[Brief Summary: This article provides valuable tips and suggestions to assist all the taxpayers in saving their taxes that are to be paid for the financial year 2019-2020. This article is packed with real-life comprehensive illustrations which shall give all the readers thorough insights to lower their tax incidence and will also help them understand the tax provisions & implications in a finer way]  

On 24th June, 2020, the Government issued a Notification No. 35/2020extending further, the various time limits under the Income Tax Act, 1961 and other related Laws for making various statutory compliances.

Earlier, in view of the challenges faced by taxpayers in meeting the statutory and regulatory compliance requirements across sectors due to the outbreak of COVID-19, the Government (Ministry of Finance) brought the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 on 31st March, 2020 which, inter alia, extended various time limits.

In order to provide further relief to the taxpayers for making various compliances, the Government issued the above Notification.

By virtue of the above mentioned notification, all the taxpayers have a last and final chance to save the taxes they have to pay for the financial year 2019-20 on their total income.

Last Chance

The salient features of the Notifications are as under:

Description Implication
FURTHER EXTENSION in the date for making investment/deposit/payment for claiming deduction under Chapter VIA-B

Date for making investment/deposit/ payment for claiming deduction under Chapter VIA-B which includes Section 80C (LIC, PPF, NSC, etc.), 80D (Mediclaim, etc.), 80G (Donations), etc. has been further extended to 31st July, 2020.

1. Investments/Deposits/Payments can now be made up to 31.07.2020 for claiming deduction under these sections for financial year 2019-2020.

2. The deduction can be availed only once for a financial year and cannot be taken for both the financial years simultaneously.

For example, Mr. Vineet can make PPF deposit on 31.07.2020 and claim the deduction for the same under section 80C for F/Y 2019-2020 or for F/Y 2020-2021. He cannot claim it for both the years simultaneously.

FURTHER EXTENSION in the date for claiming deduction under Section 54 to 54GB

Date for making investment, construction or purchase for claiming roll over benefit or deduction in respect of capital gains under sections 54 to 54GB of the Act has been further extended to  30th September, 2020.

The investment, construction or purchase made up to 30.09.2020 shall be eligible for claiming deduction from capital gains arising during F/Y 2019-2020.
FURTHER EXTENSION in the date for Aadhaar-PAN linking

Extension of Aadhaar-PAN linking date to 31st March, 2021.

The earlier date was 30th June, 2020.

To avoid penalty and invalidation of PAN, Aadhaar needs to be linked with PAN by 31.03.2021.

FURTHER EXTENSION in the date for filing income tax return (ITR) for FY 2018-2019 (AY 2019-2020) 

Date of filing ITR for FY 2018-19 further extended to 31st July, 2020.

The time for filing of original as well as revised income tax returns for the FY 2018-2019 (AY 2019-2020) has been further extended to 31st July, 2020.
EXTENSION in payment of Self-Assessment Tax if the tax liability is upto Rs. 1,00,000/- The date for payment of self-assessment tax in the case of a taxpayer, whose self-assessment tax liability is upto Rs. 1 lakh has been also extended to 30th November, 2020.

However, it was clarified that there shall not be any extension in the date for the payment of self-assessment tax for the taxpayers having self-assessment tax liability exceeding Rs. 1 lakh. In this case, the whole of the self-assessment tax shall be payable by the due dates specified in the Income Tax Act and delayed payment would attract interest under section 234A of the Act.

EXTENSION in the date for furnishing TDS/TCS statements and issuance of TDS/TCS certificates pertaining to FY 2019-2020 

Date of furnishing TDS/TCS statements/certificates extended to 31st July, 2020 and 15th August, 2020 respectively.

The furnishing of the TDS/TCS statements and issuance of TDS/TCS certificates being the prerequisite for enabling the taxpayers to prepare their return of income for FY 2019-20, the date for furnishing of TDS/TCS statements and issuance of TDS/ TCS certificates pertaining to the FY 2019-20 has been extended to 31st July, 2020 and 15th August, 2020 respectively.

Before we start our discussion, it’s important to take note of a major relief that was introduced by the Finance Act, 2019 that is applicable for the financial year 2019-2020!

