Category Archives: Tax Planning

Check your “26AS” before you file Tax Returns this year!

All about form 26AS: Annual Tax credit statement 

What is Form 26AS?

Form 26AS is a consolidated tax statement issued by IT department which shows the tax payments received by the government and credited to your account. All the tax payments made by you or on your behalf either by your employer or any other person should be reflected in your 26AS.

TDS

What it contains?

Tax credit statement 26AS contains the following info:

Part A:    Details of Tax Deducted at Source (TDS)

Part A1:  Details of TDS for 15G/15H

Part A2:  Details of TDS on sale of immovable property

Part B:     Details of Tax Collected at Source (TCS)

Part C:     Details of tax paid like Advance tax, self assessment tax or regular assessment

Part D:     Details of paid Refunds

Part E:     Details of AIR transactions

How is 26AS Tax Credit Statement useful to you?

It is a very useful tool to confirm whether the;-

  •     Tax deducted by the deductor has been duly deposited to the government.
  •    Bank has properly furnished the details of the tax deposited on your account. 
  •   The deductor/collector has correctly filed the TDS/TCS statement giving details of the tax deducted/collected on your behalf;

For e.g. if you are a salaried person and your employer has paid Rs. 2000               00 Tax by way of TDS on your salary and you also have paid self assessment tax say Rs. 20000 on your FD interest then the same should be duly reflected in your 26AS.

Can there be variation in tax credit as shown in 26 AS and your form 16?

 Yes, It may happen due to varied reasons as follows:-

  • Your employer or Deductor/collector has not filed his TDS/TCS statement
  • Your PAN is not provided to the deductor/collector; or incorrect PAN was furnished
  • There was an error by the deductor/collector in quoting your PAN while filing TDS/TCS return
  • Your PAN was not quoted at all.
  • Challan details wrongly quoted either by the deductor or wrongly uploaded by the bank.

What to do in case of variation?

You need to contact your employer/ bank or any a person being the deductor who actually has deducted and deposited tax incorrectly on your account. They need to “Revise” their TDS Return. You need to wait till they revise the same and till it starts showing in your form 26AS. Otherwise, there could be an issue of tax demand notice from IT department.

How to view Form 26AS Online?

 Option 1: By registering yourself at the IT department’s website i.e. www.incometaxindiaefiling.gov.in , this is an instant process and available free of cost.

Option 2: Through the net banking facility provided by your bank;

Option 3: You can also register through NSDL website i.e. https://www.tin-nsdl.com/

Conclusion:

Many taxpayers are receiving income tax notices asking them to pay tax in spite of the same being already paid, so please check your 26AS now and set your tax figures right before you file your tax returns.

Don’t forget to claim Rs. 10,000/- deduction u/s 80TTA while filing your Tax Returns this year!

Claim deduction for your Interest income from all your saving bank accounts

What is Section 80TTA?

Many taxpayers are not aware about section 80TTA under Income Tax Act’1961 which was introduced through Finance Act, 2012. Section 80TTA provides a deduction of Rs. 10,000/- on your income from interest on saving bank accounts.

Who can claim deduction u/s 80TTA?

Deduction u/s 80TTA is applicable to individual taxpayers and HUF only. This benefit is not available to a firm, an Association of Persons or a Body of Individuals.

 

139467701Eligible savings account for claiming deduction!

Saving accounts with any of following entities will qualify:

  • Bank or banking company;
  • Co-operative Society engaged in carrying on the banking business and as specified.
  • Post office Saving Account.

 How does it work?

Interest earned on your savings a/c or FDs has always been taxable under the head “Income from Other Sources”. In order to claim deduction, you have to first include interest income in your total income and then claim deduction u/s 80TTA. For example, if you have received interest of Rs 18,000/- from your saving bank accounts then you have to pay tax on Rs 8000/- only i.e. (18,000-10,000) thus Rs 10,000/- can be claimed as a deduction u/s 80TTA. But if total interest income from all your savings accounts is Rs. 9000/- only, then you don’t need to pay tax at all and the entire amount would be deductible u/s 80TTA.

Is section 80TTA applicable to FD Interest?

No, this deduction is NOT applicable to the interest you received on your FDs/time deposit or term deposit. Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.

For example if you make a 365 days FD for an amount of Rs. 50000/- at an interest rate of say 8%, your entire interest income of Rs. 4000/-(Rs. 50000*8%) would be subject to tax as per your applicable tax slab. You cannot claim deduction of Rs. 4000/- available u/s 80TTA and you need to pay tax on it.

