Important Income Tax changes which will apply from April 1:

There are some important income tax changes that will come into effect from April 1.

• There will a decrease in tax rate from 10 percent to 5 percent of Individuals having total income between 2.5 lakh and Rs.5 lakh.

• Individuals having income above Rs.1 Crore can save up to Rs.12,500 per years and 14,806 per year(including surcharge and cess).

• Surcharge at 10 percent of tax levied on rich taxpayers, with income between Rs. 50 lakh and Rs.1 Crore .The rate of surcharge for the super rich with income above Rs.1 Crore will remain 15 percent.

• Taxpayers with income up to Rs.3.5 lakh ,tax rebate is reduced to Rs.2500 and Rs.5,000 per year.Due to the combined effect of change in tax rate and rebate, an individual with taxable income of Rs.3.5 lakh will now pay tax of Rs.2,575 instead of 5,150 earlier.

• Long-term capital gains will result in a lower payout owing to beneficial amendments. The base year for indexation of cost has been shifted to April 1 ,2001 from April 1,1981.This means lower profit on sales.

• Holding period for immovable property to be considered “log term” reduced to 2 years from 3 years. This will ensure immovable property held beyond 2 years is taxed at reduced rate of 20 percent and eligible for various exemptions from reinvestment.

• Delay in filing tax return for 2017-18 will attract penalty of Rs.5,000 if filed by Dec 31,2018 and Rs.10,000 if filed later.Such fee will be restricted to Rs.10,000 for small taxpayers with income up to Rs.5 lakh.

• Furthur tax exemption will be available on reinvestment of capital gains in notified redeemable bonds.

• Deduction for first-time investors in listed equity shares or listed units of equity oriented fund under the Rajiv Gandhi Equity Savings Scheme is withdrawn from 2017-18.If an individual has already claimed deduction under this scheme before April1 ,2017, he/she shall be allowed to avail a deduction for the next two years.

• Time period for revision of tax return cut to one year from the end of relevant FY or before completion of assessment, which ever is earlier.

Save taxes on HRA (House Rent Allowance)

HRA (House Rent Allowance) is the major component of salaried structure for the employees. It is a part of the salary unlike basic salary, is not fully taxable. According to the income tax act part for the HRA gets fully exempted under section 10(13A).

The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps the employee in saving tax. If an employee is living in his own house or does not pay any rent then the HRA received is fully taxable.

Who can avail HRA?

The tax deduction of HRA is only available to salaried employee who has a HRA component as part of his salary and is staying at a rented accommodation. Self-employed professionals cannot claim for this tax deductions.

How much is exempted?

The exemption for HRA benefit is the minimum of

• Actual HRA received
• 50% of salary if living in metro cities, 40% for non-metro cities.
• Excess of Rent paid annually over 10% of annual salary.

The tax benefit is available to the person only for the period in which the rented house is occupied.

Documents:

The documents required for HRA exemptions are rent receipts or the rent agreement with the house owner.

It is mandatory for the employee to report the pan card of the landlord to the employer if the rent paid is more than Rs.1,00,000 annually or if it exceeds more than 15,000 per month.

 

There are also some cases in claiming HRA tax benefit.

Paying rent to family members:

The rented premises must not be owned by the person claiming the tax deduction. So if you stay with your parents and pay rent to them then you can claim that for tax deductions as HRA.

Own a house but staying in a different city:

One can avail the simultaneous benefit of deduction available for home loan against the interest paid and principal repayment and HRA in case your own home is rented out or you work in other city.

Individual who don’t get HRA but pay rent?

There may be some employees who might not have HRA component in their salary structure. Also a non-salaried individual might be paying rent. For them Section 80 (GG) of the income tax act offers help.

An individual paying rent for a furnished and unfurnished accommodation can claim the tax deduction for the rent paid under section 80 (GG) of the IT act, provided he is not paid HRA as a part of his salary by furnishing Form (1B).

Under this section, the total income is calculated as gross total income minus long-term capital gains ,the short-term capital where Securities Transaction Tax (STT) has been paid and deductions available under section 80C to 80U, except Section 80G.

While claiming tax deduction for HRA one must remember that the individual himself or as a member of HUF must not own any accommodation. If individual owns any accommodation and earns rent from it then tax deduction is not allowed.

