GST Registration

1. What is GST Registration?

In the GST Regime, businesses whose turnover is more than Rs. 20 lakhs (Rs 10 lakhs for North East and hill states) are required to register as a normal taxable person.

Registration under GST is mandatory for certain businesses. If the organisation is liable to register under the GST and carries on business without registering under GST, it will be considered as an offence under GST and heavy penalties will be levied.

GST registration will usually take 2-6 working days.

2. Who should register for GST in India?

Under the GST regime, the tax is payable by the registered taxable person on the supply of goods and services.

Here we have mentioned who needs to get registered under GST mandatorily.

  • Individuals who are registered under the previous law (Excise, VAT, Service Tax etc.)
  • When the businesses or the taxable person crosses the turnover threshold limit of Rs 20 lakhs (Rs 10 lakhs for North East and Hill States)
  • Inter-State Suppliers
  • Businesses having multiple branches in multiple states
  • Casual Taxable Person
  • A person who is required to pay tax under Reverse Charge Mechanism (if the supplier is unregistered under GST).
  • A person who want to take Input Tax Credit
  • E-Commerce operators, supplying goods or services
  • Non- Resident Taxable Person.

*Casual taxable person means the person whose place of business is not fixed and undertakes transactions occasionally involving the supply of goods or services or both.

*Non-Resident Taxable Person means the person whose place of business is not fixed or is not the resident of India and undertakes transactions occasionally involving the supply of goods or services or both.

3. What are the Documents required for GST Registration?

The document list varies for every business category. The most important document for GST Registration, Click here.

Different types of business categories under GST are:

  • Sole Proprietorship/ Individual
  • Private Limited Company/Public Company/One Person Company (OPC)
  • Partnerships
  • Limited Liability Partnerships (LLP)
  • Hindu Undivided Family (HUF)

4. What is the process for GST Registration?

  • The registration process under GST is explained in the steps below
  • To register under GST, go on the GST Portal www.gst.gov.in
  • Click the Services > Registration > New Registration option.
  • You will be re-directed to Part – A of the registration form. Please fill in all the basic details like is the person a taxpayer, GST Practitioner, Tax Deductor, etc., the State, District, Legal Name of Tax Deductor
  • Enter your Email ID and Mobile Number on which OTP will be sent for verification.
  • Based on the business entity type you will have to upload the documents.
  • Once the Documents are submitted, TRN (Temporary Reference Number) is generated. It will be sent via Email and SMS on the registered mobile number.
  • GST Officer will verify and either approve the application or would request to provide more document or details till the authority have all the information to approve.

5. GST Registration for different locations

Registration has to be taken in the state or union territory from where the registered supplier makes a taxable supply of goods & services. Registration is not required in that state where taxable supply is made. Where in case supplies of goods or services are made from different states, a separate registration will be required but there should be a fixed establishment in that other state from where the goods or services are supplied.

6. Time Period to get register under GST

The person is required to get himself registered under GST within 30 days from the date when turnover exceeds Rs.20 Lakhs or Rs. 10 Lakhs(for north east & hill states).

For example: BBC Ltd. is engaged in supplying taxable services in New Delhi. The turnover of BBC Ltd exceeds on 1st October, now BBC Ltd. is requiredto get registered by 1st November in the state of New Delhi.

7. What will be the penalty for not registering under GST?

The penalty of 10% of the taxable amount due, subject to a minimum of Rs.10,000 shall be levied on the person not paying tax or making short payments.
The penalty will at 100% of the tax amount due when the offender has intentionally evaded taxes.
Not registering under GST is an offence under Section 122. The GST Act has listed down 21 offences in section 122.

TDS on Rent of Property

A new section 194-IB has been introduced under The Finance Act, 2017 provides that any Tenant of a property making monthly rental payment exceeding Rs. 50, 000 is liable to deduct TDS at the rate of 5% from the rent payable to a resident landlord.

Eligibility to deduct the TDS on Rent of Property under section 194-IB?

The tenant of the property as an individual or a HUF (not liable for a tax audit u/s 44AB) would have to deduct the TDS and deposit the same to Government.

