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New Income Tax Rules - Update Here


New Income Tax Rules - Update Here

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  • Re : New Income Tax Rules - Update Here

    25% growth in number of Income Tax Returns filed in current fiscal Advance Tax (Personal Income Tax) collections up by 41%

    25% growth in number of Income Tax Returns filed in current fiscal Advance Tax (Personal Income Tax) collections up by 41%

    As a result of demonetization and Operation Clean Money, there is a substantial increase in the number of Income Tax Returns(ITRs) filed. The number of Returns filed as on 05.08.2017 stands at 2,82,92,955 as against 2,26,97,843 filed during the corresponding period of F.Y. 2016-2017, registering an increase of 24.7% compared to growth rate of 9.9% in the previous year. The growth in returns filed by Individuals is 25.3% with 2,79,39,083 returns having been received upto 05.08.2017 as against 2,22,92,864 returns in the corresponding period of F.Y. 2016-2017. This clearly shows that substantial number of new tax payers have been brought into the tax net subsequent to demonetization.

    The effect of demonetization is also clearly visible in the growth in Direct Tax Collections. Advance Tax collections of Personal Income Tax (i.e. other than Corporate Tax) as on 05.08.2017 showed a growth of about 41.79% over the corresponding period in F.Y. 2016-2017. Personal Income Tax under Self Assessment Tax (SAT) grew at 34.25% over the corresponding period in F.Y. 2016-2017.

    The above figures amply demonstrate the positive results of the Government’s commitment to fight the menace of black money. CBDT is committed in its resolve to eradicate tax evasion in a non intrusive manner and widening of tax base.

    25% Increase is substantial. Direct tax collection should cross Budget target. GST will further increase indirect taxes revenue
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    Last edited by yogeshraja; 1 week ago.


    • Re : New Income Tax Rules - Update Here

      Missed Filing Income Tax Return on deadline you can still file till 31 March

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      While the government has extended the last date for filing income tax returns to August 5 because of some technical glitches, if an assessee still misses the deadline, it does not mean that he cannot file his tax returns for the assessment year 2017-18. . Missing the deadline does not mean you cannot file your return. Infact if you have missed to file your return for last financial year ended March 2016, you can still file till 31 March 2018 however there is some catch. Read the article to know more.

      What Section 139(1) Says?
      Every person,-
      a. being a company; or
      b. being a person other than a company, if his/her total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form.

      31st July is the last date to file tax returns for individuals and those whose accounts are not subject to any audit. The assessee can do himself or call on his chartered accountant who can file the tax returns by just asking for few information.

      What Section 139(4) says?

      If a person has not furnished the return of income within the time allowed under section 139 (1), then he may furnish the return of income at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.

      What if you have not filed your return by due date?Don't feel dejected. You can still file the returns without paying any penalty until March 31, 2018. However there would be following implications:

      1) if an assessee misses the deadline he will not be allowed to file a revised return.

      2) He cannot carry forward losses. If an individual files returns within the due date, any loss is allowed to be carried forward for eight years for set-off against incomes of the future years. This set-off can help reduce tax liability for the future years. However if not filed on time losses cannot be carried forward

      3) The assessee will have to pay interest on any tax that had not been paid.

      4) Delayed filing also means delayed refunds.

      There will be no penalty for filing belated income tax return after due date for financial year 2016-17 till March 31, 2018. The government had introduced a maximum late fee of Rs 10,000 for delayed filing of income tax returns. This will be applicable from April 1, 2018 and will not apply for returns filed for FY2016-17.

      If one delays filing returns and in case there is any tax due on March 31 of the financial year, then the assessee will be liable to pay an additional interest under section 234A at the rate of 1% per month on that amount. Even if you file a belated return, it is advisable to deposit the outstanding tax liability at the earliest so that the interest payable is minimized. So, it makes sense to file returns on time to avoid paying the additional interest.

      Revised returns deadline changed to one year after from the end of relevant fiscal year

      Under Section 139(5) of the Income Tax Act, an assessee can file revised return within two years from the end of the relevant fiscal year or before the completion of assessment by tax authorities, whichever is earlier. The Finance Act of 2017 reduced the time limit for filing such revised return to one year from the end of relevant fiscal year or before the completion of the assessment by tax authorities, whichever is earlier. This amendment will be effective from fiscal year 2017-18. A revised return can be filed if the assessee has filed the return within the due date.
      Last edited by yogeshraja; 1 week ago.


      • Re : New Income Tax Rules - Update Here

        Filed IT Return, got Income Tax Intimation or Notice? Know what to do next

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        The Deadline for filing Income Tax Return which was 5th August. Central Processing Center (CPC) of Income Tax have started processing return and sending various intimation and notices. The processing of Income Tax returns have expedited compared to previous years and most of returns are processed within month time. The communication or intimation are usually send by Email with hard copy at address mention in ITR. Do check all communication you received on the register email id and check under which section you have received intimation or notice and respond accordingly. Here are some of the common sections under which people get notices and what these mean.

