Government takes big decision about Income Tax Exemption.

EPFO Latest News: Income Tax exemption! Modi government takes big decision - Check what it is and how it will impact you

In a major development,  Modi government on Tuesday raised the deposit threshold limit to Rs 5 lakh per annum in provident fund for which interest would continue to be tax exempt. This would be applicable to those cases where no contribution is made by employers to the retirement fund.

In her Budget presented to Parliament on February 1, Finance Minister Nirmala Sitharaman had provided that interest on employee contributions to provident fund over Rs 2.5 lakh per annum would be taxed from April 1, 2021.

Replying to the debate on the Finance Bill 2021 in the Lok Sabha, Sitharaman made the announcement regarding raising the limit to Rs 5 lakh in cases where employers do not make contributions to the provident fund.

The Finance Bill, which gives effect to tax proposals for 2021-22, was approved by voice vote. The bill was passed after acceptance of 127 amendments to the proposed legislation.

The minister also stressed that tax on interest on provident fund contribution affects only 1 per cent of the contributors, and the remaining are not impacted as their contribution is less than Rs 2.5 lakh per annum.

Referring to the issues raised by various members on higher taxes on motor fuel, Sitharaman said she would love to discuss the issue of bringing petrol and diesel under GST in the next GST Council meeting. She also sought to remind members that it was not just the Centre which taxes motor fuel and states too impose levies.

The finance minister also said rationalisation of customs duty structure will be undertaken to help domestic businesses, especially the MSME segment. On taxes, she emphasised on the need for widening the tax base. With regards to the equalisation levy, she said this is meant to provide a level playing field to domestic businesses which pay taxes in India.

Source: ZeeBusiness

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5 Things i.e. LPG Cylender Price, Income Tax, EPF, Cheque Book and Banking Rules to TDS will change from 1st April, 2021

Top 5 things that will change for you from April 1, 2021 - LPG cylinder price, income tax, EPF, Cheque book, banking rules to TDS

Financial Year 2020-21 is about to end and new Financial Year 2021-22 is going to begin from 1st April 2021. With the arrival of the new financial year, there are some major changes taking place which are going to affect an earning individual's money matter to a larger extent. Changes in LPG cylinder price, banking rules due to merger of banks, income tax rule changes in terms of EPF investment, TDS/TCS deduction, etc. are some of the glaring changes that are going to take place from 1st April 2021. We list out the top 5 changes that are going to have a direct impact on your budget and monetary affairs.

Change in LPG cylinder price

On the first date of every month, the central government announces the LPG cylinder price. In March 2021, LPG price in New Delhi was increased from Rs 769 per LPG cylinder to Rs 819 per LPG cylinder price. Since petroleum prices in the global markets are rising, there can be further rise in the LPG cooking gas price on 1st April 2021.

Cheque book, passbook of 7 banks to become non-functional

If you have bank account in any of these seven public sector banks — Dena Bank, Vijaya Bank, Corporation Bank, Andhra Bank, Oriental Bank of Commerce, United Bank of India and Allahabad Bank — then your passbook and cheque book will become non-functional from 1st April 2021. This will happen because of the merger of these banks in various other banks. Dena Bank and Vijaya Bank have been merged with Bank of Baroda, Oriental Bank of Commerce and United Bank of India have been merged with Punjab National Bank (PNB), Corporation Bank and Andhra Bank have been merged with Union Bank of India.

Income Tax rule on EPF investment

From 1st April 2021, one's investment in EPF account is no more free from the income tax. From 1s April 2021, one's investment in EPF above Rs 2.5 lakh in a financial year is taxed. One's EPF interest on EPF investment above Rs 2.5 lakh in a particular year is taxable.

Income Tax rule on TDS

Income tax rule for TDS (Tax Deducted at Source) will get changed from 1st April 2021, which is just a few days away. In her budget speech, Sitharaman said that if a person doesn't file income tax return (ITR), then in that case, the TDS rate on bank deposits would double. That means, even if an earning individual doesn't fall in the income tax slab, the TDS rate levied on them will be doubled (in case the earning individual does not file ITR)

LTC cash voucher scheme

The central government notified the Leave Travel concession or LTC cash voucher scheme's exemption in place of a leave travel concession (LTC). Under this scheme, an employee can claim an exemption under LTC allowance against the purchase of specified goods or services. This scheme is only available till 31st March 2021, i.e. money must be spent by this date to avail of the scheme.

