Saturday, May 21, 2016

How to Print Generate eStamp for Haryana Egrashry

Monday, July 21, 2014

YOUR PARENTS CAN HELP YOU SAVE TAX / REDUCE YOUR TAX LIABILITY


 
Your parents can help you save tax / reduce your tax liability

 
Saving tax is the main motto of all taxpayers. While some hire chartered accountants, others pore through tax laws, or ask friends to find out if there are ways by which they can save.

Actually, the simplest way of saving tax is by investing through parents and children. If you invest in the right instrument, the rate of return may be higher as well. Your parents can help bring down your tax liability in several ways. Here are some smart strategies that can reduce your tax outgo.

Buy House in Parents name if they are in a lower Income tax bracket

Every adult enjoys a basic tax exemption limit. For senior citizens (above 60 years), the basic exemption limit is Rs 2.5 lakh a year. If any or both of your parents do not have a high income but you have an investible surplus, you can avoid tax by transferring money to them which can then be invested in their name.

There is no tax on such gifts and the income from the investments will be treated as theirs. There are plenty of options. The Senior Citizen’s Savings Scheme offers an attractive 9.25% per annum. But the income is taxable and the investor must be over 55 years.

Here’s how you go about it. Income tax deductions allow senior citizens a tax-free income of Rs 2.5 lakh. To exhaust this limit, say you gift Rs 28 lakh to each parent in cash. Of this, both can individually put Rs 15 lakh in a senior citizens savings scheme that earns a return of nine per cent and pays interest every quarter. Each will get yearly interest of nearly Rs 1.4 lakh.

 If they invest the remaining Rs 13 lakh each in the State Bank of India’s (SBI) fixed deposit (FD) of eight-years (at an interest rate of 7.5 per cent) that pays interest each quarter, it will fetch them an income of nearly Rs 1 lakh annually.

That means both parents have earned Rs 2.8 lakh from the senior citizen saving scheme and another Rs 2 lakh from SBI’s five-year deposits each year. A total savings of Rs 4.8 lakh – the tax-free limit (Rs 2.5 lakh) that each parent enjoys. So, they don’t even need to file tax returns.

The Public Provident Fund offers tax-free income but there is a limit of Rs 1,00,000 a year. Invest in your parents’ names if your own limit is exhausted. Or open a demat account in their name and dabble in stocks. Short-term capital gains will not attract 15% tax if the basic exemption limit has not been crossed.

This strategy won’t work in the case of your spouse or minor children. Any amount given to a spouse is tax free but if it’s invested, the income is treated as that of the giver. Similarly, income from investments in a minor child’s name is added to the income of the parent who earns more and is taxed accordingly. No such clubbing provisions come into play when money is transferred to a parent. There is also no limit on the amount you can give to your parents.

 Pay them rent if you live in their house

Do you live in your parents’ house? You can pay them rent to claim House Rent Allowance exemption. This is possible only if the property is registered in the name of your parent. The owner will be taxed for the rental income after a 30% deduction. So, if you pay your father a rent of Rs 3 lakh a year (Rs 25,000 a month), he will be taxed for only Rs 2.1 lakh.

It gets better if the property is jointly owned by both parents. Then you can divide the rent two-ways so that the tax liability gets split between the two parents. If their income exceeds the basic exemption limit, you can help them save tax by investing in their name under Section 80C options such as the Senior Citizens’ Saving Scheme, five-year bank fixed deposits or tax-saving equity mutual funds.

Sell them shares and offset losses

 Tax laws allow you to adjust short-term losses from stocks against certain gains. But what if you have been holding junk stocks in your portfolio for more than a year? If you ask your broker to sell them, you won’t be able to adjust the long-term capital losses against any gain.

However, if you sell them through an off-market transaction where no securities transaction tax is paid, you are not only allowed to adjust the loss against a gain, but also carry forward the unadjusted loss for up to eight financial years. That’s easier said than done. It’s already tough finding buyers for junk stocks on the exchanges. Finding one for a private deal is infinitely more difficult.

It’s here where your parents can help you. Sell the junk stocks to them in an off-market transaction. An off-market transaction is a private deal between the buyer and seller without the exchange as an intermediary. The losses you book can then be adjusted against capital gains from other assets such as property, gold, debt funds, etc. It can also be carried forward for up to eight financial years. Keep a few things in mind while you go about this. The sale should be at the market price of the shares and the buyer should pay the sum by cheque. Otherwise, the taxman might treat the transfer as a gift.

