PTI | May 31, 2016 08:08 IST | First Post
New Delhi – No tax would be deducted at source for PF withdrawals of up to Rs 50,000 from June 1.
The government has notified raising the threshold limit of PF withdrawal for deduction of tax (TDS) from existing Rs 30,000 to Rs 50,000, a senior official said.
“The Finance Act, 2016 has amended section 192A of Income Tax Act, 1961 to raise the threshold limit of PF withdrawal from Rs 30,000 to Rs 50,000 for Tax Deducted at Source (TDS),” the notification stated.
The provision will come into effect from 1 June 2016, providing relief to subscribers of retirement fund body EPFO.
The government had introduced the proposal to deduct TDS on PF withdrawals in order to discourage pre-mature withdrawal and to promote long-term savings.
According to existing provisions, TDS is deducted at the rate of 10 percent provided PAN is submitted. TDS will be deducted at the rate of 10 percent provided PAN is submitted.
However, in case Form 15G or 15H is submitted by the member, then TDS is not deducted. These forms are to declare that their income would not be taxable after receiving payment of their PF accumulations from retirement fund body EPFO.
While Form 15H is submitted by senior citizens (above 60 years of age), Form 15G is submitted by claimants below the age of 60 years.
TDS is deducted at the maximum marginal rate of 34.608 percent if a member fails to submit PAN or Form 15G or 15H. However, there are certain exceptions to deduction of TDS by EPFO.
However, there are certain exceptions to deduction of TDS by EPFO. TDS shall not be deducted in case of transfer of PF from one account to another PF account.
Also, no tax is deducted if employee withdraws PF after a period of five years.
Source : http://goo.gl/smH1ab
By Chandralekha Mukerji, ET Bureau | 16 May, 2016, 10.39AM IST | Economic Times
They may not figure in the Panama Papers , nor have wads of cash stuffed under their beds and investments in benami properties. But there are other reasons why small taxpayers can get into trouble with the tax authorities. “My mother is a senior citizen and has paid all her taxes. But she still got a notice for not filing her return for 2014-15,” says Mumbai-based marketing manager Arun Kapoor. Delhi-based finance professional Varun Sahay has received a notice for not deducting TDS when he bought a flat last year. “I had no idea that I was supposed to deduct 1% of the value of the house and deposit the amount with the government on behalf of the seller,” he says.
Once rare, such cases are now quite common. In recent months, the tax department has stepped up efforts to ensure tax compliance. New rules have been introduced to plug tax leaks and officials are cracking down on evasion. Tax records are being put under the scanner and notices are being sent to individuals if the computer-aided selection system notices a discrepancy. Thousands of taxpayers have already received tax notice ..
This week’s cover story looks at 10 common mistakes that can fetch you a notice from the tax department. Some of these mistakes are merely calculation errors that will result in a tax demand. But some others are serious transgressions that can invite penalties of up to 300% of the unpaid tax. We tell you where taxpayers are going wrong and the correct position on the matter. We also offer smart tips to help you avoid falling foul of the tax rules. We hope you will find this information useful. Individuals who manage their taxes on their own will find it particularly helpful.
1. Not reporting interest income
This is a common mistake. Interest income from fixed deposits , recurring deposits and even tax saving bank deposits and infrastructure bonds is fully taxable. Yet, 59% of the respondents to an online survey conducted by ET Wealth believed that interest income of up to Rs 10,000 a year is tax free. Actually, the tax exemption of Rs 10,000 a year under Sec 80TTA applies only to the interest earned on the balance in a savings bank account.
Another 6% of the respondents believed that no tax is payable if their bank has deducted TDS. These taxpayers don’t realise that TDS is only 10% of the income. If they fall in a higher tax slab, their liability would be higher. In our survey, almost 50% of the respondents who got this wrong have an annual income of over Rs 10 lakh. They pay 10% TDS even though they are supposed to shell out 30%.
Interest income often goes unreported in tax returns. In recent years, new rules have been introduced to plug this leak. Till two years ago, TDS kicked in when the interest from deposits made in one bank branch exceeded Rs 10,000 in a financial year. Investors used to split their deposits across bank branches to avoid TDS. Now TDS applies if the combined income from deposits in all branches of a bank exceeds the threshold. What’s more, TDS also applies to recurring deposits now.
In future, as banks start sharing data, TDS could be applied to deposits made across other banks as well. “The mechanism to track deposits across other banks already exists. If banks share the names and PANs of fixed deposit investors, lakhs of individuals could come in the tax net,” says M.K. Agrawal, Senior Partner, Mahesh K Agarwal & Co.
Smart tip: Calculate how much interest you will get on your FDs, RDs and other fixed income investments and add that to your income.
2. Ignoring income of old job
Every time an individual switches jobs , he is in danger of falling foul of the tax laws. This is because the new employer doesn’t take into account the income earned from the previous job and offers tax exemption and deduction to the employee all over again. Instead of Rs 2.5 lakh basic exemption and Rs 1.5 lakh deduction for tax saving investments under Section 80C, he gets Rs 5 lakh basic exemption and Rs 3 lakh deduction. Obviously, he will be paying much less tax than he ought to.
But this discrepancy won’t remain hidden for long and would eventually be discovered when the taxpayer files his return. The incomes in the two Form 16s would be added but he would get basic exemption and deduction only once. This also means a large tax payment at the time of filing returns because the duplicate benefits would be rolled back. The last date for paying the tax is 15 March. After this, if the unpaid tax exceeds Rs 10,000, there is a penal interest of 1% per month of delay. “The employee will have to pay the balance tax along with interest at the rate of 1% per month for delay,” says Vaibhav Sankla, Director, H&R Block.
This is a common problem faced by people who switch jobs without keeping an eye on their taxes. They are saddled with a huge tax liability when they sit down to file their tax returns in June-July.
Don’t think you can get away by not mentioning the income from the previous employer in your return. If some tax has been deducted on the income from the first employer, it will be reflected in your Form 26AS. So if you don’t report that income, the discrepancy will immediately get picked up by the computerised scrutiny system and you will get a tax notice.
Smart tip: Inform your new employer about income from previous job so that the TDS is cut accordingly.
3. Not filing tax returns
A lot of taxpayers, especially senior citizens such as Kapoor’s mother, have received notices for not filing their tax returns. Anybody with an income above the basic exemption is liable to file his tax return. The basic exemption is Rs 2.5 lakh per year for people below 60, Rs 3 lakh for senior citizens above 60 and Rs 5 lakh for very senior citizens above 80. The rest of us , including NRIs, have to comply.
Keep in mind that this is the gross income before any deductions and tax breaks. If your annual income is Rs 4.2 lakh and you invest Rs 1.5 lakh under Sec 80C, your tax will come down to zero. But you are still liable to file your tax return. Similarly, even if all your taxes are paid, you still need to file the return.
For a lot of people, confusion stems from a rule introduced four years ago, where salaried individuals with an income of up to Rs 5 lakh a year were exempted from filing returns. However, that rule has long been withdrawn. “Although the regulation was applicable only to that particular financial year, many people tend to still follow it,” says Archit Gupta, Founder and CEO of Cleartax.in.
Not filing returns is not a very serious offence if all your taxes are paid. You will only get a notice asking you to do the needful. The tax laws allow a taxpayer to file delayed returns even after the due date has passed. But if you have unpaid taxes, be ready to pay interest as well as a penalty of up to Rs 5,000.
Smart tip: Don’t miss filing your return even if your tax is zero or all your taxes are paid. File online to avoid mistakes.
4. Tax sops on house sold before 5 years
The government offers generous tax benefits to those who buy houses on loans. But if the buyer turns into a seller too early, some of these benefits are rolled back. If you sell the house within five years, the tax benefits availed of under Sec 80C for the principal repayment will get reversed.
This could mean a heavy tax liability if you have claimed deduction for the principal repayment of the home loan under Sec 80C. You won’t be able to keep this under wraps because the buyer may seek tax benefits on the same property. However, the deduction for the interest on the home loan under Sec 24 will not be rolled back.
Similarly, if you have ended a life insurance policy within three years of purchase, any tax deduction availed on the policy will be reversed. Not many taxpayers are aware of this rule about insurance policies. “No taxpayer is so honest as to report this in his ITR and pay additional tax for the previous years,” says a chartered accountant.
