Income Tax Return A.Y 2020-21- Few Important Points

-Electricity bill exceeding 1 lac, details required to be filed in Return.

-In ITR-4, details required to be mentioned if one crore or more deposits in current account.

-Cash and bank details in detailed if Return filed u/s 44AD, 44ADA, 44AE.

-Standard deductions upto Rs.50000/-

-A person, who jointly owns a single house property, to file his/her return of income in ITR-1 or ITR-4 Form, as may be applicable, if he/she meets the other conditions.

-Insertion of New sec 80EEA:- if some condition fulfilled, additional deduction of Rs. 1.5 lac for interest on Home loan.

-Notional Rent on second self occupied house withdrawn.No need to pay rental tax for second self occupied house.

-Sec 54 (Investment of capital gain in two residential houses if amount not exceeding 2 Crore).

Income  Tax Slab Rate for Assessment Year 2020-21 for Individual below the Age of 60 Years and HUF

Income Tax Slab Tax rates
₹0 – ₹2,50,000 Nil
₹2,50,001 – ₹ 5,00,000 5%
₹5,00,001 – ₹ 7,50,000 ₹12500 + 20% of total income exceeding ₹5,00,000
₹7,50,001 – ₹ 10,00,000 ₹62500 + 20% of total income exceeding ₹7,50,000
₹10,00,001 – ₹12,50,000 ₹112500 + 30% of total income exceeding ₹10,00,000
₹12,50,001 – ₹15,00,000 ₹187500 + 30% of total income exceeding ₹12,50,000
Above ₹ 15,00,000 ₹262500 + 30% of total income exceeding ₹15,00,000

Kindly note that

1. Basic income threshold exempt from tax for senior citizen (aged 60 to 80 years) and super senior citizens (aged above 80 years) is ₹ 3 lakh and ₹ 5 lakh respectively

2. Individuals having total income below 5 lakhs, are eligible for full tax rebate under section 87A. Maximum Rebate allowed is Rs. 12,500.

 3. Above rates does not include Surcharge and Ces which are as follows-

    • 10% surcharge is applicable on income tax if income exceeds 50 lacs but upto 1 crore
    • 15% surcharge is applicable on income tax if income exceeds 1 crore
    • 4% Health & Education Cess is applicable on the income tax and applicable surcharge.

Five Sources of Income under which Income is taxable:-

1. Salary

2. Income from House Property

3. Income from Business or Profession

4. Capital Gain (Capital Gain on Sale of capital asset)

5. Income from other Sources (FD interest, saving bank interest, lottery and game etc income)

All five Source of Income called Gross total Income.

Important Deductions available for Assessment Year 2020-21

Standard deductions ;- Flat Deduction of Rs.50k is available for A.Y 2020-2021 to every employee.

Interest on Home loan deduction-  upto Rs. 2 lac u/s 24(b) (under income from house property head)

House Rent Allowance

HRA should be received from the employer and Employees should be living in rented house.

Deduction:- least of the following:-

a) Actual HRA received

b) Actual Rent Paid – 10℅ of (Basic salary +DA)

c) 50℅ of (Basic+DA) Metro and 40℅ of (Basic + DA) Non Metro

If you are not getting HRA but if you are paying rent then you can get deduction u/s 80GG which is upto Rs.60000/-

Deduction Under Section 80C (Maximum Deduction Allowed Rs.1.5 lac)

1. For the FY 2019-20 i.e AY 2020-21 you need to invest in the specified options under section 80C between 1st April 2019 to 31st March 2020. The benefit for which will be claimed at the time of filing your income tax return in July 2020.

2. Sec 80C includes PF, PPF, LIC premium, Housing Loan Principal, Stamp duty and registration charges on house loan, Fixed Deposit, Mutual Fund ELSS, Tution fee of school for the children upto two children, Govt specified Infrastructure Bond.

3. PPF (Public Provident Fund) is risk free, tax free return and long-term investment tool for tax saving.. Resident Indian individual can apply for PPF account..NRI are not allowed..It can be opened in Bank or post office..It is secured investment plan in which you get monthly compounding rate.. Minimum Rs. 500 to Rs. 1.5 lac per year can be deposited in PPf account..Lock in period full 15 F.Y..Partial withdrawal or loan can be possible on PPf account after certain year of investment..Debt liability cannot attached to PPF account..

4. Mutual funds ELSS Scheme- Diversify long-term investment with high return upto 15℅..3 year lock in period..

5. Fixed Deposits- Low Risk with high liquidity..5 year lock in period with 5% to 6% return. Its interest is taxable.
According to current income tax laws, under Section 80C of the Income Tax Act, you can claim deduction for investments up to Rs 1.5 lakh in a financial year in tax-saving fixed deposits (FDs). The amount so invested is to be deducted from gross total income to arrive at the net taxable income. Below are a few important points you should be aware of before investing in tax saving FDs.