Individuals and HUFs who are not entitled to get their accounts audited and are paying rent of more than Rs 50,000 per month will have to deduct TDS at 5% of the rent paid in a financial year.

When to deduct TDS

TDS is to be deducted in March, the last month of the financial year. In case the property is being vacated before the end of the financial year, then tax is to be deducted in the last month of the tenancy. The last date for March compliance without interest or penalty is 30 April.

The Tenant of the Property must remember the following points:

1. All individuals or HUFs (except those liable to audit u/s 44AB) paying monthly rent to a resident in excess of Rs. 50,000 are liable to deduct TDS under section 194-IB
2. Deduct tax at the rate of 5 % from the rent payment made to the Landlord.
3. Furnish the Permanent Account Number (PAN) of the Landlord.
4. PAN of the Landlord and Tenant should be mandatorily furnished while filling online Form for furnishing rental information.
5. Do not perform any error in quoting the PAN or other details in the online Form.
6. Download and furnish TDS certificate in Form 16C from TRACES and issue the same to the Landlord or Lessor or Payee within 15 days from the due date of furnishing of the challan-cum-statement in Form 26QC.
7. If the Landlord / Lessor/ Payee is a non-resident, liability to deduct TDS arises under section 195 of the Income-tax Act, 1961.

Points to be remembered by the LandLord/ Lessor of the Property:

1. Provide your PAN to the Tenant for furnishing information regarding TDS to the Income Tax Department.
2. Verify taxes deducted by the Tenant in your Form 26AS.
3. Ask Form 16C from the tenant which has been downloaded from TRACES website only.

In Short:

Section 194-IB:

ü Person Eligible
Any Individual or HUF not liable for tax audit under section 44AB.

ü Limit
Rent of Rs. 50,000 for one month or part of the month.

ü Rate of TDS – 5%

ü No need to obtain TAN
Under this section, Tax payer need not obtain TAN.

ü Deduction, once in a year
As per this section, Taxpayer is required to deduct tax at source only once in a financial year.

ü Time of deduction
The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of tenancy if the property is vacated during the year, as applicable

Form 26QC

Form 26QC is the challan-cum-statement in respect of TDS on rent under section 194-IB of the Income-tax Act, 1961. It can be downloaded from TIN- NSDLwebsite.

What is Form 26QC?

You need to deduct TDS on rent paid to the landlord when the monthly rent exceeds Rs.50,000. It is now your responsibility to deposit the same with the tax authorities. This can be done by filling a form, namely Form 26QC.

When do I need to fill Form 26QC?

You need to submit Form 26QC within 30 days of deducting TDS from the rent you have paid to your landlord. Do note, if your rental agreement states quarterly payments to your landlord then you need to fill and submit Form 26QC within 30 days of deducting the TDS once every quarter. The rule is related to when you pay the rent and deduct the TDS and not a calendar. Form 26QC is the step between deducting the TDS and finally providing the TDS certificate (Form 16C) to your landlord.

Procedure to fill Form 26QC

Firstly fill Form 26QC, which is available at www.tin-nsdl.com. You are required to furnish details of your as well as of the landlord’s PAN, email ID and phone number; address of the property, the amount of tax deducted, etc. There are options for filling multiple PAN in case the property is owned by several people or is leased by multiple tenants. Multiple Form 26QC will be filed in case of various landlords.

After furnishing the details in Form 26QC, You can deposit the TDS through the option available i.e. ‘E-tax payment immediately’ via Net banking, debit or credit cards. You can also make the payments at a later date by opting for the ‘e-payment on subsequent date’ option. You can also visit any authorised bank’s branch to deposit the TDS once you have filled the Form 26QC.

TDS certificate in Form 16C is required to be furnished to the landlord within 15 days of the last permissible date of filing Form 26QC.

What if I don’t comply?

1. You are liable to pay 1% interest for every month of delay in deducting the tax. The penalty is higher at 1.5% per month if the tax has been deducted but not deposited.
2. Late filing of Form 26QC attracts a late fee of Rs 200 per day. For delay in issuing Form 16C, the penalty is Rs 100 per day.
3. If Form 26QC is not filed within one year after the due date, a penalty ranging from Rs 10,000 to Rs 1,00,000 could be levied on the tenant.

