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

Read More

Tax Calculator for Salaried Employee for Fin. Yr. 2020-2021

The Finance Minister announced the Budget 2021 and mentioned that No Any Changes in Income Tax structure for Fin. Year 2021-2022. That's why the calculation of Income Tax for Salaried Employee is no change as Fin. Yr. 2020-21. 

To Calculate Tax Click Here 

Read More

e-Book on Income Tax Computation.

This e-book on Income Computation and Disclosure Standards published by Mr. CA. Tejas K. Andharia. This e-book is an attempt to summarize the relevant provisions of Income Computation and Disclosure Standards in comparison with provisions of Accounting Standards. Relevant sections of  Income Tax Act, 1961 are also discussed at appropriate places.  This e-book will be helpful not only to practicing CAs and  Income  Tax Practitioners, but also to students of professional courses like CA/CS/CWA.

Regarding this e-Book your valuable suggestions, criticism and guidance are most welcome from readers and for this you can write on email tejasinvites@gmail.com

Read More

Clarifications on the Direct Tax Dispute Resolution Scheme, 2016

F.No.142/11/2016-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

(TPL Division)

Clarifications on the Direct Tax Dispute Resolution Scheme, 2016

The Direct Tax Dispute Resolution Scheme, 2016 (hereinafter referred to as ‘the Scheme’) incorporated as Chapter X of the Finance Act, 2016 provides an opportunity to tax payers who are under litigation to come forward and settle the dispute in accordance with the provisions of the Scheme. The provisions of the Scheme have been clarified vide Circular No.33 of 2016 dated 12.09.2016. Subsequently, further queries have been received from the field authorities and other stakeholders. The Central Government has considered the queries and decided to clarify the same in the form of questions and answers as follows.-

Question No.1: There are cases where the Assessing Officer (AO) has made addition on account of provisions under section 9 of the Income-tax Act, 1961 (the Act), which was later retrospectively amended, especially with regard to royalty and fees for Technical Services.  What would be the position of the case of an assessee vis-à-vis the Scheme, where an addition has been made by AO before such retrospective amendment? Whether the case would be treated as one being in consequence of retrospective amendment and accordingly whether the assessee would be eligible to avail the benefit of the Scheme?

Answer: As per clause (g) of sub-section (1) of section 201 of the Finance Act, 2016, ‘specified tax’ includes a tax which is validated by an amendment made to the Income-tax Act with retrospective effect. Hence, a case where an addition has been made by AO before such retrospective amendment and the addition has got validated by such amendment, is eligible to avail the Scheme provided a dispute in respect of such addition/tax is pending as on 29.02.2016.

Question No.2: There are assessees who have filed writ petitions in Courts against the constitutional validity of retrospective amendment to the Income-tax Act. Can the assessees who have filed such writs in Courts still contest the constitutional validity of such amendments, even after availing the benefit under the Scheme?

Answer: As per section 203(3)(a) of the Finance Act, 2016, where the declaration under the Scheme is in respect of specified tax and the declarant has filed any writ petition before the High Court or the Supreme Court against any order in respect of the specified tax, he shall withdraw such writ petition with the leave of the Court wherever required and furnish proof of such withdrawal along with the declaration filed under the Scheme. It is hence clear that if the assessee avails the Scheme, he cannot contest the constitutional validity of retrospective amendment in the High Court or Supreme Court.

Question No.3: There are cases where assessees are in different stages of appeal for different years on similar issue(s). In such a situation, if an assessee avails the benefits of the Scheme for a particular year/years, whether the revenue would withdraw its appeal against the assessee, in the year(s) in which the assessee has got the relief? If such is the case, at what stage would the revenue withdraw its appeal?

Answer: In respect of ‘tax arrear’, the Scheme is available only if dispute is pending before Commissioner (Appeals). Hence the question of withdrawal of appeal by revenue does not arise in such cases.

In respect of ‘specified tax’, section 203(3) of the Finance Act, 2016 states that the declarant before opting for the said Scheme has to withdraw his pending appeal or writ petition. It also states that in a case where the declarant has initiated or given notice for proceeding of arbitration, conciliation or mediation, he shall withdraw such notice or claim prior to filing of the declaration under the Scheme. The Scheme nowhere speaks of withdrawal of any appeal or proceeding by the revenue. Hence, the question of withdrawal of appeal by the revenue owing to opting of the Scheme by the assessee in some other year(s) on a similar issue does not arise.

Question No.4: Can the tax payments under the Scheme be allowed to be made in instalments, as granted under IDS, 2016?

Answer: Since, the date of making payment under the Scheme is provided in Section 204 of the Finance Act, 2016 itself, the tax payments under the Scheme cannot be allowed to be made in instalments.

Question No.5: Whether an assessee is eligible to make a declaration in respect of ‘specified tax’ where a dispute was pending as on 29.02.2016 in form of a reference made by AO before the Committee constituted by CBDT on 28.08.2014 under section 119 of the Act, but the final order determining the ‘specified tax’ thereon was passed after 29.02.2016, and the appeal/writ/arbitration/conciliation/ mediation etc. in respect of the same was filed before commencement of the Scheme i.e. 01.06.2016?

Answer: As per the provisions of the Scheme, a declarant may make a declaration in respect of a ‘specified tax’ for which a dispute was pending as on 29.02.2016. The term ‘dispute pending as on 29.02.2016’ refers to the tax determined under the Income-tax Act or the Wealth-tax Act which has been disputed by the assessee. In the above referred case, the specified tax has been determined by AO after 29.02.2016; hence the question of dispute pending in respect of such tax as on 29.02.2016 does not arise. Therefore, the assessee in the present case is not eligible to avail the Scheme.

Question No.6: Whether a penalty order under section 271C or 271CA of the Income-tax Act for which an appeal is pending with CIT(Appeals) is covered under the Scheme?

Answer: As per the Scheme, ‘tax arrear’ in case of penalty is linked to the total income finally determined. Since, penalty order under section 271C or 271CA is not linked to the assessment proceedings, such orders are not covered under the Scheme.

Question No.7: Whether the cases in which, consequent upon search, assessments have been completed under section 143(3) of the Act shall be eligible to avail the Scheme?

Answer: As the search cases are not eligible for the Scheme, an assessment made consequent to search under section 143(3) read with section 153B of the Act is not eligible to avail the Scheme.

Question No.8: Clause(5) of section 203 of the Finance Act, 2016, refers to deemed revival of ‘consequences’ under the Income-tax Act or the Wealth-tax Act, as the case may be, under which proceedings against the declarant are or were pending. There is no explicit reference to deemed revival of ‘proceedings’. Please clarify?

Answer: Clause (5) of section 203 provides that in a case where the conditions specified therein are not fulfilled, it shall be presumed as if the declaration was never made under the Scheme; therefore, in case of rejection of declaration, the proceedings pending against the assessee before issuance of certificate under 204(1) shall stand revived.

