Tax Saving Investment Options & Deductions under Income Tax for Individual and HUF

I have brief the deductions available to Individual and Hindu Undivided Family for Assessment Year 2020-21. 

To claim deduction in any year, it is necessary to invest in that year. Due to Covid Pandemic, Govt. has extended the date to 31.07.2020 for financial year 2019-2020 to make investment for deduction under chapter VI-A and section 54 to section 54GB.

Last chance for making investment for saving tax. 

A. SECTION 80C: Following are the Investments eligible for deduction under section 80C.

1. LIFE INSURANCE PREMIUM

ELIGIBILITY:  In case of an individual, Life insurance policy should be taken on his own life, life of the spouse or any child. Child may be dependent/independent, male/female, minor/major or married/unmarried. In the case of a Hindu Undivided Family, policy may be taken on the life of any member of the family.

Life insurance premium includes payment made by Government employees to the central government employees’ insurance scheme and payment made by a person under children’s deferred endowment assurance policy.

DEDUCTION LIMIT: The deduction is valid only if the premium is less than 10% of the sum assured.

Sum assured means minimum amount assured under the policy without including any premium agreed to be returned and/or any benefit by way of bonus. 

2. PUBLIC PROVIDENT FUND

The Public Provident Fund (PPF) is a tax-free savings scheme which was launched by the Ministry of Finance (MoF). PPF is one of India’s most tax-efficient plans for salaried people.

ELIGIBILITY: In case of an individual, PPF account can open in his own name or in the name of minor of whom he is guardian. A HUF cannot open a PPF account.

INVESTMENT LIMIT: No limit prescribed under Income Tax Act. However, under the public provident fund scheme, the minimum and maximum contribution limit is Rs. 500 and Rs. 1, 50,000 respectively.

LOCK IN PERIOD: 15 Years

INTEREST RATE: Current interest rate is 7.1% p.a.

TAX TREATMENT: Interest earned is tax-free.

3. UNIT LINKED INSURANCE PLANS

A ULIP is an insurance plan where the premium paid is invested in equity, debt, or money market instruments.

ELIGIBILITY: In case of an individual, ULIP can be taken on his own life or spouse or any child. In case of HUF, ULIP can be taken on the life of any member of the family.

INVESTMENT LIMIT: No limit on maximum contribution

TAX TREATMENT: Investment and withdrawals & maturity amount are tax-free.

4. NATIONAL SAVINGS CERTIFICATES (NSC)

National Savings Certificate is a fixed income investment scheme that you can open with any post office.

ELIGIBILITY: Individual can invest in NSC investment scheme. Hindu Undivided Family can’t invest in it.

INTEREST RATE: Current interest rate is 6.8% p.a.

MATURITY PERIOD: 5 Years

INVESTMENT LIMIT: Minimum Rs. 1000 and no maximum limit on deposit.

TAX TREATMENT: Investment and accrued interest (for first 4 years) qualify for deduction. Final year’s interest are not eligible for tax deduction.

5. TAX SAVING FIXED DEPOSIT

Investment in fixed deposits are eligible for tax deduction under section 80C but here lock in period is 5 year.

ELIGIBILITY: Only resident Indian individuals can invest in FD.

LOCK IN PERIOD: 5 years

RATE OF INTEREST: Interest rate depends on bank to bank. Current interest rate is 5.5% to 7.0%.

INVESTMENT LIMIT: Minimum investment limit is Rs. 1000.

TAX TREATMENT: Interest earned on FD is taxable.

6. SUKANYA SAMRIDDHI YOJANA

The Sukanya Samriddhi Yojana (SSY) is as girl child prosperity scheme. SSY account is to ensure a bright future for girl children in India. This yojana is to facilitate them proper education and care free marriage expenses.

ELIGIBILITY: Legal guardian or parents of a girl child can open SSY Account under this scheme anytime at the time of birth of the child till she attains an age of ten years.