5 Steps to Pay Taxes Online

Guide for Online Payment of Income Tax/Advance Tax using Challan 280

Step -1 You can make an e-payment on the Department website i.e TIN-NSDL

Step -2 Select Challan 280 for making payment of Income Tax, Corporation Tax & Advance Tax.

Step -3 Enter Your Personal Information in Challan/ITNS 280

1. Applicability: In case Income Tax is levied on a Company, the option to be selected in Challan 280 is (0020)- Income Tax on Companies. In all other cases, where Income Tax is levied on Partnership Firm, LLP, Individual etc.- The option to be selected in Challan 280 is (0021) – Other than Companies.
2. PAN No. & Full Name: The Taxpayer is required to furnish the PAN No.in Challan 280 carefully as wrong PAN No. entered would lead to the tax refund being deposited on somebody else’s name. After entering the PAN No., it will automatically fetch your name as mentioned on your PAN No. Your name would appear on the confirmation screen after you click submit button.
3. Selection of Assessment Year: The Assessment year for which tax is to be paid should be carefully selected in Challan 280 as it also shows the option to pay tax for previous years as well. We’re currently on AY 2018-19
4. Type of Payment: In this option, Taxpayer is required to select the type of payment in Challan 280.

  • (100) Advance Tax: Where Tax is being paid for the same financial year on estimated income.
  • (300) Self Assessment Tax: Where Tax is being paid after the end of the Financial Year.
  • (400) Tax on Regular Assessment
  • (102) Surtax
  • (106) Tax on Distributed profit
  • (107) Tax on Distributed Income

5. Name of Bank: Mention the name of Bank through which you intent to make the online payment. Select from the dropdown list in the box.
6. Amount of Tax: It will be shown on the Bank website and not on the Challan 280. You are required to enter Income Tax amount details on Banks website.

Step -4 Once all the details have been verified by you as correct and submitted to bank, the payment can be done after login to you bank. After making payment of tax, you’ll get a tax receipt Challan 280 on the screen. Here, you’ll see details about your payment, Amount of Tax with BSR code and challan serial number.

Step -5 Enter the above challan details while filing your Income Tax Return.

CAX provides you accounting and bookkeeping services whilst also filing your taxes. You can view our list of services here.
If you have already placed a work order with us and are looking to provide us the challan you can start by PAYING YOUR TAXES following the steps mentioned above. And then upload the challan after logging in and clicking on your open work order.

Budget 2019: Tax Rebate not an Exemption

One of the key announcements from Interim Budget 2019 was the increase the in the TAX REBATE (under Section 87A) to Rs.12,500 for Individuals with income up to Rs.5 lakhs.

This has certainly led to confusion that all Individuals will get a tax benefit on their income upto Rs.5 Lakhs. Unfortunately that is not the case.

You only get benefit of the tax rebate if your Net Total Income after deductions is less than or equal to Rs. 5 lakhs.

Download and Read the Interim Budget 2019 Major Highlights!

First lets understand that there are no changes in the Tax Slabs and Rates for AY 2020-21

Income Tax Slab for FY 2019-20 (AY 2020-21):

Net Income Tax Rate for Resident Individuals (Less than 60 Years) Tax Rate for Resident Senior Citizen (More than 60 Years but less than 80 Years) Tax Rate for Resident Senior Citizen (More than 80 Years)
Upto Rs.2.5 Lakhs Nil Nil Nil
Rs.2.5Lakhs– Rs.3Lakhs 5% Nil Nil
Rs.3Lakhs- Rs.5Lakhs 5% 5% Nil
Rs.5Lakhs- Rs.10Lakhs 20% 20% 20%
Above Rs.10Lakhs 30% 30% 30%

* Health & Education Cess of 4%
* Surcharge will be levied at 10% on high taxpayers with income between Rs.50 Lakhs and Rs.1 Crore. The rate of surcharge for super high taxpayers, with income above Rs.1 Crore will remain same at 15%.

Now, Let’s understand the implication of the Tax Rebate announcement with an illustration:

Mr. Dravid has certain heads of income and has made investments under Section 80. Let us understand how his tax liability pre-budget and post-budget 2019 (assuming age < 60 years):

Scenario-1: Net Income between Rs.5 Lakh- Rs. 6 Lakh.

