The article focuses on following areas:

Non-availability of Input Tax Credit on certain inward supplies under GST.
Exception to rules / provisions of non-availability of Input Tax Credit under GST.

Refer to the below table for further details:

Membership of a Club, Health and Fitness Center.​

Travel benefits extended to employees on vacation such as leave or home travel concession.​

 

Sr. No. ITC Negative List Further Details
(a) Motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons (including the driver). Exceptions:
If motor vehicles are used for making following taxable supplies:

  • Further supply of such motor vehicles, or
  • Transportation of passengers, or
  • Imparting training on driving such motor vehicles.
Imp Notes:

  • If capacity of MV is less than or equal to 13 (including driver), Input credit will be available if used for specified purpose only.
  • If capacity of MV exceeds 13 (including driver), Input credit shall be available if used or to be used for furtherance of business.
(aa) Vessels and aircraft Exceptions:

A. If vessels and aircrafts are used for making following taxable supplies.

  • Further supply of such vessels or aircraft, or
  • Transportation of passengers,
  • Imparting training on navigating such vessels,
  • Imparting training on flying such aircraft.

B. For transportation of goods.
(ab) Services related to motor vehicles, vessels or aircraft such as:

  • General Insurance
  • Servicing
  • Repair and Maintenance
 Exceptions:

A. Where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein.

B. Where received by a taxable person engaged in:

  • The manufacture of such motor vehicles, vessels or aircraft or
  • The supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him.
 (b) (i)
  • Food and Beverages,
  • Outdoor Catering,
  • Beauty Treatment,
  • Health Services,
  • Cosmetic and Plastic Surgery,
  • Leasing, Renting or Hiring of Motor Vehicles, Vessels or Aircraft,
  • Life Insurance and Health Insurance.
 Exceptions:

  • Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply.
  • Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.
Example:

Assuming the government passes a rule for all employers to provide mandatory cab services to female staff in night shifts ABC Ltd hires a rent a cab to provide to transportation to its female staff on night shifts. In such case, ITC will be available to ABC Ltd on the GST paid to the rent a cab service.
 (b) (ii) Membership of a Club, Health and Fitness Center.
(b) (iii)

 

 Travel benefits extended to employees on vacation such as leave or home travel concession.
(c) Works contract services when supplied for construction of an immovable property (other than plant and machinery). Exceptions:

  • ITC shall be available if there is sub-contracting for construction of immovable property, and then the contractor can avail the ITC.
  • ITC to work contract services availed by Builders/ developers for providing outward supply of services, would be eligible for ITC.
Explanation:

  • Immovable property is plant and machinery i. e. ITC on works contract services used for construction of immovable plant and machinery is available.
Example:

  • XYZ makes some repair work in its office building and treats the expenditure as revenue expenditure, then it can take input tax credit
  • If the expenses are capitalized in the books, then no ITC is available.
(d) Goods or services or both received by a taxable person for construction of an immovable property on his own account, (other than plant and machinery), even when such goods or services or both are used in course or furtherance of business. Exceptions:

  • Inward supply of goods or services for construction of an immovable property for ‘own use’ would not be eligible for ITC.
  • However, if the person is building such immovable property for the further selling then he is eligible to avail the ITC.
Explanations:

  • Construction: Term ‘construction’ includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.
  • Plant & Machinery: Term ‘Plant and Machinery’ means apparatus, equipment, machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes:
    • Land, building or any other civil structures.
    • Telecommunication towers.
    • Pipelines laid outside the factory premises.
 (e)  Goods and/or services on which tax has been paid under section 10(Composition Levy). Imp Notes:

  • Composition Scheme is a simple and easy scheme under GST for taxpayers.
  • Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover.
  • They cannot charge GST from their customer They need to pay tax out of their own pocket.
  • This scheme can be opted by any taxpayer whose turnover is less than INR 1.5 crore.
  • No Input Tax Credit can be claimed by a dealer opting for composition scheme.
(f) Goods or services or both received by a non-resident taxable person except on goods imported by him. Explanation:

  • A non-resident taxable person is a person who temporarily supplies any goods or services with in India even though they are not a resident of the taxable territory.
  • No ITC shall be available to such person in respect of the goods and services availed by him in India.