“The Finance Act, 2019 provided that an assessee, being an individual resident in India, whose total income does not exceed Rs. 5,00,000 shall be entitled to a deduction, from the amount of income tax on his total income, of an amount equal to 100% of such income tax or an amount of Rs. 12,500, whichever is less. 

It is interesting to note that the government did not raise the tax-slab; instead, it raised the limit of rebate of income tax under section 87A (earlier Rs. 2,500) to exempt income tax on total income for a resident individual upto Rs. 5,00,000 w.e.f. 1st April, 2020 i.e. for the financial year 2019-2020.

As a result, of this relief, even persons having gross income up to Rs. 6,50,000 may not be required to pay any income tax if they make investments in provident funds, specified savings instruments, insurance, donations, etc. In fact, with additional deductions such as interest on home loan up to Rs. 2,00,000, interest on education loans, National Pension Scheme (NPS) contributions, medical insurance, medical expenditure on senior citizens, donation to various funds, etc. persons having even higher income will not have to pay any tax.

It is pertinent to note that

  • this rebate is available to resident individuals only and not to HUFs.
  • this rebate is only available when the total income does not exceed Rs. 5,00,000”

Taking note of the above, let’s now explore the tax saving tips/suggestions by way of 3 real-life comprehensive illustrations!

FIRST ILLUSTRATION: Mr. Avinash, resident individual, aged 36, earned salary of Rs. 8,31,000 for the financial year 2019-20. His employer deposited Rs. 1,05,000 in PF and he invested Rs. 45,000 in a 5 year tax saver fixed deposit with PNB. He also paid interest on loan of Rs. 1,05,000 taken for his self-occupied house. Moreover, he paid a premium for a family floater health insurance policy of Rs. 25,000.

What taxes shall Mr. Avinash pay for the financial year 2019-20? 

Statement showing computation of Total Income of Mr. Avinash and Tax payable thereon
Description   Amount (Rs.)
Income under the head Salary 7,81,000
Gross Salary 8,31,000
Less: Standard Deduction 50,000*
Income under the head House Property   (1,05,000)
Less: Interest paid on loan taken for self-occupied house 1,05,000
Gross Total Income (GTI)   6,76,000
Less: Deductions under Chapter VI-A   (1,75,000)
80C – PF contributions & deposit in 5 year Fixed Deposit with PNB 1,50,000
80D – Medical Insurance Premium paid 25,000
Total Income (TI)   5,01,000
Tax payable on total income   12,700
Up to Rs. 2,50,000 NIL
2,50,001 to 5,00,000 @ 5% 12,500
5,00,001 to 5,01,000 @ 20% 200
Less: Rebate on tax under section 87A (NIL as total income exceeds Rs. 5,00,000) NIL
Add: Health and Education Cess @ 4% 12,700 x 4% 508
Total Tax Payable   13,208

*Standard deduction increased from Rs. 40,000 to Rs. 50,000 by the Finance Act, 2019

Is there any way by which Mr. Avinash can save his tax? The answer is YES!

Mr. Avinash’s total income exceeds just by Rs. 1,000 which makes him ineligible to claim rebate as provided under section 87A. 

Mr. Avinash can save a tax of Rs. 13,208 only if his total income is upto Rs. 5,00,000. Thus, in order to lower his total income, Mr. Avinash is required to donate Rs. 1,000 to PM CARES FUND or PM-Nation Relief Fund which provides 100% deduction under section 80G by 31.07.2020 (as extended by Notification No. 35/2020, discussed above).

By virtue of this, his tax payable would be as follows:

Extract showing computation of Total Income of Mr. Avinash and Tax payable thereon
Gross Total Income (GTI)   6,76,000
Less: Deductions under Chapter VI-A   (1,75,000)
80C – PF contributions & deposit in 5 year Fixed Deposit with PNB 1,50,000
80D – Medical Insurance Premium paid 25,000
80G – Donation to PM Cares Fund 1,000
Total Income (TI)   5,00,000
Tax payable on total income   12,500
Up to Rs. 2,50,000 NIL
2,50,001 to 5,00,000 @ 5% 12,500
5,00,001 to 5,01,000 @ 20% 200
Less: Rebate on tax under section 87A (as total income is now not exceeding Rs. 5,00,000) 12,500
Add: Health and Education Cess @ 4% 12,700 x 4% NIL
Total Tax Payable   NIL

Thus, Mr. Avinash would save the entire tax by making a small donation towards a noble cause. Thus, there would be a multi-fold benefit! 

