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October 18, 2020

Missed providing tax deductions in investment declarations for Form 16? Do it while filing your ITR

by CA Shivam Jaiswal in Income Tax

Missed providing tax deductions in investment declarations for Form 16? Do it while filing your ITR

An income tax return (ITR) is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. The deadline for filing Income Tax Return for corporate and other assessees who are to get their accounts audited under Income Tax Act 1961 or under any other law for the time being in force is 30th September and for others, it is 31st July every year as have been prescribed under the Act.

Extension of Return filing due date

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. With the ongoing COVID -19 pandemic a lot of income tax due dates were extended by The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 read with Notification No. 35 /2020, dated 24-06-2020.

In view of the same, the due date of furnishing ITR for FY 2018-19 has been extended till 31st July, 2020 and for FY 2019-20 till 30th November, 2020. The Central Board of Direct Taxes (CBDT) has notified and released various ITR forms for different purposes.

What is Form 16?

Form 16 is the certificate issued under section 203 of the Income tax Act for tax deducted at source (TDS) from income under the head ‘salary’. It is issued on deduction of tax by the employer from an employee’s salary and deposit of the same with the government.

The certificate provides a detailed summary of the amount paid or credited to the employee and the TDS on the same. This form is issued annually in accordance with the provisions of the Income Tax Act normally after the end of the financial year for which it is issued. It also contains details of Deductions allowed under the Income Tax Act for various investments and expenses of the assessee.

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Extension of Tax Saving Investment Date

The government extended the tax-saving investment deadline multiple times for FY2019-20. The last date for income tax saving investments was set on 31st July, 2020 for the Financial Year 2019-20, from the earlier deadline March 31, 2020, and June 30, 2020. Due to the COVID-19 pandemic, there were taxpayers who were not able to invest in the necessary financial products to save tax. Therefore, this extension gave taxpayers extra time to complete their tax-saving investments for the Financial Year 2019-20.

However, despite multiple reminders from employers, many tend to delay submitting proofs of tax-saver investments, resulting in higher tax deduction from their salary. Some get overlooked due to inadequate awareness of the tax reliefs available. It is important to declare all tax saving investments at the time of TDS computation in Form 16. However, there is no reason to worry if you have missed the deadline or are about to miss the deadline.

Because, even if extra tax is deducted due to non-submission of the proof of investments, you may claim it back by filing the income tax return (ITR) for the year. So, if you made tax-saver investments between April and July 2020, you can furnish the details in your tax return.

Let us refer to the tax saving investments that are generally overlooked:

Employee’s Provident Fund (EPF) investments

EPF investments offer tax-deduction benefit under Section 80C and carry minimal investment risk. Under EPF, employees are mandated to save a portion of their salary towards building their retirement corpus. Salaried individuals who work in an organisation that is registered with the Employees’ Provident Fund Organisation (EPFO) are mandatorily required to contribute 12% of their basic salary and dearness allowance (DA) into their EPF accounts. However, you can actually increase this contribution up to Rs 1.5 lakh to complete your 80C investment needs through a single instrument. 

EPF comes under the Exempt-Exempt-Exempt category from the income tax perspective. EEE category means the amount that you invest is exempt from tax, the interest earned on such an investment is exempt from tax and the corpus that you will receive on maturity will also be exempted from the tax.

Investment in Sukanya Samriddhi Scheme

Parents of girl children may avail the deduction by investing in Sukanya Samriddhi Yojana (SSY) for up to two girls, by opening accounts before the girls turns 10 years old. Total contributions per girl child should not exceed the current limit of Rs 1,50,000 under Section 80C in a financial year.

Investments in Senior Citizen Saving Scheme (SCSS)

Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings scheme for senior citizens, which was launched in 2004. The primary objective of the scheme is to enable senior citizens to ensure a regular flow of income. As this scheme is solely a government-run scheme, so the interest rate and other conditions have been set keeping in mind the financial needs of retirees.

SCSS comes with a maximum tax benefit of Rs 1.5 lakh under section 80C of the Income-tax Act. However, interest earned on SCSS is fully taxable. In case the interest amount earned is more than Rs. 50,000 for a fiscal, Tax Deducted at Source (TDS) is applicable to the interest earned. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.

Donations under Section 80G

Section 80G of the Income Tax Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income. Deduction under this section is not restricted to any specific category of person’s/ assessee’s. This deduction can be availed by any assessee who makes a donation to the notified institutions and the relief funds set up by the government.

The amount of donation which can be claimed as a deduction under section 80G is determined as per certain rules. One can claim either 100% or 50% of the amount donated as a deduction subject to ‘With’ or ‘Without’ the upper limit. In the COVID-19 situation, many individuals have generously donated to NGOs or to the PM CARES Fund. All such donations made up to July 31, 2020 would be eligible for Section 80G deduction for the financial year 2019-20.

Interest on Savings Deposits

Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an Individual and HUF.

