Whenever a Non Resident wants to make a Full exit from his investment made in Indian private limited company, then there are different possible ways of exit routes available to him such as Buyback by the company itself, Sale to 3^rd party, etc. All these different routes have different taxability which is discussed in detail in this post.

1. Buyback of shares by the private limited company :-

In the first option, the private limited company in which investment is held by the Non-resident Indian repurchases its own shares from that Non-resident. This buyback of Non-resident shares is done at the consideration fixed by the company. This buyback must be done in compliance with the Companies Act, 2013.

This buyback is taxable in the hands of that private limited company at an effective rate of 23.296% (20% + 12% Surcharge + 4% H&E Cess). Buyback tax is levied at the level of company, the consequential income arising in the hands of shareholders is exempt from tax as per section 10(34A). Hence, the buyback will be exempt for the Non-resident investor.

2. Sale to 3rd Parties :-

Next option available to Non-resident to exit from Indian private limited company is the sale of his share of investment to any 3^rd party. When a non-resident sells his shares to any third party, then it will be taxable under capital gain.

Gain will be calculated as = Amount received on Sale – Amount paid on purchase of shares (including security premium).

This capital gain will be taxable as below :-

If holding period is upto 24 months then taxable under Short term capital gain on Slab Rates Basis applicable to that Non resident.

If holding period is more than 24 months then taxable under Long term capital gain @20% with indexation benefits.

3. Dividend Distribution :-

Any Accumulated Profit can be distributed as dividend to the shareholders. Whenever any non resident shareholder receives dividend it will be taxable @20% plus applicable surcharge and 4% cess ( Maximum marginal rate of 28.5%) on gross basis. Non resident can consider DTAA ( Double Taxation Avoidance Agreement), if any agreed between his country and India so as to avoid double taxation.

4. Bonus Share :-

Security premium can be used to issue Bonus share to existing Shareholders.

The post TAXATION OF NRI ON EXIT ROUTES FROM INVESTMENT appeared first on Tax Baniya.

Form-16 is basically a TDS Certificate

• issued by the Employer
• having details of Employee’s Income & Deductions.

This Form-16 is needed to be issued mandatorily by the employer to those employees whose TDS is deducted under Sec 192 of Income Tax Act,1961.

It is a primary document for filing Return of Income of Employees/Salaried Individuals.

FILING OF RETURN OF INCOME WITHOUT FORM 16:

As it is compulsorily required to be issued by the Employer in respect of those employees whose TDS has been deducted u/s 192. But TDS u/s 192 is required only if income is more than Basic Exemption limit (250000), otherwise there is no requirement of TDS Deduction u/s 192. In this case where income is less than basic exemption limit, your employer may not issue you FORM-16.

If your salary is liable for TDS deduction due to your income exceeding 2.5 Lakhs & still your employer has not issued you a FORM-16, then there are penalty provisions applicable to employer for such default of Non issuing of TDS Certificates.

There might be situations where Form-16 is not available to employees due to many reasons, then still Employees can file Income tax return without FORM-16 in the manner given Below :-

STEPS FOR FILING ITR WITHOUT FORM – 16 FOR SALARIED PERSONS

Step 1) Determine your income from all sources. For Salary income take the help of Salary slips issued  by your employer during the financial year. Determine your HRA details for claiming exemption. Then also collect information about your capital Gain income, interest from saving accounts and fixed deposits, dividend income, rental income of house property, etc

Step 2) Obtain information about your TDS. For this you can either
Download FORM-26AS from the TRACES website. Form 26AS is a document containing the prefilled details of TDS Deducted from your income during the F.Y.
or
Obtain information of TDS by using deductee login on TDSCPC Site of income tax dept.

Step 3) Calculate your Gross Total Income by adding the income determined from all sources (All 5 heads) and TDS  details obtained from FORM 26AS.

GTI = Income from 5 Heads + TDS ( Bcoz TDS is part of your income only )

Step 4) Compute the amount of all deductions which are available for example – contributions to PF, various investment made and expenditure incurred on medical and life insurance, etc during the F.Y.

Step 5) After that, determine your Net Taxable income which is calculated by reducing the deductions of Step 4  from GTI (Gross Total Income) of Step 3 above. NTI = GTI less Deductions.

Step 6) Calculate Tax Liability based on your Net Taxable Income by applying the Slab Rates applicable to you.

Step 7) Determine Tax payable/refundable.
If TDS available as per Form 26AS is more than computed tax liability ( of Step 6 ): then there will be a Tax Refund which will be refunded to you by the Income tax Dept.

If TDS available as per Form 26AS is less than your tax liability computed in Step 6 : then there will be tax payable which is required to be paid by you using Challan 280.

Step 8) File your ITR. So After the completion of all the above steps including payment of tax payable, You can Go Ahead to file Your ROI.

So in this way, you can file your Income tax Return Without Form 16.

The post What is Form 16? All About Form 16 appeared first on Tax Baniya.

Whenever any Non Resident purchases immovable property, they can purchase either from Resident person or from another Non Resident. The Tax treatment of both these situations is different from each other.

A. When NON RESIDENT INDIAN purchases property from a Resident Person ( Seller is Resident ) –

Since the seller is Resident Person, hence section 194IA is applicable for TDS.

• As per Section 194IA, the buyer of an immovable property is required to deduct TDS @1% of the Total Sale value. So the Non Resident buyer will be required to deduct TDS @1% at the time of making payment to the Resident seller.
• Sec 194IA for TDS deduction is applicable only if the sale value is Rs. 50 Lakhs or more. no TDS requirement for such sale by Resident seller if sale value is less than Rs 50 Lakhs.
• This section 194IA covers residential property, commercial property and Land. But not applicable on agriculture land.
• TAN & PAN requirement – In sec 194IA, any buyer (Resident as well as NON RESIDENT INDIAN) of immovable property is not required to obtain TAN No. PAN is sufficient for Deducting TDS & Payment of TDS to Government.

