In India, the high-value cash transactions has been moderated by income tax laws to monitor cash flows and preventative measures against illegal financial doings. According to these regulations, any cash deposit of INR 10 lakh or even more into an saving account demands notifying tax authorities! Moreover, the notification thresholds for current accounts has been raised to INR 50 lakh. Although high-value cash transactions is not immediately taxed, financial institutions is mandated with reporting transactions exceeding these limits to the Income Tax Department!

Purpose of Income Notice For Cash Deposits:

The Income Tax Department is employing various data analysis techniques for fingers pointing at individuals possibly evading taxes or maybe engaging in financial activities that lifts red flags! A collaboration amidst numerous government agencies enables to cross-reference financial transactions and expenditures, making detecting potential tax evasion or discrepancies simpler! This collaborative perch wants to uncover individuals who spends money significantly but fails to file income tax returns or does understate their incomes.

The following transactions are on the list of those for which a taxpayer might receive an Income Tax Notice for Cash Deposits:

High-Value Transactions
When big transactions are done in big denominations or exceed a preset threshold, taxpayers got to report these in their income tax returns, otherwise, it’ll trigger an income tax notice for cash transactions, that might result in penalties or extra investigations by the tax enforcement folks! The Income Tax Department conspires with a variety of governmental friends to collect financial datas about taxpayers engaged in such high-value transactions but kept it secret when filing.

Form 61A and How Important It Is
Form 61A, previously the Annual Information Return, it’s really crucial in all this. Taxpayers must prepare a statement telling their “specified financial transactions,” or SFTs, for a particular financial period.

Filing Deadline and them Penalties
One must submit Form 61A by the very last of May each financial year!!! Failing to do so can really pinch you with penalties.

Staying clean with these regulations is key to avoid scary cash deposit income tax notices and smoothen the tax filing process in India. Getting the hang of high-value cash transactions and the noisy income tax notices really sets taxpayers on the right path to minimize penalties or further look-overs by tax folks.

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The post Understanding High-Value Cash Transactions & IT Notices first appeared on YMC Pune.

• Tax refunds are initiated by the tax department once you have E-verified your return
• Typically, it takes 4-5 weeks for the refund to be deposited in your bank account
• If the refund is not received within this timeframe, you should consider these steps:
  • Check intimation for any discrepancies or errors in your ITR (Login to e-filing portal > e-File > Income Tax Returns > View filed returns)
  • Check your email for notifications from the Income Tax (IT) department regarding the status of the refund.
  • Check the refund status using the methods provided below

How to Claim an Income Tax Refund?

To get your income tax refund or TDS refund, all you need to do is file your Income Tax Return and declare your income, deduction and tax paid details to the Income Tax Department. The amount of refund receivable is computed and shown in the tax return.

You have to finish e-filing to get your Income Tax Refund. Make sure to e-file this year to get your tax refund faster.

How to Calculate the Income tax Refund with Example?

If you paid more taxes than you were required to pay, you can claim the additional amount as an income tax refund.

Income Tax Refund = Taxes paid – Total tax liability 

If the taxes paid (either by way of Advance Tax or TDS or TCS or Self-Assessment Tax) are more than the actual tax amount due, then the excess tax paid can be claimed as a refund. The income tax department will recompute the taxes and validate the refund claim before initiating the refund.

For example: Assume Mr. Gupta paid 3 lakh as an advance tax during the financial year. At the end of the financial year, he learns his tax liability is only 2 lakh. He can request a refund by filing an income tax return (ITR). If the assessing officer approves his request, the excess tax amount of 1 lakh will be credited to Mr Gupta’s pre-validated bank account.

3 lakh Advance Tax – 2 lakh Tax liability = 1 lakh Tax refund for Mr Gupta 

How to Check your ITR Refund Status for AY 2024-25?

If you are concerned about your tax refund status, you can check the status of the income tax refund in three different ways, here are the methods listed below.

1. Through the Income Tax Portal

Step 1: Visit the income tax portal and log in to your account

Step 2: Click on ‘e-File’, choose ‘Income Tax Returns’ and then select ‘View Filed Returns’

Step 3: You can see the status of your current and past income tax returns.

Step 4: Click on ‘View details,’ and you’ll see the status of your income tax refund, as shown in the picture below.

2. Through NSDL Portal 

Step 1:  Visit the NSDL Portal

Step 2: Enter your PAN details, select the Assessment Year from the drop-down option for which tax refund is awaited and enter the Captcha Code

Step 3: Click ‘Proceed’ under the ‘Taxpayer Refund (PAN)’ option

You will be directed to a page that displays the ‘Refund Status’.

3. Through TRACES

Step 1: Log in to the income tax portal

Step 2: Click on ‘e-File’, select ‘Income Tax Returns’ and hit ‘View Form 26AS’

Step 3: You will be directed to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) page, and Click on ‘View Tax Credit (Form 26AS/Annual tax statement) at the bottom of the page

Step 4: Select the Assessment Year from the drop-down menu, and select view as ‘text’

You are directed to a page that displays the details of the paid refund

What does my Refund Status Mean?

Types Refund Statuses are as follows:

1. No E-filing has been done for Current AY

Step 1: What does this mean? 
This could mean your IT return was not filed at all.

Step 2: What do I do now? 
Double-check the Assessment Year that you checked your refund status for. Remember, Financial Year (FY) 2022-23 corresponds to Assessment Year (AY) 2023-24

2. Under Processing

What does this mean? 
This means that the income tax department has still not processed your income tax return. Please check your refund status after a month to see if it has been updated.

3. Refund Issued

What does this mean? 
This means the income tax department has sent the refund to you (by cheque or by direct debit to the bank account number you provided while e-filing).

4. Processed with No Demand No Refund

Step 1: What does this mean?

This could mean either:

• The most common case is you filed with no refund and no tax due. In that case, you’re all set for this year.
• It could also be that you did file for a refund, but the income tax department denied it because their calculations did not match yours.

This can generally happen because of a mismatch of TDS data or incomplete or improperly filled sections in the original filing.

Step 2: What do I do now?

If you forgot to include some deductions while filing, you can revise your return

• When the income tax department differs on the information you’ve provided, they would have also sent you an intimation u/s 143(1) explaining why. You can now fix the errors and file a rectification to support your refund claim.
• You can get help from an expert who can go through your tax notices and tax returns to best guide you. The expert can also help you file a rectification.

5. Refund Failure

Step 1: What does this mean?

This could mean the bank account details (account number or IFSC Code) that you submitted to the IT department are wrong and not pre-validated, and hence the refund wasn’t processed.

Step 2: What do I do now?

You need to log in to incometax.gov.in , enter the correct bank details with the IT department, and validate the bank details.

After you pre-validate the bank account, apply for the ‘Refund Reissue’ from your e-filing account.

6. Case Transferred to Assessing Officer

Step 1: What does this mean? 
This could mean:

This typically indicates that the IT department needs further clarification/information regarding the income tax return that you filed. The Assessing Officer would like to discuss things further with you.

In some cases, this could also mean that you have some past taxes outstanding with the IT department which will be adjusted against the tax refund requested by you.

Step 2: What do I do now? 
On receiving such a message, contact the AO (Jurisdictional Assessing Officer) for your region.

7. Demand determined

Step 1: What does this mean? 
This means your refund request has been rejected, and in fact, the IT department finds that you owe them unpaid taxes instead.

You may also have received a notice from the income tax department stating the exact amount of tax outstanding and the reason for it.

This can happen because of incomplete or improper filing of tax details in the original return, withholding income information, or mismatch in TDS.

Step 2: What do I do now? 
Read the intimation the IT department has sent you carefully and figure out where the problem occurred. Cross-check with your own e-filing records to verify the information you provided was accurate.

If you find that your own refund request was indeed erroneous, pay the tax demanded by the IT department within the time limit mentioned in the intimation.

If you think the IT department made a mistake, you can update your information if necessary and file a rectification supporting your refund claim.

We can connect you to an expert who can go through your tax notices and tax returns to best guide you. They can help you file a rectification.

8. Rectification Processed Refund Determined 

What does this mean? 
This message again goes out only to taxpayers who had been served an intimation to rectify their original returns. The rectified returns may be completely or partially accepted by the IT department.

Based on the rectification, the IT department has calculated the refund amount and credited the refund

Such a message is shortly followed by a revised intimation and the refund amount from the IT department.

9. Rectification Processed Demand Determined

What does this mean? 
This message again goes out only to taxpayers who have been served an intimation to rectify their original returns. The IT department may completely or partially accept the rectified returns.

However, the IT Department maintains that you have outstanding unpaid taxes. You will also receive an intimation with the exact amount that is outstanding and will have to pay this off within 30 days of receipt.

10. Rectification Processed No Demand No Refund

What does this mean? 
This message again goes out only to taxpayers who have been served an intimation to rectify their original returns. The IT department may completely or partially accept the rectified returns.

Based on the rectification, the department arrives at the conclusion that you neither owe any extra taxes nor do you qualify for any sort of refund of taxes already paid.

You will receive a revised intimation clarifying this fact.

We can connect you to a tax expert who can go through your tax notices and tax returns to best guide you. They can then help you file a rectification.

Is the Income Tax Refund Taxable?

No, the refund amount is not taxable. But, the interest received on the tax refund is taxable. The rate of tax on the interest would be as per your applicable tax slab rate.