Smart tip: Wait for at least five years before selling a house or three years before ending a life insurance policy.
5. Misusing forms 15G, 15H to avoid TDS
As mentioned earlier, many investors try to avoid TDS by splitting their investments across different banks. Many others submit Form 15G or 15H so that their bank does not deduct TDS. These forms are declarations that the individual’s income for the year is below the taxable limit and therefore no TDS should be deducted from the interest.
However, misuse of these forms is a serious offence. “A false declaration not only attracts penalty but also prosecution. The taxpayer can be sentenced to jail for terms ranging from three months to two years,” says Sudhir Kaushik, Co-founder and CFO, Taxspanner.com. This doesn’t stop people from blindly filling the forms to escape TDS.
You need to meet two basic conditions to file form 15G. One, your taxable income for the year should not exceed the basic exemption of Rs 2.5 lakh. Two, the total interest received during the financial year should not exceed the basic exemption slab of Rs 2.5 lakh. “The total interest income includes interest from other sources as well, including PPF, NSCs and not just interest income from deposits,” says Sankla of H&R Block. Form 15H, which is for senior taxpayers above 60, imposes only the first condition. The final tax on the total annual income should be nil. So, senior citizens whose taxable income is below the Rs 3 lakh limit are eligible to file Form 15H. For very senior citizens above 80, this limit is Rs 5 lakh.
Though this is a standard practice, and investors take it lightly, don’t assume that the Form 15G and 15H will not get noticed by the taxman. “If TDS is not deducted because the person has filed Form 15G or 15H, it is separately shown in part A1 of the Form 26AS,” cautions Gupta of Cleartax.in.
Smart tip: File Forms 15G only if you fulfill both the conditions. TDS is an interim tax and you can claim a refund if you have paid more than due.
6. Not deducting TDS when buying property
Given that real estate investments involve a lot of unaccounted money, the government has extended the scope of TDS to property transactions as well. If you buy a house worth more than Rs 50 lakh, you have to deduct 1% TDS from the payment to the seller. In case the seller is an NRI , the TDS will be higher at 30%. This amount should be deposited with the government on behalf of the seller using Form 26QB. Delhibased Sahay had no idea of this rule when he bought a property in Noida last year. He now has to respond to a tax notice, and could even be slapped with a penalty of up to Rs 1 lakh.
The rule is applicable even if you pay in instalments. In such cases, the TDS needs to be deducted from each payment and the money deposited with the government within seven days.
While TDS deduction happens automatically when you buy a new property from a builder, in case of transactions between individuals, it is often ignored. Like Sahay, most buyers are unaware of the rule. Even if they are aware, they are not sure how to calculate the tax. “The TDS has to be calculated on the total sale price and not just the amount exceeding Rs 50 lakh. Many make this calculation error,” says Gupta. The total sale price is the amount payable and as registered in the sale agreement. It does not include stamp duty and brokerage.
Also, only the sale price has to be taken into consideration, not the circle rate of the property. If a property is valued at Rs 60 lakh based on the circle rate, but gets sold for less than Rs 50 lakh, the buyer need not deduct TDS.
Smart tip: Make it clear to the seller that you will be deducting 1% TDS from the payment. Make sure you have his correct PAN details.
7. Not reporting foreign assets
We usually don’t want to be alarmist but this is one area where taxpayers need to tread with caution. They can no longer afford to be unsure about their foreign income and assets. “There is a lot of exchange of information between countries and we will see an exponential rise in the number of notices being sent to taxpayers on this account,” says Tapati Ghose, Partner, Deloitte Haskins & Sells LLP.
Mis-reporting overseas assets will not be taken lightly by the government. You could be prosecuted under the Black Money Act and the penalty can be as high as Rs 10 lakh for even small errors. Experts say taxpayers who have worked abroad often go wrong when reporting their foreign assets. “The employee stock options is often acquired at no cost or be sold out during the year and therefore get missed when you take an account of your assets. Capital assets like jewellery often skips the mind as they do not generate any income. In fact, they may have been bought only as ornaments,” says Ghose.
Not just salary and perks, freelancers who receive money from foreign clients need to report this income under the foreign assets schedule. “This should also include gifts, which are deemed to be income,” says Ghose. Also, all foreign bank accounts—whether operational or not and even with a tiny balance—need to be reported. You even have to report bank accounts where you are merely a signing authority.
Smart tip: Start collecting details of your foreign assets much before the last date for filing returns.
8. Disregarding clubbing provisions
It’s quite common for taxpayers to invest in the name of non-working spouses or minor children. But though gifts made to a spouse or a minor child do not attract tax, if that money is invested the income it generates is clubbed with the income of the giver and taxed accordingly. So, if you bought a house in your wife’s name, any income from that house, whether as capital gains when you sell it or as rent, will be treated as your income.
Similarly, if a husband has invested in fixed deposits in the name of his wife, the interest will be taxed as his income. “It doesn’t matter whether your spouse’s income is below the basic exemption. the income from the investment will get clubbed to your income,” says ghose of deloitte.
The rules are slightly different in case of investments in the name of minor children (below 18 years). The earnings are treated as the income of the parent who earns more. However, the taxman has softened the tax blow by extending an exemption of Rs 1,500 a year per child up to a maximum of two children.
Parents who want to invest in the name of their children can go for tax-free options such as the Sukanya Samriddhi Yojana, PPF or tax-free bonds. Though the income will get clubbed, there will be no tax implication. Mutual funds also help bypass the clubbing provision because the tax liability is deferred indefinitely. If the child withdraws after 18, that income is his, not the parent’s.
Smart tip: Invest in tax-free options in spouse’s name. Invest the income in FDs or RDs. Income is clubbed but the income from income is not.
9. Not reporting tax-free income
This may not be a serious offence but a taxpayer is required to mention tax-free income in his return. Tax-free income includes interest earned on PPF, tax-free bonds, life insurance policies, capital gains from stocks and equity-oriented funds and gifts from specified relatives. “Even if you are not liable to pay any tax on these incomes, all your interest income, including savings bank interest, has to be reported in the ITR,” says Gupta of Cleartax.in. The taxpayer can then claim exemption for the same. While you may not receive a notice for not mentioning tax-free income, it will certainly create an inconsistency in your return.
Similarly, dividend income has to be reported in the ITR even though it is tax-free. This year’s Budget has proposed a tax on dividend income if it exceeds Rs 10 lakh. The new rule will impact HNIs who use dividend stripping strategies to earn tax-free income.
Smart tip: Mention all tax-free income in your ITR but claim exemption for it under various sections.
10. Spending, investing beyond means
We all know that reckless spending is not good for our financial health . But few people realise that spending too much can also lead to a tax notice. If your expenses or cash withdrawals exceed certain limits, your credit card company and your bank are supposed to report that to the tax department.
If these expenses are much beyond your reported income, the income tax department may send you a notice or pick up your case for scrutiny. “If cash transactions, including ATM withdrawals, exceed Rs 50 lakh in a year, a bank is supposed to report it,” says Minal Agarwal, Chartered Accountant and Partner, Mahesh K Agarwal & Company.
Similarly, if investments by an individual cross certain thresholds, mutual funds, banks and brokerages are supposed to inform the tax department. If you invest more than Rs 1 lakh in stocks, your broker will squeal on you. Invest over Rs 2 lakh in a mutual fund and your name gets into a list of high-value investors.
Buy bonds worth over Rs 5 lakh and you get noticed. Even the purchase of gold, which was till now a safe haven for unaccounted money, will require your PAN card details. If these purchases and investments don’t match your reported income, be ready for a tax notice. “The government is gradually getting to know all aspects of the individual’s financial life,” says Agarwal.
Smart tip: Avoid cash transactions as far as possible. If depositing cash in bank account, keep record of source of cash.
Got a notice? Take help from a tax expert
The first thing to do when you get a notice from the tax department is not to panic. Many notices are simply tax demands or for non-filing that can be dealt without a fuss. Only a scrutiny or reassessment notice is reason for worry. In such matters it is best to take the help of a qualified professional who knows how to respond to the notice. “Engaging a specialist would push up the compliance cost but it would ensure that the matter is skillfully handled. A chartered accountant would be better equipped to handle the situation and provide apt responses,” says a tax expert.