Tax Saving Investment Options

How to avoid mistakes in last minute tax saving decision?

Every investment option to save taxes has a certain role in a portfolio which every taxpayer should know. As taxpayers looking for a better option for investments in save taxes so they can avoid some mistakes by having knowledge about various tax saving options.

ELSS category of tax saving investment option helps to create a wealth in long term. Taxpayers can invest in these equity schemes through monthly SIPs not invest a huge amount at one go. This is an option where investors can get tax benefits under section 80C.For detailed information on mutual fund investment visit http://www.trutax.in/blog/best-elss-mutual-fund.

Every taxpayer should know that they choose investment options that can fill the gaps in their portfolio. Taxpayers looking for equity exposure can invest in ELSS funds. ELSS funds should also be chosen as per the taxpayers risk appetite. Holding for longer period instead of three year lock-in period should be considered by taxpayers as it can give better returns.

One the other side PPF is also a good tax saving investment option. In most cases the monthly contribution to the provident fund is more than sufficient to build up the debt portfolio of an individual’s investment portfolio.

Investment as per needs:

Public Provident Fund:

• Tenure: 15 years
• Purpose: Long-term savings.

Sukanya Samriddhi Yojana:

• Tenure: Till girl turn 18
• Purpose: Long-term wealth creation

Insurance Plans:

• Tenure: Policy term
• Purpose: Insurance Cover

Senior Citizens Saving Scheme :

• Tenure: 5 years
• Purpose: Regular income in retirement

National Pension System:

• Tenure: till retirement
• Purpose: Long-term Savings

ELSS funds:

• Tenure: 3 years
• Purpose: Long-term wealth creation

NSCs and Bank FDs

• Tenure: 5 years
• Purpose: Long-7.5-8%

Multi-year Investment:

These tax saving investment options are eligible for deduction under section 80C.

Life insurance policies requires you to pay the premium year by year for the full term of the plan so taxpayer should assess the need for life insurance cover, your ability to service the premium for the full term and your willingness to accept 5-6% returns. If these requirements are ticked then you can buy the insurance plan.

Ulips is also a multi-year investment option. The costs of new online Ulips are very low and lead to higher investor returns. Be sure you will be able to pay every year before you take this as a investment option.

ELSS funds as per needs:

Aggressive Funds:

These funds have a larger exposure to small and mid-cap stocks. This can be rewarding as well as risky.

Balanced funds:

These funds have a balanced exposure to large-cap, mid-cap and small-cap stocks.

Stable funds:

These funds have large-cap oriented portfolios. They can give stable returns.

Small saving best options:

Read in Details:

http://www.trutax.in/blog/best-tax-saving-investments

Though interest rates have come down in recent months but small saving schemes like PPF and Sukanya Samriddhi yojana still offers 8-8.5% .

For Senior Citizens taxpayers Senior Citizens’ Savings scheme is the best tax-saving option. The scheme is for 5 years and can be extended for a period of three years once it matures. It offers 8.5% returns and the interest is paid out every quarter. The account can be opened in any post office branch and designated branches of PSU banks and select private banks. In this scheme there is an investment limit of Rs.15 Lakh per individual.

NSCs offers close to 50-75 basis points more than what fixed deposits give. The interest earned on NSCs is also eligible for deduction under section 80C.

Small Savings Schemes:

• PPF Interest rate 8% ( tax-free)
• Sukanya Scheme Interest rate 8.5% (tax-free)
• NSCs interest rate 8% (Fully Taxable)
• Senior Citizens Savings Scheme Interest rate 8.5% (fully taxable)
• Best fixed deposit interest rate 7.5%(fully taxable)

NPS(National Pension System):

The Nation Pension System has generated a lot of interest among taxpayers after the introduction of the additional tax deduction of Rs.50,000 under the new section 80CCD(1b).NPS is a long term product and a locks up money for a very long term. If you are 30, the investment will mature in at least 28-30 years. According to the financial experts it is better to pay tax than invest in the NPS to claim tax benefits as it has a restrictive investment mandate and is not likely to match the return of equity funds.

Income tax returns by SMEs

                                                             

In India’s taxation structure there are two types of taxes: -Direct taxes and Indirect taxes. At present income tax is the direct tax which is levied by the central government in India whereas sales tax, service tax and excise duties are indirect taxes.