Buy them a health insurance policy

 
This is the simplest and most commonly used strategy to save tax through your parents. Buy a health insurance policy for them and get deduction for the premium paid under Section 80D. Up to Rs 15,000 a year is deductible from your taxable income if you buy a health insurance policy for your parents. If the parents are senior citizens, the deduction is even higher at Rs 20,000.

 
This deduction is over and above the Rs 15,000 that one can claim as deduction for the health insurance premium paid for himself and his family (spouse and children). Also, this deduction is available irrespective of whether parents are financially dependent on the taxpayer or not.

WHAT IF EMPLOYER REFUSES TO ISSUE TDS CERTIFICATE / FORM 16

I worked in XYZ limited for the period from 01.4.12 to 31.03.2013. My Company deducted TDS of Rs. 1,00,000/- but not given TDS certificate till date. What legal remedy I have to force my employer to issue me the TDS certificate i.e. Form 16?
The employee has a right to obtain the TDS certificate in form 16 from his employer. The certificate details should be filled in return of income, since no credit for TDS can be given without it. In case your employer fails to issue the TDS certificate, he shall be liable to a penalty of Rs. 100/- for each day of default u/s 272A(2)g). The Only remedy in case your employer refuse to issue you TDS certificate or he is not issuing TDS certificate is that you can complain to the concerned Assessing Officer in writing, who will take appropriate action or initiate penalty proceedings against the employer.

The employee however has no other legal remedy against his employer in case he refuses to issue the certificate except that the employee may intimate about such default to concerned Assessing Officer, who may take appropriate action or initiate penalty proceedings against the employer.

Although my previous employer not issued TDS certificate for the TDS deducted by them, can I claim the credit for TDS deducted by them while filing my IT return for A.Y. 2013-14?
Yes. The claim can be made in your return. Department however will raise a demand which will not be enforced on you but on your employer.
Can Employer Decline to Issue Form 16 when there is no deduction of TDS on Salary?
Confusion arises among employees regarding Form 16 is on following grounds :
That they think Form 16 is a salary certificate.

That income tax Return cannot be filed in absence of Form 16.

While the fact is that Form 16 is the prescribed form for issue of certificate of deduction of tax at source from an employee. Employer can decline to issue Form 16 in case there is no deduction of tax at source. It is clear from a bare reading of section 203 of the I T Act and the relevant rule 31 of IT Rule.

Liability to give a certificate of tax deduction is given in Section 203 of the I.T Act. For employer, specific provision is given in sub-section 2 of section 203 of the I.T Act. The said subsection is given as under:
[Certificate For Tax Deducted. 203.

 
[(1)] Every person deducting tax in accordance with [the

Foregoing provisions of this Chapter] [shall, within such period as may be prescribed from the time of credit or payment of the sum, or, as the case may be, from the time of issue of a cheque or warrant for payment of any dividend to a shareholder], furnish to the person to whose account such credit is given or to whom such payment is made or the cheque or warrant is issued, a certificate to the effect that tax has been deducted, and specifying the amount so deducted, the rate at which the tax has been deducted and such other particulars as may be prescribed.]

[(2) Every person, being an employer, referred to in sub-section (1A) of section 192 shall, within such period, as may be prescribed, furnish to the person in respect of whose income such payment of tax has been made, a certificate to the effect that tax has been paid to the Central Government, and specify the amount so paid, the rate at which the tax has been paid and such other particulars as may be prescribed.]



It is clear from the aforesaid provision that an employer shall furnish the certificate only if any tax has been paid to central govt. on behalf of the employee. Rule 31 of IT Rules states that employer has to issue TDS certificate in Form 16. The said Rule states as under:

31. Certificate of Tax Deducted at Source [or Tax Paid Under Sub-Section (1A) of Section 192].


[(1) The certificate of deduction of tax at source [or, the certificate of payment of tax by the employer on behalf of the employee,] under section 203 to be furnished by any person deducting tax in accordance with the provisions of-

(a) Section 192 shall be in Form No. 16 :


Therefore, it is legal to refuse to issue a certificate of deduction of tax when there is no deduction of tax.

Wednesday, July 16, 2014

E-FILING OF INCOME TAX RETURN FOR F.Y. 2013-14 - MAJOR CHANGES

Entry 82 of the Union List of Schedule VII of the Constitution of India empowers central government to levy tax on all income other than agricultural income. The government of India imposes an income tax on taxable income of all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, association of persons, body of individuals, local authority and any other artificial judicial person. If gross total income exceeds the exemption limit, Income Tax Return has to be filed. Changes in filing of such ITR for F.Y. 2013-14 are as follows:

HIGHLIGHTS ON CHANGES WHILE FILING ITR:

1. All taxpayers filing E-Returns will have to compulsorily update correct mobile number and E- Mail ID’s. Otherwise there will be login issues before uploading of return on income tax Departments Website.