Time Duration for a Tax Refund 

The time taken to receive the income tax refund entirely depends on the Income Tax Department’s internal process. Generally, it takes around 7 to 120 days, with an average time of 90 days after you have e-verified your return. The Income Tax Department implemented a new refund processing system to enable faster refund processing with an expected turnaround of a few days instead of a few months.  
Consistent with this objective, the average ITR processing duration has been reduced to 10 days for returns submitted in the AY 2023-24, as opposed to 82 days for returns submitted in the AY 2019-20 and 16 days for returns submitted in AY 2022-23.

Mode of Receiving the Refund

The Income Tax Department will send the refund amount through electronic mode (direct credit to the account) or through a ‘Refund Cheque’. You must enter the correct bank account number and IFSC code with complete address details, including the PIN code, at the time of filing your return to receive refunds. Refunds sent through cheques are dispatched to the address mentioned in the ITR through speed post.

Interest on Income Tax Refund

When the refund amount is more than 10% of the total tax payable for that particular year, you will receive a simple interest on the tax refund. Interest is computed at 6% per annum on the refund amount. The interest is computed from the beginning of the next financial year till the refund date.

Claiming Refund for Missed ITR Filing on Due Date

The deadline to file your ITR for non-audit cases was 31st July 2024. However, if you cannot manage to file your taxes before the deadline, you can still file a late return, known as Belated Return. The last date to file a belated return is 31st December 2024. You can claim your tax refund through a belated return.

Income Tax Refund Helpline

You can contact the ‘Aaykar Sampark Kendra’ for any queries regarding income tax refunds. The toll-free helpline of the Aaykar Sampark Kendra Kendra is – 1800-180-1961. You can even send a mail with your refund query to refunds@incometax.gov.in. 

For refund-related queries or modifications in the refund record processed at CPC Bangalore, you can contact – 1800-425-2229 or 080-43456700. For any payment-related query, contact the SBI Contact Centre toll-free number at -1800-425-9760.

Related Articles:
1. Tax Deductions under IT Unlock Hidden Tax Savings
2. Save Tax On New and Old Tax Regime for FY 2024-25
3. Difference Between IT Deductions and Exemptions
4. No Tax on Income Upto 7 Lakhs under New Regime
5. Income Tax Return Filing Due Dates for FY 2023-24
6. Common Mistakes to Avoid While filing 2023-24 ITR
7. Old vs New Tax Regime: Which Is Better ?

The post Income Tax Refund for AY 24-25: How to Check? first appeared on YMC Pune.

Section 80C of The Income Tax Act

Before delving into the best tax-saving investment options, it’s crucial to comprehend a key aspect of the Income Tax Act, specifically Section 80C. This section largely governs tax-saving investment schemes. Under Section 80C, investments made by an individual are eligible for tax exemptions up to a limit of Rs. 1,50,000.

This includes various investment options like

• ELSS (Equity Linked Saving Scheme)
• Fixed Deposits
•  Life Insurance
• Public Provident Fund
• National Savings Scheme
• Certain Bonds

However, limited investment choices offer tax benefits beyond this threshold. Let’s examine the most effective tax-saving investments under Section 80C.

Tax Benefits of Home Loans Under Sections 80C, 24(b), and 80EEA

Purchasing a home loan can bring significant tax benefits, especially under Sections 80C, 24(b), and 80EEA of the Income Tax Act.

Government initiatives like PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing Scheme aim to make affordable housing in India.

These sections provide ways to reduce your tax liability through deductions on home loans.

• Section 80C: This section allows for deductions on the principal repayment of a home loan. The total annual amount paid towards the principal is eligible for a deduction up to Rs 1.5 lakh under Section 80C.
• Section 24(b): This provision offers tax exemption on the interest portion of a home loan, up to Rs 2 lakh per annum. Additionally, if the property purchased with the loan is rented, the entire interest amount can be exempted from your annual income tax.
• Section 80EEA: This is particularly beneficial for first-time homeowners. Subject to certain conditions, it provides an additional tax reduction on your annual tax liability.

Moreover, those who buy property to construct a house can also benefit from Section 24(b), provided the construction is completed within five years from the end of the financial year in which the loan was taken.

Purchasing Health Insurance Policy for Tax Benefits

When you buy a health insurance policy, you can avail of tax deductions under Section 80D of the Income Tax Act. This section allows individuals to claim deductions on their annual taxable income for the amount spent on health insurance premiums. The exemption limit under Section 80D varies based on the insured person’s age.

Key points about Section 80D deductions:

• Tax Deduction on Premiums: You can claim a deduction for the money spent on health insurance premiums for yourself, your spouse, children, and parents.
• Age-Based Exemption Limits: The exemption amount under Section 80D is determined by the age of the person insured. Higher deductions are typically available for senior citizens.

Investing in Government Schemes for Tax Benefits

Investing in government-backed schemes not only offers high returns but also provides tax benefits. Under Section 80C of the Income Tax Act, individuals can claim tax waivers for investments up to Rs 1.5 lakh in such schemes against their total annual income.

Here are some government schemes where you can park your money for tax exemptions:

• Senior Citizen Savings Scheme (SCSS): Designed for senior citizens, offering attractive interest rates and tax benefits.
• Sukanya Samriddhi Yojana (SSY): Aimed at encouraging savings for the girl child’s education and marriage expenses.
• National Pension Scheme (NPS): A pension-cum-investment scheme that offers tax benefits and aims to provide retirement income.
• Public Provident Fund (PPF): A popular long-term investment option with tax-free returns.
• National Pension Scheme (NPS): Besides being a retirement-focused scheme, it also provides additional tax benefits under Section 80CCD(1B).

Purchasing Life Insurance for Tax Benefits

Life insurance plans are not just a crucial part of financial planning but also offer notable tax benefits under the Income Tax Act. Here’s how you can benefit from these plans:

Premium Payments (Section 80C): You can claim tax deductions on the premiums paid for life insurance under Section 80C, up to a maximum of Rs 1.5 lakh annually. However, the premium must be less than 10% of the total sum assured for policies issued after April 1, 2012. For policies issued before this date, the premium should not exceed 20% of the sum assured to be eligible for Section 80C benefits.

• Maturity or Death Benefit (Section 10(10D)): The amount received on maturity or the death of the insured is tax-exempt under Section 10(10D).
• Section 80CCC: This section covers the acquisition or renewal of life insurance coverage, including annuity payments made through monthly salary. Tax exemptions under this section can also be claimed up to Rs 1.5 lakh.
• Section 80CCD(1): Exemptions under this section are applicable for certain pension funds recognized under section 23AAB, with a limit of Rs 1.5 lakh.

By investing in life insurance, individuals can ensure financial security for their families and enjoy substantial tax savings.

Tax-Saving Investment Options Under Section 80C

Section 80C of the Income Tax Act provides various tax-saving investment options for individuals and Hindu Undivided Families (HUFs) in India. These investments and expenses can be claimed for deductions up to Rs. 1.5 lakh in a financial year.

Here’s a breakdown of these investment options, along with their returns and lock-in periods:

This table presents a comprehensive view of the various investment options under Section 80C of the Income Tax Act.

Tax Saving Options Beyond Section 80C

In addition to the deductions under Section 80C, the Income Tax Act provides various other sections under which you can claim deductions to save on income tax. Here’s an overview of some key tax-saving options beyond Section 80C:

Health Insurance Premiums (Section 80D)

• Claim up to Rs. 50,000 for medical insurance premiums (Rs 25,000 for self, spouse, and children, and an additional Rs 25,000 for dependent parents below 60 years).
• For senior citizens, the maximum claim can be up to Rs 1,00,000 per annum. If they aren’t covered by health insurance, medical expenses can also be claimed up to Rs 50,000.

Home Loan Interest (Section 24 and Section 80EE)

• Deduction on interest paid on a home loan under Section 24 up to Rs 2 lakh.
• Additional deduction of up to Rs 50,000 on home loan interest over the Section 24 limit under Section 80EE.
• Further, Section 80EEA provides eligibility for an additional interest deduction of Rs 1.5 lakh on purchasing a new house under the affordable housing scheme (extended till 31st March 2022).

Principal Repayment on Home Loan (Section 80C)

The principal portion of the home loan can be claimed under Section 80C up to Rs 1.5 lakh, and the interest portion can be claimed as a deduction from income from the house property.

Donations (Section 80G)

Donations to notified institutions or funds can be deducted under Section 80G.

Education Loan Interest (Section 80E)

• Interest paid on education loans is allowed as a deduction under Section 80E.
• These additional sections provide ample opportunities for taxpayers to reduce their taxable income through various expenses and investments.

How to plan your tax-saving investments for the year?

Planning your tax-saving investments early in the financial year is key to optimizing your financial strategy.

Why Start Early?

Beginning at the start of the financial year instead of waiting for the last quarter helps avoid rushed decisions. Early planning allows your investments to compound, contributing to long-term financial goals. Tax-saving should be viewed as a bonus rather than the primary objective.

Begin by evaluating existing tax-saving expenditures such as insurance premiums, children’s tuition fees, Employee Provident Fund (EPF) contributions, home loan repayments, etc.

Calculate the Remaining Investment Amount:

Subtract these expenses from the maximum limit of Rs 1.5 lakh under Section 80C. This calculation will help determine how much more needs to be invested to utilize the full deduction benefit. Remember, additional investments may not be necessary if your expenses already cover this limit.

