Whenever an Individual is preparing his income tax return, he/she in general tend to forget there are Income heads other than Salaries. The most common income not included in the income tax of the individuals would be interest earned from savings bank account and interest from fixed deposits. The interest from savings account is eligible for deduction under Section 80TTA up to INR 10,000. The interest from fixed deposit earned by senior citizens is eligible for deduction under section 80 TTB up to INR 50,000.
In addition to the interest income, the individuals should also consider gifts if any obtained by them, while filing their income tax returns. The gifts need not necessarily be claimed as gift. When a husband transfers an amount to his wife for any reason and when source of such amount is not included in his income tax return, then such amount is deemed to be a gift in the hands of his wife. Such transfer can be cash, immovable property or any other property. Let us see the taxability of such transfers in detail.
Taxability of Gifts
a) Gift in the form of CASH When any person receives cash from another a sum of value more than INR 50,000 without consideration (i.e. gift), the entire sum received will be taxable in the hands of the receiver. If the sum received is INR 50,000 or less the sum received will not be taxable in the hands of the receiver. Example: If Mr. Z gifts Mr. X INR 55,000, MR. Y INR 48,000 and Mr. W INR 50,000 in the form of cash, it Is taxable only for Mr. X and it is not taxable for Mr. Y and W.
b) Gift in the form Immovable Property (Land) With Zero Consideration When any person receives any immovable property from another without consideration and the stamp duty value of such immovable property received is more than INR 50,000, then the stamp duty value of such immovable property is taxable. If the stamp duty value of such property received is less than INR 50,000 then it is not taxable. With Consideration less than stamp duty value When any person receives an immovable property from another with a consideration(sale value) less than the stamp duty valueof such immovable property, the amount of difference between stamp duty value and the consideration is taxable only if it is more than higher of the two mentioned below: a) Amount of fifty thousand rupees and b) Amount equal to 5 percent of the consideration
Example: 1. Mr. A gifts Mr. B an immovable property with stamp duty value INR 40,000 and gifts another immovable property worth INR 60,000 to Mr. C As the stamp duty value is less than INR 50,000 it is not taxable for B and it is fully taxable for Mr. C as the stamp duty value is greater than INR 50,000.
2 . Mr. D pays Mr. A INR 20,000 for an immovable property with stamp duty value INR 70,000 and Mr. E pays Mr. A INR 30,000 for an immovable property with stamp duty value of INR 90,000. Considering the excess of stamp duty value not paid by Mr. D and Mr. E, for Mr. D the excess value did not exceed INR 50,000 and hence it is not taxable and for Mr. E it is taxable as the difference between stamp duty value and the consideration is in excess of INR 50,000 (considering higher of INR 50,000 and 5% of 20,000 (1000) in case of Mr. D and 5% of 30,000 (1500) in case of Mr. E
c) Gift in the form other than cash and immovable property When a person receives gift other than cash and immovable property and if the value of such gift (property without consideration) exceeds INR 50,000 then the same will be taxable in the hands of receiver. When a person receives gift other than cash and immovable property for a consideration which is less than the fair market value of such property and if such amount exceeding consideration is more than INR 50,000 then such sum exceeding consideration will be taxable in the hands of receiver. Example: a) Miss G gifts Ms. F jewellery worth INR 20,000 b) Miss G gifts Ms. H jewellery worth INR 1,00,000 for INR 40,000 Jewellery received by Ms. F is not taxable and jewellery received by Ms. H is taxable to the extent of INR 60,000. Exemption: The above provisions are not applicable when a person receives such cash or property: a) From any relative – relative in relation to an individual means the husband, wife, brother or sister or any lineal ascendant or descendent of that individual. b) On the occasion of the marriage of an individual c) Under a will or by way of inheritance d) In contemplation of death of the payer or donor as the case may be e) From any local authority f) From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution or any other funds of the central or state government g) From or by any trust or institution registered under Income tax Act h) Any compensation or other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto.
