Personal Finance

October 7, 2023

Personal Finance, Taxonomy

20% TCS: How A Forex Card Can Help You Reduce Taxes

Are you planning to travel abroad soon? If yes, you might wonder how to carry your foreign currency and pay your expenses. You have several options: cash, forex cards, credit cards, or debit cards. But which is the best and the cheapest, considering the increased TCS from October?

Unless you learn more about the exchange rates, transaction costs, TCS rates, and the perks offered by each alternative, making a decision may be difficult.

To make things easier, we’ve reviewed the international credit card vs. forex card in depth. Also, you will learn how the increased TCS from October 1st, 2023, can affect your travel budget, especially if you are availing of any tour packages.

Understanding TCS and Its Changes

Unfurling the Union Budget on 23rd Feb.2023, the Ministry of Finance, in consultation with RBI, brought drastic changes in the existing tax regime, including revised TCS from October 1, 2023.

Tax Collected at Source (or TCS) is governed by Sec 206C of the IT Act. It is a tax collected by the seller of selected goods from the buyer at the time of payment. The rate at which TCS is charged depends on the nature and amount of the transaction.

During tax revision, changes were made to Sub-section (1G) of Sec 206 of the IT Act 1961. Please note that this section provides for TCS on –

1. Sale of overseas Travel Program package

2. Foreign Remittance through Liberalised Remittance Scheme (LRS).

As an aftermath of these amendments to the Finance Bill, two significant changes occurred-

First, the TCS rate increased from 5% to 20% for remittances made through the Liberalised Remittance Scheme (LRS). Individuals can send up to $250,000 abroad in a fiscal year through LRS for various activities such as travel, education, medical treatment, etc.

ALSO READ: FOREX MARKET TIMING IN INDIA

Second, the Rs. 7 Lacs threshold for overseas trip tour packages was lifted. Therefore, applicable TCS from October 1st will be

Nature of Remittance	TCS Up to 30th September 2023	TCS from October 1st, 2023
For Educational Purposes (funded by a Loan from a Bank/financial institution)	Nil (Up to Rs. 7 Lacs) 0.5% (Above Rs. 7 Lacs)	Nil (Up to Rs. 7 Lacs) 0.5% (Above Rs. 7 Lacs)
For Medical Treatment/ Education (other than loan)	Nil (Up to Rs. 7 Lacs) 5% (Above Rs. 7 Lacs)	Nil (Up to Rs. 7 Lacs) 5% (Above Rs. 7 Lacs)
For Overseas Tour Package	5% (without any threshold)	5% (Up to Rs. 7 Lacs) 20% (Above Rs. 7 Lacs)
For Investment in Foreign Stocks, Cryptocurrencies, etc	Nil (Up to Rs. 7 Lacs) 5% (Above Rs. 7 Lacs)	Nil (Up to Rs. 7 Lacs) 20% (Above Rs. 7 Lacs)

Source: The Economic Times (indiatimes.com)

It is vital to emphasize that domestic mutual funds with international stock exposure will not be regarded under LRS and will thus be excluded from TCS.

How Does TCS from October 1st will Affect Your International Travel Budget?

TCS from October 1st will affect your international travel budget in two ways:

First, it will increase the cost of buying or loading foreign currency on your Forex card.
Say you want to load $10,000 (equivalent to Rs. 7 Lacs considering an exchange rate of Rs. 70 per Dollar) on your Forex card after October 1st,2023. You must pay an extra Rs. 1.4 lakh as TCS (20% of Rs. 7 lakh). This means you will get less foreign currency for the same amount of rupees.

Second, it will reduce the money you can send abroad under the LRS limit.
Say you have sent $200,000 (equivalent to Rs. 1.4 Crores assuming an exchange rate of Rs. 70 per Dollar) abroad in a financial year (from April – Sept).

If you want to send another $50,000 after October 1st, you must pay an extra Rs. 7 lakh as TCS (20% of Rs. 35 lakh). It means that you will have less money left for your other expenses. Therefore, TCS from October 1st can make your international trip more expensive and less affordable.

International Credit card vs. Forex card

Which of the two should you prefer- a Forex Card or an International Credit Card to make foreign travel the revised TCS from October 1st?

Here, it is crucial to understand the essential difference between a Forex Card and a Credit Card

When you purchase a Forex Card, the foreign exchange conversion rate is locked in as soon as you load funds into it. In the event of a credit card, however, the exchange conversion rate is only applied at the time of the transaction.

It means that by using a Forex Card, you are protected against exchange rate fluctuations. The foreign currency exchange rate changes quickly, assuming new figures every morning. So, if Forex offers you financial security, you may sleep well.

But the option of Credit Cards is not less palatable. First, the exchange conversion rate is applicable only at the time of the transaction. Second is the possibility of earning reward points and free lounge access for prolonged use.

Well, it sounds good. But, no matter what card you use in a foreign land, you are often charged a fee over and above the actual transaction value, known as a markup fee. Credit card users using cards outside of India pay a cross-currency markup fee.

Let’s explore the differential TCS rates on International Credit Card vs. Forex Card with the help of the table below-

Parameter	Forex Card	Credit Card
Exchange Rate	Fixed at the time of loading money	Variable at the time of transaction
Mark-up Fee	Low or Nil	High (up to 4% of transaction value plus GST)
TCS from October 1st, 2023	Nil (up to Rs. 7 Lacs) 20% (Above Rs. 7 Lacs)	Nil
Issuance	Convenient to buy. Most Banks charge zero issuance fees.	Banks check Credit ratings before issuance. Often issued against security. Annual fees are also payable, depending on the variant you qualify for.
Travel Insurance	No	Many Banks/financial institutions offer complimentary travel insurance
Reward Points	No	Yes
Fraudulent Transaction Reversal	To prevent further misuse, the card can be readily blocked. However, seeking a chargeback for stolen funds is complicated.	Chargeback of stolen money is much easier.
Cash Withdrawal Charges/ Cash Advance Fees	A nominal fixed charge is levied.	High (normally 2.5 to 3% of the transaction value plus GST)

Source: The Economic Times (indiatimes.com)

How can we reduce paying increased TCS from October?

Make plans for your foreign travel for up to Rs. 7 lakh in a fiscal year.

Choose the purpose of your foreign remittance wisely. A higher TCS rate (20%) will not apply to education expenses incurred abroad or for medical reasons.

Adjust the amount deducted as TCS against your tax liability when submitting an ITR. Or you can claim it as a refund if you have no tax liability. You can also use credit to calculate your advance taxes.

Based on your needs and preferences, compare and select the best alternative for carrying and paying foreign currency overseas, such as forex cards, credit cards, debit cards, or cash.

Key Takeaways

Now that we have discussed the revised TCS from October 1st, 2023, your trip to a foreign country and spending there will no longer be a lavish plan. You must be very cautious in making budgetary allocations before planning overseas trips to ensure your expenses don’t breach the defined limit.

We have also dug deep into Credit Card vs. Forex Card to weigh their pros and cons to help you save money on your international trip. However, the best option for you will depend on your travel frequency and personal preferences.

Therefore, we suggest you research and analyze before making a final decision. We hope this article has helped you understand everything about the revised TCS from October 1st to help you travel stress-free.

Happy Travelling!

FAQs

What is the difference between a Forex card and a debit card?
A Forex card is a pre-paid card that allows you to load foreign currency at a fixed exchange rate and use it like a debit card when traveling abroad. A debit card is linked to your bank account, which allows you to withdraw the available balance from ATMs.

However, you must pay a variable exchange rate and transaction fee when using a debit card abroad. Increased rates of TCS from October 1st, 2023, apply uniformly to both.
How can I transfer the unused balance in my Forex card to my bank account?
Using the encashment feature, you can transfer the unused balance in your Forex card to your bank account. You can contact your Bank or issuing company and request them to transfer the available balance to your bank account.
How can I compare different forex cards and credit cards before choosing one?
You can compare different features of credit cards vs. Forex cards based on their exchange rate, transaction fee, TCS rate, and benefits each option offers. You can also check their online reviews and ratings. You can also ask for recommendations from your friends or family who have used them.

July 26, 2023

Personal Finance, Taxonomy

Salary Arrears: What They Are And How To Claim Tax Relief?

Introduction

You have been working hard for your employer for the past few years, and you get a pay hike effective from backdate. You get super excited to get a big fat cheque from your employer as payment for your salary arrears. You are overjoyed to spend the money on your needs and wants. But wait, there is a catch. You have to pay taxes on the salary arrears as well.

Sounds complicated? Don’t worry; we are here to help you understand this concept and how to apply it in your case. This article will explain salary arrears, how they are taxed, and how to claim tax relief. We will also provide some examples and tips to make the process easier. By the end of this article, you can save money on taxes and enjoy your salary arrears without any guilt or stress. So, let’s begin! You can explore more on tax concepts with our blog.

What is Salary Arrears?

Salary arrears are the payments you receive from your employer for the previous months or years when you were underpaid or unpaid. These payments are usually made when there is a revision in the salary structure, a court order, or a settlement agreement.

Salary arrears can arise due to various reasons, such as:

Change in salary scale or grade due to promotion, increment, or dearness allowance
Retrospective effect of a new pay commission or wage board
Error or omission in salary calculation or payment
Delay in salary payment due to financial difficulties of the employer
Dispute or litigation between the employer and the employee
Premature withdrawal from provident fund
Family Pension arrears
Gratuity payment
Commutation pension received

How Are Salary Arrears Calculated?

To simplify the calculation of salary arrears, let us assume you get a monthly salary of Rs. 20,000. You have been working for more than two years now. Impressed by your performance, your employer approved a salary hike of Rs. 5000/- in June. Now, due to some problems in the backend processes, you start getting your increased salary in November. You will get salary arrears for June to November and your high salary.

So, in November, you will get Rs. 30,000/- (Rs. 5000*6) as salary arrears.

How are Salary Arrears Taxed?

The joy of getting an arrear is instantly clouded with worries of “Are Salary Arrears Taxable?”. Income tax is calculated on your income in a particular financial year from one or more sources. However, receive your salary for the previous year(s) in the current year for various reasons, such as salary revision or dispute resolution. It may increase your tax liability.

The salary arrears will add to your tax liability in the current year as your income may fall into a higher tax bracket or face a change in the tax rates. You can claim relief under Section 89(1) on your salary arrears to avoid this hardship.

This relief allows you to reduce your tax burden by adjusting the salary arrears with the tax rates of the previous year (s) to which they relate. Your employer should also calculate and indicate this relief in your Form 16. By claiming this relief, you can save taxes on your delayed salary and avoid paying more than you owe.

