Vivad Se Vishwas Scheme

Latest Extended Due Date

The deadline for filing declaration under the direct tax dispute resolution scheme ‘Vivad se Vishwas’ is extended to 30th June 2021.

What is Vivad Se Vishwas?

The Vivad Se Vishwas scheme provides for settlement of disputed tax, interest, penalty, or fees in relation to an assessment or reassessment order on payment of 100% of the disputed tax and 25% of the disputed penalty or interest or fee.

The taxpayer is granted immunity from levy of interest, penalty and institution of any proceeding for prosecution for any offence under the Income-tax Act in respect of matters covered in the declaration.

CBDT said it had received requests from taxpayers, tax consultants, and other stakeholders to extend time-barring dates in view of the severe COVID-19 pandemic raging unabated across the country.

Steps to File a Declaration under Vivad Se Vishwas

  1. Login to the Income Tax Portal

    Firstly, login to the portal and click on the Vivad se Vishwas option.

  2. Prepare and Submit DTVSV Form

    Select the year and the filing type.

  3. Fill out the Form

    Firstly, fill Form-1 correctly.
    Fill Form-2 as a final submission.
    File the required documents properly. File them with DSC or EVC accordingly.

FAQs

Can VSV form be revised?

It has been clarified in the CBDT Circular that, the Declaration in Form 1 can be revised any number of times, before the Designated Authority i.e. the PCCIT issues a Certificate of final tax amount payable under the Vivad se Vishwas Scheme.

Is Vivad SE Vishwas scheme extended?

The Central Board of Direct Taxes (CBDT) on Friday further extended the due date for filing declaration under the ‘Vivad Se Vishwas’ (VSV) scheme till 31st June 2021.

Rebate Under Section 87A – Income Tax Rebate

The taxes paid by the citizens of India are utilized for the purpose of improving of the country’s economy. The Income Tax Department has created different tax slab rates for individuals with a different set of income. In order to make sure that the people with low taxable income do not get burdened with paying more taxes, the government has also set up provisions like claiming income tax rebate u/s 87A to reduce the tax liability of these people.

What is Income Tax Rebate Under Section 87A?

Under Section 87A of the Income Tax Act, 1961, resident individuals whose net taxable income is less or equal to INR 5,00,000 will be able to claim a tax rebate of a maximum of INR 12,500 or the amount of tax payable, whichever is lower.

What are the Eligibility Criteria to Claim a Rebate u/s 87A?

Individuals can claim rebate u/s 87A if they fall under the following criteras:

  • The total taxable income after deductions must not be more than INR 5,00,000
  • Senior citizens (aboe 60 years and below 80 years) can avail a rebate
  • Super senior citizens i.e. more than 80 years old are not eligible to claim a rebate u/s 87A
Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
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Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
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How to calculate Tax Rebate u/s 87A?

Following are the steps to calculate the tax rebate amount:

  1. Add all your incomes

    To calculate the rebate amount one needs to add their incomes from all sources to arrive at Gross Total Income

  2. Claim Chapter VIA Deductions

    Now reduce the tax liability by claiming all the applicable chapter VIA deductions

  3. Arrive at Net Taxable Income

    Arrive at your net taxable income after claiming the tax deductions

  4. Net Taxable Salary is less than or equal to INR 5 lacs

    After applying all applicable deductions if your net taxable salary is less than or equal to INR 5,00,000 than you are eligible to claim a rebate under section 87A

Let us take an example to understand the calculations better:

Mr Kumar, age 45 is a salaried residential individual.

Particulars for FY 20-21 Income
Gross Total Income 6,00,000
Deductions 1,50,000
Net Taxable Income: 450,000
Tax Payable before cess(5% INR 2.5 to INR 5 lakh) 10,000
Tax Rebate u/s 87A (INR 12,500 or tax payable whichever is lower) 10,000
Tax Payable Nil

FAQs

Can HUF’s claim tax rebate under section 87A?

No, only resident individuals can claim a rebate under this section. Companies and HUF cannot avail this benefit.

Can I claim a tax rebate of flat INR 12,500?

No, individuals are entitled to claim tax rebate u/s 87A of INR 12,500 or 100% of tax liability amount whichever is lower

Save Tax with the Help of your Family

Family members can be extremely instrumental in providing you financial benefits. In context with the income tax, a certain part of your money can be associated with your family members which could help you save tax. In this article we discuss some of the methods that help us save taxes.

