kudos cbdt

Query 1]

I have a query about advance tax. During the financial year 2013-14, second installment of tax for individual was due on 15^th December 2013. I paid the tax on 17^th December 2013. While filing return my consultant has taken the paid amount to 3^rd installment instead of 2^nd installment of advance tax. Due to it, sum of Rs 5,000/- plus were taken as interest. Generally, I am very punctual in payment of govt. dues. I strongly feel that there may be some reason behind the late payment. I feel that the last date was extended during that period. Kindly enlighten me of the last date for 2^nd installment of F.Y. 2013-14. [ramesh.jeswani102@gmail.com] kudos cbdt

Opinion:

Tax is what we pay for a civilize society. It’s appreciable to have a citizen like you who are well conscious of their duty to pay the taxes well in time & to comply with the statutory provisions. You are perfectly right. Since 15^th December’2013 was Sunday, the due date of advance tax payment was extend to 17^th December 2013 without entailing any consequential interest for deferment (by CBDT vide F.No.385/8/2013-IT(B) Date: December 13, 2013). Even though, the excess amount is paid as interest, you would be happy to know that the working of Indian income tax department is transparent & neutral as far as the computation of tax & interest is concerned.

The department while processing the return would compute the interest as per its own software & would refund the excess interest of Rs. 5,000/- paid by you considering it as a delayed payment.  All the more important, refunds wherever due, are grant directly to the taxpayer through Refund Banker Scheme. Kudos to CBDT for expediting refund mechanisms & various taxpayer friendly features incorporat in the portal of www.incometaxindiaefiling.gov.in. It’s for the other government department to take the lessons for improvement while working out taxpayer friendly measure.

Query 2]

I am a senior citizen having income from interest only. So, can I claim Deduction u/s 80C & 80TTA? Sir, please guide me about this with a simple example & also tell me about section 80TTA as I don’t know much about this section & I come to know about it in the Hitvada article. [adityapatel025@gmail.com] kudos cbdt

Opinion:

Section 80TTA:

Many taxpayers are not aware about section 80TTA under Income Tax Act’1961 which was introduced through Finance Act, 2012. Section 80TTA provides a deduction of Rs. 10,000/- on income from interest on saving bank accounts. Deduction u/s 80TTA is available to individual taxpayers and HUF only. This benefit is not available to other class of taxpayer like firm, an Association of Persons or Body of Individuals etc. Saving accounts with any of following entities will qualify:

a] Banking company;

b] Co-operative Society engaged in carrying on the banking business and as specified.

c] Post office saving account.

Interest earned on your savings A/c or FD’s has always been taxable under the head “Income from Other Sources”. In order to claim deduction, you have to first include interest income in your total income and then claim deduction u/s 80TTA. For example, if you have received interest of Rs 15,000/- from your saving bank accounts then you have to pay tax on Rs 5,000/- only i.e. (15,000-10,000) , Rs 10,000/- can be claim as a deduction u/s 80TTA. But if total interest income from all your savings accounts is Rs. 9,900/- only, then you don’t need to pay tax at all and the entire amount would be deductible u/s 80TTA.

[No deduction is available on interest from FDs/time deposit or term deposit. Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.]

Section 80C:

Deduction u/s 80C is available for certain specified investment/payment like LIC/PPF/NSC etc. Against other income, an individual/HUF can claim deduction u/s 80C. Good news is that the limit for deduction under section 80C has been raised from Rs. 1 Lacs to Rs. 1.50 Lacs from the FY 2014-15. This gives an additional tax saving to the taxpayer. It may be noted that no deduction u/s 80C is admissible against capital gain income.

Query 3]

I am a professional, deriving professional income from a firm, as well as salary income from a teaching institution. My wife has a part time job and also some professional income. Both of us are income tax payee. My query is that whether I can keep my wife as a paid personal assistant i.e., my personal employee, and show her salary as my professional expenditure. Please enlighten. [Suvimal Dutta-drsdutta1@rediffmail.com]

Opinion:

The scenario has changed. The better half is equally contributing for the betterment of the business/profession. There is no bar in allowability of deduction towards the salary/remuneration / commission/ facilities/ amenities etc paid by anyone to his/her spouse. The only condition is that, it should not be excessive or unreasonable.

Now, what is unreasonable or excessive is a matter of disputes & judgments from the income tax preview. Whether the payment is excessive/ unreasonableness, it needs to be determine keeping in view the:

1. Legitimate business needs of the business (whether the services/facilities is necessary & is for the betterment of the business & whether taxpayer has derived benefit from the expenditure).
2. Fair market value of the goods/services or facilities etc. (Alternatively, what taxpayer would have paid if the person other than spouse would have worked on the same position having regard to the education, experience, background of the payee).

(The above provision of reasonableness encircles brother, sister & lineal ascendant/descendant also).

Few professionals have also forward queries on the similar issues wherein it is tell that the dis allowance is affect on the ground of payment being excessive or unreasonable. After taxpayer proves the necessity & reasonableness of the payment, onus shifts on to other side (i.e., income tax department) to justify it as unreasonable or excessive having regard to the fair market value of the services availed. No disallowance would sustain without giving an opportunity to the taxpayer to prove it as reasonable or necessary.