A new online tool launched by tax filing portal Cleartax.in will be useful here. If you have got a tax notice, the portal will help you resolve the case free of cost. All you have to do is quote your PAN number and upload the PDF file of the tax notice. The tax experts of Cleartax will examine the case and send you an e-mail within 1-2 hours explaining the steps you need to take.
If the notice relates to common issues such as TDS claims, non-filing of tax returns or verification of documents, the issue will be resolved within a day’s time. “More complex issues will have to be examined in detail and handled personally,” says Archit Gupta, Founder and CEO, ClearTax.in. If you need the further support from the site, you may have to shell out an advisory fee ranging from Rs 800 to Rs 1,600 depending on the complexity of the case.
Of late, the I-T department have been tightening their scrutiny and sending notices to taxpayers for a plethora of reasons. Apart from due taxes and penalties, the fines for not responding to these tax notices can be as as high as Rs 10,000.
Source : http://goo.gl/gkIq4Q
Changes in threshold not to have a significant revenue impact, say officials
Dilasha Seth & Indivjal Dhasmana | New Delhi | January 29, 2016 Last Updated at 00:59 IST | Business Standard
The government is considering rationalising tax deducted at source, according to recommendations made by the R V Easwar Committee.
Officials said the changes in tax deducted at source (TDS) rates and thresholds would not have a significant revenue impact. Revision of the tiny annual limits, which were long overdue, would, however, benefit small depositors and pensioners, they added. “For the Budget, we will be looking at recommendations that do not have large revenue implications. For the rest, we will have to do the math on the tax revenue foregone,” said a government official.
The panel has suggested reducing the short-term capital gains tax on annual earning of less than Rs 5 lakh from trading of shares and not treating it as business income. This will have a significant revenue implication when the government is trying to lower the fiscal deficit to 3.5 per cent of the gross domestic product (GDP) in 2016-17 from the projected 3.9 per cent in 2015-16.
Budget may offer TDS relief to taxpayers The committee has recommended reduction of the TDS rate for individuals and Hindu Undivided Families (HUFs) to five per cent from 10 per cent. For interest on securities, it has proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually and halving the tax rate to five per cent. For other interest earnings, the limit recommended is Rs 15,000, up from Rs 10,000 for bank deposits and Rs 5,000 for others.
“The thresholds are unfair to pensioners and widows, who have all their savings in fixed deposits. The average rate of tax has fallen, but these thresholds have not gone up. Why should they suffer tax at 10 per cent when the average rate of tax is somewhere at five per cent,” Easwar told Business Standard.
The 10-member panel has recommended a hike in the TDS threshold for payments in respect of NSS (National Service Scheme) deposits to Rs 15,000 from Rs 2,500, and reducing rates from 20 per cent to five per cent. The panel has also suggested raising the TDS limit for payments to contractors from the current Rs 30,000 for a single transaction and Rs 75,000 annually to Rs 1 lakh annually. The TDS limit on rent income is proposed to be raised from Rs 1.8 lakh annually to Rs 2.4 lakh.
The committee has submitted only a draft report to Finance Minister Arun Jaitley and is likely to present the final one in a few days. Sources said the final report would not be drastically different from the draft. Jaitley said on Monday at an Income Tax Appellate Tribunal event the government was looking at the recommendations to come up with a neater tax regime to reduce litigation. The committee has said nearly 65 per cent of personal income tax collection in India was through TDS and the government should consider making its provisions less tedious.
The panel was set up by Jaitley in October to identify provisions and phrases in the Income Tax Act that led to litigation over interpretation. It was asked to suggest alternatives to ensure predictability in tax laws without substantially impacting the tax base or revenue collections.
Easwar panel on tax simplification
- Treat stock trading gains of up to Rs 5 lakh as capital gains and not business income
- Reduce TDS rates for individuals to 5% from current 10%
- I-T dept should not delay tax refund due beyond six months. A higher interest rate should be applicable in case of delay in refunds beyond six months
- Exempt NRIs not having a Permanent Account Number, but seeking to provide their Tax Identification Number for applicability of TDS at a higher rate
- Defer contentious Income Computation and Disclosure Standards provisions
Source : http://goo.gl/gt9KMd
Written by Renu Yadav | Last Updated: December 22, 2015 09:06 (IST) | NDTV Profit
Receiving an income tax notice can be scary for most people. From not filing returns to hiding interest income, the reasons can vary for attracting a notice. Avoid these most common mistakes if you don’t want to get an income tax notice.
1) Not filing income tax returns
According to income tax law, if your gross income (without any deductions) is above the exempted limit of Rs 2.5 lakh in case of individuals, Rs 3 lakh for senior citizens (60-80 years of age) and Rs 5 lakh for super seniors (above 80 years), you are liable to file a tax return. Also, irrespective of the fact that your employer has deducted the tax at source (TDS) or not, you have to file an income tax return. Many people also believe that since they don’t have a tax refund to claim, they don’t need to file return. But that’s a misconception.
According to Preeti Khurana, chief editor of Cleartax.in, “If you are a resident Indian and you own a foreign asset or are a signing authority in a foreign bank account, you have to file an income tax return irrespective of your income.” If you fail to do so, you may get a notice from the income tax department, she added.
2) TDS errors
If there is mismatch between the TDS deposited by your employer and the income tax return filed by you, you may get an income tax notice. You should always check your tax credit statement (Form 26AS) online before filing the return. If a wrong TDS has been credited to your account or it has been credited to a wrong PAN, despite it being deducted from your salary, you can come under scrutiny.
3) Hiding interest income
Many people knowingly or unknowingly don’t include the interest income from their saving account, fixed deposits and recurring deposits in their income tax returns. The interest from saving account up to Rs 10,000 is tax deductible under Section 80 TTA while interest on fixed deposits and recurring deposits is fully taxable. In case of fixed deposits and recurring deposit, a TDS will be deducted in case the interest income exceeds Rs 10,000 in a financial year. But whether the interest is taxable or not, you have to disclose all your interest income in your tax return. So reveal the interest income in your return and then avail the deduction if any. Not doing so can result in a tax notice.
4) Mismatch or concealment of income
If your actual income, expenditure or investments differ from the one declared in your income tax return, you can get an income tax notice under Section 143(3)/143(7). You would be asked to provide clarifications and documents for re-calculation of your income.
“Notice is issued when tax authorities are of the opinion that you have concealed a part of your income while filing your return of income. Penalty for concealment of income can be up to a maximum of 300 per cent of tax payable.” says Neha Malhotra, executive director of taxation at Nangia & Co.
“The tax authorities can send notices pertaining to years gone by as well. So it is advisable to preserve the tax records for eight years, but where the assessee has any asset situated outside India, he should preserve the documents for past 18 years,” she said.
5) Defective income tax return
You should be careful while filing your income tax return. If the income tax authorities find any error they can issue a notice to you under Section 139(9) and direct you to file a revised return on income after correcting the error.
Source : http://goo.gl/9F1yT1
Girija Gadre, Arti Bhargava and Labdhi Mehta | Aug 3, 2015, 08.00AM IST | Economic Times
An Indian citizen or a person of Indian origin residing out of India is termed a Non resident Indian (NRI). NRIs are allowed to invest in mutual funds in India on a repatriable or non-repatriable basis subject to regulations prescribed under the Foreign Exchange Management Act ( FEMA).
Application form filled and signed by the NRI must be submitted at official points of acceptance. It must be accompanied by payment instrument drawn in favour of scheme. The applicant must indicate whether the investment is being made on a repatriable or non-repatriable basis. KYC papers and copy of PAN must be given.
Power of attorney holder
A power of attorney (POA) holder can open and operate a mutual fund account on behalf of an NRI. To operate the mutual fund account, the POA has to be registered with the mutual fund.
The POA holder has to submit the original copy of the POA or a duly notarised copy of the POA. The POA must be duly executed with signatures of both the NRI as well as the POA holder.
If investment is on a repatriable basis, the payment instrument must be drawn on NRE or FCNR account of the investor. Investments on non-repatriable basis can be made by drawing payment instrument on NRE/ FCNR/NRO account of investor.