Exception:

  • ITC shall be available on the Goods imported by such person.
(g) Goods and/or services used for personal consumption.
(h) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Explanation:
Any goods which are disposed through these mechanisms will be covered here.

  • Lost: It includes goods getting lost as part of process loss due to any abnormal activity.
  • Stolen: When any goods are found to be lower upon physical verification, it may be considered as stolen.
  • Destroyed: Any goods which get destructed due to any natural calamity like flood, earthquake or a manmade event like fire, water leakage etc.
  • Written off: If any goods are having a certain value as per the books of accounts but are completely written off due to any reason, this clause will get attracted.
  • Disposed off: by way of gift or free samples.

 

Example:

E.g. Free samples given by the pharma companies are also covered by the clause and no ITC shall be available in relation to such free samples.

Imp Notes:

  • The objective behind blocking input credit in above cases is to avoid leakage of tax. The government will not be able to get any tax benefit on the goods lost / disposed off by way of free gifts etc. if it allows input credit in such cases.
  • Above view has been confirmed by department also by Circular No. 92/11/2019-GST dated 7 March 2019. Advance ruling authorities has also given similar opinion in case of Sanofi India Limited and Surfa Coats (India) Private Limited.
(i) Any tax paid in terms of section 74, 129 or 130. Section 74:

  • Taxes are not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or willful misstatement or suppression of facts.
  • If the supplier is making payment of taxes under forward charge, no input tax credit will be available to the recipient.
  • In case of reverse charge, if the recipient is making payment of taxes, even the recipient will not be allowed to avail input tax credit.

 

Section 129:

  • Detention, seizure and release of goods and conveyance in transit.

 

Section 130:

  • Confiscation of goods and/ or conveyance and levy of penalty.
  • In both the cases, if any payment is made by any person under these sections, no input tax credit will be available

 

Notes:

  • Generally, recipient claims input credit on the basis of tax invoice which does not contain any details of payment of tax by supplier.
  • Supplier has paid tax under fraud is decided by the courts which takes longer time period to decide. However, time limit for the recipient to take input credit is 30 September of next FY.

 

Circular:

  • Circular No. 123/42/2019– GST dated 11 November 2019 allows 120% input credit of invoices uploaded by the suppliers.
  • It seems that when government allows input credit to recipient only when suppliers uploads their invoices in the GST return, it seems sr. no. (i) of Section 17 is practically redundant.

The Income Tax Return Filing due dates for Previous Year 2018-19 (Assessment Year 2019-20) are 31st July 2019 for Individuals, HUF, BOI & AOP and 30th September 2019 for businesses which are required to get their accounts audited. There are many queries and confusions particulars to individuals while filing ITR. In this article we will try to cover all the important topics everyone must keep in mind before filing ITR.

1. Selecting the Correct ITR Form:

 

2. Make sure you have Form 16 and Form 26AS:

Form 16:

 

Form 26AS:

 

3. Disclosure of all the Income including Foreign Income:

 

4. Keep all Tax Deduction Proofs:

 

5. Disclose Correct Personal Details in ITR:

 

Hence, we are providing step by step process to change mobile number or email id of primary authorized signatory which is as follows:

 

primary authorized signatory

 

Important Note:
Older mobile and email id will be pre-fetched by the system. Please ensure to change the mobile and email id to which you want to add.
For Company/LLP DSC sign the application with DSC and for individuals please use OTP.

Q. Who is liable to pay Advance tax?

As per Section 208 of the Income Tax Act, Every person (individual, firm, company, etc.) whose estimated tax liability for the year (i.e., for the year in progress such as FY 2016-17, FY 2017-18,  etc.) after TDS (i.e., TDS which is deducted for the person by its payers/clients/banks, etc.) is Rs. 10,000 or more shall pay its tax for the year in advance during the same financial year.

Q. Such tax shall be paid in installments as on due dates specified in the act:

Ans: Individuals, having only salary income are not required to pay advance tax as the liability to deduct and deposit tax is on the employer making such payment in the form of TDS. However, they must ensure that TDS deducted by an employer is adequate as per their tax liability.

