What is Advance Tax

Every individual investor who has a tax liability of Rs5000 and above is liable to pay installment of advance tax. Here is a check list of the points one should consider while paying the amount, inorder to avoid interest penalty.
1. Estimate the total income for each year and calculate the tax liability on such income.
2. Reduce such amount by the total TDS during the year.
3. Out of the arrived sum, reduce the amount of capital gain tax during the year and take 30% of the resulting amount, which should be the first installment to be paid on or before September 15.
4. For the second installment to be paid before December 15, calculate 60% of the amount in Step 2 after deducting capital gain tax and pay the resulting amount after deducting the amount of first installment.
5. In the final installment, paid on or before March 15, the full amount of tax is to be deposited (including capital gains tax) as reduced by amount in step 3 and step 4.
Surcharge, education and higher education cess should also be considered while calculating the advance tax liability.
Penalty in case of shortfall of advance tax payment
When filing returns, interest is calculated u/s 234A, 234B and 234C.
Under section 234A, the liability arises only when the return is filed after the due date.
Under section 234B, penalty arises when the total amount of advance tax paid along with the amount of TDS is less than 90% of the total tax liability. In such case interest is calculated at 1% per month of the amount of shortfall for time period from April to the month in which the return is filed.
Under Section 234C, there are three components. For the first installment, the shortfall penalty is calculated for 3 months @1% p.m. Similarly, in the second installment, the shortfall penalty is also calculated for 3 months @1% p.m and the final installment is calculated at a flat rate if 1% for 1 month only.
The best strategy for paying advance tax should be to pay a little extra for first 2 installments and then paying amount close to the total tax liability during the third installment. One should also try not to pay extra amount so as to avoid any hassles of refund as is it best to pay nominal interest amount later on.

EVENTS OF DEDUCTION OF TDS

Types Of Payment, Relevant Provisions, Person Responsible For Deduction Of Tax And Type Of Payee
S No Nature of Payment Person Responsible for deduction of tax at source TDS necessary when payment is made to

1. Salary and all positive incomes under any head on income but not including loss under the head income under the House property (Sec 192) All Governments, Companies, Co operartive societies, Local authorities, University, Institutions, Associations or Body , Trustees of a recognized Provident Fund or Superannuation Fund Any individual having taxable salary during the previous year from any number of employers

2. Interest on Securities (Sec 193) Any person Any person

3. Dividend from Domestic Companies or companies which have made prescribed arrangement for declaration/payment of dividend within India (Excluded from TDS w.e.f. 1.6.97 by Finance Act, 97) (Sec 194) Principal Officer of a Domestic Company. A resident shareholder when total dividend paid exceeds Rs 2,500/-

4. Interest other than interest on securities (Sec 194A) Any person other than individual or HUF A resident

5. Winnings from Lottery or crossword puzzles (Sec 194B) Any person Any person

6. Winnings from horse races (Sec 194BB) Book maker or person holding a licence for horse racing, wagering or betting in any race course Any person

7. i. Payment to Contractors in pursuance of any work of contract including supply of labour contract (Sec 194C) Central, State Government, local authority; Central, State or provincial Corporation; Company ; Co-operative Society; trust; University; a constituted authority engaged in housing and planning & development of Cities,Towns and Villages; and firm (firm included w.e.f. 1.7.95 vide Finance Act, 1995) Any resident person

ii. Payment to sub-contractors (Sec 194C) Any Contractor other than individual or HUF Any resident person

8. Insurance Commission covering all payments for procuring Insurance business(Sec 194D) Any person responsible for payment A resident

9. Payment to non-resident sportsman (including athlete) or sports association or institution. In case of non-resident sportsman, it includes payments in respect of advertisements as well as articles on any game or sports in India in newspapers, magazines etc. (194E) Any person responsible for payment Any non-resident sportsman who is not a citizen of India and any non-resident sports association or institution

10. Payments in respect of deposits under NSS (194EE) Person responsible for making payment in respect of amount referred to in Section 80CCA (2)(a). Any person except when the payment is made to the heirs.

11. Payment on account of repurchase of Units by Mutual Fund or UTI (194F) Person responsible for making payment in respect of amount referred to in Section 80CCB (2). Any person

12. Commission to Stockists, distributors, buyers and sellers of Lottery tickets including remuneration or prize on such tickets (sec 194G) Person responsible for making payment to such agent Any person

13. Commission brokerage (sec 194H) Not applicable w.e.f. 1.6.92 -

14. Payment of rent (sec 194I) Any person responsible for making payment excluding individual & HUF. Any person

15. Fees for professional & technical services; professional services include legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising & any profession notified under Section 44AA ; Technical fees mean any consideration for rendering any managerial , technical or Consultancy service including provision of services of technical or other personnel(sec 194J) Any person responsible for making payment except an individual & HUF. A resident.