Redemption proceeds (after deduction of taxes) are paid in rupees by cheque to the account number provided. Some banks also offer direct credit of redemption proceeds to the NRE/NRO account. If investments are made on non repatriable basis, redemption proceeds shall be credited to NRO account.
Tax is deducted at source on capital gains made on investments by NRIs. Investments in equity funds held over 1 year are exempt from tax and hence no tax is deducted at source. A digitally signed TDS certificate is sent along with the redemption proceeds.
Points to note
– The investments carry the right of repatriation of capital invested and capital appreciation only till the investor remains an NRI
– Overseas address is a mandatory field that requires to be filled in the mutual fund application made by a NRI
(The content is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta)
Source : http://goo.gl/3LMVb9
Bindisha Sarang, TNN | Mar 16, 2015, 07.20AM IST | Times of India
There is some bad news for investors who thought their recurring deposits (RDs) will not be subjected to tax deduc tion at source (TDS). The Budget has made RDs liable to TDS if the income in a financial year exceeds `10,000. Till now, only income from fixed deposits was subjected to TDS.
There is also a significant change in the rules relating to interest income from FDs. Till now, the TDS kicked in only if the income from FDs made in a particular bank branch exceeded the threshold of `10,000 in a financial year.It was common for investors to open FDs at multiple branches of their bank to avoid TDS. The Budget has proposed that TDS be levied if the combined interest income from FDs in all branches of a bank exceeds `10,000 a year.
The new rules come into effect from 1 June but banks are already witnessing a rush of investors prematurely closing their RDs and FDs. “The new rules on TDS will help nail tax evasion and improve tax collections,” declares Sudhir Kaushik, Co-founder and CFO, Taxspanner.
However, taxation experts say the new rules should not be a concern for honest taxpayers. They already pay tax on their RDs and FDs. Instead of paying the tax themselves, it will get deducted as TDS. If they fall in the higher tax bracket, they will pay the balance tax.
The third major change in TDS rules is that co-operative bank deposits are no longer exempt. The Budget has proposed that TDS will also be applicable to deposits with co-operative banks.This was more or less expected. Last year, the Karnataka Income Tax Tribunal had ruled that if the interest exceeded `10,000 in a year, it must be subjected to TDS.
Following this, several cooperative banks had received notices from the Income Tax Department asking them to deduct tax for the year 2013-14. Now the Budget has put a stamp of certainty on the rule. “This will bring a lot of revenue to the government through TDS and increase the tax base because depositors would need to adjust or claim refund at the time of filing their income tax returns,” says Kaushik.
Only an interim tax
Investors should note that TDS is only an interim tax. It is 10% of the income.If the investor has not provided his PAN, it is higher at 20%. But the interest earned on RDs and FDs is fully taxable. If the income is below `10,000 and TDS has not been deducted, you have to add the interest to your total taxable income and accordingly pay tax.
The actual tax will depend on the income of the individual. Even if TDS has been deducted, it does not mean that your tax liability is taken care of.If you are in the 20-30% tax bracket, you are required to pay more tax on the income. If the investor has an income of over `10 lakh in a year, the interest from the RD or FD will be taxed at 30%.The balance 20% will have to be paid as self-assessment tax. If he earns less than `2.5 lakh a year, the TDS will be refunded after he files his tax return.
Can you avoid TDS
If you are not liable to pay tax because your total income is below the basic exemption limit, you can avoid TDS by submitting a declaration to the bank.”Those who do not fall under the tax bracket and are below the age of 60 can submit Form 15G to the bank to claim TDS exemption. Those not under the tax bracket and above the age of 60 can submit Form 15H,” says Suresh Sadagopan, a Mumbaibased certified financial planner.Forms 15G and 15H have to be submitted at every branch of the bank where you have a deposit.
Before you rush to submit the Form 15G or 15H, make sure you are eligible. An individual must satisfy two conditions to avoid the TDS. First, the estimated taxable income for the financial year should be less than the basic exemption limit. This is `2.5 lakh for individuals below 60 years, `3 lakh for senior citizens, and `5 lakh for very senior citizens-above 80 years.
The second condition, which is applicable only to Form 15G, is that the total interest income from all sources should not exceed the basic exemption limit.Senior citizens have been exempted from this condition because most retirees get the biggest chunk of their income from interest.
These forms also require the individual to mention details of other incomes, including dividends from shares and mutual funds. Dividend income is taxfree but the Income Tax Department still wants to know how much you earned from them.
You must carefully assess your income before submitting Form 15G to escape TDS. If you are not eligible to receive the exemption, but you submit the form, it can have serious repercussions. “Giving incorrect information to avoid TDS amounts to tax evasion. A penalty of up to `1 lakh can be slapped in such cases,” warns Kaushik.
Investors are rushing to close their RDs before the taxman gets a whiff of their wealth. “Premature closure of my RD will fetch me a lower interest rate. But at least there won’t be a tax deduction,” said an investor at a public sector bank in Delhi.
Banks may see more premature closures of deposits. It is not difficult to see why investors are panicky. Since the TDS is credited to the permanent account number of the investor, not mentioning the income in the tax return can lead to problems. The computer-aided scrutiny system of the tax department could pick up the mismatch in the tax credit and income declared by the assessee, which can lead to a detailed scrutiny by the tax authorities. If tax has been deducted at source but returns have not been filed, the tax department may want to know why.
Source : http://goo.gl/hTTmjB
IANS | Oct 19, 2014, 10.09AM IST | Times of India
Under section 194D, life insurance companies have to deduct a two-percent tax at source on aggregate payouts exceeding Rs 1,00,000 during a financial year under life policies.
CHENNAI: In a quiet move, the impact of which is being felt only now, the statute books have been amended to deduct tax at source on some insurance payouts, which could particularly affect people above 45 and those with single-premium policies.
This, by way of a new section — 194DA — in the Income Tax Act, 1961, that took effect Oct 1, and surprised many policy-holders who got to know of it after they received a communique from their insurance companies.
Many more are still unaware.
“Section 194D envisages deduction of tax at source on the life insurance policy payouts which are not exempt under Section 10(10D),” Vibha Padalkar, executive director and chief financial officer of HDFC Standard Life Insurance, told IANS.
Under section 194D, life insurance companies have to deduct a two-percent tax at source on aggregate payouts exceeding Rs 1,00,000 during a financial year under life policies. In case where PAN card details are not available, the deduction shall be 20 percent.
For the record, Section 10(10D) of the Income Tax Act exempts any sum received under an insurance policy that is paid from April 1, 2012, if the premium for any of the years during the currency of the policy is within 10 percent of the actual sum assured.
For policies taken between April 1, 2003, to March 31, 2012, the condition was that the premium shall not exceed 20 percent of the actual capital sum assured. The clauses were not applicable if the amount received was on account of the death of an insured.
“The actual capital sum assured excludes the value of any premium agreed to be returned, as also benefit by way of bonus or otherwise that is over and above the policy amount,” said C.L. Baradhwaj, senior vice president, Bharti Axa Life Insurance told IANS.
While life insurers try to ensure that the premium amount is compliant with the Income Tax Act at the product-design stage itself, there are some set of policyholders who could be affected by the new provisions, Baradhwaj said.
“All single-premium policies would be the immediate casualty, as the premia paid in one instalment would generally exceed 10 percent of the sum assured,” he said.
He said it is possible that people could be paying premia higher than the 10-20 percent limit set by the new provisions on account of their personal health, as also many other reasons. In such cases, too, the TDS liability could arise.
“It is important to note that a person aged, say, 50 years, pays a higher premium for the same sum assured when compared to a person who is 35 years old. Higher the age, higher risk and higher the premium,” Baradhwaj added.
Industry officials also maintain that life insurance companies have been asked to make a TDS deduction under policies that are deviant of Section 10(10D), since some people were not reporting the same in their tax returns.
According to Baradhwaj, if the condition of 10-20 percent is not satisfied, all benefits payable — pertaining to the maturity, survival, or surrender — under a life insurance policy, excluding the death benefits, shall be liable for TDS.
“Policy loan is not a benefit. It’s a repayable obligation. Hence it is not taxable.”
