80C YOUR TAX-SAVING KNIGHT...

80C YOUR TAX-SAVING KNIGHT...

02.02.2021

Those with taxable income at 30% can save 45,000 by claiming 1.5 lakh as deduction under Section 80C and not opting for the new ‘simplified’ personal income tax regime

1  Your Provident Fund (PF) contribution

2 Principal component of your housing loan from prescribed institutions

3 You can invest 500 to 1.5 lakh every year in a Public Provident Fund (PPF) account

4 Tuition fees of two children

5 Life insurance premiums for self, spouse and kids

6 Contribution to Unit-linked Insurance Plan for self, spouse and children

7 Invest in National Savings Certificates (NSC) schemes (through post offices)

8 A 5-year term deposit with a bank under a notified scheme or a post office

9 Investment of up to 1.5 lakh a year in Sukanya Samriddhi Account in the name of your daughter (limited to two children)

...AND SAVINGS BEYOND 80C

If you have not opted for the new ‘simplified’ personal income tax regime and your basic salary is over 1 lakh a month, your 80C limit will be used up by provident fund contributions alone. Want to save more? You can save up to 82,500 a year in taxes over and above the 1.5 lakh limit allowed under 80C if you invest 50,000 in NPS, pay 25,000 for medical insurance and also repay interest of 2 lakh on housing loan for a self-occupied property.

A few more deductions are available:

1 Interest earned on savings bank account with a bank or post office. If you are less than 60, up to 10,000 (even for NRO savings a/c). If you are 60 or more, up to 50,000. Interest from FD also exempt for senior citizen

2 Interest on education loan. No limit, but deduction available for maximum 8 years

3 Disability-related tax benefits 75,000 ( 1,25,000 in case of severe disability) for expenditure towards rehab, treatment or training of self, dependent spouse, child, parent or even sibling. This can either be claimed by the dependent or by the individual on whom he/she is dependent

4 Treatment for certain diseases such as AIDS or malignant cancers for self and dependents up to 40,000 (up to 1,00,000 for patients who are 60 years or more)

5 Donation: 100% or 50% of the amount donated (subject to conditions), depending on the institute/fund to which contribution is made. No deduction is allowed if donation is made in cash over 2,000

6 Deduction of 1.5 lakh on the interest paid on loans taken to purchase electric vehicles from any financial institution

SALARY COMPONENTS: TRADES & TACTICS TO USE

SALARY COMPONENTS: TRADES & TACTICS TO USE

02.02.2021

House rent allowance (HRA)

This is the most common CTC component. Those staying in rented accommodation can avail of an exemption against the HRA received and only the balance will be taxable

THE EXEMPTION IS LIMITED TO THE LOWEST AMONG

1 Rent paid less 10% of salary*

2 50% of salary* if the house is situated in Delhi, Mumbai, Kolkata or Chennai OR 40% of salary in other cities

3 Actual HRA received

*Salary means basic salary and dearness allowance

If your CTC doesn’t contain HRA, deduction for rent paid is available from gross taxable income, subject to various limits (maximum deduction 5,000 per month)

If you live in a house you own, the HRA component is fully taxable

Work from home expenses

If you are working from home fulltime and your employer is reimbursing certain expenses such as telephone, internet, printing and stationery expenses you need not pay tax on these reimbursements. You may need to provide the requisite bills to the employer for claiming these reimbursements, as per the corporate policy.

While computers and laptops provided by employers do not give rise to any taxable perquisite, provision of any other asset say a swivel chair, computer desk or printer, would be taxed as a perquisite as per Rule 3 (7) (vii) in the hands of the employee, at the rate of 10% of the original cost of the asset as reduced by any charges recovered from the employee.

Leave travel concession (LTC)

LTC exemption is allowed on two domestic journeys taken in a block of four years. The new block commenced on January 1, 2018. Restrictions apply. For example, if you are travelling by air, it is limited to economy class airfare for the shortest route to your destination. No exemption is available for hotel and local conveyance expenses.

LEAVE ENCASHMENT: If you haven’t availed of your entitled leave, you may have an option to get it encashed – your employer may permit this only on retirement or resignation. The maximum aggregate exemption available in a lifetime is 3 lakh.

LTC cash voucher scheme

You may have made plans to travel in 2020 (during the four-year block period starting January 1, 2018), but owing to the pandemic found yourself stuck at home. Well, if you have not opted for the simplified personal tax regime, you can avail of the LTC cash voucher scheme that lets you purchase some goods and services.

However, some conditions have to be met:

You need to buy goods or services worth three times the deemed LTC fare between October 12, 2020 and March 31, 2021. If you spend less you don’t get the full exemption. For instance if the deemed LTC fare for a family of four is 80,000, then the employee is required to spend 2.4 lakh. However, if he spends only 75% of this amount ( 1.8 lakh). In this case, only 60,000 (75% of the deemed LTC) will be eligible for tax exemption.

The money must be spent on goods or services attracting GST of 12% or more.

The payment must be made through digital mode and employee must produce the GST invoice.

The tax exemption will be restricted to the deemed LTC fare up to a maximum of 36,000 per person. This exemption is only available for the financial year 2020-21.

Employee Provident Fund (EPF)

PF withdrawal after five or more years in continuous service is tax free. However, interest earned on accumulated balance in PF account post end of employment or retirement is taxable. If employee’s contribution to PF on or after 1 April 2021 exceeds 2.5 lakh in any year, Interest on contribution above 2.5 lakh shall be taxable on withdrawal.