Methods to Save Tax

Invest in the name of parents

This method is applicable to people whose parents fall under the non-taxable or lower tax bracket. It is possible to invest money under their names in the form of gifting them the money. This amount will not be taxable as monetary gifts to specified relatives are not taxed. It is possible to invest this money under FDs, in the senior citizens savings scheme, etc. Senior citizens are have tax exemptions of up to INR 50,000 on interest income from saving or fixed deposits in any bank, post office or co-operative bank.

The taxpayer can receive benefit u/s 80TTB for savings or fixed deposits and will be able to save up to INR 50,000 to INR 2,50,000 depending on parents’ income, and in addition, also INR 50,000 from the interest income.

Pay rent to parents

Receiving income from salary and living with your parents provides you an opportunity to save tax. The house should be owned by your parents and should not be co-owned by you. In this case, you can pay them rent and claim it under HRA. Your parents can claim a deduction of 30% of the annual rent for repairs and maintenance under section 24. This benefit is receivable under section 10(13A). In this case, you will be able to save the least of the following three:

  • Actual rent payable minus 10% basic salary
  • Total HRA that the employer provides
  • 40-50% of basic salary depending on residential conditions

Buy Health Insurance

It is possible to purchase health insurance for your parents who are above the age of 60 and claim deduction of up to INR 50,000 for the premium payable. Taxpayers can claim this benefit u/s 80D.

Joint Home Loan

A husband and a wife who are co-owners and co-borrowers of a self-occupied property, each can claim tax benefit on interest and principal payable for a home loan. Taxpayers can claim exemption u/s 80C in such situations. There is a possibility to save up to INR 7,00,000 depending on the amount of home loan.

Providing a Loan

Gifting money to your wife and investing the same amount will be clubbed with your income and taxed, unless you choose a tax free instrument such as the PPF. It would be better to provide a loan to your partner who was low or no income at a reasonable rate of interest. Though the interest will be added to your income and taxed, you will be able to save if she invests in an instrument with a higher rate of return.

Education Loan

Taking an education loan for higher studies will yield in the taxpayer receiving tax benefit on repayment of interest for up to 8 years starting from the year in which interest payment begins. Furthermore, the loan has to be from a financial institution such as a bank approved by the government. Taxpayers can save tax u/s 80E in this situation.

Invest for ward in PPF, mutual fund, ULIP

You can invest under your ward’s name as investment in certain mutual funds, ULIPs and traditional insurance plans are entitled to tax benefit u/s 80C. The income will be taxable. To avoid this, you can invest in tax free investments such as PPF. It is also possible to invest under equity mutual funds as there is no tax if the gain is less than INR 1,00,000 a year.

Pay tuition fee, education allowance or hostel accommodation fee

The is only applicable if the taxpayer has not completely used up section 80C deduction limit. This method can include the payable tuition fee for a maximum of two children every year. Salaried employees can claim an exemption of INR 100 every month per child up to two kids as children’s allowance. They can also claim INR 300 per child as hostel expenditure allowance.

Deduction for dependent with disability

If a taxpayer has a family member with a disability or a specific disease that requires huge medical expenses or maintenance, then, they can receive a tax benefit on the expenses they incur. They can claim a deduction under section 80DDB.

Invest under the name of adult children

If your child is above the age of 18, he/she will have to pay their taxes on the income they earn. Therefore, clubbing income rules will not be applicable to their situation anymore. Hence, if they fall under the tax exempt category, you can gift them money. The money you gift them can be invested in tax-free instruments, and the income earned will be tax free.

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FAQs

What is the limit for deduction under section 80C?

The maximum limit for deduction under section 80C is INR 1,50,000.

Can I claim deduction u/s 80E if my father has paid the loan?

No, you can not claim deduction u/s 80E. However, your father can claim a deduction u/s 80E. Because relative includes children of an individual.

Can I claim Chapter VIA deductions under the New Tax Regime?

With the majority of income tax deductions slashed in the New Tax Regime, some Deductions are still claimable.
– Rebate u/s 87A
– Standard Deduction on Rent Received
– Agricultural Income
– Life Insurance Income to Beneficiary
– Retrenchment Compensation
– Voluntary Retirement Scheme
– Leave Entrenchment on Retirement

Income Tax on Sale and Purchase of Motor Vehicle in India

India is a country with the third-largest road network in the world and today there are more than 300 million vehicles. According to Statista, travelling by road is considered a preferred choice in India with over 60 percent of the population using personal or shared vehicles for commuting from one place to another. Hence, it becomes crucial for taxpayers to understand the tax implications on the sale and purchase of the motor vehicle. This article will help you understand the various aspects related to the sale/purchase of motor vehicles.