(Dr. T.S. Mapwal)

Under Secretary to the Government of India

Copy to:

1. The Chairperson, Members and all other officers in CBDT of the rank of Under Secretary and above.

2. All Pr. Chief Commissioners/ Pr. Director General of Income-tax – with a request to circulate amongst all officers in their regions/ charges.

3. Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pr. DGIT (L&R).

4. CIT (M&TP), CBDT.

5. Web manager for posting on the departmental website.

Read More

Daily Exchange Limit of Notes Reduced to Rs. 2000

The Central Government takes several decisions to facilitate farmers, small traders, Group ‘C’ Employees of Central Government including equivalent levels in the Defence and Para Military Forces, Railways and Central Public Sector Enterprises in the aftermath of the cancellation of the legal tender character of the old Rs. 500 and Rs. 1000 notes; 

Also decides to reduce the limit of exchange of old Rs. 500/- and Rs. 1000/- notes across the counter in banks from Rs. 4500/- to Rs. 2000/-with effect from 18th November, 2016.

In the aftermath of the cancellation of the legal tender character of the old Rs. 500 and Rs. 1000 notes, the Government of India has been receiving several suggestions including those from the State Governments. The Government has considered various suggestions and the following decisions relating to certain operational aspects of this scheme have been taken: 

i. We are now at the beginning of the Rabi season. The farmers need various inputs for their agricultural activities. While the Government is keen on promoting payment through the banking or digital system, it is felt necessary to make some quantum of cash available with farmers to meet various expenses in connection with agricultural operations. It has, therefore, been decided that farmers would be permitted to draw upto Rs. 25000/- per week in cash from their KYC compliant accounts only. These cash withdrawals would be subject to the normal loan limits and conditions. This facility will also apply to the Kisan Credit Cards (KCC). 

ii. Farmers are currently selling their produce from the Kharif season in the APMC markets/mandis. The farmers who receive such payments in their bank accounts through cheque/ RTGS will be permitted to draw up to Rs. 25000/- per week in cash. These accounts will have to be KYC compliant. This facility will enable the farmers to meet their various expenses connected with agriculture. This will also infuse lot of liquidity into the rural sector. 

iii. Traders registered with APMC markets/mandis will be permitted to draw up to Rs. 50,000/- per week in cash from their KYC compliant accounts as in the case of business entities. This will enable these traders to pay wages and facilitate easy loading, unloading and other activities at the mandis. 

iv. For payment of crop insurance premium, States fix time limits depending on their local requirements and conditions. Consequently, the last date for payment expires on different dates. It has now been decided to extend the last date for payment of crop insurance premium by 15 days. 

v. While encouraging families to incur wedding expenses through cheques or digital means, it has been decided to permit families celebrating weddings to draw up to Rs. 2,50,000/- in cash from their own bank accounts. These accounts have to be necessarily KYC compliant. The amounts can be drawn only by either of the parents or the person getting married. Only one of them will be permitted to draw this amount. This limit of Rs. 2,50,000/- will apply separately to the girl’s family and the boy’s family. The person drawing such amount has to furnish the PAN details. Further, a self-declaration will have to be submitted by the person to the effect that only one person from his/her family is drawing the amount. It is expected that members of the public will fully cooperate to ensure that the above guidelines are adhered to. Any misuse of this facility will invite appropriate action based on the self-declaration and other details. 

vi. At present, over the counter exchange of old Rs. 500/- and Rs. 1000/- notes is limited up to maximum of Rs. 4500/- per person. Reports have been received that the same persons are going back to the counter again and again, thereby cornering the facility and depriving many other people from exchanging old notes. There are also reports of organized groups indulging in such practices to convert their black money into white. It is now expected and desirable that people put their old notes into their bank accounts. However, for convenience of the people who may be on temporary visit either for work or otherwise, it has been decided to reduce this limit of exchange of old Rs. 500/- and Rs. 1000/- notes across the counter in banks from Rs. 4500/- to Rs. 2000/-. This facility will be available only once per person. The reduced limit of Rs. 2000/- will take effect from 18th November, 2016. 

vii. Central Government employees up to Group `C’ including equivalent levels in the Defence and Para Military Forces, Railways and Central Public Sector Enterprises will be given an option to draw salary advance up to Rs. 10,000/- in cash. This amount will be adjusted in their salary for November, 2016. It is expected that this decision will ease the pressure on the banks. 

Read More

Salaried Employee Know your Tax Liability for Asstt. Year 2017-18.

Are you Central Government, State Government or Public Sector Employee earn monthly salary but, not understand how to deduct tax as TDS from Salary each month.  To know Income Tax Basics for Salaried Individuals, which are as below:

• What Income you taxed for?
• How much tax do you have to pay?
• What is Form 16?
• What is Form 26AS?
• How can you bring down taxable income with deductions?
• Do you have to file an Income Tax Return?

Before, Tax Calculation Salaried Employee must know about Salary Component, monthly pay will show your Gross Salary and Deductions and then after Home Take Salary.  The major factor of Salary are as follows:

• Basic Salary (including Grade Pay or other)
• House Rent Allowances
• Conveyance Allowance
• Special Allowance
• Traveling Allowance
• City allowances
• Other Allowances etc.

Now the big Question is that, How much Tax do you have to pay?

Add you all Income from the above heads. This is your Gross Income and from them deduction under section 80 are allowed to be claimed for exemption.

Know you Tax Liability for Asstt. Year 2017-18 (Click Here)

Read More

Download Standard Handbook on Income Computation and Disclosure

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income]tax Act, 1961 "the Act" and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Download Standard Handbook (Click Here)

Read More

Computation of Income and Disclosure Standards u/s. 145 notified by Government w.e.f. 1st April, 2015

Recently Government notified Computation of Income and Disclosure Standards for purpose of Section 145, w.e.f. 1st April, 2015.  This notification described detailed information about method of Accounting and Income Computation and Disclosure Standard-I relating to Accounting Policies.

The Central Government hereby notifies the income computation and disclosure standards as specified in the Annexure to be followed by all assessees, following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profit and gains of business or profession” or “ Income from other sources”. This notification shall come into force with effect from 1st day of April, 2015, and shall accordingly apply to the assessment year 2016-17 and subsequent assessment years.

Income Computation and Disclosure Standard I relating to accounting policies

Preamble

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts.

In the case of conflict between the provisions of the Income-tax Act, 1961 (‘the Act’) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent.

Scope

1. This Income Computation and Disclosure Standard deals with significant accounting policies.

Fundamental Accounting Assumptions

2. The following are fundamental accounting assumptions, namely:—

(a) Going Concern

    “Going concern” refers to the assumption that the person has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the business, profession or vocation and intends to continue his business, profession or vocation for the foreseeable future.

(b) Consistency

    “Consistency” refers to the assumption that accounting policies are consistent from one period to another;

(c) Accrual

    “Accrual” refers to the assumption that revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the previous year to which they relate.