        Refund or DemandIntimation - Intimation under Section 143(1) or 143(1A)

        If all the details you have provided are correct and matching with form 16 and form 16A and other information with Income tax department your return will be easily processed and you will acknowledgement and if refund is due will be processed. It can be simply the final assessment of your returns as your tax calculation matches that of the assessing officer.However in case someone has missed any income to be disclose for example, Interest on FDs and there is mismatch with form 26AS then you might get Demand notice. You need to file a revise return and pay the demand as per notice. If tax is due, you will have to pay it within 30 days

        One of such measure for tax evaders had been taken by amending Section 143(1)(a) of the Income Tax Act in Budget 2017This amendment is going to hit hard for those Income Tax Assessee mostly Salaried Employees who used to make manipulative claims of allowances (LTA, medical, HRA etc) or deductions (Section 80C, 80D) in Return of Income and claims refund of TDS deducted from Salary. If assessee has claimed any allowance or deduction while filing return of income, which was not considered by employer in Form 16, then he/she must compulsorily face the Income Tax Notice enquiring the same. If assesse failed to response that notice within 30 days, then differential amount between Form 16 and Return of Income will be automatically added to his income and return would be processed accordingly. Everyone will get notice unless Income shown in Return matches exactly or more than the Form 16/16A.You will have to log in to the tax filing portal and, under the ‘e-Proceeding’ section, explain the discrepancy, besides uploading the supporting documentary proof.

        Defective Return Notice – Intimation of Defective under Section 139(9)

        Individuals will get a notice under this section in case of defective filing of tax returns. Defective return means, If you have used the wrong ITR form, if you haven’t paid the entire tax due, if you have claimed a refund for deducted tax but have not mentioned the relevant income, if there is a mismatch in the name on the form and PAN card, if TDS is deducted but you have not reported correct income.

        You need to respond to notice with in15 days from date of intimation by Assessing officer. You can seek an extension by writing to the local assessing officer. If you don’t respond, the return will be considered invalid.

        Scrutiny assessment notice under Section 143 (2)

        This is a scrutiny assessment notice that follows preliminary assessment of returns. There can be of three types, with the first two coming under computer-assisted scrutiny selection (CASS), while the third is a manual scrutiny notice

        a) Limited purpose scrutiny: This is not a full-fledged scrutiny and is meant to highlight only one or two points or few points

        b) Complete scrutiny: This entails a complete, detailed scrutiny as serious discrepancies have been identified in the returns.

        c) Manual scrutiny: This notice is hand-picked by the assessment officer, but it can be sent only after an approval by the Income Tax Commissioner.

        The taxpayer can now be handle such notice online and entire process scrutiny assessment can be completed online without visiting Income Tax office.Assessee needs to get all the documents and proofs to support case and do not miss the hearing date.
        Last edited by yogeshraja; 1 week ago.


        • Re : New Income Tax Rules - Update Here

          How to Respond to Notice u/s 143(1)(a)?

          Filed under Investment Plan, Tax Return, Taxes
          August 2, 2017

          How to Respond to Notice u/s 143(1)(a) for A.Y. 2017-18?

          In an earlier Post regarding Communication u/s 143(1)(a) for PAN XXXxxxxxXX for the A.Y. 2017-18 we had asked readers to wait for further clarity from Income tax department as was communicated by them through their helpline number – 18001034455.

          But it’s more than 10 days now and there have been NO further clarification coming from department, we thought we should start responding to Proposed adjustment u/s 143(1)(a) of Income Tax Act, 1961 Notice. Why taxpayers are getting Notice u/s 143(1)(a)?

          The Section u/s 143(1)(a) existed earlier too but has not been used extensively by tax department. What has happened this time they are sending out notices even if there is slightest mismatch between Form 16, Form 16A and Form 26AS versus the return filed.

          Even for deductions u/s 80TTA which exempts interest income up to Rs 10,000 in savings bank account which mostly do no figure out in Form 16 are receiving notices. The problem is we still do NOT know what proof tax department would require for this exemption.
          Download: Ultimate Tax Saving ebook with tax calculator FY 2017-18
          All pensioners who do not have to submit their investment declaration u/s 80C too are receiving this notice.

          Other than that salaried employees who have not submitted their investment proofs or rent receipts to their employers and claimed such deductions at the time of filing the return are getting these notices. How to respond to Notice u/s 143(1)(a)?

          The notice mentions that you should respond to the same within 30 days of receiving it. We list down steps you should follow to respond to the notice.

          Step 1: Login to the efiling portal –

          Step 2: Goto e- Proceeding > eAssessment menu

          For some tax payers this section may show nothing even if they have received notice. This is because it takes 2 to 3 days for the details to appear.

          This is what is visible on clicking the above menu options.
          Also Read: How are your Investments Taxed?

          e-Proceeding to Reply to Prima Facie Adjustment 143(1)

          Step 3: Click on Prmia Facie Adjustment u/s 143(1)

          This will open the next screen

          e-Assessment Proceedings Response for Section 143(1) – Screen 1
          Also Read: Best Tax Saving Investments u/s 80C
          Step 4: Choose “Submit” to Direct to the next page

          e-Assessment Proceedings Response for Section 143(1) – Screen 2

          Step 5: Choose to Agree or Disagree

          The details show the same details as present in the notice. Now you have tochoose from “Response” – Agree or Disagree.