Does no “TDS” means “no need to pay Tax”?

Income Tax Act allows certain deposits & accounts on which no tax is required to be deducted irrespective of any limit for the amount of such interest. Hence there is no TDS on your saving account interest. Regarding FDs, Banks deducts Tax only if your total interest income is more than Rs. 10000/-.

In any case, you have to pay tax on FD or saving account interest as per your tax slab. And as mentioned above you can claim deduction up to Rs. 10000/- with respect to your savings a/c interest.  For e.g. if bank is deducting 10% tax on your FD interest and you fall under the higher slab of say 20% or 30% then you need to pay the balance tax.


(You can also read this article originally published in DNA on July 25 2013

http://www.dnaindia.com/pune/1865162/report-know-your-tax-laws-i-don-t-forget-to-claim-rs10000-deduction-under-sec-80tta)

What will you do if Taxman knocks at your door?:I-T scrutiny Notice Part -3

How to deal with Income Tax Notice?

Any communication from IT department & especially receiving a Notice can send shivers down your spine, even though it might be a routine enquiry or a simple clarification sought. Notice can be issued for varied reasons and there is no standard single solution to deal with different notices in the same way but you can surely follow these 12 golden steps as mentioned below in response to any kind of notice you may receive:-

Taxman

1)      Neither Panic nor Ignore: Your first reaction could be to press the panic button or ignoring it completely due to ignorance, both ways are wrong and key is to handle this carefully and sincerely else you may end up paying the penalty of up to Rs.10,000/- along with tax payment.

2)      Is it issued in your PAN: Department issue notices based on your PAN and not by name, so make sure notice is issued in your PAN and do not pertains to someone else who shares similar names or DOB as yours!

3)      Identify the reason behind issuing a notice: Reasons could be a simple mismatch in TDS or inconsistency in your returns or some serious concerns like income concealment or survey or scrutiny of accounts.

4)      Validity: Check the validity of a notice & timely issuance and under which IT section it has been issued.

5)      Issuer Details: Notice will mention the officer in-charge, his or her designation, signature, address with details of ward & circle no. etc. Verify these details in view to avoid being cheated.

6)      DIN: If the notice is delivered online then check document identification number.

7)      Preparation of documents: Start collecting documents which you are asked to furnish before the assessing officer or based on the gravity of the notice.

8)      Letter: Prepare a covering letter along with the set of documents.

9)      Acknowledgement: Prepare two set of all the documents required to be submitted to the department along with a covering letter, get a stamp on your copy for your record purpose and as a proof of submission of documents and complying with the notice.

10)   Reply in time: Always reply in time even if you are not able to collect the required documents. You can even ask for some time to prepare the same. It would establish that you are honest and cooperating with the laws.

11)   Preserve the Envelope: if you receive the notice in an envelope please keep the same safely as it contains Speed Post number which work as an evidence of its delivery to you.

12)   Professional Help: If the gravity of notice is high then it would be prudent to have a CA represent you; otherwise you can follow the above steps and represent yourself in most of the cases.

One of the major steps that you need to take even otherwise is to keep track & records of all your Tax papers & financial transactions for the last 6 years as it will help you substantiate your claims in case of any scrutiny.

 

How can you avoid getting Notice from IT department?:I-T scrutiny Notice Part -2

 In my previous article, I explained various circumstances under which you may receive a notice, let’s see how you can follow certain things to avoid getting Notice!

With the IT department becoming net savvy and going online, it has become very easy for them to identify discrepancies in your papers and to keep a close eye on almost every financial transaction you do. Even the honest taxpayers have received notices and have come under the scrutiny causing them running around to prove their honesty. Hence it becomes very critical for everyone to maintain their papers & documentary evidences properly to safeguard their own interest.

taxes_mgn

You need to take the following actions to minimize your chances of receiving a notice:-

1)      Always file your returns on time and correctly: This is the basic precaution you need to take to ensure 100% compliance with the law. Make sure you are filing the return correctly and all the details given by you while filling Returns matches with the details available with department.

2)      Submit ITR V to Centralized Processing Centre (CPC) Bangalore: Your filing of taxes would get complete only when your ITR V reaches CPC. Just uploading returns online is not enough; make sure you get confirmation of its receipt from CPC. Please follow the Dos & Don’ts of sending ITR-V to CPC.

