Mar 302015
 
Due dates for the Month of April 2015
06-04-2015
Central Excise
- Payment of Excise Duty for all Assessees (including SSI Units)
10-04-2015
Central Excise
- Filing ER-1 Return (Other than SSI Units)
– Filing Quarterly ER-3 Return by SSI Units availaing small scale exemption.
– Filing Quarterly ER-8 Return by the units paying 2% duty
– Filing Quarterly ER-2 Return by 100% EOUs
– Filing monthly ER-6 Return by specified class of Assessees regarding principal inputs.
15-04-2015
Providend Fund
- PF Payment for March
Central Excise
- Filing Quarterly Return (ANN. 13B) by the registered dealers.
20-04-2015
Central Excise
- Filing Quarterly Return (Annexure 75) by units availing area based exemptions
MVAT
– TDS Payment for March
21-04-2015
ESIC
- ESIC Payment for March
MVAT *
– MVAT Monthly Return for March (TAX>1000000/-)
– MVAT Quarterly Return for January to March (TAX>100000/- and <=1000000/-)
MVAT
Montly & Quarterly Payment till March
Filing of return where March occurs
25-04-2015
Service Tax
Service Tax Return for Oct to March – All Assessees.
30-04-2015
TDS
Payment for March
Central Exise
Filing Annual Information on principal inputs (ER-5) by the specified Assessees.
Filing Annual Production Capacity Statement (ER-7) by the specified Assessees.
MVAT
Six monthly payment till March
Six monthly Return till March for Vat audit dealers
Profession Tax
- Payment of March
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Mar 272015
 

Raising the limit of deduction under section 80DDB

Provisions before budget announcement

An assessee, resident in India is allowed a deduction of a sum not exceeding forty thousand rupees, being the amount actually paid, for the medical treatment of certain chronic and protracted diseases such as Cancer, full blown AIDS, thalassemia etc. This deduction is allowed up to sixty thousand rupees where the expenditure is in respect of a senior citizen i.e. a person who is of the age of sixty years or more at any time during the relevant previous year.

The above deduction is available to an individual for medical expenditure incurred on himself or a dependent relative.

It is also available to a Hindu undivided family (HUF) for such expenditure incurred on its members.

Dependant in case of an individual means the spouse, children, parents, brother or sister of an individual and in case of an HUF means a member of the HUF , wholly or mainly dependent on such individual or HUF for his support and maintenance.

A certificate in the prescribed form, from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital is required.

Hardship with assessee

It has been represented that the requirement of a certificate from a doctor working in a Government hospital causes undue hardship to the persons intending to claim the aforesaid deduction.

Government hospitals at many places do not have doctors specializing in the above branches of medicine. For this and other reasons, it may be difficult for the taxpayer to obtain a certificate from a Government hospital.

Proposed amendments

In view of the above, it is proposed to amend section 80DDB so as to provide that the assessee will be required to obtain a prescription from a specialist doctor for the purpose of availing this deduction.

Further, it is also proposed to amend section 80DDB to provide for a higher limit of deduction of upto eighty thousand rupees, for the expenditure incurred in respect of the medical treatment of a “very senior citizen”.

A “very senior citizen” is proposed to be defined as an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.

Effective date

These amendments will take effect from 1st April, 2016.

Apply in relation to the assessment year 2016-17 and subsequent assessment years. This means for computation of income for FY 2015-16, eligible assessee are entitled to get benefit of higher limit and procedural relief.

NOTE ON RELEVANT CLAUSES OF FINANCE BILL 2015

In section 80DDB of the Income-tax Act, with effect from the 1st day of April, 2016,

(i) for the first proviso, the following proviso shall be substituted, namely:—

“Provided that no such deduction shall be allowed unless the assessee obtains the prescription for such medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed.”.

(ii) after the third proviso, the following proviso shall be inserted, namely:—

‘Provided also that where the amount actually paid is in respect of the assessee or his dependent or any member of a Hindu undivided family of the assessee and who is a very senior citizen, the provisions of this section shall have effect as if for the words “forty thousand rupees”, the words “eighty thousand rupees” had been substituted.’;

(iii) in the Explanation,—

(a) clause (ii) shall be omitted;

(b) after clause (iv), the following clause shall be inserted, namely:—

‘(v) “very senior citizen” means an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.’