What do you mean by Motor Vehicle?

With respect to calculating the tax on sale and purchase of a motor vehicle, Motor Vehicle includes cars, buses, motorcycles, off-road vehicles, light and regular trucks.

Tax on Sale of Vehicle

If the motor vehicle is being used for personal purpose then it will not attract any tax on the sale of the vehicle as it is not considered a capital asset. However, if the motor vehicle is used for business purpose then it is considered as a capital asset and hence long term or short-term capital gains tax will be applicable.

Tax on Purchase of Vehicle

As per the finance bill 2016, when a motor vehicle is purchased the seller is required to deduct TCS. Under section 206(1F) a seller has to deduct TCS @1% on the sale of the motor vehicle that is above INR 10,00,000. It is to be noted that this tax provision will also be applicable if someone buys parts of a vehicle for INR 2,00,000 or more.

Now, as of October 1, 2020, if the buyer is a dealer i.e. B2B then TCS is required to be collected u/s 206C (1H). If the buyer is an end customer i.e. B2C then TCS is must be collected u/s 206C (1F) and section 206C(1H) may apply when the consideration received for the sale of the motor vehicle is less than INR10 lakhs but the aggregate value of which exceeds INR 50 lakhs.

Under Section 206C(1H) as of October 1, 2020 seller is required to collect TCS@ 0.01% on receipt of a sum above INR 50,00,000 against the sale of goods. It is also important to note that because of COVID 19, the rate of TCS is 0.075% (a concession of 0.025% is given) till March 2021.

Measures taken by the Government to promote the sale of electric vehicle

In order to promote the sale of electric vehicles, a new section 80EEB was introduced. Under this section as of April 1, 2020, an additional deduction of INR 1,50,000 can be claimed on the interest paid on the loan taken for the purchase of an electric vehicle.

GST on Motor Vehicle

On Motor vehicles, GST is charged ranging from 12% to 28%. In addition to GST, composition cess is also levied ranging from 1% to 22%. These rates are charged based on whether the car is petrol, diesel or electric.

FAQs

If the motor vehilce is sold for INR 10,00,000, will TCS be applicable?

No, according to the provision, TCS will be applicable if the value of the vehilce is exceeding INR 10,00,000.

Is the TCS charged in Ex-showroom price or on-road price?

TCS @ 1% is charged on the ex-showroom price i.e. on sales consideration of the vehicle.

Is the limit of INR 10,00,000 inclusive of tax?

Yes, the limit INR 10,00,000 is inclusive of VAT i.e. Sales Consideration.

SCSS ( Senior Citizen Savings Scheme ) – Tax Benefits, Eligibility and Interest Rate

Having a steady income source in one’s retirement days is one of the important financial goals of individuals. Hence, investing is saving schemes that will provide a regular income during retirement is of utmost importance. SCSS (Senior Citizen Savings Scheme) is one such savings scheme that aims to provide individuals above the age of 60 to invest in order to have a secure source of income. This article will help you understand the various aspects that you need to consider when investing in SCSS.

What is SCSS?

SCSS is a retirement savings scheme backed by the government of India. It is a scheme that offers stable returns to its account holders and as the government monitors the scheme the risk of the capital loss is at its minimal. An individual can avail the benefit of SPSS via Indian Post Office or certified Public/Private Banks. The rate of interest on SCSS is compounded quarterly and distributed at every quarter on the first date of April, July, October, and January. Currently, the interest rate for the first quarter of the financial year 2020-21 is 7.4%

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Who is the Eligible to open an SCSS Account?

Residential individuals can invest in Senior Citizen Savings Scheme if they fall under the following eligibility criteria:

  • Senior Citizen who is a residential individual above the age of 60 years
  • A residential individual between the age of 55 and 60 who has opted for the Voluntary Retirement Scheme. It is important to note that these individuals have to invest within one month of receiving the receipt of retirement
  • Retired Defence Service Personnel can also opt for SCSS irrespective of the age
  • NRI’s and HUF’s are not eligible to open an account under SCSS

What are the benefits of investing in SCSS?