Effective net saving to Mr. Avinash would be (13,208-1,000) Rs. 12,208.

SECOND ILLUSTRATION: Mr. Zaid, aged 64, earned salary income in form of pension of Rs. 9,75,000 for the financial year 2019-20. He also received Rs. 56,000 from interest on FD made with SBI. He deposited Rs. 1,50,000 in PPF. He also paid interest on loan of Rs. 2,15,000 taken for his self- occupied house. He also paid a premium for a floater health insurance policy of Rs. 50,000 for himself and his spouse. He also made a donation of Rs. 21,000 to the PM Nation Relief Fund.

What taxes shall Mr. Zaid pay for the financial year 2019-20? 

Statement showing computation of Total Income of Mr. Zaid and Tax payable thereon
Description   Amount (Rs.)
Income under the head Salary 9,25,000
Gross Salary/Pension 9,75,000
Less: Standard Deduction 50,000*
Income under the head House Property   (2,00,000)
Less: Interest paid on loan taken for self-occupied house 2,15,000**
Income under the head Other Sources   56,000
Interest on Fixed Deposit with SBI 56,000
Gross Total Income (GTI)   7,81,000
Less: Deductions under Chapter VI-A   (2,71,000)
80C – PPF contribution 1,50,000
80D – Medical Insurance Premium 50,000
80G – Donations to PM-NRF 21,000
80TTB – Interest on FD 50,000***
Total Income (TI)   5,10,000
Tax payable on total income   12,000
Up to Rs. 3,00,000 NIL
3,00,001 to 5,00,000 @ 5% 10,000
5,00,001 to 5,10,000 @ 20% 2,000
Less: Rebate on tax under section 87A (NIL as total income exceeds Rs. 5,00,000) NIL
Add: Health and Education Cess @ 4% 12,000 x 4% 480
Total Tax Payable   12,480

*Standard deduction increased from Rs. 40,000 to Rs. 50,000 by the Finance Act, 2019

**Max. interest on loan paid taken for self-occupied house that can be allowed as deduction is Rs. 2,00,000 under section 24. The balance of Rs. 15,000 is disallowed.

***Max. allowance under section 80TTB is Rs. 50,000.

Is there any way by which Mr. Zaid can save his tax? The answer is YES!

Mr. Zaid’s total income exceeds by Rs. 10,000 which makes him ineligible to claim rebate as provided under section 87A. 

Mr. Zaid can save a tax of Rs. 12,480 only if his total income is upto Rs. 5,00,000. Thus, in order to lower his total income, Mr. Zaid is required to donate Rs. 10,000 to PM CARES FUND or further to PM-Nation Relief Fund which provides 100% deduction under section 80G by 31.07.2020 (as extended by Notification No. 35/2020, discussed above).

By virtue of this, his tax payable would be as follows:

Extract showing computation of Total Income of Mr. Zaid and Tax payable thereon
Gross Total Income (GTI)   7,81,000
Less: Deductions under Chapter VI-A   (2,81,000)
80C – PPF contribution 1,50,000
80D – Medical Insurance Premium 50,000
80G Donations to PM-NRF & PM CARES 31,000
80TTB – Interest on FD 50,000
Total Income (TI)   5,00,000
Tax payable on total income   10,000
Up to Rs. 3,00,000 NIL
3,00,001 to 5,00,000 @ 5% 10,000
5,00,001 to 5,10,000 @ 20% 2,000
Less: Rebate on tax under section 87A (as total income is now not exceeding Rs. 5,00,000) 10,000
Add: Health and Education Cess @ 4% 12,000 x 4% NIL
Total Tax Payable   NIL

Thus, Mr. Zaid would save the entire tax by making a further donation towards a noble cause. Thus there would be a multi-fold benefit! 

