Various Deductions Under chapter VI-A

As we know that the Income tax is payable after all the adjustments which are as follows:

Income under all the heads of Income                                                                                   ****

Salary

House property

                Capital gains

Profits & gains from business & profession

Other sources

Less: Brought forward Losses & Allowances                                                                       ****

Gross Total Income                                                                                                   ****

Less: Deductions under Chapter VI-A                                                                                   ****

Estimated Income                                                                                                                      ****

Income tax on estimated income                                             ****

Add: Surcharge                                                                            ****

Less: Relief under Section 89                                                   ****

Add: HC & SHEC                                                                        ****

Total Tax liability                                                                        ****

Less: Relief under Section 90,90A & 91                                 ****

Less: MAT Credit u/s 115JAA                                                   ****

Less: TDS deducted as per Form 16/16A                               ****

Now, today, we will discuss all the deductions under Chapter VI-A. The main motive to provide the tax exemptions under the same is to enhance the investments under the schemes which are mentioned in the said sections. Hence, the assessee makes the investment which serves the two purposes, at one side, government gets the funds & liquidity of resources in the particular schemes, on the other hand, assessee gets the deduction under Income tax for the same

Deductions under chapter VI-A Explained:

Section 80C

The deduction under section 80C is allowed from the Gross Total Income of the assessee. These are available to an Individual or a HUF. The deduction is allowed for various investments, expenses and payments.

 Section 80CCC:

Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurance is available under Section 80CCC . This section provides deduction to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer for receiving pension from a fund referred to in Section 10(23AAB). In case the annuity is surrendered before the date of its maturity, the surrender value is taxable in the year of receipt.

Section 80CCD: Deduction in respect of Contribution to Pension Account

Earlier, the amount of deduction under 80C, 80CCC and 80CCD(1) together was limited to Rs. 1,00,000. However, as per new amendment since the financial year 2014-15(assessment year 2015-16) the amount of deduction is Rs. 1,50,000.

Deductions on Savings Bank Account under Section 80 TTA:

Deduction from gross total income with respect to any Income by way of Interest on Savings account. Deduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account with a bank, co-operative society or post office. Section 80TTA deduction is not available on interest income from fixed deposits.

Deductions on House Rent -Section 80GG:

This deduction is available for rent paid when HRA is not received. Assessee or his spouse or minor child should not own residential accommodation at the place of employment. Assessee should not be in receipt of house rent allowance. He should not have self occupied residential premises in any other place.

Deduction available is the least of

  1. Rent paid minus 10% of total income
  2. Actual HRA received
  3. 50% of salary (Basic+ DA) for Metro cities & 40% for Non-metro cities

Deductions on Loan for Higher Studies under Section 80E

Deduction in respect of interest on loan taken for pursuing higher education. This loan is taken for higher education for the assessee, spouse or children or for a student for whom the assessee is a legal guardian.

Deduction for First Time Home Owners under Section 80EE

This section provided deduction on the Home Loan Interest paid and is valid for financial years 2013-14 & 2014-15 (Assessment year 2014-15 and 2015-16) only. The deduction under this section is available only to Individuals for first house purchased where the value of the house is Rs 40lakhs or less and loan taken for the house is Rs 25lakhs or less. And the Loan has been sanctioned between 01.04.2013 to 31.03.2014. The total deduction allowed under this section is Rs 1,00,000.

Section 80CCG: Rajiv Gandhi Equity Saving Scheme (RGESS)

The Rajiv Gandhi Equity Saving Scheme (RGESS) was launched after the 2012 Budget. Investors whose gross total income is less than Rs. 12 lakhs can invest in this scheme. Upon fulfillment of conditions laid down in the section, the deduction is lower of – 50% of amount invested in equity shares or Rs. 25,000.