Ind AS 116 Leases came into effect from 01 April 2019. It does not mean that there was no standard on leases before 01 April 2019. IndAs 116 Leases replaced, the existing Ind As 17 – Leases with effect from 01 April 2019. For the entities which are not covered under IndAS, AS 19 Leases will be applicable. The essence of bringing Ind As 116 into effect from 01 April 2019 is to align the Indian Accounting Standards with the Global standards on leases namely IFRS 16 which came into effect from 01 January 2019. The Lessor accounting of leases in their books of accounts did not undergo any material change under IndAS 116 or even under IndAS 17. Hence this article will discuss primarily on the lessee’s point of view. Lessor – One who lets out the asset on lease. Lessee – one who uses the assets under lease transaction.
The Background of IndAS 116: “One of my great ambitions before I die is to fly in an aircraft that is on an airline’s balance sheet”
Sir David Tweedie, Former Chairman of the IASB
Sir David Tweedie, Former Chairman of the IASB, revealed during a speech to the Empire Club of Canada on April 25, 2008. The airline companies, in general enter into contract with the airplane manufacturers for operating lease of airplanes. The accounting for operating lease contract will not be directly visible in the financial statements of a Company. The core liability is only given as a Note to Financial Statements. It became difficult for the investors and other users of the financial statement to identify the actual liability of the airline companies. Not only in case of the Airline companies, financial statements of any Company that has higher Operating lease liability will not show a clear picture of their actual liabilities. This lead to the birth of necessity to bring in a new standard for accounting of leases i.e. IFRS 16. In turn Ind AS 116 came into effect.
Applicability of IndAS 116: It is applicable to companies which gets covered under Ind AS.IndAS in general is applicable to
a) All Listed Companies (Including Bank, NBFC and Insurance Companies)
b) Companies with Net worth greater than 250 Crore (Including Bank, NBFC and Insurance Companies).
c) Companies which voluntarily adopted IndAS.
d) Subsidiaries, Holding Companies, Associated companies, and Joint Ventures of the Company, which follow IndAS. Irrespective of individual qualification of such companies.
Lease transactions for all assets are covered under Ind AS 116, except: ·Leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources· Leases of biological assets· Service concession arrangements· Licenses of intellectual property granted by lessor· Rights held by a lessee under certain licensing agreements (e.g. films) ·The value of such assets (per unit value of assets) are considered to be low (not defined in the Standard) or the term of the lease is less than 12 months. The effect of IndAS 116 will be seen in the listed companies first, as they have to publish their first quarter results for the period 01 April 2019 to 30 June 2019 by 14 August to the SEBI. Anyhow the disclosure requirement will be reflected only in the March 2020 financials. IndAS 116 Vs IndAS 17:
S.No
Particulars
IndAS 17
IndAS116
1
Definition
Lease is an agreement whereby the lessor conveys to the lessee in return for payment or series of payments the right to use an asset for an agreed period of time.
Lease is a contract or a part of contract that conveys the right to control the use of an underlying asset for a period of time in exchange for consideration.
2
Classification
Under IndAS 17, leases are to be classified as finance lease and operating lease. It also specifies different accounting model for Operating and finance lease.
Under IndAS 116 a single lease accounting model is followed and it requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
3
Accounting
The payments made by lessee under operating lease to be expensed through profit or loss.
The lessee should measure the right of use of assets and account it similar to non-financial asset. Lease liability to be accounted like other financial liabilities.Depreciation will be charged on the right of use of asset and interest will be charged on the Lease liability.
4
Lease Modification
There is no provision for accounting of lease modification.
There is specific provision for accounting of lease modification by lessee and lessor.
Point to be Noted:
Lessee should satisfy the following conditions for Ind AS 116 to be applicable: Lessee should receive substantial economic benefits from the Leased assets to get covered in this standard and also should have the control over the right to use the asset which is taken on lease to get covered under Ind AS 116. If the lessee does not have control over the right to use the asset, Ind AS 116 will not applicable. Example: Lessee enters into lease transaction of a Plant and Machinery, if the lessor imposes any conditions and restricts the use of the leased asset by the lessee, the contract will not be a Lease Contract. If the lessor has substantive substitution right over the asset leased, such leased assets will not get covered under IndAS116. Eg: A company enters into a contract with a Warehousing Company for occupying space in one of their Warehouses. The company will use this space to deploy its finished goods and other equipment. As per the contract, the Warehousing Company will provide a particular area of space and the space must be located within the hall number 1 of the Warehouse. However, the Warehousing Company has a right to change the allocated location at any time during the contract. The Warehouse has several unoccupied spaces that will meet the company’s requirements. The Company needs to incur minimal costs for changing the allocated space. The Warehousing Company will economically benefit by changing the space allocated to a customer. The Ind AS 116 will have positive impact on the EBITDA and total assets of the Company and will have an adverse impact on the Net Assets and Interest Coverage Ratios.