Select Investments Based on Personal Goals and Risk Profile:

Choose tax-saving instruments that align with your financial goals and risk tolerance. Popular options include Equity-Linked Savings Schemes (ELSS), Public Provident Funds (PPF), National Pension System (NPS), and fixed deposits.

Plan to Utilize the 80C Limit Effectively:

Aim to start investing in the first quarter of the financial year. This approach allows you to spread out your investments over the year, easing financial pressure at the year-end and enabling more informed decision-making.

Following these steps can effectively plan and maximize your tax savings. For comprehensive guidance, explore our detailed Section 80C guide, which covers an extensive range of tax-saving investments and expenses. Remember, a well-planned approach is crucial for a balanced and fruitful financial year.

Latest Update on the Pay Later Option for Income Tax Filing

The Income Tax e-filing portal has recently rolled out a ‘Pay Later’ option, allowing you to complete your tax filing process before making any tax payments. You can pay taxes after you are done filing.

Conclusion

In India, tax-saving investments are integral for enhancing your financial portfolio and lessening the tax burden. However, the key lies in carefully evaluating your financial requirements, understanding your risk appetite, and considering your investment timelines before choosing the most appropriate tax-saving options. Tailoring these investments to align with your unique financial situation is crucial. By making well-informed decisions, you can secure a more stable financial future and effectively reduce your tax liabilities. This strategic approach to tax-saving investments is vital to achieving immediate and long-term financial health.

For more- Click Here
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The post Best Ways to Save Income Tax for FY 2024-25 first appeared on YMC Pune.

This is usually seen as a bonus income, as TDS rates are far lower than the income tax slab rates.

What is Income Tax Refund?

An income tax refund is a state of reimbursement to a taxpayer when he pays a higher tax in the given financial year (FY) than your final assessed liability. Income tax refunds are possible when you have been paying the compulsory advance tax or have TDS deductions on your income.

At the time of filing an income tax return (or ITR), you can estimate the possible tax refund. The excess tax you have paid will be returned to you as a refund under Section 237 of the Income Tax Act, 1961. The income tax department will sanction the tax refund only after thorough verification of the income tax return filed.

The additional tax paid does not attract any interest. Thus, you can avoid paying excess tax and rather invest the money. You should estimate your possible tax liability for the year in advance and adjust your advance tax payments accordingly.

Eligibility Criteria for Income Tax Refund

You become eligible for the income tax refund if you meet any of the following criteria:

a) Your total advance tax payments are more than 100% of your actual tax liabilities for the financial year
b) Your TDS payments in the financial year exceed your final tax liability after regular assessment
c) If you have made last moment tax-saving investments
d) You have paid tax on your income in a foreign country that has double taxation avoidance agreement (DTAA) with India
e) You have paid excess tax under regular assessment due to an error in assessment

How to Claim Income Tax Refund?

The simplest way to claim your income tax refund is by filing a correct income tax return before the due date. While filing your return you can check the total advance tax payments under Form 26AS.

After you have filed your income tax return the assessment officer must be satisfied with the income tax calculation of the form. If your balance of advance tax payment under Form 26AS is more than your tax liability under the filed ITR, the officer may approve your tax refund.

Otherwise, you can also file Form 30 to request a review of your income tax payments against your liability. You can receive your income tax refunds faster if you provide your bank account details for direct transfer.

You can check the income tax refund status on your e-filing dashboard after filing and verifying the ITR.

Due Date to Claim Income Tax Refund

You can claim an income tax refund within 12 months after the end of the relevant assessment year. However, the following conditions will also apply to the tax refund claims:

a) You can claim a tax refund on the income tax paid within six successive assessment years. CBDT will not accept tax refund claims older than this period.
b) CBDT does not pay any interest on the tax refunds
c) The officers may accept delayed tax refund claims if it requires verification
d) The total claim amount for one assessment year should not be more than Rs 50 lakh

Income Tax Refund in Special Cases

In case a person is unable to claim an income tax refund due to insolvency, death, liquidation, incapacity, or any other cause, their legal representative, guardian, receiver, or trustee can file for an income tax refund on their behalf, under Section 238 of the Income Tax Act, 1961.

Interest Earned on Income Tax Refund

The Income Tax Department mandatorily pays an interest if the refund amount is equal to or above 10% of the total tax paid under Section 244A of the Income Tax Act. Accordingly, simple interest of 0.5% per month is levied on the amount of tax refund and paid to you.

How can you Check Income Tax Refund Status through E-Filing Website?

You can file and track your ITR and income tax refund status at eportal.incometax.gov.in. If you do not have an account create your account on the website using your PAN and Aadhaar numbers. Log in to this portal and check your latest ITR status.

If your last ITR is not visible on the dashboard you can go to e-File on the menu, then Income Tax Returns and select ‘View Filed Returns’. This will show you all your historical ITRs and their status. If you have been filing returns in the offline mode, you will need to navigate through ‘View Filed Forms’.

If your last ITR has been processed and a tax refund has been issued you can check the status of the same here.

How can you Check Income Tax Refund Status through TIN NSDL Website?

You can also check the status of the issued income tax refund through the TIN NSDL portal. Visit https://tin.tin.nsdl.com/oltas/refund-status-pan and enter your PAN and select the assessment year you want to check tax refund status for.

The portal will show you one of the following status messages:

a) Not determined if the assessing officer is yet to accept the refund
b) Refund Paid or Credited to Bank if the refund has been processed and paid
c) ITR Proceeds determined and sent to Refund Banker if the refund amount is yet to be transferred (cheque drawn)

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The post How to Claim full Refund of Income Tax? first appeared on YMC Pune.

PAN is a unique identification number issued to individuals and businesses for tax purposes. The Aadhaar number is a 12-digit unique identification number issued for all residents. However, the IT department has made linking PAN and Aadhaar cards mandatory. 

Thus, if you have not linked your PAN card with your Aadhaar, your PAN card will be inoperative and you will not be able to provide your PAN number for financial transactions. However, you can still apply for linking your PAN with your Aadhaar even now after paying the penalty and your PAN card will be operative within 30 days. Read on to know more.

Circular on PAN-Aadhaar Linking

Section 139AA This section mandates that linking of PAN with Aadhar is mandatory for all taxpayers to provide the Aadhar card details when filing their income tax returns.

The IT department issued a circular that it is mandatory for all PAN-holders (except those who fall under the exempt category) to link their PAN-Aadhaar within 30th June 2023. Initially, the IT department mandated to link PAN-Aadhaar by 31st March 2022 and then extended it to 30th June 2022. However, people who linked their PAN-Aadhaar between 1st July 2022 to 30th June 2022 had to pay a fine of Rs.500.

Subsequently, the IT department extended the last date to link PAN-Aadhaar to 30th June 2023. PAN holders who link PAN-Aadhaar between 1st July 2022 to 30th June 2023 must pay a penalty of Rs.1,000. PAN card will become inoperative from 01st July 2023 if PAN holders do not link it with their Aadhaar card. The IT department has mandated linking PAN-Aadhaar to regulate and curb tax evasion.

Who falls under the exempt category for PAN-Aadhaar linking?

The exempt category people need not link PAN-Aadhaar within 30th June 2023. The exempt category is as follows:

• Individuals residing in the states of Jammu and Kashmir, Assam and Meghalaya.
• A non-resident taxable person as per the Income-tax Act, 1961.
• People aged more than 80 years (Super Senior Citizens).
• Persons who are not citizens of India.

Last date to link PAN with Aadhaar card

The last date for PAN-Aadhaar linking is 30th June 2023. PAN cards not linked with Aadhaar will become inoperative after 1st July 2023.

‘My PAN-Aadhaar is not linked yet, what to do now?’

If you still have not linked the PAN-Aadhaar. Your PAN status will be shown as Active but inoperative and your service recipients will be doing higher tax deductions. No need to worry, you can still link them by paying a fine of Rs.1000, within 7-30 days your PAN status will be Active and operative and you will have all your TDS credits showing in your Form 26AS and you can rightly claim them while filing taxes. The process to link PAN-Aadhaar after the deadline is provided in detail below.

Importance of linking PAN with Aadhaar card

• The PAN card of a person will become inoperative when it is not linked to an Aadhaar card.
• PAN-Aadhaar linking is required when filing the Income Tax Return (ITR). The IT department may reject the ITR when PAN and Aadhaar are not linked.
• PAN and Aadhaar cards are required to be submitted to get government services, such as applying for a passport, obtaining subsidies and opening a bank account. Thus, it is difficult to access government services when PAN and Aadhaar cards are not linked.
• When the PAN-Aadhaar is not linked, getting a new PAN card may be difficult if the old one is damaged or lost since it is mandatory to mention the Aadhaar card number while applying for a new PAN card.

Consequences of not linking PAN with Aadhaar card

When the PAN-Aadhaar cards are not linked within the last date, it becomes inoperative as a result of which:

• Taxpayers cannot file ITR or claim refunds with inoperative PAN cards.
• The pending returns will not be processed, and pending refunds will not be issued to inoperative PAN cards.
• The TCS/TDS will be applicable at a higher rate.
• The TCS/TDS credit will not appear in Form 26AS, and TCS/TDS certificates will not be available.
• Taxpayers will be unable to submit 15G/15H declarations for nil TDS.
• The following transactions cannot be done since the PAN card will be inoperative:
  • Open a bank account.
  • Issue of debit/credit cards.
  • Purchase of mutual funds units.
  • Cash deposit with a bank or post office during a day exceeding Rs.50,000.
  • Purchase of a bank draft or pay order in cash exceeding Rs.50,000 in a day.
  • A time deposit with banks, Nidhi, Non-Banking Financial Corporations (NBFCs), etc., exceeding Rs.50,000 or aggregating to more than Rs.2,50,000 during a financial year.
  • Payment for one or more prepaid payment instruments as defined by the Reserve Bank of India (RBI) through bank draft, pay order or banker’s cheque aggregating to more than Rs.50,000 in a financial year.
  • Sale or purchase of goods or services by any person more than Rs.2,00,000 per transaction.
  • All bank transactions exceeding Rs.10,000.