          In case you agree which means the tax department was right in its calculation, you should submit the response and file a revised return within 15 days after paying additional taxes.
          Also Read: How to file Revised Income Tax return?

          e-Assessment Proceedings Response for Section 143(1) – If you Agree for Addition

          Another thing to notice is if you agree it sums up the Variance – which is a bug in the system. Both the rows question the same exemption and hence it should have shown addition of Rs 1,59,000 only (as in the above example).
          Also Read: How to pay additional Self-Assessment Tax Online?
          However in most cases Taxpayer would disagree to the addition. So if you respond by choosing Disagree, an additional response table opens up at the bottom asking for more details.

          e-Assessment Proceedings Response for Section 143(1) – If you Disagree for Addition
          Also Read: Detailed explanation on Mutual Funds taxation
          The Form for reply is shown below:

          Reason for Disagreement Form

          The form has the following fields. Read carefully on what needs to be filled:

          • Enter the TAN of the employer (available in the Form 16 or Form 26AS) for salary income
          • If you have income from interest etc, put TAN of bank/company (available in Form 16A or Form 26AS)
          Deduction made under section
          • Mention 80C (for investment in PPF, Tax Saving Fixed Deposit, etc),
          • 80CCD(1), 80CCD(2) or 80CCD(1B) for NPS as the case may be,
          • 80TTA for taking deduction of Rs 10,000 on interest from savings account
          • 10(13A) for HRA
          • 80D for medical insurance
          • 80E for education loan
          • 80G for donation made to charity/NGOs, etc
          You’ll get the complete list from the ITR form you filled
          Also Read: 21 changes in Income Tax laws in FY 2017-18
          Amount paid/credited by deductor

          Put the amount paid – you’ll get this from Form 16 or 26AS (shown below) for salaried and Form 16A or 26AS for interest income, etc.

          Form 26AS to reply to Notice 143(1)

          Nature of receipt as per the deductor

          This would be any of five types of income defined by income Tax – salary (Pension is salary income), Business, Capital Gains, income from house and other income (includes interest income)
          Also Read: How to Pay 0 Income Tax on Rs 11 Lakh Salary?
          Income/Gross Receipts as per the return

          Enter the amount after taking on account the above deduction.

          So for the case above I would put Rs 4,36,160 (5,95,156 – 1,59,000) which was the income filed in actual tax return

          Head of Income/Schedule under which reported in the return

          This should be same as “Nature of receipt as per the deductor” until you have put it differently in income tax return. For e.g. Pension income should be treated as salary income but someone unknowingly has put in other income. So in this case he has to fill “Other Income”

          Head of Income/Schedule under which reported in the return IS ACCEPTING ONLY NUMERIC VALUE BUT YOU SAID IT IS SAME AS NATURE OF RECEIPT. So you’ll have to put following numbers (Sections) as the case may be:
          • Salary/Pension – 17
          • Capital Gains – 54
          • House Property – 24
          • Business/Profession – 28
          • Other Income (includes interest) – 56
          This idea came from comment from Sagar (Thanks Sagar)!

          Also I am surprised how tax department thinks all taxpayers would know these sections. If it was just 5 they should have given a drop down rather than fill numbers only!
          Also Read: When and How can Tax Benefits Claimed Earlier be Reversed?

          There are 10 reasons to choose from as shown below:

          e-Assessment Proceedings Response for Section 143(1) – Choose Reason

          In case you claimed HRA which was not present in Form 16 then select reason as “Allowance exempt claimed in return but not in Form 16”
          Also Read: How to claim Tax Benefit on both HRA & Home Loan?
          For all deductions under chapter VIA (includes 80C, 80D, 80E, NPS related etc) which you claimed but were not part of Form 16 select “Deductions claimed in the return but not in Form 16”

          In case everything was present in your Form 16 but still you got noticeselect “Others” and mention in Justification that the deduction already present in Form 16. Also attach the Form 16.


          Briefly state why your Allowance or deduction was not in Form 16. It could be “employer did not consider this deduction” or “investment was made after proof submission to employer” etc.

          And most important DO NOT forget to attach relevant documents.
          • For 80C investments you can attach the investment proof.
          • For HRA you can submit rent receipt, etc.
          • I am still not sure what proof to attach for 80TTA!
          Also Read: How to Claim Tax Exemptions while filing ITR?
          Section 143(1) Acknowledgement

          After all the process is complete you get the following acknowledgement:

          e-Assessment Proceedings Response for Section 143(1) – Acknowledgement

          Disclaimer: Please remember this post is best to my understanding and I am not a tax expert. You might want to consult a qualified tax consultant or CA for your specific case! To Conclude:

          This action was initiated by income tax department as some tax payers misused the “proof not required while filing tax return” part and used to claim deductions they were not eligible for. For e.g. with more strict polices at employer end many people could not claim HRA with fake receipts as rent receipt without landlord PAN in not accepted. But they claimed while filing ITR as this is allowed. We all know there are a lot of genuine tax payers who are not able to claim HRA as landlords DO NOT share their PAN number. Also some tax payers took advantage of 80C without making actual investment.
          Also Read: 13 Tax Free Components You Must have in Salary
          The intent of income tax department was good – to weed out such events. But unfortunately as we have seen with mot government initiatives – the plan is good on paper but execution is very poor. Same is the case here.

          Even tax helpline is NOT able to guide people and telling them to wait. Also this should be stated while filing returns and not sending a notice after that. This would badly hurt people who are not tech savvy and do not check emails frequently & this means a lot of housewives, senior citizens on pension income.

          Also sending notice for Section 80TTA – deduction up to Rs 10,000 for interest earned in savings account is ridiculous because I do not understand what proof would be required for the same.
          Also Read: 25 Tax Free Incomes & Investments in India
          The e- Proceeding form has bugs and it adds income across rows – as shown above. The department has still not corrected these and neither sent further communication. On one hand they want more and more people to file returns by telling it’s simple and then bowl a googly by sending such notices. Hopefully the tax department is working on it and would create more awareness on how to reply to these notices or at the end its tax payer would be sufferer.