Lessee’s Accounting: The Lessee should consider the following items while accounting for leases under IndAS16: Under this IndAS, the lessee should record liability under the lease agreement and also record the corresponding assets leased by them. To record the lease liability, the lessee should identify the following terms: a) Lease termb) Lease Payment andc) Discount rate 1. Lease Term:The lease term in the lease contract should satisfy the following conditions: a) The lease term should be for a Non-Cancellable period.b) The lease agreement should have optional period where lessee can extend lease/excise right to renew.c) The lease agreement should have optional period where lessee will not execute the right to terminate. 2. Lease Payment: The lease should be accounted only if the lease payments are fixed. If the lease payments are variable the lease should not be accounted for under this standard. But if the variable lease payments are linked to the indices, then it should be recorded as leases under this standard. 3. Discount Rate: As per the standard the lessee should either consider the Implicit Rate (IRR) in the lease or the Incremental borrowing rate (rate at which the lessee will obtain loan to purchase the leased asset) as the discount rate. To record the leased Asset, the lessee should identify the Right to use Asset: Right to use Asset = Lease Liability + Initial Cost + Prepaid Lease Payment + Cost to dismantle (at Present value) – Lease incentive (Present Value) Transition Provision: The Company has the option to adopt Ind AS in the following manner: a) Fully Retrospectiveb) Modified Retrospective – Option Ic) Modified Retrospective – Option II
A. Fully Retrospective The transition impact based on the full retrospective transition approach will be as follows: • The lease liability is recognized on the lease commencement date using the interest rate implicit in the lease. If that rate cannot be readily determined, the incremental borrowing rate is used for discounting • Comparative periods are restated as if Ind AS 116 is applied from the commencement of the lease, as such entities will present a third balance sheet as at the beginning of the preceding period in addition to the minimum comparative financial statements • The provisions of Ind AS 8 “Accounting policies, changes in accounting estimates and errors” are applied. Accordingly, a third statement of financial position as at the beginning of the preceding period is presented, in addition to the minimum comparative financial statements Impact Points: 1. The active contract should be restated retrospectively from the date of commencement of the contract. 2. The impact of such restatement will have impact on the opening reserves of the third balance sheet (i.e. at the beginning of the preceding period in addition to the minimum comparative financial statements) 3. Only if the Company opts fully retrospective third Balance sheet becomes applicable.
B. Modified Retrospective: The transition impact based on the modified retrospective transition approach will be as follows: • For the FY 2019-2020, the effective date of initial application will be 1 April 2019. • The lease liability is recognized at the date of initial application. The lease liability is measured at the present value of the remaining lease payments discounted using lease incremental borrowing rate at the date of initial application. Option I • Under the option given in para C8(b)(i), the right-of-use asset is recognized at the date of initial application. The ROU asset is measured as if the Standard had been applied since the commencement date, but discounted using incremental borrowing rate at the date of initial application. Difference between ROU asset and lease liability is recognized in the opening retained earnings on initial application Impact Points: 1. The active contracts will be recognized on 1 April, 2019 only. The value of the right to use assets will be calculated retrospectively from the date of commencement of the contract, using the discount rate at the date of initial application. (i.e. 01 April 2019). 2. The value of lease liability will be recognized at present value of remaining lease payments discounted at incremental borrowing rate at the date of initial application. 3. The impact of such restatement will have impact on the opening reserves of the current year balance sheet (i.e. FY 2019-20) Option II • Under the option given in para C8(b)(ii), the right-of-use asset is recognized at the date of initial application. The ROU asset is measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before the date of initial application Impact Points: 1. The active contracts will be recognized on 1 April, 2019, where the value of the right to use assets will be equal to lease liability plus prepaid lease rental less accrued lease payment relating to that lease recognized in the balance sheet immediately before the date of initial application. There will be no impact on the opening reserve. 2. The value of lease liability will be recognized at present value of remaining lease payments discounted at incremental borrowing rate at the date of initial application. 3. The impact will be on the profit or loss account, having final impact on the closing reserves.