Income Heads Pre-Budget 2019 (AY 19-20) Post-Budget 2019 (AY 20-21)
  (in Rs.) (in Rs.)
Income From Salary 7,00,000 7,00,000
Less: Standard Deductions 40,000 50,000
Income From Salary chargeable to tax 6,60,000 6,50,000
Income From other sources    
Bank Interest 10,000 10,000
Gross Total Income 6,70,000 6,60,000
Less: Deductions under section 80C 1,50,000 1,50,000
Deductions under section 80TTA 10,000 10,000
Net Total Income 5,10,000 5,00,000
Income Tax Calculation    
Basic Exemption Limit:
For AY 2019-20 = Rs.2,50,000
For AY 2020-21 = Rs. 2,50,000
2,50,000 2,50,000
Tax at slab rates 14,500 12,500
Less: Rebate under Section 87A NIL 12,500
Add: Education Cess at 4% 580
-
Tax Payable 15,080 NIL

Therefore, Tax Rebate of Rs.12,500 will be given to all taxpayers with income upto Rs. 5 lakhs.

Scenario-2: Net Income between Rs.6 Lakh- Rs. 10 Lakh.

Income Heads Pre-Budget 2019 (AY 19-20) Post-Budget 2019 (AY 20-21)
  (in Rs.) (in Rs.)
Income From Salary 8,50,000 8,50,000
Less: Standard Deductions 40,000 50,000
Income From Salary chargeable to tax 8,10,000 8,00,000
Income From other sources    
Bank Interest 10,000 10,000
Gross Total Income 8,20,000 8,10,000
Less: Deductions under section 80C 1,50,000 1,50,000
Deductions under section 80TTA 10,000 10,000
Net Total Income 6,60,000 6,50,000
Income Tax Calculation    
Basic Exemption Limit:
For AY 2019-20 = Rs.2,50,000
For AY 2020-21 = Rs. 2,50,000
2,50,000 2,50,000
Tax at slab rates 44,500 42,500
Less: Rebate under Section 87A NIL NIL
Add: Education Cess at 4% 1780 1700
Tax Payable 46,280 44,200

As you can see in the above scenario the Benefit of Tax Rebate under Section 87A is not allowed if you Net Total Income is above Rs. 5lakhs.

Scenario-3 Now Lets discuss the tax implications on Mr.Dravid’s taxability with and without Tax Planning:

Income Heads Pre-Budget 2019 (AY 19-20) Post-Budget 2019 (AY 20-21)
  (in Rs.) (in Rs.)
Income From Salary 9,75,000 9,75,000
Less: Standard Deductions 40,000 50,000
Income From Salary chargeable to tax 9,35,000 9,25,000
Income From House Property    
Interest Paid on Housing Loan for Self Occupied House Property (u/s 24b) -2,00,000 -2,00,000
Income From other sources    
Bank Interest 10,000 10,000
Gross Total Income 7,45,000 7,35,000
Less: Deductions under section 80C: Maximum up to Rs.1,50,000
  • Life Insurance Premium (LIC) - Rs.35,000
  • School Education Fees for children's - Rs.15,000
  • Home Loan Principal Repayment - Rs. 1,40,000
  • Investment in National Saving Certificate (NSC) - Rs.20,000
No Tax Savings Investment 1,50,000
Deductions under section 80CCD(1B): Additional NPS NIL 50,000
Deductions under section 80TTA : Savings Bank Interest 10,000 10,000
Deductions under section 80D: Medical Insurance Premium Paid for self, spouse and children's. NIL 25,000
Net Total Income 7,35,000 5,00,000
Income Tax Calculation    
Basic Exemption Limit:
For AY 2019-20 = Rs.2,50,000
For AY 2020-21 = Rs. 2,50,000
2,50,000 2,50,000
Tax at slab rates 59,500 12,500
Less: Rebate under Section 87A NIL 12,500
Add: Education Cess at 4% 2,380 NIL
Tax Payable 61,880 NIL

Therefore, you can see Mr. Dravid has to pay Rs.61,880 in AY 2020-21 if he does not plan his tax saving investments and where Mr. Dravid plans for a proper tax saving investments efficiently for FY 2019-20 (AY 2020-21), he can save his tax liability and is not required to pay any tax upto a taxable income of Rs.5,00,000.