          • Re : New Income Tax Rules - Update Here

            Best Tax Saving Investments u/s 80C

            Filed under Investment Plan, Tax Saving, Taxes
            August 6, 2017

            Best Tax Saving Investment Plans u/s 80C

            The tax season is here and I have started getting mails and comments asking for the “Best Tax Saving Investments”. Unfortunately there is no straight answer to this. The best investment is different for different people and is aligned with their return expectations, risk taking ability, personal circumstances, and alignment with their financial goals among other things.

            Investments for Section 80C

            You can claim maximum deduction of Rs 1.5 Lakhs u/s 80C (including Sections 80CCC, 80CCD) by investing in eligible instruments. Unfortunately investments and expenditures allowed u/s 80C is too crowded and that makes the choice difficult for most people.

            Below is the list of investments/expenses eligible for deduction u/s 80C:
            1. Provident Fund (EPF/ VPF)
            2. Public Provident Fund (PPF)
            3. Sukanya Samriddhi Account (SSA)
            4. National Saving Certificate (NSC)
            5. Senior Citizen’s Saving Scheme (SCSS)
            6. Tax Saving Fixed Deposits (for 5 Years)
            7. Life Insurance Premium
            8. Pension Plans from Mutual Funds
            9. Pension Plans from Insurance Companies
            10. New Pension Scheme (NPS)
            11. Tax Saving Mutual Funds (ELSS)
            12. Central Govt. Employees Pension Scheme
            13. Principal Payment on Home Loan
            14. Tuition Fees for up to 2 children
            15. Stamp Duty for registration of Home
            Download Free: Tax Planning Guide for FY 2017-18
            The post below suggests the approach to select the investments for tax planning. Expenditures Eligible for Tax Benefit:

            The first step is to check all expenditures which are eligible for tax deduction. Below is the list: 1. Tuition Fees for up to 2 children

            The expenses on tuition fees for full time courses for maximum of two children is eligible for deduction u/s 80C. However, the deduction is not available for tuition fee to coaching classes or private tuitions. The following expenses are not considered as tuition fees – Development Fee, Transport charges, hostel charges, Mess charges, library fees, Late fines, etc. 2. Stamp Duty for registration of New Home

            Stamp duty and registration charges up to Rs 1.5 Lakh can be claimed for deduction u/s 80C. The payment should have been made in the same financial year for which the tax is being paid. i.e. the deduction cannot be carried forward to next year. Also the house should be in the name of assessee claiming deduction.
            Also Read: How builders use super built-up area to deceive home buyers?
            In case you have paid stamp duty for new home, you most probably would exhaust your 80C limit for the year and no further investment might be required. Compulsory Deductions:

            There are some compulsory deductions that are eligible for tax benefit u/s 80C. Check if you contribute in any of such deductions: 1. Provident Funds (EPF/VPF)

            EPF is a compulsory deduction for most salaried employees. The deduction can be 12% of the basic salary & dearness allowance or Rs 1,800 every month. Look at your salary statement to know how much have you contributed for the year. Count only your contribution. Employer’s contribution is not eligible for tax saving investment. You can also have some amount contributed throughVoluntary Provident Fund (VPF), which can be up to 100% of the basic salary & DA.
            Also Read: VPF – A Good Retirement Option!
            2. National Pension Scheme (NPS)

            NPS (Tier 1) is compulsory for most Government employees who joined after 2004. Look at your salary slip to check your deduction. Again only your contribution is valid deduction. Employer’s contribution is not eligible. The good thing is you can use this contribution to claim additional tax deduction up to Rs 50,000 under the newly introduced Section 80CCD(1B). We have explained this at the last paragraph of the post.
            Also Read: NPS – Maturity, Partial Withdrawal & Early Exit Rules
            Recurring Deductions:

            There are some deductions which happen year on year like home loan repayment, insurance premium etc. 1. Home Loan Principal Amount

            Are you paying home loan? The principal component paid every year is eligible as tax deduction. For this you can download the tax statement from banks’ website. In case not get it from the loan provider. This would give you an estimate of principal and interest paid for the financial year. 2. Insurance Premium

            Have you bought life insurance products like ULIP, Endowment Plan or Term Insurance where you need to pay the premium for subsequent years? If you want to continue investing in the same you can continue to claim tax benefit. 3. PPF (public Provident Fund)

            If you have PPF account you should contribute minimum Rs 500 in a financial year. In case you don’t do, a fine is levied.
            Also read: How to Claim Tax Exemptions while filing ITR?
            4. Sukanya Samriddhi Account (SSA)

            Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied. 5. NPS

            Do you have NPS account? A minimum contribution of Rs 1,000 is required every financial year to keep the account active.
            For many people the 80C deduction limit is reached by this time. In case not, choose from the list below depending on your risk profile and investment goals:
            New Investment for 80C:

            1. Term Life Insurance

            Do you have dependents? Would they survive financially in case something happens to you? Do you have enough life insurance? If no go get a term insurance first. It’s important to opt for protection first.

            Useful Tips:
            • Online term plans are much cheaper than offline. So it makes sense to go for online plans.
            • Do not provide false information in the insurance form. The insurance claim can be rejected for wrong information.
            • Do not buy anything other than Term Plans from insurance companies. No money back, endowment plans!
            Also Read: 9 Tips to Buy the Right Life Insurance
            2. ELSS (Equity Linked Saving Scheme)

            Popularly known as Tax saving Mutual Fund. These are equity based mutual funds and one of the best investment options to create wealth in the long run while saving tax. In case you can digest the volatility of stock market, this is the recommended option.