3)      Check your form 26AS (Tax Credit Statement): “26AS” gives the details of the “TDS” deposited on your behalf. You should check all the TDS payments duly credited to you or get it rectified otherwise. It can be viewed though NSDL or IT department’s site and even through Bank’s online portal.

4)      Mismatch in Income & Expenses/investments:  If your income was Rs. 10 lakhs and you invested Rs. 25 lakhs, you need to justify the source of used funds and the same applies to expenses also.

5)      Gifts/Money credited to your account: If you have funds credited to your account out of Gifts or loan from relatives/ friends, you need to keep the documentary evidence for the same. You may also need to report these transactions in few instances.

6)      Declaring “Exempt” Income: Even though few Incomes are exempt from the tax, you still need to declare this while filing your return.

7)      Updating PAN details: Keep updating any changes in your pan data like address/surname change post marriage etc.

8)      Pay Advanced Tax: if you are liable to pay advance tax, then you have to pay it as per its schedule & deadline.

9)      Form 15H or 15G: Use 15H/15G instead of claiming refund, submit this at all the financial institutions like banks to prevent them from deducting TDS on your investments with them; in case your Income is below the taxable limit.

10)   Avoid High Value transactions: Department gets information for all your high value transactions from the concerned institution and chances of you coming under scrutiny increases. Avoid these transactions wherever possible & plan it carefully and legally.

Can you expect the Taxman to knock on your door?:I-T scrutiny Notice Part -1

“They know what you did last summer”

If you are a taxpayer then you must have heard the recent news about IT department’s drive by keeping a close eye on all your transactions. Even the salaried employees are on the radar. Department has already identified 12 lakh taxpayers who have not filed their returns, more than 20 Crores high value transactions are being scrutinized and Notices/letters to more than 1.5 lakh people have already been issued.

TheTaxmanIsWatching

So do you need to press the panic button if you happen to get an IT notice? No, you don’t need to and to help you prepare in dealing with these notices, I will run a series of three articles to cover the following 3 important parameters; starting today:-

  • When can you expect IT department to issue a Notice to you?
  • What you need to do to avoid getting Notice from IT department?
  • How to handle & respond to the Notice already issued to you?       

Let’s take the first parameter today and see how & under what circumstances a notice can be issued to you as follows:-

  1.    You have not filed your return: Every individual earning more than Rs. 5,00,000/-p.a. needs to file tax returns compulsorily even if the tax is already deducted (TDS) and paid.
  2.       Interest from FDs or Savings A/C: Bank deducts 10% tax and you forgot to report or pay the additional taxes in case your total income falls under the higher tax bracket of 20/30%.
  3.       Sudden drop in Income: A significant reduction in your income from last year may cause suspicion, especially in case of businessmen/traders.
  4.       Claiming Higher refund amount: If you have filed your returns claiming a high refund.
  5.       Mismatch in TDS credit: You need to check & reconcile your 26AS with all the taxes as paid on your account.
  6.       Non Declaration of Exempted Income: You need to report income which is exempt from tax for e.g. long term capital gains on sale of shares or keeping records for gifts received from parents /relatives etc.
  7.       Change in Job: Many times salaried employee who changed job during previous year gets multiple form 16 & fails to declare income from all the employers & calculate and pay the due taxes, if any. It may arise on account of certain deductions & benefits given twice.
  8.       High Value Transactions: If you have executed high value transactions either for investments or spending then chances of you getting the notice from IT Department are very high. For e.g. your credit card usage of more than Rs. 2 lakhs p.a./ investing in FDs for more than Rs. 5 lakhs/ depositing more than Rs. 10 lakhs in your bank account/ investing more than Rs. 2 lakh in MFs or Rs. 1 lakh in Shares or buying or selling property over Rs. 30 lakhs. All these transactions are reported to the IT department under Annual information Returns filed by respective companies.

So these are the various circumstances under which you may get IT notice, I will explain you how to avoid this by following certain things in the next article.

Gift Tax & How It Affects You

Do you know that, when someone deposits some money in your bank account, what about its taxation?  Your parents deposit some money to your bank account because you want to pay the down payment of your house. While it’s a help from your parents, have you ever thought if you have to pay tax on that amount or not?

It is very important for us to understand the tax implications in various scenarios and the possible issues which can come up in the future.