This deduction is allowed on interest earned:

  • From a savings account with a bank
  • From a savings account with a co-operative society carrying on the business of banking
  • From a savings account with a post office

Earlier, this deduction was available to everyone irrespective of their age, i.e., to individuals aged below 60 years, senior citizens, and super senior citizens.  However, with effect from financial year 2018-19, senior citizens cannot claim deduction under this section. Post Budget 2018, section 80TTA has been amended which restricts senior citizens from claiming any deductions on interest received on savings account either with bank or post office under this particular section. However, they can claim deduction up to Rs 50,000 for interest received from savings account and fixed deposit with banks and post office under section 80TTB.

Section 80TTB which was applicable w.e.f 1st April 2018 is a provision whereby a taxpayer who is a resident senior citizen, aged 60 years and above at any time during a financial year claim a deduction of lower of Rs 50,000 or an amount from a specified income from his gross total income for that FY. 

Specified income is any of the following income in aggregate:

  • Interest on bank deposits (savings or fixed)
  • Interest on deposits held in a co-operative society engaged in the business of banking, including a co-operative land mortgage bank or a co-operative land development bank; or
  • Interest on post office deposits

Medical Insurance under Section 80D

Every individual can claim a deduction under Section 80D for their medical insurance which is taken from their total income in any given year. Not only can an individual take benefit by purchasing a health plan for themselves but also one can take advantage of buying the policy to cover their spouse, dependent children or parent. Hindu Undivided Families are also eligible to claim deductions under this section. The premium payments of any member in a Hindu Undivided Family can be used for tax deductions, which is however, subject to upper limit as per the Act.

An individual can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and dependent children. An additional deduction for the insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age, or Rs 50,000 if parents are aged above 60.

Deduction of Preventive Health Check up

Any payments made towards preventive health check-ups will entitle a taxpayer to a deduction under Section 80D of up to Rs 5,000, which is within the overall limit of Rs 25,000/Rs 50,000 as the case may be. It is not necessary that the preventive health check-up should be carried out for the taxpayer only. Deduction for preventive health check-up is available even when the check-up is conducted for spouse, dependent children and parents of the assessee.

Expenses of preventive health check-up can be made in cash or any other mode other than cash. There is no requirement of submitting any document/receipt to the income tax department. However, it is important to remember that the taxpayer must keep documentary evidences such as doctor’s bill, medical report, receipt and other documentary evidence in case the income tax department asks for proof.

Interest on Education Loan

If the assessee has taken an education loan and are repaying the same, then the interest paid on that education loan is allowed as a deduction from the total income under Section 80E. However, the deduction is provided only for the interest part of the EMI. Only an individual can claim this deduction. It is not available to HUF or any other kind of taxpayer. The loan should be taken for the higher education of self, spouse or children or for a student for whom the individual is a legal guardian. Parents can easily claim this deduction for the loan taken for the higher studies of their children.

Rent paid

For most employees, House Rent Allowance (HRA) is a part of their salary structure. The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps an employee to save tax. The exemption for HRA benefit is the minimum of:

  • Actual HRA received
  • 50% of salary if living in metro cities, or 40% for non-metro cities; and
  • Excess of rent paid annually over 10% of annual salary

It is not just employees who can get this exemption, even non-salaried individuals staying in a rented accommodation can avail of tax benefits under section 80GG on rent paid. Quantum of deduction would be the least of the actual rent paid in excess of 10% of total income, Rs 5,000 per month or 25% of total income. If you failed to avail of this exemption while filing your investment declaration, you can remedy the situation in your tax returns.

Leave Travel Allowance

If you happen to be self-employed or run your own business, you could deduct your travel expenses against the income you earn and only pay tax on the remaining profit you make. If you happen to be employed, then the Leave Travel Allowance (LTA) that your employer offers you when you travel with your family or by yourself is completely tax-free.

Leave Travel Allowance is one of the best tax saving tools that an employee can avail. It is a tax exemption offered by employers to their employees. Leave Travel Allowance as the name suggests is an allowance paid to the employee by the employer when the former is travelling with their family or alone. The amount paid as Leave Travel Allowance is tax free. One should ensure to carefully preserve their flight tickets, boarding passes, train tickets or fuel bills if they have travelled by road.

Investment in Equity Linked Savings Schemes 

Investments in Equity Linked Savings Schemes or ELSS mutual funds qualify for deduction from your taxable income under Section 80C of the Income Tax Act 1961. The maximum investment amount eligible for tax deduction under Section 80C, is Rs 1.5 lakhs. ELSS comes with the advantage of a shorter lock-in period of 3 year and professional fund management, which can lead to wealth accumulation. 

So do not worry if you missed claiming tax deductions in your investment declarations for Form 16. You can enter the details in income tax return forms to claim the tax benefits. Although the Income Tax department does not require you attach any proofs in your ITR forms, you need to ensure that you preserve the proofs such as school fee, house rent and medical check-up receipts. If you are found to have furnished false information, you will have to face repercussions.

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