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Budget 2022 Highlights - Brief inputs for you

The much-awaited Union Budget was at last announced yesterday, i.e on 1st Feb 2022. In comparison to the last 4 budget announcements made by our finance minister, this was the shortest of all. In her 90-minute speech, Nirmala Sitharaman announced various measures through the Union Budget 2022.

Before knowing various measures, it is very important to understand what the budget means.

I am pretty sure that you might have a budget for your income i.e a track of your income and expenses and plan your month accordingly (If not, you need to start it right now before it is too late). Similarly, our country too has a budget. On this day, our finance minister shares the following :

Ways and means to raise the revenue of our country
Estimates of the expenditure in upcoming fiscal
The economic and financial policy of the coming year.

Not only this, the budget contains data of 3 fiscal years:

The actual number of previous fiscal year
The revised number of current fiscal year
Estimates of next fiscal year

Now let us discuss the top 10 highlights made by the Indian Finance Minister that you should know of:

Changes for income taxpayers

The Union Budget did not announce any new changes in tax slabs for the personal income tax category. It was highly expected that some incremental changes would be introduced to the current income tax regime, but no significant change was announced. You can read more about it here

If you missed sharing certain tax information while filing ITR, then you can do the same by revising within 2 years from the end of the relevant assessment year. Rest details will be updated soon.

The parents or guardians can take insurance from their children with disabilities. The payment of the annuity or lump sum for the disabled dependent will be exempted during the lifetime.

Central Bank’s Digital Currency Introduced

The Reserve Bank of India will introduce the digital rupee in the 2022-2023 financial year which begins on Apr. 1.

“Introduction of Central Bank Digital Currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” she said.

“It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23,” she added.

Digital Assets will be taxed at 30% whereas 1% TDS will be levied on payments made on transfer of digital assets - Read here
The post office will now be online

All 1.5 lakh post offices in India will be connected to the core banking system that will enable people to access their accounts online and also transfer money within post office accounts and to other banks, Nirmala Sitharaman said.

Something we have personally been rooting for, if you have a PPF account or an MIS account with the post office, you would know this is a great move and much-needed move.

E-passports for you

E-passports to be rolled out in 2022-23. The passport jacket will contain an electronic chip that will have important security-related data encoded on it.

In case, anyone tampers with the chip, the system shall be able to identify it, resulting in the failure of the passport authentication.

I have personally been waiting for an e-passport. Long overdue. If they are able to get it rolling, keep security in place. This would be exciting.

The government is going green

Sustainable Development is at the core of India’s Development Strategy. The minister announced ₹19,500 crores for Production Linked Incentive for the manufacture of high-efficiency solar modules.

She also announced sovereign Green Bonds under the government’s overall market borrowings in 2022-23, which will be used to mobilize resources for green or climate-friendly infrastructure. Green Bonds will serve as a transformative step in that direction.

A green bond is a fixed-income investment used to finance environmental and sustainable projects. Green bonds can be issued by governments, organizations and companies. These bonds can help fund renewable energy (such as wind, solar and hydro), recycling efforts, clean transportation and sustainable forestry.

India has the second-largest Green Bond market in the world and has immense untapped potential. With the recent announcements during the Budget Session, the size and penetration of the Green Bond market are expected to go up. However, don't go jumping to invest in them, let us share more information on it soon.

7. Centre to formulate battery swapping policy for electric vehicles

In order to scale, promote and use electric vehicles in the country, a policy was announced for the battery as a service or battery swapping that is being prepared and deployed.

During the speech she said, for setting up battery stations at a mass level a battery swapping policy will be brought and interoperability standards will be formulated. With this, private players will be encouraged to develop sustainable and innovative models for the battery as a service which will increase efficiency in the electric vehicle ecosystem.

National Tele Mental Health Program

The National Tele Mental Health programme will include a network of 23 Tele mental health centres of excellence. Nimhans is the nodal centre and IIIT Bangalore will provide technological support for the mental health programme.

Where Mental health becomes a part of the budget, we know the efforts are reaching the centre and will help spread the right message across. Again a great move.

Education

The education sector is among one of the worst-hit sectors in the Covid-19 pandemic as schools remained closed for nearly two years. Classes were shifted online to adopt alternative ways, making it difficult for many to find the means and infrastructure for remote learning. Following are the initiatives are taken by the government:

Govt to expand ‘one class, one TV channel’ from 12 to 200 channels. This expansion has been done in order to enable states to offer supplementary education in regional languages for Classes 1 to 12.
2 lakh anganwadis to be upgraded for improving child health
Digital university to set up for online education focusing on ICT using the hub and spoke model
Select ITIs in all states that will offer skilling courses

Other Policies

The budget had an explicit focus on what the finance minister called “Amrut Kaal” which refers to the next 25 years that will take us towards celebrating 100 years of Indian Independence. And the government believes that this budget should lay the groundwork to propel India on to a path of sustained prosperity.
Recognizing the importance of 'Nari Shakti', she said three schemes were launched to provide integrated development for women and children.
Defence R&D to be opened for industry and startups.

I hope this was helpful and simplified Budget 2022 for you.

Tax - 02/04/2022

Cryptocurrency Taxation in India – Budget 2022

India has finally introduced a capital gains tax on crypto gains! You’ve probably seen it already. News media is talking about it. Twitter is going bonkers over this story.

During Budget 2022, the finance minister made a big announcement that virtual digital assets including cryptocurrencies will be taxed from 1st April 2022.