Q. Whether a taxpayer opting for Presumptive Taxation u/s 44AD or 44ADA is liable to pay advance tax?

Ans: Yes, from the A.Y 2017-18, an assessee who opts for the presumptive taxation scheme under section 44AD and section 44ADA is required to pay advance tax related to such business. However, the advance tax can be paid during the financial year (immediately proceeding to the assessment year) on or before March 15.

Q. When Assessing Officer is liable to determine the Advance tax liability?

Ans: If a taxpayer who has a legal obligation to pay advance tax fails to make payment for advance tax or advance tax is lower than the correct amount, AO may pass an order asking the taxpayer to pay tax on assessee’s current year income. Such order shall clearly specify the amount payable and in the number of installments, the same needs to be paid.

Such order should be passed anytime during the previous year but before 1st March, i.e., by 28th February.

Assessing Officer can serve an order requiring the assessed to pay advance tax if he is of the opinion that such person is liable to pay advance tax or the tax paid is lower.

In such cases, the Officer will take the higher of following incomes and calculate the tax as per the prevailing rate of income-tax:-

(a)The total income of the latest previous year in respect of which Officer has assessed income, i.e., the year for which an assessment has been completed by the Income-tax Officer;
or
(b)   The total income declared by the assessed in any return after the year of assessment by an officer., i.e., Any income furnished by the assessee in Income-tax return for any previous year after;

Q. Which tax rates are to be used for computing advance tax liability?

Ans: For computing, the advance tax liability of the prevailing tax rates or the rates in force of the previous year for which the advance tax is to be computed are to be used.

Q. What is the treatment of Advance Tax in the books of accounts?
Ans:

Q. Who is not required to pay Advance tax?

Ans: A resident senior citizen not having any income from business or profession is not liable to pay advance tax.

Q. What are the due dates for payment of advance tax?

Ans: The Advance Tax must be paid in four equal installments on or before the following dates:

Installment Due Date
1st Installment 15th June
2nd Installment 15th September
3rd Installment 15th December
4th Installment 15th March

 

Q. How much tax must be paid in each installment of advance tax?

Ans: The amount of Advance tax to be paid in each installment must not be less than prescribed in the following table:

Installments Amount of Advanced Tax
1st Installment Not less than 15% of advance tax liability.
2nd Installment Not less than 45% of advance tax liability as reduced by the amount, if any, paid in the earlier installment.
3rd Installment Not less than 75% of advance tax liability, as reduced by the amount(s) if any, paid in the earlier installment (s).
4th Installment The whole amount of advance tax liability as reduced by the amount(s) if any, paid in the earlier installment (s).

Audit under GST is compulsory for all registered dealers whose annual turnover is more than 2 crores. GST Audit is the examination of records maintained by a registered dealer. The audit will mainly focus on three key areas namely i) correctness of data declared by the taxpayer, ii) taxes paid and iii) compliance with GST law. GST Audit must be conducted by a practicing CA or a CMA.

The Government has notified the GSTR-9C form for annual GST audit under which every taxpayer above Rs 2 crore turnover in a financial year would need to fill up a reconciliation statement and also obtain a certification of an audit.

According to section 35 of CGST Act, 2017, every taxpayer whose turnover exceeds Rs 2 crore during a financial year, is required to submit audited annual accounts and a reconciliation statement in GSTR-9C.

Design of GST Audit Report:

GSTR-9C is essentially a reconciliation statement for reconciling turnover, input tax credits and tax payments reported in GST returns (annual return) vis-a-vis annual books of accounts.

GSTR-9C is broadly divided into the following:

a) Gross turnover (including taxable and non-taxable turnovers)
b) Taxable turnover
c) Tax liability and payments (rate-wise)
d) Input tax credit availement

The reconciliation is to be accompanied with certification from the auditor (can be statutory auditor as well). Further, there is a separate table for auditor’s recommendation on additional liability to be discharged on account of non-reconciliation of turnover and input tax credit. The auditor may also recommend on erroneous refunds, outstanding demands etc.