Investing in SCSS can have many advantages, some of which are as follows:

Income Tax Benefits

SCSS is one of the best retirements saving schemes as it offers a stagnant source of income, high-interest rate and also Income Tax Benefits. An individual can avail deductions under section 80C up to INR 1.5 lakhs on the principle amount if they opt for old tax regime. It is also important to note that the interest receivable is taxable as per the applicable tax slab. If the interest amount receivable is more than INR 50,000 for a year, TDS is applicable to the interest. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.

Minimum and Maximum Deposit Limits

The minimum amount that one can deposit in this scheme is INR 1000 and the maximum is INR 15,00,000. Moreover, it is important to note that deposits in SCSS can be made only in multiples of INR 1000.

One can deposit an amount in cash but it cannot exceed INR 1 lakh. However, if you want to deposit more than INR 1 Lakh than it has to be via cheque or demand draft.

Maturity and Withdrawals

The maturity period of SCSS is 5 years but can be further extended for 3 more years. An account holder can withdraw from their SCSS account prematurely after one year. There is also a penalty of 1.5% on the deposited amount which will be charged if someone wants to close before the completion of 2 years. Furthermore, if the account holder wishes to close the account after 2 years then there is a penalty of 1% on the deposit amount.

How to Open an SCSS Account?

One can open an SCSS account by either going to the post office or private/public bank. Self Attested copy of the following documents will be needed:

  • PAN card or Passport
  • Telephone bill/Electricity bill/ Adhaar Card
  • Birth Certificate/Senior Citizen Card
  • 2 passport-sized photographs
  • Form A needs to filled (One can get Form A from the Department of Posts)

After these documents are ready, one can go to the post office or private/public bank to open the account.

Which Banks are Offering SCSS Account?

Following is the list of banks from where one can open an SCSS account:

  • Allahabad Bank
  • Andhra bank
  • State Bank of India
  • Bank of Maharashtra
  • Bank of India
  • Corporation Bank
  • Bank of Baroda
  • Canara Bank
  • Central Bank of India
  • Syndicate Bank
  • UCO Bank
  • Union Bank of India
  • IDBI Bank
  • Indian Bank
  • Indian Overseas Bank
  • Punjab National Bank
  • United Bank of India

FAQs

Is it possible for an account holder obtain a loan by pledging the deposit/account under the SCSS, 2004?

No, withdrawals for loans is not permissible under this scheme as it defies the very nature of the scheme.

Can I transfer my account from one deposit office to another?

Yes, Form G must be filled, to transfer an account from one deposit office to another.

Am I allowed to cancel or change my nomination?

Yes, the nomination can easily be cancelled or changed by submitting a fresh nomination in Form-C to the bank/post office wherein said SCSS account is being maintained.

I am 57 and my wife is 50 years old, can I appoint her as partner in a joint account under SCSS?

As you are the primary account holder SCSS account, it is your age that is the qualifying factor. You can appoint your spouse as the joint account holder. Her age does not affect eligibility to act as your joint partner in the account. 

Proofs for Income Tax Declaration

The HR Department of your company is all set to roll up their sleeves and email you asking you to submit proofs of your Income Tax Declaration with the approaching new year. Employees have to submit investment proofs and provide income tax declaration so that their employer deducts the correct amount of TDS. There are things that you must be aware of pertaining to investment proofs that an individual needs to provide to their employer. These details are to be submitted under Form 12BB.

Major Sections to Claim Income Tax Declaration

Section 80C

Maximum deduction available under section 80C is INR 1,50,000. Following are the deductions covered under this section.

  • Life Insurance: Life insurance Premium slips (in the name of self/spouse/children)
  • ELSS/Mutual Fund (Tax Saving): ELSS/Mutual Fund Statement
  • PPF: Copy of PPF Passbook (Self, Spouse, any child)
  • Principal Repayment of Housing Loan: Home loan Statement mentioning principal amount repayment / Certificate from Bank
  • Children Tuition Fees (up to 2 children): Children Education fee receipts
  • Fixed Deposits (Tax Savings): Copy of Tax saving FD receipt
  • Unit linked Insurance Scheme / Plan: Receipts /Certificate / Statement of Account / Copy of passbook of the current financial year (Self, Spouse, any child)
  • NSC: NSC certificate, Interest statements on NSC purchased
  • Sukanya Samriddhi Account: Sukanya Samriddhi Account passbook.
  • Deferred Annuity Plan: Proof for the payment made for a non-commutable deferred annuity on the life of the individual himself or spouse or any child
  • Subscription to any deposit scheme/pension fund set up by the National Housing Bank (NHB): Subscription proof of deposit scheme or any pension fund or home loan account scheme of National Housing Bank

Section 80CCC

  • Pension Plan: Receipts /Certificate / Statement of Accounts / Copy of passbook of current financial year

Section 80D

The section 80D provides deduction for payment of medical health insurance premium.