9 Components of Salary Structure

The term ‘Salary’ signifies any consideration given to employee by his employer. Any income is known as Salary if relationship between Payer and Payee is of Employer & Employee.

Breakup of your Salary

1. Basic Salary – Basic Salary is the minimum salary given by the employer to employee keeping in mind his qualifications, experience and technical skills. Basic salary is always given under grade system. This is a fixed component in your salary portion or CTC package (cost to company).

2. House Rent Allowance (HRA) House Rent Allowance or HRA is a component of the salary portion, which is provided by the employer to his/her employee. Employeed or Salaried Individuals who live in a rented house property can claim full or partial HRA exemption under section 10(13A). However, HRA is fully taxable in the hands of employees if they don’t live in a rented accommodation.

HRA Exemption allowed will be least of the following:

a) Actual HRA Received

b) Actual Rent paid reduced by 10% of Salary

c) 50% of basic salary in case where taxpayer is residing in a metro city.

d) 40% of basic salary in case where taxpayer is residing in a non-metro city.

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3. Conveyance AllowanceConveyance allowance is to be given to the salaried individuals for meeting travel expenses from their residence to work/office. From FY 2015-16, the conveyance allowance has been exempted up to Rs.1600 per month or Rs.19,200 per annum u/s 10 of Income Tax Act’1961.

You can claim this exemption only if it is provided by your Employer and not at the time of filing Income Tax Return.

In Budget 2018, Standard deduction of Rs.40,000 has been proposed to replace Transport Allowance of Rs.1600 p.m i.e Rs. 19,200 p.a and reimbursement of miscellaneous medical expenses of Rs.15,000 p.a.

4. Leave Travel Allowance (LTA)Leave Travel Allowance (LTA) is an allowance given to an employee from his employer for his travel expenses. LTA is also known as Leave Travel Concession (LTC). Salaried Individuals can claim exemption of LTA u/s 10(5) of Income Tax Act, 1961. Salaried employees are required to submit the proof of travel bills to their employer to claim the exemption. The exemption on LTA cannot be claimed in your Income Tax return. LTA can only be claimed from your employer.

5. Medical Reimbursement – A Salaried Individual can claim medical expenses up to Rs.15,000 for which you must submit bills to your employer. Under this Employers reimburse the portion of the medical expenses incurred by the employee. Deductions can be claimed for the medical expenses incurred on your dependents. Out of Rs.15000, unclaimed amount of medical reimbursement will be added to your taxable salary.

6. Special Allowance – The amount of special allowance is fully taxable in your salary.

7. Bonus – Any bonus paid to employees as performance incentive is fully taxable. This is all based on company polices. Bonus received by the employee is fully taxable in the hands of the employee on receipt basis and will be included in the gross salary of employee.

8. Employee contribution to Provident Fund – Employer and Employee both have to contribute a 12% of the employee’s basic salary every month towards Employee Provident Fund (EPF). This benefit is given to employees for their retirement. Employee’s contribution Deduction is available under Section 80C.

Amendment- In Budget 2018 proposals – EPF Contribution for women employees has been reduced to 8% from 12%. The contribution in respect of employer contribution remains same at 12%.

9. Professional TaxProfessional tax is a tax on employment, which is levied by a state. The maximum amount of professional tax that can be levied by a state is Rs 2,500. It is usually deducted by the employer and deposited with the state government. Professional tax is allowed as a deduction from your salary income while filing your Income Tax Return. No Professional Tax can be charged in Union Territories that is why there is no professional tax in Delhi

What is Medical Reimbursement? What is the difference between Medical Reimbursement, Allowance and Mediclaim?

Medical Reimbursement, Medical Allowance and Mediclaim , all these sound similar but they all have different tax implications in Income Tax Act.