1. • Both buyer & seller should have PAN.

• • • Buyer needs PAN (in place of TAN) for TDS payment to Government.
    • Seller needs PAN so that TDS is not deducted at higher rate of 20% as per sec 206AA.

1. • Both parties, neither the buyer nor the seller requires to obtain TAN.

• TDS deduction – TDS is required to be deducted at the time of making payment or crediting the seller in his books, whichever is earlier. TDS deduction is required on Each payment including any advance payments made to Seller. So if payment is done in instalments, then TDS is to be deducted on each instalment paid.
• TDS payment & return – TDS so deducted needs to be deposited to the government by filing challan-cum-return FORM 26QB within 30 days from the end of the month of TDS deduction. Example: if TDS deducted on 25 March, then TDS payment using Form 26QB has to be done on or before 30^th
• TDS Certificate – Buyer after TDS payment to government, has to furnish TDS certificate in FORM 16B to the seller within 15 days from the due date for furnishing Form 26QB. FORM 16B can be generated and downloaded from TRACES site. For example: in above case, due date of FORM 26QB was 30^th April, so Form 16B should be furnished till 14^TH

 Other Points to remember:-

• Sale Value will include club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of the immovable property.
• In case of multiple parties, This Form 26QB has to be filed for Each Combination of Sellers & Buyers. Example: if there is 1 Seller and 2 Buyers, then two Form 26QB’s will be filed and if there are 2 sellers and 2 buyers, then 4 Form 26QB’s will be filed.

B. When One Non-resident purchases property from another Non-Resident Person (Seller is Non- Resident) –

Since the seller is also Non Resident Person, hence section 195 is applicable for TDS.

• All the provisions of sec 195 which are applicable to Resident buyer for purchasing immovable property will also apply on Non-Resident Buyer.
• As per Section 195, the Non resident buyer of an immovable property is required to deduct TDS @20% for LTCG and @Slab rates for STCG. This is covered in detailed here – https://taxbaniya.com/sale-of-immovable-property-by-non-resident-in-india/

The post PURCHASE OF IMMOVABLE PROPERTY BY NON RESIDENT INDIAN appeared first on Tax Baniya.

TDS deduction on Sale of Immovable Property by Non Resident in India

Sec 195 of the Income Tax Act is applicable whenever any payment is made by any person to a Non-Resident. So the buyer of such property will have to deduct TDS on the amount of payment made to the Non-Resident. Below are the answer that will come in the mind of NON RESIDENT INDIAN regarding TDS at the time of sale?

Rate of TDS :

• If Long term Capital Gain (where the immovable property is held by Non-resident Indian for more than 2 years) – TDS rate will be 20% (plus surcharge & Cess as applicable).
• If Short term Capital Gain (where the immovable property is held by Non-resident Indian for less than 2 years) – TDS rate will be as per Slab Rates of that Non-resident Indian seller (plus surcharge & cess as applicable).

Any Minimum Threshold Limit:
There is no Minimum Transaction Value for TDS requirement. It means TDS is Must be deducted irrespective of the sale value.

When to deduct this TDS:
The TDS needs to be deducted at the time when payment is made to the Non-resident Indian. One must also note that TDS is also required to be deducted on any advance payment done by the buyer to a Non-resident Indian seller.

Amount on which TDS to be deducted:
The TDS is required to be deducted on the Capital Gains. However, this computation of Capital Gains cannot be done by the Seller himself and should be done by the Income Tax Officer. So there are 2 Options:-

1.Option 1 – By obtaining Certificate from income tax officer –

For this seller (or buyer on seller’s behalf ) can approach Income tax officer by filing an application to the income tax officer and request him to compute his Capital Gains.

The Income Tax Officer will compute the Capital Gains of the seller and will issue a certificate for deduction of TDS depending on the capital gains arising on the sale of property.

The seller is required to give this certificate to the buyer and the buyer will deduct the TDS on the Capital Gains arising to the seller as per the TDS Rate mentioned in the income tax certificate.

Tax Baniya team are helping in getting the lower deduction certificate from the income tax office

2. Option 2 – By Deducting TDS on the entire sale value

In case this certificate is not obtained by the seller from the Income Tax Officer, the TDS should be deducted on the Total Sale Price and not on the Capital Gains. This will result in TDS deduction of Excess amount, so it is very necessary for the seller to obtain this certificate from the Income tax Officer.

What is required from Buyer’s Side for deducting TDS of NON RESIDENT INDIAN-

• Buyer have to obtain TAN (Tax deduction & collection Number) if he don’t have.
• Buyer will have to deduct TDS on the amount of payment made to the Non Resident. This TDS is required to be deposited by the buyer with the Income Tax Dept as per normal TDS provisions of the Act.
• This TDS deducted is needed to be deposited with the Government within 7 days from the end of the month in which such TDS has been deducted. Example – If sale done in May & TDS also deducted in May month, then it has to be deposited to the Govt by 7^th June.  

Use challan no. ITNS 281 for TDS payment to Govt.

• After the deposit of TDS, Buyer is required to file Quarterly TDS return in FORM 27Q. This TDS Return is required to be deposited within 31 days from the end of the quarter in which the TDS has been deducted.
• At last, After TDS deposit & filing of TDS return, buyer is required to give TDS certificate in FORM 16A to the seller.

