6 Infuriating Tax Queries Answered

We are all usually surrounded by lot of questions related to investments, taxation, finance etc. In this article, we have handpicked 6 questions which are important and applicable to most of us.

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1. How are tax rebates calculated for payment and prepayment of a home loan?

Those who have availed a home loan usually have this typical problem in the initial years. The rebate under Section 80C is not available to the extent of amount repaid as principle repayment. Mr. Suresh (name changed) has started paying an EMI of Rs. 25,000 p.m. and thinks that his 80C is taken care because he is paying Rs. 3 Lakhs towards home loan. However, his principle repayment could be in the range of Rs. 30,000-40,000. Thus, balance 80C needs to be taken care.

Another example, out of the total 80C limit of Rs. 1.5 Lakhs, lets say your PF deduction already takes care of Rs. 48,000 and your insurance payments are around Rs. 30,000, then you are already good for Rs. 78,000 as far as tax saving is concerned. So from the rebate point of view, you may pay a lumpsum of Rs. 72,000 towards home loan prepayment. But if you are paying more than that you may not get tax benefits for the additional amount.

So, before you prepay your home loan, calculate whether the additional amount you intend to pay will fetch any tax benefits.

2. When do I need the help of a CA?

This query could be in everyone’s mind. A CA is someone perceived to be performing audits for corporates. However, there are CA firms who undertake tax consulting for individual tax payers too. Are his services necessary for individuals? Well, this depends from person to person. If you have decent knowledge about taxation matters and can take care of your ITR filing without requiring a second opinion, you can do without a CA.

However, those who are either less knowledgeable about taxation matters or less confident without a second opinion should avail the services of a CA for routine ITR filings and for other taxation queries.

Also, if you have a business which needs to be audited, then you would definitely require help of a CA.

3. What are the big tax breaks apart from 80C?

Apart from 80C, there are a few more tax breaks which might be worth taking a look at:

Section 80D: This section deals with premium paid towards health insurance. The limit has been enhanced from Rs. 15,000 to Rs. 25,000 and Rs. 30,000 p.a. for someone paying premium for senior citizen parents.

Section 80E: This section deals with the interest paid for educational loan. However, the loan has to be availed by the individual himself. For example, you cannot avail this benefit for payment of interest for loan availed by your children.

Section 80CCG: This section is mostly unknown to many because of its restrictions. This section allows you to invest up to Rs.50,000 in products eligible for RGESS (Rajiv Gandhi Equity Savings Scheme). When you invest Rs. 50,000 you get a deduction for Rs. 25,000 subject to fulfilment of 3 conditions:

1: Your annual income is less than Rs. 12 Lakhs

2: You have a demat account

3: You have not traded in equity markets before investing in RGESS.

Section 80DDB: This is towards the expenses made for a dependent’s treatment fo

r specified diseases. The maximum deduction available is Rs. 40,000 (and Rs. 60,000 if the patient is a senior citizen). If some amount of the expenses is reimbursed by medical insurance, it needs to be reduced.

Section 54EC: This is available if you have sold a property and have some capital gains. You can invest upto Rs. 50 Lakhs in one financial year to save tax on capital gains.

4. When I will be audited?

If you are a business person then you will be audited u/s 44AD if you meet any one of below conditions:

A] Your turnover for the FY is more than Rs. 1 crore

B] Your turnover is less than Rs. 1 crore but your profit is less than 8% of turnover.

If you are a professional (CA / Doctor / Lawyer) and your receipts are more than Rs. 25 Lakhs, then you will be audited.

5. When will I get previous years’ refund?

This is again a question that most people are worried about. Income tax department is in the process of streamlining the systems so that refunds are processed in not more than 120 days. However, there are few precautions that we need to take:

A] File your ITR on time. Delayed filing results in delayed refunds.

B] If you are not using digital signature, don’t forget to send the signed copy of ITR V within 120 days of filing.

C] Fill up your bank details with utmost care.

6. What’s the main difference between new ITR forms as compared to older ones?

  • Introduction of EVC (Electronic Verification Code) prevents sending hard copy ITRV
  • Super Senior citizen can file ITR in paper form
  • Detailed listing of all bank accounts held during the FY, details about your foreign travel, foreign assets, domestic assets etc. (ITR 2A for those having foreign assets).

P.S : The above article is written by Prof. Saurabh Bajaj and was first published on https://blog.bankbazaar.com/6-infuriating-tax-queries-answered/

Author: Prof. Saurabh Bajaj is CEO with Nidhi Investments, Mumbai. He has been actively involved in writing for investor awareness since last 5 years. His articles have a readership from 64 countries across the globe. He may be reached at saurabh@nidhiinvestments.com for any queries.

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Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

2 thoughts on “6 Infuriating Tax Queries Answered

  1. Very Well Written.

    I was not aware of 80DDB and 80CCG. Also had vague knowledge on 80E. Thanks to you, now I am aware.

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