1. Only Individuals and Hindu Undivided Families (HUFs) can invest in tax saving FD scheme.

2. The FD can be placed with a minimum amount which varies from bank to bank.

3.A person can invest in these FD’s through any public or private sector bank except for co-operative and rural banks.

4. Investment in Post Office Time Deposit of 5 years also qualifies for deduction under section 80 (C) of the Income Tax Act, 1961.

5.The interest earned is taxable as per the investor’s tax bracket and therefore, TDS is applicable. The interest on deposits is payable on either monthly/quarterly basis or can be reinvested. A person can avoid TDS deduction on the interest earned by submitting Form 15G (or Form 15H for senior citizens) to the bank. Senior citizens can claim deduction of Rs 50,000 on the interest earned from deposits as per the section 80TTB.

6. National Savings Certificate (NSC)-  The National Savings Certificate is a fixed income investment scheme that you can open with any post office. A Government of India initiative, it is a savings bond that encourages subscribers – mainly small to mid-income investors – to invest while saving on income tax. A fixed-income instrument like Public Provident Fund and Post Office FDs, this scheme too is a secure and low-risk product. You can buy it from the nearest post office in your name, for a minor or with another adult as a joint account. They come with two fixed maturity periods – five years and ten years. There is no maximum limit on the purchase of NSCs, but only investments of up to Rs.1.5 lakh can earn you a tax break under Section 80C of the Income Tax Act. The certificates earn a fixed interest, which is currently at a rate of 8% per annum.

Deduction U/S 80CCD National Pension Scheme (NPS)

The NPS, which is a voluntary, defined contribution retirement savings scheme, offers two types of accounts to its subscribers. The Tier 1 account is non-withdrawable till the subscriber reaches the age of 60. Partial withdrawal before that is allowed in specific cases. The Tier 2 account is a voluntary savings account and subscribers can withdraw their money from it whenever they want.

Investment of up to Rs. 50,000 in the National Pension Scheme or NPS for all subscribers, whether salaried or self-employed, qualifies for additional tax deduction of Rs. 50000/- under Section 80CCD (1B) of the Income Tax Act. This deduction is in addition to the ₹ 1.5 lakh allowed under Section 80C. only Tier 1 accounts of the NPS are eligible for the additional ₹ 50,000 deduction under Section 80CCD (1B). Tier 2 NPS investments do not qualify for Section 80CCD (1B) income-tax benefits.

NPS Return 8% to 14% Return with high risk.

Deduction under Section 80D

  • In case of the individual, Rs. 25,000 for himself and his family
  • If individual or spouse is 60 years old or more the deduction available is Rs 50,000
  • An additional deduction for insurance of parents (father or mother or both, whether dependent or not) is available to the extent of Rs. 25,000 if less than 60 years old and Rs 50,000 if parents are 60 years old or more.
  • For uninsured super senior citizens (80 years old or more) medical expenditure incurred up to Rs 50,000 shall be allowed
  • A deduction of Rs. 5000 will be allowed under this section for payment of preventive health check-up of either the individual himself or his family members which includes spouse, parents and dependent children. This deduction is NOT in addition to the deduction of Rs.25000/50000 stated above, but is included in the above deduction

Deduction u/s 80DD

Treatment for specified illness:-

You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. The tax deduction limit of upto Rs 1.25 lakh in case of severe disability (i.e. disability of 80% or above) can be availed.

To claim this deduction, you have to submit Form no 10-IA.

Disability of the dependent should not less than 40%. The taxpayer has incurred expenses for medical treatment (including nursing), training and Rehabilitation of the differently abled dependant.

Deduction under Section 80DDB Medical Treatment

Medical treatment of spouse, children, parents and siblings and not for himself. Medical expenses incurred for critical disease like Cancer, Neuron Disease, Renal Failure, AIDS. Complete list is given in Rule 11DD) Medical Certificate from Neurologist or Civil Surgeon or CMO of govt hospital.

Deduction upto 40k and senior citizen upto One lac.

Deduction under Section 80E

Educational loan for Higher Studies.

Loan for higher studies in India or Outside India from bank or Financial Institution for himself, spouse, children.

Deduction can be claimed on Interest portion and not on principal..Any amount of interest can be claimed as deduction without limit.. Deduction is available for maximum 8 years or till the interest is paid whichever is earlier. It is advisable to take loan which ends upto 8 years.