 Important Provision on TDS deduction on Sale of Immovable Property by Non Resident in India

• TDS to be deducted at the time of each payment and not at the time of registration of immovable property.
• For TDS deposit and TDS Returns – Penalty and Interest are also leviable if any default is done in complying TDS provisions.
• If buyer has taken a home loan for this purchase, then TDS is required to be deducted when payment is done to the NON RESIDENT INDIAN Seller and not when the loan instalments are paid to the bank.
• Seller must try to get this certificate of Capital Gain calculations from the Income tax officer. It will help in lower deduction of TDS amount. Otherwise, TDS will get deducted on entire sale value.
• Tax Saving for NON RESIDENT INDIAN Seller – NON RESIDENT INDIAN Seller are allowed to claim exemptions under section 54 and Section 54EC on long term capital gains from sale of house property in India.

The post Sale of Immovable Property by Non Resident in India appeared first on Tax Baniya.

CHANGES TO DETERMINE RESIDENCE FOR NON-RESIDENT ON VISIT TO INDIA

Presently, an individual being Citizen of India or a Person of Indian Origin, who being outside India was considered as Non-resident of India, if he/she comes on a visit to India for a period of less than 182 days in a year.

It is now provided to reduce the period  of  stay in  India  to  less than  120 days in a year to be considered as Non-resident of India –

1. for a citizen of India or PIO (who being outside India, comes on a visit to India in any previous year)

and

1. having total income of more than ? 15 lacs (other than the income from foreign sources)

This means that the NRI’s coming for a visit to India and having total income of more than ? 15 lacs (other than income from foreign  sources)  need  to limit  their stay in India to less than 120 days in a year; Or else they shall  become resident in India and may become liable to tax in India  on   their  worldwide income in that year.

Further, the legislature has continued the present provision for  the  NRI’s   coming for a visit to India and having total income of less than ? 15 lacs for the relevant previous year, the limit for their stay  in  India to  less than  182  days. This means that they shall become resident in India and shall be liable to tax in India on their worldwide income only if they exceed this limit of  182  days  or  more in that year.

NEW PROVISIONS FOR DEEMED RESIDENCE IN INDIA 

A new provision is introduced wherein  an  individual  is  deemed   to  be “Resident” in India in the relevant previous  year,  irrespective  of  number  of   days of stay in India if the following conditions are satisfied – 

1. Individual is Citizen of India;

and

1. has total income exceeding ? 15 lacs (other than income from the foreign sources) in India during the previous year;

and

1. who is not liable to tax in any country or territory by  reason  on  his domicile or residence or any other criteria of similar

It is  likely that those who shall be a resident in India under the  aforesaid provision shall be liable to taxation in India in respect  of   their  worldwide  income. This will attract heavy Indian taxation for certain persons and create genuine hardships. However, there is a relief introduced for such individuals as explained in the ensuing paragraph 3.

CHANGES TO DETERMINE RESIDENCE AS ‘RNOR’ OF INDIA 

At present, an individual is said to be “Resident but not ordinarily resident” i.e. RNOR in the relevant year, if such individual satisfies one of the following conditions:

It is now proposed to add two more categories for an individual to be treated as RNOR –

1. a citizen of India or PIO and having total income of more than ?  15  lacs during the previous year (other than income from foreign sources) and his stay in India in the previous year is 120 days or  more  but  less  than  182

Or

2. a citizen of India who is deemed to be resident  in  India  as  defined  in  above paragraph

 The hardship and rigours of newly  introduced  provision  of  ‘deemed  resident’  has been reduced by the aforesaid RNOR provision in as  much as  such persons  who are deemed to be resident shall not be  liable  to  tax  in  India in  respect  of  any income arising outside India like capital gains, dividend, interest, rentals et cetera other than the income from the business activities outside India which is managed and controlled from India.

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In this article, we will discuss the conditions of the amendment and provide a detailed analysis with examples so that you get a better understanding of the impact of the amendment in your business. Finance Act, 2020 has come into effect from 1st October 2020.

Provision of TCS on sale of goods

According to the note issued by the Finance Ministry about the applicability of TCS (Tax Collected at Source) provisions: –

1. Seller of goods shall collect tax @ 0.1 per cent (0.075% up to 31.03.2021) if the receipt of sale consideration from a buyer exceeds INR 50 lakh in the financial year.
2. To reduce the compliance burden, a seller would be required to collect tax only if his turnover exceeds INR 10 crore in the last financial year.
3. The export of goods has also been exempted from the applicability of these provisions.

These are the only conditions of the new Act. Now, in order to get a better glimpse, check out the illustrated example below:

Let us consider a seller has received INR 1 crore before 1st October 2020 from a particular buyer and receives INR 5 lakh after 1st October 2020. In this case, he would be required to collect tax on INR 5 lakh only and not on INR 1.05 crore – INR 50 lakh = INR 55 lakh. Note that INR 50 lakh is the threshold. Here, in this illustration, the seller has to collect tax on receipt of INR 5 lakh after 1st October 2020 because the receipts from 1st April 2020 is INR 1.05 crore, which exceeded the specified threshold of INR 50 lakh.

Is TCS is an expense for my business?

Note that TCS is not an additional tax but it is like an advance income tax / TDS for which the buyer would get the credit against his actual income tax liability and if the amount of TCS is more than his tax liability, the buyer would be entitled for refund of the excess amount along with interest.