Accounting Policies

3. The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by a person.

Considerations in the Selection and Change of Accounting Policies 

4. Accounting policies adopted by a person shall be such so as to represent a true and fair view of the state of affairs and income of the business, profession or vocation. For this purpose,

   (i)  the treatment and presentation of transactions and events shall be governed by their substance and not merely by the legal form; and

   (ii) marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other Income Computation and Disclosure Standard. 

5. An accounting policy shall not be changed without reasonable cause.

Disclosure of Accounting Policies

6. All significant accounting policies adopted by a person shall be disclosed.

7. Any change in an accounting policy which has a material effect shall be disclosed. The amount by which any item is affected by such change shall also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact shall be indicated. If a change is made in the accounting policies which has no material effect for the current previous year but which is reasonably expected to have a material effect in later previous years, the fact of such change shall be appropriately disclosed in the previous year in which the change is adopted and also in the previous year in which such change has material effect for the first time.

8. Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item.

9. If the fundamental accounting assumptions of Going Concern, Consistency and Accrual are followed, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact shall be disclosed. 

Transitional Provisions

10. All contract or transaction existing on the 1st day of April, 2015 or entered into on or after the 1st day of April, 2015 shall be dealt with in accordance with the provisions of this standard after taking into account the income, expense or loss, if any, recognised in respect of the said contract or transaction for the previous year ending on or before the 31st March, 2015. 

Download Notification (Click Here)

Read More

Company Law Settlement Scheme, 2014 (CLSS-2014) extended to 31st Dec., 2014

Ministry of Corporate Affairs, Government of India has issued General Circular No. 44/2014 dated 14th Nov., 2014 regarding extension of date of Company Law Settlement Scheme, 2014 i.e. CLSS-2014.

In continuation to the Ministry's General Circular No. 34/2014 dated 12.08.2014 and 40/2014 dated 15/10/2014 on the subject cited above, this Ministry has, on consideration of requests received from various stakeholders, has decided to extend the Company Law Settlement Scheme (CLSS-2014) up to 31st December, 2014.

This issues with the approval of the competent authority.

The General Circular regarding Extension of dated for Company Law Settlement Scheme (CLSS-2014) is as under :

Read More

Salaried Employee, Individuals how to compute Income Tax for Asstt. Year 2015-16 ?

Efficient tax planning enables you to reduce tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions & rebates. Tax Planning is NOT tax evasion which is illegal under laws. It involves planning of income & investments. Tax Planning can be practiced easily. Often staff gives estimated declaration at Fin.Year starting to minimize tax liabilities but could not save till Fin. Year end; and faces burden in last months. Better start investing from the beginning of Fin. Year to get interest & appreciation from April.

Tax deduction on monthly basis (employer's corner): Normally employer estimates total income of employee & calculates I-Tax, estimated tax is to be divided by 12 months & avg tax from monthly salary is to be deducted. Hence raise saving plans in advance considering the pay hike & send the correct proofs to payroll. Ensure the document delivery within the pay roll's time frame.

If employee resigns: An employee resigns or otherwise leaves the service, only the salary due and payable up to the date on which he leaves service shall be considered and tax shall not be deducted from the future salary.

 Notes on tax exemptions:

HRA-House Rent Allowance: exempt u/s 10 (13A):If you are occupying a rented residential accommodation, the amount of HRA exempted to the lowest of:

1. Actual HRA 
2. Rent paid minus 10% of basic salary 
3. 40 % of basic salary (50 % for Mumbai, Kolkata, Delhi & Chennai)

Normally employer considers exemptions on original rent receipts. Receipts should be signed by the owner with name & address of the property. Receipt should be of the current FY. Generally receipts should be for the current employer & exemptions for the period not with current employer may not be considered. Rent agreement alone does not constitute proof of payment. Cir No.8/2013/10.10.2013 issued by CBDT says that it is mandatory for the employee to report PAN of the landlord to the employer if rent payment exceeds Rs One lakh per year.

Paying rent to parents or relatives: If you want to pay rent to parents or any relatives whom you are staying with. You will need to treat them as landlords. Request the owner (which will be your parent/relative) to declare it in their tax return.

If property is self occupied, employee cannot claim both i.e. HRA exemption & loss from house property where the property is in same city."

Uniform Allowance: exempt u/s 10(14) ii: To meet the expenditure incurred on purchase or maintenance of uniform to be worn during performance of duty.

Transport Allowance: exempt u/s 10(14) ii:

• Rs 800 monthly granted to an employee to meet his expenditure for commuting between the place of residence & duty.
• Rs.1600 monthly granted to physically disabled employee for purpose of commuting between place of residence & duty."

Children Education Allowance: exempt u/s 10(14) ii:

• Children education allowance: Rs.100 per month per child up to two children.
• Allowance granted to meet hostel expenses on employee’s child: Rs.300 per month per child up to two children."

Reimbursement of Medical Bills u/s 17(2): Exempted for self & dependent family up to Rs 15000 per annum against original medical bills. Bills of cosmetics & toiletries not allowed. Receipt should be for the period with the current employer only & exemptions for the period not with current employer may not be considered. Authenticity of the bills will be employee's responsibility. If you are paid a medical allowance instead of reimbursement i.e. without bills, then same is taxable.

Leave Travel Allowance-LTA: exempt u/s 10(5):
Exempted economy class train/ air / recognized public transport fare of family to any destination in India, by shortest route. LTA can be claimed twice in block of 4 years. The current block is 1-1-2014 to 31-12-2017. For claim, it is must to provide originals tickets & boarding passes. Employee should be on paid leave during travel period. LTA can be carry forwarded if it has not used, it can be brought forward & claimed in 1st year of next block.

GRATUITY: exempt u/s 10(10):

• Any Death-cum-Retirement gratuity to Govt. employees; wholly exempt.
• Any gratuity received by the employees covered under Payment of Gratuity Act, 1972. Least of the following is exempt:- 
• 15 days salary (7 days in case of seasonal employment) for each completed year of service or part in excess of 6 months. 
• Rs. 10 Lakh Or iii) Amount of gratuity actually received.
• Any other gratuity, (not covered under (a) or (b)) least of the followings is exempt:- 
• Rs 10 Lakh 
• Half month’s salary for each completed year of service Or iii) Amount of gratuity actually received."

Leave Encashment: u/s 10 (10AA) :Leave Encashment during service is fully taxable in all cases. Leave Encashment on Retirement is exempted from tax;

• Govt. Employees; fully exempt
• Non-government employees; the exemption is to be limited to a maximum of 10 months of leave encashment, based on last 10 months average salary subject to a limit of Rs 3 lakhs.

Retrenchment Compensation: u/s 10 (10B) : The retrenchment compensation received by a workman is exempted; provided that it does not exceed the sum calculated on the basis provided in Sec.25F(b) of Industrial Disputes Act, 1947 or any such amount as is specified by the Central Govt. by a Notification, whichever is less.