Yes, it’s big news! Not just this, there was no negative impact on the prices of most of the popular crypto tokens including Bitcoin, ETH, WRX, SOL, ADA, DOGE, MATIC listed on Indian exchanges.

Now let us understand what exactly are virtual digital assets?

The definition of digital assets as per the Budget 2022 is as below:

“Any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;“.

Basically virtual digital assets include private cryptocurrencies, DeFi (decentralized finance), and non-fungible tokens (NFTs). Prima facie, excludes digital gold, central bank digital currency (CBDC), or any other traditional digital assets.

Crypto taxation rules:

A flat rate of 30% will be levied on the income from virtual digital assets regardless of the tax slab
Indexation of the gains is not allowed.
The gifting of crypto tokens and virtual assets would be taxed at the hands of the recipient at the same rate. No recipient will be excluded from taxation.
In order to tax crypto transactions, a 1% TDS will be levied. Our understanding is that this 1% is within the overall 30% tax. The monetary threshold above which the TDS is applicable will be intimated later.
Can set off crypto losses in the same year with crypto gains
Losses or gains arising from digital virtual assets cannot be set off with any other gains
Losses cannot be carried forward

So if you’ve made two transactions during the financial year 2022-23, one where you turn a profit of INR 1000 and one where you lose INR 700 in virtual digital assets. Then the government will only tax the net again. In this case, INR 300 i.e. INR 1000 - INR 700.

However, with cryptos, you won’t be able to offset losses using gains made via the sale of other assets — stocks for instance, nor can you carry forward the loss next financial year i.e 2023-24 to set off it with net tax.

Overall, the government has neither legalised nor banned cryptocurrencies. But it’s made a move to discourage short-term trading, at least.

Investments / Tax - 02/03/2022

Income-tax Rates FY 2022-23 (AY 2023-24)

Before knowing the tax rates, it is very important to understand the terms Financial year (FY) and Assessment Year (AY).

The below-mentioned tax rates/ slab is on the income earned for the period 1 April 2022 to 31 March 2023. FY stands for the ‘financial year’ which is from 1 April 2022 to 31 March 2023. AY stands for Assessment year which is 1 April 2023 to 31 March 24.

For individuals, the due date to file the income tax return for the income earned from 1 April 2022 to 31 March 2023 is 31 July 2023.

However, considering the current updates available after the Finance Minister’s speech, there is no change in tax slabs. Therefore, the tax rates remain unchanged.

Income tax Rates

1. Income Tax Rate & Slab for Individuals & HUF:

1a. Individual (Resident or Resident but not Ordinarily Resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year & for HUF:

Taxable income	Tax Rate (Existing Scheme)	Tax Rate (New Scheme)
Up to Rs. 2,50,000	NIL	NIL
Rs. 2,50,001 to Rs. 5,00,000	5%	5%
Rs. 5,00,001 to Rs. 7,50,000	20%	20%
Rs. 7,50,001 to Rs. 10,00,000	20%	15%
Rs. 10,00,001 to Rs. 12,50,000	30%	20%
Rs. 12,50,001 to Rs. 15,00,000	30%	25%
Above Rs. 15,00,000	30%	30%

1b. Resident or Resident but not Ordinarily Resident senior citizen, i.e., every individual, being a resident or Resident but not Ordinarily Resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:

Taxable income	Tax Rate (Existing Scheme)	Tax Rate (New Scheme)
Up to Rs. 2,50,000	Nil	Nil
Rs. 2,50,001 to Rs. 3,00,000	Nil	5%
Rs. 3,00,001 to Rs. 5,00,000	5%	5%
Rs. 5,00,001 to Rs. 7,50,000	20%	10%
Rs. 7,50,001 to Rs. 10,00,000	20%	15%
Rs. 10,00,001 to Rs. 12,50,000	30%	20%
Rs. 12,50,001 to Rs. 15,00,000	30%	25%
Above Rs. 15,00,000	30%	30%

1c. Resident or Resident but not Ordinarily Resident super senior citizen, i.e., every individual, being a resident or Resident but not Ordinarily Resident in India, who is of the age of 80 years or more at any time during the previous year:

Taxable income	Tax Rate (Existing Scheme)	Tax Rate (New Scheme)
Up to Rs. 2,50,000	Nil	NIL
Rs. 2,50,001 to Rs. 5,00,000	Nil	5%
Rs. 5,00,001 to Rs. 7,50,000	20%	10%
Rs. 7,50,001 to Rs. 10,00,000	20%	15%
Rs. 10,00,001 to Rs. 12,50,000	30%	20%
Rs. 12,50,001 to Rs. 15,00,000	30%	25%
Above Rs. 15,00,000	30%	30%

Surcharge:
a) 10% of Income-tax where total income exceeds Rs.50 lakh
b) 15% of Income-tax where total income exceeds Rs.1 crore
c) 25% of Income-tax where total income exceeds Rs.2 crore
d) 37% of Income-tax where total income exceeds Rs.5 crore

Note: The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A, and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

Education cess: 4% of income tax plus surcharge

Note: A resident or Resident but not an Ordinarily Resident individual is entitled to a rebate under section 87A if his total income does not exceed Rs. 5, 00,000. The amount of rebate shall be 100% of income tax or Rs. 12,500, whichever is less. rebate under section 87A is available in both schemes I.e. existing scheme as well as the new scheme.