How to Claim Relief under Sec 89(1) on Salary Arrears?

A simple tax concept follows in the case of salary arrears. If you have paid taxes in the year the salary was due, you should not be taxed again in the payment year.

Step 1: Check your salary slip for any salary arrears paid in the current year.
Step 2: Calculate the tax relief under Section 89 (1) by following the steps given above.
Step 3: Fill out Form 10E online on the income tax portal by providing the details of your income and arrears for the current year and the previous year (s) to which they relate. You cannot claim relief under sec 89 if you miss out on this form.
Step 4: Select the relevant assessment year and choose the applicable form for Salary Arrears. Fill in the required information, like the current year and the relevant year to which the arrears belongs.
Step 5: You must also mention the amount of relief and the acknowledgment number of Form 10E in your income tax return. Your employer should also calculate and indicate this relief in Part B of Form 16.
Step 6: Opt for e-verification through Aadhar OTP/Net Banking/ etc.

Key Takeaways

Salary arrears is a common phenomenon for many employees who receive their salary for the previous year (s) in the current year on account of wage settlement or pay fixation. While salary arrears are taxable in the year of receipt, they may also increase your tax liability due to changes in the tax rates or brackets.

However, you don’t pay more than you owe, as income tax laws provide relief under Section 89 (1). This relief lets you adjust your arrears with the tax rates of the previous year(s) to which they relate.

To avail of this relief, you must follow some simple steps and fill out Form 10E online on the income tax portal before filing your income tax return. You must also report the amount of relief and the acknowledgment number of Form 10E in your income tax return. Your employer should also reflect this relief in your Form 16. By claiming this relief, you can ensure that your salary arrears are taxed fairly and accurately.

FAQs

Is Form 10E mandatory to file?

Yes, Form 10E is mandatory to file if you want to claim tax relief on salary arrears or advance salary. It should be filed online on the income tax portal before filing your income tax return for the year the arrears are received.

What will happen if I fail to file Form 10E but claim relief under Section 89 (1) in my income tax return?

If you fail to file Form 10E but claim relief under Section 89 (1) in your income tax return, your income tax return will be processed, but the relief claimed under Section 89 (1) will not be allowed. You may even receive an intimation from the tax department.

Do I also need to submit a copy of Form 10E to my employer?

No, it’s not mandatory for you to furnish a copy of the form 10E filled by you to your employer. Your employer may ask for it to adjust the taxes and allow tax relief if required.

July 7, 2023

Personal Finance, Taxonomy

Tax Collected At Source(TCS): All You Need To Know

Introduction

Have you recently bought a car, bike, or necklace? You feel happy and proud, right? But there is a catch. You have to pay an extra tax called TCS or Tax Collected at Source in addition to other taxes on your purchase. And you can’t just pay it later or forget about it. You have to pay it according to the applicable TCS slab rates right away to the seller.

The Budget 2023 raised Tax Collection at Source (TCS) on foreign remittance through Liberalised Remittance Scheme (LRS) to 20% from the existing 5%, except in certain cases. This news caught the attention of people, with everyone trying to understand more about TCS.

This article will cover everything you must know about TCS, from TCS slab rates to TCS compliance penalties and everything in between.

What is Tax Collected at Source (TCS)?

TCS, or tax collected at source, is a mechanism to collect tax from the buyers of specific goods and services at the time of sale. TCS applies to various items, such as scrap, minerals, forest produce, liquor, jewelry, motor vehicles, etc. The Tax Collected at Source rates vary depending on the nature and value of the transaction

The seller is responsible for managing and depositing the tax with the government and issuing a TCS certificate to the buyer. The buyer can use the TCS certificate to claim credit for the tax paid against their income tax liability.

TCS means tax collected at source, which means that the seller of specific goods and services must collect tax from you, the buyer, during a sale and pay it to the government. The seller must also provide a TCS certificate showing the tax you paid and where it went. Every clause, from Tax Collected at Source rates to its exemptions, compliance, penalties, etc., is covered under Section 206 C of the IT Act 1961.

The Tax collected at Source rates depends on what you are buying and how much it costs. An example will help us grasp this idea more clearly. Say, you buy a car worth more than Rs. 10 lakhs; you have to pay 1% of the price as TCS. So, if your car costs Rs. 15 lakhs, you have to pay Rs—15,000 as TCS to the seller, who will then pass it on to the government.

List of Goods or Transactions Covered under TCS and applicable Tax Collected at Source Rates

TCS is not applicable when manufacturing, processing, or producing the goods listed below. It is only applicable when the goods are purchased for trading purposes.

The seller collects TCS at the point of sale by the list of Tax Collected at Source rates provided below.

Type of Transaction/Goods	TCS Slab Rates
Alcoholic Liquor for Human Consumption	1%
Timber obtained under a forest lease	2.5%
Any Timber that is not acquired through a forest lease	2.5%
Products from Forests (other than timber or tendu leaves)	2.5%
Scrap	1%
Minerals like lignite, coal and iron ore	1%
Purchase of Motor vehicle exceeding Rs.10 lakh	1%
Parking, tolling and digging for minerals and rocks	1%
Tendu leaves (bidi wrappers)	5%
Overseas Tour Program Package	20% (40% if PAN/Aadhar are not provided)
Remittance under Liberalised Remittance Scheme or LRS of RBI (for medical treatment/education purposes)	5% of Remittances over Rs. 7.00 Lacs during the relevant FY(10% if PAN/Aadhar not furnished)
Remittance under LRS for purposes other than Education/Medical Treatment)	20% of the Remittance (40% in case PAN/Aadhar is not furnished)
Education Loan-financed remittance to study abroad	0.5% of the remittance over Rs. 7 Lacs in the relevant FY( 5% in case PAN/Aadhar is not provided)
Sale of goods exceeding Rs.50 lakh in a year by a seller having a turnover of more than Rs.10 crore in the previous year	0.1% (1% in case PAN/Aadhar is not provided)

When Higher Tax Collected at Source Rates are Applicable

Let’s now discuss the cases covered under Section 206CCA in which the buyer has to pay higher Tax Collected at Source Rates than those discussed above.

Case 1: When the buyer has not filed his ITR return for two consecutive financial years before the relevant financial year in which TCS is to be collected.

Case 2: The time limit for filing your ITR returns has expired.

Case 3: Aggregate TDS and TCS in each of the two consecutive financial years exceeds Rs. 50000.

The payable Tax Collected at Source Rates, in such cases, will be the highest of the two rates-

Two times the applicable Tax Collected at Source Rates specified by the IT Act (please refer to the table given above for the applicable TCS slab rates)

Tax slabs

Form 16

Tax saving investments

Income Tax on Salary

Tax laws

Income Tax Slabs

Classification of TCS Buyers and Sellers as Defined U/S 260 IT Act

Generally, only the trading transactions where the goods are purchased for reselling are considered.

But who are the sellers and buyers to calculate the Tax Collected at Source Rates? How are they defined under the Income Tax Act? Let us find out.

Sellers

According to Section 260 of the Income Tax Act, a seller is any person who sells any goods or grants any right to receive any goods on which TCS is applicable. The seller must have a Tax Collection Account Number (TAN) to collect and deposit TCS.

The seller can be any of the following:

Central Government
State Government
Local Authority
Statutory Corporation or Authority
Company registered under the Companies Act
Partnership firm
Co-operative Society
Any person or HUF who is subject to an audit of accounts under the Income Tax Act for a particular financial year

Buyers

According to Section 260 of the Income Tax Act, a buyer is any person who obtains any goods or the right to receive any goods on which TCS is applicable. The seller will collect TCS at a higher rate from the buyer unless the buyer gives his PAN to the seller. The buyer can be any person except for the following:

Public Sector Company
Central Government
State Government
Embassy of High Commission
Consulate and other Trade Representatives of a Foreign Nation
Various clubs, including Sports Club and Social Club
Local Authority for purchase of a vehicle

Thus, TCS is applicable only when there is a sale or transfer of goods or rights between a seller and a buyer as defined under Section 260 of the Income Tax Act. The seller and the buyer have certain obligations and rights under this provision, which they must comply with to avoid paying any penalty or interest.

Rules for TCS exemptions

The applicable Tax Collected at Source rates can sometimes be exempted. Here are some of the rules for TCS exemptions-

TCS is not applicable when the goods are used for personal consumption by the buyer.
TCS is not applicable when the buyer uses the goods for manufacturing, processing, or production and not for trading purposes. The buyer has to furnish a declaration to the seller and the tax authorities for this purpose.
TCS is not applicable when the buyer is a public sector company, central government, state government, embassy, consulate, club, or local authority to purchase a vehicle.
TCS is not applicable when the sale of goods or services through an e-commerce platform and the supplier is liable to pay GST on such supply under Section 9(5) of the CGST Act. For example, hotel accommodation, radio taxi, housekeeping services, etc.
TCS is not applicable when the sale of goods is made by a seller whose turnover does not exceed Rs.10 crore in the previous financial year, and the sale consideration is at most Rs.50 lakh in a year.

TCS Tax Filing Dates

The buyer can claim credit for the TCS paid against their income tax liability. The filing dates for the TCS return are as follows-

Quarter Ending	Due Dates for filing return	Due Dates for Generating Form 27D
June 30	July 15^th	July 30th
September 30	October 15th	October 30th
December 31	January 15th	January 30th
March 31	May 15^th	May 30th

TCS Compliance Checklist

The seller has to comply with various rules and regulations under the Income Tax Act and the GST Act for TCS. Here follows a comprehensive TCS compliance checklist-

The seller has to obtain a Tax Collection Account Number (TAN) and register under GST as an e-commerce operator.
The seller must collect TCS at the specified TCS slab rates from the buyers on the net taxable value of the goods or services sold online.
The seller has to deposit the TCS collected at the applicable Tax collected at Source rates every month by the 7th of the next month, except for March, where the due date is April 30^th, using Challan 281.
The seller has to file a return of TCS every quarter and issue a certificate to the buyer within 15 days from the due date of filing the return in form 27EQ.
The seller has to issue a TCS certificate in Form 27D to the buyer within 15 days from the due date of filing the return.
The seller has to reconcile the TCS collected and deposited with the TCS reported in the returns and rectify any discrepancies or errors.

TCS Compliance Penalties for Non-deposit of TCS

If the seller fails to deposit the TCS collected according to the applicable Tax Collected at Source Rates, TCS Compliance penalties imposed will be as follows:

In the event of a delay in the deposit of TCS, interest at 1% per month or part of the month is charged in addition to the TCS amount that he fails to collect.