Gratuity

Gratuity received under the Payment of Gratuity Act after completion of 5 years of continuous service is eligible for exemption of up to 20 lakh. But remember the exemption is the cumulative of all gratuity payments received by an individual in his/her lifetime.

PERSONAL INCOME TAX ‘CHECKS’ YOU MUST WATCH OUT FOR

PERSONAL INCOME TAX ‘CHECKS’ YOU MUST WATCH OUT FOR

02.02.2021

Relief from income-tax return filing for senior citizens (aged 75 or more) will not be available if the individual has more than one bank account or has income other than pension and bank interest.

Gap of up to 20% between stamp duty value and sale consideration is only allowed for first-time allotment of residential unit between November 12, 2020 and June 30, 2021. For all other cases (such as purchase of house from an existing owner), the current limit of 10% in variation will continue to apply.

LTC cash scheme is only applicable for the financial year 2020-21. No tax benefit on LTC is available for goods or services purchased after April 1, 2021.

There is lack of clarity on whether EPF interest will be taxable even where the employee’s contribution exceeding 2.5 lakh was made before April 1, 2021 but the interest accrues on such past contributions after April 1, 2021.

Same tax, less hassle for 75-plus

Same tax, less hassle for 75-plus

TEAM TOI

02.02.2021

The Budget has attempted to reduce the compliance burden on senior citizens above 75 years of age having only pension and interest income by exempting them from filing tax returns.

However, if seniors have any other income like rentals from house and investments in mutual funds, they will have to file the return. Therefore, its effectiveness would be limited to those pensioners who do not have any income other than pension. In addition to such pension income he or she may also have interest income from the same bank in which the pension is coming in.

Also, certain conditions need to be satisfied for getting exemption from return filing. In order to implement the scheme, the central government plans to notify a few banks as specified bank for the purpose. In order to avail the benefit, the pensioner will have to open his or her account in the specified bank.

Pensioner will also be required to furnish a declaration to the specified bank containing particulars as specified by the government. The bank will also verify the declaration.

Once the declaration is furnished and verified, the specified bank would be required to compute the income of the senior citizen after giving effect to the deduction and rebate allowed under the I-T Act. The bank will deduct the necessary tax, and the senior citizen will be saved the hassle of filing returns.

IT’S A BREEZE FOR SENIORS

Many happy returns... Only if you file by Dec 31

Many happy returns... Only if you file by Dec 31

TEAM TOI

02.02.2021

From the compliance point of view, the Budget seems to offer many pluses for the taxpayer. But, if you scratch beneath the surface, it does seem to be a mixed bag.

Let’s begin with the sting in the fine print of the finance bill. The time-limit for belated or revised returns (to correct any errors) is shorter, and these can now be filed three months before the end of the relevant assessment year, or before the completion of the tax assessment, whichever is earlier. Let us look at a case study.

For a salaried taxpayer, the date of filing his I-T return for the financial year ending March 2021will be July 31, 2021. The belated or revised return — which could earlier be filed by March 31, 2022 — now have a deadline of December 31, 2021, or before completion of assessment. whichever is earlier.

“The reduction of such time-limits will impact taxpayers whose returns are due by October 31 (businessmen who need to get their audits accounted) or November 30, for companies having significant international transactions. Typically, mistakes in the original returns are discovered only after a few months. Not complying with the requirement by these dates could attract severe consequences — penalty for nondisclosure of income, besides potential prosecution,” says Gautam Nayak, tax partner at CNK & Associates.

Coming to tax-audit requirements. Currently, if the turnover of a businessman exceeds Rs 1 crore, the books of accounts are required to undergo a tax audit. The FM, in her speech, pointed out that she had increased the limit to Rs 5 crore for those who carry out 95% of their transactions digitally. To give a further push, this compliance turnover threshold is now increased to Rs 10 crore.

Gautam Nayak, tax partner at CNK & Associates, says it is a positive move. “However, for informal businesses having a larger number of transactions in cash, the limit is still unchanged at Rs 1crore; this should have been enhanced to at least Rs 2 crore,” states Nayak.

A dispute-resolution committee is proposed to be set up to reduce litigation for small taxpayers. Anyone with a taxable income of up to Rs 50 lakh and disputed income of up to Rs 10 lakh can approach this committee, the proceedings of which shall be faceless. The exact contours will be notified later.

JUMBO HURDLE TO CROSS

Apex court to open doors for physical hearings after a year

Apex court to open doors for physical hearings after a year

TIMES NEWS NETWORK

New Delhi:02.02.2021

The Supreme Court is likely to resume physical hearings in three to four weeks, the Bar Council of India (BCI) said on Monday after its chairman and other bar leaders met CJI S A Bobde and sought normal functioning of the court, disrupted for nearly a year because of the Covid-19 pandemic.

The CJI met BCI chairman Manan Kumar Mishra, solicitor general Tushar Mehta, SC Bar Association leader Kailash Vasdev, leaders of advocates' on record association and former SCBA president Vikas Singh to chalk out the modalities and standard operating procedures to begin a hybrid system of working, with both physical and virtual hearings.

"From today's meeting, it is clear that physical hearings are going to start in the Supreme Court within three to four weeks," Mishra said in a press release. Mishra said he conveyed to the CJI that virtual hearings through video-conferencing mode was unacceptable to advocates and there could be no substitute to physical hearings in courts.

The SG had suggested easing the difficulties faced by advocates in getting petitions listed for hearing by assigning mentioning work to one or two judges. This was supported by the BCI chairperson. The CJI said he would consult other judges on this.

On resumption of physical hearings, the CJI said that he would consult medical experts, assess infrastructure and availability of staff before taking a decision on full-scale resumption of physical hearings.

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