Transition Impact in the Financials
Type of Transition
FY 2018-19
FY 2019-20
Date of adjustment in reserves
Fully Retrospective
Ind AS 116Ind AS 17
Ind AS 116
01.04.2018
Modified Retrospective
Ind AS 17
Ind AS 116
01.04.2019
Prospective
Ind AS 17
Ind AS 116
31.03.2020
Point to be Noted: If the lease contracts were present valued already as a requirement of any other Ind AS during implementation of Ind AS for the first time in a Company, No adjustment will be required while implementing Ind AS 116. If the remaining lease term of the active contract as on April 01, 2019 is less than a year, then Ind AS 116 need not be applied. As the impact will be anyhow on the Profit or Loss of FY 2019-20. Disclosures: The following are the disclosures to be made in the financials prepared on March 31, 2020 with respect to Ind AS 116 1. Disclosure on Interest Expense2. Depreciation of Right to Use of the Asset3. Expense relating to lease of assets which are of lesser cost and hence Ind AS 116 is not applied.4. Expense relation to lease of assets with shorter duration and hence Ind AS 116 is not applied.5. Commitments as disclosed under Ind AS 17 should be reconciled with lease liability recorded under Ind AS 116. Presentation: In Balance Sheet: a) Leased Assets to be shown separately as Right to use of Asset.b) Lease Liability should be shown separately in financials. There is no specific guidance given in Ind AS 116, but IFRS 16 states that lease liability should be grouped under Borrowings. In Profit or Loss: a) Interest expense on the financial liability under finance costb) Depreciation of Right to use of Asset under the Depreciation and Amortization In Cash flow the impact will be on the Operating cash flow and Cash flow from financing activities. Deferred Tax: Under Income Tax Act, the lessee is not allowed to capitalize the lease payment made to the Lessor, even though it is considered as finance lease under erstwhile Ind AS 17. In Income tax act, the Lessor claims the depreciation benefit unlike the Ind AS. Hence deferred tax treatment arises on the Finance lease. Under Ind AS 116, single lease accounting model is followed, where all the leases are capitalized in the lessees’ books and hence this will give raise to deferred tax accounting. Initially there might be recording of deferred tax liability as the lease payments under Income tax Act may be higher than the depreciation and interest on lease payments.
Special Thanks to CA Karthikeyan M, for reviewing my article and for suggesting valuable inputs.
Section 54 of the Income Tax Act provides the seller of a residential property with relief from capital gains tax, if the proceeds from the sale are used to acquire another residential property.The following conditions must be satisfied by the taxpayer to claim benefits under Section 54 of the Income Tax Act:
Taxpayer is an individual or HUF. Exemption under Section 54 is not available for companies or LLPs.
The asset transferred should be a long-term capital asset, being a residential house property.
Within a period of one yearbeforeortwo years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house.
Short-term capital asset is an asset which is held not more than 36 months or less. Any gain from selling a short-term capital asset, is termed as short-term capital gain. Long-term capital asset is an asset which is held more than 36 months. Any gain from selling a long-term capital asset, is termed as long-term capital gain. To claim benefit under Section 54, one of the important criteria is that the residential property has to be a long-term capital assets. Hence, to claim capital gains exemption, the property must have been held by the taxpayer for a period of more than 3 years from date of purchase.Transfer of Property After Claiming Benefit under Section 54Further, if a taxpayer claims benefit under Section 54 of the Income Tax Act and purchases or constructs a new house, he/she must hold that property for a minimum period of three years. If the taxpayer sells the property before the end of three years, then the benefit granted under Section 54 will be withdrawn and the taxpayer would have to pay the capital gains due on the previous transaction.Amount of ExemptionThe amount of capital gains exemption under Section 54 of the Income Tax Act will be the lower of:
Amount of capital gains arising on transfer of residential house.
Investments made in purchase or construction of a new residential house property.