            Lock-in Period: 3 Years

            The Good:
            • Among the tax saving investments, ELSS has least lock-in period of 3 years.
            • The gains on ELSS Fund is Tax Free.
            • Convenient to buy and manage as ELSS can be bought and redeemed online.
            The Bad:
            • There can be considerable volatility in returns and you can get negative returns at the end of 3 years.
            Also Read: Best ELSS (Tax Saving Mutual Fund) to Invest in 2017
            Helpful Tips:
            • Invest through SIP (Systematic Investment Plan). This helps in tiding over volatility to some extent.
            • Choose “Growth” option over “Dividend Payout” as this creates wealth in the long run.
            • Try to invest directly to fund as this would give you 0.5% to 1% higher returns as compared to when you invest through broker (How to Invest Direct in Mutual Funds?)
            • If doing lump-sum check for stock market valuations. If you invest at high valuations, you might see very low or negative returns at the end of 3 years.
            • Avoid “closed-ended” ELSS NFOs which are launched at this time of the year.
            3. PPF (Public Provident Fund)

            PPF is another popular tax saving investment option for 80C, especially for people without any other provident fund.

            Lock-in Period: 15 Years. However partial withdrawal is allowed from 7th year

            The Good:
            • The interest earned on PPF is Tax Free
            • After opening the PPF account, investment can be done online every Year (for some banks)
            • Highest Safety – backed by Govt. of India
            The Bad:
            • The lock-in is for 15 years but there is partial liquidity from 7th year on wards.
            Also Read: PPF – A Must Have Investment
            Helpful Tips:
            • Investment done till 5th of the month earns interest for the month. So deposit your money before 5th of month
            • You can use combination of PPF and ELSS for tax saving investments. In case you find stock market over-valued, PPF is good option.
            4. Senior Citizen’s Saving Scheme (SCSS)

            SCSS is good option for senior citizens (above 60 years of age) as it gives regular quarterly interest income directly in bank account.
            Also read: All about Senior Citizens’ Savings Scheme
            Lock-in: 5 years

            The Good:
            • Highest Safety – backed by Govt. of India
            • The interest rate offered is highest among the small saving schemes
            The Bad:
            • The interest received is taxable.
            • TDS would be deducted if the total interest in a year is over Rs 10,000. However, if eligible Form 15H can be submitted to avoid TDS.
            Helpful Tips:
            • SCSS account can be closed after 1 Year (with penalty) but in case you have availed Sec 80C benefit, it would be reversed.
            • The joint account can be opened only with your spouse. There is no age limit applicable for the joint account holder.
            5. Sukanya Samriddhi Account (SSA)

            SSA can be opened by parents of girl child subject to certain conditions. SSA can be a good option for fixed income investment for child. However you should also invest in ELSS or other equity mutual funds for goals related to child.
            Also Read: All about Sukanya Samriddhi Account
            Lock-in: Deposit to the account to be made for 14 years and account matures at 21 years from date of opening

            The Good:
            • The interest earned on SSA is Tax Free and also higher than that offered to PPF
            • 50% withdrawal allowed when girl turns 18 for marriage/higher education
            • Highest Safety – backed by Govt. of India
            The Bad:
            • No provision of Loan or pre-mature withdrawal unlike PPF
            Helpful Tips:
            • Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied
            • Account can be closed before 21 years in case of marriage
            6. National Saving Certificate (NSC)

            NSC can be bought at post offices to save tax u/s 80c. It is available for 5 years (NSC VIII) only. The interest offered is 7.8%.
            Also Read: All about NSC (National Saving Certificate)
            Lock-in: 5 Years

            The Good:
            • The interest is higher than most tax saving bank fixed deposits.
            • Certificates can be kept as collateral security to get loan from banks
            • No Tax deduction at source
            • The interest accrued for NSC qualifies for Sec 80C deduction in subsequent years
            • Highest Safety – backed by Govt. of India
            The Bad:
            • The interest earned is taxable
            • You need to visit Post office for buying and redeeming NSC units. This can be a hassle for people who shift addresses frequently.
            Also Read: Calculate Tax on Arrears in 7 Easy Steps
            Helpful Tips:
            • You can buy NSC in denominations of Rs 100, 500, 1000, 5000 and 10000
            • NSC is better tax saving option than banks Tax Saving FD (offering similar interest) as interest accrued for NSC qualifies for Sec 80C deduction in subsequent years
            7. Tax Saving Bank Fixed Deposits

            India loves fixed deposits and FD which saves tax is obviously very popular.
            Also Read: Highest Tax Saving Bank Fixed Deposit Rates U/S 80C across 44 banks
            Lock-in: 5 years

            The Good:
            • Convenient to invest. Many banks offers online facility for Tax Saving FD
            • High Safety – FD up to Rs 1 Lakh is insured by RBI
            The Bad:Helpful Tips:8. Pension Plans from Mutual Funds

            There are Pension plans from mutual funds which offer tax benefit u/s 80C:
            1. Templeton India Pension Plan
            2. UTI Retirement Benefit Pension Fund
            3. Reliance Mutual Fund Pension Plan
            The above funds are hybrid or balanced mutual funds – the first two funds are debt oriented mutual fund while the one from Reliance has two funds – one debt oriented and other equity oriented.

            Lock-in: 5 years

            Helpful Tips:
            • Reliance Mutual Fund Pension Plan is better option among the three funds as you use Wealth option (which is equity oriented fund) to create the corpus and then switch to Income option (which is debt oriented fund) for regular income after retirement.
            • All 3 funds levy exit load to discourage people from exiting early
            Download:Excel based Income Tax Calculator for FY 2017-18 [AY 2018-19]
            9. NPS (National Pension Scheme)

            Some of you might have to contribute compulsorily to NPS. In this case you can take deduction up to Rs 50,000 under the newly introduced Section 80CCD(1B). And then you can choose more efficient investment for 80C.