• Compensation calculated @ 15 days average pay for every completed year of continuous service or part there of in excess of 6 months.
• The maximum exemption is Rs 5 lakhs where retrenchment is on or after 1-1-97

Voluntary Retirement Scheme-VRS: u/s 10 (10C):
Any amount received at the time of voluntary retirement is exempt to the extent such amount does not exceed Rs. 5 lakhs, provided the scheme of such voluntary retirement is in accordance with the guidelines prescribed under rule 2BA of Income Tax Rules 1962. If an exemption has been allowed under this section for any assessment year, no exemption there under is allowable in relation to any other assessment year.

Saving Bank Interest: 

From the year 2012-2013 interest up to Rs 10,000 is allowed as deduction.

Taxable Perquisites:
Such as rent free accommodation, company provided car, concessional education, employee stock option plan, free club membership, company provided credit card, gift vouchers, meal coupons, hotel stay beyond 15days are taxable.

PF amount is withdrawn before five years of continuous service; it may be taxable in the hands of the individual.

Tax on employment:
Professional Tax deduction u/s 16iii - Professional tax paid by employee is to deducted from the income. Professional tax firstly include in gross salary then allowable as deduction limited to 2500/- u/s 16(iii) as deduction from salary.

Interest on housing loan for self occupied residence u/s 24:
If loan taken before Apr 1, 1999 exemption limited to Rs 30,000 per year. If the loan taken after Apr 1, 1999 exemption limit to Rs 200,000 per year ( If loan taken first time then interest exemption limit extended up to 2.5 lakh fin bill 2013 ). There is no limit if the house is rented out. This exemption is available on accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether paid it or not. In case of self occupied property, employee cannot claim both i.e. HRA exemption as well as loss from house property where the property is in the same city. Require provisional certificate from the bank with specifying the Interest, Principal & pre-EMI interest separately.

If you rented out your house, enter the income / loss from the house after deducting property tax & maintenance expenses.

More about deductions under chapter VI A: 

Max limit u/s 80C Rs 1.5 lakh 

Provident Fund (PF) & Voluntary Provident Fund (VPF): PF is deducted from your salary, employee’s contribution is covered as investment u/s 80C. Additional contributions can be made through VPF. Interest earned treated as tax free.

Life Insurance Premiums (LIC): Any amount paid towards LIC or any other Insurance company for yourself, spouse or children can also be included in section 80C deduction. Premium paid for ULIP will also be treated as premium paid for life insurance policies.

Public Provident Fund (PPF): Among all the assured returns small saving schemes, PPF is one of the best. Current rate of interest is 8.7% tax-free and the normal maturity period is 15 years. Minimum contribution is Rs 500 and maximum is Rs 1.5 Lakh.

National Savings Certificate (NSC): Is a 5 year small savings instrument. Interest is compounded half-yearly. Interest accrued every year is liable to tax hence to be included as income but the interest is also deemed to be reinvested & thus eligible u/s 80C deduction.

Home Loan Principal Repayment, Stamp Duty and Registration Charges for a home Loan: The Equated Monthly Installment (EMI) consists of two components i.e. Principal & Interest. The principal component is deductible u/s 80C. The interest component comes u/s 24. Amount of stamp duty & registration when buying a house can be claimed as deduction u/s 80C in the year of house purchase.

Tuition fees for 2 children: Children’s tuition fee can be claimed as deductions u/s 80C. Expenses, such as transport, library, hostel, development fees or donation, are not covered. The deduction can be claimed only for full-time courses including pre-nursery & playschool. Part-time, distance learning, private tuitions & coaching classes are not covered. Each parent can claim deduction for the tuition fees paid for up to 2 children each. This deduction can be availed of on the basis of actual payment, irrespective of the period fee may pertain.

Unit Linked Insurance Plan (ULIP): It covers life insurance with benefits of equity investments. Amount received at maturity, survival benefits, withdrawal in insurance policies are tax free and fully exempted u/s 10 (10D).

Equity Linked Savings Scheme (ELSS): There are some mutual fund schemes specially created for offering you tax savings, and these are ELSS. The investments that you make in ELSS are eligible for deduction u/s 80C.

5-Year bank fixed deposits (FDs): Declared Tax-saving fixed deposits of scheduled banks with tenure of 5 years eligible for deduction.

5-Year post office time deposit (POTD): Similar to bank fixed deposits. Available for various duration of 1 to 5 year, only 5year POTD qualifies for tax saving u/s 80C. The interest rate is compounded quarterly but paid annually. Interest is entirely taxable.

Pension Funds or Pension Policies u/s 80CCC: Investment in pension funds up to Rs 1.5 lakh can be claimed as deduction u/s 80CCC. However the total deduction u/s 80C and 80CCC can not exceed Rs 1.5 lakh.

Infrastructure Bonds: These are also called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in u/s 80C deductions.

NABARD bonds:  Investment in notified bonds issued by National Bank for Agriculture and Rural Development (NABARD)

Senior Citizen Savings Scheme 2004 (SCSS): Is the good scheme among all small savings schemes but only for Sr. citizens. Current interest rate is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on the deposits won’t earn any further interest. Interest is chargeable to tax.

80CCD: Notified Pension Scheme (NPS): Contributing a part of your income towards the new pension scheme. From the AY 2012-13, the employer’s contribution are not included in overall limit of Rs 1.5 lakh provided contribution does not exceed 10 % of salary.

80CCE: Maximum exemption up to 1.5 lakh: Investments in PF, VPF, PPF, Employee contribution in NPS, Insurance premium, Housing loan principal repayment, NSC, ELSS, Long term bank fixed deposit, Post office term deposit, etc. are deductible from the taxable income. There is no limit on individual items, for example all 1.5 lakh can be invested either in NSC or PPF etc.

More about deductions under chapter VI-A  

80D: Medical insurance premium & health insurance plans: Premium is exempt up to Rs 15,000 for self, spouse and children and Rs 15,000 for parents. If the premium of a dependent who is Sr. citizen an extra Rs 5,000 can be claimed.

80DD: Deduction of medical treatment of handicapped dependents limited to Rs 50,000; if disability above 80% then Rs 1 lakh.

80DDB: Deduction of medical treatment for specified ailments or diseases for the assessee or dependent can be claimed up to Rs 40,000 per year. If the person being treated is a sr.citizen, the exemption up to Rs 60,000. But any amount received under Medical Insurance will be reduced from the amount of deduction allowed. The diseases & ailments specified under rule 11DD:- 

1. Neurological diseases being Dementia, Dystonia, Musculorum deformans, Motor neuron disease, Ataxia, Chorea, Hemiballisumu, Aphasia & Parkinsons disease 
2. Cancer
3. AIDS 
4. Chronic renal failure 
5. Hematological disorders: i. Hemophilia & ii. Thalassaemia.

80E: Interest repayment on education loan taken for higher education for self & dependents is completely tax exempted. Deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit. To claim, certificate or proof from the bank specifying the said loan is an Educational Loan and interest paid in the current year by you, i.e. the loan borrower. Interest repayment is tax exempt from the 1st year of repayment up to a maximum of 8 years. There is no exemption for principal repayment.