Every enterprise is required to adhere to income tax norms but many firms ignore the filing of income tax returns as they think this due to lower income, the size of company operation is not big.

This type of ignorance by firms results in notices from income tax department, interest, penalties for various non compliances like non-filing of TDS returns,non payment of advance taxes and non deduction of TDS. This ignorance only creates barriers to the growth of the company in a short or for a long term.

Compliance with income tax can be divided into two parts, compliance with TDS and other compliances.

Deduction and payment of TDS:

There are some identified payment/expenses against which government has prescribed a specific rate of deduction. After deduction of TDS, it should be deposited to the credit of government on or before 7th of next month through online banking, by cheque or cash by presenting the challans at designated banks.

 If a deductor fails in deducting TDS or deducts an amount less than the required amount, the deductor is liable to pay an interest at 1% per month or part of the month, till the date on which TDS is deducted.

Filing of TDS return and issuing TDS certificates:

Every deductor who is liable to deduct TDS should obtain TAN number to file his TDS return which is to be filed quarterly on or before 15th day on next month of the quarter.

After filing TDS return deductor has to issue TDS certificates to the parties within 15 days of due date of filing TDS return.

If a person fails to file TDS return on or before the due date then he shall be liable to pay a late fee, a sum of Rs.200 for every day during which the failure continues.

Advance Tax:-

As per section 208, every person whose estimated tax liability for the year is Rs.10, 000 or more shall pay his tax in advance in the form of Advance Tax. Advance Tax is to be paid in different installments.

Non- payment of advance tax will attract interest under section 234 A/B/C, hence enterprise should pay their advance tax on timely basis.

Filing of Income Tax Return:

As per section 139 of income Tax Act, every company and person requiring audit under section 44AB should file their income tax return on before September 30.In any other case, the return should be filed on or before July 31st.

Income tax returns is a key factor for any company to raise any funding from financial institutions. 

The increase of income tax burden from perks provided by the employer:-

There are many perks provided by the employers to employees in addition to the salary.

The perks offer by the employers are:-

• Club Memberships
• Employee stock options
• Housing allowance
• Vehicle
• Personal attendants
• Company lease house

Some of the perks provided by the employers are taxable and some are exempt as per income tax rules.Perks can be reimbursements of expenses such as for telephone, medicines and treatment, fuels, books, and journals.These perks are fully exempt from tax.

Reimbursements for medical expenses can be up to Rs.15000 while there is no maximum amount of cap for the telephone as it totally depends on the company.

Many firms provide interest-free loans and loans on the concessional rate which is totally taxable.

 Car allowance:-

There is an amount of cap in case of transport allowance for commuting between home and office which is an exemption from tax for up to Rs.1600 per month.

Concessional education:-

If the free or concessional education provided for any family member of the employee then the amount of expenditure is totally incurred by the employer.

Company lease house:-

If the company provides a house on lease to the employee the value of the perk will be 15% of the salary or the actual amount of lease rental paid by the employer,  whichever is lower.

 Use of assets:-

If the employee is using the movable assets which are owned by the employer then the perquisite will be charged at 10% of total cost of the asset.Laptops and computers do not come under this category.

BEST TAX SAVING INVESTMENTS:-

1.      Prime Minister Awas Yojana (PMAY)

Under the Prime Minister Awas Yojana (PMAY), Govt. has announced slab based subsidies can actually save Rs 2.4 lakh for any first time home owner, if he is earning less than Rs 18 lakh per annum.This applies for those, who opt for a home loan spanning at least 20 years. As of now, this subsidy is present only for those who are earning less than Rs 6 lakh.

2.      Mutual Funds

• We provide an advisory service which identifies investment goals & risk tolerance and provide customised scheme recommendations based on these preferences. 
• We ensures that investors capitalise on schemes which will help them realise their dreams earlier and faster.
• We provides investors access to a vast library of news, views, updates and statistics related to mutual fund schemes and everything else that impacts them.
• We also provides intelligent measures to empower the investor with expected savings, past performance of schemes, wealth calculators and retirement planning.
• With this detailed level knowledge at their disposal, investors can make a well-informed decision on the right schemes to invest.