Now, let us consider another example considering multiple sellers and each buyer. Here, if a buyer makes payment of INR 1 crore each to 10 different sellers, the total tax collected shall be only INR 50,000 (INR 37,500 this year). Each seller will collect INR 3,750 this year because INR 3,750 is 0.1% of (INR 1 crore – INR 50 lakh)

Now, let us incorporate a net profit of 8% on sales in order to understand the impact on tax liability. Considering a net profit of 8% on sales, the buyer’s business income in respect of payment of INR 10 crore product purchase will be something around INR 87 lakh. In the new taxation regime, the income-tax liability on the income of INR 87 lakh for an individual would be around INR 27 lakh. Thus, the amount of Tax Collected at Source (TCS) INR 50,000 (INR 37,500 this year) would be a miniscule part of his actual tax liability and would be easily adjusted against his tax liability. However, in a super rare case, if his tax liability is less than even INR 50,000 (INR 37,500 this year), he shall be entitled for refund of excess TCS with interest.

Who will collect the TCS?

Note that every seller will not have to collect TCS. This is applicable to only those sellers whose business turnover exceeds INR 10 crore. And there is some restrictions about goods as well. If the other conditions satisfy, a TCS should be collected for all goods except these:

1. If goods are exported from India to any country outside India.
2. If the buyer is liable to deduct TDS (Tax Deducted at Source) under the Income Tax Act.
3. If the goods sold are already covered under subsections (1), (1C), (1F) and (1G) of section 206C of the Income Tax Act.

Note – While calculating turnover of previous year both goods and service will be included.

Frequently asked Questions on TCS?

• Whether TCS is applicable on service bill also?
  No, TCS is applicable only on sale of goods
• Whether to deduct TCS on GST amount or not?
  Yes, TCS will be deducted on the GST amount also. As in provision it is clear TCS to be deducted on payment made.
• Is TCS applicable on bill made before 01^st October while payment received after that?
  Yes, TCS will be applicable on payment received on or after 01^st October.
• Is TCS applicable on bill made after 01^st October while payment received before that?
  No, TCS will be applicable on payment received on or after 01^st October.

The post TCS ON SALE OF GOODS appeared first on Tax Baniya.

The basic income tax slabs for different age groups

As per the Income Tax Act, any person who is less than 60 years old and has a yearly salary of more than two lac fifty thousand rupees has to file income tax. Similarly, for a person between 60 and 80 years of age, the yearly slab starts from three lac rupees and for an 80 above person, the yearly slab starts from five lac rupees.

From this, we can see that every individual has to file for income tax if he or she crosses this minimum yearly salary slab.

Who should file income tax?

Income tax Act of 1961 clearly defines a taxable person as:

1. An Individual.
2. A Hindu Undivided Family (HUF).
3. A Company.
4. A Firm.
5. An association irrespective of whether it is yet incorporated or not.
6. A local authority and every artificial juridical person not falling within any of the preceding sub-clauses.
7. Association of persons or local authority or artificial juridical persons.

Types of income tax

Now, let us understand the types of income on which taxes are levied. According to the Income Tax Act of 1961, as many as five headers come under this.

1. Income from Salary –

• • As the name suggests, it is nothing but the yearly package that you receive from your company or employer for services rendered.

2. Income from house property –

• • If you rent a part of your house to a shop or a garage, or an office or some family to stay in then all those income breakups are to be calculated hear.

3. Income from business and profession –

• • If you are doing some kind of trade and commerce, such as brokers or import and export, then you have to add those incomes in business part. Similarly, if you are a professional, and you earn by directly rendering services such as a doctor or a chartered accountant or an engineer then you have to add those breakups in the profession segment.

4. Income from Capital Gains –

• • It is nothing but income from the sale of some capital assets like financial investment or real estate investment.

5. Income from other sources –

• • Other sources of income such as income from an interest rate from a savings account, interest rate from a fixed deposit, interest rate from a recurring deposit, dividends earned for holding a stock are added here.

Documents required for filing Income tax return

You will require all the necessary documents to support the income claims you are making in your income from salary, income from house property, income from business and profession, income from capital gains and income from other sources. We will discuss them in brief. Note that irrespective of the means of income, you would require these documents:

1. A copy of your PAN card.
2. A copy of your AADHAR card.
3. A copy of the yearly bank statement with clearly mentioned capital gains. In technical terms, it is also called a TDS certificate statement. If you don’t have such a statement, contact your branch manager and get a copy. Note that you have to provide bank statements of all the banks with whom you have an account.
4. Your income tax login id and password.

As promised before, now, we will dig deep into it and let you know the list of documents necessary for filing an income tax return under each income category.

Income specific documents required for filing income tax return

As per the source of income select, the income tax department has many forms like ITR-1 (Sahaj), ITR-2, ITR-3, ITR-4, ITR-4S (Sugam). Choosing the right option is required to fill your details correctly. We recommend you to take professional help while choosing your income tax form because choosing the wrong form will inevitably lead you to incorrectly fill up the form which can lead you towards a penalty.

In case, the person is an individual or HUF person, he must keep his identity proof, address proof, and birth certificate. On the other hand, for an association, documents like address proof and board resolution copy, and registration copy are mandatory.

Documents required for a salaried individual

In order to claim a tax deduction, a person has to apply for a TAN (Tax Deduction and Collection Account Number). Along with Form 49B, the person has to submit the following documents:

Salary Income :          

• Form 16

Capital Gains Income :

• Purchase and Sale deeds of immovable property
• Contract note/Demat account statement for securities sale/purchase
• Purchase and sale proof/receipts of all applicable capital assets.
• Broker’s ledger statement.
• Demat account statement.

Income from other Sources:

• Interest or TDS certificate for bank FD interest
• Bank account/bank passbook statement for interest earned from savings account
• Dividend warrant in case of dividend income
• Rent agreement and TDS certificate (if applicable)
• Any other documentary proof (as applicable)

Income from house property:

• Rent agreement of Shop/House/office etc.
• Housing loan interest certificate.