2. Income Tax Rates for AOP/BOI/Any other Artificial Juridical Person:

Taxable income	Tax Rate
Up to Rs. 2,50,000	Nil
Rs. 2,50,001 to Rs. 5,00,000	5%
Rs. 5,00,001 to Rs. 10,00,000	20%
Above Rs. 10,00,000	30%

Surcharge:

a) 10% of Income-tax where total income exceeds Rs.50 lakh
b) 15% of Income-tax where total income exceeds Rs.1 crore
c) 25% of Income-tax where total income exceeds Rs.2 crore
d) 37% of Income-tax where total income exceeds Rs.5 crore

Note: Enhanced Surcharge rate (25% or 37%) is not applicable in case of specified incomes I.e. short-term capital gain u/s 111A, long-term capital gain u/s 112A & short-term or long-term capital gain u/s 115AD(1)(b).

Education cess: 4% of tax plus surcharge

3. Tax Rate for Partnership Firms:

A partnership firm (including LLP) is taxable at 30%.

Surcharge: 12% of Income-tax where total income exceeds Rs. 1 crore

Education cess: 4% of Income-tax plus surcharge

3a. Income Tax Slab Rate for Local Authority:

A local authority is Income taxable at 30%.

Surcharge: 12% of Income-tax where total income exceeds Rs. 1 crore

Education cess: 4% of tax plus surcharge

3b. Tax Slab Rate for Domestic Companies:

A domestic company is taxable at 30%. However, the tax rate is 25% if turnover or gross receipt of the company does not exceed Rs. 400 crore in the previous year.

Particulars	Tax Rate(%)
If turnover or gross receipt of the company does not exceed Rs. 400 crore in the previous year 2019-20	25%
If the company opted for section 115 BA (Note 1)	25%
If the company opted for section 115 BAA (Note 2)	22%
If the company opted for section 115 BAB (Note 3)	15%
Any other domestic company	30%

Note 1: Section 115BA – A domestic company which is registered on or after March 1, 2016, and engaged in the business of manufacture or production of any article or thing and research in relation to (or distribution of) such article or thing manufactured or produced by it and also It is not claiming any deduction u/s 10AA, 32AC, 32AD, 33AB, 33ABA, 35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB), 35AC, 35AD, 35CCC, 35CCD, section 80H to 80TT (Other than 80JJAA) or additional depreciation, can opt section 115BA on or before the due date of return by filing Form 10-IB online. The company cannot claim any brought-forward losses (if such loss is related to the deductions specified in the above point).

Note 2: Section 115 BAA – Total income of a company is taxable at the rate of 22% (from A.Y 2020-21) if the following conditions are satisfied:

– Company is not claiming any deduction u/s 10AA or 32(1)(iia) or 32AD or 33AB or 33ABA or 35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB) or 35AD or 35CCC or 35CCD or section 80H to 80TT (Other than 80JJAA).

– The Company is not claiming any brought forward losses (if such loss is related to the deductions specified in the above point).

– Provisions of MAT are not applicable to such companies after exercising their option. The company cannot claim the MAT credit (if any is available at the time of exercising section 115 BAA).

Note 3: Section 115 BAB – Total income of a company is taxable at the rate of 15% (from A.Y 2020-21) if the following conditions are satisfied:

– Company (not covered in section 115BA and 115BAA) is registered on or after October 1, 2019, and commenced manufacturing on or before 31st March 2023.

– Company is not formed by splitting up or reconstructing a business already in existence.

– Company does not use any machinery or plant previously used for any purpose.

– Company does not use any building previously used as a hotel or a convention center, as the case may be.

– The company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to (or distribution of) such article or thing manufactured or produced by it. Business of manufacture or production shall not include the business of –

Development of computer software;
Mining;
Conversion of marble blocks or similar items into slabs;
Bottling of gas into the cylinder;
Printing of books or production of the cinematographic film; or
Any other notified by Central Govt.

– Company is not claiming any deduction u/s 10AA or 32(1)(iia) or 32AD or 33AB or 33ABA or 35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB) or 35AD or 35CCC or 35CCD or section 80H to 80TT (Other than 80JJAA and 80M).

– The Company is not claiming any brought forward losses (if such loss is related to the deductions specified in the above point).

– Provisions of MAT are not applicable to such companies after exercising their option. The company cannot claim the MAT credit (if any is available at the time of exercising section 115 BAA).

Surcharge:

a) 7% of Income-tax where total income exceeds Rs.1 crore
b) 12% of Income-tax where total income exceeds Rs.10 crore
c) 10% of income tax where domestic company opted for section 115 BAA and 115 BAB

Education cess: 4% of Income-tax plus surcharge.

4. Tax Rates for Foreign Companies:

A foreign company is taxable at 40%

Surcharge:

a) 2% of Income-tax where total income exceeds Rs. 1 crore
b) 5% of Income-tax where total income exceeds Rs. 10 crore

Education cess: 4% of Income-tax plus surcharge.

5. Income Tax Slab for Co-operative Society

Taxable income	Tax Rate (Existing Scheme)	Tax Rate (New Scheme)
Up to Rs. 10,000	10%	–
Rs. 10,001 to Rs. 20,000	20%	22%
Above Rs. 20,000	30%	–

Surcharge:

a) 12% of Income-tax where total income exceeds Rs. 1 crore
b) In the case of the Concessional scheme, the surcharge rate is 10%

Education cess: 4% of Income-tax plus surcharge.

Income Tax rates of last 5 years:

Income Tax Rate FY 2016 - 17 (AY 2017-18)

Income Tax Slab Rate & Deductions - FY 2017-18 (AY 2018-19)

Income-tax Rates FY 2019-20 (AY 2020-21)

Income-tax Rates FY 2020-21 (AY 2021-22)

Income-tax Rates FY 2021-22 (AY 2022-23)

Disclaimer: – The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

Tax - 02/03/2022

Fully Exempted Allowances

An Allowance is a financial advantage given to employees on top of the regular salary. Allowances are considered to be part of the salary structure in Indian Payroll. Based on the tax behaviors, allowances are divided into three categories; Taxable, Non-taxable, and Partially Taxable allowances.

