AVAIL ADDITIONAL DEDUCTION OF RS. 50,000/- BY INVESTING IN NPS

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investing in NPS

Query 1]

I have query regarding income tax FY 2015-16. I am a salaried individual resident status individual. It has been mentioned in current budget that Additional deduction of Rs. 50,000/- for contribution to the new pension scheme u/s 80CCD will be in effect from 01/04/2015. But if I see in ITR 2 Form for me, under Schedule VI-A there is CCD(1) assesses contribution & CCD (2) employer contribution. Now my employer is contributing in EPS Rs. 1,082/- monthly and since additional limit is raised to 50,000/- so I would like to utilize this opportunity and open a NPS account in a bank and start contributing to it. So, whether I am eligible to do so? If yes then where I have to mention in ITR 2 form for my deduction as total contribution in 80C/80CCC & 80 CCD(1) together cannot exceed Rs 1,50,000/-. My point is where and how I should mention it while filing ITR 2 form? Secondly, I was having a NRI status in FY 2012-13. After returning to India, while filing return, I have mentioned my bank accounts details  abroad as I was a student. Somehow, I missed to mention it in last year filing. So if I mention it again in the current year, whether I will liable for any fine or not? Please advice. [S.M. Tiwari-s.smt@rediffmail.com]

Opinion:

  1. As of now, you would be filing the income tax return for the FY 2014-15 (i.e., A.Y. 2015-16) & you are referring to the income tax return forms notified for the FY 2014-15.
  2. With a view to promote social security measures and to encourage people to contribute towards National Pension Scheme (NPS), an additional deduction of Rs. 50,000/- is provided u/s 80CCD (1B) by the Finance Act-2015 with effect from 01.04.2015. The same would be available from the FY 2015-16. The income tax return forms for the FY 2015-16 would be notified in the next year wherein the additional column would be incorporated to provide for the deduction of Rs. 50,000/- over & above regular deduction of Rs. 1.50 Lacs.
  3. Change in the Income tax return forms has now become an annual feature. Every year, new sets of forms are notified for filing income tax return. As Additional deduction of Rs. 50,000/- would be effective from the FY 2015-16, no column is incorporated in those ITR forms of FY 2014-15. It may further be noted that newly notified Income Tax Return (ITR) forms for the FY 2014-15 has been kept on hold. The government is expected to come out with simplified ITR forms shortly.
  4. One need to be very cautious while filling the income tax returns forms. Furnishing of inaccurate particulars or wrong particulars in the income tax return attracts penal consequences. Even if you have not filled the details of the foreign bank accounts in the preceding year return, don’t erred in incorporating the same in the current year income tax return.

 

Query 2]

I had purchased a flat in Nagpur for Rs 3.43 Lacs, stamp duty Rs. 10,830/-. Sale deed was executed on 20/12/2000 and possession of the flat was taken on that date. I intend to sell the flat for Rs 16.00 Lacs in May 2015. My queries are as follows:

  1. What is the amount of Capital Gains for the above?
  2. I wish to deposit the sale amount of Rs 16.00 Lacs in Capital Gain FD for
    2 years. Can I utilize the same within two years for purchasing a flat jointly
    with my son? Will I be exempt from paying LTCG tax? Anyother alternative option?
  3. Can the property be purchased anywhere in India? Kindly reply at the earliest. [Lata Raman-latasraman@rediffmail.com]

Opinion:

  1. Computing Long Term Capital Gain (LTCG):
    Cost Inflation Index (CII) for FY 2000-01 (year of flat purchase) was “406” & your cost of acquisition was Rs. 3.53 Lacs (i.e., Rs. 3.43 Lacs +0.10 Lacs). CII for the FY 2015-16 has not yet been notified. Assuming CII for the FY 2015-16 as “x”, the amount of LTCG would be Rs. 16 Lacs less (Rs. 3.53 Lacs * x/406). You can compute the LTCG by replacing “x” with CII of FY 2015-16 after the same is notified. (Precaution: If the ready reckoner value i.e., stamp duty value of the property exceeds Rs. 16 Lacs then LTCG would be require to be compute by taking such higher value as sales consideration).
  2. Tax saving Options:
    You can save LTCG tax by exercising any of the following tax saving options:
    i) Exemption Under Section 54:
    For exemption u/s 54, you have to invests the amount of LTCG (need not be entire sale consideration) for purchase or construction of another residential house property within a prescribed time period. The prescribed time periods are as under:
    a] For purchase:
    One year before or two years from the date of sale.
    b] For Constructions:
    Three years from the date of sale.
    ii] Exemption Under Section 54EC:
    To save tax u/s 54EC, you have to invest the amount of LTCG in the Specified bonds issued by Rural Electrification Corporation (REC) or National Highway Authority of India ( NHAI) within a period of 6 months from the date of sale. [Other readers may note that there is a maximum investment ceiling of Rs. 50 Lacs for investment in 54EC Bonds. Effectively, LTCG up to Rs. 50 Lacs only can be saved u/s 54EC].

 

  1. You would be selling the flat in May -2015 (FY: 2015-16). You can save tax by investing the amount of LTCG for purchase of another flat by May-2017. However, the due date of filing the income tax return for FY 2015-16 for most of the individual taxpayer would be 31st July 2016. You can purchase the property prior to 31.07.2016 even without doing any investment in FD. You have ample time (i.e., till 31.07.2016) at your disposal to utilize the amount either for purchase of another house directly or for investment elsewhere where you can get higher returns. However, if you are not able to complete the transaction of investing the amount for purchase of another house property before 31st July 2016, ensure to deposit the LTCG in the Capital Gain Deposit Accounts Scheme-1988 (CGDAS) by that date so as to save tax. At the time of purchase within the time period mentioned in (2) above, you can make the payment by withdrawing the amount from CGDAS A/c. The flat can be purchase in joint name also but ensure that your share in the house property exceeds LTCG amount so as to save entire LTCG tax.

 

  1. The exemption from LTCG would be available if the property is purchase anywhere in India. The investment need not necessarily be in the city where taxpayer resides or where the LTCG is earn.

investing in NPS

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