Income from Business or Profession:

• Balance Sheet
• Audit records (if applicable/mandatory)
• Income Tax payment (self- assessment tax/advance tax) challan copy.
• Sale bills.
• Purchase bills.
• Expense Voucher.
• Bank Statements.
• Stock register.
• Fixed Assets Register.
• Fixed Asset Accounts.
• Tax audit report.
• TDS Returns & payment challan.
• GST Challan & returns.
• Income Tax payment challan copy.

Tax Saving Investments:

• Receipt of life insurance premium paid
• Receipt of medical insurance
• Public Provident Fund passbook
• Fixed Deposit receipt
• Home loan repayment certificate/receipt
• Donation paid receipt
• Tuition fee paid receipt
• Mutual Fund Consolidated Account Statement (CAS)
• Education loan repayment certificate.
• Bank pass book for interest & Dividend income.
• FD Interest certificate from bank

HRA Exemption:         

• Rent paid receipt

Details of Investment for 80C/80D/80G Deduction

• Statement of LIC Premium paid.
• Tax saver FD receipt.
• Tuition fees payment receipt.
• NSC/KVP receipt.
• Medical insurance premium payment receipt.
• Donation receipt.
• PPF Passbook.
• Housing loan interest certificate.

Tax deduction on Medical Expenses :

• Bills of medical expenses incurred

Leave Travel Allowance:

• Applicable tickets and ticket purchase receipts

Note that there are as many as three types of Form 16. They are Form 16A, Form 16B, and Form 16C. Form 16A highlights the TDS deduction for income other than salary. Note that these could be returns on investments on fixed deposits, mutual funds, gold, bonds, and so on. On the other hand, Form 16B is a TDS certificate which reflects that the amount deducted as TDS on the property by the buyer has been deposited with the Income Tax Department and Form 16C is the TDS certificate that reflects the amount of TDS on rent. This applies to individuals and HUFs who pay a rent of more than INR 50000 per month.

The tax payer must understand that the income tax return you file is an ‘annexure less’ return which means there is no need of attaching any documents or proofs. The Income Tax Act asks for collecting certificates and proofs in order to claim deductions which makes it ambiguous for the taxpayer, as to whom they must handover those certificates and documents and legitimate proofs. In short, the tax payers have to preserve those certificates and receipts for future references and need not attach or send it to anyone and in case an assessing officer (AO) sends a notice asking for documents, the taxpayer has to submit the proof to the AO.

Documents required for charitable or religious trust

If it is a charitable or religious trust, then it has to fill up Form 10A and keep these documents in hand:

1. Certified true copy of trust deed
2. Documents evidencing the creation of trust
3. Copy of accounts for the previous 3 years immediately preceding the year in which application is made.

Documents required to claim deduction if the individual is not salaried

If an individual is not a salaried person, then also, he can claim deductions while filing for income tax. In such a scenario, the person has to provide details of the documents listed below to claim deductions under Section 80C.

1. Life Insurance premium receipts.
2. Public provident fund contribution receipts.
3. Receipt of subscription to ELSS mutual funds.
4. Receipt of provident fund contribution.
5. Senior Citizen Savings Scheme receipts.
6. Receipt of 5 year Bank FDs.
7. Receipt of tuition fees.
8. Receipt of investment in the National Pension Scheme.
9. Receipt of contribution made to ULIPs.
10. Receipt of principal repayment on your home loan.

Not only under 80C, but the person can also claim deductions under section 80D of the Income Tax Act. Here, an individual who is not salaried can claim for a deduction on health insurance premiums for a maximum of up to INR 25000 year. And if the tax payer is paying the health insurance premium for his or her parents, then he or she can claim an additional INR 25000 (INR 30000 if they are senior citizen).

Dates to remember for fiscal year 2019-2020

In general, 31st July is the last date to file your Income Tax Returns in any given financial year otherwise you have to pay a penalty fee for late filing. Due to coronavirus scenario, in the current year, our financial minister granted us an extension till 30^th November 2020 for fiscal year 2019-2020.

How to link your Aadhar number with PAN?

1. The process of linking Aadhaar and PAN is very simple. It is a paperless process. To link your PAN with your Aadhaar follow these steps:
2. Go to Income Tax e-filing portal by clicking here.
3. If you have previously registered log in. If you are a new user, register on it. Your PAN will be your user id. Provide other details like date of birth and password and log in to your account.
4. Automatically, as soon as you log in to your account, a pop up window will appear prompting you to link your PAN with Aadhaar. Simply click on it. However, if the pop up does not appear, then go to ‘Menu bar’ -> ‘Profile Settings’ -> ‘Link Aadhaar’.
5. Verify the PAN details with your Aadhaar details on screen. You must note that if there is a mismatch then you have to correct the error of the document furnishing wrong quotes first.
6. Simply click on “link now” if the documents match. As soon as you do this, you will get a pop-up message that says “Your Aadhaar has been successfully linked to your PAN”.
7. You can also do the same through https://www.utiitsl.com/ or https://www.egov-nsdl.co.in/ in case you find it difficult to access this website. The process is same.

Conclusion

From the above information, it is clear that different persons earning different types of income have to maintain various documents and it can be quite messy if you try to do it yourself and you don’t have an accounting background. Therefore, we recommend you to take professional help. The process of filing your Income Tax Returns in India needs some preparation so we would recommend you to start preparing for it from now on. Note that all your hard work of compiling all documents will be nullified if you have not yet linked your Aadhaar number with PAN number. It is a new amendment over the existing Income Tax Act. It is applicable from accounting year 2019-20. We recommend you to start with the very first step of filing income tax return, which is by linking Aadhaar id and PAN number.