The allowances given to an employee which form a part of their salary but are fully exempted from tax are called non-taxable allowance.

The following allowances are fully exempted for all employees:

1. Uniform allowance

An allowance that has been provided for the purchase or maintenance of a uniform that is to be used during duty in the office is called a uniform allowance. This allowance could be availed only for the specific uniform stated by the organization. Generally, it is not significant to embellish details of such expenses incurred unless the expense is not commensurate with the salary. In most cases, it is not required to keep proof of documents as a simple declaration meets the requirement.

2. Academic and Research Allowance

Allowance endowed for the reason of promoting academic and research-related training, education, or professional duties is known as academic or research allowance.

3. Travelling Allowance

Any allowance provided to meet the charges of travel on tour or the transfer of duty is called travelling allowances. Allowances about the cost of travel on transfer include any amount paid to transfer, packaging, and transportation of such transfer.

4. Helper Allowance

In certain peculiar cases, the employer might allow the employee to recruit a helper for performing his official duties. In such cases, a helper allowance is granted.

5. Daily Allowance

Daily allowance is provided to employees to meet the daily expenses incurred when on tour or for the period of a transfer in the job. This type of allowance is bestowed when the employee is not in the usual place of duty.

6 . Conveyance Allowance

Allowance for conveyance is provided to employees to compensate them for the cost incurred while travelling for official duties. However, the employer doesn’t get paid for the commute from home to work as it is not considered an official duty. The allowance for travel from home to work is treated under another section of allowance termed as ‘Transport allowance’, which isn’t exempt from tax.

The following allowances are fully exempted for certain employees only

1. Allowances Paid to Government Employees Abroad

When servants of the Indian Government travel abroad for assignments they receive an allowance to carry out their expenditure in another country. These allowances are exempted from tax liability.

2. Allowances Paid to UNO Employees

The allowances received by UNO employees are free from tax liability.

3. Allowances Paid to Judges of HC & SC

Judges of the High court and Supreme Court get allowances that are exempt from tax. These allowances are known as sumptuary allowances.

4. Compensatory Allowances

The compensatory allowances received by Judges of the High Court and Supreme court are also exempted from tax as per the Income Tax Act.

To know more about Benefits available to government employees - Read here

Note: These non-taxable allowances can become taxable if the amount is received but not spent by the employee.

Tax - 12/29/2021

Understanding Variable Pay

Not long ago, the concept of Variable Salary hardly existed in India. Today employees, especially at managerial levels, find a part of their compensation depending on the sector, listed as variable pay .Variable pay, also known as performance pay, is used to recognize and reward employee contribution above and beyond their normal job requirements.

What is Variable Pay?

Variable pay is often based on two main factors: your own performance and your company's performance. So, most schemes evolved by companies have a target-setting and actual payout based on that combination. Variable pay is one of the five main components of total rewards in any organization, and is usually a percentage of fixed pay.

Difference between Fixed Pay and Variable Pay in salary structure?

Fixed Pay is what is defined as fixed and you will get the same salary as was mentioned in the offer letter.

Your package= Fixed Pay (X% of total package) + Variable Pay (100-X% of total package).

So variable pay is part of your salary package. You will get your fixed pay at the end of every month but you will get your variable pay once in a quarter/half-year/year (may differ from company to company).

Let us understand this with the help of an example.

Let’s assume that a company is paying variable pay each quarter. Suppose your total monthly salary is Rs. 30,000. Out of which you are getting Rs. 25,000 as fixed pay and Rs. 5,000 as variable pay. So you will always get Rs. 25,000 at the end of each month.

Now let’s suppose that your company announces the percentage of variable pay to be 80%, so you will get 80% of your variable pay which is = Rs. 4,000.

Hence at the end of the quarter you will get: Rs. 4,000 X 3= Rs. 12,000.

Advantages and Disadvantages of Variable Pay

Advantages	Disadvantages
One of the primary advantages of variable pay is employee retention.	Most of the companies fail to establish an equalizer in their variable pay. It results in a seemingly high pay package, which turns out very less paid in reality.
Variable Pay helps the organization to balance out and equalize the salaries of their employees.	If the criteria for variable pay are not defined accurately, it can result in the improper implementation of the pay structure.
Performance-based variable pay helps to reward hard-working employees, thereby motivating them.	An increase in variable pay adds to the cost of the organization.
Variable pay allows organizations to tie compensation to revenue and financial performance.	Variable Pay isn’t factored into an employee’s annual compensation, although the amount may be based on the employee’s salary.

Types of Variable Pay

Commission: This is a portion of revenue given to the sales employee as part of an official compensation plan.
Profit-Sharing Plan: This plan gives employees a portion of the company’s quarterly or annual profit in addition to their base salary.
Bonus: This is an extra lump sum given to employees based on the company’s performance. It’s often an unspecified amount on an annual basis and will vary depending on the year’s results.
ESOP: This option is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company. They are sometimes offered as an alternative to cash compensation.
Gratuity: Gratuity is the monetary amount which is payable to the employee of an organization under the Payment of Gratuity Act 1972. This is mainly paid to the employee as a token of appreciation for his/her services towards the company.

Who does and doesn’t get Variable Pay?