However, the PAN can be made operative again in 30 days, upon intimation of Aadhaar number to the prescribed authority after payment of fee of Rs.1,000.

Penalty for non-linking of PAN with Aadhaar card

The taxpayers who have not linked their PAN-Aadhaar within the last date of 30th June 2023, can do so by paying a late penalty of Rs.1,000. They must pay the penalty before filing for the PAN-Aadhaar link on the Income Tax website. However, they need to ensure they have a valid PAN number and Aadhaar number to pay the penalty.

How to activate inoperative PAN card and link with Aadhaar card?

When the PAN card is not linked with the Aadhaar card, it becomes inoperative. However, you can re-activate your PAN card by first paying the penalty for non-linking PAN with an Aadhaar card and then applying to link PAN with Aadhaar card.

Follow the below steps to pay the penalty for re-activating an inoperative PAN card:

Step 1: Visit the Income Tax e-Filing Portal.

Step 2: Click the ‘e-Pay Tax’ option under the ‘Quick Links’ heading.

Step 3: Enter the ‘PAN’ number under ‘PAN/TAN’ and ‘Confirm PAN/TAN’ column, enter mobile number and click the ‘Continue’ button.

Step 4: After OTP verification, it will be redirected to e-Pay Tax page. Click the ‘Continue’ button.

Step 5:  Click the ‘Proceed’ button under the ‘Income Tax’ tab.

Step 6: Select Assessment Year as ‘2024-25’ and ‘Type of Payment (Minor Head)’ as ‘Other Receipts (500)’ and select ‘Fee for delay in linking PAN with Aadhar’ and click the ‘Continue’ button.

Step 7: The applicable amount will be pre-filled against ‘Others’ option. Click ‘Continue’ button and make the payment.

You can pay the late penalty on Income Tax e-filing Portal through net banking, debit card, over the counter, NEFT/RTGS or payment gateway option. However, you can pay the penalty through the payment gateway option when you have a bank account with the following authorised banks:

• Axis Bank
• Bandhan Bank
• Bank of Baroda
• Bank of India
• Bank of Maharashtra
• Canara Bank
• Central Bank of India
• City Union Bank
• DCB Bank
• Federal Bank
• HDFC Bank
• ICICI Bank
• IDBI Bank
• Indian Bank
• Indian Overseas Bank
• IndusInd Bank
• Jammu & Kashmir Bank
• Karur Vysya Bank
• Kotak Mahindra Bank
• Karnataka Bank
• Punjab & Sind Bank
• Punjab National Bank
• RBL Bank
• South Indian Bank
• State Bank of India
• UCO Bank
• Union Bank of India 

After making the payment, proceed to link your PAN with Aadhaar card.

How to link a PAN with an Aadhaar card after deadline?

Taxpayers can link their PAN with their Aadhaar after four to five days of paying the penalty by following the steps below:

Step 1: Go to the Income Tax e-filing portal.

Step 2: Under the ‘Quick Links’ heading on the left-hand side of the homepage, click on the ‘Link Aadhaar’ option.

Step 3: Enter the ‘PAN’ and ‘Aadhaar Number’ and click the ‘Validate’ button.

Step 4: A pop-up message stating ‘Your payment details are verified’ will appear when the penalty payment has been verified. Click the ‘Continue’ button to submit the linking request.

Step 5: Enter the required details and click the ‘Link Aadhaar’ button.

Step 6: Enter the OTP received on the mobile number.

Step 7: The request to link the PAN-Aadhaar card will be successfully submitted. 

A taxpayer can also visit a PAN card centre, fill out the appropriate form and submit it with photocopies of PAN and Aadhaar cards for PAN-Aadhaar linking.

The PAN card will be linked with your Aadhaar card and become operative within 7-30 days of applying for PAN-Aadhaar card linking. Once the PAN card becomes operative, it can be used for various transactions, including filing your ITR and claiming TDS refunds.

Related Articles:
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2. Save Tax On New and Old Tax Regime for FY 2024-25
3. Difference Between IT Deductions and Exemptions
4. No Tax on Income upto 7 Lakhs under New Regime
5. Income Tax Return Filing Due Dates for FY 2023-24
6. Common Mistakes to Avoid While filing 2023-24 ITR
7. Old vs New Tax Regime: Which Is Better ?

The post How to Link PAN-Aadhaar? Penalty & Consequences first appeared on YMC Pune.

The government gives a four-month window every Assessment Year (A.Y.) for taxpaying citizens to consolidate their income details for the relevant financial year and file income tax returns. The said four-month period starts on 1st April and ends on 31st July (unless extended).

It takes only a few minutes to file your ITR, therefore this is more than reasonable. In addition to paying taxes on time, we must file returns by the due date or suffer penalties. This post will go over the consequences of filing an ITR late and what to do if you fail to file an ITR.

The Due Date For Filing ITR For AY 2024-25

For the Assessment Year 2024-25, the due date for return filing as per section 139(1) is 31st July 2024 unless extended by the government.

Many taxpayers believe that they have no further obligation if they have paid their taxes. However, missing the ITR filing deadline has legal consequences. Effective from the financial year 2017-18, a late filing fee is applicable for filing returns after the due date.

Late Filing Fees u/s 234F

Effective from FY 2017-18, a late filing fee will be applicable for filing your returns after the due date under Section 234F. 

For instance, the due date for filing returns for FY 2023-24 is 31st July 2024. If you miss filing the ITR by the due date, you can file the belated return by 31st December 2024. However, you are required to pay the penalty for late filing.

The maximum penalty of Rs 5,000 will be levied if you file your ITR after the due date of 31st July 2024 but before 31st December 2024.

However, there is a relief given to small taxpayers – if their total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1,000. And if total income does not exceed the basic exemption limit, then no penalty will be charged.

Benefits of Filing ITR on Time

Filing your ITR on time does make you feel responsible and good about yourself, but the benefits don’t end there. Filing your ITR on time can benefit you in more ways:

Easy Loan Approval

Filing the ITR will help individuals when they have to apply for a vehicle loan (2-wheeler or 4-wheeler), house loan, personal loan, etc.

Claim Tax Refund

If you have paid excess tax to the income tax department, you should file your income tax return as early as possible to process the return and receive a tax refund.

Income & Address Proof

You can use the income tax return as proof of your income and address, which is mandatory when applying for a loan or visa.

Quick Visa Processing

Most embassies & consulates require you to furnish copies of your tax returns for the past couple of years at the visa application.

Carry Forward Your Losses

If you file the income tax return within the due date, you will be able to carry forward losses to subsequent years. You can use such losses to set off against your future income.

Avoid Penalty and Prosecution

You can avoid the income tax department initiating prosecution proceedings as discussed in the below section.

Consequences of Not Filing by the Due Date

Prosecution

The income tax officer can initiate proceedings for prosecution if the person willfully fails to file a return even after issuing notices. The imprisonment can be for a term of three months to two years with a fine.

If the tax you owe to the income tax department is higher, the prosecution period may extend to seven years.

Penalty

Further, the income tax officer may impose a penalty of up to 50% of the tax due in case of underreporting income.

Apart from the penalty levied by the IT department, there are other consequences that a taxpayer may face for late filing of returns:

Unable to set off losses

Losses incurred (other than house property loss) are not allowed to be carried forward to subsequent years. You cannot set off these losses against future gains if the return has not been filed within the due date. However, if there are losses under house property, carrying forward losses is permitted.

Interest in the delay of filing the return

Apart from the penalty for late filing, interest will be charged under Section 234A at 1% per month or part thereof on tax due until the payment of taxes.

The interest calculation under the said section will start from the date falling immediately after the due date, i.e. 31 July 2024 for FY 2023-24. So, the longer you wait, the more you pay.

Delayed refunds

In case you’re entitled to receive a refund from the government for excess taxes paid, you must file the returns before the due date to receive your refund at the earliest.

Related Articles:
1. Tax Deductions under IT Unlock Hidden Tax Savings
2. Save Tax On New and Old Tax Regime for FY 2024-25
3. Difference Between IT Deductions and Exemptions
4. No Tax on Income upto 7 Lakhs under New Regime
5. Income Tax Return Filing Due Dates for FY 2023-24
6. Common Mistakes to Avoid While filing 2023-24 ITR
7. Old vs New Tax Regime: Which Is Better ?

The post Penalty for Late Filing of Income Tax Return first appeared on YMC Pune.

In this video, You Will learn step-by-step on how to file ITR online. Learn how to navigate the Income Tax e-filing portal, enter your income details, claim deductions, and verify your return. Whether you’re a salaried individual, have capital gains, or own multiple properties, this video simplifies the process and ensures you file your ITR correctly.

Stay tuned for tips and common mistakes to avoid.
Subscribe for more tax filing tips and updates!