Section 80D: Deduction in respect of Medical Insurance

For financial year 2014-15 – Deduction is available up to Rs. 15,000/- to an assessee for insurance of self, spouse and dependent children. If individual or spouse is more than 60 years old the deduction available is Rs 20,000. An additional deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 15,000/- if less than 60 years old and Rs 20,000 if parents are more than 60 years old. Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/-. (From AY 2013-14, within the existing limit a deduction of up to Rs. 5,000 for preventive health check-up is available).

For financial year 2015-16 – Deduction is raised from Rs 15,000 to Rs 25,000. The deduction for senior citizens is raised from Rs 20,000 to Rs 30,000. For uninsured super senior citizens (more than 80 years old) medical expenditure incurred up to Rs 30,000 shall be allowed as a deduction under section 80D. However, total deduction for health insurance premium and medical expenses for parents shall be limited to Rs 30,000

Section 80DD: Deduction in respect of Rehabilitation of Handicapped

Deduction is available on:

  • Expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependent relative
  • Payment or deposit to specified scheme for maintenance of dependent handicapped relative.

Where disability is 40% or more but less than 80% – fixed deduction of Rs 50,000. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,00,000.A certificate of disability is required from prescribed medical authority.

 

What are Advance Tax Payment Challans ?

As its name suggests, advance tax is the tax which is paid in advance. Now, the question arises how and when the tax is paid in advance and the very important question which arises is on what amount it is paid. Readers, no need to be worried, I will take you through the whole of advance tax in detail and the utility of advance tax payment challans. An earlier post discusses in detail what is advance tax?

First of all, are all assesses required to pay Advance tax. The answer is: if the income tax liability of a person is more than Rs. 10,000 in a financial year, then the assessee is liable to pay Advance tax.

Due date of submitting Advance Tax Payment Challans:

Now, this was regarding the point as to when the assessee will pay advance tax. Now, the question is how assessee will pay the advance tax. The answer is it will be paid in the installments depending on the type of assessee. There are 4 installments in the year when the advance tax can be paid. Advance tax payment challan for individuals’ and companies is same but dates may vary. The following is the due date when the advance tax has to be paid:

For companies:

Due date Amount payable
On or before 15th June 15% of the Advance tax liability
On or before 15th September 45% of the Advance tax liability
On or before 15th December 75% of the Advance tax liability
On or before 15th March 100% of the Advance tax liability

 For assesses other than Companies:

Due date Amount payable
On or before 15th September 30% of the Advance tax liability
On or before 15th December 60% of the Advance tax liability
On or before 15th March 100% of the Advance tax liability

 

Computation of Advance Tax

Advance Tax is payable after having a fair idea of the income of current year, i.e., by estimating the current years’ income. Now, the following is the formula to calculate the same:

Income under all the heads of Income

Salary

                House Property

Capital Gains

Profits and Gains From Business And Profession

Other Sources

Less: Brought forward Losses and Allowances                                                                    ****

Gross Total Income                                                                                                    ****

Less: Deductions under Chapter VI-A                                                                                    ****

Estimated Income                                                                                                                      ****

Income tax on estimated income                                             ****

Add: Surcharge                                                                             ****

Less: Relief under Section 89                                                     ****

Add: HC and SHEC

Less: Brought forward Losses and Allowances                                                                    ****

Gross Total Income                                                                                                   ****

Less: Deductions under Chapter VI-A                                                                                   ****

Estimated Income                                                                                                                      ****

Income tax on estimated income                                                                                             ****

Add: Surcharge                                                                                 ****

Less: Relief under Section 89                                                         ****

Add: HC and SHEC                                                                          ****

 

Total Tax liability                                                                               ****

Less: Relief under Section 90,90A and 91                                    ****

Less: MAT Credit u/s 115JAA                                                          ****

Less: TDS deducted as per Form 16/16A                                       ****

 

Advance Tax Liability                                                                         ****