When it comes to providing variable pay, many companies have diverse views. As incentives are also measured as a part of variable pay in some companies. For example, the sales and marketing departments get variable pay, Office and admin staff may not have a high component of variable pay. In the current market scenario, variable pay is a huge motivating factor and hence is generally a part of your CTC.

It is important to have a discussion with your employer beforehand to understand their expectations and set your goals right to make the most of the variable pay component.

Tax - 12/29/2021

What is Form 12BB? And Why is it important to submit the same?

Every employer seeks a tax declaration from their employees at the beginning of a financial year. This declaration is a list of all tax-saving investments that an employee commits to make in that particular year.

Declaring tax-saving investments is not all! Employees need to submit proof of expenses or investments during the year to support their declaration. If they fail to do so, the employer will have to recover the tax shortfall from the employee’s salary in the remaining months.

What is Form 12BB?

Form 12BB, with effect from 1st June 2016, is a statement of claims by an employee for the purpose of a tax deduction, claiming tax benefits, or a rebate on investments and expenses, which has to be submitted by the end of the financial year.

List of Things to mention in Form 12BB (Income Tax deduction)

Employers provide a cut-off date for submission of investment or expense proof. Generally, this date lies in January or February, so that shortfall of taxes is recovered in the remaining months of the financial year.

Here’s the checklist for employers for the most popular tax-saving investments.

Name and Address of Employer :- Fill the name of your company with Address

PAN Number of employee :- Your PAN Card Number

House Rent Allowance: – As per IT Act 10 (13A), House Rent Allowance gets exemption from Taxable Income. For claiming HRA tax exemption, you need to submit the following details to your employer -

Amount of Rent paid
Name of your landlord
Address of your landlord
PAN No of your landlord in case the total amount of rent paid during the year exceeds Rs.1 lakh.

In Addition, you also need to submit the proof for claiming HRA tax exemption.

1. Evidence/Proof for claiming House Rent Allowance tax exemption:
The proof for claiming HRA tax exemption are the monthly rent receipts.

2. Things to remember when claiming HRA tax exemption:

You can claim HRA tax exemption only when HRA is a part of your CTC.
In case, HRA is not a part of your CTC and you are living in a rented house you can claim tax benefit under section 80GG.
Rent receipt is required only when your monthly rent exceeds Rs. 3,000.
You can’t claim HRA if you are living in your own house.
If you are paying rent to your parents, then ask them to show it as their income at the time of filing their Income Tax Return.
Never submit fake rent receipts, this might land you in big trouble with the income tax authorities.

Leave Travel Allowance (LTA):-

This allowance is one and the only allowance that helps save tax only when you take a holiday.

1. Evidence/Proof for claiming LTA tax exemption: To claim LTA, employees need to submit travel bills like boarding passes, flight tickets, invoice of travel agent, boarding pass etc. to employer.

2. Amount of tax saving on LTA : This tax exemption is allowed only on actual travel cost to the extent specified in CTC.The fare is exempt as per the mentioned conditions.

You need to provide all proof of travel expenses you made from LTA money in 12BB form.

Deduction of Interest on Borrowing:

The information needs to be filled in the Form 12BB are:

Interest Payable/paid to the lender during the financial year
Name of the lender from whom loan is taken
Address of the lender
PAN of the lender: Financial Institutions/Employer/Others, from whoever the loan is taken

1. Evidence/Proof for claiming tax exemption for interest on borrowing:

Documents required to claim deduction u/s 24B on interest payment of home loan are:

Statement / Certificate stating total EMI paid along with Interest and Principal Components.
Possession/construction completion certificate
Self-declaration from the employee whether the house is self-occupied or let out.
Joint Owner if Property is the name of more than one owner.

2. Home Loan Interest :-

a. Tax benefits on payment of interest: If you have taken home loan , you can be exempt from interest paid for home loan under Section 24, Mention the amount you paid as an interest, your name and address and Pan card number.

Tip : Claiming deduction on interest payment shall result in a loss under head house property. This loss can be adjusted against income from other heads in the current year subject to the limit of Rs. 2 lakh

b. Tax benefits on repayment of Principal Amount: In both the cases whether there is self-occupied property or rented property, principal amount repayment is eligible to be claimed under Sec 80C of the income tax act. A maximum of Rs. 1.5 lakh can be claimed under Sec. 80C for the principal amount.(Max. the limit of claiming all deductions under 80c is 1.5 lakh.So, plan accordingly.)

3. Things to remember when claiming Interest on Home Loan tax exemption :

In case, you have taken a home loan jointly then you can claim benefit of the interest deduction proportionately.
If you have taken home loan from a lender other than bank i.e. your friends, relatives or any money lender the interest payment can be claimed as a deduction under section 24.Provided you take a certificate of interest from the person to whom you had paid interest.
Where loan is taken from your friends, relatives or any money lender i.e. other than banks the repayment of principal is not eligible for deduction under section 80C. This part of the form may take more time to finish if you are claiming maximum tax benefits .If you do not have any deductions to make, you can then move on to the last section.

Investments:

Chapter VI-A covers income tax deduction under various sections as follows:

80C: Premium to be paid for life insurance and/or investments to be made in ELSS funds, PPF, NPS and/or school tuition fees for children, etc
80CCC: Premium to be paid for annuity plan
80CCD: Additional contributions made to NPS
80E: Interest to be paid on education loan
80G: Donations to be made to specified organisations
80TTA: Interest income earned from savings bank account
80D: Premium to be paid for medical insurance
To claim deduction, evidence of investment made or expenditure incurred is required.