Effective net saving to Mr. Zaid would be (12,480-10,000) Rs. 2,480.

THIRD ILLUSTRATION: Mr. Ram Gopal, aged 86, receives a pension of Rs. 10,00,000 for the financial year 2019-20. He received Rs. 58,000 as interest on his saving bank account with IDBI. He deposited Rs. 1,00,000 in a 5 year FD with Post Office. He also paid interest on loan of Rs. 2,55,000 taken for his self-occupied house. He also paid a premium for a health insurance policy of Rs. 75,000 for his spouse and incurred Rs. 5,000 in cash towards her preventive health check-up. He also made a donation of Rs. 27,000 to the PM Nation Relief Fund. He has also paid interest on loan of Rs. 26,000 taken for higher education of his Ms. Shilpa for whom he is a legal guardian.

What taxes shall Mr. Ram Gopal pay for the financial year 2019-20? 

Statement showing computation of Total Income of Mr. Ram Gopal and Tax payable thereon
Description   Amount (Rs.)
Income under the head Salary 9,50,000
Gross Pension 10,00,000
Less: Standard Deduction 50,000*
Income under the head House Property   (2,00,000)
Less: Interest paid on loan taken for self-occupied house 2,50,000**
Income under the head Other Sources   58,000
Interest on Saving Bank Account 58,000
Gross Total Income (GTI)   8,08,000
Less: Deductions under Chapter VI-A   (2,53,000)
80C – 5 year FD with Post Office 1,00,000
80D – Medical Insurance Premium paid and  amount paid towards Preventive Health Check-up 50,000***
80E – Interest on loan for higher education 26,000
80G – Donations to PM-NRF 27,000
80TTB – Saving Bank Interest 50,000****
Total Income (TI)   5,55,000
Tax payable on total income   11,000
Up to Rs. 5,00,000 NIL
5,00,001 to 5,55,000 @ 20% 11,000
Less: Rebate on tax under section 87A (N/A here as the total income of Rs. 5,00,000 is already exempt) N.A.
Add: Health and Education Cess @ 4% 11,000 x 4% 440
Total Tax Payable   11,440

*Standard deduction increased from Rs. 40,000 to Rs. 50,000 by the Finance Act, 2019.

**Max. interest on loan paid taken for self-occupied house that can be allowed as deduction is Rs. 2,00,000. The balance of Rs. 55,000 is disallowed.

***Max. amount deductible under section 80D for Medical insurance premia and amount paid towards preventive health check-up is Rs. 50,000 therefore Rs. 30,000 is disallowed.

****Max. allowance under section 80TTB is Rs. 50,000.

Is there any way by which Mr. Ram Gopal can save his tax? The answer is YES!

Mr. Ram Gopal’s total income exceeds by Rs. 55,000 which makes him liable to pay tax. 

Mr. Ram Gopal can save a tax of Rs. 11,440 only if his total income is upto Rs. 5,00,000. Thus, in order to lower his total income, Mr. Ram Gopal is required to invest/deposit Rs. 50,000 in 5 year FD or ELSS or ULIP, etc. which shall provide a further deduction to the extent of Rs. 50,000 under section 80C (as the limit remains unutilized to this extent) and donate the balance Rs. 5,000 to PM CARES FUND or further to PM-Nation Relief Fund which provides 100% deduction under section 80G by 31.07.2020 (as extended by Notification No. 35/2020, discussed above).