Source: ZeeBusiness

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Top 5 ways to save tax without investment in Fin. Yr. 2021-21

The deadline (31st March 2021) for investment declaration to claim tax deduction for FY 2020-21 is fast approaching. Hence, earning individuals are busy finding ways to save their hard earned money meant for income tax outgo. While some people are busy buying insurance policies some are found investing in Section 80C investment options like Public Provident Fund (PPF), Post Office Saving Schemes, etc. However, for information to such earning individuals, one can save income tax without making any investments. They can claim income tax benefits for some of their regular expenses like tuition fees paid for their children at their school, home loan, health insurance and health checkups, etc. These are some of the expenses that one needs to add before making any investment to claim income tax relaxation.

Speaking on the income tax benefit offered by the Income Tax Department on other than investment options Pankaj Mathpal, Managing Director at Optima Money Managers said, "Regular payments like tuition fee of one's children paid at their school, medical check up of one's dependent, principal paid on home loan, medical expenses on one's parents (if they are not insured), interest paid on education loan, etc. are some of the heads that qualifies for income tax exemption." Mathpal advised earning individuals to mention these expenses in their tax deduction investments for the financial year 2020-21.

1] Tuition Fee: For those who have expenses related to the tuition fee of children can claim up to Rs 1.5 lakh incurred on the same under Section 80C of the Income Tax Act. This means if a parent pays Rs 60,000 each for two children then Rs 1.2 lakh can be claimed under the deduction. The tuition fee paid to any college, school, university, college or any educational institute in India can be availed for upto two children for a given financial year and is an effective way for reducing your burden.

2] Home Loan Principal Repayment: An amount of Rs 1.5 lakh can also be claimed under Section 80C against repayment of the principal amount of a home loan taken during a financial year. In fact, if you have bought the house in FY 2020-21, then you can claim income tax benefit on the stamp duty payment too. However, after claiming this income tax deduction, one won't be able to sell the property within five years.

3] Education Loan Interest Repayment: If an earning individual has availed education loan for its children or for itself, then in that case, one can claim income tax exemption on 100 per cent education loan interest repayment under Section 80E of the Income Tax Act.

4] Health Checkups: If the earning individual has spent on the health checkups of oneself and other dependents of the family like wife and children, then they can claim income tax deduction under Section 80D of the Income Tax Act.

5] Health Checkup Expense on Parents: If the earning individual's parents are not covered by any insurance, in that case health checkup expenses up to Rs 50,000 is exempted from any income tax outgo under Section 80D.

Source: ZeeBusiness

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First Time Home Buyers can't afford to lose out Up to Rs 5 lakh tax benefits

Buying a house means you have to pay home loan EMI on time. However, there are monetary benefits given by the Income Tax Department that the home loan applicant just cannot afford to miss claiming. As per the Income Tax Act, first time home buyers can claim income tax benefit of up to Rs 5 lakh under various sections. But, to claim these benefits, one has to be aware of these benefits too.

Speaking on the income tax benefits for the first time home buyers, Ravi Singhal, Vice-Chairman, GCL Securities Limited said, "Many first-time home buyers often remain confused about the Income Tax benefits that they can avail on home loan after the purchase of their first residential property. If you are buying home for the first time, you are entitled to get Income Tax benefits on home loan under three sections- Section 80C, Section 24 and Section 80EEA of Income Tax Act. These sections of Income Tax Act let you avail home loan benefit of Rs 5 lakh annually."

Income Tax benefit under Section 80C

Highlighting the income tax benefit under Section 80C of the Income Tax Act; Harsh Roongta, Head at Fee Only Investment Advisers said, "Under Section 80C of the Income Tax Act, a first time home buyer can claim tax benefit on up to Rs 1.5 lakh under Home Loan Principal and Stamp Duty component. However, to avail of this income tax benefit, the home buyer won't be able to sell out the property within five years of possession."

