Filing I-T Return? Claim These Deductions Part – II View First Part >>

Many salaried people, professionals, and small businesses owned by individuals and small firms are now getting ready to file their ITRs for the financial year 2019-20. This year, the date for filing ITR got extended to 30/11/2020. The I-T Returns are filed by salaried people on the basis of information in Form 16 given to them by their employers. In Form 16, the employer has accounted for all the tax-saving investments and expenses that are provided to him. However, it is generally the case that most of the people miss out on something which may save their tax however of small amounts. They may miss out on claiming certain deductions or may miscompute certain tax-free incomes etc. Further, in the case of salaried ones, it is seen that employers are generally cautious in not deducting the TDS lesser than due, and hence often end up deducting TDS more than the tax due from the employee. The summary lesson from this is that Form 16 is not your I-T Return, you may even have the tax dues lesser than those computed therein.

A similar thing may also happen in the case of professionals and businesses owned by individuals in their proprietary capacity. This article analyses some of the things that are more prone to be missed from claiming in I-T Returns by many taxpayers.

Even if you miss these claims at the Form 16 stage, you can still, and you must make those claims in your I-T Return.

06. Savings Account Interest
The savings from our regular income are invested by us in financial instruments for earning interest income. The most popular of such instruments are Fixed Deposits (FDs) in banks and Post Office, Recurring Deposits (RDs), Public Provident Fund (PPF), Corporate and Government Bonds. Besides these many people keep money in savings accounts in banks and post offices. All of these investments earn interest income on the amount of investments at an applicable rate of interest. Besides the interest income, it also gives us capital gains income on instruments like bonds. The interest income on such investments is categorized as ‘Income from Other Sources (IfOS). The interest income, if taxable suffers TDS at the applicable rates.

Different incomes are summarised here:

Sr. No. Source Exempt Portion u/s10 (Max. Limit ) Deduction available u/s 80TTA/TTB () To whom Conditions TDS Applicable?
01 Savings Bank 0 10000/- and

50,000/- in case of senior citizens

Individual and HUF The income which is claimed as exempt u/s 10 is not again claimed for deduction u/s 80TTA/TTB Yes
02 Savings Post Account 3500 in case of individual and 7000 in case of the joint account 10000/- and

50,000/- in case of senior citizens

Individual and HUF Yes
03 Interest on Fixed Deposits 0 50,000/- in case of senior citizens Individual and HUF The income which is claimed as deductible u/s 80TTA is not to be again claimed as deductible u/s 80TTB Yes
04 Public Provident Fund (PPF) Entire income NA Individual and HUF No
05 Corporate or Government bonds Fully-taxable.  Except for amount as specified in case of Tax-Free Government Bonds. NO NA Yes

The tax deductions and exemptions are discussed in detail in the specific article here.

07. Tax relief on arrear salary:
The income tax on the income is computed and imposed at the tax rates in force in that year. What happens if the salary income was taxable in earlier years when the rates were low and is received in the year (and included in taxable income) when the tax rates are higher. In that situation, it is possible that a taxpayer may end up paying taxes more than his due. In order to avoid this situation, the Income-tax law has a built-in provision for computing tax relief in such situations. Popularly, this tax relief is called as section 89(1) relief. This relief is available only in the case of income from salary and income from a family pension. This relief is only for the purpose to avoid tax at higher rates when in fact the tax was due at lower rates. This is computed in the following manner:

For a detailed and separate discussion on the arrear salary relief, please read here.

08. Rebate on tax for small taxpayers
The tax rebate does not mean that your income is exempt, or your income is deductible for tax purposes. It simply means ‘discount or concession’ in tax. This implies that to claim this rebate you first have to compute your tax on your total taxable income which should be less than ₹500,000/-. Such tax should be computed excluding the amount of any cess therein. Rebate is in respect of tax and not cess. From the assessment year 2020-21 (financial year 2019-20) the maximum amount of the rebate is ₹12,500/-.

What are the conditions for the rebate claim?
The rebate is available if you satisfy the following conditions:

  • The rebate is available to only individual taxpayers
  • The rebate is available only to residents in India
  • The total income after claiming deductions under chapter VIA (e.g. 80C, 80D, 80DD, 80G etc.) is less than ₹500,000/-
  • The maximum limit for the amount of rebate is ₹12,500/- (for A Y 2020-21 and onwards)
  • The rebate is applied to the tax amount and not to the amount of cess on tax

To know more about the tax rebate in detail please read here.

09. Extra Tax Benefit on Home Loan
The additional deduction is available in respect of interest repayment on housing loans borrowed from the financial institution and banks. The interest repayment deduction against income from house property is available in respect of loans borrowed from friends and relatives but that is not the case in respect of this deduction. In this case, the loan has to be borrowed from a financial institution or bank. A similar deduction is also available of ₹50,000/- u/s 80EE of the Income-tax Act but this is available only if you have borrowed the home loan in the financial year 2016-17. If you have availed deduction u/s 80EE or if you are eligible to avail that deduction, you are disqualified from claiming the deduction of ₹1,50,000/- u/s80EEA.

Conditions for eligibility of deduction u/s 80EEA

  • This deduction is available only to individuals and NOT to HUFs or firms
  • The agreement value of the house bought by you must not exceed ₹45,00,000/-
  • The home must be financed with home loan
  • Such home loan must be borrowed in the financial year 2019-20 or 2020-21 (purchase agreement date is not relevant)
  • On the date of sanction of this home loan, you must not own any other residential house property
  • This deduction can be claimed in the assessment year 2020-21 and subsequent assessment years
  • The amount against which this deduction is claimed can not be claimed as a deduction against any other section for e.g. on a home loan if you have total interest repayment of ₹200,000/-, and you have claimed the same as a deduction against income from house property u/s 24 of the Income-tax Act, then again, you can not claim the same amount as deduction u/s 80EEA. However, if you have interest repayment of ₹2,50,000/- and you have claimed ₹2,00,000/- as deduction u/s 24 of the Income-tax Act, then the remaining amount of ₹50,000/- can be claimed as deduction u/s 80EEA.

Read more on the extra tax benefit and deduction u/s 80EEA here

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