  • Medical Health Insurance for self, spouse, and children
    • Proofs: Mediclaim policy copy or Copy of Premium receipt, Health- Checkup receipts
    • Deduction Limit: INR 25,000/- (for citizen above 60 years, the limit is INR 50,000/-)
  • Medical Health Insurance for parents
    • Proofs: Mediclaim policy copy or Copy of Premium receipt, Health- Checkup receipts
    • Deduction Limit: INR 25,000/- (If parents are above 60 years then the limit is INR 50,000/-)

Section 80DD

  • Expenditure on Dependents with Disability u/s 80DD.
    • Proofs: Certificate from Prescribed Authority in Form No. 10-IA or as per the applicable prescribed Form.
    • Deduction Limit:
      • INR 75,000 for 40% or more disability
      • INR 125,000 for 80% or more disability

Section 80U

  • Expenditure on own Disability u/s 80U.
    • Proofs: Certificate from Prescribed Authority in Form No. 10-IA or as per the applicable prescribed Form
    • Deduction Limit:
      • INR 75,000 for 40% or more disability
      • INR 125,000 for 80% or more disability

Section 80DDB

Treatment of Specified Diseases u/s 80DDB.

  • Proofs: The prescription in respect of the diseases or ailments specified diseases by the specialists
  • Deduction Limit: INR 40,000 [INR 1,00,000 in case of a senior citizen (aged 60 years or more)]

Section 80G

  • Donations to specified trust u/s 80G: Receipts of donations & PAN of Donee

Section 80E

  • Deduction of education loan interest u/s 80E: Copy of loan certificate reflecting the interest payments

Section 24(b)

  • Interest on Housing Loan:
    • Proofs: Certificate from Bank/Home Loan statement, Self- Declaration whether the house is self-occupied or let-out one, submit completion certificate or occupancy certificate for claiming interest paid on housing loan
    • Deductions: INR 2,00,000 in case of Self-Occupied Property. The total amount of interest paid in case of Let out property

House Rent Allowance (HRA)

Rental agreement or Monthly rent receipts (with Revenue Stamp in case rent in cash is INR 5,000/- or more-). In case, annual rent paid is more than INR 1 Lakh, landlord’s permanent account number should be quoted.

Section 10(5)

  • Leave Travel Allowance: LTA can be claimed in respect of two journeys performed in a block of four calendar years. The current block runs from 2018-2021
  • Proofs: Travel tickets

Section 17(2)

  • Medical Reimbursement
    • Proofs: Original Medical bills (including Parents, Wife/husband, Children)
    • Maximum Limit: INR 15,000
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FAQ

Can a company or a firm take the benefit of Section 80C?

The provisions of Section 80C are applicable only to individuals or a Hindu Undivided Family (HUF). Hence, a company or a firm cannot take the benefit of Section 80C.

What are the tax benefits that I can avail of for repaying a home loan ?

You will be eligible to claim both the interest and principal components of your repayment during the year.

Is the interest received on the tax saving FD taxable?

Yes, the interest received on a tax saving FD is taxable.

Tax consequences of switching Jobs during the year

People change jobs for higher salaries, better prospects, better exposure, etc. It’s common for people to move jobs during the financial year going after better pay or better work. But this results in various tax consequences of switching jobs mid-year. Communicating your last drawn salary and deductions claimed can solve half of your problems.

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Tax Consequences of Switching Jobs

Higher tax bracket due to switching jobs

Always check if the new job is putting you in a higher tax bracket. Let’s say if you are currently earning a Taxable Salary Income of INR 7,50,000 in the 20% tax bracket. And after switching jobs, your Taxable Salary Income is INR 10,65,000 which will take you into the 30% tax bracket. This could mean a substantially higher tax outgo. Which you need to communicate with your employer and ask them to deduct your TDS accordingly.