Under Sec 271 CA of the IT Act, the defaulting person would be liable for TDS compliance penalties equal to the amount of tax liable to be collected.

Under Sec 276BB of the IT Act, the defaulting person will also be liable for prosecution and imprisonment of up to 7 years.

Tax Saving Investment

Key Takeaways

TCS is one of the important provisions under the Income Tax Act that aims to widen the tax base and improve tax collection. Tax Collected at Source Rates is the rate at which a seller collects tax from the buyer on certain goods or transactions and deposits it with the government. TCS is a way of collecting tax at the source of income and ensuring buyer tax compliance.

Knowing TCS implications is crucial because it affects the seller and buyer’s cash flow and tax liability. If TCS is not collected or deposited correctly, the seller and buyer will have to pay penalties and interest on the unpaid amount. Therefore, it is advisable to be aware of the TCS provisions and comply with them diligently

FAQs

When is TCS collected from the Buyer?

The seller has to collect TCS at the specified Tax Collected at Source rates from the buyer at the time of sale or receipt of payment, whichever is earlier-

For example, if a seller sells scrap worth Rs. 1 lakh to a buyer, he has to collect TCS at 1% of Rs. 1 lakh, i.e., Rs. 1000 from the buyer. The seller must collect the TCS when he debits the buyer’s account or upon receiving payment from the buyer, whichever happens first.

What is the applicable Tax Collected at Source Rates under GST?

Tax Collected at Source Rates for goods covered under GST are as follows-
● 1% of the net taxable value of intra-state supplies (0.5% for CGST and 0.5% for SGST)
● 1% of the net taxable value of inter-state supplies (1% for IGST)
● 2% of the net taxable value of supplies made by notified suppliers through notified e-commerce operators (1% for CGST and 1% for SGST)

May 19, 2023

Personal Finance

What is Section 80G and How it Helps You Save Tax?

Do you want to save tax while making a positive difference in the world? If yes, you should know about section 80G of the Income Tax Act, 1961. This section allows you to claim deductions for your donations to various charitable institutions approved by the government. By donating to these institutions, you can support their noble causes, reduce your taxable income, and pay less tax.

Sounds good, right? But before you start writing cheques or transferring money online, you must understand some crucial aspects of section 80G deduction. In this article, we will tell you everything you need to know about 80G and how to reduce your tax liability using this fantastic tool.

What is 80G?

Definition of Section 80G in the Income Tax Act

Section 80G of the Income Tax Act allows taxpayers to claim deductions on donations made to specified relief funds and charitable institutions. The main purpose of this section is to encourage philanthropy by offering financial benefits to donors.

Purpose of 80G: Encouraging Donations for Charitable Causes

The government provides tax incentives to encourage individuals and businesses to contribute to organizations working towards education, healthcare, disaster relief, and other welfare activities.

Eligibility for 80G Deduction

1. Who Can Claim 80G Tax Benefit?

The following entities are eligible to claim deduction under Section 80G:

Individuals
Hindu Undivided Families (HUFs)
Companies (Proprietorship/Partnership/LLPs)
Firms
Non-Resident Indians (NRIs)

2. Types of Donations Eligible Under 80G: Why Section 80G is a Win-Win for Taxpayers and Charitable Causes

Only donations made to government-approved charitable institutions and funds qualify for Section 80G deductions. The eligibility depends on the institution’s registration under the Income Tax Act.

3. Exclusions: Donations Not Qualifying for 80G Deduction

Certain donations do not qualify for tax deductions under income tax Section 80G, such as:

Contributions made to foreign charities
Donations in kind (clothes, food, medicines, etc.)
Political party donations

Tax Saving Under 80G: How it Works

1. Deduction Limits: 100% vs 50% Based on the Organization

Depending on the nature of the recipient organization, donations qualify for either a 100% or 50% deduction. Some funds offer full deductions without limits, while others have a restriction of 10% of adjusted gross total income.

2. Conditions for Full Deduction Eligibility

To qualify for 100% deduction, donations must be made to specific government relief funds and recognized institutions. A list of eligible funds is available on the Income Tax Department’s website.

3. How to Calculate 80G Deduction Amount

The deduction amount is calculated as follows:

Determine the category of the recipient organization
Apply the deduction percentage (50% or 100%)

Tax Saving Under 80G: How it Works

1. Deduction Limits: 100% vs 50% Based on the Organization

2. Conditions for Full Deduction Eligibility

3. How to Calculate 80G Deduction Amount

The deduction amount is calculated as follows:

Determine the category of the recipient organization
Apply the deduction percentage (50% or 100%)
Check if the 10% adjusted gross total income limit applies

How to Claim 80G Deduction

1. Required Documentation for Claiming 80G Deductions

To successfully claim deduction under Section 80G, ensure you have:

Donation receipt (must contain donor’s name, amount, and institution details)
PAN of the charitable organization
Registration certificate of the institution

2. Steps to File 80G Claims While Filing Income Tax Returns

Verify if the institution is eligible for 80G deduction.
Collect receipts and other required documents.
Report the donation details under Section 80G while filing ITR.
Attach supporting documents if required.

3. Common Mistakes to Avoid When Claiming Tax Benefits

Donating to non-registered institutions
Not obtaining or misplacing donation receipts
Misreporting deduction limits in tax returns

Advantages of Donating Under 80G

Financial Benefits Through Tax Savings
- Reduces taxable income, resulting in lower tax liabilities.
Contributing to Social and Environmental Causes
- Supports initiatives in healthcare, education, disaster relief, and more.
Gaining Recognition for Philanthropy
- Corporate and individual donors gain goodwill by contributing to national development.

Common Challenges in Claiming 80G Deductions

Incomplete or Incorrect Documentation
- Ensure the receipt includes PAN details and the organization’s registration number.
Donating to Non-Eligible Organizations
- Always verify if the institution qualifies under Section 80G of the Income Tax Act.
Misunderstanding Deduction Limits and Conditions

Be aware of which donations qualify for 100% deduction versus 50% deduction.

How to Claim Tax Exemption Under 80G?

Before being generous, learn the ins and outs of the 80 tax exemptions and how to get the most out of them.

Who Can Claim 80G tax exemption?

If you fall into one of the following categories, you are eligible to claim an 80G tax exemption on your donations:

Individual
Company (Proprietorship/Partnership/LLPs)
NRI
Firm
Hindu Undivided Family (HUF)
Any other person

Payment Modes for Donations under 80G

Acceptable modes of payment include-

Stamped Cash receipt (for amounts up to Rs. 2000/-)
Cheque
Draft

Remember that other payment modes, such as food, clothing, medicines etc., are not eligible for an 80G tax deduction.

Documents Required to Claim 80G Deduction

To claim an 80G deduction, you need to have the following documents:

A valid receipt from the trust/charitable institution you donated to. The receipt should mention the name, address, PAN, registration number, amount and mode of donation of the institution. It should also have the seal and signature of the authorized person of the institution.

A copy of the registration certificate of the institution that shows its eligibility under section 80G. You can also check the website of the Income Tax Department for the list of eligible institutions.

proof of your identity and income, such as a PAN card, Aadhaar card, salary slip, bank statement etc.

You must necessarily submit form 58 received from donee along with your ITR if you wish to claim a 100% tax rebate on your donation. Otherwise, your contribution will be deemed eligible for a 50% deduction only.

Scope of deductions under Section 80G

Donations made with taxable income are only eligible for a rebate. Any contributions made with non-taxable income will not be eligible for the 80G deduction.

Any contribution made towards the following funds will not qualify for 80G deductions from the assessment year 2024-25 and subsequent assessment years. –

National Defense Fund
Prime Minister’s National Relief Fund
The National Foundation for Communal Harmony
National/State Blood Transfusion Council

Only donations made for charity purposes are considered for an 80 G deduction. No donations made for commercial or personal benefits are covered.

Donations made to political parties or foreign institutions are eligible for consideration of tax rebates.

Challenges of Section 80G

Some of the challenges of Section 80G you should be aware of –

Keeping track of all the donations and receipts throughout the year
Verifying the eligibility and authenticity of the charitable institutions before making a donation
Ensuring that the donation is made in cash or cheque only, as other modes of payment are not eligible for deduction
Checking the category and limit of the deduction for each institution, as different institutions have different deduction percentages and limits
Providing the details of the donations in the ITR form and attaching the receipts along with it

Types of deductions under 80G tax exemption

100% tax-deductible donations with no qualifying limit

Donations within this category include-

National Defence Fund set up by the Central Government (only up to FY 22-23)

Prime Minister’s National Relief Fund (only up to FY 22-23)

National Foundation for Communal Harmony (only up to FY 22-23)

Approved University or educational institution

Zila Saksharta Samiti

State-created fund for poor populations’ medical expenses.

National Illness Assistance Fund

National or State Blood Transfusion Council (only up to FY 22-23)

National Sports Fund

National Cultural Fund

Fund for Technology Development and Application

National Children’s Fund

CM’s Relief Fund

Lieutenant Governor’s Relief Fund

Andhra Pradesh Chief Minister’s Cyclone Relief Fund, Army Central Welfare Fund, Indian Naval Benevolent Fund, Air Force Central Welfare Fund, and the Maharashtra Chief Minister’s Relief Fund

Chief Minister’s Earthquake Relief Fund, Maharashtra

Contribution towards relief to Gujarat earthquake victims

Swachh Bharat Kosh

Clean Ganga Fund

Contribution to the National Fund for Drug Addiction Control

50% tax-deductible donations with no qualifying limit

Donations within this category include-

Jawaharlal Nehru Memorial Fund

Prime Minister’s Drought Relief Fund

National Children’s Fund (only up to FY 22-23)

Indira Gandhi Memorial Trust (only up to FY 22-23)

Rajiv Gandhi Foundation (only up to FY 22-23)

3.100% tax-deductible with a limit of 10% of the adjusted gross total income

Donations within this category include-

Donations to the government /any approved local authority/ institution/association to promote family planning.

Corporate donations to the Indian Olympic Association/ other notified associations for the development of infrastructure or sponsorship for sports and games in India.

Donations made in the previous year for renovation or repair of any temple, mosque, gurudwara, church/or other well-known place of public worship.

50% tax-deductible with a limit of 10% of the adjusted gross total income

Donations within this category include-

Donations to any local authority or government for any charitable purpose except family planning.

Donations to any authority in India to deal with and meet the need for housing accommodation or development or both.