3.      Sukanya Samriddhi Scheme

• Sukanya Samriddhi Scheme is one of the best investment options available today. It not only offers lucrative returns to the investor but is also a tax free investment option. It was launched as a part of Beti Bachao Beti Padhao initiative to promote welfare of women in India.
• Maximum of 2 accounts can be opened in public sector banks & post offices by the parents/legal guardian for 2 different girl children only (3 accounts in special case).
• Minimum deposit of Rs. 1,000 & maximum deposit of Rs. 1,50,000 per year is allowed via cheque/DD/cash.
• Rate of interest is 8.6% p.a.
• Interest income and amount received at the time of maturity are tax free.

Things to Know Before You File ITR in 2017

Getting income in your account every month is really too comforting, but filing the income tax returns for the same annually is quite a pain! However, if you know the easy ways to file your ITR accurately then there would be no pain in doing this. Income tax returns would not give you same excitement as claiming the income, but it is quite important and mandatory to file your returns.

Filing ITR doesn't always mean that you would be paying tax as most of the salaried people do pay their taxes in the form of TDS (Tax Deducted at Source). There are many tax exemptions offered later based on the investments, expenses, and even the salary heads. All these would result into return of excess tax paid in the form of TDS. You would be able to claim this tax returns only when you file ITR. Hence, even if you are not having regulatory obligations to pay the tax or file ITR, do it if you have a source of income. Remember, filing ITR does not always mean paying tax!

There are many ways to file ITR -

·         Do it yourself - ITR can be done online by visiting our website http://www.trutax.in/ . You can file your returns for free on this website.

·         Use income tax software online - Using ITR filing software is another free option you can explore, if you are not getting your income from multiple sources. Such option would work for relatively simple financial year that doesn't have different income heads, new addition to your income or property, or even to your life.

·         Hire tax consultant online - In case of complexities, you can hire the tax consultant online as well. The online consultant will charge nominal fees for filing the returns, but reduce major hassles of tax filing.

·         Hire the tax consultant in person - This is for those who may not want to go the online way. You may hire a tax consulting firm or the consultant in person. All you have to do is share your financial details like income, savings, and expenses with valid documents, while the rest is done by the consultant.

The above four ways of filing ITR may take care of all your ITR needs, however here are few important things you may know before you file ITR in 2017.

·         What would be your assessment year?

This is the first thing that you need to select when it comes to filing returns, and here is where the confusion starts. Assessment Year (AY) is the year when you are filing the returns. Financial Year (FY) on other hand is the year when you earned the income. FY in India starts from 1st April to 31st March, so it spreads over two different calendar years. The Form 16 is prepared for the FY and then it is filed on our website for the AY. Example - For the income earned in FY 2016-2017, the AY would be 2017-2018.

·         Tax Deducted at Source (TDS)

When everything has gone online, the information about TDS is also present online. You will have to view Form 26AS. The link to view this form is already present on our website.

ITR Forms

ITR Forms are also presented under different heads. The information about the ITR form and where it is applicable is clearly mentioned. One should select the form that suits his/her income specifications.

Look out for income tax deductions

Paying the tax is the skillful task and so is saving the same. There are various tax deductions available under different government investment schemes that you can use to save on your hard earned money being paid as tax. These savings can be made under following sections -

o    Section 80C covering various forms of investments.

o    Section 80CCC for the investments made under pension scheme.

o    Section 80CCG for equity savings.

o    Section 80D for medical insurance premium payment.

o    Section 80DD for the medical treatment of dependent with some kind of disability.

o    Section 8DDB for expenses incurred in medical treatment.

o    Section 80E for interest payment on the loan taken to meet educational expenses.

o    Section 80EE for loan interest payment on home loans.

o    Section 80G for donations made to charitable trusts and some funds

o    Section 80GG for the rent payment

o    Section 80GGA for the donations towards rural development or scientific research.

o    Section 80GGC for donations towards political parties.

o    Section 80QQB on income made from book royalty.

o    Section 80RRB for royalty income made from patents.

o    Section 80TTA for interest earned out of savings deposits.

o    Section 80U for person with disability.

ITR filing is not a rocket science. However, with little knowledge, more of accuracy, time investment, and online help, you can make it possible with proper savings without violating government regulations. Be a responsible citizen; file your ITR regularly on time!