Also, do not hide out any investment, loan, insurance premiums, other sources of income to your financial manager or accountant, because, that way, you might be missing on a mouthwatering deduction for the sake of curtailing some extra income or loss.

TAX BANIYA – BUSINESS & INVESTMENT ADVISORS

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Method 1: Instant PAN through Aadhaar Card from Income Tax Portal

Income Tax Department has launched an Aadhaar based PAN verification process named e-PAN. In short, it is a free of cost and paperless facility where you get an e-PAN number in real times based on your Aadhaar documents e-KYC. However, this facility is strictly for residents individual who is not an owner of a PAN card. Under this facility, any individual over 18 years of age and having a valid Aadhaar card is allotted a PAN card number.

1. Click on this link and then select “Instant PAN through Aadhaar” under “Quick Links”.
2. Click on “Get New PAN” and then follow it up by entering your Aadhaar details and the captcha code.
3. When you confirm the above, you will be required to tick a box which says:
4. You have never been allotted a PAN.
5. Your mobile number is linked with Aadhaar.
6. Your complete date of birth in (DD-MM-YY) format is available on Aadhaar card.
7. You are not a minor as on the application date of PAN.
8. You have read terms and conditions.
9. After this, click on “Generate Aadhaar OTP” and confirm the OTP and validate Aadhaar details.
10. When you submit this, you will get an acknowledgement number in your registered mobile number and email id. With this, you have successfully applied for a PAN card.
11. Redo step 1 and then select “Check status of PAN”.
12. Quote your Aadhaar number, verify it with OTP, and you will get the e-PAN.
13. You will get an option to download it if PAN has been allotted.

Method 2: Digital Signature Certificate (DSC) based PAN Application from NSDL Portal

If you are a resident Indian and want to apply for a New PAN through DSC, click here.

If you are a non-resident Indian and want to apply for a New PAN through DSC, click here.

For PAN Correction through DSC, click here.

It must be noted that the DSC must be issued to them by an authorized Certifying Authority in India. For PAN application through DSC, only class II and III DSCs are accepted. The DSC of the applicant should be used for signing the application. It must be noted that the DSC should bear the name of the applicant or Representative Assesse (guardians in the case of minor or lunatic or idiot applicants, their guardians).

The PAN applicant should get a scanned copy of all supporting documents such as a proof of identity, a proof of address, a proof of date of birth, a photograph, a signature. There are some specifications that are to be maintained while uploading the scanned documents. The specifications are:

Note that if you don’t follow these guidelines then you we will get an error saying “Please upload standard Documents”. So follow the parameter guidelines and don’t try to compress documents with any software.

You can check out the DSC utility by clicking here.

Now, follow the stepwise guidelines to apply DSC based PAN.

1. Firstly, the applicant has to fill up and submit the Form 49A online. For instructions of filling form 49A, click here. Before making the final submission, he or she must make sure that there is no error. If any error is found, the applicant must rectify and resubmit the form.
2. A confirmation screen will be displayed. The applicant has to edit it to make correction or confirm the same.
3. Then the applicant must make the payment. It can be done through Credit card or Debit card or through Net banking. For a physical copy of PAN Card, if the communication address is within India, PAN application is charged at the rate of INR 101.00 including GST and if the communication address is outside India, PAN application is charged at the rate of INR 1011.00 including GST. For an e-PAN card, PAN application is charged INR 66.00 irrespective of communication address location.
4. Finally, when the confirmation is done, a 15 digit unique acknowledgment number will be displayed. The applicant must save it in his personal computer and take a print of it.

Method 3: PAN Application through NSDL website – Ekyc or Signed Document Submission

As the name suggests, you can verify your PAN details in the website of National Security Depository too.

1. Click here then click on “Application Type” and select the form applicable for you. If you are a resident Indian then Form 49A is applicable for you. On the other hand, if you are a non-resident individual (NRI) or foreign national then Form 49AA is applicable for you.
2. Select “Categoty” and fill up the form by quoting your name and date of birth.
3. Click on “Submit”. As soon as you do this, a token number will be generated and you will be required to click on a link to continue your application. We recommend you to take a screenshot or note down the number before you continue.
4. When you continue with the PAN application, a page will ask you to proceed with any of the three options:
5. Submit digitally through e-KYC and e-Sign (Paperless) – Only for Individual or Forward the Application Physically – for others.
6. Fill up necessary details such as Aadhaar number, parents name and then click on “Next”.
7. A new page will ask for some personal details like source of income, address, and contact details. You have to fill these up and click on “Next”.
8. You have to make a payment of INR 115.9 + GST. If you choose for physical documents instead of e-KYC and e-Sign then you have to pay INR 110.
9. After this authenticate your Aadhaar through OTP, take a print if it and send it to the Income Tax PAN Service Unit of NSDL office. In case, the verification fails since Aadhaar is not linked with mobile, take a print out of the acknowledgement receipt, paste your photograph and sign the receipt. Send this along with all other documents to the abovementioned Unit of NSDL office.
10. It will take 15-20 days for the whole process. In the meanwhile, you can track your PAN application here.

PAN verification process for non-individuals

Some Quick links

Download e-PAN card allotted within 30 days by clicking here – here you can download the e-PAN copy like e-Adhar for PAN allotted within 30 days

Request for e-PAN by clicking here – here you can download the e-PAN copy like e-Adhar for PAN allotted for more then 30 days by

Request reprint of PAN card then he or she can do that by clicking here – here you can request for just reprint of PAN card without any changes and without any documents, you just need to verify through OTP

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Almost every one of us saves towards owning a property and hopes to achieve this one day. However, this dream comes with costs when fulfilled. Once you own a property, you have to carry the responsibilities of paying house property taxes annually. In this article, we will discuss on how to calculate income from house property while filing income tax. We will also tell you some tricks on how to save tax.