Donations to any corporation referred to in section 10(26BB) for promoting the interests of the minority community.

Donations to any temple, mosque, gurudwara, church, or other places of worship for repairs or renovation.

What is Adjusted Gross Total Income?

Adjusted Gross Total Income is the amount of income that is left after deducting certain items, as detailed below from the Gross Total Income from all heads. Permissible deductions include-

Amount deductible under Sections 80C to 80U excluding 80G
Non-taxable income
Long-term capital gains
Short-term capital gains
Income relating to NRIs and foreign companies (referred to in Sections 115A, 115AB, 115AC, 115AD and 115D)

Key Takeaways

Section 80G of the Income Tax Act, 1961 is a beneficial provision that allows you to claim deductions for your donations to eligible charitable institutions. By donating to these institutions, you can support various social and environmental causes and save tax by reducing your taxable income.

However, to claim this deduction, you need to follow certain rules and conditions, such as providing the details of your donations in your ITR form, having a valid receipt from the institution, and making the donation in cash or cheque only.

You also need to check the category and eligibility of the institution before donating, as different institutions have different deduction percentages and limits. By following these guidelines, you can make the most of the section 80G deduction and enjoy the dual benefits of charity and tax saving.

Be generous and smart with your tax planning.

FAQs on Section 80G Deductions

Can a partnership firm claim an 80G exemption for the donations made?

Yes, a partnership firm can claim an 80G deduction for donations made during the fiscal year. The partnership firm must obtain a receipt from the designated trust for the donation made to submit it to IT authorities. The receipt must include the trust’s name, address, and registration number, as well as the amount and mode of donation.

How to find out which institution is covered under section 80G before donating?

One method is to look up the trust’s information in the list of eligible institutions on the Income Tax Department’s website. You can use the searchable database to find out every detail needed to claim the 80 G tax exemption, such as your PAN number, address, registration number, and category. You can also see if it falls into the exempted category. Alternatively, you can request these details from the organization to which you wish to donate.

What is Form 58?

Form 58 is the certificate issued by the eligible trust with details such as the name and address of the donor and the donee, the amount and mode of donation, the registration number and validity of the donee, and the signature and seal of the authorized person of the donee.

April 29, 2023

Personal Finance

How To Pay Less Tax: Understanding Tax Brackets In FY24

Don’t get pinned down in the query “How to pay less tax?”. Instead, read this article until the end to learn the best ways to pay less taxes in FY 24. Also, we will work out how much you can save tax that doesn’t hamper your long-term goals.

Tax Brackets for FY24

The Finance Minister, Ms Nirmala Sitaraman, announced the Budget 2023 on 1st February 2023, making the “New Tax regime” the default option for taxpayers. This initiative is intended to simplify the existing tax structure with lower tax rates but fewer permissible deductions and exemptions.

Before we jump on to how to pay less tax, let us first discuss the two coexisting tax regimes- the Old Tax Regime and the New Tax Regime and which one you should opt for salary-wise.

Net Annual Income Range	Old Tax Slabs	New Tax Slabs
Upto Rs. 2.50 Lacs	NIL	NIL
Rs. 2.5 lacs –Rs. 3 Lacs	5%	NIL
Rs. 3 Lacs – Rs.5 Lacs	5%	5%
Rs. 5 Lacs – Rs. 6 Lacs	20%	5%
Rs. 6 Lacs – Rs. 7.50 Lacs	20%	10%
Rs. 7.50 Lacs – Rs. 9 Lacs	20%	10%
Rs. 9 Lacs – Rs 10 Lacs	20%	15%
Rs. 10 Lacs – Rs. 12 Lacs	30%	15%
Rs. 12 lacs -. Rs.15 Lacs	30%	20%
Above 15 Lacs	30%	30%

To figure out how to pay less tax, we must first decide which tax regime we prefer to choose to scale back our tax outgo. Then, to make an informed decision salary-wise, you must analyze the tax exemptions and deductions available in each tax regime.

Permissible Exemptions and Deductions	Old Tax Regime	New Tax Regime
Standard Deduction	Rs. 50,000.	Rs. 50,000.
HRA Exemption	Yes	No
LTA (Leave Travel Allowance)	Yes	No
Food Allowance	Yes	No
Exemption u/s 10(10 C) on Voluntary Retirement	Yes	Yes
Exemption on Gratuity	Yes	Yes
Exemption on Leave Encashment	Yes	Yes
Professional Tax	Yes	No
Home Loan interest u/s 24b on self-occupied or vacant property	Yes	No
Home Loan interest u/s 24b on rented property	Yes	Yes
Deductions u/s 80 C	Yes	No
Self-contribution in NPS u/s 80 CCD(1B)	Yes	No
Self-contribution in NPS u/s 80 CCD (2)	Yes	Yes
Premium paid on Medical insurance u/s 80 D	Yes	No
Education Loan interest u/s 80E	Yes	No
Electric Vehicle Loan interest u/s 80 EEB	Yes	No
Saving Bank interest u/s 80 TTA and 80 TTB	Yes	No

How to Pay Less Tax in FY24 in India?

When you understand the tax layers, deductions, and exemptions available, the next big question is, “How to Pay Less Tax?”. The most common ways include-

Choosing the proper tax regime can make your tax-saving journey a breeze.

Submitting your tax returns on time, as any delay in filing carries a hefty penalty,

Broadening the scope of your allowable exemptions and deductions to minimize your net taxable income.

How to Pay Less Tax By Choosing the Right Tax Regime?

Individuals who have just begun earning and have made no tax-saving buys or investments will benefit the most from the new tax regime. Also, the new tax regime will be a better option if you do not have a housing loan to claim a rebate on your loan’s interest and principal.

Furthermore, you don’t have to worry about how to pay less tax can be eased through the new tax regime if your income is less than Rs. 7.5 Lacs, as there is no tax deduction in this income range. If you have only invested Rs. 1.5 Lacs in tax-saving schemes and have received an 80C rebate, the new tax regime will be a better deal.

Suppose you pay housing loan interest, rent, medical/life insurance premium, education loan interest, retirement fund contribution, and NPS contribution in addition to your employer’s contribution. In that case, you can stay in the Old Tax Regime. If you have more allowable deductions and exemptions to claim, your net taxable income and, thus, your tax burden will be lower under the old tax regime. Select the best tax regime for your income, and you won’t worry about how to pay less tax.

Salary-wise, How Much Tax Can You Save

Let’s take the case of Mr A, who earns Rs 12 lakh each year. The HRA deduction is Rs 35,000 per year. He makes use of the Section 80C limit of Rs. 1.5 lakh by combining EPF and ELSS mutual funds. He also bought health insurance for Rs 15,000 (self and spouse) and Rs 30,000 (senior citizen – parents), which he claims as a tax deduction under Section 80D. He also put an extra Rs 20,000 into NPS to save even more taxes on his earnings.

Items	Old Tax Regime (Rs.)	New Tax Regime (Rs.)
Annual Income	12,00,000	12,00,000
Less: Standard Deduction	50,000	50,000
Less: Section 80C (EPF +LIC+ Tuition Fees, etc)	1,50,000	NA
Less: House Rent Allowance	35,000	NA
Less: Health Insurance- self and spouse- parents (if senior citizen)	45,000	NA
Less: New Pension Scheme 80CCD (1B)	20,000	NA
Total (Deduction & Exemption)	3,00,000	NA
Net Taxable Income (Annual Income – Total deductions & exemptions)	9,00,000	11,50,000

To understand salary wise how much tax can you save, read our earlier blog New Income Tax Slabs For FY24: How To Navigate?

How to Pay Less Tax by Filing Returns On Time?

Late filing of your income tax returns can attract heavy penalties u/s 234F of the IT Act. Don’t waste time figuring out how to pay less tax so that you miss the return filing deadline. Furthermore, to relieve small taxpayers with annual incomes less than Rs. 5 lacs, the government has reduced the maximum penalty for late ITR filing to Rs. 1000/-

Another reason to take quick action rather than obsessing over how to pay less taxes is the shorter time frame for revising your income tax return. Previously, taxpayers had a two-year window to revise and resubmit their ITRs post-correction. However, this has now been reduced to one year. So, the earlier you file, the more time you have to revise or correct your ITR.

How To Pay Less Tax by Choosing the Right Tax-Saving Investments?

If you’re having trouble deciding on the best investment vehicle for your tax-saving needs, fret not. We’ve compiled a comprehensive tax-saving guide on the top three most preferred investments to help you find the answer to how to pay less tax.

Public Provident Fund (PPF)

PPF is a small saving, government-backed investment scheme that offers a guaranteed return and tax breaks on investments up to Rs. 1.5 Lacs. PPF is a 15-year investment, with the government revising interest rates quarterly. As a result, the public Provident Fund is one of the most catching on tax-advantage investment vehicles for risk-averse investors seeking to play it safe amid market volatility.

If you are looking for how to pay less tax using tax-saving investing tools, PPF is the most preferred choice, as you get:

Tax benefit of 80C on the principal invested up to Rs. 1.5 Lacs
Tax-free interest
The maturity proceeds are exempted from Wealth Tax or any Capital gains.

Equity-Linked Savings Scheme (ELSS)

ELSS is an effective answer to how to pay less tax if you want to save taxes while investing in your long-term financial goals. Some of the benefits of investing in ELSS are-

Having the shortest Lock-in Period (i.e., 3 years) among all tax-saving investment options
Helps reduce risk through portfolio diversification across market capitalization (Large Cap, Mid Cap, and Small Cap) and industry sectors.
Offers better returns than traditional instruments like PPF, NSC, or Tax-Saver FDs

If you invest in the ELSS scheme, you can claim an exemption of up to Rs. 1.50 Lacs in a financial year. However, given that the units cannot be redeemed before three years, only a Long-Term Capital Gains Tax (LTCG) of 10% on gains exceeding one lakh rupees will be imposed.

If an investor made a capital gain of Rs. 1.2 lacs on investment in this scheme during redemption, an LTCG of 10% would be levied on the first Rs. 20,000 in the year of redemption. Capital gains of up to one lakh rupees are free from taxation. The tax due would be Rs. 2,000.

No more wondering how to pay less tax; choose an ELSS that provides consistent returns to gain capital appreciation by sweetening tax savings.

National Pension Scheme (NPS)

With its built-in flexibility to switch between debt and equity while offering an additional tax deduction of up to Rs. 50,000, NPS stands as a promising resolution to your concerns about how to pay less tax. Unlike life insurance policies, the best part is that you can easily change your pension fund manager, and switching between debt and equity has no tax impacts. The only drawback is the lengthy investment tenure or lock-in.