A marketing official of the state-run Life Insurance Corporation of India told IANS that policyholders in rural and small towns would be severely affected by the new provisions, as they might not have PAN cards.
At the same time conflicting views are being expressed on pension polices. According to one view, pension policies are outside the newly introduced section 194DA of the Income Tax Act as they are outside the scope of Section 10(10D).
The argument: Pension policies do not have any death benefit like ULIP Pension Policies, or have only miniscule death benefits like in the current regime pension schemes, so they do not qualify as a pure life insurance policy.
But a Supreme Court advocate and expert in insurance and company laws, D. Varadarajan, differs, raising a fundamental question: “How do life insurance companies sell pension policies if they are not treated as life insurance policies?”
“The regulator’s licence allows insurance companies to only deal with the life insurance business. Hence it will be incongruous with the Insurance Act to keep pension policies outside the ambit of life insurance policy,” Varadarajan told IANS.
He said pension policy is also a life insurance policy, as it covers the risk of living longer, as opposed to the conventional life insurance policies which cover the risk of dying early.
Meanwhile, industry officials agree that life insurers have to communicate with their policyholders about the impact of the new section of the Income Tax Act.
“It’s also important to create awareness among the sales force on the need to tell their customers on the need for proper disclosures to the authorities so that insurance firms can avoid unnecessary policy cancellation requests later,” Baradhwaj said.
“Software systems also need upgrade to ensure compliance with the new requirements.”
Source : http://goo.gl/SutmNB
Aryan Singhania | Nov 2013 | CAclubindia.com
Provisions of TDS on sale of Immovable Property (Sec 194IA) – as stated:-
The provisions of this section states that TDS on sale of Immovable Property should be deducted at source from payment on transfer of immovable properties (other than agricultural land) where the consideration paid or payable is more than Rs 50,00,000/-. Earlier, there was no such deduction in case of immovable properties as it is in the case of salary, interest, rent etc. Any person responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), is liable to deduct tax at source under section 194-IA.Where the transaction is less than Rs 50,00,000 /-, the liability to deduct tax at source will not be applicable.
Rate at which TDS shall be deducted :-
Tax is deductible at the rate of 1% of the consideration payable to a resident transferor. If a valid PAN is not provided by the seller, the tax rate would go up to 20%.
Purchaser is not required to obtain a TAN for deduction.
Payment and return of TDS :-
Tax shall be deducted at the time of payment or at the time of giving credit to the transferor, whichever is earlier. If advance payment is being made then TDS would be required to be deducted at the time of advance payment itself. And if installment payment is made, the TDS would be required to be deducted at each such installment. The tax deducted shall be paid to the credit of Central Government within a period of seven days from the end of the month of deduction.
Online payment u/s 194IA is mandatory and the tax should be deposited on challan-cum-statement on Form No.26QB. Form No 16B (TDS Certificate) will be issued by the deductor within fifteen days from the due date of depositing tax.
Applicability of section :-
Section 194IA is only attracted for the transactions on or after 1st June, 2013. For example:- Sale agreement is made before 1st June, 2013 but consideration received after 1st June, 2013 – Sec 194IA is not applicable. Advance consideration of Rs 5000,000 or more is received before 1st June, 2013 but sale agreement made after 1st June, 2013. – Section 194IA is not applicable.
Where property is held by Joint-owners :-
In case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all. The value of property should be more than Rs 50,00,000/- for applicability of deduction of tax. For example:- A,B and C jointly purchased an immovable property. The purchase price for each owner is Rs 20lakhs, Rs 15 lakhs and Rs 35 Lakhs respectively. In this case individual purchase price is less than Rs 50,00,000 but the aggregate value of the transaction is exceeds Rs 50,00,000. Thus section 194-IA would be applicable.
Section 194-IA is applicable to all including relatives, minor, senior citizens etc. However, if transfer is made without payment of any consideration like in case of gift, then this section will not apply.
Provisions for Non Resident Indian:-
If payment is made to a Non-Resident then section 194-IA will not be applicable. Rather section 195 will be attracted and TDS is required to be deducted @ 20%+EC&SHEC on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI’s.
In case of failure to comply with the provisions, interest and penalty would be imposed to the purchaser. Interest will be charged @ 1% p.m or part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.
Courtesy: Alok Patnia, ICAI.org, Journals
Source : http://goo.gl/RMUZ4S
BankBazaar.com | Updated On: December 25, 2013 13:15 (IST) | NDTV Profit
As the year draws to a close, looking back at the overall financial report of the year gone plays an important role in effective financial management. The end of the year gives us a perfect time and opportunity to check the financial books to asses tax strategies for the current financial year. Exploring tax saving options at the last minute are a bad idea and the end of the year offers the perfect window of opportunity to evaluate and change taxation strategies as required. Irrespective of whether you are a salaried individual or a business owner or self employed professional, there are some essential financial to do things that must be a part of your overall financial planning routine.
- Assess your tax strategies: With the financial year ending closing in, the end of year is the perfect time to assess your tax strategies for the year. Irrespective of whether you are self employed or salaried, tax strategies play an important role in a financial well being. Any major purchases that can potentially give you tax rebate must be done in 2013 itself to counter any unexpected large chunk of taxable profit. A lot of people commit the cardinal sin of checking their books only a few weeks before the March 31 deadline. By that time it is usually too late to embrace effective tax planning. The last month of the year offers a perfect opportunity to evaluate and assess the taxation strategies to make sure one does run out options in the last minute.
- Make a capital purchase: Making a capital purchase before the end of the year can bring multiple benefits especially if you are a business owner and seeking to buy a vehicle. Firstly one may get a cheaper deal as most buyers wait for the New Year before taking delivery of their vehicles and secondly one can show the purchase under capital expenses which can compensate for taxation in the business ownership. Technically one can buy any asset that has a useful life for more than a year including vehicle, electronic equipment or machinery and even furniture to increase your capital expense in the current year.
- Make a charitable gift or donation: The year end is one of the best times to contribute to society by donating for charity or a cause you believe in. Apart from bringing a smile on the faces of the under privileged, all donations and charity can avail you deductions from 50 to 100 per cent under Section 80G of the Income Tax Act. However, deduction for donations made cannot exceed 10 per cent of gross total income.
- Explore other tax saving instruments: The end of the year is the best time to evaluate your personal finance goals for the New Year as well as commit tax planning for the current financial year. There are a number of tax saving options that can be availed. The earlier one commits to tax planning, the better the chances of effective tax management. A lot of people end up paying a hefty tax only due to poor tax planning. Explore tax saving instruments like provident funds, National Savings Certificates and Senior Citizens Savings Scheme and other schemes like Section 80D for payment of health insurance premium. The sooner one starts to plan; the better it is for the overall financial well being.
- Get your financial books in order: Do not wait for the last week of March to get your financial books in order. The end of the year is the best time to get all your financial books updated to avoid the last minute jitters before the end of the financial year. It is useful to update all your bank account statements and any Tax Deducted at Source (TDS) certificates and compile them in your financial folder updated till December. If you have made a donation to any charitable organization make sure that you collect a valid receipt to claim deduction u/s 80G. Compute your tax for the year and assess your profit and expenditure till December to give you a better insight into the future tax planning that can be useful in saving tax for the current financial year before the March 31 deadline.
BankBazaar.com is an online loan marketplace.
Disclaimer: All information in this article has been provided by BankBazaar.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/vv3oO1
Press Trust of India | Updated On: December 26, 2013 18:46 (IST) | NDTV Profit
New Delhi: The Income Tax Department will now accept Aadhaar Card as proof of identity and address for issuance of Permanent Account Number (PAN). The Central Board of Direct Taxes (CBDT) has issued a notification expanding the list of documents admissible as proof of identity and address by including Aadhaar Card.
Now, Aadhaar Card can be used as proof of identity and address for getting a PAN, which is a ten-digit alphanumeric number issued in the form of a laminated card by the Income Tax Department.
Aadhaar is a 12-digit individual identification number issued by the Unique Identification Authority of India (UIDAI) on behalf of the government.
The UIDAI has issued about 51 crore Aadhaar numbers so far with about 11 lakh of such numbers generated every day.
Other documents for identity accepted by the I-T department include elector photo identity card, ration card having photograph of the applicant, passport, driving licence, arms license and photo identity card issued by government or a public sector undertaking.