Deduction u/s 80EE (Home loan interest for the first time buyers)

The existing provisions of section 80EE provide a deduction in respect of interest up to Rs 50,000 on loan taken for residential house property from any financial institution subject to the following conditions:

  1. He has taken loan for acquisition of Residential House Propety.
  2. Purchaser should be first time buyer. i.e. he has never purchased any house and now he is going to purchase a house.

iii. Value of the residential house property should not more than 50 lakh.

  1. Loan taken by Individual for the residential house property should not be more than 35 lakh.
  2. On the date of sanction of loan individual does not own any residential house property.
  3. Loan for this purpose taken by individual should be from the Bank or Housing Finance Company.

vii. For this purpose, loan should be sanctioned between 01.04.16 to 31.03.17.

Deduction u/s 80EEA

The existing provisions of section 80EEA provide a deduction in respect of interest up to Rs 1.5 Lakhs on loan taken for residential house property from any financial institution subject to the following conditions:

  1. Loan Sanctioned between 1.4.2019 to 31.3.2020 from financial institution /HFC
  2. Stamp Duty Value of House Property (HP) not exceed Rs.45 Lakh
  3. Not own any residential HP on the date of sanction of loan i.e. 1st time buyer
  4. when deduction is allowed under Section 80EEA , not allowable in other section
  5. Only to Individual (not for HUF, AOP etc)
  6. Rs.1.50 Lakh is over and above Rs.2 Lakh u/s 24, hence total Rs. 3.50 Lakh
  7. Carpet area of HP not exceed 60 sqmtr (645 sq ft) in metropolitan cities including Delhi NCR & carpet area not exceed 90 sqmtr (968 sq ft) in any other cities
  8. if a person jointly owns HP with spouse and they both paying the installments of the loan, then both of them can claim this deduction
  9. Section 80EEA Interest deduction is available from FY 2019-20 (AY 2020-21)

Period of sanctioning of loan by the financial institution is proposed to be extended to 31st March, 2021.

Deduction u/s 80G

Donation to Relief fund or approved charitable institutions. 100℅ or 50℅ deduction to prescribed funds.. Maximum 10℅ of Income for certain donations.

Deduction u/s 80TTA (Interest on saving bank account)

This deduction in respect of interest on deposits in the savings which is available for Resident Individual or HUF (other than those assessee who has covered in Section 80TTB) and Maximum deduction of Rs. 10,000/- will be allowed under this section

Deduction u/s 80TTB (Interest on saving bank account for Senior Citizen)

This deduction in respect of interest on deposits in case of senior citizens (a resident individual who is of the age of sixty years or more at any time during the relevant previous year) and Maximum deduction of Rs. 50,000/- will be allowed under this section

Deduction u/s 80GG (Deduction for Rent Paid)

Section 80GG allows the Individuals to a deduction in respect of house rent paid by him for his own residence. Such deduction is permissible subject to the following conditions :-

(a)  the Individual has not been in receipt of any House Rent Allowance from his employer specifically granted to him which qualifies for exemption under section 10(13A) of the Act;

(b) the Individual files the declaration in Form No. 10BA.

(c) The employee does not own any residential accommodation himself or by his spouse or minor child or where such Individual  is a member of a Hindu Undivided Family, by such family, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession; or

Quantum of deduction is as under:

Lower of:

1) Rent paid minus 10 percent the adjusted total income.

2) Rs 5,000 per month

3) 25 percent of the adjusted total income.

Deduction u/s 80U – Tax deduction for disabled Individual

Deduction under section 80U is available to a resident Individual who is certified by the medical authority to be a person with a disability.

For this section Disability means Low vision, Mental illness, Blindness, Loco motor disability, Mental retardation, Hearing impairment, Leprosy cured, Multiple disabilities, Cerebral Palsy and Autism.

The maximum amount of deduction available under section 80U differs between ‘person with disability’ and ‘person with severe disability’, and the same is tabulated here under –

Type of person Maximum amount of deduction available under section 80U
Person with disability (40% of any disabilities) INR 75,000
Person with severe disability (80% or more of any disabilities) INR 1,25,000

Author Bio

Qualification: CS
Company: Ishrat Siddiqui & Associates
Location: Gurgaon, Haryana, IN
Member Since: 31 Jul 2018 | Total Posts: 7
Ishrat Siddiqui,(B.COM, ACS), PRACTICING COMPANY SECRETARY FROM GURGAON. She is Associate Member of The Institute of Company Secretaries of India. Her domain is in assignments related to Companies Act 2013, Secretarial Audit, FEMA,Taxation . etc View Full Profile

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