UNDERSTAND WHAT IS CENVAT CREDIT

You are entitled to take CENVAT Credit of the excise duty paid on inputs, capital goods, service tax paid on input service


for taking credit of the same you have to maintain separate registers like INPUT REGISTER, INPUT SERVICE REGISTER PART- I & II, CAPITAL GOODS REGISTER etc.


you have to maintain duly records of clearances of final products and the same have to be cleared on issue of C.Ex.invoice as prescribed in C.Ex.Rules and you can debit the duty at the end of month in your register instead ot paying it in cash.

CENVAT (Central Value Added Tax) credit is the the set off of the duty paid on inputs and capital goods and also service tax paid on input service against the Excise duty on final products or service tax o input service.


EXAMPLE



 Ex:-


1. Purchased Raw Material (inputs) Rs.110


(Includes 10% Tax paid on it i.e. Rs.10)


2. Value addition Rs.200


3. Total (1+2) Rs.310


4. Excise Duty on (3) above, Say 20% i.e Rs. 62


-----------------------


If Cenvat credit,is there,


Cost of Product= [(110-10)+200+ 20%(100+200)]=Rs.360


If Cenvat credit,is not there,


Cost of Product= [110+200+ 20%(100+200)]=Rs.372

HOW TO GET INCOME TAX EXEPTIONS

By- Nilesh Mandole

Here is a list of Exempted Incomes for different categories.

General

Section	Nature of Income	Exemption limit, if any
10(1)	Agricultural income
10(2)	Share from income of HUF
10(2A)	Share of profit from firm
10(3)	Casual and non-recurring receipts	Winnings from races Rs.2500/- other receipts Rs.5000/-
10(10D)	Receipts from life Insurance Policy
10(16)	Scholarships to meet cost of education
10(17)	Allowances of MP and MLA.	For MLA not exceeding Rs. 600/- per month
10(17A)	Awards and rewards (i) from awards by Central/State Government (ii) from approved awards by others (iii) Approved rewards from Central & State Governments
10(26)	Income of Members of scheduled tribes residing in certain areas in North Eastern States or in the Ladakh region.	Only on income arising in those areas or interest on securities or dividends
10(26A)	Income of resident of Ladakh	On income arising in Ladakh or outside India
10(30)	(i) Subsidy from Tea Board under approved scheme of replantation
10(31)	(ii) Subsidy from concerned Board under approved Scheme of replantation
10(32)	Minor's income clubbed with individual	Upto Rs. 1,500/-
10(33)	Dividend from Indian Companies, Income from units of Unit Trust of India and Mutual Funds, and income from Venture Capital Company/fund.
10(A)	Profit of newly established undertaking in free trade zones electronic hardware technology park on software technology park for 10 years (net beyond 10 year from 2000-01)
10(B)	Profit of 100% export oriented undertakings manufacturing articles or things or computer software for 10 years (not beyond 10 years from 2000-01)
10(C)	Profit of newly established undertaking in I.I.D.C or I.G.C. in North-Eastern Region for 10 years

Income From Interest

Section	Nature of Income	Exemption limit, if any
10(15)(i)(iib)(iic)	Interest, premium on� redemption or other payments from notified securities, bonds, Capital investment bonds, Relief bonds etc.	To the extent mentioned in notification
10(15)(iv)(h)	Income from interest payable by a Public Sector Company on notified bonds or debentures
10(15)(iv)(i)	Interest payable by Government on deposits made by employees of Central or State Government or Public Sector Company of money due on retirement under a notified scheme
10(15)(vi)	Interest on notified Gold Deposit bonds
10(15)(vii)	Interest on notified bonds of local authorities