2. Now onwards Income Tax Refund will be issued directly in the bank account of the taxpayer through ECS only, cheques are discontinued. Therefore at most care should be taken while mentioning Bank Account Number and IFSC Code in the income tax returns.

3. From this year while claiming TDS in Income Tax return facility has been given to carry forward the TDS of previous year and brought forward TDS to next year. Due to this reconciliation of TDS claimed on Income and total available TDS as per Form 26 can be made. Tax payers which follow cash system of accounting will be benefited, like Doctors, Advocates, CAs and other professionals.

4. As per newly inserted Section 87A if annual income of the taxpayer is up to Rs. 5,00,000/- then Tax relief of maximum of Rs. 2,000/- is given. For claiming this relief separate space has been inserted in the return.

5. As per newly inserted Section 80EE if taxpayer has purchased house up to Rs. 40 Lakh and taken housing loan of Rs. 25 Lakh then taxpayer can claim deduction of interest up to Rs. 1 Lakh. For claiming this deduction separate space has been inserted in the return.
 
6. If income of the taxpayer is more than Rs. 1 crore then surcharge of 10% is applicable. For this separate space has been inserted in the return.

7. All salaries taxpayers will now have to give now separate details of LTA (Leave Travel Allowance) and HRA (House Rent Allowance) and other allowances separately. This will help Govt. to track proper claim of such deductions, recent HRA and LTA fallacious claimed by some MPs and Govt. taxpayers may have forced for such changes.

8. From this year the details of short and long term capital gain will have to be given in three parts viz.

a) sale of plot / flat

b) sale of STT paid shares and mutual funds

c) sale of other assets.

Further in case of sale of land or building Stamp Duty Value will have to be mentioned. Further if taxpayer is availing exemption under capital gains then value of newly purchased asset, date of acquisition of the asset and if invested in capital gain account then its details will have to be mentioned.

9. Corporate or LLP assessee will have to mention Corporate Identification Number or LLP Identification Number. Further Director or Designated Partner Identification Number will have to be mentioned. This will help in cross check of information with other legal departments by income tax dept or visa a versa.

10. If assessee carrying on business is taking deduction of bad debts of more than Rs. 1 Lakh of single person, then his PAN will have to be mentioned.

11. As per newly inserted section 43 CA if, taxpayer have sold other than capital assets below stamp duty value (e.g. Builders / developers) then the difference between the two will be considered as deemed income of the assessee and tax will have to be paid on it. For this separate space has been inserted in the return.

12. If there is more than one owner of the house then, while mentioning details in the schedule of Income from House Property the percentage of co ownership will have to be given.

13. From this year e-filing of wealth tax return is compulsory and in this return the details of all wealth whether taxable or not, will have to be given in depth.

Sunday, July 13, 2014

UNION BUDGET 2014 - (ARTICLE) HIGHLIGHTS OF PROPOSED CHANGES TO INCOME TAX LAWS APPLICABLE TO INDIVIDUALS


Important information about budget proposals on income tax :


  • Budget proposals on income tax do not become the law immediately.
  • Modifications, albeit minor, are often made to few of the proposals while actually passing the law. 
  • The proposals become a law when both the houses of the Parliament pass the bill and the President of India gives his assent thereto.      
  • Almost all of the proposed amendments to the tax law would be effective from the Financial Year 2014-15. The tax returns for FY 2014-15 would be filed after you receive your Form 16 for the year in April 2015.

 HIGHLIGHTS :

 i)    Increase in basic exemption limit from Rs. 2 lakh and Rs. 2.5 lakh :

 This proposed change would result in tax saving of Rs. 5,150 for most individual tax payers.

There has been a wide expectation that the amount of basic exemption would be increased to Rs. 5 lakh. However, that was not feasible considering the revenue and fiscal deficit targets set by the government. Given this constraint, this proposed increase of 25% from Rs. 2 lakh to Rs. 2.5 lakh is a welcome move from the Honorable Finance Minister.

ii)     Increase in the ceiling for deduction of interest on loan taken for purchase of house (section 24(b)) :

Taxpayers would get more from their housing loans. Ceiling of deduction on interest on housing loan is proposed to be increased from Rs. 1.5 lakh to Rs. 2 lakh in respect of self-occupied houses. For those who are paying high amount of interest, the additional tax savings would be up to Rs. 15,450.