80G: Donations to certain charities are tax exempted: Some NGO, trusts are exempt up to 50%, whereas govt funds are 100%.

80GG: If you are not receiving HRA but living in rented house, an exemption is available. This will be calculated as minimum of (25% of total income or rent paid less 10% of total income or Rs 24000 per year) provided you/your spouse/children do not own any residential property either at the place of your work or residence, or if your spouse/children own a residential property at any other place (but not the assessee), then you can claim deduction for the rent paid as per sec 80GG under Income Tax Act, 1961.

80U: Permanent Physical Disability: Including blindness, an exemption Rs 50000 per year, however, if the assessee suffers from severe disability, the deduction shall be Rs 1 Lakh. ‘Severe disability’ means disability of 80% or more.

80CCG: Rajiv Gandhi Equity Savings Scheme (RGESS): The exemption available for investment in stock markets i.e. direct equity. Available only to those with gross income less than 12 lakhs & only for first time investors in stock market. Exemption limited to 50% of investment subject to maximum of Rs 50,000 invested. Such investments are locked-in for 3 years.

87A: A person whose income is up to Rs 5 lakhs will get a tax credit of Rs 2000/-. The person will get a rebate of Rs 2000/- under newly inserted section 87A of the act. Means, tax payers in Rs 2 to 5 lakh slab will get the rebate and will claim this rebate while filling the returns & will reduce their tax liability from FY 2013-14.

Common incorrect practices during return filling:

1. All the communication by the tax department is now done via email and mobile. Many individuals make a mistake of providing email IDs which are either not in use or discontinued due to inactivity or change of jobs. Hence make sure that a valid & functional email ID and mobile, which you regularly access is to be provided in the return.
2. You must provide correct bank a/c number along with IFSC/MICR code on your return form. This helps tax department in processing the refund. Not providing the correct information may treated the return as defective."

Read More

Dis-allowance of Expenses u/s. 14A - Clarification - IT

Department of Revenue CBDT has issued a circular - Clarification regarding dis-allowance of expenses under section 14A of the Income-Tax in cases where corresponding exempt income has not been earned during the Financial Year.

This circular says that-

Section 14A of the Income Tax Act, 1961("Act") provides for dis-allowance of expenditure in relation to income not "includible" in total income.

A controversy has arisen in certain cases as to whether disallowance can be made by invoking section 14A of the Act even in those cases where no income has been earned by an assessee which has been claimed as exempt during the Financial Year.

The matter has been examined in the board.  It is pertinent to mention that section 14A of the Act was introduced by the Fiance Act, 2001 with retrospective effect from 01.04.1962.  The purpose for introduction of section 14A with retrospective effect since inception of the Act was clarified vide Circular No. 14 of 2001 as under:

"Certain incomes are not includible while computing total income, as these are exempt under various provisions of the Act.  There have been cases where deductions have been claimed in respect of such exempt Income.  This in effect means that the tax incentive given by way of exemptions to certain categories of income is being used to reduce also the tax payable on the non-exempt income by debiting the expenses incurred to earn the exempt income against taxable income.  This is against the basic principles of taxation whereby only the net income, i.e. gross income minus the expenditure, is taxed.  On the some analogy, the exemption is also in respect of the net Income.  Expenses Incurred can be allowed only to the extend they are relatable to the earning of taxable Income"

Thus, legislative intent is to allow only that expenditure which is relatable to earning of Income and it therefore follows that the expenses which are relatable to earning of exempt income have to be considered for disallowance, irrespective of the fact whether any such income has been earned during the financial year or not.

The above position is further clarified by the usage of term "includible" in the Heading to section 14A of the Act and also the Heading to Rule 8D of I.T.Rules, 1962 which indicates that it is not necessary that exempt income should necessarily be included in a particular year's income, for disallowance to be triggered.   Also, section 14A of the Act does not use the word "income of the year" but "Income under the Act".  This also indicates that for invoking disallowance under section 14A, it is not material that assessee should have earned such exempt income during the financial year under consideration.

Thus, in light of above, Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act hereby clarifies that Rule 8D read with section 14A of the Act provides for disallwoance of the expenditure even where taxpayer in a particular year has not earned any exempt income.

Download Full Circular (Click Here)

Read More

What says Tax Rule before investment declaration ?

KNOW THE TAX RULES BEFORE MAKING INVESTMENT DECLARATION

Many salaried individuals are in the process of finalizing their tax-saving investments and other deductions they intend to claim this financial year, as most companies ask their employees to file their investment declaration along with proof by January. If you fail to submit the details along with the proof, be prepared for huge cuts from the monthly salary. The company will deduct applicable tax deducted at source (TDS) from your salary in the remaining months in the financial year, though you have the option of claiming a refund later from the Income Tax department. Here's a list of some new tax rules and deductions you need to be aware of while submitting your declarations this year:

PAN OF LANDLORD IS MANDATORY:

Perhaps this is the most important change in rules this year that could impact many salaried persons who claim house rent allowance. As per I-T department's circular, you have to mention the PAN of your landlord, if you are paying an annual rent of more than Rs 1 lakh.

"If your monthly rent is more than Rs 8,333, it is mandatory to quote the PAN of landlord. If the landlord doesn't have a PAN, a declaration to stating this along  with the name and address of the landlord should be filed," explains Vineet Agarwal, director, KPMG. The new rule could be bothersome for many individuals paying rent, as landlords may refuse to part with their PAN.

EXTRA BENEFIT FOR FIRST-TIME HOME BUYERS:

First-time home buyers can look forward to some additional tax savings this year. However, the loan amount has to be under Rs 25 lakh to claim the benefit. "Also, the value of the residential house should not exceed Rs 40 lakh. In addition, the deduction is available, only if the assessee does not own any residential house property on the date of sanction of the loan," says Suresh Surana, founder of tax consulting firm RSM Astute Consulting. If you have obtained a home loan this year (financial year 2013-14), you can claim an additional tax deduction of Rs 1 lakh on the interest paid on that loan under section 80EEE. Moreover, if interest paid during the year is less than Rs 1 lakh, the unclaimed deduction can be utilised in the subsequent year.

ADDITIONAL TAX RELIEF FOR LOWER INCOME CATEGORIES:

If your annual taxable income is under Rs 5 lakh, you will be entitled to a tax rebate of Rs 2,000 this year. "The lower of Rs 2,000 or the entire tax liability (tax payable) will be allowed as a rebate under section 87A of the Income tax Act," says Agarwal.

TAX BENEFIT ON DONATIONS:

While this is not exactly a rule introduced this year, many employers and employees are still unclear about tax treatment of donations. Typically, most employers do not take into account the donations made by employees, which qualify for tax deduction under section 80G. Because of this, individuals will have to claim refund when they file their returns for tax deductions on these donations.

"Over the last few years, TDS circulars were issued expressly stating the intention of the government to allow deduction by the employer only if donations were made to certain specific funds through the employer. However, in the recent couple of TDS circulars, no such restrictions have been made. This relaxation is a welcome step as employees can provide donation receipts to the employer," explains Agarwal.