Related Articles:
1. Tax Deductions under IT Unlock Hidden Tax Savings
2. Save Tax On New and Old Tax Regime for FY 2024-25
3. Difference Between IT Deductions and Exemptions
4. No Tax on Income upto 7 Lakhs under New Regime
5. Income Tax Return Filing Due Dates for FY 2023-24
6. Common Mistakes to Avoid While filing 2023-24 ITR
7. Old vs New Tax Regime: Which Is Better ?

The post Learn How to File ITR through E-filing Portal first appeared on YMC Pune.

Ǫ.1: Taxpayer is unable to choose ITR 1/ 4 from drop down for AY 2024-25 as the option is greyed off” while filing return?

Ans: In case taxpayer has special rate of Income and TDS is deducted for such income (For Ex:

115BB), then ITR 1 and ITR 4 are not applicable for such taxpayer. So, the respective dropdowns are greyed off. In this case, taxpayer is required to file ITR Form 2 or 3 as applicable.

Ǫ.2: Schedule VIA for claiming deductions is not enabled while filing the ITR for AY 2024-25?

Ans: From AY 2024-25, new tax regime has become the default tax regime and VIA deductions cannot be claimed, except deduction u/s 80CCD(2)/80CCH/80JJAA as per the provision of Section 115BAC of the Income Tax Act, 1961. In case taxpayer wants to claim any deductions (as applicable), then taxpayer need to choose for old tax regime by selecting “Yes” option in ITR 1 / ITR 2 (or) “Yes, within due date” option in ITR 3 / ITR 4 / ITR 5 in the field provided for “opting out option” under Schedule ‘Personal Information’ or ‘Part-A General’ in the respective ITR.

Ǫ.3: While filing the ITR, taxpayer is getting bank account validation error. So, how to resolve the issue?

Ans: Taxpayer has to check that ‘whether a valid bank account detail’ is added under ‘My Bank Account’ tab in ‘My profile’ section in the income tax portal before filing the ITR. Taxpayer should update the profile correctly before starting the new filing of return. Taxpayer can file ITR using offline utility in case of facing any issues while validation Bank account. However, pre-validated bank account is required for issue of refund.

Ǫ.4: In case taxpayer has earned special income like winning from lottery or horse races, then whether taxpayer is eligible to file ITR 1 and ITR 4?

Ans: In the cases where TDS has been deducted on special income like winning from lottery or horse races etc, then filing of ITR-1 and 4 is not allowed. So, it is recommended to taxpayer to check Form 26AS and AIS before filing the ITR.

Ǫ.5: If Form 10IEA is filed for AY 2024-25 then is it compulsory for taxpayer to opt for old tax regime?

Ans: Yes, once Form 10IEA is filed for AY 2024-25 then it cannot be reverted in same AY and Taxpayer need to mandatorily opt for the old tax regime for AY 2024-25. Taxpayer can change the option in the next assessment year based on the income details and ITR applicability for such Assessment Year.

Ǫ.6: In which case filing of Form 10IEA for AY 2024-25 is compulsory to opt for old tax regime?

Ans: In the cases where taxpayer wants to file ITR under old tax regime for AY 2024-25 with Business and profession income i.e., either in ITR-3 or ITR-4, then filing of FORM 10IEA is mandatory.

Ǫ.7: Taxpayer is unable to claim Interest on borrowed capital of Self occupied property as it is greyed off?

Ans: From AY 2024-25, ‘New Tax Regime’ has become the ‘Default tax regime’ and claiming of “Interest on borrowed capital for Self-occupied property” is not allowed as per the provision of Section 115BAC of the Act, 1961. In case Taxpayer wants to claim, then taxpayer must choose ‘Old Tax Regime’ by selecting “Yes” in ITR 1 / ITR 2 or “Yes, within due date” option in ITR 3 / ITR 4 / ITR 5 in the field provided for “opting out option” in the ITR Form.

Ǫ.8: While filing ITR for AY 2024-25, “Taxpayer unable to claim all other deductions other than 80CCD (2)?”

Ans: From AY 2024-25, new tax regime has become the default tax regime where claiming of chapter VIA deductions are not allowed except section 80CCD (2) as per the provision of section 115BAC of the Income Tax Act. In case Taxpayer wants to claim any other VIA deductions, then taxpayer must choose ‘Old Tax Regime’ by selecting “Yes” in ITR 1 / ITR 2 or “Yes, within due date” option in ITR 3 / ITR 4 in the field provided for “opting out option” in the ITR Form.

Ǫ.9: Taxpayer is getting error as “Name of taxpayer in ITR does not match with the Name as per the PAN data base?

Ans: First Name, Middle Name and Last Name in ITR should be same as per the name registered under My profile section after login on the portal. Taxpayer should update the profile and then download the latest prefill Json for filing return in offline mode or start new filing in Online mode to resolve these issues.

Ǫ.10: For AY 24-25, Taxpayer filed Form 10IEA by mistake and now wish to revoke / withdraw the same. Can taxpayer withdraw or revoke?

Ans: Once Form 10IEA is filed for AY 2024-25, then it cannot be revoked / withdraw in same AY, Taxpayer must mandatorily opt for the old tax regime for AY 2024-25. But option to ‘Withdraw’ will be available in subsequent year and it can be changed only once in a lifetime for Business and profession case i.e. (in case of ITR-3 or ITR-4).

Ǫ.11: Taxpayer unable to claim 10(13A) house rent allowance while filing return for AY 2024-25?

Ans: From AY 2024-25, new tax regime has become the default tax regime where claiming of HRA u/s 10(13A) is not allowed as per the provision of section 115BAC of the Income Tax Act. In case Taxpayer wants to claim HRA, taxpayer must choose ‘Old Tax Regime’ by selecting “Yes” in ITR 1

/ ITR 2 or “Yes, within due date” option in ITR 3 / ITR 4 in the field provided for “opting out option” in the ITR Form.

Ǫ.12. Is there any Form required to file for claiming the deduction u/s. 80DD and 80U?

Ans: In case taxpayer is claiming any deduction u/s 80DD and 80U in the return of income, then it is recommended for taxpayer to obtain a certificate from the relevant medical authority for such disabilities in support of deduction claimed under section 80DD/80U and to file Form 10IA as applicable as per Rule 11A and details of form 10-IA (acknowledgement no. and date) may be furnished in Sch 80DD/80U of the return.

Ǫ.13. Does Taxpayer require to mandatorily verify the return?

Ans: Yes, verification of ITR after submission of ITR is mandatory. Taxpayer to ensure the return should be verified within applicable due time of 30 days post successful submission of return either through EVC mode or DSC. Taxpayer can also download the ITR-V receipt copy available under View Filed return after login on the portal and send to CPC through speed post within 30 days of filing return for verification of ITR to avoid any further issues. Please note that it is recommended to complete the verification through Online mode only to avoid any postal related issue.

Ǫ.14: Taxpayer is not able to choose Yes/No” for “Whether you were director in a company at time during the previous year” while filing return in ITR 2 / ITR 3?

Ans: This question is applicable only for “Individual”. Please check the Status of the Assessee. If

Status is selected as ‘Individual’, then option “Whether you are a ‘Director’ of a company at any time during the previous year” will gets enabled and then enter the details and proceed to file the return.

Ǫ.15: Taxpayer is getting error as “Gross receipts/ Turnover is provided in schedule BP but financial particulars such as sundry creditors/Inventories, sundry debtors, cash in hand is not filled” in ITR 4?

Ans: It is mandatory to fill fields such as ‘Sundry Creditors, Inventories, Sundry Debtors, Cash in Hand’ under “Financial particulars” in schedule BP in ITR 4. If not filled, it will throw error.

Ǫ.16: Taxpayer filed Form 10-IEA and submitting ITR with correct Form 10-IEA details, but still error is appearing to please enter valid Form 10IEA details?

Ans: Taxpayer to check and validate the Form 10IEA details under “view filed Forms’ after submission of Form 10IEA and then retry filing ITR after entering correct form filed details. Also, Taxpayer to make sure not to submit Form 10-IEA multiple times on the portal.

Ǫ.17: Taxpayer corrected the validation errors which he encountered during ITR submission. But even after correction when he clicks on “Proceed” errors are still showing?

Ans: It is recommended to try resubmitting ITR in fresh session to avoid such issues after correcting errors.

Ǫ.18: Taxpayer has entered the amount of deduction u/s 80CCD (2) under Schedule VIA in the return, but eligible amount of deduction is computing as 0.

Ans: Taxpayer to check if Salary income is provided after selecting the ‘Basic Salary’ drop down under Schedule Salary for computing the eligible amount of deduction claimed u/s 80CCD (2) of the Income Tax Act, 1961.

Ǫ.19: Is it mandatory to verify the return through DSC option only for 44AB audit return cases?

Ans: There is an amendment in Rule 12 of Income Tax Rules, 1962 from 1st April 2024, where in case return is being filed by Individual or HUF then taxpayers can verify the return through EVC mode or DSC mode even for 44AB audit applicable cases.

Ǫ.20: What is difference in new tax regime provision as per section 115BAD, 115BAE and 115BAC of Income Tax Act, 1961, applicable for filing ITR-5 return for AY 2024-25?

Ans: Section 115BAE is the new section introduced from AY 2024-25 for new co-operative Society resident in India, incorporated on or after 1st April 2023, engaged in business of manufacturing. Such taxpayers are required to pay tax @15% on manufacturing business income and @ 22% on remaining income. Form 10IFA is required to submit to avail this option.