Capital Gains Deposit Account Scheme
If the asset is sold in the PY, and the seller intends to, but is yet to purchase the new house property as the time limit of 2 years or 3 years has not yet expired, then the assessee is required to deposit the amount of gains in the Capital gains account scheme (in any branch of public sector, bank) before the due date for filing income tax returns.The amount already incurred towards purchase/construction along with the amount deposited in the capital gains account scheme can be claimed as cost while claiming the deduction.However, if the amount deposited in the Capital Gains Account Scheme is not utilized within the time limit mentioned, then it shall be treated as income of the previous year in which 3 years expire (from the date of transfer of the original asset).
The interim budget delivered on Feb 01, 2019 is applicable from 01 April 2019 in certain cases. The key items to be kept in mind from today are briefed below: 1. The threshold for Tax Deducted at Source (TDS) on rent increased from INR 1.8 Lakh to 2.4 Lakh. 2. The threshold for TDS on interest income from banks and post office schemes increased from INR 10,000 to 40,000. Note that it is increased for income from banks and post office schemes only, not for other interest incomes. 3. Standard deduction for salaried tax payers increased from INR 40,000 to 50,000. 4. The notional rental income on the second house which is locked up will no longer be added to taxable income. 5. The rebate under section 87A increased from INR 2,500 to 12,500. 6. Individuals and HUFs earning long term capital gain of up to INR 2 crore under section 54 on sale of residential house will get exemption by investing in up to two residential houses instead of one. This is once in a lifetime option. 7. The exemption from notional rent taxation of unsold inventory for builders and developers extended from 1 year to 2 years.
The above points are only the key points to be considered and does not include all the changes made in the interim budget delivered on Feb 01, 2019.
What is Advance tax?Advance tax is a form of Income tax, payable in advance, instead of making a lump sum payment at the end of the financial year. The advance tax is in respect of the total income of the assessee, which would be chargeable to tax in such financial year. Who should pay Advance tax ?Every Assessee (Individual, Firm, Company etc.,) whose amount of tax payable in a financial year is rupees ten thousand or more (after considering TDS & Deductions). Exception:Individuals: (i) aged 60 or more and (ii) does not have income chargeable under the head Profit and gains from business or profession. How to compute Advance tax?Estimate the Income to be earned in a financial year. Estimates can be arrived by considering the Income earned in the previous year as base and considering the expected increase and decrease in the current financial year, also should consider adding a percentage for expected new customers and decreasing a percentage, if there is expected deletion in the existing customers. Income tax should be calculated on the estimated revenue after deducting the amount of TDS that shall be deducted on such estimated revenue. If the Net tax payable computed on the estimated revenue is INR 10,000/- or more then the assessee should pay advance tax in instalments. The advance tax shall be paid in four instalments. The due dates and the amount of such advance tax to be paid in instalments are mentioned below:
Due date of Instalment
Amount payable
On or before 15th June – 1st Instalment
Not less than 15% of advance tax
On or before 15th September – 2nd Instalment
Not less than 45% of advance tax (less the amount paid in previous instalment)
On or before 15th December – 3rd Instalment
Not less than 75% of advance tax (less the amount paid in previous two instalments)
On or before 15th March – 4th Instalment
100% of advance tax (less the amount paid in previous three instalments)
For tax payers who have opted for presumptive income:
Due date of Instalment
Amount payable
by15th of March
100% of Advance tax
Example:Net taxable Payable – for tax payers who have not opted for presumptive income (Calculated after considering (i) income from all the heads, (ii) deductions in Chapter VIA (i.e. 80G,80C etc.,), (iii) TDS) – say INR 10,000/- Amount payable on or before 15th June – INR 1,500 Amount Payable on or before 15th September – INR 4,500 – INR1,500 (amount paid in previous instalment) = INR 3,000/- Amount Payable on or before 15th December – INR 7,500 – INR 4,500 (amount paid till previous instalment) = INR 3,000/- Amount payable on or before 15th March – INR 10,000 – INR 7,500 (amount paid till previous instalment) = INR 2,500/- Net taxable Payable – for tax payers who have opted for presumptive income Amount payable on or before 15th March – INR 10,000/-
What if I don’t pay advance tax?