Before we start, let us dig deep into the basics of house property tax. House is not only exclusive under this category; it can be an office, a shop, a building, or some land attached to the building. Example: a parking lot. All the above mentioned types of properties are taxed under the header of ‘income from house property’ while you fill your income tax.

It should be noted that if the tax payer has only one house then he / she would have to provide a detailed breakup of income in the ITR-1. The calculation of income from the house property and the eligibility of tax deductions claims depend upon whether the house is let-out or self-occupied.

It must be noted that when a property is used for some kind of business including freelancing then it is taxed under the ‘income from business and profession’ header.

Types of house property
Broadly, we can categorize house property in three types.

1. Self-Occupied House Property –
   These are simply residential properties. It can be occupied by the taxpayer’s family members. Eventually, it can also be a vacant property. It must be noted that, till 2019, if more than one self-occupied house property is owned by the taxpayer, then only one of them was treated as a self-occupied property.
   The taxpayer was given the full freedom to choose the self-occupied property. From 2019-20 onwards, this benefit has been extended to 2 houses which means, now, a taxpayer can claim his 2 properties as self-occupied. Simply, the other houses owned by the taxpayer would be let out of Income tax.
2. Let out House Property –
   These are rental properties. A house property which is rented irrespective of whether it is rented partly or fully, comes under this category. The owner of the housing has to pay the tax.
3. Inherited Property –
   It is simply a property that is bequeathed from parents, grandparents or someone else. The one who is inheriting the bequeathed property has to pay the property tax.

Calculation of house property tax

In this part, we will elaborately describe the components of house property tax and how to calculate house property tax. In order to claim property tax deduction, you have to first fill up the income tax form. You will be required to fill the type of house property.

The drop down will come with two selectable options: “Self-occupied” and “Let-out” property.

Calculation for Self occupied property:
Under this category, the annual value will automatically be taken as zero or nil. Here, you can get deduction only for the interest paid on the borrowed capital. The maximum amount you can fill in the “interest paid on borrowed capital” column under the header income from house property is INR 2 lakh.

In simple words, this means, if the interest paid by you exceeds INR 2 lakh in a year, then the maximum amount that can be entered by you shall be INR 2 lakh.

For an example, if you have paid INR 2 lakh as interest then you will be able to claim a maximum of INR 2 lakh deduction from the income from house property.

Now, as the calculation goes, since the annual value of the house is a zero or nil, the deduction claimed of INR 2 lakh will result in a negative figure, or a loss of INR 2 lakh under ‘income from house property” category.

Now consider, that you have filled the form showing a loss as discussed above, then, this loss will be adjusted against other heads of income such as “income from salary”. This will bring down your gross income chargeable to tax.

Now, if you don’t have any other source of income, and you want to carry forward the losses, then you have to file return in other ITR forms as ITR-1 has no column to carry forward loss.
Calculation for Let-out property:

Here, you have to full in three additional cells in the income from house property section. However, this is a bit tricky as you have to make a few calculations of a couple of things. Let us understand what we have to calculate and how.
a. Gross rent received/ receivable/ let-able value –
Under this option, you have to calculate two values: Actual rent receivable and Expected rent. Out of these two options, whichever value is higher, will be automatically selected as Gross rent received / receivable.
Let us now have a clear understanding of each of these two components.

i. Actual rent received / receivable –
It is nothing but the amount received by you from your tenant during the year. Please note that if there is any arrear yet to be received, it should also be added and computed.

ii. Expected rent –
It is nothing but the amount that is expected to be received as rent. It should be determined by taking the higher of the Municipal valuation and Fair rent, provided the higher value does not exceed standard rent, if applicable.

iii. Municipal valuation –
As per laws, the local municipality should conduct a survey in order to determine the tax to be paid up by the house owner. This municipality survey determines the gross rental valuation of all the buildings within the area and calculates taxes that should be levied over them. You will get details of this in the form you fill to pay your property taxes. You must know that this tax varies from one locality to another as per gross valuation of the area. Sometimes, local authorities allow a deduction on account of repair and considers only the net municipal value to determine the tax/ In this case, the tax payer has to adjust the net municipal value himself to get a gross value out of it.

iv. Fair rent –
Rent payable for similarly situated properties are taken into consideration here to determine the annual value.

v. Standard rent
Exclusively, if your state comes under the Rent Control Act then you have to follow this. As the name suggests, it is the base price set by the government over which, a landlord cannot charge.

vi. Actual Rent –
It is nothing but the sum of Rent Received and Rent receivable and subtraction of Unrealized rent from it.
Simply, take the higher value of Municipal valuation and Fair Rent. If Rent Control Act is applicable, and standard rent is lower than higher value, then it is your Expected Rent. Compare this Expected Rent with the Actual Rent received by you.

b. Tax paid –
If you have paid any tax to the municipal authority, include it in this part. You must have got a challan if you have paid tax. You have to fill up the ITR form mentioning the challan numbers.

c. 30% of annual value –
As soon as you fill up the previous two parts, the form will automatically calculate the annual value of your house along with a deduction of 30% from the annual value. For let-out properties, this deduction comes straight forward as a deduction for maintenance cost.

d. Interest paid on home loan –
If applicable, you have to fill up the interest paid on home loan. Unlike the calculation of self-occupied property, you can enter a value of more than INR 2 lakh as shown in your home loan statement but you can claim a maximum loss of INR 2 lakh only.

However, the residual can be carried forward in this case. But for that, you have to fill up other income tax forms as ITR 1 does not allow any kind of carry forward of loss.