– For Employers: – Central Board of Direct Taxes (CBDT) has clearly mentioned that Employers need to give proper evidence of the employee’s income and calculate the TDS according to that.

– For employees :- if your income is less than the income tax slab or if you have paid more income tax than your actual income at the end of the financial year, you can claim Income Tax Refund.

Employees can download the PDF format of ITR Form 12BB from this link.

Mode and time of submission

Employers should collate online Form 12BB, income disclosure information, and documentary proofs. The employees will upload these documents to the online portal, and the payroll team can verify the same. Alternatively, some employers manually collate the data or combine both.

The tax declarations and their proofs should be submitted by the cut-off date.

Tax - 12/29/2021

Documents Needed for Filing Income Tax Returns in India

The process of filing your Income Tax Returns in India takes some preparation. This is why the Government usually gives you four months’ window period to compile all documents like salary/income details, bank statements, previous tax statements, etc. The procedure varies as per the income earned per year and income source like salary, business profit, investment profit and so on.

Collating all your documents ready is just one aspect of it. In this article, we will discuss the documents needed for filing Income Tax Returns in India.

To know more about the new income tax portal for easy filing of the return for FY 21-22 - Click here

The various documents required for ITR filing:

1. The appropriate ITR Form

Depending on the type of income, the category the taxpayer falls under, and the income the taxpayer makes, the relevant form must be chosen.

ITR-1 or SAHAJ: For individuals with annual income below INR 50 lakh and not more that one house property
ITR-2: For individual with annual income above INR 50 lakhs
ITR3: Individuals or HUF carrying proprietary business or profession.
ITR-4 or SUGAM: Assess opted for Presumptive Income Scheme or Individual’s, HUF and partnership firms (except LLB’s)
ITR-5: For LLBs, AOPs, AJPs, BOIs, etc
ITR-6: Applicable for all companies except those who are claiming exemption under Section 11
ITR-7: For all assessees covered under Section 139(4A), or 139(4B) or 139(4C) or 139(4D), or 139(4E) or 139(4F)

2. Aadhaar linked with PAN

3. For Salaried Employees:

PAN
Form-16 (it is issued by the employer)
Monthly salary slips.

4. Interest Income related Documents required for ITR filing

Bank statement/passbook for interest on savings account.
Interest income statement for fixed deposits.
Tax Deducted at Source (TDS) Certificate (it is issued by banks).

5. Form 26AS

It is provided by the Income Tax Department- you can download it from the Income tax website.

6. Section 80C Investment Documents

Investment in PPF, NSC, ULIPS, ELSS and LIC comes in deduction under Section 80C. The maximum amount claimed under section 80C is Rs 1.5 lakhs.

For salaried individuals - the Form 12BB and Form 16 (which you would get from your employer is a must)

7. Other Expenses Deduction Documents

Contribution to the Provident Fund.
Children’s school tuition fees.
Life/Health Insurance premium pay.
Stamp-duty and Registration charges.
Principal repayment on home loan.
Mutual Funds investment.

8. Other Investment Documents required for ITR filing

Interest paid on the housing loan.
Education loan interest payments.
Stock trading statement.

Hence, the taxpayers have to maintain the record of certificates and receipts of their transactions made in the annual year for the filing of income tax return and need to attach these with it. Also if it has been asked for the clarification of transactions mentioned in the return then the taxpayers have to submit all the proofs to the AO (Assessing Officer).

Wealth Cafe Advise

As we always advise, do not plan for your ITR at the end of the year but start it from the beginning of the year and keep it a practice to have all documents stored in one place on a drive year wise so whenever required you could access the same easily.

Tax - 12/29/2021

NPS Tax Deduction

Most of us dream of retirement - with leisure travel, more time with family and friends and a certain peace of mind that is a welcome change from our regular hectic lives. However, rising inflation, higher life expectancy owing to better medical facilities, and minimal government support means that if one doesn’t have a big retirement corpus, you may be forced to work even during retirement. To avoid this you need to not just invest but invest smartly. And one smart investment option is the National Pension System (NPS),

The government of India launched NPS in 2004 for government employees and opened it for the general public in 2009. NPS is a voluntary contribution scheme that not only helps you get you financially ready for the future but also offers tons of tax-benefits as well. However, most people get confused about how much and under which section they can save tax when investing in NPS.

We have explained the tax benefits of NPS in 4 simple points below:

● Tax Benefits under Section 80C

NPS is one of the eligible options to save tax under Section 80C. The maximum deduction limit for this section is ₹1.5 lakh, and you can invest the entire amount in NPS and claim a deduction for that amount.

● Tax Benefits under Section 80CCD (1B)

This is an additional tax benefit for NPS investments. Here, you can claim deductions up to ₹50,000 above the Section 80C limit.

So, you can claim tax deduction up to Rs 2 lakh simply by investing in NPS – Rs 1.5 lakh under Section 80C and another Rs 50,000 under Section 80CCD (1B). This means if you fall under the income tax bracket of 30 percent, you can save as much as Rs 62,400 in taxes.

● Tax Benefits under Section 80CCD (2)

Applicable for only salaried employees, this benefit comes into effect when an employer contributes towards NPS of an employee. Deductions of up to 10% of salary (Basic pay + Dearness allowance) for the corporate sector and 14% for the government sector can be claimed by an employee

For example, a corporate employee earns Rs 6 lakh as the basic salary and another Rs 3 lakh as Dearness Allowance. In case his employer contributes to his NPS, he can claim Rs 90,000 (10 percent of Basic + DA) on his employer’s contribution. Besides, if he adds the deductions under Section 80C and Section 80CCD (1B), he can claim deductions up to Rs 2 lakh.