Documents for address proof include, electricity bill, landline telephone or broadband connection bill, consumer gas connection card or book or piped gas bill, bank account statement, passport of applicant or even spouse, among others.
Recently, the Reserve Bank of India (RBI) had also notified that Aadhaar Card is a valid proof for opening of a bank account under the Know Your Customer (KYC) scheme.
InvestmentYogi.com | December 20, 2013 15:39 (IST) | NDTV Profit
At the end of every financial year, many tax payers frantically make investments to minimize taxes, without adequate knowledge of the various available options. The Income Tax Act offers many more incentives and allowances, apart from the popular 80C, which could reduce tax liability substantially for the salaried individuals. Here are seven smart tips to help you save more and reduce taxes.
1. Salary Restructuring
Restructuring your salary may not always be possible. But if your company permits, or if you are on good terms with your HR department, restructuring a few components could reduce your tax liability.
- Opt for food coupons instead of lunch allowances, as they are exempt from tax up to Rs. 60,000 per year
- Include medical allowance, transport allowance, education allowance, uniform expenses (if any), and telephone expenses as part of salary. Produce bills of actual expenses incurred for these allowances to reduce tax
- Opt for the company car instead of using your own car, to reduce high prerequisite taxation.
2. Utilizing Section 80C
Section 80C offers a maximum deduction of up to Rs. 1,00,000. Utilize this section to the fullest by investing in any of the available investment options. A few of the options are as follows:
- Public Provident Fund
- Life Insurance Premium
- National Savings Certificate
- Equity Linked Savings Scheme
- 5 year fixed deposits with banks and post office
- Tuition fees paid for children’s education, up to a maximum of 2 children
3. Options beyond 80C
If you have exhausted your limit of Rs. 1,00,000 under section 80C, here are a few more options:
- Section 80D – Deduction of Rs. 15,000 for medical insurance of self, spouse and dependent children and Rs. 20,000 for medical insurance of parents above 65 years
- Section 80CCF- Deduction of Rs. 20,000, in addition to the Rs. 1,00,000 under 80C, for investments in notified infrastructure bonds
- Section 80G- Donations to specified funds or charitable institutions.
4. House Rent Allowance
Are you paying rent, yet not receiving any HRA from your company? The least of the following could be claimed under Section 80GG:
- 25 per cent of the total income or
- Rs. 2,000 per month or
- Excess of rent paid over 10 per cent of total income
This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform office duties.
If HRA forms part of your salary, then the minimum of the following three is available as exemption:
- The actual HRA received from your employer
- The actual rent paid by you for the house, minus 10 per cent of your salary (this includes basic dearness allowance, if any)
- 50 per cent of your basic salary (for a metro) or 40 per cent of your basic salary (for non-metro).
5. Tax Saving from Home Loans
Use your home loan efficiently to save more tax. The principal component of your loan, is included under Section 80C, offering a deduction up to Rs. 1,00,000. The interest portion offers a deduction up to Rs. 1,50,000 separately under Section 24.
6. Leave Travel Allowance
Use your Leave Travel Allowance for your holidays, which is available twice in a block of four years. In case you have been unable to claim the benefit in a particular four- year block, you could now carry forward one journey to the succeeding block and claim it in the first calendar year of that block. Thus, you may be eligible for three exemptions in that block.
7. Tax on Bonus
A bonus from your employer is fully taxable in the year in which you receive it. However request your employer for the following:
- If you anticipate tax rates to be reduced or slabs to be modified in the subsequent year, see if you could push the bonus payment to the subsequent year
- Produce your tax investment details well before, to prevent your employer from deducting tax on bonus before handing it over
A Final Word
Keep in mind the below points, to avoid the hassles of last minute tax planning.
- Give your employer details of loans and tax saving investments beforehand, to prevent any excess deduction
- Check the Form 16 received at the end of each year from your employer thoroughly
- It is important to start your tax planning well before 31st March, and to file your returns before the 31st of July each year
InvestmentYogi.com is a leading personal finance portal.
Disclaimer: All information in this article has been provided by InvestmentYogi.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/nFCwmS
By ET Bureau | 8 Jul, 2013, 12.13PM IST12 comments | Economic Times
As the 31 July deadline approaches to file your returns, here’s how to ensure you don’t commit errors and receive a tax notice.
1) Availing of deduction twice
This is a common error that many salaried taxpayers commit. If you had switched jobs during the previous financial year, you might have got the Form 16 from both employers. While the first company may have deducted the tax correctly, the second might have deducted very little. It would have considered only the income for the rest of the year and given you the basic exemption of Rs 2 lakh, as also the deduction under Section 80C. However, these must have already been factored in by the previous company. “You might have to pay additional tax in such a situation,” says Sudhir Kaushik, co-founder of tax filing portal, Taxspanner. com.
Don’t think you can escape by ignoring the previous income in your tax return. The computerised scrutiny will immediately detect the discrepancy. There will also be a mismatch in your TDS details because the previous employer would have deposited the TDS on your behalf, along with your PAN and other details.
2) Not mentioning exempt income
Dividends are tax-free. So are longterm capital gains from stocks and equity funds, as well as the interest on your PPF investments and tax-free bonds. There is also no tax to be paid on agricultural income and gifts from specified relatives. Even though these are tax-free, all exempt incomes must be mentioned in the tax return. Ignore this at your peril.
The new rules for tax filing announced this year state that if the total exempt income during the year exceeded Rs 5,000, you will have to use ITR 2 to file your return.
3) Not including interest
Last year’s budget had introduced a new Section 80TTA, which gives a deduction of up to Rs 10,000 on interest earned on your balance in the savings bank account. Many taxpayers think this deduction also includes the interest earned on bank deposits. The interest earned on fixed deposits and recurring deposits is fully taxable at the normal rate. You have to mention it under the head ‘Income from other sources’ in your tax return.
Tax is payable even if the TDS has been deducted. TDS is only 10% (20% if you haven’t submitted your PAN details), and if you are in the 20-30% bracket, you need to pay additional tax. The interest on NSCs is also taxable.
4) Not checking TDS details
Before you file your returns, check whether the tax you had paid for last year has been correctly credited to your name. The Form 26AS has details of the tax deducted on behalf of the taxpayer and can be easily checked online. It is easier if you have a Net banking account with any of the 35 banks that offer this facility.
Otherwise, you can go to the official website of the Income Tax Department and click on ‘View your tax credit’. The first-time users will have to register, but it takes less than 5 minutes before you can log on and view your details.
5) Not mailing ITR V in time
The ITR V is the acknowledgment of your tax return. It is to be submitted along with your return if you file offline. If you have efiled your return without a digital signature, you need to take a print of the ITR V, sign it and send it to the CPC in Bangalore by ordinary mail.
This should be done within 120 days of uploading your return. The filing process is complete only after the ITR V is received at the CPC. You can check the status of your ITR V on the official website of the Income Tax Department. If it has not been received within 7-10 days of mailing, call up the Ayakar Sampark Kendra or send another copy.
Source : http://goo.gl/fkGnY
The responsibility of deducting TDS on immovable property lies on the buyer.
Vivina Vishwanathan | First Published: Tue, Jun 11 2013. 07 27 PM IST| Live Mint
The Central Board of Direct Taxes (CBDT) issued a notification on 31 May giving clarity on tax deducted at source (TDS) on immovable property. Effective 1 June, TDS at the rate of 1% on the value of transfer of immovable property above Rs.50 lakh will be applicable. If you have bought a property that cost Rs.50 lakh or more, here is how you can deposit TDS.
Who will deduct TDS on immovable property?
The responsibility of deducting TDS on immovable property lies on the buyer. For example, if X buys a property worth Rs.50 lakh from Y, then X will have to deduct tax at 1% or Rs.50,000 on sale value and deposit it. Besides making the payment, X will also have to obtain a challan for the payment and issue Form 16B to the seller.
How do you make the payment?
The CBDT has issued Form 26QB or “TDS on sale of property” form, an online form for making TDS payments on property transactions. You can download the form from http://tinyurl.com/33nrceb. You can also use income tax portals such as myitreturn.com for the same. To make the payment you will need to fill the following details: Permanent Account Number of the buyer and the seller; complete address of the buyer as well as the seller; address of the eligible immovable property; date of sale agreement and the value of the property that is for consideration.