LIQUIDITY: Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years

RATE OF INTEREST:  Interest rate on Sukanya Samriddhi Yojana is 8.5%.

INVESTMENT LIMIT: Minimum investment limit is Rs. 250 and maximum is Rs. 1,50,000.

TAX TREATMENT: Interest totally exempt from tax. Investment eligible for deduction under section 80C. 

7. Other than above investment schemes, section 80C also prescribed other payments which is eligible for deduction under Income Tax Act.

• Payment in respect of non-commutable deferred annuity.
• Contribution towards statutory provident fund and recognized provident fund.
• Contribution towards an approved superannuation fund.
• Subscription towards notified units of Mutual Fund or UTI.
• Any sum paid as tuition fees whether at the time of admission or otherwise to any university/college/educational institution in India for full time education of any two children of an individual.
• Repayment of Housing Loan
• Investment in Senior Citizens Saving Scheme

Note: 

• Investments/payments are eligible for deductions on payment basis.
• The maximum amount deductible under section 80C is Rs. 1, 50,000.
• Under section 80C, deduction is available from gross total income.

B. SECTION 80CCD: NATIONAL PENSION SYSTEM

Deduction for contribution to pension account

Employee’s contribution under section 80CCD (1) 

Maximum deduction: 10% of salary in case of taxpayer is an employee or 20% of gross total income in case the taxpayer being self-employed.  

Additional contribution to NPS under section 80CCD (1B) 

Section 80CCD (1B) provides additional deduction in respect of any amount paid up to Rs. 50,000 towards NPS. On this contribution, the ceiling of Rs. 1, 50,000 under section 80CCE will not be applicable.

As per section 80CCE, the combined maximum limit for deduction which can be availed under section 80C, 80CCC and 80CCD (1) is Rs. 1, 50,000.

Employer’s contribution to NPS under section 80CCD (2)

Employer’s contribution to NPS is deductible under section 80CCD (2) in the hands of employee in the year in which contribution is made. Deduction is available up to 10% of the salary of the employee.

C. SECTION 80D

MEDICAL INSURANCE

ELIGIBILITY: an individual or a Hindu Undivided Family

MODE OF PAYMENT: Payment of medical insurance should be made by any mode other than cash. Payment of preventive health checkup can be made by any mode (including cash).

DEDUCTION LIMIT: Individual can claim a deduction of Rs. 25,000 under section 80D for medical insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs. 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs. 50,000. 

The aggregate payment on account of preventive health check-up of family can’t exceed Rs. 5,000/-

MEDICAL EXPENDITURE

MODE OF PAYMENT: Payment of medical expenditure should be made by any mode other than cash.

ELIGIBILITY: medical expenditure on the health of a person who is a senior citizen and medical insurance premium is not paid on the health of such person.

Senior citizen is a resident individual who is at least 60 years of age at any time during the previous year.

DEDUCTION LIMIT: Maximum amount of medical expenditure available for deduction under section 80D is Rs. 50,000.

OVERALL DEDUCTION UNDER SECTION 80D

Maximum amount of deduction under section 80D (medical insurance premium and medical expenditure) is Rs. 50,000 for family and Rs. 50,000 for parents. Total deduction is Rs. 1, 00,000.

D. SECTION 80EEA

INTEREST ON LOAN TAKEN FOR CERTAIN HOUSE PROPERTY

CONDITIONS:

• The assessee is an individual.
• The assessee is not eligible to claim any deduction under section 80EE.
• The assessee has taken loan for the purpose of acquisition of residential house property.
• Loan is sanctioned during 01.04.2019 to 31.03.2021.
• Stamp duty value of the residential house property on the date does not exceed Rs. 45 lakh.
• The assessee does not own any residential house property on the date of sanction of loan.

DEDUCTION: Interest payable on the loan or Rs. 1, 50,000 whichever is less.