If an assessee is liable to pay advance taxi) has not paid advance tax orii) Paid less than 90% of tax computed at the end of financial year,
The assessee shall be liable to pay simple interest of one percent for every month or part of month on the advance not paid or short paid from first day of April following such financial year till the date of payment of such advance tax (234B). AND If an assessee pays any instalment less than the amount specified above, then a simple interest is charged in the shortfall amount at the rate of 3% on the first, second and third instalments and 1% on the fourth instalment (234C). Exception: If an assessee reaches 12 % of tax on returned income in the first instalment (income reported in income tax return) instead of 15%, no 3% interest is applicable. Similarly if the assessee reaches 36% of the tax on returned income in the second instalment instead of 45%, no 3% interest is applicable. Kindly note that no such exemption is there for third and fourth instalment. If the shortfall in advance tax is due to under estimation or failure to estimate the amount of capital gains the assessee is not liable to pay interest.
Happy New Year to all! Wish you all a prosperous new year. Let us be more prosperous by unlocking the full potential of deductions available in Chapter VIA of Income tax Act which helps you in saving the outflow of taxes. We just have 68 more days remaining in the financial year, this article is all about the possible tax savings that can be made in the coming days before the end of financial year. This article primarily focuses on the Chapter VI A deductions w.r.t Individual/Salaried Assessees. You can check whether you have utilized all the possible and applicable deductions in full and reaped the maximum benefits. If you find a tax benefit available for you and if you are planning to invest in it, it should be done on orbefore March 31, 2019 to avail the below mentioned benefits for current FY 2018-19 (AY 2019-20).
Please make a note that all the benefits mentioned below are available for the current FY 2018-19 i.e April 01, 2018 to March 31, 2019, only if it is paid between April 01, 2018 and March 31, 2019. Basics:The Chapter VI A deductions are available against the gross total income of the tax representative.First let us understand how gross total income is arrived to calculate tax and the tax slabs for the current year.For Salaried Individuals only:Taxable Income from Salary* xxxx *Enter details as per Part B of Form 16 provided by the employer(It is the number after the allowances like HRA and ProfessionalTax are reduced and the taxable salary number is arrived)
Taxable income from House Property* xxxx *This number is arrived at after deducting the standard deduction andthe allowable interest portion of EMI paid against the part of the houseproperty which is occupied Total Taxable Income xxxx Less: Chapter VI Deductions xxxx (The Topic that we are going to discuss) Net Taxable Income xxxx Tax Amount xxxx Less: TDS xxxx
Balance Tax Payable xxxx
The Net Taxable Income is taxed based on the slab rates applicable for the FY 2018-19.
Chapter VIA deductionsIncome tax department allows deductions on the Total Taxable Income as specified in the Chapter VI-A of the Income Tax Act. Chapter VI A has many types of deductions under it, like 80C, 80D, 80G etc., This article primarily focuses on the Sections that are broadly applicable to the individuals/ salaried tax payers. The tax payers can make use of these deductions if its applicable to them. For them to be eligible to claim these deductions the below mentioned they should have spent/invested between April 01, 2018 and March 31, 2019. The deductions discussed in the article are not the only deductions available under Chapter VIA, there are various other deductions under VIA, the sections are chosen with an objective to benefit the commoner and majority of the readers.