Section 115BAD is applicable for all other resident co-operative societies registered on or after 1s April 2021, and eligible to opt and pay applicable tax rate @22% on their Total Income. Form 10IF is required to submit to avail this option.

Please note once this new tax regime provision is exercised u/s 115BAD or 115BAE, then same provision will be applicable for all subsequent AY’s, and it cannot be withdrawn later for any Assessment year.

Section 115BAC is applicable to all AOP’s (other than Co-operative society) or BOI or AJP, who are filing return of Income in ITR-5 from AY 2024-25 where taxpayer can compute the tax as per

the revised tax slab applicable for new tax regime and can pay the tax accordingly. Form 10IEA is required to submit within due date to avail this in case of business income.

Ǫ.21: Is there any requirement to file any form for claiming new tax regime as per provision of section 115BAD or 115BAE?

Ans: Taxpayers need to file Form 10IF for claiming new tax regime as per section 115BAD and Form 10IFA for claiming new tax regime as per section 115BAE.

Ǫ.22: Is taxpayer required to file Form 10IF or 10IFA every year for claiming the new Tax Regime in ITR-5 return for Section 115BAD or Section 115BAE?

Ans: No. Taxpayer is not expected to file the form 10IF or 10IFA every year. Taxpayer is required to file the Form 10IF or 10IFA only once within due date as per section 139(1) in the year in which the taxpayer wants to opt for the new tax regime for the first time.

Other Articles:
1. All About to Income Tax
2. List of Exempted Goods
3. Tax Deduction under IT
4. Old vs New Tax Regime: Which Is Better ?

The post COMMON ITR FAǪ’S FOR FILING RETURN AY 2024-25 first appeared on YMC Pune.

Interim Budget 2024 –

The budget maintained the existing tax rates for both direct and indirect taxes. 

Taxpayers with income up to Rs 7 lakh have no tax liability.

Finance Minister Nirmala Sitharaman also withdraws ‘tax dispute’ up to Rs 25,000 for the period up to the financial year 2009-10, Rs 10,000 for financial years 2010-11 to 2014-15.

Budget 2023 Updates

For individuals with income up to Rs 7 lakh, a tax rebate 

The new tax slabs under the new tax regime will be:

Browse By Topics

What is Income Tax?

Income tax is a type of tax that the central government charges on the income earned during a financial year by individuals and businesses. Taxes are sources of revenue for the government. The government utilises this revenue for developing infrastructure, providing healthcare, education, subsidies to the farmer/agriculture sector and other government welfare schemes. 

Taxes are mainly of two types: direct taxes and indirect taxes. Tax levied directly on the income earned is called a direct tax; for example, Income tax is a direct tax. The tax calculation is based on the income slab rates applicable during that financial year.

Direct Taxes are broadly classified as :

• Income Tax – This is taxes an individual, a Hindu Undivided Family (HUF), or any taxpayer other than companies pay on the income received. The law prescribes the rate at which such income is taxable.
• Corporate Tax – This is the tax paid on the company’s taxable income. Here again, a specific tax rate for corporations has been prescribed by the income tax laws of India.

Who Should Pay Income Tax? – Types Of Taxpayers

According to the Income Tax Act, everyone in India, whether resident or non-resident, has to file income tax returns. Currently, tax is payable if the income exceeds Rs 3 lakh in a financial year. The Income Tax Act has classified taxpayers into various categories. Different tax rules apply to different types of taxpayers. 

   Below are the categories of taxpayers: 

• Individuals
• Hindu Undivided Family (HUF)
• Firms
• Companies
• Association of Persons(AOP)
• Body of Individuals (BOI)
• Local Authority
• Artificial Judicial Person

Further, Individuals and HUFs are classified as residents and non-residents. Resident individuals are liable to pay tax on their global income in India, i.e. income earned in India and abroad. Meanwhile, those who qualify as non-residents must only pay taxes on income earned or accrued in India. The residential status has to be determined separately for tax purposes for every financial year based on the individual tenure of stay in India. Resident Individuals are further classified into the mentioned categories for tax purposes:

• Individuals less than 60 years of age
• Individuals aged more than 60 but less than 80 years
• Individual aged more than 80 years 

Types of Income – What are the 5 Heads of Income?

Everyone who earns or gets an income in India is subject to income tax (Yes, be it a resident or a non-resident of India). For simpler classification, the Income tax department breaks down income into five main heads:

Taxpayers and Tax Slabs

Each of these taxpayers is taxed differently under the Indian income tax laws. While firms and Indian companies have a fixed rate of tax calculated on taxable income, the individual, HUF, AOP and BOI taxpayers are taxed based on the income slab they fall under. People’s income grouped into blocks are called tax brackets or tax slabs. And each tax slab has a different tax rate. The rate at which the tax is charged increases as the taxable income increases. 

What is the Old Income Tax Regime?

The old tax regime provides three slab rates for income tax levy, which are 5%, 20%, and 30% for different income brackets. Individuals can continue with the old taxation regime, and they can claim the following deductions: 

• Deductions of allowances like Leave Travel Concession (LTC), House Rent Allowance (HRA), and specific other allowances.
• Deductions for tax-saving investments as per Section 80C (LIC, PPF, NPS, etc) to 80U can be claimed.
• Standard deduction of Rs 50,000.
• Deduction for interest paid on home loan.

Tax slab rates applicable for Individual taxpayers below 60 years for the Old tax regime are as below: 

There are two other tax slabs for two other age groups: those 60 and older and those above 80. 

A word of note: People often misunderstand that if they earn, let’s say, Rs12 lakh, they will be paying a 30% tax on Rs.12 lakh, i.e. Rs 3,60,000. This is incorrect. A person earning Rs 12 lakh in the progressive tax system will pay Rs 1,12,500 + Rs 60,000 = Rs 1,72,500. 

Income Tax Slabs Under New Tax Regime

In the 2020 budget, a new tax regime was introduced with lower tax rates and limited deductions/exemptions for Individuals and HUFs. Hence, many taxpayers did not opt for the new tax regime. However, to encourage taxpayers to adopt the new tax regime in Budget 2023, it was made the default regime and the income tax slabs under the new tax regime for FY 2023-24 (AY 2024-25) are revised as follows:

Most of the deductions and exemptions are not allowed if the taxpayers opt for the New Tax regime. However, the exemptions and deductions available under the new regime are:

• Transport allowances in case of a specially-abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditures you incur on account of absence from his regular place of duty. 

Exceptions to the Income Tax Slab

One must remember that not all income can be taxed on a slab basis. Capital gains income is an exception to this rule. Capital gains are taxed depending on your asset and how long you’ve owned it. The holding period would determine if assets are long-term or short-term. The holding period to determine the nature of assets differs for different assets. A glance at the holding period, the nature of the assets and the tax rate for each are given below.

Financial Year

The financial year is a one-year period that the taxpayers use for accounting and financial reporting purposes. It is the year in which the income is earned. According to the Income Tax Act, such a period begins from 1st April of the calendar year to 31st March of the next calendar year. It is abbreviated as “FY”. For example, the financial year starting from 1st April 2023 and ending on 31st March 2024 can be written as FY 2023-24.

In simple words, a financial year is a year in which the income of a person is earned.  

Assessment Year

The one year from 1st April to 31st March starting immediately after the financial year is termed an assessment year. This period is the assessment year because all the taxpayers have to evaluate their income earned in the financial year and pay taxes this year. For example, for incomes earned during the FY 2023-24, the assessment year will be AY 2024-25.

In simple words, the income earned in the financial year will be assessed to tax in the assessment year. 

Assessee

The assessee is a person or a group who assesses his/her income and pays tax as per the Income Tax Act. The assessee can be an individual, a partnership firm, a company, an Association of Persons (AOP), a Trust, etc.

What is PAN?

PAN is an abbreviation for the Permanent Account Number. It is a unique 10-digit alphanumeric digit issued by the Income Tax Department to Indian taxpayers. All the tax-related transactions and information of a person are recorded against their unique permanent account number. When the person has to pay advance tax or self-assessment tax, they must mention the PAN number. 

Also, an individual submits his PAN to certain entities like banks, mutual fund companies, etc. The financial information from such entities goes to the income tax department via PAN. This allows the Government to link all tax-related activities with the department. Hence, just by putting in a permanent account number, the department can identify all your financial transactions.      

What is TAN?

TAN is an abbreviation for Tax Deduction and Collection Account Number. It is a unique 10-digit alphanumeric digit allotted by the Income Tax Department of India. All persons responsible for deduction (TDS) or collection of tax (TCS) are required to obtain TAN. It is compulsory to quote the TAN in TDS/TCS return, any TDS/TCS payment challan, and TDS/TCS certificates.   

Residents and Non-Residents

Levy of income tax in India is dependent on the residential status of a taxpayer. Individuals who qualify as a resident in India must pay tax on their global income in India, i.e. income earned in India and abroad. Whereas, those who qualify as Non-residents need to pay taxes only on their Indian income. The residential status has to be determined separately for every financial year for which income and taxes are computed.

Income Tax Payment

Tax Deducted at Source (TDS)

For specified payments, tax is deducted at source when paying the recipient of income. The income recipient can claim credit of the TDS amount by adjusting it with the final tax liability.

Advance Tax

The taxpayer must pay tax in advance when his estimated income tax liability for the year exceeds Rs 10,000. The government has specified due dates for payment of advance tax installments. Click here to learn more about the advance tax liability and due dates.