SAME INTEREST IS NOT DEDUCTIBLE TWICE: if any individual claims deduction of interest under section 80EEA then such amount of interest is not eligible for deduction under section 24 (b) or any other provision of the Income Tax Act for the same year or any other assessment year.

 

E. SECTION 80EEB

INTEREST ON LOAN TAKEN FOR PURCHASE OF ELECTRIC VEHICLE

CONDITIONS

• The assessee is an individual
• The assessee has taken loan for the purpose of purchase of an electric vehicle.
• Loan is sanctioned during 01.04.2019 to 31.03.2023.

DEDUCTION: Interest payable on the loan or Rs. 1, 50,000 whichever is less.

SAME INTEREST IS NOT DEDUCTIBLE TWICE: if any individual claims deduction of interest under section 80EEB then such amount of interest is not eligible for deduction under provision of the Income Tax Act for the same year or any other assessment year.

F. SECTION 80GGC 

CONTRIBUTION TO POLITICAL PARTY

ELIGIBILITY: any person

DEDUCTION: any amount of contribution eligible for deduction.

MODE OF PAYMENT: any mode of payment other than cash.

G. SECTION 80TTA – INTEREST ON SAVINGS ACCOUNTS

ELIGIBILITY: an individual or a HUF but not senior citizen

DEDUCTION: Interest earned or Rs. 10,000, whichever is lower.

First you have to show interest income in Other Income after that you can claim this deduction.

Which interest deduction is available?

Interest on deposits in a savings accounts with-

1. a banking company
2. a co-operative society engaged in carrying on the business of banking
3. a post office

H. SECTION 80TTB 

INTEREST ON DEPOSITS IN CASE OF SENIOR CITIZENS

ELIGIBILITY: Assessee is a senior citizen 

DEDUCTION: interest earned or Rs. 50,000, whichever is lower.

First you have to show interest income in Other Income after that you can claim this deduction.

Which interest deduction is available?

Interest on deposits with a bank/co-operative bank/post office. It may be interest on fixed deposits, interest on savings account or any other interest.

I. SECTION 24 (b) – INTEREST ON HOME LOAN FOR THE PROPERTY

Owners can claim a deduction of up to Rs. 2, 00,000 on their home loan interest, if the owner or his family reside in the house property. If the property is rented, then the entire interest on the home loan will eligible for deduction.

Disclaimer:  This is meant purely for general education purpose.While the information is believed to be accurate to the best of my knowledge, I do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Reader should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. I accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.

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ITC on Taxi Hiring for transportation of Employee is allowed where Transportation is obligatory under any law: HP AAR

Applicant: Prasar Bharti Broadcasting Corporation of India    (All India Radio), Shimla

Facts of the case

The applicant is a public service broadcaster. The taxpayer avails services of hiring taxis for different purposes as mentioned below:

• To pick up/drop shift duty staff in odd hours,
• This facility is being provided in odd hours to lady employees, handicapped & general employees.
• Taxis are hired for tour/OB recordings etc. within the state of Himachal Pradesh on different occasions.
• Taxis are also hired to drop shift staff at High Power Transmitter during morning/ evening & for office work during any time.

Questions on which Advance Ruling sought by applicant:

Applicable GST rate on renting of motor cab service.

Whether ITC will be available to the recepient on the renting of motor cab service for transporation of employees?

Discussion and Findings

As per section 16 of the CGST Act, 2017, every registered person shall, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. However, on this availment of input tax credit (ITC), there are exceptions prescribed under section 17(5) of the CGST Act, 2017, which provides as under:

17(5) : Notwithstanding anything contained in sub section 1 of section 16 and subsection 1 of section 18, input tax credit shall not be available in respect of the following namely:-

(a) …………………………………………………….

(b) the following supply of goods or services or both—

i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

ii. membership of a club, health and fitness centre; and

iii. travel benefits extended to employees on vacation such as leave or home travel concession:

“Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employee under any law for the time being in force.”

The applicant has not been able to cite any law under which the services of providing the facility of transportation to his employees is obligatory under any law, therefore ITC will not be available to him. 