1. Section 80C
Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total income. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C. The tax payer will get a total deduction of 1,50,000 from all the 80C deductions put together.a) Life Insurance Premium deduction is allowed in respect of life insurance premium that you pay on your LIC policy but policy must be in the name of the tax payer, his/her spouse or any child of such individual.Do note that before making the payment towards the premium, first check with agent or read the policy description whether it is eligible for deduction for income tax purpose. Also the interest paid on late payment of insurance premium cannot be claimed under 80C.b) Provident Fund, this deduction will be available for 99% of the salaried employees reading this article. The provident fund you can claim deduction in respect of your* contribution towards your Statutory Provident Fund or Recognized Provident Fund Account. If the tax payer has not opted for Provident fund but has invested in Public Provident Fund, then the same can be considered for the 80 C Deduction. The Tax payer can also additionally claim PPF even if he is claiming PF.*Provident fund in your pay slip represents the provident fund contributed by you and hence the same can be directly taken from the payslip for 80 C purposes.c) Children’s Tuition Fees You can claim deduction for the payment of tuition fees of your children to any university, college, school or other educational institution situated within India for the purpose of education. However, deduction would not be allowed for payment towards any development fees or donation or payment of similar nature. This deduction is allowed for maximum two children.Note: Take the fee slip provided by the School and consider the amount against Tuition fee and do not consider the total value of the fee slip provided by the school.d) Principal Repayment of Housing Loan You can claim the deduction of principal repayment of your housing loan taken for purchase or construction of residential house property. Deduction can also be availed in respect of stamp duty charges, registration fee and other expenses paid for purchase of your house. To make it simple the corresponding Principal portion of the interest from the EMI paid, that is claimed under the head Income from House Property is eligible for deduction here. e) Sukanya Samriddhi SchemeIn lines with the Beti Bachao, Beti Padhao campaign, this scheme was launched on 22nd January, 2015 by Prime Minister Narendra Modi. You claim deduction under this scheme for any sum deposited by you in the Sukanya Samriddhi Account of your girl child or any girl child for whom you’re her legal guardian. The minimum limit of deposit under this account is Rs 1000 annually and maximum Rs 1,50,000. Interest earned and money withdrawals from this account are tax free. f) Mutual Funds (Equity Linked Saving Scheme)You can claim deduction in respect of subscription to units of UTI or mutual funds specified u/s 10(23D) of Income Tax India, 1961. g) Bank FDR’s (Known as 5 Year Tax Saving FDR’s) Almost everyone invests in Bank FDR’s but did you know that you can claim deduction for it too. Investment must be made in term deposit for a fixed period of 5 years or more with scheduled banks to avail the deduction. If the amount is withdrawn before the end of 5 years, then the amount will become taxable with interest and penalty. h) Post Office Tax Saving FDR’s (Post Office Time Deposit Scheme) Similar to Bank FDR’s, 5 year FDRs of Post Offices are also eligible for deduction under section 80C.If you have paid excess taxes, by not considering any of the above while submitting the Investment Proof details to your HR, you can still claim deduction of the same under 80C, while filing your Income Tax Return.The above mentioned options are not the all the options available under 80C, I have highlighted only the options that is applicable to the majority of the readers and you can contact your Chartered Account to know about the other options available under 80C.
2. Section 80D: (Medical Health Insurance)
Medical health insurance is important to cover yourself from financial crisis in case of any medical emergency. This deduction is allowed in respect of Health Insurance premium paid by you or contribution made towards CGHS or payment made for preventive health checkup of yourself, your spouse, dependent children or dependent parents. However, there are certain limits for availing deduction under this section:
Various Cases
Maximum Deduction allowed for Health Insurance Premium
Total Deduction under 80D
Yourself, spouse & Dependent Children
Parents
No family member is over 60 years of age
Up to Rs. 25,000
Up to Rs. 25,000
Rs. 50,000
Your parents are over 60 years of age and neither you nor your wife is more than 60 years.
Up to Rs. 25,000
Up to Rs. 30,000
Rs. 55,000
You or your wife has attained more than 60 years of age.
Up to Rs. 30,000
Up to Rs. 30,000
Rs. 60,000
The above-mentioned limits include a limit of Rs. 5,000 for any expenditure made for the purpose of Preventive Health Checkup.If any medical expenses are incurred on a Super Senior Citizen (above 80 years of age), it will be considered a part of the limits mentioned above provided that no policy is taken for him/her.
3. Section 80E Education Loan: It is available on the interest component of an educational loan.
It starts from the year when an individual starts repaying the loan. However, it is to be noted that the deduction can be availed only for eight years, beginning from repayment from the first year. There is no limit in the amount claimed under this section.