There is a separate table for disclosing additional amount payable on account of un-reconciled amount as per Sr. No. 1, 2, 3 and 4. Taxpayers should note that it appears that the said amount is to be paid in cash (and not credit).

Some Points for Consideration:

The format prescribes indicative sub-heads under which the expenses are generally booked in the financials (like freight, purchases, imports, employee cost, repair & maintenance, capital goods etc.). Tax payer may add/ delete the sub-head as per relevancy and against these sub-heads, the amount of input tax credit as reported in financials is to be reconciled with annual return. However, this is a new requirement and could be challenging for most taxpayers.

Fortunately, the Government has prescribed 2 different certifications as part of GST Audit Format – one where reconciliation statement is drawn and audited by statutory audit and the other wherein it is drawn and audited by a person other than statutory auditor.

It would, however, be interesting to see if the auditors would be comfortable with the prescribed language for certifications and if any changes in the language would be allowed while certifying the reconciliation statement. At the moment, Part B provides the format of the certification.

Check List for Companies:

GST Law prescribes specific guidelines regarding issue and format of Tax Invoice by registered dealers. Here is a detailed check list of things to keep in mind while issuing tax invoice. Refer to the following list for further details:

  • Invoice Title
  • Name and Address of the Supplier
  • GST Number of the Supplier
  • Tax Invoice Number
  • Date of Invoice
  • Name and Address of the Recipient
  • GST Number of Recipient
  • HSN / SAC Code
  • Description of Goods / Services supplied
  • Rate per unit and Taxable Value of Goods / Services
  • GST Rate
  • Amount of GST Charged
  • HSN / SAC Code wise bifurcation of GST

Invoice Title:

Every invoice issued by a registered dealer in which GST in charged must be titled “Tax Invoice”. Hence, it is compulsory to give appropriate title to your invoice.

Name and Address of the Supplier:

A primary information in a tax invoice is the business name and address of the supplier. Make sure the Trade Name and business address is accurate and as per registered business details.

GST Number of the Supplier:

It is mandatory to mention GST number of the supplier on every invoice. Make sure that GSTIN mentioned on the invoice is correct.

Tax Invoice Number:

Every invoice issued during a financial year must be assigned a unique consecutive serial number. Likewise, Financial Year in which the invoice is issued must also be mentioned in the invoice number.

Date of Invoice:

This is the date on which the invoice is issued. This is one of the most important elements of a tax invoice as GST liability is determined based on the date of invoice. While deciding the date of issue of invoice, rules related to time of supply under GST must be kept in mind.

Name and Address of the Recipient:

It is mandatory to mention name and address of the recipient in the tax invoice. These details must be in accordance with the registered details of the recipient. It is also necessary to mention Pin Code and State Code of the recipient.

GST Number of Recipient:

A recipient of goods / services requires to take Input Tax Credit of the GST charged by supplier in the tax invoice. However, the recipient will not be able to take any credit unless and until his GST number is mentioned in the invoice. Hence, it is utmost important to mention recipient’s GSTIN in the invoice.

HSN / SAC Code:

As per GST law, it is mandatory to mention HSN / SAC code in the invoice for all goods / services supplied. However, dealers having annual turnover of less than 1.5 crore are granted exemption from mentioning HSN / SAC code in the invoice.

Description of Goods / Services supplied:

It goes without saying that description of goods / services supplied must be mentioned in the invoice. Appropriate unit of measurement for goods must also be stated.

Rate Per Unit and Taxable Value of Goods / Services:

Taxable Value is the value of goods / services on which GST is charged. Details of both rate per unit and total taxable value must be specified. Normally, GST is charged on the total taxable value. However, in some specified cases, GST may be charged based on item rate per unit.

GST Rate:

It is mandatory to mention rate at which GST is charged on the taxable value of goods / services. Slabs for the GST rates are 0%, 5%, 12%, 18% and 28%. In case if CGST and SGST are charged instead of IGST then mention rates accordingly.

Amount of GST Charged:

Amount of GST charged must be mentioned in the invoice. Also, details like total GST charged including CGST and SGST must be stated separately.