            Here is an example:

            Mr Amit is Government employee and has compulsory NPS deduction of Rs 60,000 every year. Until last year this NPS was part of Section 80C deduction. After introduction of Section 80CCD(1B), he can claim Rs 50,000 deduction under this section. Rest of Rs 10,000 (Rs 60K – 50K) can be claimed as deduction u/s 80C. And he can additionally make investment of Rs 1.4 lakhs in other 80C instruments like PPF, ELSS, etc – taking his total deduction to Rs 2 lakhs [Rs 1.5 lakhs from 80C & Rs 50,000 from Sec 80CCD(1B)]

            However for people who do not have NPS account, it might NOT make sense to open one just for newer introduced tax benefit u/s 80CCD(1B).You would do better to pay tax and invest the remaining amount in good equity mutual fund.

            With New taxation for NPS on maturity you can invest in NPS to take tax benefit u/s 80CCD(1B). We redid our calculations which you can check in hte link below.
            Also Read: Should you Invest Rs 50,000 in NPS to Save Tax u/s 80CCD (1B)?
            Why you should not invest in NPS?
            1. The investment is locked-in till the time of retirement of till the subscriber turns 60. If you close the account mid-way only 20% is offered lump-sum and buy compulsory annuity for rest 80%. So in case of early retirement, this money is not going to work for you.
            2. On maturity at least 40% of amount needs to buy annuity which offers low returns and is taxable.
            Investments to Avoid for 80C:

            Below are some investments that I would recommend to stay away as they have poor returns and/or can hold you in complicated tax tangles. Also you would hear multiple horror stories on how these investments were miss-sold and people are now struck.
            Also Read: How to Pay 0 Income Tax on Rs 11 Lakh Salary?
            1. Pension Plans from Insurance Companies:

            Unit Linked Pension Plans (ULPP) is offered by insurance companies as a investment to take care of your retirement. The broader product structure is, you invest in the product for first few years and then the insurance company pays you some lump-sum amount and then a regular annuity after certain period.

            Why you should not invest in ULPP?
            1. These are long term products and you would need to pay premium for a long period of time.
            2. The returns on ULPP are miserable.
            3. If you want to surrender these, you loose a lot in terms of returns.
            4. The tax benefit claimed is reversed if the plan is surrendered mid-way.
            5. Only one third of amount at maturity/surrender can be taken as lump-sum. Two third amount has to be necessarily used for buying annuity.
            2. Life Insurance (Endowment Plan/ ULIP)

            ULIP and endowment plans are other investment which is miss-sold very often. People do not understand the complex product and later suffer heavily.
            Also Read: Not all Life Insurance/ULIPs Offer Tax Benefit?

            Why you should not invest in ULIPs?
            1. These are long term products and you would need to pay premium for a long period of time (at least 3 to 5 years)
            2. The returns endowment plans are miserable (lesser than fixed deposits)
            3. In case you want to discontinue your investment, the surrender value is pathetic.
            4. The tax benefit claimed is reversed if the plan is surrendered mid-way.

            Section 80C – Best Tax Saving Investment To conclude:

            As said earlier the best tax saving investment is different for different people and is aligned with their return expectations, risk taking ability, personal circumstances, and alignment with their financial goals among other things. So you must choose product that suits your above requirement. Also the ranking done by me may not suit you but you would do good to stay away from ULIPs, Endowment Plans and Pension Plans (ULPP). Go ahead and save tax!



            • Re : New Income Tax Rules - Update Here

              Tax Free Incomes & Investments in India

              Filed under Investment Plan, Tax Saving, Taxes
              August 9, 2017

              Tax Free Incomes and Investments in India

              Everyone hates Taxes and go out in full force to save it – sometime legally and sometimes beyond the law. Fortunately there are still some incomes & investments which are tax free. Learn about them and use it to your advantage.

              Tax Free Incomes:

              1. Agriculture Income

              India started as agrarian economy and to encourage farming agriculture income was made tax free. Unfortunately even after so many years it has remained so due to its political sensitivity. For tax free income, Agriculture income refers to
              • Processing & sale of agricultural crops
              • Rental income from agriculture land or building and
              • Gains from sale/purchase of agriculture land
              Unfortunately this loophole is being used big time to make income tax free illegally. A catch in this is for computing tax liability, you need to include agriculture income in your total income if:
              • Net agriculture income is more than Rs 5000 for the financial year or
              • Total income (excluding agriculture income) is more than income tax exemption limit.
              Also Read: How are your Investments Taxed?
              2. Some Components of Salary:

              Some components of salary are either fully or partially exempted from tax. Medical Reimbursement, Transport Allowance, Meal Coupons, Mobile Phone and Internet Bill Reimbursement, Leave Travel Allowance, etc are exempted to certain limit. You can read more details in the link below.
              Also Read: 13 Tax Free Components You Must have in Salary
              3. Share of Profit from Partnership Firms:

              The share of profits received from partnership firms as partner is totally tax free in your hands because the tax is already paid by the firm on it. However all other payments like salary, interests etc are taxable. 4. Receipts from HUF for its members:

              Any receipts from HUF income to its members is tax free. This is because HUF in itself is treated as separate tax entity and taxes are already paid by it on its income. 5. Retirement Benefits:

