Income –Tax Tips for Government Employees and pensioners for giving Income-Tax Statements in Feb 2019 and March 2019

All employees, whether government or Non-Government have to give Income-Tax statements in Feb 2019 to process their salary of Feb 2019. In certain cases, they have to give Income –Tax statements in March 2019. As far as pensioners are concerned they have to give Income-Tax statements to the Bank Managers or the Concerned Treasury officers for getting the pension of 2019 February and 2019 March . Therefore, through this article, I tries to inform you the latest income-tax information on the basis of which you may prepare your Income Tax –Statement. Besides, you have to file your Income-Tax return before July 31, 2020. Although ,this article is generally intended for all employees, its special purpose is to help the employees and Pensioners in the government sector.

Following are the important points on the basis of which you have to prepare your Income-Tax statement.

1. Your previous Year will be 2019-2020 and Assessment Year will be 2020-2021

1A. If your Gross Total Income is less than 5 lakhs, no special tax planning is needed from yourself. You may simply claim Rebate under Section 87A which amounts to a maximum of Rs. 12500 in the Assessment Year 2020-2021. Gross Total Income means total of the following Income.

  1. Income from Salaries
  2. Income from House Property
  3. Income from Business or Profession
  4. Income from Capital Gains
  5. Income from Other Sources

1B . Pension will come under the head salary and Family pension will come under the head Income from other sources.

2. As far as Salaried persons and pensioners are concerned, Standard Deduction of Rs. 50000 is available in the Assessment Year 2020-2021.

2A. A deduction amounted Rs. 15000 or 1/3 of Total Family pension whichever is less will be the deduction from Family pension.

2 B. House rent Allowance.

Following important points you have to consider to claim HRA

i. You must be living in a rented house.

ii. You should have rent receipts.

iii. You have to Pan Card copy of landlord if you are paying more than 100,000 annual rent.

2C. Travelling and Daily Allowance.

Any allowance granted to meet the cost of travel or tour or transfer is exempt as per the Income-Tax Act.

2D. Conveyance allowance and Transport allowance.

You will get exemption on the basis of certificate produced by you that the entire amount is spent by you for the discharge of your duties

2E. Fixed Medical Allowance.

Fully Taxable both in the case of salaried persons and pensioners

2F. Uniform Allowance.

Fully exempted.

2G. Professional Tax.

The amount of professional tax can be deducted from your gross salary.

3. You may claim Second House as Second Self –Occupied Property . But Total Deduction under Interest on loan taken for the House Property will be Rs. 200000. You may take Joint Housing loan with your Spouse. Then you and your spouse can claim maximum deduction of Rs. 200000 each.

3A. A deduction under Section 24 for interest paid on loan availed from friends or relatives is also allowed from the Net Annual Value. The law nowhere mandates that the loan should have been taken only from a bank to claim this deduction.

But here, one must note that the principal repayment in respect of such a loan will not qualify for a deduction under Section 80C.

3B. The Following points are also to taken into consideration to get deduction under sec . 24

i. Rs. 30,000/-is allowable for interest payable on loan taken for repair and maintenance of self -occupied property.

ii. The whole construction or acquisition of the house property should be done within 5 years from the FY during which the capital was borrowed.

iii. Certificate from the borrower is necessary to get deduction under Sec. 24

4. If your Gross Total Income (Including Interest) is less than Rs. 500,000 ,You may deposit in banks /Post-Offices (Term /Fixed/Recurring) as such:-

a. Total annual Interest on such accounts is less than Rs. 40000.

Banks and Post Offices did not deduct TDS up to Rs. 40000. Banks and Co-operative Societies will deduct TDS when the Interest is more than 40,000.

Other financial institutions will deduct TDS when you earn a interest of Rs. 5000 and above.

5. Closure or Opting out of the NPS did not attract tax up to 60% of the total amount payable.

6. Use maximum Electronic mode of payments

7. Maximum compliance of newly introduced Sections in Chapter VIA of Income Tax Act.

8. Sec 80EEA-Interest Up to 150,000 on loan taken for Residential House Property (Loan should be taken from 01/4/2019 to 31/03/2020)

Subject to conditions

b. Section 80EEB –Tax Incentives for Electric Vehicles

Maximum deduction on Interest on loan taken for purchase of an electric vehicle –Rs. 150,000

(Loan Should be taken from 01/04/2019 to 31/03/2023 )

Subject to Conditions

8. Easy Application of Sec. 89 is possible in the Assessment Year if you have received arrears of Salary (Easy Procedure).

9. Use PAN Card. Avoidance of PAN CARD attract TDS@20%. AadhaarCard can be used as PAN CARD for certain transactions.

10. Link PAN with Aadhaar . It is most urgent

11. You cannot hide your transactions from 2020-2021 on-words. CBDT will introduce Pre-filled Tax Returns in the Assessment Year 2020-2021 on words.

12. Contribute to NPS even if you are not coming under NPS Scheme. You may take NPS in Banks or Post offices.

13. . Besides,You may deduct the following deductions from your Gross Total Income (Chapter VIA). Please keep copies of receipt with you and attach original/copies as required by the DDO/The Treasury officer/Bank Manager /CEO with the statement of Income-Tax

A. SEC 80 C

LIC premium paid by you in respect of self, spouse and son and daughter can be deducted up to Rs. 150,000. In case of an individual, deduction is available in respect of policy taken in the name of taxpayer or his/her spouse or his/her children. No deduction is available in respect of premium paid in respect of policy taken in the name of any person, other than given above. Other deductions under Sec 80C are as follows

i. Tuition fees

ii. Contribution to SLI

iii. Contribution to GIS

iv. Contribution to Government Provident Fund.

v. Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions)

vi. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions)

vi. Contribution to Tier-II NPS account by central Government’s employees.

