Employee Investment Guidelines for FY 2019-2020: Brief note on applicable deductions under the Income Tax Act and Rules.
PAN Card and Investment Declaration Compulsory Requirement to furnish PAN by employee (Section 206AA):
The Income Tax Act makes furnishing of PAN number by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If employee (deductee) fails to furnish his/her PAN to the deductor, the deductor (Employer) has been made responsible to make TDS at higher of the following rates:
|Net income Range||Income-Tax Rate*|
|Up to Rs. 2,50,000||Nil|
|Rs. 2,50,000 – 5,00,000||5%|
|Rs. 5,00,000 – 10,00,000||20%|
|Above Rs. 10,00,000||30%|
For Resident Individuals 60 years to <80 years, tax rate will be NIL having Total Income upto Rs. 300,000/
Surcharge @ 10% for taxable income between Rs. 50 lakhs to 1 crore and
Surcharge @ 15% for taxable income > Rs. 1 Crore
II ) at the rate of twenty per cent.
In addition to above , Education Cess at 3 % on tax would be charged in both of the above cases.
The above implies that if taxable income is Rs 5 lakhs or less and there is no PAN card, tax will be at minimum of 20.60 %.
However, where the income of the employee is below taxable limit, no tax will be deducted.
We however recommend that Employees who do not have PAN card , procure PAN cards immediately post joining in their own interest, so as to avoid un- necessary enquiries from tax authorities at a future date.
House Rent Allowance 10(13A)
|10(13A)||For rented premises, the deduction will be the lowest of the following:
Salary includes Basic Salary & Dearness allowance
If the rent paid is 10% or less than 10% of salary, no exemption will be admissible.
HRA is fully taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent.
Individuals will be now required to deduct 5% TDS (Tax Deducted at Source) for rental payments above Rs. 50,000 per month.
If rent exceeds Rs. 1,00,000/- per annum, Employee has to furnish PAN card copy of Landlord.
Leave Travel Concession (LTC) 10(5) with Rule 2B :
The following are the important points, for claiming exemption u/s 10(5) of the Act read with Rule 2B of the Rules:
|10(5)||Exemption is limited to the actual expenses incurred on the journey for himself and his family.
The exemption shall be available in respect of 2 journeys performed in the block of 4 calendar years.
Journey has to perform in India (Domestic)
Definition of Family :
There is no as such ceiling limit for LTA.
|For journeys performed by Air||Air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination|
|Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air||Air-conditioned first class rail fare by the shortest route to the place of destination|
|Where place of origin of journey and destination or part thereof are not connected by rail||i) Where a recognized public transport system exists, the first class or deluxe class fare on such transport by the shortest route to the place of destination
ii) Where no recognized public transport system exists, the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey has been performed by rail.
|Note: Current block of four year is 2014-2017. Benefit claimed cannot be more than the amount of LTA received|
Deduction of Interest on Borrowed Capital for Computation of Income from House Property under Section 24(b) in case of Self-Occupied House Property:
|24(b)||Quantum of deduction allowed as per Table below:
Set- off of losses from house property against any other income is restricted up to Rs.2,00,000/ and balance unabsorbed loss from house property can be carried forward for eight subsequent years.
|Purpose of Borrowing||Date of Borrowing||Maximum Deduction||Repair or renewal or reconstruction of the house||Any Time||Rs.30,000||Acquisition or construction of the house||Before 01.04.1999||Rs.30,000||Acquisition or construction of the house||On or after 01.04.1999||Rs.2,00,000|
|Purpose of Borrowing||Date of Borrowing||Maximum Deduction|
|Repair or renewal or reconstruction of the house||Any Time||Rs.30,000|
|Acquisition or construction of the house||Before 01.04.1999||Rs.30,000|
|Acquisition or construction of the house||On or after 01.04.1999||Rs.2,00,000|
Deduction under Chapter VI-A
|80C||ULIP, Tax Saver Mutual Fund, Pension Fund, Bank Term Deposit (FD)||
|80C||National Saving Certificate||
|80C||Tuition Fees for full time Education||
|80C||Repayment of Housing Loan||
|80C||Stamp Duty & Registration||Total deduction under section 80C for various investments can’t exceed Rs.1,50,000/-|
|80C||Investment in Post Office||Total deduction under section 80C for various investments can’t exceed Rs.1,50,000/-|
|80C||Sukanya Samriddhi Account||
|80C||ELSS, Long Term Infrastructure Bond||Total deduction under section 80C for various investments can’t exceed Rs.1,50,000/|
|80D||Mediclaim on Self, spouse and dependent children (including preventive health checkup)||
|80DDB||Maintenance including medical treatment of a dependant with disability||
|80CCD||Contribution to Pension Scheme (NPS) notified by the Central Government||Additional deduction to the extent of Rs. 50,000 shall be available to the assessee under Section 80CCD(1B). Additional deduction is over and above ceiling limit of Rs. 1,50,000 as provided under Section 80C.|
|80U||Deduction in case of disability (Self)||
|80DDB||Deductions of expenses on medical treatment of specified ailments (such as AIDS, cancer and neurological diseases) can be claimed under Section 80DDB||
|80E||Interest on Loan for higher education of self or relative||
|80EE||Interest on Loan for the purpose of acquisition of a residential house.||
- In case employees joining during the year, Form 12B or Provisional Form 16 or Tax Computation sheet for the current Financial Year is required from previous employer.
- If the same is not submitted, the income from previous employer will not be considered for tax calculation and the same should be considered later by the Employee while filing IT Return.
- Non submission of form 12B may also result in further income tax liability
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