              Retirement benefits such as Gratuity, Leave encashment etc are either fully or partially exempted from tax depending if you are government or non-government employee and the amount received.
              Also Read: How to Pay 0 Income Tax on Rs 11 Lakh Salary?
              6. Commutation of Pension:

              On retirement Central & State Government employees, Local Authority, Defense Services and PSU employees can encash a part of their pension in lumpsum known as Commutation of Pension. This amount is tax free. In case of other employees the commuted pension is partially exempted from tax. 7. Tax Free Pension:

              Pension received from some organizations like UNO is tax free. Also one-third or Rs 15,000 (whichever is less) is exempted from tax in case of family pension received by dependents. 8. Voluntary Retirement:

              Amount up to Rs 5 lakhs received at the time of voluntary retirement or termination of service is tax free. Any excess is taxed at income tax slabs applicable to you.
              Download: Ultimate Tax Saving ebook with tax calculator FY 2017-18
              9. Retrenchment:

              The compensation received by employees in event of closure of a company is tax free. 10. Scholarship:

              Any scholarship received to cover educational expenses is tax free u/s 10(16). The scholarship need NOT necessarily be awarded by Government. ‘Cost of education’ includes not only the tuition fees but all other expenses which are incidental to acquiring education. Scholarship may have been given by Govt., University, Board, Trust, etc. 11. Awards by Government:

              All payments receive in cash or kind as an award given by the central or state governments or by a body recognized by the central government is tax free.
              Also Read: Highest Interest Rate on Bank Fixed Deposits
              12. Government Relief Funds

              Any amounts offered by government to individuals from Prime Minister’s National Relief Fund or students fund or foundation for communal harmony is tax free. 13. Gifts:

              Gifts received from relatives are tax free u/s 56(2) without any upper limit. Also gifts up to Rs 50,000 from non-relatives are tax exempted. The good this is all gifts received at the time of marriage from relatives or non-relatives are fully exempted from tax.

              Following are considered relatives as per income tax laws:
              • Spouse of Individual
              • Brother or sister of Individual
              • Brother or sister of spouse of Individual
              • Brother or sister of either of parents of Individual
              • Any lineal ascendant or descendant of Individual
              • Any lineal ascendant or descendant of spouse of Individual
              • Spouse of person referred to in clauses above
              Also Read: High Rated Companies Offering more than Bank Fixed Deposits
              Tax Free Investments

              14. Long Term Capital Gains on Equity or Equity Mutual Funds:

              Long term capital gains on sale of equity or equity mutual funds (mutual funds which hold more than 65% of portfolio in equity) are tax free Under Section 10(38). To qualify as long term, the investment tenure should be more than 1 year. Also remember that income is tax free only if STT (Securities Transaction tax) has been paid at the sale/purchase of the equities.
              Also Read: Best ELSS (Tax Saving Mutual Fund) to Invest
              15. Dividend Income from Equity or Mutual Funds:

              Dividends received from Indian companies are tax free under Section 10(34). Budget 2016 changed the limit of tax free dividend to Rs 10 lakh. Any excess dividend received by individuals or HUFs have to pay tax at 10%.

              Dividends received from mutual funds are tax free under Section 10(35). The above limit of Rs 10 lakh does not apply to it.
              Also Read: How are Mutual Funds Taxed?
              16. Tax Free Bonds:

              As the name suggests any interest received on tax free bonds is NOT taxable. 17. Interest on Saving Account:

              Interest received up to Rs 10,000 in saving account (either banks or post offices) is tax exempted u/s 800TTA. Any excess interest is taxed at marginal income tax rates. 18. Interest on NRE Accounts:

              The interest earned on NRE (Non Resident External account) deposits for NRIs are completely tax free. The money in NRE account is fully repatriable – means if you are in US and you invest some money in India in your NRE account, the principle and interest money can be taken back to US. So NRE deposits are ideal way for NRIs to get tax free income.
              Also Read: 13 Investments to Generate Regular Income
              19. EPF (Employee Provident Fund):

              The EPF is tax free if it’s withdrawn after 5 years of continuous service. In case withdrawal happens before 5 years, it’s fully taxable. Five year of continuous service means that your EPF account is active (has received active contribution) for more than 5 years even if you have changed multiple employers in the period. 20. PPF (Public Provident Fund):

              The maturity amount or partial withdrawals from PPF are completely tax free. 21. Sukanya Samriddhi Account:

              The interest received on Sukanya Samriddhi Account is tax free. This makes it good investment option for girl child.
              Also Read: Latest Small Savings Scheme Interest Rate
              22. Life insurance policy Maturity Amount:

              Maturity Amount of life insurance policy is tax free if the premium paid for all the years are less than 10% of the maturity amount. Surrender amount for endowment/traditional insurance is exempt from tax after 3 years while its tax free for ULIPs after 5 years.
              Also Read: Does Your Life Insurance Offers Tax Benefit?
              23. Sovereign Gold Bonds

              There is no capital gains tax if the bonds are held till maturity. However the interest received is taxable. Also if the bonds are sold before maturity it entails capital gains tax. 24. Gold Monetization Scheme:

              The interest received is tax free. Also there is No Capital Gains Tax on the appreciation in the value of gold deposited.
              Also Read: Sovereign Gold Bonds latest issues
              25. Inheritance:

              Thankfully there is NO inheritance tax in India. So all the assets, money etc you receive from inheritance or will is tax free. But after it’s transferred to you, any income generated using inherited asset is your income and taxed accordingly.