In the face of growing investor concerns about rising inflation, sluggish demand, and high market volatility, NPS can protect your returns to a large extent. Because inflation is inversely proportional to bond yields, you can invest in Bonds if market volatility persists. When markets stabilize, you can easily reclaim your equity position at no additional cost (free up to four times a year).

Wrapping it Up!

If you are on the hunt for how to pay less tax, start tax planning as soon as possible to avoid the last-minute rush and distress investing decisions. But, on the other hand, don’t wait until the last minute, hoping for a wishing wand to manage your tax planning.

First, decide on the best tax regime for your income. After that, go deeper into selecting investment vehicles that will maximize your exemptions and deductions, allowing you to reduce your net taxable income. Working out “How to Pay Less Taxes” is as simple as that. I hope this article guided you in locating your answer.

FAQs

How to pay less tax and earn good returns?

If you want to invest in traditional investment options that yield 7.1 – 8% returns, you can invest smartly in PPF, Sukanya Samriddhi Yojna, SCSS, and NSC. Depending on your investment horizon, you can choose between the ELSS Scheme and the NPS for higher returns.

How to pay less tax if I have an account with Post Office only?

You can still save tax if you only have a Post Office account. You can easily opt for small saving tax-saving schemes offering decent returns like NSC, PPF, Post Office 5-year term deposit, etc.

April 24, 2023

Personal Finance

A Comprehensive Guide To The 8 Best Tax Saving Investments

We all work very hard to make money. But no matter how much money we make, the fear of losing our hard-earned money due to taxes never disappears. What if we had a tried-and-true system for identifying tax-advantaged investment opportunities? What if we could make some tax saving investments while earning attractive returns? Sounds fascinating?

Before we start, we must understand that saving and investing are two distinct theories. You may be a wise saver, but taxes may rob you of your wealth. So, if you, like many others, want to save taxes but need help with questions such as how to invest, where to invest, and why to invest, you have come to the right place. This is a must-read for anyone looking for fantastic tax saving investments.

Top 8 Tax Saving Investments You Must Know

Public Provident Fund (PPF)

The Public Provident Fund (or PPF) is among the favored tax saving investment options that not only help to get a tax rebate under Section 80C of the Income Tax Act but also earn a guaranteed return.

All Indian citizens above 18 can open a PPF account with notified Public Sector/Private Banks or the nearest Post Office. However, NRIs and HUFs are not eligible to invest in this tax saving scheme.

Key Features of Tax saving investments: Public Provident Fund

Interest Rate	7.1%
Min. investment amount	Rs. 500/-
Maximum investment amount	Rs. 1.5 Lacs in one financial year (in Lump Sum or 12 multiple investments)
Tenure	15 Years
Tax Rebate	Up to Rs. 1.5 Lacs in a financial year
Loan Facility	Available only between three to six years (maximum tenure can be 36 months)
Extensions Allowed	Yes, for five years (Unlimited times)
Premature Withdrawal	Partial withdrawal allowed after 7 years
Is Interest Tax-free	Both PPF interest and maturity are tax free.
Premature closure	Allowed only under these conditions- Death of the subscriber Only after completing five years. When the account holder or any member of his family suffers from any critical illness For higher education Change in residency status
Premature Closure Penalty	1%

National Pension Scheme (NPS)

NPS is one of the market-linked tax saving investments the government introduced to promote old-age income security for all citizens. NPS was initially crafted as a replacement for the Old Pension Scheme but later opened for all Indian citizens, including residents, non-residents, and Overseas citizens falling in the age band of 18 to 70 years, to imbibe the habit of savings.

Key Features of Tax saving investments Scheme: NPS

Interest Rate	Market Linked
Min. investment amount	Partial withdrawal allowed for treatment of critical illness, higher education, and marriage of children subject to specific stipulations – Maximum up to 25% of NPS contributions, not the corpus. -The minimum contribution period must be 10 or 3 years (if joined after 60 years). -Min gap of 5 years between two subsequent withdrawals. -Max three times during the currency of the scheme.
Maximum investment amount	No Limit
Tenure	Till the subscriber reaches 60 years (Can be extended till 75 yrs.)
Tax Rebate	Tax Benefits under Sec 80 C- Can claim up to Rs. 1.5 Lacs under Sec 80 C of the IT Act Tax Benefits under Section 80 CCD (1B) – Additional tax benefit on investments up to Rs. 50,000/- Tax Benefit under Sec 80 CCD (2) – Government employees can deduct up to 14% of their pay. Employees in the private sector can deduct up to 10% of their salary. Tax Benefits on Returns and Maturity – NPS interest and maturity are entirely tax-free as investments under this scheme fall under exempt-exempt-exempt (EEE) tax status.
Loan Facility	Not Available
Extensions Allowed	Up to 75 years of age
Premature Withdrawal	Partial withdrawal allowed for treatment of critical illness, higher education, and marriage of children subject to specific stipulations – Maximum up to 25% of NPS contributions, not the corpus. -The minimum contribution period must be 10 years or 3 years (if joined after 60 years). -Min gap of 5 years between two subsequent withdrawals. -Max three times during the currency of the scheme.
Is Interest Tax-free	Yes (the maturity amount and the interest are both tax-free)
Premature closure	Allowed after 10 years or before 3 years (in the case of a subscriber joining after 60). Subscribers can withdraw up to 20% of their corpus as a lump sum, with the remaining 80% used to purchase an annuity plan to receive a pension.

Equity Linked Savings Scheme (ELSS)

ELSS funds are popular tax saving investments that help investors to generate wealth, get regular returns, and save taxes. These equity-oriented mutual fund schemes allow a tax exemption of up to Rs. 1.50 Lacs and come with a mandatory lock-in of 3 years.

ELSS becomes an investor’s preferred choice where most tax saving investments don’t yield tax-free returns or the investment tenure is too long. In these schemes, a minimum of 80% of investment is made in equity or equity-oriented instruments, and the funds are diversified across different themes and sectors.

Key Features of Tax saving investments Scheme: ELSS

Interest Rate	Market Linked
Tax Rebate	Rebate up to Rs. 1.50 Lacs on the invested amount under Sec 80 C
Minimum Investment	Rs. 500/-
Maximum investment	No Limit
Loan Facility	Not Allowed
Premature Withdrawal	Not Allowed (Lock-in Period: 3 years from the date of investment)
Is Interest Tax-free	Income Up to Rs. 1 Lac in a financial year – Tax-Free Income above Rs. 1 Lacs in a financial year- 10% LTCG (Long Term Capital Gains)
Premature Closure	Not Allowed before 3 years

Sukanya Samriddhi Yojna (SSY)

Sukanya Samriddhi Yojana (SSY), created solely for girls’, falls under the well-liked tax saving investments category. However, you can only invest in this scheme if you have a girl child under ten.

Among other tax saving investments, this scheme encourages parents to create a fund to support their daughter’s future studies and marriage expenses. In addition, this scheme allows a maximum of two girl children in one family to open an account.

Key Features of Tax saving investments Scheme: SSY

Interest Rate (April- June 23)	8%
Min. investment amt	Rs. 250/-
Max. investment amt	Rs. 1.50 Lacs
Tenure	Maturity occurs 21 years after the account was opened or when the girl child gets married after 18.
Tax Rebate	Up to 1.50 Lacs under Sec 80 C
Loan Facility	Not Allowed
Extensions Allowed	Not Allowed
Premature Withdrawal	When a girl reaches the age of 18 or completes the 10th grade, her guardians can withdraw up to 50% of the account balance in a financial year. Withdrawals can be made in one transaction or tranches, with a maximum of one leave per year and a 5-year limit.
Is Interest Tax-free	Maturity Benefits (invested corpus + interest earned during the tenure) are tax-exempted under EEE (exempt-exempt-exempt) status.
Premature closure	Allowed after completion of 5 years (with certain restrictions) In case of the Death of the account holder/guardian making the contributions. In case of critical illness of the account holder, on extremely compassionate grounds

National Savings Scheme (NSC) VIII issue

NSC is among the most popular tax saving investments because it offers assured capital appreciation with a tax rebate. All individuals, including minors over ten and their parents or legal guardians, can invest in this low-risk scheme. However, this scheme does not allow HUFs, NRIs, or non-individuals to open accounts.

Interest Rate (Apr- June 23)	7.7%
Min. investment amount	Rs. 100/-
Maximum investment amount	No Limit
Tenure	5 Years
Tax Rebate	Up to Rs. 1.5 Lacs under Sec 80 C
Loan Facility	Allowed
Premature Withdrawal	Not Allowed
Is Interest Tax-free	No (Only the fifth year interest is taxed as the previous interests up to the fourth year are reinvested in the scheme)
Premature closure	Not allowed, except- Death of the account holders (single or joint) Court order On forfeiture if the Pledgee is a Gazette Officer

Tax Saving Fixed Deposits

A Tax Saving Fixed Deposit is a good option for tax saving investments if you are looking for low-risk traditional investment vehicles that offer guaranteed returns. However, while investing, remember that tax-free FDs have limited flexibility and provide no tax benefit on the interest earned.

Key Features of Tax saving investments Scheme: Tax Saver FD

Interest Rate	6.20% – 7.60%
Min. investment amount	Rs. 1000/- (in multiples of Rs. 100/- after that)
Maximum investment amount	Rs. 1.50 (to take advantage under Sec 80 C)
Tenure	Min. 5 and Max. 10 years
Tax Rebate	On Principal investment up to Rs. 1.50 Lacs
Loan Facility	Not Allowed
Premature Withdrawal	Not Allowed
Is Interest Tax-free	TDS is applicable on the interest paid (Depositor can submit Form 15 G/H to claim an exemption under the Tax Laws)
Premature closure	Not Allowed

Life Insurance Policies

Given the added benefit of life coverage, life insurance policies are preferred tax saving investments over vanilla tax saving options. You can claim a tax rebate even if you pay the premium for an approach taken in the name of your spouse or children. To be eligible for claiming the deduction, your premium amount should be less than 10% of the sum assured.