Income from Salary

Section	Nature of Income	Exemption limit, if any
10(5)	Leave Travel assistance/ concession	Not to exceed the amount payable by Central Government to its employees
10(5B)	Remuneration of technicians having specialised knowledge and experience in specified fields (not resident in any of the four preceding financial years) whose services commence after 31.3.93 and tax on whose remuneration is paid by the employer	Exemption in respect of income in the from of tax paid by employer for a period upto 48 months
10(7)	Allowances and perquisites by the government to citizens of India for services abroad
10(8)	Remuneration from foreign governments for duties in India under Cooperative technical assistance programmes. Exemption is provided also in respect of any other income arising outside India provided tax on such income is payable to that Government.
10(10)	Death-cum-retirement Gratuity-
	(i) from Government
	(ii) Under payment of Gratuity Act 1972	Amount as per Sub-sections (2), (3) and (4) of the Act.
	(iii) Any other	Upto one-half months salary for each year of completed service.
10(10A)	Commutation of Pension-
	(i) from government, statutory Corporation etc.
	(ii) from other employers	Where gratuity is payable - value of 1/3 pension.� Where gratuity is not payable - value of 1/2 pension
	(iii) from fund set up by LIC u/s 10(23AAB)
10(10AA)	Encashment of unutilised earned leave
	(i) from Central or State government
	(ii) from other employers	Upto an amount equal to 10 months salary or Rs. 1,35,360/- which ever is less
10(10B)	Retrenchment compensation	Amount u/s. 25F(b) of Industrial Dispute Act 1947 or the amount notified by the government, whichever is less.
10(10C)	Amount received on voluntary retirement or termination of service or voluntary separation under the schemes prepared as per Rule 2BA from public sector companies, statutory authorities, local authorities, Indian Institute of Technology, specified institutes of management or under any scheme of a company or Co-operative Society	Amount as per the Scheme subject to maximum of Rs. 5 lakh
10(11)	Payment under Provident Fund Act 1925 or other notified funds of Central Government
10(12)	Payment under recognised provident funds	To the extent provided in rule 8 of Part A of Fourth Schedule
10(13)	Payment from approved Superannuation Fund
10(13A)	House rent allowance	least of-
		(i) actual allowance
		(ii) actual rent in excess of 10% of salary
		(iii) 50% of salary in Mumbai, Chennai, Delhi and Calcutta and 40% in other places
10(14)	Prescribed [See Rule 2BB (1)] special allowances or benefits specifically granted to meet expenses wholly necessarily and exclusively incurred in the performance of duties	To the extent such expenses are actually incurred.
10(18)	Pension including family pension of recipients of notified gallantry awards

Section 80L used to allow deduction of interest earned on, say, a National Savings Certificate or a bank deposit up to a limit of Rs 12,000. But now all these are gone .In their place has come Section 80C -- "u/s 80CCC, & u/s 80CCD", as the Finance Bill puts it. Thus, the new Section 80C of the Income Tax Act proposed in Union Budget gives you a bigger tax break than what the current regime offers.

• Deduction in respect of Life Insurance Premia, Contribution to Provident Fund, etc.
• Rs 1 lakh can be invested under this section without any individual sub-limits except in the case of Rs 10,000 in pension funds.
• Sections 88, 80L, 80CCC and 80CCD is clubbed in.

INSERT (AY 2007-08) It is proposed to insert clause (xxi) in sub-section (2) of this section in order to provide that the investment in a term deposit for a fixed period of not less than five years with any scheduled bank shall be eligible for a deduction under this section.

Schemes eligible for Section 80C benefits

• PPF
• ELSS - Mutual Funds
• NSC
• KVP

• Life Insurance
• Senior Citizen Saving Scheme 2004
• Post Office Time Deposit Account
• 
  

Note : - Section 80CCC is for deduction in respect of contribution to certain Pension Funds. Section 80L is for deductions in respect to Interest on certain Securities, Dividends, etc

Sections abolished from Union Budget 2005-06

• 88 (Rebate on Life Insurance Premia, Contribution to Provident Fund, etc.)
• 80L (Deductions in respect to Interest on certain Securities, Dividends, etc.)
• Note :-
  Rebate of Rs 5,000 for women and Rs 20,000 for senior citizens have been wiped off.

The key features of the new provision

• Exemption available to all taxpayers irrespective of income bracket -earlier Section 88 did not provide benefit to those having income exceeding Rs 500,000.
• No exemption/adjustment for interest income
• All saving modes/options under Section 88 covered and also 80CCC and 80CCD covered.

Following benefits will continue irrespective of changes

• Interest paid on housing loan for self-occupied house property.
• Medical insurance premium. (Additional deduction of Rs 15000 u/s 80D to an individual paying medical insurance premium for his/her parent(s)
• Specified expenditure on disabled dependant.
• Expenses for medical treatment for self or dependant or member of an HUF.
• Deduction in respect of interest on loans for pursuing higher studies - Section 80E.
• Deduction to person with disability.

Section 10(33)
Dividends from mutual funds are fully exempt from income tax under Section 10(33). Equity funds (schemes that invest 50 per cent of their funds in equity

) are also exempt from dividend tax. This means that unlike companies, they do not have to pay tax at the rate of 10.2 per cent on the dividend that they distribute.

INSERT (AY 2008-09) Coir Board included in Section 10(29A) and exempted from income tax.

Section 88
Upto 31 March 2005, rebates were available on the tax payable under three sections.

According to the section, 30 per cent or 20 per cent or 15 per cent of the amount invested in certain schemes (schemes referred in Section 80C) was available as a rebate on the tax payable.