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By virtue of Section 56(2) any sum of money exceeding Rs. 50000 received without consideration by an individual or an HUF from any person is chargeable to tax subject to exclusions as follows:

1. Upto Rs 50,000/year is not taxable:

The first major rule which every person should know is that there is no tax to be paid, if the amount of the gift upto Rs 50,000 in a year. However if the total amount exceeds Rs 50,000/-, then you will have to pay the tax on the entire amount.

2. Any amount received by relatives:

Another rule for taxation on gifts is that any amount received from specified relatives is totally tax free in the hands of recipient. So a relative gives you gift in form of cash/cheque or in consideration, you will not have to pay any tax on the amount received.

Following is the list of relations which are considered as “relatives” for this

  • Your spouse
  • Your brother or sister
  • Brother or sister of your spouse
  • Brother or sister of either of your parents
  • Any of your lineal ascendants or descendants
  • Any lineal ascendant or descendant of your spouse
  • Spouse of the persons referred to in (2) to (6)

3. Amount received as Wedding Gift:

Any amount you get as a wedding gift is not taxable in your hands, either from relative or non-relative.  So even if you get Rs 1 crore as wedding gift from someone in your wedding, it’s not taxable.

4.  Gift Tax on Movable/ Immovable properties:-

‘’Gifts’’ also includes movable & immovable properties under its ambit.

5.  Any sum of money or any property received under a will or by way of inheritance is exempt from Gift Tax.

Conclusion:

How to document Gift transactions, Registered Deed or plain paper?

There is indistinctness with respect to compliance of the gift deed at times, Gift made by way of cash or cheque does not mandatorily require to be executed through a gift deed. Writing a plain typed note on a paper will generally suffice. It is not required to be stamped and registration is also not needed you may simply mention the names of persons, their relation and that the gift is being given out of love and affection. Gift made by way of movable property is required to be made in stamp paper & should be notarized and registration of gift deed is not required in this case. For the purpose of making a gift of immovable property, the transfer must be affected by a registered instrument signed by or on behalf of the donor.

 

RGESS

Save more in Taxes by investing in Rajiv Gandhi Equity Savings Scheme (RGESS) 

 

What is RGESS?

In the last Union Budget, Finance Minister announced a new Section 80 CCG, which would give you deductions in respect of investments made under the Rajiv Gandhi Equity Savings Scheme. The scheme is designed exclusively for the first time retail individual investors in securities market.

Who is eligible to participate?

The tax deduction under the Scheme shall be available to a new retail investor who:

ü  is a resident of India

ü  has not traded in equity market or derivatives market

ü  has Gross Total Income for the Financial Year less than or equal to Rs. 10 Lakh

ü  complies with all the other conditions of the Scheme

How to invest?

To be eligible for investment under this scheme, you must open a demat account. You can invest in any of the eligible mutual funds or stocks in lump sum or in instalments.

What are the associated Tax Benefits?

A maximum of Rs. 50,000/- investment eligible for tax benefits and for the first year of investment only and maximum 50% of invested amount i.e. Rs.25,000 is deductible from taxable income.

  • For investors in 10% tax bracket: saving = Rs. 2,500 (for investment of Rs. 50,000/-)
  • For investors in 20% tax bracket: saving = Rs. 5,000 (for investment of Rs. 50,000/-)

Why RGESS Investments are limited to top 100 stocks?

The Scheme is designed for new investors who are venturing in the equity markets for the first time. The choice of investments have been restricted to the stocks included in BSE 100 or CNX 100 and to selected PSU stocks as they  generally  have shown relatively lower volatility, higher liquidity and it also provides enough scope for diversification.

I have already claimed tax benefit under Section 80C. Can I avail of RGESS?

Yes you can. The tax deduction for RGESS is u/s 80CCG and it is over and above Rs. 1 lakh limit specified under Section 80C.


What are the benefits of investing in RGESS?

ü  Investors can get the returns of Equity of top 100 BSE companies.

ü  Gains, arising of investments in RGESS, can be realized after a year.

ü  Dividend payments are tax free.

 

Should you invest in this?

RGESS attempts to encourage first time investors to invest in equity, directly or indirectly, and avail tax benefits. You can get the benefit (for the current financial year) by investing in RGESS on or before 31st March’2013. It is a good move considering that individual taxpayers have very limited scope of tax saving investment options and RGESS will serve as an additional benefit over and above existing section 80C. But presently there are numerous conditions which needs to be satisfied before investing in RGESS and that makes investing in it very difficult but we will surely see lot of relaxation and ease in these conditions in the upcoming budget.