R U L I N G

The applicable rate of tax on renting of cabs as per Notification No. 20/2017 dated 22.08.2017 is 5% with limited ITC (of input services in the same line of business) and 12% with full ITC.

If the facility provided by a taxpayer for transportation of employees is not obligatory under any law, for the time being in force then no ITC will be available to such a taxpayer. The applicant will however be eligible to claim ITC for the service supplied at 12% GST Rate if the conditions laid down in the second proviso to section 17(5)b are satisfied.

Source: http://gstcouncil.gov.in/sites/default/files/ruling-new/HP_AAR_01_2020_19.05.2020_PBBCI.pdf

Disclaimer:  This is meant purely for general education purpose.While the information is believed to be accurate to the best of my knowledge, I do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Reader should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. I accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.

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Five Major Finance Changes effective from 01.07.2020

In this article, I have brief five major changes effective from 01.07.2020.

Restrictions on ATM withdrawals are back

The Finance Minister on 24 March, 2020 announced that for three months debit cardholders could withdraw cash from any bank’s ATM free of charge for the next three months.

From today on wards, this relaxations has ended and the regular limits and charges will apply.

Penalty for non-maintenance of bank account balance

Another relief provided by FM in March was the waiver of penalty on non-maintenance of bank account balance for three months.

This relief are over on 30 June, 2020. Now non-maintenance of minimum balance will again attract a penalty. The penalty amount levied for non-maintenance of minimum balances will vary from bank to bank.

Stamp duty on buying of shares and mutual fund units

From 1 July, all shares and mutual fund purchases will attract a stamp duty of 0.005 per cent and any transfer of security (MF units) will attract a stamp duty of 0.015 per cent. The government had introduced changes to the Stamp duty Act last year by introducing a uniform rate of stamp duty on trading of shares and commodities.

Higher penal interest on delayed tax payments

For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30th June 2020, the reduced interest rate at 9% per annum instead of 12% or 18% will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.

Any delayed tax payment made after June 30, 2020 will attract penal interest of 12 per cent /18 per cent as applicable instead of 9 per cent.

TDS on cash withdrawal

Section 194N of Income Tax Act

TDS on payment of certain amounts in cash

Deductor: Bank, Co-operative bank or a post office

If aggregate payment in cash from one or more accounts during a previous year to an account holder exceeds the threshold limit given below:

Time of Payment	Threshold limit for payment in cash	TDS Rate
On or after 01.07.2020	Customer who have not filed  their tax returns for the previous 3 years and for which the due date for filing tax return has expired: 1.  exceeding Rs. 20 lakh but not exceeding Rs. 1 crore 2.       exceeding Rs. 1 crore	2%   5%
On or after 01.07.2020	Customers other than mentioned above: 1.      up to Rs. 1 crore 2.         2.       exceeding Rs. 1 crore	0%    2%

 

The applicability of new provision as per amendments in the Finance Act 2020

The cash withdrawal limit for this F/Y will be considered from 01.04.2020.

for more details go to this link

https://carahuldmittal.blogspot.com/2020/06/new-rule-for-cash-withdrawal-effective.html

Disclaimer:  This is meant purely for general education purpose.While the information is believed to be accurate to the best of my knowledge, I do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Reader should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. I accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.

Thanks for visiting our blog and reading this article. Kindly provide your feedback on the above article in comment box below.

M: +91-99917-25373

waiver of Late Fees of GSTR 3B via Notification No. 57/2020 dated 30.06.2020

CBIC has issued Notification No. 57/2020 on 30.06.2020 to prescribe maximum amount of penalty if GSTR3B is filed up to 30.09.2020. The said relief is for both class of taxpayers i.e. taxpayers having turnover up to Rs. 5 crores or more than 5 crores.