Tax slabs will be applicable as in force for the particular FY

 Mode of Payment

Challan no. 280 are the advance tax payment challans;  by selecting Advance tax (100) as the payment type. The format of challan no. 280 is as under:

advance tax payment challans

Individuals may pay advance tax using tax payment challans at bank branches authorized by the Income Tax (I-T) Department. It can be deposited with the Reserve Bank of India, State Bank of India, ICICI Bank, HDFC Bank, Indian Overseas Bank, Indian Bank, Allahabad Bank, Syndicate Bank, Axis Bank, Punjab National Bank, Punjab and Sindh Bank and other authorized banks. There are 926 branches in India that can accept advance tax payments. Individuals may also pay it online through the I-T department

 Interest on Late Payment of Advance Tax

Section 234A, B and C defines the interest rates which are paid on failure to pay advance tax. Let’s discuss the same in detail.

Section 234B: Interest @ 1% is payable if 90% of the tax is not paid before the end of the Financial year i.e. for Default in Payment of Advance Tax

Section 234C – Interest @ 1% per month is payable if the tax is not paid as per the above schedule i.e. for Deferment in Installments of Advance Tax.

 Advance Tax Paid is more than required?

If the amount paid as advance tax is higher than the total tax liability, the assessee will receive the excess amount as a refund. Interest @ 6% per annum will be paid by the Income Tax department to the assessee on the excess amount if the amount is more than 10% of tax liability.

 

How to Get a Bank Locker in SBI

Storing too much of jewelry and valuables at home at times becomes a security issue. In order to protect your valuables in the event of any natural calamity or theft, various banks have come up with bank locker facility. State bank of India (SBI) is one of such banks which offer a safe and trustworthy space to store all your valuables and documents. Just as you trust your bank for the money deposited in the account, in the similar way the bank lockers protects your valuables stored with them.

This facility offered by SBI can be availed from its branches who are offering these services. Many banks have the condition of having an account with their bank to obtain the bank lockers with them. However, it varies from bank to bank and therefore one needs to check with their preferred bank. The discussion below focuses on how to get a bank locker in SBI? Locker facility is allotted on first come first basis. If the lockers are not available at that point of time then your name is put on the wait list and you will be contacted whenever the lockers are available.

How to Get a Bank Locker in SBI ?

You need to collect the form for opening of a bank locker from the nearest branch of SBI which provides this service. If you do not have a savings account  you could read an earlier post on how to open a saving bank account ? Fill in your basic details and attached the required documents. Both private and public sector banks that provide the locker facility are governed by the guidelines of Reserve Bank of India. The bank may ask its customer to deposit some amount as security in the beginning while opening a locker. It is also called as Caution Money. This may include the rent of a locker for a period of 3 years and also an amount in case of emergencies when the bank has to break open the locker for example if the customer has lost the key. It is not mandatory to do so but most of the banks do ask.

The relationship of the bank and the locker holder is that of a lessor and lessee, or in simple words that of an owner and a tenant. While opening an account one needs to sign an agreement. This agreement is between you who are hiring a locker and the bank that is letting out the locker. This is the key document in which all the clause and the conditions of hiring a locker are mentioned and is duly signed.

The lockers can be rented on single as well on joint basis. If there are joint holders then the mode of holding whether either or survivor, former or survivor needs to be mentioned in the agreement signed while opening the account. Nomination facility is also available. Want to know more about joint accounts; read an earlier post.   It is always advisable to assign a nominee. In case of death of the account holder/holders the nominee mentioned in the agreement gets to access the locker by producing the death certificate. By holding a locker in joint names and also having a nominee ensures hassle free transfer of contents of the locker in the event of death of the account holder.

All the lockers have two set of keys, one is with the customer and the other with the bank. The locker can be opened only if both the keys are being used.

Charges

One needs to pay rent as charges for using the locker. Generally this rent is paid in advance for the entire year. The rent of the locker not only varies from bank to bank but also among the branches. The rate varies as per the location of the branch whether in metro cities, rural areas or busy commercial areas.

The rent of the locker is also different for different sizes of the locker. The cheapest ones are the small sized lockers. Also the rent differs with the type of account holder you are with bank. Rent is less for the A group customers of the bank.