Key Features of Tax saving investments Scheme: Life Insurance Policies

Tax Rebate	Under Sec 80 C- Premium Paid up to Rs. 1.5 Lacs in a year (If you cancel the policy 5 years before the date of purchase, the deductions will be added to your income and taxed at the applicable slab rate.) Under Sec 10(10D), The maturity amount is completely tax-free. Under Sec 80 CCC- It provides a tax break to customers who pay insurance premiums from their taxable income towards any annuity plan. Under Sec 80 DD- Any person who deposits a Life insurance premium (up to Rs. 50,000/-) for the maintenance of a differently abled person is exempt from paying taxes.
Loan Facility	Yes
Premature Withdrawal	It is only permitted in the case of ULIPs and unit-linked endowment plans, not in traditional life insurance policies.
Is Interest Tax-free	Yes

Senior Citizens Savings Scheme (SCSS)

SCSS is among the government-supported tax saving investments focused on providing tax benefits to senior citizens and creating a regular income source.

Key Features of Tax saving investments Scheme: SCSS

Interest Rate	8%
Min. investment amount	Rs. 1000/-
Maximum investment amount	Rs. 30 Lacs (in single deposit only)
Tenure	5 Years
Tax Rebate	Up to Rs. 1.5 Lacs on the invested corpus
Loan Facility	Not Available
Extensions Allowed	Yes, two subsequent extensions of 3 years allowed
Premature Closure Penalty	After one year, a penalty of 1.5% is charged. After two years, a penalty of 1% charged
Is Interest Tax-free	No, interest is subject to TDS. However, eligible depositors can claim exemption by submitting 15 G/H as applicable.

Wrapping it Up!

You must educate yourself on the numerous tax saving investment options available to grab the best investment opportunities before it passes you by. Unfortunately, tax savings are more challenging than they appear. We frequently begin our tax planning but get bogged down in the debate between tax savings vs equity investment.

Consider long-term investing in ELSS schemes to address such concerns over tax saving investments. Long-term investing keeps you afloat during market volatility, and the tax exemption benefit is the icing on the cake. Remember to consider equity investments if you are looking for higher returns to grow your wealth.

FAQs

Can I get a rebate each year if I choose Tax saving FD for 5 years over other tax saving investments?

No, you only get a tax break up to Rs.1.5 lacs in the initial investment year. After that, you must make a new investment under the scheme to claim the yearly tax rebate.

I retired under the VRS scheme at the age of 55. Can I invest in the SCSS scheme?

Employees who are retired under VRS or Superannuation in the age bracket of 55-60 years can also open SCSS accounts. In addition, defence employees falling in the age bracket of 50 – 60 years are also eligible under this scheme.

March 10, 2023

Personal Finance

ELSS Funds: The Ultimate Tax-Saving Investment Tool

It’s time for tax saving again, and we are sure you are racking your brain to come up with a few options to save on tax. One of the most popular options is the Equity-Linked Saving Scheme, often called ELSS. We thought understanding these ELSS funds would help you decide better.

Let’s see what Equity-Linked Saving Scheme is.

What are ELSS Funds?

ELSS funds are mutual funds that invest primarily in equity and equity-related instruments. If you choose the old regime, you can claim a deduction of up to Rs. 1.5 lakhs from your taxable income in a fiscal year under Section 80C of the Income Tax Act. These funds have a lock-in period of three years, meaning you cannot redeem your investment before completing this period.

Who Can Invest in ELSS Funds?

Any resident Indian individual or HUF (Hindu Undivided Family) can invest in these funds. You can invest either through a lump sum or a systematic investment plan (SIP), which allows you to invest a fixed amount of money at regular intervals, such as monthly or quarterly.

How to Invest in ELSS Funds?

To invest in these funds, follow these simple steps:

Choose the right fund that matches your investment goals and risk appetite.
Open a mutual fund account with a fund house or broker, or invest through their online or offline platforms.
To complete KYC formalities, you must submit your identity, address proofs, and other documents like your PAN card, Aadhaar card, and bank details.
Invest in ELSS funds through a lump sum or a systematic investment plan (SIP), which allows you to invest a fixed amount at regular intervals, like monthly or quarterly.

Avoid These Pitfalls When Investing in Tax-Saving Mutual Funds

Investing in ELSS funds can effectively save taxes and earn higher returns, but there are certain mistakes to avoid. Avoid the following to get the maximum return on your investment:

Don’t invest only for tax-saving purposes; consider them equity-oriented mutual funds offering long-term capital appreciation.
Diversify your portfolio across different asset classes.
Regularly review your ELSS portfolio to ensure it aligns with your investment goals and risk appetite.
Be aware of the lock-in period of three years and avoid investing money that you may need in the near future.
Research the fund manager’s track record and investment style before investing in the fund.

ELSS Funds Under New Regime Vs. Old Regime

The potential consequence of shifting to the new tax regime is to abandon the ELSS funds tax benefit. According to the article, the new tax regime may not be as beneficial as it seems, as it eliminates many deductions and exemptions, including those offered by these funds. Conversely, these funds offer significant tax savings under the old tax regime and can help diversify one’s portfolio.

To illustrate the difference, consider the following example.

Ms Mala is a salaried employee at ABC ltd, earning Rs. 10 lakhs. What would her taxable income be under the old and new regimes?

Items	Old Tax Regime (Rs.)	New Tax Regime (Rs.)
Annual Income	10,00,000	10,00,000
Less: Standard Deduction	50,000	50,000
Less: Section 80C (ELSS+ EPF +LIC+ Tuition Fees, etc)	1,50,000	NA
Less: House Rent Allowance	25,000	NA
Less: Insurance(Health) – self and spouse, parents (if senior citizen)	35,000	NA
Less: New Pension Scheme 80CCD (1B)	30,000	NA
Total (Deduction & Exemption)	2,90,000	NA
Net Taxable Income	7,10,000	9,50,000

The table shows that the old regime allows section 80C deduction while the new regime has eliminated the Section 80C deduction.

Risks and Rewards of Investing in ELSS Funds

Investing in these funds can be rewarding and risky, just like any other investment. The rewards include tax benefits under Section 80C if you opt for the old regime, potentially higher returns than traditional investments, and a diversified portfolio that reduces overall risk. However, there are also risks, such as market volatility, a lock-in period of three years that limits liquidity and flexibility, and the risk of underperformance due to the fund manager’s skills and experience.

As shown in the below graph, these funds are highly liquid compared to other tax-saving instruments.

Final Words

Understanding these risks and rewards before investing in these funds is important, as carefully consider your investment goals and risk appetite. With proper research and planning, investing in these funds can help you achieve your financial goals and save on taxes under the old regime.

FAQS

Who should avoid ELSS investments?

You are seeking quick profits. Seeking rapid profits using ELSS funds may not always work. Therefore, you should avoid them if you desire quick returns. These funds may be appropriate if you have a longer investing horizon.

Can I redeem my investment in ELSS funds before the completion of the lock-in period?

No, you cannot redeem your investment in These funds before completing the three-year lock-in period. However, you can redeem your investment after the lock-in period or continue to hold it longer.

Are capital gains from ELSS subject to taxation?

The government exempts long-term capital gains from ELSS from taxes up to INR 1 lakh. Any gains exceeding that limit will attract a long-term capital gains tax of 10%. Moreover, the applicable slab rate taxes the dividends received.

What is the lock-in period for ELSS funds?

ELSS funds have a lock-in period of three years, meaning you cannot redeem your investment before completing this period. It ensures that investors stay invested longer, potentially resulting in higher returns.

What are the minimum and maximum investment amounts for ELSS funds?

Fortunately, there is no maximum limit for investing in ELSS or any other mutual fund. You can invest as much as you desire and allow your funds to grow through compounding. The minimum investment amount for ELSS varies depending on the fund house. Generally, it is Rs 500.

Is it possible to make partial withdrawals from ELSS funds?

No, it is not possible. This is good news because staying invested in the fund for at least three years is essential. The longer you stay invested in equities, the more wealth you may accumulate, depending on your investment amount.

Income Tax Slabs for FY 2023-24: The Ultimate Guide

India’s income tax rules have undergone several revisions since the introduction of income tax in 1860. The Income Tax Act of 1961 is the current law governing income taxation in India. The rules are regularly updated to reflect economic changes, tax administration, and government policies.

New Income Tax Rules in Budget 2023

The new income tax slabs and rules introduced in Union Budget 2023 will impact individual taxpayers significantly. With updated tax rates, rebates, and exemptions, the changes aim to reduce the tax burden on low and middle-income earners.

Taxpayers can choose between the new and old regimes to optimize their tax payments. Understanding these changes is critical so taxpayers can make informed decisions and stay up-to-date with the latest tax regulations.

As taxpayers navigate these changes, it is essential to remember that the significant increase in tax collection over the past 12 years is a testament to India’s evolving tax system and the need to stay updated with the latest regulations to make the most of the available opportunities.

According to data from the Ministry of Finance, India’s tax collection has grown by a remarkable 303% over the last 12 years. Between FY10 and FY22, the tax collection grew from Rs 6.36 lakh crore to Rs 21.33 lakh crore, marking a significant increase of 235%.

What are the Income Tax Slabs?

The income tax slabs refer to the specific income levels at which different tax rates apply to individual taxpayers in India. Introducing a slab system ensures a fair tax system, where higher-income individuals must pay more tax. The income tax slab rates vary based on several factors, including the taxpayer’s age, income level, and other considerations. The slab rates tend to change yearly during the budget announcement, and taxpayers must stay updated on the latest changes to ensure they’re paying the correct amount of tax.

New Regime Income Tax Slab Rates – Individuals

As per budget 23, the tables below display the new income tax slabs:

Income Tax Slab	Income Tax Rate
Up to Rs.3 lakh	Nil
Above Rs.3 lakh – Rs.6 lakh	5% of the total income
Above Rs.6 lakh – Rs.9 lakh	10% of the total income
Above Rs.9 lakh – Rs.12 lakh	15% of the total income
Above Rs.12 lakh – Rs.15 lakh	20% of the total income
Above Rs.15 lakh	30% of the total income

Note: A income tax rebate is available to those earning up to Rs 7 lakh per year. Under the new tax regime, the highest surcharge rate on income beyond INR 5 crore would drop from 37% to 25%.

Factors to Keep in Mind before Opting for the New Tax Regime

It is important to note that the tax rates for all categories of individuals, including those aged up to 60 years, senior citizens aged 60 to 80, and super senior citizens over 80, are the same in the new tax regime. It means that senior and super-senior citizens will not receive any additional benefit from the increased basic exemption limit in the new tax regime.

The option is available for individuals and members of a Hindu Undivided Family (HUF) without any business income and must be exercised on or before the previous year’s deadline. Please note that the new income tax rates are not mandatory and can be opted for voluntarily.

Once you choose the new tax regime, you cannot switch back to the old regime during the same financial year. However, you can switch back to the new regime the following year if you previously withdrew your option.