Notification No. 57/2020 - Central Tax dated 30th June 2020

GSTR-3B – Taxpayers having turnover more than Rs. 5 crore in the preceding year

Tax Period	No penalty if return is filed up to	Maximum Penalty if return is filed up to 30.09.2020 ( Notification No. 57/2020)
February 2020	24.06.2020 (Notification No. 52/2020)	ZERO in case of NIL Returns     &     Rs. 500/- in case of other than NIL Return   (Notification No. 57/2020)
March 2020	24.06.2020 (Notification No. 52/2020)
April 2020	24.06.2020 (Notification No. 52/2020)
May 2020	27.06.2020 (Notification No. 52/2020)
June 2020	20.07.2020 (Notification No. 52/2020)
July 2020	20.08.2020 (Notification No. 52/2020)

 

GSTR-3B – Taxpayers having turnover up to Rs. 5 crore in the preceding year

(For taxpayers whose principal place of business is in the states of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana or Andhra Pradesh or the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands and Lakshadweep)

Tax Period	No penalty if return is filed up to	Maximum Penalty if return is filed up to 30.09.2020 ( Notification No. 57/2020)
February 2020	30.06.2020 (Notification No. 52/2020)	ZERO in case of NIL Returns     &     Rs. 500/- in case of other than NIL Return   (Notification No. 57/2020)
March 2020	03.07.2020 (Notification No. 52/2020)
April 2020	06.07.2020 (Notification No. 52/2020)
May 2020	12.09.2020 (Notification No. 52/2020)
June 2020	23.09.2020 (Notification No. 52/2020)
July 2020	27.09.2020 (Notification No. 52/2020)
August 2020	01.10.2020 (Notification No. 54/2020)	NOT APPLICABLE

 

GSTR-3B – Taxpayers having turnover up to Rs. 5 crore in the preceding year

(For taxpayers whose principal place of business is in the states of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha or the Union territories of Jammu and Kashmir, Ladakh, Chandigarh and Delhi)

Tax Period	No penalty if return is filed up to	Maximum Penalty if return is filed up to 30.09.2020 ( Notification No. 57/2020)
February 2020	30.06.2020 (Notification No. 52/2020)	ZERO in case of NIL Returns     &     Rs. 500/- in case of other than NIL Return   (Notification No. 57/2020)
March 2020	05.07.2020 (Notification No. 52/2020)
April 2020	09.07.2020 (Notification No. 52/2020)
May 2020	15.09.2020 (Notification No. 52/2020)
June 2020	25.09.2020 (Notification No. 52/2020)
July 2020	29.09.2020 (Notification No. 52/2020)
August 2020	03.10.2020 (Notification No. 54/2020)	NOT APPLICABLE

 

It is important to note that Notification No. 57/2020-Central Tax dated 30.06.2020 is effective from 25.06.2020

 

If the GSTR3B is not done by 30.09.2020 then full late fees shall be applicable from the due date.

Notification No. 53/2020 - Central Tax dated 24th June, 2020

Waiver of late fee for delay in filing GSTR-1- March to June 2020 if the returns are filed within the time period mentioned in below table:

Month/Quarter	Dates
March, 2020	10.07.2020
April, 2020	24.07.2020
May, 2020	28.07.2020
June, 2020	05.08.2020
Jan. 2020 to March 2020	17.07.2020
April 2020 to June 2020	03.08.2020

 

Note: In case GSTR-1 is not filed by above dates, full late fee for the delayed period from the due date shall be payable.

No change has been made by Notification No 57/2020- Central Tax in this regard.

Recent notifications issued under GST Dated 24.06.2020

https://carahuldmittal.blogspot.com/2020/06/recent-notifications-issued-under-gst.html

Source: Notification No. 57/2020 and 52/2020 to 54/2020

Disclaimer:  This is meant purely for general education purpose.While the information is believed to be accurate to the best of my knowledge, I do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Reader should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. I accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.

Thanks for visiting our blog and reading this article. Kindly provide your feedback on the above article in comment box below.

M: +91-99917-25373