Basic SBI Bank Locker Charges:

(Inclusive of Service Tax@12.36% w.e.f. 01.04.2012)

SBI bank locker charges for different size and location of the locker is mentioned below:

 

1. Safe Deposit Lockers Annual Charges
1.Locker Metro & Urban Semi-Urban & Rural
Type of Locker
Size
SMALL
Size A 125 X 175 x 492 Size B 159 X 210 X 492 Rs.1,019/- Rs.764/-
MEDIUM
Size C 125 X 352 X 492 Size D 189 X 263 X 492 Size E 159 X 423 X 492 Size H1 325 X 210 X 492 Rs.2,547/- Rs.1,528/-
LARGE
Size F 278 X 352 X 492 Size G 189 X 529 X 492 Size H 325 X 423 X 492 Rs.3,056/- Rs.2,547/-
EXTRA LARGE
Size L 404 X 529 X 492 Size L1 385 X 529 X 492 Rs.5,093/- Rs.4,075/-
  • In case of loss of key of the lockers, a service charge of Rs.509/- has to be recovered from hirer in addition to the actual expenditure incurred in breaking open the locker and changing of key by manufacturer of lockers.**
  • One Time Locker Registration Charges:- Rs.509/-**
  • No. of Locker visits per year: 12 visits free: thereafter Rs.51/- per visit to be recovered manually.
  • Locker Rent Overdue Charges: **
1st Quarter 10% of annual rent.
2nd Quarter 25% of annual rent
3rd Quarter 40% of annual rent
1yr 50% of annual rent.

** to be recovered manually.

 

In addition, there is a wide disparity in rates between public sector banks and private ones. For instance, the rental prices for a medium-sized locker in a private bank may go up to Rs 20,000 a year, but the same can be had in a public sector bank for one-sixth the price. Thus it is important to check all the fine print before selecting a bank and its branch where you want to open a locker. It is also important to make sure that the locker is not located at a lonely place and also it should be near to your house so that it is easy to carry your valuables. Of all the banks, state bank of India can be preferred for its competitive charges, popularity and reliability. Since now you know how to get a bank locker in SBI , you can protect your valuables.

Benefits of Mutual Fund Investing and Risks Associated with It

Mutual Fund is an investment trust which pools the savings and funds of the investors together, to invest in securities such as shares, bonds, money market instruments, etc. It is managed by an able and diligent professional who invest funds on behalf of investors who are having less of time or lack of knowledge in making investments in financial markets. While there are benefits of mutual fund investing, there are certain risks too. Investors investing their savings in a mutual fund scheme have common objectives and needs or goals regarding returns and flexibility of a mutual fund.

The portfolio of a mutual fund is well diversified in order to set off potential losses, if any. It is a great investment opportunity for a conservative investor to diversify his portfolio from fixed deposits into stock markets, with comparatively lesser amount of risks with respect to trading in equities. Also, the burden of giving time and having knowledgeable skill sets, required for smart investing, are taken over by the portfolio manager who makes the investment decisions.

Operations of a mutual fund begin from collecting funds from investors and then investing it into various diversified securities. The returns generated from investments into these securities are passed back to the investors in the form of dividend and capital appreciation. The investors are issued mutual fund units at the Net Asset Value (NAV) of the mutual fund at the time of investing. At the time of redemption, increase in NAV represents capital appreciation and returns generated on investments made by the fund are distributed in form of dividends.

Mutual Funds are of different types; namely, open ended funds, close ended funds, equity funds, debt funds, balanced funds, index funds, money market funds, etc. Read our tutorial on distinction between open and closed ended funds.