Tax exemption under Section 24

On income tax exemption for the first time home buyer under Section 24 of the income tax act, Harsh Roongta said, "Under Section 24, a first time home buyer can claim tax exemption on up to Rs 2 lakh income under home loan interest payment component. But, to avail of this tax exemption, the income tax assessee or any of the family members of his family should be residing in that house."

Tax benefit claim under Section 80EEA

On income tax benefit available under Section 80EEA of the Income Tax Act for first time home buyers, Harsh Roongta said, "A first time home buyer can claim tax benefit of up to Rs 1.5 lakh under Section 80EEA provided the Stamp Duty value of residential property is up to Rs 45 Lakh. Apart from this, the home loan approval should be dated from 1st April 2019 to 31st March 2022."

Ravi Singhal of GCL Securities said that there are five conditions that the income tax assessee needs to fulfill while claiming the income tax benefit under Section 80EEA:

• Stamp duty value of property should be up to Rs 45 Lakhs;
• Loan sanction date should be between 1st April 2019 to 31st March 2022;
• Assesse should not own any residential property till sanction of loan;
• Should not be claiming any amount under income tax section 80EE; and
• Loan should be borrowed from Financial Institution only.

Source: ZeeBusiness

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Tax Computation for Asstt. Year 2021-22

Sec 115BAC – New Regime for Tax Computation

The government has been looking at avenues to make income tax provisions simplified and lessen dependencies on consultants. A step towards it came through the introduction of Sec 115BAC- Tax on Income of Individual/ HUF in the Budget of 2020, as an alternate to the existing regime.

Effective AY21-22 (FY 20-21), every individual and HUF has the option to either continue with existing tax rate where exemptions and deductions can be claimed or opt for the “new tax regime”; where the rates are lower but there are no exemptions or deduction. With some cost-benefit analysis taxpayers can now decide their avenue of savings and investments, i.e. whether to opt for taxable but highly rewarding schemes or tax-saving schemes with nominal return options.

Following are the tax rates applicable for AY 21-22:

 The Assessee opting for New Scheme shall not be able to claim the following:

In case of a salaried employee:

• Standard Deduction
• Professional tax paid
• Entertainment allowance (in case of govt employees)
• Leave travel Concession
• House Rent Allowance
• Special Allowances provided u/s 10(14) except:
• Transport allowance granted to a handicapped employee
• Conveyance allowance
• Any allowance granted to meet the cost of travel on tour or on transfer
• Daily allowance

If Assessee has Income from Business and Profession:

• Exemption to SEZ u/s. 10AA
• Deductions u/s. 32AD, 33AB, 33ABA, 35(1)(ii),35(1)(iia), 35(1)(iii), 35(2AA), 35AD and 35CCC
• Additional depreciation u/s. 32(iia)
• Carried forward or unabsorbed depreciation of earlier years

All Taxpayers:

• Interest paid on home loan on self-occupied house
• All deductions provided under Chapter VIA (except 80CCD(2) and 80JJAA)

Benefits still available under new regime:

• Interest received on post office saving account u/s 10(15)(i) Max Rs. 3,500
• Gratuity received from employer Maximum Rs. 20 Lacs
• Amount received from LIP on maturity u/s 10(10D)
• Interest on PPF under Sec 10(11)
• Employer contribution in NPS or EPF upto 12% of salary & Interest on EPF upto 9.5% P.A.
• Interest and maturity amount of PPF or Sukanya Smriddhi Yojna
• Pension commutation

How to choose whether to opt for Old or New Regime?

A comparison needs to be done on case to case basis, in order to decide which regime to opt for. The following table is an attempt to broadly classify which regime should be opted based on the income of the assessee:

Tax Payable (in Rs.)

Annual Income Old Scheme

(with exemptions)* Old Scheme

(without exemptions) New Scheme

Up to Rs. 2.5L –

Rs. 5L –

Rs. 7.5L – 65,000 39,000

Rs. 10L 65,000 117,000 78,000

Rs. 12.5L 117,000 195,000 130,000

Rs. 15L 195,000 273,000 195,000

*Considering exemption under Sec 80C, 80CCD(1B), Sec 80D and HRA of ~ Rs. 2.6L

Well the applicability of “new regime” may intuit dilemma and confusion amongst the Assessee; but with our next article, we shall endeavor to break down the section into simplified questions/ answers for better understanding.