It must be noted that you will get a deduction of INR 30000 only instead of INR 2 lakhs if the loan is taken on or after 1st April 1999 and if the purchase or construction is not completed within 5 years from the end of the fiscal year in which loan was availed.

There are a few more conditions for deduction under home loan. They are:

The home loan must be taken for purchase or construction of a new property and the property must not be sold within five years of taking possession.

So far, we have discussed the whole mechanism of how to how to calculate income from house property while filing income tax. We believe that now, you have got a fair understanding of the calculations. As we have promised, now, we will tell you a trick on how to save tax from house property.

Tax benefits on Home Loans for Joint Owners

If a self-occupied property has more than one owner, and all the joint owners are co-borrowers of a home loan, then both or all of them can claim a deduction on interest on the home loan up to INR 2 lakh each. Apart from this, they can also claim a deduction on principal repayments such as deduction for stamp duty and deduction of registration charges under Section 80C within the overall limit of INR 1.5 lakh each owner. All these deductions are allowed to be claimed in the same ratio as the ownership ratio goes.

However, be cautious that you might be a joint owner of a property but you must have also taken the loan to get this benefit. Similarly, you might be taking a loan jointly, but to get this benefit, you have to be a joint owner of the property as well. If you are planning for a / another house, then keep this in your mind and save some tax by sharing loan borrowing and property ownership. Technically, this will suit joint families best but neutral families can also try out this by sharing loan and property with family members.

Conclusion
We have discussed the components of house property tax and how to calculate and report it quite elaborately so we hope you don’t have any problem while filing it. However, we would recommend you take expert assistance while filing your income tax because one negligible error can cost you big. It will not only just dig a hole in your purse but also cost you hours if you make a mistake. As promised, we have also added a post script trick for you to save some property tax if you are still planning for your house. If you have any query, feel free to ask it in the comments section below.

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Today we will understand the important topics what is ESTATE PLANNING IN INCOME TAX. Meaning of estate planning, why it is needed also how to do estate planning.

Meaning of Estate Planning

Estate planning means plans for the transfer of your estate after death. Estate includes all movable and immovable property you own like cash, clothes, jewelry, cars, houses, land, bank accounts.

Why Estate planning?

• Pass on your wealth
• Caring for your family
• No Court battles
• Digital settlement

 Estate planning by way of

1. Joint holder
2. Nomination
3. WILL
4. Private trust
5. Gift

Estate planning by way of Joint holder
Make the joint holder in all assets like bank FD, Demat account , MF, PPF accounts. In the case of a joint-holder only a death certificate is sufficient to transfer the property.

Estate planning by way of Nomination
Nomination is helpful till the WILL get executed, Note in case of share and DEMAT account nomination is Prevail our WILL.

Estate planning by way of WILL
WILL to be given the priority over the nominee in all cases other than share and demat account

Note – It is advisable to keep the same person in a nomination as well as in WILL.

How to make a Will?

• For making a WILLS No stamp paper required. WILL can be made in a plain paper
• 2 witness required
• Appoint executors
• Make WILL in details mention the complete name and property details with address
• Designate beneficiary – Any person can be beneficiary. If you are not making your family member as a beneficiary than also specify.
• Mention date is the WILL – It is very important as WILL that is made in a later date to prevail our WILLS made on an earlier date.
• For Foreign property kindly make the separate WILL. It is advisable to make the separate WILLS for each country.
• Registration of WILL is not compulsory.

 Foreign properties

• If assets in UAE – Kindly make the DIFC Registered WILL/ADGM WILL
• If assets in UK – kindly considered Inheritance tax
• If assets in US – kindly pay US federal and state estate duty

Estate planning by way of PRIVATE TRUST
The private trust will reduce the succession dispute like WILLS. In a private trust, there is complete control during the lifetime and after death.

How to make a Private trust

• A private trust is a separate entity having PAN and TAN in his own name.
• Helpful in avoiding estate duty when it comes
• Reduce succession disputes that happen in WILLS
• No probate required like in WILLS
• Complete control during lifetime and after death also
• Very useful if the beneficiary is a minor, unborn person, married daughter, Handicapped, Relative, Mentally unstable, Pets etc
• Registration of private trust is not compulsory

 Can Private Trust own asset in his name?
Private trust can own immovable property, land building, etc.

Can open a bank account in its own name

• Can held a unit of mutual fund
• Private trust cannot open a DEMAT account in his name. but we can make DEMAT account in the name of trustee and linked the bank account of the trust.
• Once asset parked in a private trust
• No Gift
• No Nomination
• No WILLS
• No Interstate succession 

 How to make a GIFT DEED
Transfer of movable or immovable property from Donor to Donee without consideration. Gift once made cannot be revoked. Only conditional gift can be revoked if the condition not fulfilled.

Note: It is always advisable to make the gift deed conditional example – while making the gift deed make the point that retention of property in the hands of donor till his lifetime.

ESTATE PLANNING IN HUF
A Hindu Undivided Family (HUF) is automatically created at the time of marriage as a separate taxable entity and a new PAN Card is allotted to the HUF. Hindus, Buddhists, Jains and Sikhs can form HUFs. The head of a HUF is called the Karta, he is the senior-most male member of the family.

Daughter can be karta in father HUF. Elder member of the HUF will be the karta.

How to do the Partion of HUF?
Manner of partition

1. Oral
2. Suit
3. Agreement
4. Arbitrator

It is very important as HUF law provides partial partition while the Income-tax act will recognize only complete partition. example if HUF owns five property and partition of 4 property done while one is in the name of HUF than in income tax act all the five will be taxable in the hands of HUF.

Challenges in HUF
Multiple owners of a single property are major concern Also, If any co-parcener is a US citizen or green card holder than how to shown tax is also an issue.

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