Self-Assessment Tax

It is the balance tax that the taxpayer has to pay on the assessed income. The self-assessment tax is calculated after reducing the advance tax and TDS from the total income tax calculated on the assessed income.

E-Payment of Taxes

Taxpayers can pay advance tax and self-assessment tax online from the e-filing website. Click here to learn how to pay taxes online through e-filing portal.

Filing Your ITR

E-filing of income tax return has been made mandatory for all classes of taxpayers, barring a few exceptions:

• Taxpayers aged 80 and above need not e-file the return.
• Taxpayers having an income less than Rs 5 lakhs and not claiming a refund need not e-file the return.

For the rest, E-filing is mandatory. Do note that deadlines for filing returns have also been prescribed. For most individual taxpayers, the due date for filing the return of income is 31 July, immediately following the concerned financial year. If you do not file on time, here are some disadvantages:

• You will be denied carry forward of losses (except house property loss) to future years.
• Delay processing of refund claims if any.
• Difficulty on getting home loans.
• Levy of late filing fee upto Rs 5,000 (if the total income is above Rs 5 lakh) and Rs 1,000 (if the total income is below Rs 5 lakh) under Section 234F.
• Levy of interest under 234A if there are taxes due as on 31 July.

E-filing is a better alternative to filing on the income tax website. Also, it is for more than just e-filing your income tax return. 

Income Tax Return

The taxpayer shall file an income tax return every year via ITR forms prescribed by the income tax department. The government has prescribed seven ITR forms through which the taxpayer can file his income tax return. The taxpayer has to choose the appropriate ITR forms and file his income tax return.

Income Tax Forms List

The seven ITR forms are:

• ITR-1: Individuals (residents) having income from salary, one house property, other sources, agricultural income less than Rs 5,000 and with a total income of up to Rs 50 lakh.
• ITR-2: Individuals/HUFs not having any business or profession under any proprietorship, more than one house property. 
• ITR-3: Individuals/HUFs having income from a proprietary business or profession, income of a person as a partner in a firm.
• ITR-4: Individuals/HUFs having presumptive income from business or profession, one house property.
• ITR-5: Partnership firms or LLPs.
• ITR-6: Companies.
• ITR-7: Trusts.

Documents Required for ITR Filinghttps://www.ymcpune.com/

Form 16, Form 26AS, AIS, TIS, Form 16A, proof of tax saving investments made, bank account details, etc, are some of the crucial information/documents you need to be ready with before filing your return. Further, the documents you will need to file your tax return will largely depend on your source of income. Here is our detailed article on documents you need for filing of your return of income. 

How Can I Calculate my Income Tax?

Individuals should calculate income tax depending on the nature of their income. The salaried individual can take the eligible exemptions available for various allowances received. Individuals/HUF can take a deduction under Sections 80C to 80U, deduct it from the gross total income, and calculate the income tax liability. Also, the total income tax liability should be adjusted by the taxes paid, such as advance tax, TDS, etc. 

Also, the taxpayer should apply the effect of rebate under Section 87A and relief under Section 89, Section 90, and Section 91 to arrive at the net amount of income tax payable.

Any income that you receive should form part of your income tax return. Of course, the law provides exemptions for certain incomes, e.g. LTCG on listed equity shares up to Rs 1 lakh in any financial year, agricultural income, etc.  Therefore, here is a quick guideline you can probably follow to compute taxes due on your income:

• List down all your income – be it salary, rental income, capital gains, interest income or profits from your business or profession.
• Remove incomes that are exempt under the law.
• Claim all applicable deductions available under every source of income. E.g., claim a standard deduction of Rs 50,000 from salary income, claim municipal taxes from rental income, claim business-related expenses from your business turnover, etc.
• Claim all applicable exemptions under every head of income, e.g., amount reinvested in another house property can be claimed as exemption from capital gains income, etc.
• Claim applicable deductions from your total income, e.g. the Section 80 deductions like 80C, 80D, 80TTA, 80TTB, etc.
• You will now arrive at your taxable income. Check the tax slab you fall under and accordingly arrive at your income tax payable.

The government keeps introducing and altering tax slabs, schemes and tax benefits, so it’s a good idea to keep up with the Budget. 

What Is Computation Of Income?

The process of calculating taxable income after taking into account the income from all the five heads (salary, house property, capital gains, business or profession, and other sources), exemptions, deductions, rebates, set off of losses, etc., is called computation of income. After the computation of income, the taxpayer can compute the income tax liability as per the Income Tax Act.

Rebate u/s 87A

Rebates under Section 87A allow taxpayers to reduce their income tax liability. If you are a resident individual and the amount of your total income after reducing Chapter VI-A deductions (Section 80C, 80D, 80U, etc) does not exceed Rs 5 lakh in a financial year, you can claim a tax rebate up to Rs 12,500. This means if your total tax payable is less than Rs 12,500, then you will not have to pay any tax.

In Budget 2023, a tax rebate on income of Rs 7 lakhs has been introduced under the new tax regime, and no changes have been made in the 2024 interim budget. Therefore, you do not have to pay tax if your taxable income is up to Rs 7 lakhs under the new tax regime.

E-File Returns

The taxpayer shall electronically file the income tax return through the e-filing platform of the IT department. To file the income tax return, the taxpayer should register at www.incometax.gov.in. After that, the taxpayer can log in to the website and file his ITR. Also, there is no need to manually send the acknowledgement of the return to the income tax department. The income tax department now allows e-verification of the ITR in different ways, which completes the income tax return process.   

What is ITR–V?

Form ITR-V is an income tax return verification form generated after the taxpayer files income tax return and submits it to the income tax department. The ITR-V should be e-verified or must be sent to CPC Bangalore at “Income Tax Department – CPC, Post Box No – 1, Electronic City Post Office, Bangalore – 560100, Karnataka” for verification. The ITR processing takes place only if its verification is completed.

Income Tax Saving Instruments

A taxpayer can save tax by tax planning. A taxpayer can do tax planning by investing in tax-saving instruments. It helps in reducing the income tax liability. Section 80C to 80U of the Income Tax Act allows a deduction for certain expenditures and investments from the total computed income if taxes paid under the old tax regime. Some of the popular Section 80C investments are: 

*ELSS and NSC have no upper investment limit. However, you get tax benefits under Section 80C only up to Rs 1.5 lakh per financial year.

Health Insurance and Medical Expense Deduction

Apart from the Section 80C deduction, a taxpayer can also take a tax benefit under Section 80D for health insurance premium and medical expenditure incurred for self, family and parents. 

Education Loan Deduction

Under Section 80E, the taxpayer can claim a deduction for the interest paid on a loan taken for higher education. There is no limit to claiming such a deduction in the income tax return.

Home Loan Deduction

Under Section 24, the taxpayer can claim a deduction for interest paid on a housing loan during the relevant financial year. The deduction amount will depend upon whether the house is self-occupied or let out. The taxpayer can also claim a deduction of the principal amount of the loan under Section 80C up to Rs 1.5 lakh. 

Income Tax – Latest Updates, Basics, Tax Slabs, Rules, Income Tax Guide 2024-25

Income Tax – Latest Updates, Basics, Tax Slabs, Rules, Income Tax Guide 2024-25

Deduction for Interest Income

The taxpayer can also claim a deduction for interest on deposits from banks under Section 80TTA of the Income Tax Act. Individuals can claim up to Rs 10,000 deduction under the said section.

Important Income Tax Dates 2024

• 15th March 2024 – Due date for the fourth installment of advance tax for the FY 2023-24. 
• 15th June 2024 – Due date for the first installment of advance tax for the FY 2024-25.
• 31st July 2024 – Income tax return filing for FY 2023-24 for individuals and entities not liable for tax audit and who have not entered into any international or specified domestic transaction.
• 15th September 2024 – Due date for the second installment of advance tax for the FY 2024-25.
• 30th September 2024 – Submission of audit report (Section 44AB) for AY 2024-25 for taxpayers liable for audit under the Income Tax Act.
• 31st October 2024 – ITR filing for taxpayers requiring audit (not having international or specified domestic transactions).
• 31st October 2024 – Submission of the audit report for AY 2024-25 for taxpayers having transfer pricing and specified domestic transactions.
• 15th December 2024 – Due date for the third installment of advance tax for the FY 2024-25.
• 31st December 2024 – Last date for filing a belated return or revised return for FY 2023-24.

You can also go through our Income Tax Calender to know more about the dates 

Income Tax Law

Income Tax Act

The Income Tax Act includes all the provisions that govern the country’s taxation. Every year, the Finance Minister presents a budget in February. The Union Budget brings in various amendments to the Income Tax Act. The most recent Union Budget presented by the current Finance Minister included the introduction of a new tax regime.

Apart from the IT Act, the other components of the income tax law are income tax rules, circulars, notifications, and case laws. All of these help in the implementation of income tax law and the collection of taxes.

About Income Tax Department India

The Income Tax Department is a government agency. The Act empowers the Income Tax Department to collect direct tax on behalf of the Government of India. The Ministry of Finance manages the revenue functions of the Government of India. The finance ministry has given the task of administration of direct taxes, like Income Tax, etc., to the Central Board of Direct Taxes (CBDT). The CBDT is one of the parts of the Department of Revenue in the Ministry of Finance. The CBDT administers direct tax laws through the IT Department. 

Thus, the Income Tax Department is a government agency that administers the Income-tax law under the control and supervision of the CBDT. The Income Tax Department has been given the power to collect direct tax on behalf of the Government of India. 