HSN / SAC Code wise bifurcation of GST:

An HSN / SAC code wise summary must be provided at the bottom of the invoice. The summary must state how many HSN codes are used in the invoice. GST rate wise bifurcation of taxable value and tax thereon should also be provided.

Introduction of Tax Audit:

The Finance Act, 1984 inserted section 44AB to introduce provisions related to tax audit in Income Tax Act, 1961 w.e.f 1st April 1985. As per this section, it is the obligation of every assessee having income / loss from business or profession to get his books of accounts audited by a CA in practice.

Applicability of Tax Audit:

Tax Audit may be applicable to an assessee who is carrying on any business or profession. However, it is not necessarily applicable to all such assessees. Please refer to below table:

Type of Assessee Applicability of Tax Audit
Assessee covered under section  44AE, 44BB or 44BBB Applicable if profit or gain from business are lower than profit and gain computed under the said sections.
Assessee covered under section 44AD Applicable where profit or gain declared by assessee is less than minimum profit percentage of annual turnover as prescribed in this section if such profit or gain exceeds minimum amount of income not charitable to tax.

OR

Total turnover exceeds Rs. 2 crore
Assessee covered under section 44ADA Applicable where profit or gain declared by assessee is less than minimum profit percentage of annual turnover as prescribed in this section if such profit or gain exceeds minimum amount of income not charitable to tax.

OR

Total turnover exceeds Rs. 50 lakh
All other Assessee In case of business : If turnover during previous year exceeds 1 crore.
In case of Profession : If gross receipts during previous year exceeds Rs. 50 lakh.

Relevant Forms for Tax Audit:

Nature of Person Audit Report Form
In case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited Form 3CA Form 3CD
In case of person who carries on business or profession but not being a person referred to above. Form 3CB Form 3CD
In case of a company, when previous year and accounting year are different the tax auditor would have to carry out the tax audit in respect of the period covered by the relevant financial year and submit his report in Form 3CB only Circular No. 561/22.5.1990

 

Note: Form No. 3CD is been recently revised vide notification No. 33/2018 dated 17th July 2018 with effect from 20th August 2018.

Due Date for Filing Income Tax Return:

The Due date for filing the Return of Income for persons liable to Tax Audit is 30th September of the year succeeding the relevant financial year. For the financial year ending on 31.03.2018 the due date is 30.09.2018.

Tax Audit report Submission:-

If the assessee gets his account audited u/s 44AB and furnish the said report as required, than penalty u/s 271B shall not be levied even if the return of income is filed after the due date specified u/s 139(1).

Signature on Auditors’ report:

Penalty in case of Non Compliance:-

If any person fails to get his accounts audited as required under the provisions of section 44AB before the due date u/s 139(1), the AO may impose penalty which may be a sum equal to one-half percent of the total sales, turnover or gross receipts subject to a maximum of Rs. 1.5 Lakh.

Auditors Responsibility:-

It is the professional duty of the CA to ensure that the audit accepted by him gets completed on or before the due date. If there is any unreasonable delay on his part, he is answerable to ICAI, if the complaint is made by the client. However, if the delay in the completion of audit is attributable to his client, the tax auditor cannot be held responsible.

Communication with Previous Auditor: –

A CA in practice shall be deemed to be guilty of professional misconduct, if he accepts a position as auditor previously held by another CA without first communicating with him in writing.

Assessee not bound to accept Tax Auditors View: –

The opinion expressed by the tax auditor is not binding on the assessee.
If the tax auditor has qualified his report and expressed an opinion on a particular item, the assessee may take a different view while preparing his return of income. In such cases, it is advisable for the assessee to state his viewpoint and support the same by any judicial pronouncements on which he wants to rely.

FAQs:-

1. Who can appoint Tax Auditors and who should sign their appointment letter?
The assessee himself can appoint Tax Auditor for conducting the audit as mentioned in section 44AB. It is advisable that such an appointment letter should be signed by the person competent to sign the Return of Income.