● Tax benefits on returns of and maturity amount

Tax benefits of NPS don’t just end at the amount you invest. With NPS, you don’t have to pay any tax on the returns or the maturity amount as well. This triple-tax benefit (called Exempt-Exempt-Exempt) is available only on select products in India.

Tax - 12/15/2021

TAX DEDUCTION ON PRE-CONSTRUCTION INTEREST

In some cases money may be borrowed (home loan) prior to the acquisition or construction of the property. In such a case, what is the tax treatment of interest paid/payable before the final completion of construction or acquisition of the property(pre-construction period) under Income Tax Act/Rules.

What is the Tax treatment of Pre-construction period Interest ?

The interest paid can be claimed as deduction only after the property is ready for possession. Any interest paid before possession is tax deductible in five instalments and allowed for five successive financial years starting with the year in which the acquisition or construction is completed. This deduction is not allowed if the loan is utilised for repairs, renewal or reconstruction. It is also subject to a cap of Rs 2 lakh if the property is self-occupied. Hence, if you get the possession by the end of March 2022, you can claim deduction for interest from the current financial year. Additionally, a deduction of Rs 1.5 lakh is also available u/s 80 EEA for interest paid on loan for purchase of a house that has stamp duty value not exceeding Rs 45 lakh and the loan is availed during 2020-21. The benefit is available only on first residential property. You cannot claim any of the deductions if you opt for the new regime of taxation u/s 115 BAC of the IT Act.

Frequently Asked Questions

How do I claim pre-construction interest?

The income tax act allows one to claim the pre-construction interest from the date of borrowing of loan till the 31st March before the end of the financial year in which the construction gets completed.

Under which section can you claim pre-construction interest?

Pre-construction interest is allowed to be claimed for under construction residential property under the section 24 of the Income tax act

Is pre-EMI fully taxable?

Income tax act allows to claim pre-construction interest only after the construction is completed in 5 equal installments. Also only interest component can be claimed as deduction on completion of construction.

Tax - 12/15/2021

INCOME TAX DEDUCTIONS

Income tax deductions are a specified amount of certain expenses incurred by the taxpayer during the financial year that can be subtracted from their gross income to calculate the tax liability. Income tax deductions are specified under Section 80C to 80U of the Income Tax Act. After following these deductions, the total income of the assessee has arrived & tax is charged on it at prescribed rates.

1. Deductions are not permitted on the following incomes:

Long term capital gains
Short-term capital gains on transfer of equity shares and units of the equity-oriented fund through a recognized stock exchange.
Winning from lotteries & races.

2. The deduction cannot exceed Gross total Income

3. No deduction shall be allowed if the deduction is not claimed in the return of income.

Various Types of Tax Deductions in India

You can reduce your taxable income by increasing your deductions. There are many investment options and forms of expenditure which can help you get reductions on your taxable income. The Indian Income Tax Act provides many provisions for this. Mentioned below are several different tax deduction options.

1. Section 80C

For	Payment of LIC, PF, NSC, etc
Eligible Assessee	Individual or HUF
Conditions	Deposit or investment in any one or more of the listed items during the previous year
Amount of deduction	The amount deposited/invested or RS 1,50,000 whichever is less
Eligible deposits	Life Insurance Premium paid on the life of the individual, spouse, any child, or any member of HUF Public Provident Fund (PPF) Unit Linked Insurance Plan (ULIP) of UTI or LIC Payment to a notified annuity plan of LIC Recognized Provident Fund Tuition fees paid (max 2 children) Repayment of House Loan (excluding interest on the loan) Superannuation fund Sukanya Samriddhi Account Scheme National Saving Certificates (VIII issue) UTI or Mutual Fund Notified pension fund of Mutual Fund Notified deposit scheme or pension fund of housing finance companies or housing boards Notified deposit scheme of housing finance companies or housing boards Equity shares, debentures, units, etc of Infrastructure undertakings Fixed deposit of 5 years more with a scheduled bank Fixed deposit of 5 years more with a post office Notified Bonds of NABARD Deposit in an account under Senior Citizen Saving Scheme

2. Section 80CCC

For	A contribution made to annuity plans of LIC & other insurers
Eligible Assessee	Individual
Conditions	Deposit during the previous year a sum under an annuity plan of LIC for receiving a pension from the fund
Amount of deduction	The amount deposited/invested or Rs 1,50,000 whichever is less

3. Section 80CCD

For	Contribution toward approved pension scheme
Eligible Assessee	Central Government employee or any other individual assessee
Conditions	Employer & Employee contribution to approved pension scheme of the central government & any amount deposited by any other individual assessee to such scheme
Amount of deduction	In case of salaried employee: Employers contribution: Amount paid in assessee’s account or 10%of salary, whichever is lower; Employee’s Contribution: Amount paid or 10% of salary, whichever is lower; In case of any other individual assessee: The amount deposited in an approved pension scheme or 20% of gross total income in the previous year, whichever is lower
Additional deduction	Up to Rs 50,000 in respect of contribution to NPS of the central government.