However, not all tax experts are convinced that the change in rules will help employees immediately. "The employers have been given an option to factor in the 80G donations. However, it is not mandatory. Many employers may choose not to give the benefit while deducting tax at source, as it is not easy to verify whether the donations made are actually eligible for deduction due to lack of documentary evidence submitted. Not many would want to take on the liability," cautions Surana. Get in touch with your organisation and ask about its policy on donations. Also, remember, you will not be able to claim this deduction if your donation is made in cash and exceeds Rs 10,000.

Source:  The Economics Times

Read More

How to make Computation of Income under the Head "Salaries" for Asstt. Year 2014-15.

The following income shall be chargeable to income-tax under the head "Salaries" :

• any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
• any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him.
• any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.

For the removal of doubts, it is clarified that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due.

Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as "Salary".

"Salary" includes:
The Wages, fees, commissions, perquisites, profits in lieu of, or, in addition to salary, advance of salary, annuity or pension, gratuity, payments in respect of encashment of leave etc.

The portion of the annual accretion to the balance at the credit of the employee participating in a recognized provident fund as consists of {Rule 6 of Part A of the Fourth Schedule of the Act}:

• contributions made by the employer to the account of the employee in a recognized provident fund in excess of 12% of the salary of the employee,
• interest credited on the balance to the credit of the employee in so far as it is allowed at a rate exceeding such rate as may be fixed by Central Government. [w.e.f. 01-09-2010 rate is fixed at 9.5% - Notification No SO 1046(E) dated 13-05-2011]

The contribution made by the Central Government or any other employer to the account of the employee under the New Pension Scheme as notified vide Notification F.N. 5/7/2003- ECB&PR dated 22.12.2003 (enclosed as Annexure VII) referred to in section 80CCD (para 5.5.3 of this Circular).

It may be noted that, since salary includes pension, tax at source would have to be deducted from pension also, unless otherwise so required. However, no tax is required to be deducted from the commuted portion of pension to the extent exempt under section 10 (10A).

Family Pension is chargeable to tax under head “Income from other sources” and not under the head “Salaries”. Therefore, provisions of section 192 of the Act are not applicable. Hence no TDS is required to be made on family pension.

Read More

Income details & proof of savings for tax calculation / deduction purposes for FY 2013-2014

Central Pollution Control Board, New Delhi

File No. AC-101/05/VG/2013-14/ 

September 24, 2013

CIRCULAR

Subject: Income details & proof of savings for tax calculation / deduction purposes for FY 2013-2014

 

The government of India imposes an income tax on taxable income of individuals. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue under the Ministry of Finance, Govt. of India. Income tax is a key source of funds that the government uses to fund its activities and serve the public.

Section 192 of the I.T.Act, 1961 provides that every person (DDO in case of CPCB) responsible for paying any income which is chargeable under the head ‘salary, shall deduct income tax on the estimated income of the assessee under the head salaries. The tax is required to be calculated at the average rate of income tax as computed on the basis of the rates in force. The deduction is to be made at the time of the actual payment. However, no tax is required to be deducted at source, unless the estimated salary income exceeds the maximum amount not chargeable to tax applicable in case of an individual during the relevant financial year. The tax once deducted is required to be deposited in government account and a certificate of deduction of tax at source (also referred as Form No.16) is to be issued to the employee. Finally, the employer/deductor is required to prepare and file quarterly statements in form No.24Q with the Income-tax Department PAN and address are mandatory. If not furnished, tax at source is to be deducted at the prescribed rates or 20% whichever is higher without giving any rebate/deduction.

Arrangements	By 30th November 2013	By 15th February 2014
Annexure	I & II along-with proof of the savings (self-attested) till Nov. 30th 2013.	Only the documentary proof (Annexure need not be sent again) of the proposed savings (self-attested) declared in annexure II.
Declaration	Declaration of Proposed savings in the prescribed column in annexure II which are proposed to be made after 30th November 2013 for 2013-2014.	Proposed savings or proof of the savings will not be considered after this date, even if submitted.
Last Date	30th November 2013	15th February 2014)

In case, no declaration is received by November 30th 2013, due tax will be deducted as per the current tax structure.  soft copy of this circular & saving submission annexure are also available at the employees’ corner on the CPCB’s web-site i.e. http://www.cpcb.nic.in/employee/itcircular13-14.pdf & saving submission annexure http://www.cpcb.nic.in/employee/savingsubmission13-14.pdf at Intranet portal (http://10.24.84.156:8080/cpcb.htm).

(M.S. Bansal)

 Accounts Officer & I/C F&A

Income Tax Rates for the Financial Year 2013-2014

For All Assesses:
Upto Rs.2,00,000/-	NIL
Rs.2,00,010/- to Rs.5,00,000/-	@ 10% of (total income minus Rs.2,00,000)
Rs.5,00,010/- to Rs.10,00,000/-	Rs.30,000/- + 20% of (total income minus Rs.5,00,000)
Rs.10,00,010/- & above	Rs.1,30,000/- + 30% of (total income minus Rs.10,00,000)

Things one must know: 

1. As per new section 87A wef AY 2014-2015 onwards: 

An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his / her total income with which he/she is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of two thousand rupees, whichever is less. 

2. Education Cess 2% +Secondary and Higher Secondary Education Cess 1% Education Cess is applicable (2%+1%)@ 3% on income tax 

3. Threshold limit of exemption from personal income tax in the case of all assesses is Rs.2,00,000. The threshold limit for a resident woman assessee is also Rs.200,000, while for a resident senior citizen over 60 years is Rs.2,50,000 and for senior citizen over 80 years is Rs.500,000. 

4. The last date for filing of individual income tax return with the concerned ITO is 31st July 2014. For the Assessment year 2013-14, E-filing must for people with annual income above Rs 5 lakh. 

5. Tax payers with salary income of up to Rs.5 lakh and interest from savings bank accounts up to `10,000 is required to file income tax returns in either mode manually or e.filing.

(M.S. Bansal) 

Accounts Officer 

& I/C F&A

Source: www.cpcb.nic.in

Read More

Confused about taxes on income from shares?

Confused about taxation of any income arising in respect of shares, be it capital gains on sale of such shares or dividends received? People generally think that any income received in respect of shares is exempt from tax. This is really not so.

In order to make matter clear for the readers, I have tried to explain the tax implications of income from shares in this article. There are many aspects relating to taxation of shares in India. First let us take up the provision for computing capital gains and tax rates on capital gains on sale of shares.

Holding Period requirement long-term and short-term:

Generally, profits arising on sale of any capital assets are treated as long-term if the same have been held for 36 months or more on the date of sale.

However, in case of shares in any Company, the holding period requirement is only 12 months or more in order to make such profits as long-term. It is important to note that the requirement of lower holding period is applicable for shares in any Company and not necessarily an Indian Company.

Moreover even shares held in a private limited company will become long- term if held for 12 months or more on the date of sale of such shares.