Mar 192015
 

To give more clarity to the users of our blog, here an attempt is made for detail case study on computation of income under salary. Please see the below case study:-

Mrs. X an employee director of XYZ Ltd. submit the following information relevant for the assessment year 2015-16:

Income Details Expenditure / Investment Details
Salary component details  
Salary Rs. 2,56,000
Entertainment allowance Rs. 1,06,000
Bonus Rs.1,11,200
Education allowance-    For her grandchildren Rs. 2,000
Payments made by employer Contributions by Mrs A
Income tax-penalty by employer Rs.1,500
Medical expenses reimbursed by employer Rs 12,10
Travel concession –    Actual expenditure on fare is more than Rs 51,300 Rs51,000
Reimbursement of gas bills Rs11,500
Payment of delegation fee to FICCI for attending All India Conference of Corporate Manager and Tax Executives Rs 3,000
Employer’s contribution towards recognised provident fund Rs47,920
Employer’s contribution to superannuation fund Rs.7,200
Employer’s contribution to approved gratuity fund on accrual basis Rs 2,700
(A) Contribution towards recognised provident fund Rs 30,000
(B) contribution towards superannuation fund Rs 7,200
Facilities availed as per terms of employment Expenditure in respect of facilities availed
Free residential telephone Rs11,000
Furnished flat for concessional rate – lease rent of the house Rs 1,60,800;
cost of maintenance of ground (including salary of Gardner) Rs2,000
Salary of two watchmen Rs 11,000
Salary of sweeper Rs 6,200
Rent of air conditioner Rs. 2,000
Cost of furniture Rs.18,000
Car (1900cc) owned by the employer given partly for official and partly for private use –cost of car
Maintenance of car Rs48,000,
Salary of driver-    10% of the expenditure is attributable for the journey between office and residence and back Rs 24,000
(A) Rent of furnishing house paid to the employer : Rs.11,200(B) Payment in respect of use of car : Rs.6,000,as per service rule Mrs has to pay an amount equal to Rs.2 per km., whenever car is for personal purposes; however, nothing is payable in respect of journey from office to residence and back
Taxes Paid
Professional tax paid by Mrs X :Rs1,650
Details of other incomes Investments
Arrears of bonus of 2008-09 (not taxed earlier) Rs52,000
Interest credited in PF account @ 14%-    credited on August 10,2013 Rs14,000
Dividend from XYZ Ltd., a foreign company Rs 57,880
Agricultural income from Nepal Rs 2,29,160
Mrs X is a retired Government employee. She gets a sum of Rs.14,700 per month as pension from the Government.
(A) insurance premium for a policy on the life of her husband Rs.5,200-sum assured Rs.90,000
(B) insurance premium for a policy 10,000 on the life of her father Rs 4,000
(C) deposits in 10-years accounts under the post Office Saving Banks ( CTD) Rules including advanced deposit of April –May 2014 Rs 2,400
(D) payment of school fees of 2 children Rs.19,200 for each child

Now the above case is analyse and computed as below:

Table 1 – Computation of Gross Salary

Components of salary Explanation Computed Amount
(In Rs)
Salary      256,000
Entertainment allowance      106,000
Bonus      111,200
Education allowance for grandchildren        2,000
IT penalty paid by the employer        1,500
Payment of electricity bills      11,000
Reimbursement of gas bills      11,500
Arrears of bonus 4      52,000
Furnished house at concessional rent 1      90,340
Salary of two watchmen      11,000
Salary of sweeper        6,200
Salary of gardener        2,000
Car [12 * (Rs. 2,400 + Rs. 900)] (amount recovered from Mrs is not deductible)      39,600
Excess of employer’s contribution towards provident fund over 12% of salary 3      17,200
Interest credited in PF account in excess over 9.5% (i.e., Rs14, 000 * 4.5 /14)        4,500
Pension from government (Rs14, 700 * 12)      176,400
Gross salary        898,440

Table 2 Analysis of Deduction allowable from Gross Salary

Nature of Deduction Explanation Amount Involve
(In Rs)
Less : Deduction under section 16
Standard deductible Now not available Nil
Entertainment allowance Not applicable to this case being Mrs A is not govt employee Nil
Professional tax Allow on actual payment basis 1,650
Total Deduction 1,650

Table 3 Computation of Net Income

Components of Income Explanation Amount Involve
(In Rs)
Gross Salary Table 1    898,440
Less : Deductions Table 2        (1,650)
Net Salary    896,790
Dividend from XYZ Ltd.      57,880
Agricultural income from Nepal    229,160
Gross Total Income 1,183,830
Less : Deduction under sec 80C (Max allowable Rs 1,50,000) 5      80,800
Net Income 1,103,030

Explanations:

  1. Valuation of the perquisites in the form of concessional rent

Step 1: Salary for the purposes of valuation of perquisite:

Components of salary Explanation Computed Amount
(In Rs)
Salary 2,56,000
Entertainment allowance 1,06,000
Bonus 1,11,200
Education allowance for grandchildren See Blogs 2,000
Pension from government 1,76,400
Total   6,51,600

Step 2: Lease rent of the unfurnished house is Rs 1,60,800.