Budget 2023 – All Income Tax Related Announcements

• Deduction from Capital Gain –  Capital gains on reinvestment in a residential house property under sections 54 and 54F of the Income Tax Act are ceiled to Rs.10 crores.
• Surcharge – The highest surcharge rate was reduced from 37% to 25%.
• Insurance policies – Income from insurance policies having a premium or aggregate premium above Rs 5,00,000 a year is taxable under the head ‘Income from other sources’. This new rule will apply to policies issued on or after 1st April 2023. A deduction shall be allowed for a premium paid if it is not claimed earlier under any other provisions of the act. Suppose the Income received on the insured person’s death is considered exempt.
• E-gold Receipt – Conversion of gold into E-gold receipts or vice versa is not treated as capital gain. 
• Presumptive taxation – For MSMEs and certain professionals, the limit is raised to Rs 3 crore and Rs 75 lakh to avail presumptive taxation benefits. An increased limit applies provided the total cash receipts are not more than five per cent of the total gross receipts/ turnover.

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Understanding the taxability also involves knowing whether the item/goods is exempt or not under GST. Due to the scope of taxable supplies being widened under GST, exemptions under GST have clearly been defined. Not just knowing the exemption list, but also understanding the implication of an item being exempt is important as certain conditions are attached to it like reversing the ITC.

Also, what can be nil-rated today may become charged a higher tax rate in the future. Hence, clearly demarking the various terms such as Nil Rated, Exempt, Zero-rated and Non-GST supplies under GST is important.

What is Exempt Supply

Exempt supplies comprise the following three types of supplies:

• Supplies taxable at a ‘NIL’ rate of tax* (0% tax);
• Supplies that are wholly or partially exempted from CGST or IGST, by way of a notification amending Section 11 of CGST Act or Section 6 of IGST Act;
• Non-taxable supplies as defined under Section 2(78) – supplies that are not taxable under the Act (For Example Alcoholic liquor for human consumption.

Tax need not be paid on these supplies. Input tax credit attributable to exempt supplies will not be available for utilization/setoff. 

*Zero-rated supplies such as exports would not be treated as supplies taxable at ‘NIL’ rate of tax;

Central or the State Governments are empowered to grant exemptions from GST. The conditions for granting an exemption are:

GST Exempted Goods: List of Exempted Goods Under GST

• The exemption should be in the public interest
• By way of issue of notification
• Must be recommended by the GST Council
• Absolute exemption or conditional exemption may be for any goods and/or services of any specified description.
• Exemption by way of a special order (not notification) may be granted under exceptional circumstances.
• The registered person supplying the goods and/or services is not entitled to collect tax higher than the effective rate, where the supply enjoys an absolute exemption.

Classification of Exemptions

Supplier may be exempt – Exemption to the person making supplies – .i.e, supplier, regardless of the nature of outward supply.

Ex: Services by Charitable entities.

Certain Supplies may be exempt – Certain supplies due to their nature and type are exempted from GST. All supplies that are notified would be eligible for the exemption. Here, irrespective of who the supplier is, the exemption is allowed. not very much relevant.

Ex: Services by way of sponsorship of sporting events, Services by way of public conveniences.

Types of Exemptions

Absolute exemption: Exemption without any conditions. 

Ex: Transmission or distribution of electricity by an electricity transmission or distribution utility.

Conditional Exemption: Exemption subject to certain conditions. 

Ex: Health care services by a clinical establishment by way of providing room [other than Intensive Care Unit (ICU)/ Critical Care Unit(CCU)/ Intensive Cardiac Care Unit (ICCU)/ Neonatal Intensive Care Unit (NICU)] having room charges exceeding Rs. 5000 per day.

Conditional or partial exemption: Intra-State supplies of goods and/or services received from an unregistered person by a registered person is exempted from payment of tax under reverse charge provided the aggregate value of such supplies received by a registered person from all or any of the suppliers does not exceed `Rs 5000/- in a day.

Exemption under one GST Law and the effect on another GST Law

Important Notifications issued for exemption from payment of GST

What goods are exempted from GST? (List of exempted goods)

Click here to view the complete list of exempted goods.

Treatment of ITC if supply is exempt

In the case of exempt supplies, the amount of credit attributable to exempt supplies shall be reversed.

How to determine the credit attributable to exempt supplies?

Credit attributable to exempt supplies =  (A/T) x C

Where, 
A = Aggregate value of exempt supplies (all supplies other than taxable and zero-rated supplies) 
T = Total turnover of the person in the tax period 
C= Common Credit

What is a non-taxable supply?

“Non-taxable supply” means a supply of goods or services or both which is not leviable to tax under the CGST Act or under the IGST Act. A transaction must be a ‘supply’ as defined under the GST law to qualify as a non-taxable supply under the GST. 

Note: Only those supplies that are excluded from the scope of taxation under GST are covered by this definition – i.e., alcoholic liquor for human consumption, articles listed in section 9(2) or in schedule III.

It must also be noted that the following items are not out of the scope of GST. However, the GST rate has not yet been announced or notified to them.

• petroleum crude
• high-speed diesel
• motor spirit (commonly known as petrol)
• natural gas and
• aviation turbine fuel

The negative list under GST

Items that are not covered under GST are called a negative list. Also, these items are notified under Schedule III of the CGST Act. The following items are on the negative list under GST:

• Services by an employee to the employer in the course/ relation to employment
• Services of funeral, burial, crematorium or mortuary
• Sale of land
• Sale of completed buildings
• Actionable claims (other than lottery, betting and gambling)
• Services by any court or Tribunal
• Functions performed by the MPs, MLAs etc.
• Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity.

Difference between Exempt, Nil Rated, Zero Rated and Non-GST supplies

Frequently Asked Questions

Who has the power to grant exemption from payment of taxes?

Only Government has the power to grant the exemption. On the recommendations of the GST Council, the Government by notification may grant exemption from tax.

From which date does the exemption apply? Date of notification or date of publication of notification?

Exemption notifications will apply from the effective date as specified in the notification.

I am a trader dealing with only exempt supplies. Is it necessary to register under GST, if the turnover exceeds Rs.20 lakh?

There is no requirement for registration under GST if a person is dealing with 100% exempt supplies.

What is the exemption from GST registration?

GST registration is mandatory for every person doing business in India. However, you don’t have to register under GST when you are

• Agriculturists
• Having turnover within the GST registration threshold limit
• Making only nil-rated/exempt supplies of goods and services
• Making non-taxable/non-GST supplies of goods and services
• Doing activities that are neither supply of goods nor services
• Making only supplies covered under the reverse charge mechanism

Is the supply of exempt goods considered taxable or non-taxable supply?

The supply of exempt goods is considered non-taxable. Hence, such supplies do not trigger Registration, claim for input tax credit and other relevant provisions.

Should I issue a tax invoice if I sell only exempted products to a single customer?

A bill of supply should be issued when a registered dealer supplies exempt goods or services. For example, when a registered taxpayer supplies handloom, they have to issue a Bill of Supply instead of a tax invoice.

Whether Petrol is exempt good or non-taxable good?

Petrol is non-taxable good since it is excluded from the levy of tax for the time being.

Is an e-way bill required to be generated in case of movement of exempt supplies?

Not required to be generated. As per provisions of rule 138 (14) of CGST Rules, an e-way bill is not required to be generated when goods specified in notification no. 2/2017-Central Tax (Rate) dated 28.06.2017 other than de-oiled cake, is being transported. And, basically, goods specified in notification no. 2/2017-Central Tax are exempt goods.

Should I report exempt supplies separately in the GSTR-1 Return? If yes, in which tile/table?

Yes. Taxpayers should report consolidated details of nil rated, exempted and non-GST outward supplies in the tile “8A, 8B, 8C, 8D – Nil Rated Supplies”

Should I report exempt supplies separately in the GSTR-3B Return? If yes, in which tile/section?

Yes. Taxpayers should report details of nil rated and exempted outward supplies in Section “3.1 Tax on outward and reverse charge inward supplies” and the details of exempt, nil and Non-GST inward supplies in Section “5. Exempt, nil and Non-GST inward supplies”.

What is tax treatment in the case when a supply becomes chargeable to tax when earlier was exempt?

In this case, the taxpayer will be entitled as follows:

• On Inputs: Can claim credit of tax paid related to such exempt supply on stock held (inputs, semi-finished goods or finished goods) preceding the day when the supply becomes taxable.
• On the capital goods exclusively used for exempt supply: The credit of capital goods shall, however, stand reduced by 5 percentage points for every quarter or part thereof from the date of the issue of the invoice for such goods.

What is tax treatment in the case when a supply becomes exempt from tax when earlier was taxable?

Yes. Taxpayers should report co In case of switchover from taxable to exempt transactions, an amount equal to the credit of tax paid on stock held (inputs, semi-finished goods or finished goods) and capital goods (reduced by percentage points) on the day preceding the date of effecting exempt supplies will have to be paid.

In other words, the input tax credit is fully restricted. However, the taxpayer has the option to pay the same by utilization of available credit.

Can a taxpayer claim input tax credit pertaining to capital goods used for both taxable and exempt supply?

No. A taxpayer is not eligible to claim the tax paid on capital goods used for both, taxable and exempt supply

Does exemption from CGST automatically apply as an exemption from SGST?

Yes, notification issued under section 11(1) or 11(2) of the CGST Act will be deemed to be issued under the SGST Act / UTGST Act.

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