While the new tax regime offers lower income tax slabs rates, taxpayers should evaluate the benefits and drawbacks of both regimes. Some factors are the availability of deductions and exemptions, the taxpayer’s income level, and future income expectations.

Old Income Tax Regime vs New Income Tax Regime

As an Indian taxpayer, you can choose between the old and new income tax regimes for FY 2023-24. However, it’s essential to understand the differences between the two regimes before deciding. The new tax regime offers more income tax slabs with lower rates but doesn’t provide many exemptions or deduction choices.

On the other hand, the previous tax regime allowed up to 70 deductions or exclusions to decrease your taxable income and income tax liability based on income tax slabs. Therefore, evaluating your financial situation and investment portfolio before opting for the new tax regime is crucial to ensure you make an informed decision.

Let’s take the case of Mr Arun, who earns Rs 12 lakh each year. The HRA deduction is Rs 35,000 per year. He makes use of the Section 80C limit of Rs. 1.5 lakh by combining EPF and ELSS mutual funds. He also bought health insurance for Rs 15,000 (self and spouse) and Rs 30,000 (senior citizen – parents), which he claims as a tax deduction under Section 80D. He also put an extra Rs 20,000 into NPS to save even more taxes on his earnings.

Items	Old Tax Regime (Rs.)	New Tax Regime (Rs.)
Annual Income	12,00,000	12,00,000
Less: Standard Deduction	50,000	50,000
Less: Section 80C (EPF +LIC+ Tuition Fees, etc)	1,50,000	NA
Less: House Rent Allowance	35,000	NA
Less: Health Insurance- self and spouse- parents (if senior citizen)	45,000	NA
Less: New Pension Scheme 80CCD (1B)	20,000	NA
Total (Deduction & Exemption)	3,00,000	NA
Net Taxable Income (Annual Income – Total deductions & exemptions)	9,00,000	11,50,000

Total Tax Payable as per New Income Tax Slabs in the Old Regime

Income Tax Slabs (Rs.)	Old Tax Rates	Tax(Old) (Rs.)
0 – 2,50,000	0%	0
2,50,000 – 5,00,000	5%	12,500
5,00,000 – 7,50,000	20%	50,000
7,50,000 – 10,00,000	20%	50,000
10,00,000 – 12,50,000	30%	75,000
12,50,000 – 15,00,000	30%	0
15,00,000 & above	30%	0
Total taxes		1,87,500
Add: Higher Education Cess @4%		7,500
Total tax payable		1,95,000

Total Tax Payable as per New Tax Slabs in the New Regime (FY 23-24)

Income Tax Slabs (Rs.)	New Tax Rates	Tax(New)(Rs.)
0 – 3,00,000	0%	0
3,00,000 – 6,00,000	5%	15,000
6,00,000 – 9,00,000	10%	30,000
9,00,000 – 12,00,000	15%	45,000
12,00,000 – 15,00,000	20%	60,000
Above 15,00,000	30%	0
Total taxes		1,50,000
Add: Higher Education Cess @4%		6,000
Total tax payable		1,56,000

Hence, as you can see from the tables above, Mr Arun may prefer the new tax structure.

Final Words

Taxpayers should evaluate their options before switching to the new regime. Considering the factors above, taxpayers can decide which income tax regime to choose for budget 2023.

FAQs

Which individuals are eligible to claim the income tax rebate under Section 87A?

The tax rebate under Section 87A is available for all resident Indians whose total annual income is Rs.7 lakh under the new tax regime.

Can the Income Tax regime be changed for filing tax returns?

Yes, you can choose either the old or new regime according to your preference while filing your income tax returns.

Do I need to file an Income Tax Return if my annual income is below
Rs. 2.5 lakhs?

If your yearly income is below Rs. 2.5 lakh, filing an ITR is not mandatory. However, you should file a ‘Nil Return’ for the record, which can serve as proof of employment in various situations.

February 15, 2023

Personal Finance

Eight Lesser-Known Facts About HRA Tax Exemption Rules And Its Tax Benefits

If you are a salaried employee obsessed with savings near the end of the fiscal year, you have come to the right place. Often, HRA is a significant portion of your net salary, but due to a lack of awareness, you claim the incorrect HRA tax exemption, resulting in a financial loss.

Whatever the case, we’ve addressed all of your concerns in this guide to ensure that you never have any problems with HRA tax exemption after reading this.

An Overview of HRA (House Rent Allowance)

House Rent Allowance (HRA) is a component of employees’ salary working in the organized sector. HRA is paid by the employer towards the payment of rent. HRA tax exemption is allowed as a deduction from the taxable salary under Section 10(13A). However, this benefit is available only for salaried individuals who opt for the old income tax slabs.

HRA tax deduction is calculated as the least of the following amounts-

Actual HRA received
50% of the (basic salary + DA) for those living in Metro cities or
40% of the (basic salary + DA) for those living in non-metro cities

Actual rent paid should be less than 10% of the basic salary + DA.

Let us understand this with a real-world example. Assume you receive a compensation (basic + DA) of Rs. 25,000/-, with an HRA component of Rs. 8000. You live in a metropolis and pay a monthly rent of Rs. 10,000/-. In this case, we’ve assumed you’re eligible for the 10% tax bracket.

Annual salary (basic salary + DA)	Rs. 3,00,000/-
(A) Actual HRA Received (Annual)	Rs. 96,000/-
(B) 50% of the Salary(Annual)	Rs. 1,50,000/-
(C) Excess of rent paid annually over 10% of annual salary	Rs. [1,20,000 – {10% * 3,00,000 }] Rs. 90,000 /-
Eligible HRA Tax Exemption (Min. of A, B, and C)	Rs. 90,000/-

This means that out of the Rs. 96,000/- received as HRA, you can claim an HRA tax exemption of Rs. 90,000/- and only the remaining Rs. 6,000/- is added to your income, on which a tax of Rs. 600 (assuming a 10% tax slab) is payable.

Landlord’s PAN number required

According to the latest income tax news, the government has mandated that the landlord’s PAN Card be included on the claim form if the total annual rent exceeds Rs. 1 lac.

If your annual rent exceeds Rs. 1 Lac, you must quote your landlord’s PAN or provide a declaration to your company mentioning your landlord’s name and complete address to claim HRA tax exemption. To substantiate your claims, you can submit rent receipts duly authenticated by the landlord or a copy of your rental agreement.

Claim HRA exemption jointly or in shared accommodation.

HRA tax exemption can be claimed by both husband and wife and by more people living in shared housing as tenants or paying guests. Isn’t that remarkable? Couples can claim the HRA tax exemption jointly if the lease agreement names both husband and wife as tenants and clearly states their proportionate share. If more than one person is co-living or sharing a rented space, the rental agreement must clearly state their proportionate share of the rent.

Take HRA tax exemption and home loan tax benefits.

Many taxpayers need clarification about whether they can simultaneously claim HRA tax exemption and Home Loan benefits. Let us make this easier for you by considering various scenarios-

Scenarios	Can HRA tax exemption and Home Loan Rebate be availed simultaneously?
You bought a house with a home loan but live in rented housing in another city due to work obligations.	Yes
You used a Home Loan to buy a house, but you live in a rented apartment in the same city because your job/business/profession/child’s school is too far from your own house.	Yes, Conditions- -you may have to satisfy the competent authority about the genuineness of your case -the property should not be rented at any time during the year.
You have purchased a house under construction from loan finance and live on rent elsewhere in the same/different city.	Yes, Conditions- You must show the rent receipts or the rental agreements if asked during scrutiny.

Rent can be exempt without HRA

You are probably wondering how to claim an HRA tax exemption if HRA is separate from your salary income. Don’t worry; we’ve covered this too. We understand that some small or medium-sized businesses pay wages in a lump sum with no breakup. HRA must be part of your salary to qualify for tax exemption, but Section 80 GG of the Income Tax Act of 1961 allows even self-employed individuals to deduct house rent paid.

You must not have received HRA during any part of the fiscal year to qualify for the HRA tax exemption under Section 80 GG. In addition, to claim tax exemption under this section, you must fill out an additional form 10 BA confirming that all of the conditions of the preceding section have been fully met.

How to Claim an HRA tax exemption if you missed the deadline?

If you did not submit your HRA tax exemption claim documents to your employer on time, you could still claim them when you file your ITR returns. If you miss the ITR filing date, you can file a revised return to correct the error before 31 December of the assessment year or the completion of the assessment, whichever comes first.

How to claim an HRA tax exemption if the landlord is NRI?

Non-Resident Indians (NRIs) buy properties in India and rent them out for a profit. So, the obvious question is whether you can still claim an HRA tax exemption if your landlord is an NRI. But, don’t worry, we have a solution for that as well.

If your landlord is an NRI, you must deduct 31.2% TDS before crediting the monthly rent to your landlord’s NRO account. To do so, you must first obtain a Tax Deduction and Collection Account Number (TAN), deposit it with the government, and send a copy to your NRI landlord. TDS must be deposited by the seventh of the following month every time.

It is crucial to remember that the tenant is responsible for paying taxes. Failure to do so results in a penalty equal to the TDS, and failure to deposit TDS results in imprisonment ranging from three months to seven years.

TDS norms when rent payment exceeds Rs 50,000 or more per month

You must have come across TDS being deducted for multiple transactions like the sale of property, bank deposits, or your salary. But do you know about the applicable TDS norms when your monthly rent exceeds Rs. 50,000/-? If not, worry not; we are here to make things simpler for you.

If you pay Rs. 50,000 or more in monthly rent, you must deduct TDS at the rate of 5% before actually paying it to the landlord. After deducting the TDS amount, the residual amount may be credited to the landlord’s account.

Can you take an HRA tax exemption if your parents are your landlord?

Yes, if you pay rent to your parents and provide sufficient evidence, you can claim an HRA tax exemption. To avail of the benefit, you must give duly authenticated rent receipts and a copy of the lease agreement. However, your parents’ rent will be taxable, but they can claim a standard deduction of up to 30% on their rental income.

Conclusion

Now that we have revealed the secret sauce for HRA tax exemption make sure you follow these requirements. Always submit the entire set of documents to avoid rejection by the income tax authorities, which could lead to trouble. Our comprehensive guide will assist you in lowering your taxable income and filling your pockets closer to the end of the financial year.

FAQs

What happens if TDS on rent is not deducted?

If you fail to deduct TDS before paying your landlord’s rent, you will be charged an interest rate of 1% per month from the month TDS on rent is applicable until the month it is debited. If you deducted but could not deposit with the government, an interest rate of 1.5% is payable.