Tax rate in case of capital gains arising on sale of equity shares listed on Indian Stock Exchanges:

As per the present provisions of income-tax laws, any long-term capital gains arising on sale of equity shares listed on Indian stock exchange and sold through a stock-broker are fully exempt from income tax.

This exemption is not available in case the listed shares are sold outside the stock exchange platform or cases where the shares have been tendered under buyback scheme or under any open offer.

For claiming this exemption, the equity shares should be sold on the platform of stock exchange in India on which Security Transaction Tax (STT) has been paid. In order to verify whether the shares sold by you are subjected to STT, please see the bill issued by your share broker.

An item of STT will be there in the invoice raised by the broker in case security transaction tax is levied on your sale transaction.

All the transactions of equity shares executed on stock exchange are liable for STT. It is interesting to note that this exemption for long-term capital gains is not available in case the shares are sold on any stock exchanges outside India.

It is also pertinent to note that this exemption is available only in respect of equity shares listed on Indian Stock Exchange whether it is an Indian Company or a foreign company. This way say shares of Standard Chartered Bank, a foreign company, which are listed in India enjoy this exemption.

In case of profit on equity shares sold on stock exchanges in India held for less than 12 months are s taxed at a flat rate of 15 percent. It is also interesting to note that even in cases where the applicable slab tax rate is 10 percent, you will still have to pay tax of 15 percent on such short- term capital gains.

This rate still will be 15 percent even in case the slab rate applicable to you is 30 percent. In case your other income excluding this short- term capital gains is less than basic exemption limit, you will be entitled to take the benefit of such shortfall in the basic exemption limit while calculating your tax liability.

Tax in respect of capital gains arising on sale of shares other than equity shares transacted on Indian Exchange:

All transactions of shares do not take place on the plat form of stock exchange. This would cover transaction of unlisted shares as well as transactions of listed shares in the form of open offer or buy back by of these shares by the company directly.

Any capital gains arising on sale of such transactions will still be treated as long-term if the shares have been held for 12 months or more on the date of sale. In case the shares are sold within 12 months, the short-term capital gains arising on such transaction shall be included in your regular income and shall be taxed at the slab rate applicable to you.

Generally the tax-rate applicable in case of long-term capital gains is 20 percent on the indexed capital gains. However in case the long-term capital gains calculated with indexation is higher than 10 percent of unindexed capital gains, your liability on such long-term capital gains shall be restricted to 10 percent only in certain cases.

This option of choosing between 20 percent on indexed long-term capital gains or 10 percent of unindexed capital gains is available only in case of listed shares which are transacted outside stock exchange. So in case you had tendered shares of Hindustan Uniliver under buyback scheme, your liability would be restricted to 10 percent of profit made by you in case the shares were held for 12 months or more.

In case the shares sold are not listed in India, this option of choosing between 10 percent unindexed and 20 percent indexed capital gains is not available. In case your other income excluding these long-term capital gains is less than basic exemption limit, you will be entitled to take the benefit of such shortfall in the basic exemption limit here also.

However in case of short-term gains, though the shares are listed in India, your liability on such short-term gains will depend on the slab rate applicable to you.

Taxation of Dividends received on shares:

Any dividend received on shares held in Indian company is fully exempt from payment of tax. However the company is required to pay a tax called Dividend Distribution Tax on such dividend at the rate of 15 percent on such dividend. So effectively 15 percent tax on your behalf has been paid by the company on the dividends received by you.

Hope the article has eased your confusion about the taxability and the rate of tax on sale of shares. Your feedback and queries are welcome.

Source: www.moneycontrol.com

Read More

First Installment of Advance Tax must be paid before 15th September.

The due date for first installment of advance tax for individuals for financial year 2013-14 is September 15. With due date just around the corner, it would be a good idea to take stock of your incomes and pay taxes on time.

What is advance tax? The concept of advance tax is outlined in Section 208 of the Income-Tax Act, 1961 (‘I-T Act’). Advance tax is a mechanism to pay an individual’s annual tax liability in installments before the specified dates. It is tax paid in advance based on the estimated income likely to be earned in a year.

When does the liability to pay advance tax arise? Individuals can have income from multiple sources. In some cases, all taxes would have been deducted and in some partial. The liability to pay advance tax arises when there is a balance tax liability of Rs 10,000, which needs to be still deposited.

Due dates for payment for the current FY14: Advance tax has to be paid in three installments for an individual by the following due dates:

September 15: Installment amount to be paid will be 30 per cent of advance tax due.

December 15: Installment amount to be paid will be 60 per cent of advance tax due.

March 15: Installment amount to be paid will be 100 per cent of advance tax due.

Mechanism of payment of advance tax: Advance tax can be paid by using tax payment challan (Challan no ITNS 280) and submitting it with any bank listed with the income-tax department. Online payment can also be made through the income-tax department or National Securities Depository Limited’s website. At the time of payment, it should be ensured that the challan has been filled with accurate details of the taxpayer.

Advance tax not applicable in some cases: Advance tax provisions are not applicable for senior citizens having income other than income from business or profession or if the tax payable is up to Rs 10,000.

Penalty for non-payment of advance tax: The I-T Act has specific penal provisions for non-payment of advance tax installments.

If during the year an advance tax installment has not been paid or has been paid for a lower percentage than prescribed, an interest of 1 per cent per month will be required to be paid under Section 234C of the IT Act. Also, if advance tax paid is less than 90 per cent during the year then an additional interest of 1 per cent per month is payable under Section 234B of the act for the period beginning April 1, 2014, till the date of deposit.

Relaxation in some cases: Ascertaining salary income, interest income and rental income is possible. However, it may be difficult to estimate income from lotteries, game shows and sale of assets. The I-T Act has special relaxations for such cases. No interest shall be charged for delayed payment of advance tax on such income provided tax is correctly paid in the subsequent installments when the amount has been estimated properly.

To sum up: It is always prudent to start ascertaining your sources of income and tax liability for the current financial year and deposit advance taxes, if any. It is certainly advisable to discharge advance tax within the due date rather than pay interest later on. After all every penny saved is a penny earned.

Source: www.mydigitalfc.com

Read More

Do you Calculate TDS Liabilities for Asstt. Year 2014-15 ?

After declaration Budget and cleared the Income Tax Exemption Limit by Finance Minister for Asstt. Year 2014-15, there are many Income Tax Calculators are available on internet.  Some are available  condition of pay and some are on non-pay.  Free Income Tax calculators are calculate Tax on Taxable Income.  This Income Tax Calculator is for Salaried Employee for Assessment Year 2014-15 i.e. Financial Year 2013-14 along with Salary Statement Month-wise. All salaried Employee enjoying Dearness Allowance is 80% and from July-2013 may increase by 10%, thus I already cleared in our TDS/Income Tax Calculator. This calculator benefited you to calculator your Income Tax and Deduct the TDS Monthly from your Salary as per Income Tax Rules.