2. Is it necessary to appoint statutory auditors as tax auditors?
Section 44AB does not specify that only the statutory auditor appointed under the Companies Act should perform the tax audit. Therefore the tax audit can, be conducted either by the statutory auditor or by any other CA in practice.

3. Whether more than one CA firms can be appointed as Tax Auditor?
It is possible for the assessee to appoint two or more CAs as joint auditors for carrying out the tax audit, in which case, the audit report will have to be signed by all the CAs.

4. In case where multiple auditors are appointed, can they issued separate audit reports?
Yes, each tax auditor may issue separate audit report.

5. Can a relative of the director be appointed as Tax Auditor?
Yes, however, the provisions of section 188 of the Companies Act, 2013 will be attracted when a relative of a director is appointed as a tax auditor of the company, if the remuneration thereof exceeds the limits prescribed in the aforesaid section. The necessary formalities will be required to be complied with as required under section 188.

House Rent Allowance is one of the important components of salary. Particularly if you are living in a rented house and your salary income is taxable, House Rent Allowance can provide some tax relief for you. However, entire amount of HRA received cannot be claimed as deduction. Income Tax Act prescribes a specific formula through which amount of exempt HRA can be determine. In this article we shall focus on important rules related to claiming exemption for HRA and House Rent paid.

Section 10(13A):

The exemption on HRA is covered under Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules. It must be kept in mind that entire amount of HRA is not an exempt income. It is an allowance and exemption can be claimed only if certain conditions are fulfilled.

Conditions for Claiming HRA Exemption:

  1. First and foremost condition for claiming HRA exemption is that the assessee must reside in a rented house. If the assessee resides in his own house or does not pay any rent for the house he resides in to, he shall not be eligible for any exemption in HRA.
  2. The amount of HRA received by the employee from his employer must be clearly stated in salary statement and Form 16.

How to Calculate amount of Exempt HRA?

According to section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules, House Rent Exemption will be least of following three:

1. Actual HRA received
2. Rent paid in excess of 10% of salary (Basic + DA) (Actual Rent Paid – 10% of Salary)
3. 40% of salary (50% if residing in a metro i.e., New Delhi, Kolkata, Chennai or Mumbai)

Let’s take an example.

Basic Salary per month 1,00,000
House Rent Allowance 55,000
Rent Paid per month 40,000
City of Residence Mumbai

Exempt HRA shall be least of the following:

Actual HRA Received per month 55,000
Rent above 10% of basic i.e. 30,000 (40,000 – 10,000)
50% of Basic 50,000
Exempt HRA 30,000

 

HRA Calculation – Monthly or Annual?

 

There are four variables in HRA tax calculations: namely:

  1. Salary (i.e., basic pay plus DA)
  2. Actual HRA received
  3. Rent paid
  4. City of residence (whether metro or non-metro)

If all of above variables remain the same throughout the year, the HRA tax exemption calculation cab be done on ‘annual’ basis. However, if there is any change in the variables during any month of the year, HRA calculation must be done on monthly basis as exempt HRA for different months may be different.

Cases where location of residence and location of work are different?

For the purpose of HRA calculation, location of residence shall be considered as valid for determination of Metro or Non-Metro city. In such a case for the purpose of HRA calculation, place of residence will be considered and not place of working. Suppose that you’re working in a factory or a company located in Vapi (near Mumbai) while residing in Mumbai. So, for the purpose of HRA, your maximum entitlement for tax purpose will be 50% of the basic instead of 40% because for metros HRA tax entitlement is 50% and for non-metros it is 40%.

Can a self-employed person claim tax benefit for the rent paid?

A self-employed person does not receive salary. Hence, no tax benefit in respect of HRA can be claimed by such assessee. However, such person can claim exemption under section 80GG for rent paid by him.

What if the employer refuses to allow the HRA tax benefit?

In case if an employee residing in a rented house does not receive HRA as part of salary, he can claim tax exemption for the rent paid by him under section 80GG.

Can husband and wife both claim HRA tax benefit separately?

Both working spouses can claim exemption for HRA received by them subject to following conditions:

Payment of Rent to Spouse:

HRA Exemption cannot be availed for payment of rent to husband or wife. The legal relationship between husband and wife entails that they are supposed to live together and any rent paid to a spouse is not valid for claiming deduction from HRA or u/s 80GG.