Furnishing Form 12BB with the previous salary details

Once you join the new employer, he/she will ask you to submit Form 12BB. Which includes the details of salary paid by previous employer and TDS deduction. One needs to be careful while filling Form 12BB as it will be the basis on which your employer will deduct TDS in the remaining month of the financial year.

You can also submit Taxable Salary of Previous Employer from your Form 26AS.
Tip
You can also submit Taxable Salary of Previous Employer from your Form 26AS.

Take a copy of Form 16 from the previous employer

Don’t forget to take a copy of Form 16 from your previous employer. Even though Form 16 is available after the end of the financial year, you will receive an interim Form 16 from your previous employer including details of salary paid, TDS deducted on your salary. This will help you to fill up Form 12BB which you need to submit to your new employer.

Upload Form 16
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Avoid claiming Deductions twice

Only claim tax-saving deductions and exemptions once. You can avoid this situation by submitting Form 12BB to your new employer. Just make sure that you claim only those deductions which you did not claim during earlier employment.

If you were unable to submit Form 12BB then you may have to check whether you are liable to pay any Advance Tax or Self-Assessment Tax. If your new employer has not taken into account your old employer’s TDS and deductions claimed, you might end up owing tax along with some interest penalty. In that case, you will end up with tax dues even after the deduction of TDS by both the employer.

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Example

Dinesh switched jobs during FY 2018-19. The following are his salary and TDS details.

Particulars Income from
ABC ltd (in INR)
Income from
XYZ ltd (in INR)
Actual tax liability (in INR)
Income from Salary 5,00,000 (April-September) 7,00,000 (October-March) 12,00,000
Less:
Basic Exemption Limit
(2,50,000) (2,50,000) (2,50,000)
Taxable Income 2,50,000 4,50,000 6,50,000
Tax Liability 0 10,400 44,200
Monthly TDS deducted by the employer 0 1733 for six months  
Total TDS deposited by the employer 0 10,400 10,400
Tax liability at the year-end     44,200
TDS shortfall     33,800

 

Conclusion

  • Higher Tax Bracket: When total salary income from both the employer is considered, Dinesh’s income falls under a 20% tax bracket.
  • Double Deductions: Both the employers considered the basic exemption limit of INR. 2,50,000 before deducting TDS. Hence there is a shortfall of INR. 33,800 which Dinesh will have to pay with interest penalty before he files his ITR.

You can avoid a shortfall in taxes by communicating your previous employment details (salary, allowance, deductions claimed, etc) accurately to your new employer. You can do it by submitting Form 12BB / Interim Form 16 to your new employer. Which will enable your new employer to calculate TDS accurately.

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FAQs

What to do if TDS is not properly deducted by an employer?

You need to ask your current employer to rectify the error and deduct the correct TDS on your total salary income. The other option is to pay the Advance Tax or Self Assessment Tax by yourself.

Can I file ITR-1 if I have switched jobs during the year?

Yes. You can file ITR-1. Further, make sure to consolidate the salary from both the employers before filing ITR.

Yes. You can file ITR-1. Make sure to consolidate the salary from both the employers before filing ITR.

Yes, you should declare your income from previous employment to the current employer. This will help the current employer to calculate tax on your total income for the year and deduct TDS accordingly. If you dont show the income the same will not get taxed, but you are violating the laws



Sukanya Samriddhi Yojana – Features, Registration and Benefits

Sukanya Samriddhi Yojana is aimed at the betterment of girl child in India. It is a savings scheme to cover girl child education and wedding expenses. The scheme offers income tax deductions on savings and fixed interest rates against the deposits.

Features of Sukanya Samriddhi Yojana

  • Rate of interest of 7-8% per annum which is more than any other government scheme
  • Investments are exempt from income tax under section 80C of the Income Tax Act
  • The opening amount for the account is INR 1,000. Thereafter multiples of INR 100 can be deposited in the account with a minimum of INR 1,000 per year
  • The maximum limit for deposits in the account is INR 1,50,000 per year
  • If a minimum of INR 1000/- is not deposited in a financial year, an account will be discontinued and can be revived with a penalty of INR 50/- per year along with the minimum amount required for a deposit for that year
  • If the account is not closed after maturity, a balance will continue to earn interest as specified for the scheme from time to time
  • Normal Premature closure will be allowed after completion of 18 years /provided that girl is married. The maturity period of the account is 21 years from the date of opening the account
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Who is Eligible to Open an Account under Sukanya Samriddhi Yojana?