This again is a welcome change considering that the previous limit of Rs. 150,000 was set many years ago. However, it would have been more appropriate to set a limit which would change every year based on annual change in some index relating to housing prices and in the interest rates.

iii)    Increase in the ceiling for deduction for investment (sections 80C, 80CCC and 80CCE) :

Now, you have more incentive to invest more for tax savings. Ceiling on deduction on investments is proposed to be increased to Rs. 1.5 lakhs from Rs. 1 lakh. Individuals can have tax savings of up to Rs. 15,450.

The common investments covered are EPF, PPF, Life insurance premium, housing loan repayment, children tuition fees, etc.

A welcome move considering that the limit was set many years ago. Those who are in 10% tax bracket are unlikely to take benefit of this enhanced limit. However, the taxpayers in 30% tax bracket, i.e. those having annual taxable income of over Rs. 10 lakhs would definitely consider making additional investment for extra tax savings.

iv)    Changes in rules regarding tax exemption reinvestment of on long term capital gains on sale of a house (sections 54 and 54F) :

The tax law provides for deduction from long term capital gains arising on sale of a house if the amount of gain is invested in a residential house. There was a lack of clarity about the quantum of tax deduction if taxpayer reinvested the amount of the long term capital gains in more than one house. The proposal seeks to clarify that the investment made only in one house would qualify for the tax deduction. Further, it is also clarified that the house to be acquired should be within India only.

A similar change is proposed in section 54F as well.

These proposed changes would over rule many judicial pronouncements wherein the taxpayers were allowed tax benefit on purchase of multiple houses and in some cases purchase of houses outside of India.

Taxpayers would be disappointed with this proposal which is restrictive. However, a good part is that the law is now sought to be clearly worded and would avoid unnecessary litigation.

v)     Changes in rules regarding tax exemption reinvestment of on long term capital gains on sale of any asset in capital gains tax saving bonds (section 54EC) :

 
The tax law provides a deduction from long term capital gains if the amount of gains is invested in certain bonds within 6 months from the date sale of the long term capital asset. It further provides that the investment in such bonds in a financial year cannot exceed Rs. 50 lakhs.

There was a lack of clarity on the amount of tax deduction on reinvestment in capital gains tax saving bonds when the capital asset was sold in the second half of the year. A lot of taxpayers claimed a deduction of Rs. 1 crore by splitting the investment in two financial years. It is now clarified that such splitting is not permissible and therefore, the total deduction in a financial year cannot exceed Rs. 50 lakhs.

While the proposed amendment provides more clarity, the taxpayers would be disappointed over the fact that the maximum amount of deduction now stands reduced from Rss 1 crore to just Rs. 50 lakhs.

vi)    Changes to taxation of income arising from non-equity oriented mutual funds :

So far, the units of non-equity oriented MFs were considered as long term capital assets if those were held for more than 12 months. It is proposed to change this period to 36 months. (Section 2(42A))

Currently, the taxpayers have an option to pay income tax on the long term capital gains on sale of such units at the rate of 10% without availing indexation benefit. It is proposed to remove this option. This would mean that the taxpayers would have to pay income tax at the rate of 20% after taking into consideration indexation benefit. (Section 112).

The Honorable Finance Minister, however, has been kind enough to retain the indexation benefit available on the units of non-equity mutual funds held for more than 3 years.

These above changes would mean that the investments alternatives to FDs such as FMPs would no longer be attractive unless the investments are made for more than 3 years.


vii)   Taxation of REITs (Real Estate Investment Trusts) (section 10(38) and section 111A) :


REITs are structurally similar to mutual funds and invest only in real estate assets. It is proposed that the tax treatment of investments in the units of listed REITs would be made at par with those of listed equity shares. Therefore, the long term capital gains on sale of units of listed REITs would be made tax exempt and the short term gains would be taxed only @ 15%.

This proposal would make investment in REITs very attractive from tax perspective.

viii)  Other changes :

The rate of dividend distribution tax (DDT) payable by companies and non-equity oriented mutual funds is proposed to be increased slightly by a grossing up formula. (Sections 115O and 115R)

It is proposed to tax forfeiture of advance amount received on failed asset sale transactions as ‘income from other sources.’ (Sections 2(24) and 56). Earlier such forfeited amount was reduced from the cost of the asset being sold. In cases where the forfeited amount was more than the cost of the asset, the excess was considered as a capital receipt and as non-taxable. It was believed that this rule was misused and therefore this proposed amendment seeks to plug this loophole.