Benefits of Mutual Fund Investment:

The several benefits of investing in mutual funds are as follows:

  1. Regulations and guidelines:
  2. Mutual Funds are governed and regulated by the Securities and Exchange Board of India (SEBI). SEBI is an institution set up in order to govern the working of stock exchanges and protect the interests of investors. All mutual fund trusts need to operate within the guidelines issued by SEBI.
  3. Professional Management of investors’ funds: A fund manager plays an important role in the success of a mutual fund.
  4. Mutual funds are operated and managed by portfolio managers having a knowledgeable interest in the financial markets and a professional background. Investors not having an exposure to the markets, the required skill sets and with lack of time can invest in mutual funds relying on the professional management of the portfolio managers.
  5. Diversified investments/ hedging risks:
  6. One of the main benefits of investing in mutual fund is diversification. The investments are well diversified to offset losses in one with returns from another. The portfolio is well diversified satisfying the objectives of the scheme and needs of investors. Do you know how many mutual funds should you have in your portfolio?
  7. Flexibility and liquidity in the funds invested: Systematic Investment Plans are a great way for wealth creation
  8. The investors get a wide range of schemes to invest their savings in, keeping in mind their needs and requirements. Also, most of the mutual fund investments are liquid in nature. The lock-in period is predefined in most of the schemes.
  9. Options for receiving dividend:
  10. One can receive dividend payments in cash or is credited to bank accounts. Also, one can receive dividends in form of capital reinvestments i.e. the dividend amounts are capitalized and reinvested into units of mutual funds. Thus, it helps an investor wanting to generate long term benefits

Risks of Mutual Fund Investing :

The advertisements and commercial of any mutual fund scheme are always ended with a golden note: “Mutual fund investments are subject to market risk….” which is a true fact.

Investing in a mutual fund doesn’t assure guaranteed returns always. The element of risk always prevails. Risks of mutual fund  investing are associated with the risk of the price movement of the securities which may result in a capital loss. Risk relates to volatility in price movements, upwards or downwards, which is a constant play of the markets. Thus having a balanced portfolio is a must. An investor must balance his level of debts with a proportionate amount of equity exposure. Exposure to equity mutual funds must be in the risk tolerance limits of an investor.

Also, an investor must not miss out to invest in Fixed Deposits, PPFs, Govt. bonds, etc. (fixed income securities). Compare investing in a fixed maturity plan or a fixed deposit. Basically, risk in a mutual fund can be mitigated by diversifying the portfolio. Not taking risk at all, will limit the returns generated to a minimum level. Higher the risks, higher the returns. But one must not invest by taking risks out of one’s risk appetite and face losses later. Thus, a right level of risk must be determined in order to determine and match the risk appetite of an investor with the risks carried by the securities in which the investments are made.

To conclude there are benefits of mutual fund investment as they are a great opportunity for investors to put in their savings. Risks and returns flow hand in hand. An informed investor and proficient management of mutual fund investments can mitigate the existing risks to a lower level. An investor can generate better returns by proper planning and risk management by investing, as without investing in stock markets and being risk averse, the value of money is eroded due to inflation.

Process for Online Filing of Form 15CA

Now, life has actually become simpler when the Income Tax Department facilitates the online filing of form 15CA via Income Tax login which we all usually use for e-filing of Income Tax Returns. This has been effectual from 12th February, 2014. This facility can only be utilized by the ones who are already the registered users for e-filing web portal. Filing of Form 15CA and 15CB is actually an essential procedure which is utilized for information to be provided for payments which are chargeable to tax to an NRI, not being a company or foreign company. Read about the uses of form 15CA and form 15CB.

Process for Online Filing of Form 15CA

The steps for online filing of the form are mentioned underneath:

Step 1:             In the 1st step, you need to login and then navigate to the menu ‘e-file’. Then click on ‘Prepare and       Submit Online Form (Other than ITR)’. You can file ITR also online; read the post the guides on how to file SAHAJ online.

Step 2:             At the drop down menu you have to select the option of 15CA and then submit

Step3:              Then you have to select the suitable part (Part ‘A’ or Part ‘B’ on the basis of remittances) and then submit

Step4:              You need to fill up the necessary data in the Form and then click on submit. Then you may examine ‘Procedure for Furnishing Form 15CA’ as filling the information required in the particular sections ‘Part A’ or ‘Part B’.