Vii. Contribution to PPF

B. Deduction in respect of Contribution to pension scheme of Central Government. (Including Atal pension Yojana)

I. Sec 80CCD (1).

Quantum of deduction

i. Amount deposited by the employer or 10% of his salary, whichever is less ;and

ii. in case of other individual , upto 20percent of his gross total income in the previous year.

II. Sec 8OCCD (IB)

Whether or not any deduction is allowed under as per Sec 80CCD (1) amount up to Rs. 50000 can be deposited in pension scheme and it will also be eligible for deduction. An additional deduction of Rs. 50,000/- under Section 80CCD (1B) is available to assesse over and above the benefit of Rs. 1. 50 Lakhs. Thereby, raising the maximum limit of exemption to Rs. 2. 00 Lakhs.

III. Sec 80 CCD(2).

Quantum of deduction

Amount contributed by Central Government or the employer subject to a maximum of 14% of employees salary for the previous year (In case of any other individual maximum deduction is 10%)

C. Sec 80 CCE

The maximum amount of deduction under sec 80C, Sec 80CCC and Sec 80CCD (1) shall not exceed Rs. 150,000.

D. Deduction in respect of medical insurance premium and Medical expenditure. (Sec 80D)

a. Health Insurance Premium

Following are the important points

i. Self and family (Including Senior Citizen)-Maximum Rs. 50000

ii. Parents –Maximum Rs. 25,000

iii. Parents (Senior) –Maximum-50,000

iv. Self and Family including Parents –Maximum Rs. 50,000

v. Self and Family including Senior citizen Parents –Maximum Rs. 75,000

vi. Self (Senior Citizen) and including Senior Citizen Parents –Maximum Rs. 100,000

b. Medical Expenditure

Following are the important points

i. Self and (Senior Citizen)-Maximum Rs. 50000

ii. Parents (Senior) –Maximum Rs. 50000

iii. Self and Family including Parents (senior citizen) –Maximum Rs. 100,000

Payment through cash mode is not allowed for Sec 80 D Payments except the following preventive medical checkup

c. Preventive Medical checkup

Maximum Rs. 5000 deduction is allowed for Preventive Medical checkup

E. Sec 80DD deduction in respect of Maintenance including medical treatment of dependant who is a person with disability

Quantum of deduction

a. For disability –Rs. 75000. (b) For severe disability –Rs. 125000

F. Sec 80DDB Medical treatment of Specified diseases for self and dependents.

Quantum of deduction

i. Amount paid or 40,000 whichever is less

ii. Where the payment is in relation to a senior citizen of the age of 60 years or more , the deduction shall be allowed amount paid or one lakh whichever is less.

G. Deduction in respect of interest on loan taken for higher education (Sec 80E)

H. Sec 80 Donations to certain funds and charitable Institutions

Following points are important in this respect

a. Pay any mode other than cash

b. Visit Income Tax Department Website and check eligibility of Institution Donations are as follows

c. Without qualifying Limit -100%

d. Without qualifying Limit- 50%

e. With qualifying Limit -100%

f. With qualifying Limit-50%

Donation to Kerala Chief Minister Draught Relief Fund can be included in Donation as 100% without limit menu.

I. Deduction in respect of Contributions Given by any Person to Political Parties or an Electoral Trust (Section 80GGC)

Any amount of contribution made by an assessee being any person to a a political party or an electoral trust except local authority and every artificial juridical person wholly or partly funded by the Government shall be allowed as deduction while computing the total income of such person.

Note : Sum contributed by way of cash shall not be allowed as deduction

J. SEC 80TTA Income from interest on Saving bank Accounts

Maximum amount of Rs. 10,000 can be deducted from interest on savings bank accounts of Banks and Post Offices included in the above Income from other sources

K. SEC 80TTB Interest on deposit in case of senior citizens.

Maximum interest of Rs,50,000 can be deducted by a senior citizen from interest on deposit income included in the above Income from other sources

L. SEC 80U In case of person with disability

Following are the important points

a. Self with disability –Maximum-Rs. 75,000

b. Self with severe Disability –Maximum -125,000

14. A. Rates are the same as those specified in Part III of the First Schedule to the Finance Act 2018

Upto Rs. 250,000 Nil
Rs. 250,001 to Rs. 500,000 5 percent
Rs. 500,001 to Rs. 10,00,000 20 percent
Above Rs. 10,00,000 30 percent

B. In the case of every individual,being a resident in India, who is of the age of sixty years or more but less than the age of eighty years at any time during previous year

Up to Rs. 300,000 Nil
Rs. 300,001 to Rs. 500,000 5 percent
Rs. 500,001 to Rs. 10,00,000 20 percent
Above Rs. 10,00,000 30 percent

15. Other Points

Surcharge will be as follows

A. If the Total Income exceeds Rs. 50 lakhs but does not exceeds Rs. 1 crore@10%

B. If the Total Income exceeds Rs. 1 crore but does not exceeds Rs. 2crore@15%

C. If the Total Income exceeds Rs. 2 crore but doesnot exceeds Rs. 5@ crore 25%

D. If the Total Income exceeds Rs. 5 crore@37%

E. Health and Education cess will be@4%

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December 2020