Payment of Rent to Parents:

Tax benefit can be availed for payment of rent to parents. However, parents must show such rent amount as “Income from House Property” in ITR.

Required Evidence for claiming HRA Exemptions:

Following documents are required as evidence for claiming exemption from HRA in respect of rent paid.

  1. Rent Receipt issued by Landlord to the tenant.
  2. Form 16 issued by employer specifying amount of HRA received by employee.

Requirement to mention PAN of Landlord:

If rent paid for the year exceeds is Rs. 1 lacs . (Cir. No. 8/2013) PAN of landlord needs to be mentioned. However, if the landlord does not have a PAN, declaration must be taken from him for the same.

HRA benefits if no rent is paid:

Exemption from HRA can be claimed only if the assessee pays rent for the relevant FY for residential purpose. If no rent is paid by the assessee, he/she cannot claim deduction for HRA received by him.

 

  

Liability for Payment of Advance Tax (Section 208):

 

Instalments of advance tax and due dates (section 211):

Due Date of Instalment (On or before) All assessees (other than the Eligible assessee as referred to in Section 44AD or section 44ADA) Taxpayers who opted for presumptive taxation scheme of section 44AD or section 44ADA
15th June Not less than 15% of advance tax liability Nil
15th September Not less than 45% of advance tax liability as reduced by the amount, if any, paid in the earlier instalment. Nil
15th December Not less than 75% of advance tax liability, as reduced by the amount(s) if any, paid in the earlier instalment(s) Nil
15th March The whole amount of advance tax liability as reduced by the amount(s) if any, paid in the earlier instalment(s). Up to 100% of Advance tax

Note:- Assessees covered u/s 44AD & u/s 44ADA are to pay advance tax of the whole amount in one instalment on or before the 15th March of the financial year.

Interest payable to assessee u/s 244A:

 

Refund Type Rate of Interest Period
Where refund is out of TDS/TCS or advance tax paid during F.Y. ½ % per month or part of a month 1st day of April of the assessment year to the date on which refund is granted.
In any other case ½ % per month or part of month Date of payment of tax or penalty to the date on which refund is granted.

 

Interest Payable by Assessee :

 

Note: Where the assessee had paid the taxes before the due date of filing the return but could not file the return for reasons beyond his control but filed belated, interest u/s 234A will not applicable as there is no loss of revenue.

 

To own a house is dream of one and all. However, the stark inflation in real estate market has proven to be a nightmare for young couples in India who aspire to own a house. Thanks to Income Tax Act which has given Home Loan borrowers a reason to cheer. There are two sections under Income Tax Act i.e. Section 80C and section 24 under which a Home Loan borrower can claim deductions in relation to Home Loan.

Key Highlights:

Tax Benefit on Repayment of Home Loan for a self occupied House Property
Tax Benefit on Repayment of Home Loan in case of Jointly Owned Property
Eligibility for HRA Exemption Benefits
Treatment of Pre-Construction Interest

Tax Benefit on Repayment of Home Loan for a self occupied House Property:

From Income Tax point of view, you must bifurcate total amount of EMIs paid by you during the relevant previous year in two components:

1. Home Loan Principal Repayment: Principal repayment can be claimed as deduction under section 80C up to maximum limit of Rs. 1,50,000. Hence, claimable deduction is either Rs. 1,50,000 or actual amount of principal repaid during the year whichever is lower. This is subject to the maximum limit across all 80C investments.
2. Home Loan Interest Payment: Interest paid during the year can be claimed as a deduction under Section 24B. The maximum amount of interest that can be claimed as deduction is Rs. 2,00,000 or the actual interest paid whichever is lower. (You can claim this interest only when you are in possession of the house).

Refer to below table to understand maximum deduction limit on home loan repayment.