Medical Reimbursement –

Medical Reimbursement is a reimbursement of medical expenses incurred by the employee for his own or his family member’s*. To claim this reimbursement, an employee is required to submit medical bills or cash memos to his employer and after verification by the employer, the amount will be reimbursed up to a certain limit. This reimbursement is not pre-determined or fixed. Medical Reimbursement up to Rs. 15000 p.a. is exempt from Income Tax.

*family member’s include: The Spouse and Children of the employee. Children may be dependent or independent (married or unmarried). Parents, Brothers & Sisters of the employee wholly or mainly dependent on the employee.

The Medical bills may not necessarily be of some Govt. Hospital or any other Hospital. It can be of any expense incurred on Medical Treatment for self or family members in private clinic/hospital etc. Thus, Medical Reimbursement is a Tax-free perquisite (up to extent of Rs.15000).

Apart from the above exemption of Medical Reimbursement, the following are also not taxable as per section 17(2) of Income Tax Act if treated in India:

1. Any amount of medical expenditure incurred by the employee for self or family members at a hospital run by the employer.

2. Any amount reimbursed for treatment in Government hospital or a hospital maintained by local authority or hospital approved by the Government for employees’ treatment.

3. Any amount paid by the employer towards the scheme of General Insurance Company for insuring the health of the employee.

In Budget 2018, Standard deduction of Rs.40,000 has been proposed to replace Transport Allowance of Rs.1600 p.m i.e Rs. 19,200 p.a and reimbursement of miscellaneous medical expenses of Rs.15,000 p.a.

Can I claim medical expenditure related to previous years?

The medical expenditure, which is incurred by the employee in the said financial year, can be claimed in same financial year itself by the employer and not of any other previous years.

Medical Allowance –

Medical allowance is a fixed component that you receive as part of your monthly salary; such allowance is taxable under the head salary income. No bills are required to be submitted for taking this allowance.

Difference between the Medical Reimbursement and Medical Allowance:

Medical Allowance and Medical Reimbursement both are the part of the salary structure but Medical Allowance is just an allowance and is fully taxable in the hands of employee whereas Medical Reimbursement is a perquisite and is exempt to a certain limit if employee submits original medical bills to employer. Medical Reimbursement is a Tax Free Component and it is exempted up to the amount spent by employee or Rs.15000 whichever is less.

For Example:

A) Mr. Kumar is working in XYZ Private Ltd. and spent Rs.12, 500 on medical expenditure on his and his spouse for the purchase for medicines during the financial year. Thus, to claim this medical expenditure from employer, he is required to submit original medical bills or cash memos to XYZ Private Ltd. to claim income tax exemption to the extent of Rs.15,000.

B) Alternatively, in case where Mr. Kumar has incurred medical expenses of more than Rs.15,000 for example Rs.22, 000, in such scenario Mr. Kumar can only claim tax exemption from his salary income to the extent of Rs.15,000 and the remaining Rs.7,000 will become taxable as per Income Tax Slab rate.

Mediclaim –

Mediclaim refers to Medical Insurance Premium or Health Insurance Premium. Deduction u/s 80D can be claimed on the premium paid towards mediclaim policy taken on the health of the self, spouse, parents or dependent children. But, the payment should be made by any mode, other than cash.

Medical insurance premium paid for Self, Spouse or dependent children can be claimed u/s 80D upto Rs 25,000. This limit has been increased to Rs 25,000 in Budget 2015-2016 which was earlier Rs.15,000.

If such person is specified as a senior citizen then the deduction amount will be Rs. 30,000 for AY 17-18.

An additional deduction for Medical Insurance premium paid for parents is tax deductible to the extent of Rs 25,000,if they are less than 60 years of age.

If your parents are senior citizens (60 years and above) then the maximum allowable deduction is Rs 30,000.

Amendment: The Limit of Rs.30,000 for senior citizens has been increased to Rs.50,000 in Budget 2018.

What is Conveyance Allowance?

The employers offer many allowances to their employees. One of the allowance is given for conveyance.

Conveyance Allowance also known as Transport Allowance granted to an employee to meet expenditure on commuting between residence and place of duty.

It is exempted up to Rs. 1,600 per month i.e Rs.19,200 p.a (Rs. 3,200 per month for blind, deaf, dumb and handicapped employees) under Section 10(14) of Income Tax Act.