Can I claim HRA without a rent receipt or a rent agreement?

Yes, you can claim an HRA tax exemption without rent receipts or a rent agreement if your HRA is up to Rs. 3000 per month.

Can the husband pay rent to the wife and claim HRA tax exemption?

No, if a husband pays rent to his wife or inter-alia, this case is not admissible under claiming tax exemption.

January 18, 2023

Personal Finance

Discover The Budget Expectations For Taxpayers in 2023

Key expectations of relief and reforms from almost every sector have been high since the pre-budget consultations took off. Therefore, the budget is crucial as it will be the Modi Government’s final budget before the upcoming Lok Sabha elections in early 2024.

Overview of Union Budget

Budget expectations for taxpayers, from corporations to the common man, are high as the Union Budget is set to be tabled on February 1st, 2023. Budget 2023-24 is critical because of the fear that a global recession will stymie India’s growth momentum.

Finance Minister Nirmala Sitaraman kicked off pre-budget consultations on November 21st, holding meetings with various industry heads and infrastructure experts about their Budget expectations on Income Tax. But, before we push ahead, let us look at the Union Budget and how it affects taxpayers’ lives.

Simply put, the Union Budget is our country’s annual financial statement, presented before the fiscal year’s start, from April 1st to March 31st. The Union Budget is a necessity to improve the economic and social framework. It comprises of-

Capital Budget- Includes capital income and expenditure.

Revenue Budget– Comprises revenue receipts and expenditures.

Implications of Tax Changes in Union Budget on Taxpayers and Economic Growth

The Government uses the power of income tax to gain control over its revenue generation. Higher taxes on individuals affect the households’ level of disposable income as it takes money out of the households. Likewise, a decrease in personal income tax increases the purchasing power of the individual by leaving higher disposable income in the hands of the consumer.

On the other hand, income tax changes for businesses affect the supply chain and overall cost of production of goods and services. Lower tax rates can boost economic growth as it implies more disposable cash for individuals, businesses, and corporates. This surplus cash can be reinvested in existing businesses or a new venture. Restructuring the income tax system can improve our tax-to-GDP ratio, which is a critical component of economic growth.

Recommendations of CII regarding budget expectations for Taxpayers

In its pre-budget proposal, the Confederation of Indian Industry (CII) laid down the following key recommendations –

Reducing personal income tax rates to increase disposable income, thereby reviving the diminishing consumer demand.
Reduce the present 28% GST rate on selected consumer durables, facilitating better market penetration.
Step up rural infrastructure projects to facilitate employment generation.
Raise capital spending to 3-3.4% of GDP from the present rate of 2.9%, then increase it to 3.8 -3.9 by FY25.

Increasing capital spending can help to improve production facilities and operational efficiency, thereby increasing per capita GDP and income. Deloitte India recently surveyed taxpayers’ pre-budget expectations. The results indicated that most industry leaders are optimistic about India’s growth trajectory, with BFSI and Chemical Industries leading the way.

Expectations of Salaried Class

Pre-budget expectations of the salaried class include the following-

Revising tax-free slabs from Rs. 2.5 lacs to at least 5 lacs in the wake of gripping inflation and the onset of a global recession.

On the personal tax front, the salaried class anticipates an increase in the standard deduction from Rs. 50,000 to Rs. 1, 00,000/- to offset the effect of inflation.

Each asset class has its Capital Gain structure. If a uniform capital gains tax is implemented, taxpayers will have more disposable income to contribute to wealth creation.

Expectations of Corporate

The COVID-19 pandemic has affected global production, consumer demand, and profit margins. Budget expectations for taxpayers in the corporate sector include-

Budgetary increases for healthcare, agriculture, digital payments, and e-commerce.
A significant reduction or exemption from GST on services would pave the way for improved operational efficiencies.
Fiscal reforms to close loopholes, simplify the tax structure to avoid income tax cascading, and improve the ease of business.
Dropping corporate tax rates and eliminating the Minimum Alternate Tax (MAT) will aid corporate capital formation and drive economic recovery.

Expectations in Real Estate Sector

Budget expectations for taxpayers in the Real Estate Sector include-

Single window clearance and industry status are among the most recurrent and yet-to-be-addressed demands.
Need for more tax sops for homebuyers and investors. Hiking the present income tax rebate on housing loan interest from 2lacs to 5 lacs can bring back the lost momentum in the real estate sector.
To meet the Government’s criteria for affordable housing, the current price bandwidth of Rs. 45 Lacs must be revised. Homebuyers in cities such as Mumbai, where the average house cost is Rs. 60-65 Lacs, are rendered ineligible for government subsidies and other benefits.

Expectations of Pensioners

Budget expectations for taxpayers in the category of Pensioners include-

Demand for raising the tax-free income slab from 3 lakhs to at least Rs. 5 Lacs tops the pensioner’s wish list.

Increasing the limit of tax deductions permissible under Sec 80 C of IT Act’1961 and an additional deduction of Rs. 50,000.

Increasing the threshold limit for Sec 80 TTB that allows an interest deduction of up to Rs. 50,000 on deposits in a given fiscal year. Pensioners are also demanding the inclusion of NSC interest in Sec 80 TTB.

Expectations of Firms/LLPs

Budget expectations from taxpayers in the Partnership and Limited Liability Partnership categories include

Providing a concessional/special tax regime aligned with their specific business needs.
Reducing the income tax levy on LLPs from 30% to 22% brings LLPs on par with corporates.

Global Expectations from Budget

Global budget expectations for taxpayers include the following-

Creating physical, digital, and skill infrastructure to facilitate the establishment of Global Capability Centres.
Significantly decrease the income tax on Global Capability Centres’ service exports.
Integrate safe harbor and uniform tax rules to enable international trade in the face of geopolitical uncertainties.

Key Takeaways

The upcoming budget will lay out a strategy to steer the economy to the $5 trillion target. The need of the hour is to revise the tax-free income slabs to keep up with the country’s rising living, medical, and educational costs.

FAQs

Who will present the Union Budget?

The Union Finance Minister Nirmala Sitaraman will present the Budget 2023-24 on February 1st 2023.

Which sectors will be in focus in the upcoming Budget 2023?

According to the latest business news, infrastructure, green energy, and logistic companies may get support from the upcoming budget.

Frequently asked questions

Get answers to the most pertinent questions on your mind now.

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What is an Investment Advisory Firm?

An investment advisory firm is a company that helps investors make decisions about buying and selling securities (like stocks) in exchange for a fee. They can advise clients directly or provide advisory reports and other publications about specific securities, such as high growth stock recommendations. Some firms use both methods, like Research & Ranking, India’s leading stock advisory company, specializing in smart investments and long-term stocks since 2015.

Do we have SEBI registration as an Investment Advisory?

Why choose a SEBI Registered Investment Advisor?

What is the Role of an Investment/Stock Market Advisory Firm in India?

Is investment advisory the same as wealth management?

Personal Finance

Understanding TCS and Its Changes

How Does TCS from October 1st will Affect Your International Travel Budget?

International Credit card vs. Forex card

How can we reduce paying increased TCS from October?

Key Takeaways

FAQs

What is the difference between a Forex card and a debit card?

How can I transfer the unused balance in my Forex card to my bank account?

How can I compare different forex cards and credit cards before choosing one?

Introduction

What is Salary Arrears?

How Are Salary Arrears Calculated?

How are Salary Arrears Taxed?

How to Claim Relief under Sec 89(1) on Salary Arrears?

Key Takeaways

FAQs

Is Form 10E mandatory to file?

What will happen if I fail to file Form 10E but claim relief under Section 89 (1) in my income tax return?

Do I also need to submit a copy of Form 10E to my employer?

Introduction

What is Tax Collected at Source (TCS)?

List of Goods or Transactions Covered under TCS and applicable Tax Collected at Source Rates

When Higher Tax Collected at Source Rates are Applicable

Classification of TCS Buyers and Sellers as Defined U/S 260 IT Act

Sellers

Buyers

Rules for TCS exemptions

TCS Tax Filing Dates

TCS Compliance Checklist

TCS Compliance Penalties for Non-deposit of TCS

Key Takeaways

FAQs

When is TCS collected from the Buyer?

What is the applicable Tax Collected at Source Rates under GST?

What is 80G?

Definition of Section 80G in the Income Tax Act

Purpose of 80G: Encouraging Donations for Charitable Causes

Eligibility for 80G Deduction

1. Who Can Claim 80G Tax Benefit?

2. Types of Donations Eligible Under 80G: Why Section 80G is a Win-Win for Taxpayers and Charitable Causes

3. Exclusions: Donations Not Qualifying for 80G Deduction

Tax Saving Under 80G: How it Works

1. Deduction Limits: 100% vs 50% Based on the Organization

2. Conditions for Full Deduction Eligibility

3. How to Calculate 80G Deduction Amount

Tax Saving Under 80G: How it Works

1. Deduction Limits: 100% vs 50% Based on the Organization

2. Conditions for Full Deduction Eligibility

3. How to Calculate 80G Deduction Amount

How to Claim 80G Deduction

1. Required Documentation for Claiming 80G Deductions

2. Steps to File 80G Claims While Filing Income Tax Returns

3. Common Mistakes to Avoid When Claiming Tax Benefits

Advantages of Donating Under 80G

Common Challenges in Claiming 80G Deductions

How to Claim Tax Exemption Under 80G?

Who Can Claim 80G tax exemption?

Payment Modes for Donations under 80G

Documents Required to Claim 80G Deduction

Scope of deductions under Section 80G

Challenges of Section 80G

Types of deductions under 80G tax exemption

100% tax-deductible donations with no qualifying limit

50% tax-deductible donations with no qualifying limit

3.100% tax-deductible with a limit of 10% of the adjusted gross total income

50% tax-deductible with a limit of 10% of the adjusted gross total income

What is Adjusted Gross Total Income?

Key Takeaways

FAQs on Section 80G Deductions

Can a partnership firm claim an 80G exemption for the donations made?

How to find out which institution is covered under section 80G before donating?

What is Form 58?

Tax Brackets for FY24

How to Pay Less Tax in FY24 in India?

How to Pay Less Tax By Choosing the Right Tax Regime?

Salary-wise, How Much Tax Can You Save

How to Pay Less Tax by Filing Returns On Time?

How To Pay Less Tax by Choosing the Right Tax-Saving Investments?

Public Provident Fund (PPF)

Do I need to file an Income Tax Return if my annual income is below
Rs. 2.5 lakhs?