Step 3: The perquisites value of the unfurnished house (lower of lease rent & 15% of salary):

Salary 651600
Value of unfurnished house
(15% of salary) 97740

Step 4: Value of furniture:

Cost of furniture 18000
Rent of AC 2000
10% of cost of furniture 1800
Value of furniture 3800

Step 5: Value of concession

Value of unfurnished house Step 3 97740
Value of furniture Step 4 3800
Rent recovered 11200
Value for computation 90340
  1. Reimbursement of medical expenses, free residential telephone, free refreshment, payment of conference fees and leave travel concession reimbursed by the employer are not taxable in the hands of the employee.
  1. Employer’s contribution towards superannuation fund and approved gratuity funds are not taxable.
  1. X is entitled to claim relief under section 89 read with 21 A in respects of arrears of bonus.
  1. Deduction under section 80C is the total of the following qualifying amounts.

 

PF Contribution 30,000
Superannuation fund for contribution                      7,200
Insurance premium on the life of husbands                      5,200
Insurance premium on the life of father                            -
Deposits under the Post Office Saving Bank (CTD) Rules (including advance deposits)                                    -
School fees of 2 children 38,400
Total                              80,800


Mar 122015
 

Computation in case of two house properties

After discussion basic factors that are necessary for computation of income from house property, now we can analyse the practical case study on computation of income from house property:

Case:

Mrs. A owns a house property: comprising two residential unit – units 1 and unit 2. While unit 1 is self –occupied by A for his residential purposes. Unit 2 is let out. Following are the other specifications:

Rental details Local taxation detail (Paid by Mrs A)
-  Fair rent of the property in Rs 140000-  Standard rent is Rs 125,000.-  Annual rent of Rs. 144,000-  Rateable value according to municipal records is Rs.130,000 - General tax: 12%
Expenditure Incurred by Tenants Expenditure by Mrs A
-  Repairs expenditure Rs 250 - Insurance premium due but outstanding Rs 600
Interest details
- interest on borrowed capital for construction Rs 63000
Rental Recovery Expenses Unrealized Rent
-  Legal charges for notice sent to three tenants for arrears of rent: Rs 4,00;-  Collection charges payable Rs 219 -  Rent of 2 months could not be recovered.
Occupancy status
One unit (rent Rs.6000 per month) is rented for whole year.

Following are the notable points in the above case:

Point 1.    It is always batter to take share of each unit based of area covered by each unit. In case information is not available it is always safer to presume share as 50%. Hence analysis of rental values for computation of income from house property will be as below:

Basis of computation Deemed Income of HP Share of HP Self Occupied Share of HP rented
Fair Rent 140000 70000 70000
Standard Rent 125000 62500 62500
Annual Rent 144000 72000 72000
Rentable value as per municipal records 130000 65000 65000
* In case property / unit is self occupied, Gross Annual Value of property / unit shall be taken as NIL

Point 2.    Here one property is identified as self occupied. In case more than one properties are self occupied, it is better to compute income from each such unit separately and avail option of house property which is having highest income to reduce your tax bill to minimum.

Point 3.    No treatment of repair done by tenants or Mrs A.

Point 4.    All other expenses by Mrs A are irrelevant for calculation.

Point 5.    Interest up to Rs 200,000 is deductible in case of self occupied property.

Now calculation of property income for Mrs A shall be given below:-

Income from a let out house property is determined as under:-
1. Calculation of Gross Annual Value Unit 1 – SO Unit 2
1. Find out reasonable expected rent of property -          62,500
Gross municipal valuation of property -          65,000
Fair rent of property -          70,000
Standard rent (As per rent control act) -          62,500
2. Find out rent actually received or receivable -          60,000
Rent of PY (or that part of PY) property is available for letting out -          72,000
Less: after excluding unrealized rent -          12,000
3. Loss due to vacancy -                      -
Period for which property is available -
Period for which property remain vacant -
Gross annual value -          62,500
Less: Municipal taxes -            7,800
Net annual value -          54,700
Less:Deduction under section 24
-Standared Deduction -          16,410
-Interest on borrowed capital 31,500          31,500
31,500 47,910
Income from HP -31,500 6,790
Total Income From House Property        -24,710

Mar 102015
 

More Than One Self-Occupied Properties – Tax implication

It is important for an individual, who is planning to buy a second home, to understand the tax implications under the Income-Tax Act 1961 of owning and maintaining the second home.