Step 5:             After the successful submission, an acknowledgement number and transaction ID will be created

Step6:              Lastly, in order to examine the current status or print the submitted Form, you need to go to ‘My Account’ menu

Form 15CA format is available online on the website that has been designated by IT department and after that the signed printout Form 15CA must be submitted to the certified dealer before the remittance of the payment.

 Guiding Principles for online filling of Form 15CA :

Procedure for Part A of Form 15CA

Remitter:

  • Permanent Account Number as well as Tax Deduction and collection Account Number which is fixed by the IT Department must be mentioned. Thus TAN is obligatory in cases where-
    1. tax has already been deducted or it will be deducted at source;
    2. remitter has acquired an order u/s 195 (2) of the IT Act from the Assessing Officer (AO)
  • If in case an untrue PAN and/or TAN is filled up by the remitter, then the Form will not be created
  • If in case the remitter do not possess a TAN, it is necessary to mention PAN of the remitter
  • The PAN must consistently be specified. On the other hand, the same is obligatory if the entity status is Company or Firm. Besides, if PAN is not provided in such case, then the remitter will be not permitted allowed to generate this Form.
  • The detailing in at least 2 address columns for remitter must be mentioned.
  • The name of the entity must be already in the “Name of remitter” column.
  • No such value must be provided in the Area code, Assessing Officer kind, Range code and AO number. All these fields will be filled up by the system after authenticating the PAN and/or TAN.
  • The e-mail id as well as the mobile no., if any, must be mentioned
  • Beneficiary of remittance:
  • The entire address of the beneficiary of remittance, alienated by coma, must be mentioned
  • PAN, provided by the IT Department must be mentioned
  • If the entity’s status is ‘company’, then mention the kind of company: domestic or apart from domestic
  • In column of ‘Principal Place of Business’, the nation of tax residence of the beneficiary of the remittance must be mentioned.
  • Details for accountant
  1. Enter the name of the CA in the column ‘Name of the accountant’
  2. The details of at least 2 addresses must be provided
  3. The date of the certificate must not be future date
  4. The registration number must be numeric
  5. The details of the accountant is not needed if point number 15 chosen, that is any order u/s 195 (2)/ 195 (3)/ 197 of the IT Act has been acquired from the AO
  6. The certificate numeral is an alphanumeric field

Guidelines for PART B of Form 15CA (Particulars of Remittance as well as TDS)

  • Give the values according to the accountant certificate acquired in Form 15CB
  • If in case the name of the nation is not provided in the drop sown menu, then select value ‘other’ and mention the nation’s name
  • If in case the name of the currency is not given in the drop down menu, then select value ‘other’ and mention the currency’s name
  • The amount of TDS must be less than the sum of remittance
  • The proposed date of remittance must be the current date or future date
  • The actual sum of remittance subsequent to TDS must be less than sum of remittance.
  • The BSR code of bank via which remittance is prepared must be mentioned
  • The rate of TDS according to DTAA (if applicable) must be mentioned up to two decimals
  • The details of the ‘responsible individual’ must be mentioned for confirmation
  • If in case no tax is deducted then the value “0.00” must be mentioned in the field ‘Amount of TDS’ (foreign currency plus Indian Rs.) Read about TDS rules for property purchased by NRI.
  • The value for ‘rate of deduction according to the IT Act’ must be ‘0.00’ if no tax is deducted and the ‘amount of TDS in Indian as well as foreign currency’ must be ‘0.00’.

File Form 15CA by using Downloaded Utility

The main issue while online filing of Form 15CA directly through income tax login is that the page gets expired if more time is taken while filling up your necessary details. Thus, you have to be very vigilant while submitting details appropriate to remittance or else it may get abandoned. Then, in such a situation, it is advisable that you download the utility accessible under the Download Tab->ITR Forms->Form (Other than ITR)- Offline-> Form 15CA and then fill form 15CA format offline. In this way, you can file the Form directly from utility that facilitates you to login there by using User ID and Password.