The following are the eligibility criterias for openining an account:

  • Account under Sukanya Samriddhi Yojana has to be opened under the name of girl child
  • The parents or legal guardians can open the account in the name of the girl child
  • At the time of opening the account the girl has to be below the age of 10
  • One cannot open multiple Sukanya Samriddhi accounts for the same girl child
  • Two accounts for two girls can be opened in one family
  • The girl child has to be a resident Indian

How to open an Account for Sukanya Samriddhi Yojana?

An account can be opened at any of the authorized banks or at any post office. Form to open an account is available at all eligible bank branches and post office branches.

Documents required to open Sukanya Samriddhi Account:

  • Account Opening Form
  • Birth Certificate of Girl Child
  • Identity Proof for both Girl Child & Parent or Legal Guardian
  • Address Proof of depositor

What are the Tax Benefits available under SSY?

The investments made under Sukanya Samriddhi Yojana fall under the EEE (Exempt, Exempt, Exempt) Category. This means that contribution up to INR 1.5 lakh is deductible under section 80C, the interest that is earned as well as the maturity amount all are exempted from tax.

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Transfer of Sukanya Samriddhi Account

One of the major benefits of SSY is the ease of convience. One can transfer their SSY account from one part of the country to another without any hassel. One only needs to fill out and submit the transfer request form to the concerened post office or bank.

FAQs

How can my Sukanya Samridhdhi Yojana account get deactivated/inactive?

The Sukanya Samriddhi account will turn inactive in case the requirement of the minimum annual deposit of Rs 1,000 is not met.

How many times can I deposit in Sukanya Samriddhi Yojana?

The amount deposited in Sukanya Samriddhi account should not exceed Rs. 1.5 lakhs per year. However, the total number of deposits that you have made doesn’t matter either in a month or financial year.

Can Sukanya Samriddhi Yojana account be closed prematurely?

Yes, it is possible. Following are the circumstances where your account can be closed prematurely:
– It can be closed prematurely on the basis of marriage, change of citizenship and country of residence, only after maintaining deposits for 5 years. 
– It can be prematurely closed in case the account is causing a financial burden on the girl child or there is an urgent medical requirement or in instances of death of a parent or guardian.

Am I allowed to take a loan against the amount in Sukanya Samriddhi Yojana?

No, currently you are not allowed to avail a loan against your SSY balance.

If I forget to pay the minimum amount will there be a penalty charged?

Yes, a penalty of INR 50 will be charged if you miss contributing the minimum amount of INR 250 in a financial year.

What will happen in case of an unforseen death of the depositer?

In case of unforseen death of the depositor, the account is either closed and the accumulated amount is given to the family or girl child. Or, the account is kept running till the maturity period and the deposited amount continues to earn interest till the girl child attains the age of 21 years.

NSC ( National Savings Certificate ) – Features, Tax Benefits and Eligibility

NSC is a small savings scheme offered by the Indian Post office. The certificates earn fixed interest, which is currently at 6.8% per anum. You can get a tax deduction on your investment. However, returns earned are taxable at maturity. This article will help you understand the various aspects that you need to consider when investing in NSC.

What is NSC?

NSC is a scheme which encourages small to mid-income investors to invest in savings scheme which will also help them in availing tax benefits and having a risk-free return on investment. This scheme is popular amongst government employees and other salaried taxpayers. However, it does not earn inflation-beating returns like Tax saving Mutual funds.

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What are the Features of NSC?

  • Rate of Interest: The Interest rate offered is 6.8%
  • Minimum and Maximum Investment: There is no maximum limit for investment. The minimum investment amount is INR. 1000/-. Effective from 1.4.2016, NSC can be issued for any amount above INR 100 in one transaction, provided the certificate is issued for an amount rounded off to the nearest 100.
    • One transaction of one (set of) investor(s) should result in only one certificate in e-mode or one entry in the passbook on one day.
    • So the issue of the certificate need not be dependent on the availability of a pre-printed certificate of the appropriate denomination.
    • Earlier, it could only be issued in denominations of INR 100, INR 500, INR 1000, INR 5000 and INR 10000
  • TDS Applicability: There will not be any tax deduction at the source.
  • Loan Against NSC: The savings certificates obtained can be kept as collateral security to get a loan from banks
  • Rate of Return: It guarantees the same rate of return for the entire investment term
  • Types: The NSC VIII issue has a fixed maturity period of 5 years. The NSC IX issued with a fixed maturity period of 10 years had been discontinued w.e.f. 20.12.2015. Transfer of certificates from one person to another can be done only once from the date of issue to the date of maturity
  • Physical and E-Certificate: Effective from 1st April 2016, the National Savings certificate will only be available in electronic mode(e-mode). The existing physical certificates owned by you are to be discontinued