Second House is Self-Occupied

If an individual owns more than one house property for his use, then any one property as per his choice is treated as self-occupied and its annual value is computed to be nil.

The second house is treated as being rented-out and its estimated rental income is treated as taxable income.

Second home is used as a holiday home

As the benefit of self-occupied property is available for only one home, the estimated annual rent will be considered as the taxable value.

Even vacant house has tax implications

If a property is treated as a Deemed to be Let out Property, it is effectively put at par with a let out property as far as taxation is concerned.

Hence, a notional rental value is considered as the gross taxable rent for such property. You are allowed to claim a flat deduction of 30% for repairs and maintenance charges.

Which option is better in case two houses are in possession?

If you have two houses to be self-occupied it is always better to rent it out at reasonable value or standard rent applicable in the area due to following reasons:

  1. Will increase your wealth base and minimise your wealth tax bill
  2. You can claim unrestricted interest deduction
  3. You can claim benefit by way of deduction of municipal taxes
  4. Your return will show feel good factor in terms of disposable income capacity

Second House is Let-Out

If the second house is let-out to a tenant, the actual rent received, subject to certain conditions, is treated as the taxable income under the head ‘Income from House Property’.

Deduction for Municipal Taxes

The taxes paid to the local authority, generally the municipal taxes, are allowed as deduction in the financial year, in which such taxes are actually paid.

This is irrespective of whether these taxes pertain to the current financial year or the earlier year. Therefore, an individual should keep a track of the municipal taxes paid and claim this deduction accordingly.

Interest Deduction

Whether the second house property is deemed to be let-out or actually let-out, the actual interest paid on the housing loan is allowed as deduction.

This is contrary to the case of a self-occupied property, wherein the maximum interest on housing loan is restricted to Rs 150,000 p.a. ( 2 Lakh from AY 2015-16), subject to certain conditions.

Mar 092015
 

Self-Occupied Property tax implication

When one property is owned for residential purposes

If you are using your property for residence throughout the year and it’s not let out or used for any other purpose – in such a case the Annual Value of the property is Nil. There is no income from your house property.

But if you occupy your house property to carry your freelancing work– any income or expenses with respect to this property shall be covered under the head ‘Profits & Gains of Business & Profession’. You will be allowed to deduct expenses that you may incur towards maintenance and repairs from your business income. Any rent receipts will be added to your income.

Where the property consists of one house in the occupation of the owner for his own residence, the annual value of such house shall be taken to be the nil, under section 23 (2)(a),if the following conditions are satisfied-

  • Condition 1-The property (or part thereof) is not actually let out during the whole(or any part)of the previous year and
  • Condition 2 – No other benefits is derived therefrom.

Practical cases-

  1. Mr X owns a property .Throughout the previous year2013-14,it is used by him (and his family members) for own residential purposes.No part of the property is let out or part to some other use.
  2. Mr Y owns a property .He sells the property on Dec1,2013. Between April 1,2013 and Dec 1,2013 it is used by Y and his family for residential purpose.It is neither let out nor put to some other use.
  3. Mr Z purchases a property on June 1,2013.Since then it is occupied by Z for his residential purposes. Neither it is let out nor put to some other use.
  4. Mr A own house property .During the previous year2013-14,he retains exclusive control over the possession of the house owned by him. Though he may not be actually present in house,when he is away from it,he is still in constructive possession of his residential house.

Computation of income

In this case of one property (which is let out or nor put to any other use) used throughout the previous year by the owner for his residential purposes, income shall be determined as follows –

Gross annual value                                                                    nil

Less; municipal tax                                                                    nil

Net annual value                                                                        nil

Less; deduction under section 24

Standard deduction                                                                    NIL

Interest on borrowed capital                                                    deductible

Income from House Property                                                  xxx

Impact if self-occupied property is used for carrying on any business or for own business purposes

Where an assessee uses his property for carrying on any business or profession, no income is chargeable to tax under the head” Income from house property”.

The Assessee, in such a case, is not entitled to claim any deduction on accounts of rent in respect of such house property in computing taxable profits of the business or profession.

Mar 052015
 

Reasons and Remedies For Refund Failure

You might have faced the cases where even after return is filled correctly and intimation is received, your account is not get credited with refund amount. This happens so even after waiting for 6 month to one year. A list covering the all possible reasons for not crediting the refund to your account is made available to you so that next time while filling your return you must take care of these factors.

In this document we have discussed 15 Reason for Failure or non -issuance of Income Tax Refund and Solutions for the same.