Section 80C + Section 80CCC+ Section 80CCD ≤ Rs 1,50,000

4. Section 80D

Eligible Assessee: Individual or HUF

In respect of Payment of Medical Insurance Premia Section 80CCC

Particulars	Individual		HUF
For the benefit of -	Family	Parents	Any member
Medical Insurance Premium	✔	✔	✔
Payment of Preventive Health Checkup	✔	✔	✘
Contribution to CGHS/ Notified Scheme	✔	✘	✘
Maximum Deduction- General Deduction Additional deduction (Policy taken on the life of senior citizen)	Rs 25,000 Rs 25,000	Rs 25,000 Rs 25,000	Rs 25,000 Rs 25,000

5. Section 80DD

For	Medical treatment of disabled dependent
Eligible Assessee	Resident Individual or HUF
Conditions	Expenditure incurred for medical treatment, training, and rehabilitation of a dependent being a person with a disability The amount deposited under any scheme of LIC, UTI, or any other insurer for maintenance of a dependent, being a person with a disability
Amount of deduction	Fixed deduction of Rs 75,000 (Rs 1,25,000 in case a dependent is a person with a severe disability)
Disability Certificate	To furnish along with the return of income

6. Section 80DDB

For	Medical treatment of specified disease
Eligible Assessee	Resident Individual or HUF
Conditions	Expenditure incurred on medical treatment of prescribed disease in respect of an individual, his spouse, children, parents, brothers, and sisters dependent on him and any member of HUF dependent on HUF
Amount of deduction	The actual amount paid or Rs 40,000 (Rs 1,00,000 in case of senior citizen), whichever is lower
Prescription	Should obtain a medical prescription from a doctor

7. Section 80E

For	Repayment of interest on Education Loan
Eligible Assessee	Individual
Conditions	Interest on loan taken from a financial or charitable institution
Amount of deduction	100% of the amount of interest on a loan
Period of deduction	8 assessment years(including initial assessment year)

8. Section 80EE

For	Interest on loan taken for residential house property
Eligible Assessee	Individual
Conditions	The value of the house should be Rs 50 lakhs or less The loan taken for the house must be Rs 35 lakhs or less The loan must be sanctioned by a Financial Institution or a Housing Finance Company The loan must be sanctioned between 01.04.2016 to 31.03.2017 As on the date of the sanction of the loan, no other house property must be owned by you.
Amount of deduction	Interest payable or Rs 50,000, whichever is lower
No double deduction	The deduction is not allowed if interest is already allowed

9. Section 80G

For	Donation to certain funds, charitable institutions, etc
Eligible Assessee	All assessee
Conditions	Donation in kind not eligible No deduction if the amount exceeds Rs 2,000/- unless the amount is paid by any mode other than cash.
Amount of deduction	As given below

Donations eligible for Full Deduction

National Defence Fund set by the Central Govt.
Prime Minister’s National Relief Fund
Prime Minister’s Armenia Earthquake Relief Fund
National Foundation for Communal Harmony
University/ Education Institution of National eminence approved by the prescribed authority
Maharashtra Chief Minister’s Earthquake Relief Fund
Any Fund set-up by the State Govt of Gujarat, exclusively for providing relief to the victims of the earthquake of Gujarat
Zila Saksharta Samiti constituted in any district
National Blood Transfusion Council or any State Blood Transfusion Council
Any fund set up by the state Govt to provide Medical Relief to the poor
Army Central Welfare Fund or Indian Naval Benevolent Fund or the Air Force Central Welfare Fund
National Illness Assistance Fund
Andhra Pradesh Chief Minister’s Cyclone Relief Fund
Chief Minister Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Territory
National Sports Fund set up by the Central Govt
National Cultural Fund set up by the Central Govt
Fund for Technology Development and Application, set up by the Central Govt
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities.

Donations eligible for 50% Deduction

Jawaharlal Nehru Memorial Fund
Prime Minister’s Drought Relief Fund
National Children’s Fund
Indira Gandhi Memorial Fund
Rajiv Gandhi Foundation

Deductions with a max limit of 10% of Adjusted Gross Total Income*

Government or any local authority, institution, or association for promoting family planning
Indian Olympic association
Renovation or repair of the temple, mosque, gurudwara, church, or other places notified by the CG
Corporation for promoting the interest of minority community

*Adjusted Gross total income= Gross total income - Long-term capital gains, Short-term capital gains subject to STT, and all deductions available u/s 80 except section 80G

10. Section 80GG

For	Rent paid
Eligible Assessee	Individual
Conditions	Must not be receipt of rent allowance Any residential accommodation must not be owned by the assessee or his spouse or minor child at the place where he originally resides or performs duties of his office or employment or carries on his business profession
Amount of deduction	Least of the following: Rs.5,000 per month 25% of the adjusted total Income Rent paid - 10% of adjusted total Income

11. Section 80TTA

For	Interest on saving deposit
Eligible Assessee	Individual or HUF
Conditions	Interest on saving deposit maintained with bank or post office
Amount of deduction	100% of interest income or Rs 10,000 whichever lower

12. Section 80 TTB

For	Interest on all kinds of deposits
Eligible Assessee	Resident senior citizen
Conditions	Interest on deposits maintained with bank or post office
Amount of deduction	100% of interest income or Rs 10,000 whichever lower

Note: Apart from all the sections discussed above under chapter VI-A, there are many other sections that have not been covered, keeping in mind the importance and relevance of the sections to the mass.

Tax - 12/15/2021

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What is Variable Pay?

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Advantages and Disadvantages of Variable Pay

Types of Variable Pay

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What is Form 12BB?

List of Things to mention in Form 12BB (Income Tax deduction)

Here’s the checklist for employers for the most popular tax-saving investments.

Mode and time of submission

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The various documents required for ITR filing:

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What is the Tax treatment of Pre-construction period Interest ?

Frequently Asked Questions

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Various Types of Tax Deductions in India

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