By virtue of this, his tax payable would be as follows:

Extract showing computation of Total Income of Mr. Ram Gopal and Tax payable thereon
Gross Total Income (GTI)   8,08,000
Less: Deductions under Chapter VI-A   (3,08,000)
80C – 5 year Post Office FD & ELSS 1,50,000
80D – Medical Insurance Premium paid and amount paid towards Preventive Health Check-up 50,000
80E – Interest on loan for higher education 26,000
80G – Donations to PM-NRF/PM CARES 32,000
80TTB – Saving Bank Interest 50,000
Total Income (TI)   5,00,000
Tax payable on total income   NIL
Up to Rs. 5,00,000 NIL
5,00,001 to 5,55,000 @ 20% 11,000
Less: Rebate on tax under section 87A (N/A here as the total income of Rs. 5,00,000 is already exempt) N.A.
Add: Health and Education Cess @ 4% 11,000 x 4% NIL
Total Tax Payable   NIL

Thus, Mr. Ram Gopal would save the entire tax by making a further investment/deposit and donation towards a noble cause. There would thus be a multifold benefit! 

Effective net saving to Mr. Ram Gopal would be (Rs. 11,440-5,000) Rs. 6,440

[Note: Investment/Deposit made is not an expense rather it’s an asset. Thus, Rs. 50,000 which has been invested in ELSS has not been considered in computing the effective net savings]. 

CONCLUSION:

It is therefore, of utmost importance that you compute your total income and calculate the taxes payable thereon.

Time is runing

There is still a last opportunity by which you can save taxes on your total income i.e. by 31st July, 2020.

As discussed in the above examples, you can save taxes upto Rs. 13,000 (Rs. 12500 + 4% applicable health cess) by making donation towards a noble cause or by making necessary investments, deposits and payments.

For the information of all our readers, we wish to highlight the due dates for Filing Return of Income (ITR) and Tax Audit Report for F/Y 2019-2020 (A/Y 2020-2021): 

Description Before Now
–   ITR by a Company or

–   Where there is Audit requirement under Income Tax Act or any other law or

–   ITR by a partner of a firm whose accounts are required to be audited

31st October, 2020 30th November, 2020
Others 31st July, 2020 30th November, 2020
Filing of Tax Audit Report 30th September, 2020 31st October, 2020

 All our readers are requested to kindly take note of the following: 

[For ITR-1, 2, 3 and 4]

1. We advise all the taxpayers to file their ITRs only after 31st July, 2020 (being the extended last date for making investments/payments/deposits in order to claim deductions under chapter VIA-B i.e. 80C, 80D, 80G, etc.) so that they do not miss out on the last opportunity for claiming any deduction in a hurry to file for their ITRs.

[For ITR-2 and 3]

2. We advise all the taxpayers to file their ITRs only after 30th September, 2020 (being the extended last date for making investments/construction/purchase in order to claim roll over benefit/deductions under section 54 to 54GB, if applicable) so that they do not miss out on claiming any benefit/deduction in a hurry to file for their ITRs.

File your income tax returns in time to avoid last minute rush, late fees, interest, penalties and other statutory fines.

*****

For any queries with respect to the above article or to get assistance with regard to income and tax computation or alike, drop in the comment section below or send us an e-mail at connect@ujandco.com

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Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

Author Bio

Qualification: CA in Practice
Company: U J & CO.
Location: Delhi NCR, New Delhi, IN
Member Since: 29 Apr 2020 | Total Posts: 13
A first class commerce graduate from Delhi University, a Company Secretary and a practicing Chartered Accountant. Also a Co-Founder at UJ LEGAL LLP and Content Writer at TaxGuru. View Full Profile

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8 Comments

  1. CA (CS) Ujjwal Jindal says:

    To get the investment/deposits/payments made in time i.e. on or before 31.07.2020 you can contact us on the above mentioned details.

    We ensure the necessary well in time

  2. CA (CS) Ujjwal Jindal says:

    FOR INFO OF ALL OUR READERS:

    Kindly read 2,50,000 (inner column) in the answer to SECOND ILLUSTRATION as 2,55,000.
    This would however not impact the final answer.

  3. Ashok Pujari says:

    I am a retired person of 72 years.I have gone thru the detailed discussion on the above matter and found the same to be useful guidance.thank you.with regards.

    1. CA (CS) Ujjwal Jindal says:

      Thanks a lot for reading our article and appreciating.
      If you need any assistance with respect to Income Taxes or other Legal matters, feel free to contact us on e-Mail or Call/Whatsapp.
      We can also help you file your ITR for the FY 2019-20!

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