Who is Eligible to Invest in NSC? 

The government launched NSC as a saving scheme for residential individuals. National Savings Certificate aims to offer capital protection, even though the rate of interest is less than tax saving mutual funds or Public Provident Fund, the return is in this scheme is a guarantee.

  • Indian residents can invest
  • Trust and HUF cannot invest
  • NRI’s can also not invest

What are the Tax Benefits of NSC?

Deposits up to INR 1,50,000/- per annum qualifies for IT deduction under section 80C of the Income Tax Act. The interest earned is taxable. But each year the interest considered is reinvested in the NSC. This means that every year you show the interest amount as income and then reinvest that income. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. When the certificates mature it does not receive any tax deduction since the amount is not reinvested. The investor will have to pay tax on the final interest.

What are the Documents Required to Purchase NSC?

You must be KYC compliant to purchase National Savings Certificate.

  • NSC Purchase Form
  • Identity Proof such as PAN Card, Aadhar Card, Senior Citizen ID, Voter ID
  • Address Proof in the form of ELectricity Bill, Passport, Telephone Bill
  • Bank Statement along with a cheque
  • Passport Size Photographs

What is the Premature Withdrawal Procedure of NSC?

Even though NSC has a lock in period of 5 years, premature withdrawals are allowed in the following scenarios:

  • In case of death of the holder or holders (in case of the joint holder)
  • If any court of law orders the withdrawal of the certificate
  • If any Gazetted Government Officer forfeits the certificate

It is important to note that, if the certificates are withdrawn before completion of 1 year, you will not receive the interest amount only the principal amount. If the certificates are withdrawn after the completion of 1 year than the entire contribution as well as interest will be received.

Following documents are necessary for the withdrawal process:

  • NSC Original Certificate
  • NSC Encashment Form
  • Proof of identity
  • Signature of the nominee on the certificate is required
  • In case of a minor, attestation by a guardian is compulsory
  • If there are no nominees, the legal heir can opt for encashment upon submission of form SB84
  • In case of the demise of the account holder, the nominee can encash the certificate by submitting the following forms:
    • Annexure 1: Claim settlement application (registered at a post office)
    • Annexure 2: Claim settlement application (legal evidence)

Comparison with other Tax Saving Schemes

Investment Interest Lock-in Period Risk Profile
NPS 8% to 10% (expected) Till retirement Market-related risks
ELSS 12% to 15% (expected) 3 years Market-related risks
PPF 7.9% (guaranteed) 15 years Risk-free
FD 7% to 9% (guaranteed) 5 years Risk-free
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FAQs

Is the maturity value of NSC taxable?

Interest earned on the maturity of is taxable. During the investment tenure, annual accrued interest is not paid to the investor but instead, it is deemed reinvested. Since it is reinvested, it qualifies for deduction under section 80C thereby making it tax-free. However, when the NSC matures, the interest of the sixth year is not reinvested but paid out to the investor. So this interest amount upon maturity is not taxfree.

Is NSC one time investment?

NSC is a one-time investment. You can invest a minimum of Rs. 100 and there is not an upper limit for investment. Once you invest , then you will receive the maturity amount after 5 years of the lock-in period.

Can HUF invest in NSC?

No. HUFs and Trusts can not invest in NSC. The scheme is specially designed for Government employees, businessmen and other salaried classes.

Is there a lock in period in NSC?

Yes, the lock-in period is equal to the maturity period of the certificates i.e. 5 years. One can redeem it early but only under specific conditions.

Am I allowed to take a loan on the basis of NSC?

Yes, one can take a loan by keeping their certificates as collatral.

Can the nomination be changed in NSC?

Yes, nomination can be canceled or changed at any time by filling Form 3 and paying a nominal fee of INR 5.