  1. Expired Cheque

Due to delayed receipt of cheque or non presentation of cheque on time it is observed that your refund cheque has been expired. You are requested to apply for refund reissue to claim your refund. See our next document on “How to claim for re-issue of refund”.

Issues Related to A/c No and A/c Descriptions

  1. Incorrect A/C No

The account number provided by you was incorrect. You are requested to apply for refund reissue by providing the correct account number to claim your refund. Few reasons of your account no being incorrect are listed below:

  1. Incorrect A/C Number Length

The account number provided by you was incorrect. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid A/C Number

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid A/C Number: Between two special characters there should be atleast one alphabet/number

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid A/C Number: First Character in A/C No should be an alphabet/number only

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid A/C Number: Last Character in A/C Number should be a number

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid A/C Number: Numeric string between alphabets or special characters cannot be all zeros

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid character in A/C Number

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Account has been closed

The account number provided by you was closed. You are requested to apply for refund reissue to claim your refund with new account number.

Necessary details are not / wrongly furnished in return

  1. Mandatory fields missing: (Account Number/Account Name/Account Type/Address 1/City/State/Pincode)

Mandatory fields like Account Number, Account Name, Account Type, Address line 1, City, Pincode were not provided by you. You are requested to apply for refund reissue to claim your refund by providing the above mentioned mandatory details.

  1. Incorrect MICR code/unavailable

The MICR code provided by you was incorrect or not provided. You are requested to apply for refund reissue by providing the correct MICR code to claim your refund.

  1. Invalid character in Account Name or Name too short

The account name provided by you had invalid character or name too short. You are requested to apply for refund reissue by providing the correct account name to claim your refund.

  1. No numeric digit in Account Number

The account number provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

  1. Invalid IFSC code

The IFSC code provided by you was invalid. You are requested to apply for refund reissue by providing the correct account number to claim your refund. The refund reissue can be applied through online by following above.

After taking care of above you are sure your return is filled correctly. Now there are certain other reasons which you should control after filing your return so that your refund shall not get unnecessary delayed. Keep on reading our blog on “Reasons and remedies of refund failure”.

Mar 032015
 

EPFO has cut the administrative fee charged from employers effective from 1st January 2015.

EPF Admin Charges

Existing Rate New Rate
1.10  % of Total EPF Salary 0.85 % of Total EPF Salary
Minimum Rs 5  in case of  Non  Contributory Member Minimum Rs 75 Per Month in case of non-functional establishment having no contributory member
Minimum Rs 500 for Contributory Members

EDLI Admin Charges 

Existing Rate New Rate
0.01  % of Total  EDLI Salary 0.01 % of Total EDLI Salary
Minimum Rs 2  in case of  Non  Contributory Member Minimum Rs 25 Per Month in case of non-functional establishment having no contributory member
Minimum Rs 200 for Contributory Members

 

Mar 032015
 

Limit of deduction under 80CCC raised

Budget 2015-16 – Raising the limit of deduction under 80CCC

Existing Provision:-

Under the existing provisions contained in sub-section (1) of the section 80CCC, an assessee, being an individual is allowed a deduction upto one lakh rupees in the computation of his total income, of an amount paid or deposited by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme.

Reason for amendment:

In order to promote social security, it is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction under section 80CCC from one lakh rupees to one lakh and fifty thousand rupees only, within the overall limit provided in section 80CCE.

Period for which income is eligible for deduction:

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. This means income earn in previous year 2015-16 and subsequent year is eligible for higher deduction.

Note On Relevant Clauses Of Finance Bill 2015

Clause 16 of the Bill seeks to amend section 80CCC of the Income-tax Act relating to deduction in respect of contribution to certain pension funds.

Under the existing provisions contained in sub-section (1) of the aforesaid section, an assessee, being an individual is allowed a deduction up to one lakh rupees in the computation of his total income, of an amount paid or deposited by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme.

It is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction from one lakh rupees to one hundred and fifty thousand rupees.

This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

Amendment of section 80CCC

In section 80CCC of the Income-tax Act, in sub-section (1), for the words “one lakh rupees”, the words “one hundred and fifty thousand rupees” shall be substituted with effect from the 1st day of 25 April, 2016.

Analysis:

Even after pension scheme limit in revised upwards, there may not be major benefits to individual tax payers. The overall cap of investment under sec 80C and 80CCC is still one lakh and fifty thousand rupees only.

The only benefit is to risk averse investor who are looking for comfortable old age life. Now area of choice shifted mere from PPF of pension if one desires so. Now whether you invest in PPF or pension scheme, you will get same tax treatment.