Amount paid over and above the conveyance allowance prescribed limit is taxable under the head Income from Salaries. This exemption can be claimed by salaried individual employee.

Please do remember that you cannot claim the same at the time of filing your Income Tax return if your employer has not provided you the same.

In Budget 2018, Standard deduction of Rs.40,000 has been proposed to replace Transport Allowance of Rs.1600 p.m i.e Rs. 19,200 p.a and reimbursement of miscellaneous medical expenses of Rs.15,000 p.a.

Can You Claim Both HRA And Home Loan For Tax Exemption?

Can You Claim Both HRA And Home Loan For Tax Exemption?

Yes, you can claim tax exemption on both house rent allowance (HRA) and repayment of housing loan. In case you are living in a rented house and paying home loan on another house – even if both the houses are located in the same city – you can claim tax benefit.

Salaried individuals who live in a rental accommodation can claim HRA to lower their taxes. It is partially exempted. However, if an individual do not live in a rented accommodation, then the HRA is fully taxable.

The deduction on HRA is the lowest of the following under Section 10(13A) of the Income Tax Act:

a) Actual HRA Received

b) Actual Rent paid reduced by 10% of Salary

c) 50% of basic salary in case where taxpayer is residing in a metro city.

d) 40% of basic salary in case where taxpayer is residing in a non-metro city.

On the other hand, if you are paying a home loan you can also claim tax benefits on amount of principal and interest payments. Principal repayment, under Section 80C of the Income Tax Act, is exempted up to Rs. 1,50,000. And on interest repayment, exemption can be claimed up to Rs. 2,00,000, under Section 24.

Illustration 1:

Suppose Mr. Aditya lives in New Delhi and earns a basic salary of Rs. 40,000 per month. The HRA received by him is Rs. 18,000 and actual rent paid is Rs 12,000. How much exemption can he claim?

Solution: Let us understand the factors affecting HRA calculation.

a) Actual HRA received is (Rs 18,000 x 12) = Rs 2,16,000

b) Actual rent paid (Rs 12,000 x 12) – 10% of salary [(Rs 40,000 x 12) x 10%] = Rs 96,000

c) 50% of basic salary i.e. [(Rs 40,000 x 12) x 50%] = Rs 2,40,000

Therefore, Rs 96,000 is the least among the above obtained figures so Mr. Aditya can get Rs 96,000 exempt.

Illustration 2:

You are working in a city where you are living in a rented accommodation and you bought a house in your hometown.

Samarth works in Noida, but his wife and children live in Jaipur. He recently bought a house in Jaipur on a loan while he lives in a rented house.

Samarth can claim: HRA for rent he pays for the house in Noida, deduction of interest on home loan up to Rs.2,00,000 u/s 24b and principal repayment deduction under section 80C.

Guide to Income Tax

Income Tax in India

The two types of taxes in India are Direct Tax and Indirect Tax.

A direct tax is a tax which you pay on your income directly to the government. Indirect tax is a tax that is levied for goods or a service. This tax is, in turn, paid to the government. Indirect taxes take many forms in India such as service tax, value added tax or VAT .

Goods and services tax (GST), which has recently been introduced is an Indirect Tax which is levied in India on sale of goods and services.

Basics of Income Tax

In India, Income Tax is payable by every person on the total income, earned during the previous year at the rate of tax applicable for assessment year. There are five sources for income classified as:

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Head of Income Nature of Income
Income from Salary/Pension Salary and pension income is covered under the head of Salary
Income from House Property Rental Income
Income from Capital Gains Income from sale of capital asset e.g house property, shares etc.
Income from Business and Profession Self employed Income, Running own business, freelancer, Doctors, Chartered Accountants etc.
Income from Other Sources Interest income from Saving Bank Account, Fixed Deposits.

Income Tax Slab Rates

One of the key announcements from Interim Budget 2019 was the increase the in the TAX REBATE (under Section 87A) to Rs.12,500 for Individuals with income up to Rs.5 lakhs.

This has certainly led to confusion that all Individuals will get a tax benefit on their income upto Rs.5 Lakhs. Unfortunately that is not the case.