• 30 per cent of the amount invested was available as rebate only if the salary income of the individual was less than Rs. 1 lakh and if it constituted 90 per cent or more of the assessee's gross total income.
• 20 per cent of the amount invested was available as rebate if the gross total income of the individual was less than Rs 1.5 lakh and the case did not fall under the above mentioned case.
• If gross total income was more than Rs. 1.5 lakh but less than Rs 5 lakh of the individual, a rebate of 15 per cent of the amount invested was available.
• If gross total income was more than Rs 5 lakh of the individual, then there is no rebate.

Section 88B

INSERT (AY 2008-09) A new sub-section (11C) in Section 80-IB to grant a five year tax holiday to encourage hospitals to be set up anywhere in India, except certain specified urban agglomerations, and especially in tier-2 and tier-3 towns in order to serve the rural hinterland. This window will be open for the period April 1, 2008 to March 31, 2013, during which the hospital must commence operations.

Under this section, an individual resident in India and above the age of 65 years was allowed to a maximum rebate of Rs. 20,000 on the tax payable.

Section 88C
Under this section a lady resident in India, aged below 65 years, was allowed a maximum rebate on the tax payable of Rs 5,000.

Section 89 (1)
This is available to an employee when he receives salary in advance or in arrear or when in one financial year, he receives salary of more than 12 months or receives 'profits in lieu of salary' W.e.f. 1.6.89, relief u/s 89(1) can be granted at the time of TDS by employees of all companies co-operative societies, universities or institutions as well as govt./public sector undertakings. The relief should be claimed by the employee in Form No. 10E and should be worked out as explained in Rule 21A of the Income Tax Rules.
Exemptions to Non-citizens only

Section	Nature of Income	Exemption limit, if any
10(6)(i)(a) and (b)	(i) passage money from employer for the employee and his family for home leave outside India
	(ii) Passage money for the employee and his family to 'Home country' after retirement/termination of service in India.
10(6)(ii)	Remuneration of members of diplomatic missions in India and their staff, provided the members of staff are not engaged in any business or profession or another employment in India.
10(6)(vi)	Remuneration of employee of foreign enterprise for services rendered during his stay in India in specified circumstances provided the stay does not exceed 90 days in that previous year.
10(6)(xi)	Remuneration of foreign Government employee on training in certain establishments in India.

Exemptions to Non-resident Indians (NRIs) only

Section	Nature of Income	Exemption limit, if any
11.2	The units purchased by them are out of the amount remitted from abroad or from their Non-resident (External) Account

HRA 

BY - NILESH M



HRA stands for House Rent Allowance, it is an allowance provided by an employer to an employee. The main intention of this is to meet the cost of renting a home. Everybody whose salary package includes HRA is potentially eligible to get some deduction in Income Tax. Most, of the government and private employees have HRA as part of their salary package. In order to get income tax deduction for HRA, you must be paying rent for your accommodation; merely receiving HRA won’t help you to get tax benefit.


For the purpose of discussion on HRA, salary means your Basic + Dearness Allowance (DA).

For Salaried persons

It is exempt for a salaried person if house rent allowance (HRA) is provided to him as a part of compensation for the services rendered. The maximum amount of exemption that he can get is the amount paid by the employee*.

Other Individuals

These includes who do not receive HRA, government has made a provision under section 80GG, as per this, a non- Salaried Individual can also avail a maximum deduction of Rs 2000 every month i.e. 24,000 per annum.

How to deal with HRA (House Rent Allowance) 

MINIMUM OF BELOW

• You should have an HRA allowance as part of your salary package.
• You must be staying in a rented house and paying rent for it.
• Rent should exceed 10% of your salary.

How Much HRA You Can Claim 

• The actual amount of HRA received.
• 40% of salary. This increases to 50% if you are staying in Chennai, Delhi, Kolkata or Mumbai.
• Rent paid minus 10% of Salary (Basic + Dearness Allowance)

Exemptions for HRA

• Rent given to your parents
• Took a home loan and bought a home but are not residing
• Home loan for a home in a city where you are not residing

Rent given to your parents

You can claim tax deduction on the rent given to your parents. If you are living with your parents and pay them rent they will be the landlords. One of them should declare it in his/ her personal income tax return to prevent litigation in the future.

Took a home loan and bought a home but are not residing

If you took a home loan and have bought a home but are not residing in it because of some genuine reasons you can get the following benefits

• Tax benefit on principal repayment under Section 80C
• Tax benefit on interest payment under Section 24
• HRA benefit

Home loan for a home in a city where you are not residing

In this case also you can avail the same benefits in the previous case such as;

• Tax benefit on principal repayment under Section 80C
• Tax benefit on interest payment under Section 24