Article Details

New retail investors are eligible for tax benefit u/s 80CCG

TAX TALK-30.01.2017-THE HITAVADA

TAX TALK

CA. NARESH JAKHOTIA

Chartered Accountant

New retail investors are eligible for tax benefit u/s 80CCG

Query 1]
In case of salaried Govt. employee, for Income Tax exemptions in general, please advice:

What are the options of savings/investments available to employees to claim exemption in income tax in FY 2016-17 other than in Section 80C and 80D and details thereof, like infrastructure bond etc.? (Specific info. about infrastructure bonds available this year and about such other available bonds/savings.)
What document/s is required to submit to the Govt. office of the employee or with return by him, if employees wish to claim House Rent exemption? (Notarized Rent agreement or receipts of monthly rents paid to landlord or any other document). [rjdsugar_nagpur@rediffmail.com]

Opinion:

Option beyond Section 80C & 80D:
Being in the last quarter of the financial year, lot many taxpayers started exploring the tax saving options more aggressively. Section 80C (deduction towards LIC/PPF/NSC etc investment) & 80D (deduction towards medi-claim policy payment) are the most commonly used tax saving options used by majority of the taxpayer. Deduction towards investment in long term infrastructure bond (u/s 80CCF) is no more available from A.Y. 2013-14. However, there are certain tax benefit beyond section 80C & 80D as well which may not have been utilized by lot many taxpayers. The following two deductions could help save some tax for individual taxpayers:
.
a] Deduction u/s 80CCD(1B):
Section 80CCD(1B) in the Income Tax Act-1961 offers an additional deduction of Rs. 50,000/- to the taxpayer for contribution in the National Pension Scheme (NPS). The deduction is over and above the deduction of Rs. 1.50 Lacs available u/s 80C for contribution in LIC/PPF/NSC etc. Deduction of Rs 50,000/- under 80CCD (1B) is available to all the individuals who has not completed 60 years of age.

b] Deduction u/s 80CCG:
Section 80CCG has been inserted with effect from the assessment year 2013-14. U/s 80CCG, deduction is available to a new retail investor who is resident individual with gross total income not exceeding Rs.12 lakh. For deduction, taxpayers have to invest the amount in stock listed under BSE 100 or CNX 100 or those of PSU (public sector undertakings which are Navratnas, Maharatnas & Mini-ratnas. Even investment in Exchange Traded Fund (ETF) or Mutual Fund (MF) that have above investment in above stocks and are listed and traded in stock exchanges and settled through depository mechanism are also eligible for deduction. There is a lock-in period of 3 years in the scheme.

If a resident individual claims a deduction for the assessment year 2013-14 u/s 80CCG, he shall not be entitled for any deduction under this section for any subsequent year. In other words, for the assessment year 2013-14, the deduction is available only in one assessment year to the extent of 50 per cent of amount invested during the previous year 2012-13 or Rs. 25, 000 whichever is less. However, this provision has been amended from the assessment year 2014-15. The modified provision permits deduction for three consecutive years, beginning with assessment year relevant to the previous year in which the listed equity share or listed units of equity oriented fund are first acquired.

c] Other deductions:
Individual taxpayer can further explore the possibility of claiming deduction u/s 80E towards payment of interest on loan taken for higher education, U/s 80DDB towards medical treatment of a specified disease/ailment, U/s 80G or U/s 80GGA towards donation to recognized trust/institutions etc.

Deduction towards House Rent Allowance (HRA):

In a bid to check on false claims with respect to deductions such as LTA/ LTC/HRA etc by the employee or unwarranted allowance of deduction by the employer, the Central Board of Direct Taxes (CBDT) has introduced a new form (Form No. 12BB) w.e.f. 01.06.2016 which is to be submitted by the employee to the employer. In short, from this financial year onwards, no deduction can be granted by the employer without submission of declaration form (12BB) along with documentary evidences thereof.
Any individual salaried taxpayer living in a rented premise & receiving HRA from his employer is eligible for tax deductions according to the prescribed limit of HRA exemption u/s 10(13A) read with Rule 2A. The quantum of exemption allowable on HRA to meet expenditure on payment of rent shall be the least of the following:
a] The actual amount of such allowance received by the assessee in respect of the relevant period i.e., the period during which the accommodation was occupied by the assessee during the financial year; or
b] The actual expenditure incurred in payment of rent in excess of 1/10^th of the salary due for the relevant period; or
c] Where such accommodation is situated in Mumbai, Kolkata, Delhi or Chennai, 50% of the salary due to the employee for the relevant period; or Where such accommodation is situated in any other places, 40% of the salary due to the employee for the relevant period
[For this purpose, "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites].

To claim deduction u/s 10(13A), employee have to submit the rent receipts to the employer every year alongwith Form No. 12BB. If annual rent paid by the employee exceeds Rs 1,00,000/- per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee. Rent agreement is not a pre-condition for allowability of deduction towards HRA.

[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at nareshjakhotia@ssrpn.com]