First lets understand that there are no changes in the Tax Slabs and Rates for AY 2020-21

Income Tax Slab applicable for FY 2019-20 (AY 2020-21)- Proposed in Budget 2019

Net Income Tax Rate for Resident Individuals (Less than 60 Years) Tax Rate for Resident Senior Citizen (More than 60 Years but less than 80 Years) Tax Rate for Resident Senior Citizen (More than 80 Years)
Upto Rs.2.5 Lakhs Nil Nil Nil
Rs.2.5Lakhs– Rs.3Lakhs 5% Nil Nil
Rs.3Lakhs- Rs.5Lakhs 5% 5% Nil
Rs.5Lakhs- Rs.10Lakhs 20% 20% 20%
Above Rs.10Lakhs 30% 30% 30%

* Health & Education Cess of 4%
* Surcharge will be levied at 10% on high taxpayers with income between Rs.50 Lakhs and Rs.1 Crore. The rate of surcharge for super high taxpayers, with income above Rs.1 Crore will remain same at 15%.

Income Tax Slab for FY 2018-19 (AY 2019-20):

Net Income Tax Rate for Resident Individuals (Less than 60 Years) Tax Rate for Resident Senior Citizen (More than 60 Years but less than 80 Years) Tax Rate for Resident Senior Citizen (More than 80 Years)
Upto Rs.2.5 Lakhs Nil Nil Nil
Rs.2.5Lakhs– Rs.3Lakhs 5% Nil Nil
Rs.3Lakhs- Rs.5Lakhs 5% 5% Nil
Rs.5Lakhs- Rs.10Lakhs 20% 20% 20%
Above Rs.10Lakhs 30% 30% 30%

* Health & Education Cess has been introduced and effective rate shall be 4% (Earlier Secondary & higher Education cess was 3%).
* Surcharge will be levied at 10% on high taxpayers with income between Rs.50 Lakhs and Rs.1 Crore. The rate of surcharge for super high taxpayers, with income above Rs.1 Crore will remain same at 15%.

Income Tax Slab for FY 2017-18 (AY 2018-19):

(I) For Resident Individual (Less than 60 years)/HUF/AOP/BOI

Net Income Tax Rate Surcharge Education Cess Secondary & higher Education cess
Upto Rs.2.5 Lakhs Nil Nil Nil Nil
Rs.2.5Lakhs – Rs.5L 5% Nil 2% 1%
Rs.5Lakhs- Rs.10L 20% Nil 2% 1%
Rs.10Lakhs- Rs.50L 30% Nil 2% 1%
Rs.50Lakhs- Rs.1Cr 30% 10% 2% 1%
More Than Rs.1Cr 30% 15% 2% 1%

(II) For Resident Senior Citizen (Whose age is 60 years or more but less than 80 years)

Net Income Tax Rate Surcharge Education Cess Secondary & higher Education cess
Upto Rs.3 Lakhs Nil Nil Nil Nil
Rs.3Lakhs – Rs.5Lakhs 5% Nil 2% 1%
Rs.5Lakhs- Rs.10Lakhs 20% Nil 2% 1%
Rs.10Lakhs- Rs.50Lakhs 30% Nil 2% 1%
Rs.50Lakhs- Rs.1Crore 30% 10% 2% 1%
More Than Rs.1Crore 30% 15% 2% 1%

(II) For Resident Super Senior Citizen (Whose age is 60 years or more but less than 80 years)

Net Income Tax Rate Surcharge Education Cess Secondary & higher Education cess
Upto Rs.5 Lakhs Nil Nil Nil Nil
Rs.5Lakhs- Rs.10Lakhs 20% Nil 2% 1%
Rs.10Lakhs- Rs.50Lakhs 30% Nil 2% 1%
Rs.50Lakhs- Rs.1Crore 30% 10% 2% 1%
More Than Rs.1Crore 30% 15% 2% 1%

Income Tax Slab for Domestic Companies for FY 2017-18 (AY 2018-19) – The companies with an annual turnover of up to Rs 50 crore in FY.2015-16, tax rate of them has been brought down to 25% from 30%. Other rates remains the same as were in the previous year.