Income Tax Liability For Asstt. Year 2014-15

Download Tax Calculator For. A. Y. 2014-15  (Click Here)
Form 16 Utility (A.Y. 2013-14) Free Download (Click Here)

Read More

Second Change remember Tax Defaulters.

The Income Tax department has been at the center of all action in the recent past, because of the plans for its revamp that the government has had.

The revenues that the department have not been in line with the expected numbers, since the number of assesses registered with it are much more than the ones who are actually filing the returns.

Filing I-T returns first time? What you need to know?

This has led to the government considering serious changes in the structure of the entire department along with major modifications in the operational policies, which has reflected in the decisions that it has taken recently.

One important move that the government has decided to execute is the implementation of the amnesty scheme named as the ‘Voluntary Compliance Encouragement Scheme’.

This scheme would allow all the tax defaulters registered with the department, to declare their liabilities pertaining to the department within a stipulated timeframe and escape the adverse results that are in store for them otherwise.

The stipulated time period is the end of the month of December, and anyone who files his returns in line with his liabilities within this time frame would avoid any penalties or penal proceedings.

The government has planned to increase the revenue of the IT department from the indirect taxes, so as to increase the efficiency and help accommodate better growth.

The difficult economic conditions and the growing pressure on the growth rate of the country have not helped the cause, and have led to the coveted fragment of the Indian governance structure acquiring an aggressive stance.

The authorities have promised strong actions against those who fail to respond to the notices sent by the department and its concerned wings, irrespective of the magnitude of the irregularities.

The figures suggest that there is a gaping hole in what the government should receive and what it is receiving currently, which has fast tracked the revamping of the entire Income Tax section.

The highest number of defaulters has been found in the service tax section, which makes it imperative for all the commercial institutions across the country, to respond to tax notices and declare their tax liabilities voluntarily.

The effect although yet to be measured, is expected to be significant, as the government has rarely taken such a strong stand against the poor state of the efficiency of the Income Tax department.

Also, the digitization of the operations of the department is expected to impact revenue generation significantly, as it would completely eliminate any irregularities in the calculation of the return amounts.

The implementation of the scheme would also prove to be highly beneficial for the consumer in the longer run, and this would be in addition to the immediate benefit of avoiding penalties and penal proceedings, making it a master step from the Indian government.

Source: www.moneycontrol.com

Read More

Taxable Income Over 5 Lakhs e-Filing of Return is mandatory For A.Y. 2013-14

E-filing was mandatory for those whose Taxable Income over Rs. 10 Lakhs.  But from the Assessment Year 2013-14 it is mandatory to file electronic income tax return if Taxable Income is exceeds Rs. 5 Lakhs. In this regard the Income Tax department has already issued Notification No. 34/2013 dated 01-05-2013.

A senior Finance Ministry officially said on Last Tuesday from Asstt. Year 2013-14 e-filing of Income Tax Return is mandatory to taxpayer whose annual taxable income above Rs. 500000/-.  Now in current year i.e. Asstt. Year 2012-13 e-filing is is mandatory to those taxpayee whose income more than 10 lakhs.  Besides, the Finance Ministry is also making provisions for e-filing of Wealth Tax returns.

“Income tax returns for the group above Rs 5 lakh, all such returns will be e-filed. This is a move towards using technology so that the interface between Assessing Officer and assessee is minimized,” Revenue Secretary Sumit Bose said at a Ficci event here.

The government had last year introduced the system of e-filing of Income tax returns for assessees with annual income of Rs 10 lakh and above.

Section 14 of the Wealth-tax Act provides for furnishing of return of net wealth as on the valuation date in the prescribed form.

At present, certain documents and reports are required to be furnished along with the return of net wealth under the provisions of Wealth-tax Act read with the provisions of Wealth-tax Rules.

Sections 139C and 139D of the I-T Act contain provisions for facilitating filing of return of income in electronic form by certain class of income-tax assessees.

“In order to facilitate electronic filing of annexure- less return of net wealth, it is proposed to insert new sections 14A and 14B in the Wealth-tax Act on similar lines… The amendments will take effect from June 1, 2013,” said the Memorandum to the Finance Bill 2013.

Read More

Income Tax on Leave Salary/Leave Encashment.

The basic provision related to taxability of leave salary. Leave salary, also known as leave encashment, means that employee will receive the cash for leaves which are not taken by the employees. The leave encashment received during the service period is taxable for all the employees as per the income tax slab applicable to the employee. However, the tax treatment is different for the leave encashment received at the time of retirement/ superannuation. Further, the tax treatment is different for Government employee (Central or State) vis a vis  Non –Government employee as under: 

     In the case of Central/ State Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/ superannuation is fully exempt from tax u/s 10(10AA)(i). 

     In the case of Non-Government employee (i.e., the employee other than an employee of the Central Government or a State Government) leave salary is exempt from the tax u/s 10(10AA) (ii) to the extent of the least of the following:

• Cash equivalent of the leave salary in respect of the period of earned leave to the credit of an employee only at the time of retirement whether on superannuation or otherwise (earned leave entitlement cannot exceed 30 days for every year of actual service rendered for the employer from whose service he has retired): or
• 10 month “Average Salary” or
• The amount not chargeable to tax as specified by the Government. (Presently, Rs. 3 Lacs has been specified).
• Leave encashment actually received at the time of retirement.

Average salary, as mentioned above, is to be calculated on the basis of average salary during the period of 10 months immediately preceding the retirement/ superannuation.

”Salary” here means basic salary & includes dearness allowances if term of employment so provided. It also includes commission based on a fixed percentage of turnover achieved by an employee as per term of contract of employment but excludes all other allowances & perquisites.

Now, with above basic brief up about taxability of leave salary, the opinions on the issue raised in your queries are as under:

1. Leave salary received at the time of retirement is exempt only in the hands of State or Central Government employee. It will not be exempt in the hands of the employee of PSU or Local Authorities. The definition of “Government Employee” is not specifically given in the Income Tax Act-1961. However, the Act has specifically incorporated the PSU employees, Government undertaking employee, Local Authorities employees etc in various other Sections / clauses in the Income Tax Act-1961 where the benefit is meant to be conferred to them. The same is not there in Section 10(10AA).
2. The Leave Salary is taxable under the head “Income from Salary”. The Salary Income is taxable in the year in which it has accrued or in the year in which it is received, whichever is earlier. Accordingly, the leave encashment is taxable as income of the FY 2012-13 and not FY 2013-14.

TAXABILITY OF LEAVE SALARY AT A GLANCE:

S.No.	Particulars	Tax Treatment
A]	Encashment of leave during service	It is charged to tax.
B]	Encashment of leave at the time of retirement
	1. If Central or State Government Employees	Fully exempt from tax u/s 10(10AA)(i)
	2. For any other employees	Lease of the following is exempt:
		1. Earned leave months x Average salary
		2. Avg. monthly salary x 10
		3. Maximum amount Rs. 3,00,000/-
		4. Actually received

Source: The Hitwada

Read More