              • Re : New Income Tax Rules - Update Here

                Form 26AS – Verify Before Filing Tax Return

                Filed under Investment Plan, Tax Return, Taxes
                July 17, 2017

                Form 26AS – Verify Before Filing Tax Return

                Talk to any expert on tax return filing and he would suggest you to “verify your Form 26AS”.
                Form 26AS is consolidated statement of all your TDS, Self Assessment tax, advance tax, tax refunds, and high value transactions for relevant assessment years.
                The post gives an overview and structure of Form 26AS, why it’s so important, what to verify and how to use it for Income Tax Return filing. What is Form 26AS?

                Form 26AS (also called the annual statement) gives you the following details for the associated PAN card:
                • Salary Credited and the corresponding TDS
                • Interest Credited and corresponding TDS by banks and companies
                • Advance tax or self assessment tax paid
                • TDS deducted in case of selling/buying of property of more than 50 lakhs value
                • Any high value transaction done in the year like buying property, shares, mutual funds, etc
                • Income tax refund paid, if any
                Also Read: ITR 2017 – Which ITR Form to use for AY 2017-18?
                How to view 26AS?

                There are two ways to view your 26AS
                1. You can do it directly from Income tax Website –
                2. You can do it through your net banking of authorized banks (with PAN card correctly linked to the account)
                How to view information in Form 26AS?

                Once the Form is opened, you have option to select the Assessment year and the format “View as”. Select the relevant Assessment year and the format and click view.

                Select ‘HTML” to view it online and “PDF” to download it.

                Password for opening downloaded Form 26AS is date of birth of PAN holder in ddmmyyyy format as mentioned in PAN Card. So if your date of birth is January 1, 1980 then your password would be 01011980.
                Download: Ultimate Tax Saving ebook with tax calculator FY 2017-18
                Also remember the difference between Financial and Assessment year (for Financial Year 2016-17 the assessment year is 2017-18 and so on).

                How to view information in Form 26AS?
                Also Read: 9 key changes in the ITR forms 2017
                Interpreting From 26AS:

                The 26AS is divided into 7 broad sections (A to G). Following are the details for each section.

                PART A – Details of Tax Deducted at Source.

                This section is most common and has details of Tax deducted by your employer or TDS deducted by banks on interest on Fixed Deposits, etc. TDS deducted by each source is shown as a separate table.

                PART A1 – Details of Tax Deducted at Source for 15G / 15H

                This section shows details of the income where tax was not deducted as you had submitted form 15G or 15H. The TDS will always show “0” because you have submitted Form 15G/H for not deducting TDS. It helps in tracking the interest you received.
                Also Read: 25 Tax Free Incomes & Investments in India
                PART A2 – Details of Tax Deducted at Source on Sale of Immovable Property u/s 194IA (For Seller of Property)

                Form 26AS – PART A – Details of Tax Deducted at Source

                PART B – Details of Tax Collected at Source

                This is tax that is collected by seller from buyer on sale of certain goods like liquor, timber, minerals, etc. This would be mainly populated for people involved in such trades.
                Also Read: How to Claim Tax Exemptions while filing ITR?
                PART C – Details of Tax Paid (other than TDS or TCS)

                This part shows any “Advance Tax or Self Assessment Tax” paid during the financial year. The banks generally upload this information after clearing of the cheque.

                Form 26AS – PART C – Advance Tax or Self Assessment Tax

                Part D – Details of Paid Refund

                This part shows any refund paid to you by Income tax department in that financial year
                Also Read: 13 Tax Free Components You Must have in Salary
                Part E: Details of AIR Transaction

                It shows the details of any high value transactions such as purchase of property etc. These high value transactions are reported to income tax department by banks/ Registrar/ mutual Funds/ companies etc through Annual Information Return (AIR)

                Form 26AS – PART E – Details of AIR Transaction

                PART F – Details of Tax Deducted at Source on Sale of Immovable Property u/s 194IA (For Buyer of Property)

                PART G – TDS Defaults (Processing of Statements) What should be verified from 26AS?

                As you can see it’s a long form but is visually easy to understand. The question is what should be verified in this form? The answer is EVERYTHING. Yes you should verify all the numbers and relevant details present there.
                Also Read: How to Pay 0 Income Tax on Rs 11 Lakh Salary?
                • Check the name, TAN of the deductor from FORM 16 (salary)/16A (banks)
                • Check the section for each entry 192 is for salary and 194A is for interest income
                • Check status of booking. It should be ‘F’ which means Final. This means that the TDS amount deposited to income tax authorities match with the TDS statement filed by deductor. In case its “U” meaning Unmatched, it means there is some issue either with the TDS statement or the amount deposited. You will need to check with the concerned deductor in this case.

                Form 26AS – What should be verified? What if entries do not match?

                As stated above in case someone has deducted TDS but has not submitted or updated it wrongly to the income tax authorities, you might see wrong or missing entries. In that case you will need to contact that person/company.
                • In case your advance tax or self assessment tax paid does not match, check with your bank.
                • In case your Form 16 details do not match consult your employer.
                • In case you find some entries missing consult with the relevant entities.
                Also Read: Calculate Tax on Arrears in 7 Easy Steps
                Why you should check 26AS before filing ITR?

                Form 26AS can be compared to your resume while applying for any job. The interviewer knows everything mentioned in your resume – similarly, income tax authorities know about all the information present in 26AS. And as you would not mess up in interview by not preparing what’s on your resume, similarly you can mess your income tax returns by not verifying the entries in 26AS.
                And the worst part if you have discrepancies in the 26AS and your income tax return, you might get notice from income tax for wrong returns or for scrutiny of documents.



                Have any questions or thoughts about this?