Source : TDSMan

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Taxpayer must complete 7 Tax Task before 31st March, 2021

7 tax tasks to complete before 31 March 2021

There are certain tax tasks which we need to complete by the 31st March 2021. Here we are taking a look at some of them.

As we are approaching the end of the financial year 2020-21, there are certain tax tasks which we need to complete by the 31st March 2021. Let us discuss those tasks in detail.

1. Submitting the details of salaries received from earlier employer

If you are a salaried person and were employed with more than one employer in the current year, please furnish details of your salaries from the previous employer/s in Form No. 12B, to your current employer immediately so as to ensure proper tax deductions on your aggregate salary earning is made by the current employer. In case you fail to do so, you may get a shock at the time of filing of your income tax return (ITR) finding that you have huge tax (along with interest) to pay. This happens because all the employers would have given the benefits of initial exemption as well as various deductions, resulting into deduction of lower tax on aggregate basis.

2. Submit the proof of expenses to your employer

There are certain exemptions which are available to employees on expenses actually incurred. For items like House Rent Allowance (HRA) and Leave Travel Assistance (LTA) unless you submit the necessary documents, the employer will treat these allowances as taxable and deduct tax thereon. If you fail to submit the documents, you can still claim these items as exempt and claim the refund for the excess tax while filing your ITR.

3. Verify quantum of deductions available from your bank records

Most of us use ECS debit facility for items like life insurance premium, SIP for equity linked saving schemes (ELSS), home loan EMIs etc. It might have happened that, due to any reason, the ECS might not have been debited. Likewise, even in case you have issued a cheque for such items, the same might not have been yet presented to the bank. So please verify the details from your bank statement and cross check that for all the eligible deductions factored into by you amounts have been debited in your bank account. In case some items have not been debited, please ensure that either the payment is made for the same or investments are made in any alternate product available before the year end.

4. Payment of advance tax

You are required to pay advance tax on your current year’s income, in case your net tax liability for the year after reducing the tax deducted at source from all the sources exceeds ten thousand rupees. Senior citizens not engaged in any business or profession are not required to pay advance tax. Though advance tax has to be paid in four instalments in the ratio of 15%, 30%, 30% and 25%, but in case you miss all the four instalments, at least pay the same by 31st March, as advance tax paid by 31st March is also treated as advance tax. Failure to pay adequate advance tax attracts punitive interest.

Even if you are salaried and tax has been deducted from your salary, you still have to pay advance tax on any other income like rent, interest, dividend, capital gains etc. in case the aggregate tax liability exceeds Rs 10,000. For self-employed where the tax deducted is not sufficient enough to cover the aggregate tax liability, they also have to pay advance tax. Even in cases of interest income where the tax is deducted at source at the rate of 10%, you may still have to pay advance tax in case you are in a higher tax slab.

5. Minimum contribution to PPF account and NPS account

In case you have a PPF account either in your own name or in the name of children or spouse, you have to contribute minimum Rs 500 every year in each account to avoid the account becoming dormant. A dormant account can be made active by payment of a nominal amount and contribution of Rs 500 for each year of default. Likewise, in case you have an NPS account, you need to deposit minimum of Rs 500 every year in your account failing which the account gets frozen. A frozen account can be reactivated by paying a nominal penalty and one time contribution of Rs 500.

6. File your pending income tax return for financial year 2019-2020

In case you have not yet filed your income tax return for the last financial year, i.e. 2019-2020, you have the last chance to file it by 31st March 2021, that too with penalty.

7. Book long-term capital gains on listed shares and equity mutual funds schemes upto Rs 1 lakh

Section 112A long-term capital gains on listed equity shares and equity-oriented schemes are fully exempt upto Rs 1 lakh and the balance is taxed @10%. So you can book long-term capital gains upto one lakh of rupees before march 31st March, 2021 in case not yet booked. In case you have made these investments for long term, you may decide to sell the shares the same day and buy the same next day or carry out these transactions with different brokers on the same day. The purchase and redemption of the units can be done the same day. By this strategy you can minimise your overall tax liability.

Source : Financial Express

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