4. Section 80EE – First time Home Buyers: This deduction is a boon for the first time home buyers.
The deduction allowed under this section is over and above the deduction u/s 24. The amount of deduction is maximum Rs 50,000 per financial year and shall be allowed until the loan is repaid. However, for availing benefit under this section you have to fulfill the below conditions:
You are not the owner of any other house i.e. this is your 1st house
Value of the property should be Rs 50 lakhs or less
The amount of Loan shall be Rs 35 lakhs or less
Loan has been sanctioned between 01.04.2016 to 31.03.2017
5. 80GG: Deduction where House rent is paid and HRA not received
You’re eligible for availing deduction if you don’t receive House Rent Allowance (HRA) from your employer or if you’re self-employed.However, 80GG deduction for FY 2018-19 would not be allowed in the following cases:
If you, your spouse, minor child or HUF of which you’re a member owns any accommodation at the place where you’re employed or doing business.
If you own any residential house at the place other than place of your residence, then such property should not be assessed as self-occupied property.
Deduction allowed is lower of the following amount:
Rent paid minus 10% of your adjusted total income
5000/- per month
25% of your adjusted total income
Here, adjusted total income = Gross Total Income (From All Heads) – Long Term Capital Gain – Short Term Capital Gain – Deductions (except deduction under 80GG).
6. 80TTA: Deduction in respect of interest on deposits in Savings Account
Under this section, you can avail deduction in respect of income by the way of interest on deposits in Savings Bank Accounts of Banks, Co-Operatives Banks or Post Office. The quantum of deduction allowed under this section is Rs. 10,000 or the actual interest earned, whichever is lower.
7. 80TTB: Deduction in respect of interest from deposits held by Senior Citizens
Section 80TTB allows a deduction upto Rs 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases
8. 80G: DONATIONS
The deduction under section 80G for FY 2018-19 is available in respect of donations made by you towards certain specified funds, charitable institutions etc.If you have made contributions to any Trusts/Charitable Institutions that is eligible under 80G, then you are eligible to claim a deduction of 50% of the total funds contributed to such trusts.Interestingly during the current year, if you have contributed towards Kerala Floods against Kerala Chief Minister Relief Fund and Tamil Nadu Floods against Tamil Nadu Chief Minister Relief fund, the entire amount that your have contributed will be eligible for deduction under this section. Kindly note that if you paid to any other 80G Registered Trusts against the Relief and not the Chief Minister’s Fund, then you will be eligible for only 50% of the amount contributed and not 100%
9. Section 80U – Physical Disability: Deduction for Person suffering from Physical Disability
If an individual, is certified by the medical authority or a government doctor to be a person with disability, then he is allowed deduction of Rs. 75,000 under this section. In case the person is certified by the medical authority to be a person with severe disability, then the quantum of deduction allowed under this section will be Rs. 1, 25,000.
10. Section 80DD – Disabled Dependent: Deduction in respect of maintenance including medical treatment of a dependent with disability.
You can claim Sec 80DD deduction for AY 2018-19 in respect of a dependent person with a disability when you incur expenditure on their training, rehabilitation, medical treatment, payment made to LIC, Unit Trust of India or any other specified scheme or deposit on behalf of such dependent.The deduction is allowed from the following two amounts:
Rs. 75,000 fixed, in case the dependent has 40% of more disability but less than 80%.
Rs. 1, 25,000 fixed, in case the dependent has 80% or more disability.
Notes
Dependent person includes your spouse, children, parents, brothers and sisters. In case of HUF, any member of HUF.
Benefit under this section is available only if the dependent person has not claimed deduction u\s 80U.
A certificate of disability is required from prescribed medical authority.
This is a fixed deduction and not based on actual expenses.
11. Section 80DDB: Deduction in respect of medical treatment on specified disease
Deduction u/s 80DDB for FY 2018-19 can be availed by you in respect of payment for medical treatment of a specified disease or ailment (such as AIDS, cancer, hemophilia, chronic renal failure or other neurological diseases specified under Rule 11DD). Deduction under this section can be availed for yourself or dependent up to the amount actually paid or Rs. 40,000 (Rs. 60,000 in case of a senior citizen or Rs 80,000 in case of very senior citizen) whichever is less. This deduction is subject to the following two conditions:a) You must mandatorily obtain a prescription for such medical treatment from the prescribed specialist. b) The amount of deduction will be reduced by amount, if any `received, in respect of insurance or reimbursement by your employer for the treatment of the person concerned. Dependent person includes your spouse, children, parents, brothers and sisters.