Once you fill in all the details, the next step will be to make the payment. You can either pay it immediately or on a subsequent date. Once you choose your option, the e-tax payment will direct you to the net banking site of your bank. In case you wish to opt for e-tax payment at a later date, an acknowledgement number will be generated and the same has to be retained by you and presented to any of the authorized banks for further payment. (To see the authorized banks go to http://tinyurl.com/c4dqftd). The tax deducted will go to the Reserve Bank of India or the State Bank of India or any authorized bank. After you make the payment a challan will be generated.
Documents you need to give to the seller
Considering that the buyer is responsible for tax deduction under section 194 IA, the buyer will be responsible to give the certificate of deduction of tax at source in Form 16B to the seller. CBDT clarifies that Form 16B should be given to the seller within 15 days from the due date of submission of the challan. This is to enable the seller of the house to claim credit for such TDS against her tax liability.
Hence, the government has clarified that you will not need the Tax Deduction Account Number (TAN) for TDS process. Earlier the provision was that any person who is required to deduct tax at source will have to first obtain a unique identification number called TAN. With the new development, the government has made the process of TDS on immovable property simpler. However, we need to wait and watch to see if the process works.
Source : http://goo.gl/8CDGa
Times News Network | Jun 12, 2013, 06.06AM IST
BANGALORE: Buying property worth over Rs 50 lakh? Then pay TDS before registering it, or income tax sleuths will come knocking on your door.
The TDS (Tax Deducted at Source) kicks in from June 1 with the implementation of Section 194-IA, announced in the finance budget of 2013-14. As per this section, the buyer should provide TDS documents on transfer or sale of immovable property (mainly land or house) other than agricultural land, before registering the property. The sub-registrars act as check-posts, if such transactions take place and TDS documents are not provided. This is applicable only if the transaction is Rs 50 lakh or above.
This was made clear at a workshop organized by the IT department and the stamps and registration department, to educate sub-registrars on TDS provision on the sale of immovable property, on Tuesday.
Of the total transaction, 1% is TDS and 1% is levied as stamp duty, but in case the seller doesn’t provide PAN documents or gives an invalid PAN, the buyer should deduct 20% tax instead of 1%.
S Ravi, director-general of income tax (investment), said: “Sub-registrars ensure that PAN numbers and the permanent address of the seller should be available because many a time, in case of tax evasion and property sale, the original land owner is untraceable by the department. This should be done if the land is sold via a joint development agreement. PAN should be mentioned in all transactions, applicable under this section. Sub-registrars have been sending us a lot of information of TDS collection and cases of evasion too, but now there’s a format which should be adhered to. This format makes it easy for IT sleuths to track cases.”
Inspector-general of registration and commissioner of stamps AS Saleem said: “Out of the Rs 5,260 crore revenue the stamps and registration department collected last fiscal, 60-70% was collected from Bangalore Urban alone. Another Rs 500 crore comes from optional registerable documents like shares and loan bonds. We’re also trying to levy stamp duty on imported goods.”
WHAT THE LAW SAYS
Section 194-IA of Income Tax Act — payment on transfer of certain immovable property other than agricultural land states: Any person, being a transferee, responsible for paying to a resident (transferor), any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 1%of such sum as income-tax.
Who should pay TDS: buyer of the property
When it should be paid: before registering the property
Sub-registrars must note the permanent address and PAN of seller
In 2010-11, 12,000 properties were registered across the state
In 2011-12, it was 3 lakh registrations
Source : http://goo.gl/EpGP5
By Preeti Kulkarni, ET Bureau | 17 Jun, 2013, 03.56PM IST|Economic Times|
MUMBAI: As July 31 – the last date for filing your income tax returns – approaches, it’s time to brace yourself for the annual ritual. However, this year, you will not have the luxury of simply gathering all the relevant documents and handing them over to your tax consultant. You will have to adopt a more proactive approach this year, as all tax-payers with a taxable income of over Rs 5 lakh are now required to file their return online.
Naturally, this development could unnerve many tax-payers, particularly those who are not conversant with the computer and the Internet.
However, the process is not as cumbersome as it is assumed to be. If you are a salaried individual not liable to pay any additional taxes and are not expecting any refund from the income tax department, you can follow these simple steps to complete the process within an hour:
Step 1: Log on to http://www.incometaxindiaefiling.gov.in and register yourself, if you haven’t done so already. Your PAN will act as your user ID.
Step 2: The next step is to download the ITR form applicable to you. You will find the forms in ‘Downloads’ menu. This year, most tax-payers will have to download Form ITR 2 as those with tax-exempt income of over Rs 5,000 cannot file their tax return using Form Sahaj (ITR 1). In simple terms, if your salary includes components like conveyance allowance, house rent allowance (HRA), leave travel allowance, etc, which collectively exceed Rs 5,000 in a year, you will have to opt for ITR-2.
Step 3: Once you download the Return Form’s excel utility, you need to enter all the details asked for by referring to the Form 16 issued by your employer.
Step 4: Now, validate the information by clicking the ‘Validate’ key. An XML sheet will be generated and saved on your computer.
Step 5: Upload the XML file on to the I-T e-filing website after selecting AY 2013-2014 and the applicable ITR form. You will be asked whether you wish to digitally sign the file. If you have obtained the DS (digital signature), select ‘Yes’. Otherwise, choose ‘No’ and proceed further.
Step 6: If the process is completed as per the requirements, the site will flash a message indicating the success of your e-filing process. You can check your mailbox to ascertain whether your ITR-Verification form has been mailed to your registered e-mail ID.
Step 7: Next, get a print-out of your ITR-V, sign the form (in blue ink) and send it by ordinary post to the Income Tax Department-CPC, Post Bag No-1, Electronic City Post Office, Bangalore – 560 100, Karnataka within 120 days of filing your returns electronically.
Step 8: If you do not receive any acknowledgement from the I-T Department, you should send the form again. However, avoid enlisting the services of courier companies, as your form will not be accepted. Forms sent through Speed Post, though, will be accepted.
By: Preeti Sharma and Ravleen Sethi|Jun 4, 2013, 12.12PM IST|Economic Times|
The Tax return filing for most of us is like the toughest exam, it brings nervousness and trouble and when completed, there is a sigh of relief!
We often consider filing of the tax return is the end of the whole story. There is misconception that once the tax return has been filed, work is over until the next tax return filing deadline. This is what even Gaurav thought when he filed his tax return for the year 2011-12.
Gaurav is a software engineer with an IT company and his personal tax situation is not very complex. His only sources of income are salary received from his employer and a small amount of interest from his savings bank accounts. He reported these incomes and filed his tax return before 31 July 2012 and took a deep breath, he too thought it is all over.
He was a relieved man until one day, when he received an e-mail from the tax department. “An e-mail from the tax department” – he thought he had landed in trouble. Shivering and tensed, he opens the mail which said that his ITR-V was not received by the Income tax Department – CPC, Bangalore. And there he sat, now confused what ‘ITR-V’ meant and not knowing what was he supposed to do next. He quickly caught hold of his return files and glanced through the papers of his last tax return. He realized that the acknowledgement of the income tax return is called the ITR-V. When he read the document hard, he found a caption on it reading that it is required to be signed and sent to the Income tax Department – CPC, Bangalore within 120 days of e-filing of his tax return. “How could I miss this?”, so thought Gaurav as he quickly signed the ITR-V and sent it off through Speed Post.
Gaurav soon realized that tax return filing may not necessarily end with the deadline. One needs to watch out a host of other factors even after filing of the tax return.
A few days later while I was sitting with Gaurav I offered him a few handy tips that one should be vigilant of even after the tax returns have been filed. Here are the tips for the readers:
The process of return filing is complete only once a signed copy of the ITR-V has been sent to the Income tax Department – CPC, Bangalore after e-filing of the return. The ITR-V should be sent within 120 days of filing of the return.