Sunday, January 19, 2014

No TDS on Service Tax under Sec-194J Professional Fees Circular No. 01/2014 dated 13.01.2014

The Central Board of Direct Taxes has issued Circular No. 01/2014 dated 13.01.2014 clarifying that TDS under Section 194J of the Income tax Act,1961 shall be deducted on the amount paid/payable as per the agreement, without considering the Service tax portion. But it is necessary that the Service tax payable is shown separately on the invoice. 

For Example


Auditor Fees for the year 2012-13           1,00,000.00
Service Tax @ 12%              12,000.00
Ed.Cess @ 2%                   240.00
Sec.Ed.Cess @ 1%                   120.00
Total           1,12,360.00

TDS shall be deducted only on Rs 1,00,000/- as per above Circular No. 01/2014 dated 13.01.2014 it will not deducted on Service Tax. The condition in this circular is service tax shall be shown separately in the invoice.

Sunday, August 18, 2013

[Sec 194C] TDS from payments to contractors or sub-contractors

Who is responsible for tax deduction - any person responsible for paying any sum to any resident contractor for carrying out any work (including labour for carring out any work) is pursuance of a contract between a specified person and the resident contractor is required to deduct tax at source. For this purpose, payer himself is treated as person responsible for paying any sum to contractor. if, however, payer is company, the company itself including the principal officer thereof, is the person responsible for paying to resident contractor.

Specified Person: Meaning of - Tax deductible under section 194C(1) only if payment is made in pursuance of a contract between a specified person and a resident contractor. The Following are the 'Specified Person' for this purpose :


  • The Central Government or any Statement Government
  • any local authority
  • any corporation established by or under a central, state or provincial Act
  • any company
  • any co-operative society
  • any authority constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying eh need for housing accommodation or for the purpose of planning, development or improvement of cities towns and villages, or for both
  • any society registered under the societies registration act, 1860 or under any law corresponding to that act in force in any part of India
  • any trust
  • any university established or incorporated by or under a central, state or provincial act and an institution declared to be a university under section 3 of university grants commission act 1956
  • any foreign Government or a foreign enterprise or any association  or body established outside India
  • any firm
  • any individual or HUF whose books of account are required to be audited under section 44AB(a) / (b) during the immediately preceding financial year and sum credited / paid is not exclusively for personal purposes
  • with effect from 01 June 2008 AOP/BOI whose books of accounts are required to be audited under section 44AB(a)/(b) during immediately preceding financial year
When Tax has to be deducted at source - tax is to be deducted either at the time of credit of such sum to the account of payee or at the time of payment thereof in cash or by issue of cheque or by any other mde whichever is earlier
for this purpose any sum credited to any account, whether called "Suspense Account" or by any other name, in the books of account of the payee, is treated as credit of such income to the account of the payee.

Consideration / sum exceeding a particular sum is subject to tax deduction at source - The provisions are given below:

Petty Cases - to avoid tax deduction in petty cases, tax is required to be deducted at source where the amount credited or paid to a contractor or sub contractor exceeds Rs. 30,000/- in a single payment or credit or Rs. 75,000/- in the aggregate during a financial year. In other words, tax is not be deductible under section 194C if the following two conditions are satisfied -

a. the amount of any (single) sum credited or paid (or likely to be credited or paid) to the contractor or sub       contractor does not exceed Rs. 30,000/- and
b. the aggregate of the amounts of such sums credited or paid (or likely to be credited or paid) during the    
    financial year does not exceed Rs. 75,000/-

If payment recipient is a transport operator and furnishes his PAN to the deductor, tax is not deductible with effect from October 1 2009.

Who is Contractor - A "Contractor" is one who makes an agreement with another to do a piece of work, retaining in himself control of the means, methods and the manner of producing the result to be accomplished, neither party having the right to terminate the contract at will.
Sub-contractor is one who takes portion of contract from principal contractor or another sub-contractor.

Meaning of work contract - Provision of 194C relating to the tax deduction from payment to contract/sub-contractor are applicable only where contract is either a "work contract" or a contract for supply of labour for works contract. Theses provisions are, therefore, not applicable for payments made under contract of sale of goods.

"work" shall also include a few servies [explanation III to sec 194C]

  • Advertising
  • broadcasting and telecasing including production of programmes for such broadcasting or telecasting
  • carriage of goods and passengers by any mode of transport other than by railways
  • catering
  • manufacturing & supplying a product according to the requirement or specification of a customer by  using material purchased from such customer. However, it will not include if material is purchased other than such customer