Particulars Deduction U/S Maximum Deduction
Principal Payment 80C 1,50,000.00
Interest Payment 24b 2,00,000.00
Total Maximum Deduction on House Loan Repayment 3,50,000.00

 

Consider below scenarios for further clarification:

Particulars Case 1 Case 2 Case 3
Principal Repayment 1,50,000 1,00,000 3,00,000
Interest Repayment 2,00,000 1,50,000 2,50,000
Maximum Deduction U/S 80C 1,50,000 1,00,000 1,50,000
Maximum Deduction U/S 24B 2,00,000 1,50,000 2,00,000
Total Deduction 3,50,000 2,50,000 3,50,000

 

Note:
In case if house property is given on rent, there is no upper cap for claiming deduction U/S 24B.
However, if loss from house property needs to be set off against any other head, the maximum loss that can be set off must not exceed Rs. 2,00,000.

 

In case of Jointly Owned Property:

If house property is jointly owned all co-owners can claim deduction under both sections subject to following conditions:

1. You must be a co-owner in the property: To be able to claim tax benefits for a home loan, you must be an owner in the property. Many a times, a loan is taken jointly, but the borrower is not an owner as per the property documents. In such a case you may not be able to claim tax benefits.

2. You must be a co-borrower for the loan: Besides being an owner, you must also be an applicant as per the loan documents. Owners who are not borrowers and do not contribute to the EMI shall be devoid of the tax benefits.

3. The construction of the property must be complete: Tax benefits on a house property can only be claimed starting the financial year in which construction of the property is complete. Tax benefits are not available for an under construction property. However, any expenses prior to completion are claimed in five equal instalments starting the year in which construction is complete.

Tax Benefit on Repayment of Home Loan in case of Jointly Owned Property:

Tax Benefit in case of Self-Occupied Property:

1. For a self occupied property: Each co-owner, who is also a co-applicant in the loan, can claim a maximum deduction Rs 2,00,000 for interest on the home loan in their Income Tax Return. The total interest paid on the loan is allocated to the owners in the ratio of their ownership.

2. Each owner/borrower can claim interest benefit up to a maximum of Rs 2,00,000. Goes without saying, the total interest claimed by the owners/borrowers cannot exceed the total interest paid for the loan. For example Mr. X and his father bought a house on loan and paid Rs 5,60,000 in interest. They have a 50:50 share in the property. Mr. X can claim Rs 2,00,000 in his tax return, his father can also claim Rs 2,00,000.

3. For Rented Property: In the budget 2017, the interest that can be claimed as a deduction in case of rented property is restricted to the amount to which loss from such house property does not exceed Rs 2 lakhs.

Each co-owner can claim a deduction of maximum Rs 1,50,000 towards repayment of principal under section 80C. This is within the overall limit of Rs 1,50,000 of Section 80C.

Eligibility for HRA Exemption Benefits:

If the house for which you have taken a home loan is not ready for possession, and you leave in rented house, you can claim HRA exemption. Once, construction is complete, no exemption can be claimed for HRA. However, if you let out your house for rent and yourself leave in another rented house, you can continue to avail HRA exemption.

Pre-Construction Interest:

Pre-Construction Interest is the amount of interest paid by borrower before construction of the house is complete. No benefit in respect of such interest can be availed during construction period. However, such interest can be claimed as deduction in five equal instalments starting from the year in which construction is completed. Please note that such deduction shall be subject to maximum deduction limit under relevant sections.

Key Highlights:

  1. Home loan borrowers are entitled to tax benefits under Section 80C and Section 24 of the Income Tax Act. These can be claimed by the property’s owner.
  2. In the case of co-owners, all are entitled to tax benefits provided they are co-borrowers for the home loan too. The limit applies to each co-owner.
  3. A co-owner, who is not a co-borrower, is not entitled to tax benefits. Similarly, a co-borrower, who is not a co-owner, cannot claim benefits.
  4. Housing companies usually require all co-owners to be joint borrowers to a home loan. Loan providers specify who can be a joint borrower for a home loan.
  5. The tax benefit is shared by each joint owner in proportion to his share in the home loan. It’s important to establish the share for each co-borrower to claim tax benefits.
  6. The certificate issued by the housing loan company, showing the split between principal and interest for the EMIs paid, is required for claiming tax benefits.
  7. You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.

 

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