It is necessary that the credit of taxes deducted at source as claimed in the tax return is also appropriately reflected in the Form 26As. If not your refund may not be processed. In case the credit in the Form 26As does not match with the amount claimed in the tax return, you may have to approach the deductor of tax and ask him to revise his quarterly TDS tax return. Once the deductor’s quarterly TDS return has been revised, the credit will automatically get updated in the Form 26As.
Be watchful of emails, letters and notices received from the Income tax Department and respond to them within the requisite time. The process of responding to the notices has been simplified now and in many cases one can directly send the details and documents to the Income tax Department – CPC, Bangalore online.
The Indian tax authorities follow a well laid out procedure for assessment of income and taxes. As provided in the India tax law, after the preparation of a tax return, the total income and tax of an individual is re-assessed by the tax office. Tax returns to be assessed by the tax officer are chosen on a random basis. If the tax office determines any differences in the amount of income or tax, they send an intimation/notice to the individual. One must be promptly respond to such notices.
If you have missed the deadline for filing of your tax return, you may still be able to file your tax return after the deadline. A belated Income-tax return for the tax year 2012-13 can be filed upto 31 March 2015. However, in such a case, the following points need to be noted:
a)A belated return cannot be revised if certain errors / omissions are discovered after filing the return of income
b)Certain losses under some heads of income cannot be carried forward to subsequent years for being set-off against future income
c)If any taxes remain unpaid, then simple interest @1% per month is payable on such outstanding tax liability upto the date of payment of such tax. In case the return of income is not filed within 1 year from the end of financial year, the tax officer has the power to levy a penalty of Rs 5,000.
Be careful of spam e-mails on income tax refunds. Such e-mails may ask you to disclose your Permanent Account Number and personal information which can be misused by the sender.
With these simple tips, we hope the tax return filing will no more be life’s toughest exam.
(The authors are Senior Tax Professionals, Ernst & Young. Views expressed are personal)
Neha Pandey Deoras & Shivani Shinde | Bangalore/ Mumbai April 7, 2013 Last Updated at 22:30 IST| Business Standard|
For retirement solutions, financial advisors prefer sticking to a combination of EPF/PPF and equity mutual funds
Bangalore-based Dirk Lewis, 30, who works for a leading information technology services company, plans to subscribe to the National Pension System (NPS) from the next financial year (2014-15). His company offers the NPS option to its employees, over and above the mandatory Employees’ Provident Fund (EPF) provision.
“NPS would help me save more on the tax front. Also, knowing myself, I would save only when I am forced to. This way (through NPS), I would be able to build a neat corpus for my retired life. I have some expenses this year, which wouldn’t allow me to contribute towards NPS,” says Lewis.
A host of companies, including Infosys, Wipro, Reliance Industries, Muthoot Finance, Colgate-Palmolive, Capgemini and Pantaloons, offer the NPS option.
Samir Gadgil, general manager and global head (compensation and benefits), Wipro, says the company has been seeing good traction from employees interested in NPS, over and above EPF. “On an average, annual contribution stood at Rs 4-6 crore. And, the number of employees subscribing to the scheme is growing on an annual basis,” he says.
Wipro recommends NPS for product diversification, as well as a substitute for voluntary contribution towards EPF, Gadgil says.
Some companies say primarily, those in the 30-35 age bracket are subscribing to NPS, as they are aware the product’s equity component could deliver good returns through 30 years.
George Alexander Muthoot, managing director of Muthoot Finance, feels NPS would help his employees build a decent retirement fund.
A company can either offer investment options at the subscriber level, allowing employees to choose the pension fund manager and the asset allocation (active choice), or at the company level, in which case the company decides the fund manager and the asset allocation (auto choice). Under the latter, the company may opt for the portfolio mandated for central government employees and choose from the three government fund managers – LIC Pension Fund, SBI Pension Fund and UTI Retirement Solution – or from schemes and fund managers for the voluntary sector.
All one has to do is subscribe to NPS and ask his/her employer to deduct a fixed amount every month or year. Many companies also contribute towards their employees’ NPS and get tax benefits under Section 80CCE by terming this business expenditure in their profit-and-loss accounts. Even the employer’s contribution of up to 10 per cent of basic and dearness allowance is eligible for deduction, though such employers later deduct their contribution from the employee’s salary. Most companies ask for an annual contribution of at least Rs 6,000 (once a year), or at least Rs 500 a month. Many companies have spread awareness on NPS among employees through web seminars, group discussions and helpdesks at their campuses.
Financial planners, however, aren’t too enthused by NPS (compared to EPF), though comparing the two isn’t fair—while EPF is purely a debt product, NPS also invests in equity. Certified financial planner Arnav Pandya feels EPF is meant for those who do not understand investment very well—they simply put away money in EPF and earn handsome returns. NPS, however, is meant for those who have a fair knowledge on investment and can choose funds. “NPS is a product that should figure in the list you consider for investing for your retirement, whether you put money into it or not,” he says.
For Mumbai-based certified financial planner Gaurav Mashruwala, in their current forms, EPF scores over NPS, a view shared by Sumeet Vaid of Freedom Financial Planners.
“Simply put, EPF is slightly market-driven to the extent of investing in government securities, while NPS is about 50 per cent market-driven, due to the equity component. As a result, returns are safe in EPF, not in NPS. There is a small cost attached to investing in NPS, but there is no cost in investing in EPF,” says Mashruwala.
Also, NPS has withdrawal limits; EPF does not—it offers premature withdrawal for specific purposes (house construction, marriage and illness), without foreclosure. Any premature withdrawal leads to account closure in the case of NPS. Up to 20 per cent of the funds can be withdrawn from NPS before one turns 60; the rest has to be used to buy annuity. Also, you can easily stop contributing towards EPF in desperate times; you can’t do so with NPS.
“One NPS fund manager I met recently told me they don’t make money on NPS asset management; they hardly rejig the portfolio on the back of market conditions,” says an industry expert. If fund managers aren’t paid adequately, returns may soon start declining. The expert, therefore, feels the government should look at developing the product to make it more investor-friendly.
Also, NPS returns aren’t very attractive. The Employees’ Provident Fund Organisation (EPFO) gives 8.5 per cent returns to subscribers. Till August 2012, returns offered by NPS stood at 6-11 per cent (an average of 8.5 per cent). Though NPS should give better returns (compared to EPF) due to the equity component, this hasn’t been the case. Therefore, it hasn’t appealed to investors or financial advisors. Vaid says many company trusts that manage EPF money on their own have delivered higher returns – 9-9.5 per cent. Therefore, it might not be sensible to consider NPS.
Like Lewis, most look at NPS from a tax-saving perspective. Even then, the product doesn’t seem lucrative. An employee’s contribution of only up to 10 per cent of the basic and dearness allowance is eligible for deduction under Section 80CCD (this amount is within the Rs 1-lakh limit, under Section 80C). Most taxpayers exhaust a substantial part of the Section 80C limit through EPF contribution, which can be invested up to Rs 1 lakh, completely tax-free. Hence, contributing to NPS is hardly of any use, as long as you are an indisciplined investor and need to be forced into investing. A withdrawal from NPS is taxable at the slab rate and so is the annuity to be earned after retirement.
Therefore, Mashruwala advises sticking to EPF or Public Provident Fund (PPF), which offer annual returns of 8.7 per cent, and taking the equity-oriented balanced fund route to add equity to the retirement portfolio. According to mutual fund rating agency Value Research, equity-oriented balanced funds returned about seven per cent in the past year.
Financial experts feel for self-employed individuals, too, PPF scores over NPS, as investments of up to Rs 1 lakh in PPF are completely tax-exempt.
While Gadgil says an employee can continue using his NPS account even after quitting an organisation, Vaid is doubtful about whether an employee would be disciplined enough to continue investing on his own, as the organisation he joins next may not offer NPS. He says, “Servicing is better when a product is offered by an organisation. This might not be true for independent NPS accountholders. NPS’ product structure might not be easy to understand for most.” He recommends a combination of EPF/PPF, debt funds and index funds. In the past year, the BSE Sensex returned about nine per cent, while the National Stock Exchange’s Nifty gave eight per cent returns. From a tax point of view, too, equity is very efficient—if held for more than a year, returns from equity investment are tax-free in the hands of investors. Across categories, debt funds have returned 9-11 per cent higher than NPS. Also, if held for more than a year, debt funds get indexation benefits.