Effective Tips for Taxpayers on Year-End Tax Planning

As the year-end is approaching, it’s vital to spare some time on income tax planning. Tax planning not only helps in saving your hard-earned money on taxes, but it also helps in enhancing your income.

Many personnel or companies seek professional help from experts since these experts are well-versed in tax planning strategies and can guide you in planning your taxation in the best possible manner. One such reputed and reliable company is Choksi Tax Services (CTS) whose experts provide the best guidance to all your tax issues.

To alleviate the burden of taxes, The Income Tax Act offers many exemptions on direct taxes that are charged on the income of the individual/company. This blog is all about the strategies that can be implemented to minimize tax liabilities.

➨ Tips for Effective Year-end Tax Planning:

1: Assess your Income & Deductions:

Calculate your total income (salary, bonus, other income, etc.) and check out the deductions that are available on it.
The deductions on income are available under sections 80C, 80D, and 24(B). Ensure that you make the most of these to decrease your taxable income.

2: Optimise Investments under Section 80C:

By investing in government schemes, you can maximize your deductions as per Section 80C and minimize your taxes. The Section 80C provides deductions on varied investments on the amount invested or Rs. 1.5 lac/per year whichever is lower.

The investments include:

1. Life insurance premium paid for self, spouse, and children

2. Employee Provident Fund (EPF)

3. Public Provident Fund (PPF)

4. 5-year Tax Saving Fixed Deposit with a bank or post office

5. National Savings Certificate (NSC)

6. Equity Linked Savings Scheme (ELSS)

7. National Pension Scheme (NPS)

8. Sukanya Samriddhi Account (SSA)

9. Senior Citizen Savings Scheme (SCSS)

10. Home loan principal repayment

11. Stamp duty, registration fee, and some other specified expenses paid towards the purchase of a house property

12. Tuition fees are paid to an education institution in India for the full-time education of any two children.

When your income is channeled into these investments, it decreases the taxable income by exempting a part of the amount, thus enhancing your wealth.

➨ Purchase a Health Insurance Policy:

A smart tax-saving strategy is to invest in a health insurance policy for yourself and your family members. This will permit you to claim tax deductions on the premium paid under Section 80D, thus reducing the burden of taxes. Depending on your age, varied tax exemptions are available on the policy amount.

1. • A taxpayer can claim a deduction for health insurance premiums paid for self, spouse, and dependent children. The maximum deduction permitted in a financial year is the amount of premium paid or Rs. 25,000, whichever is lower.
     If you or your spouse are senior citizens, the maximum deduction amount permitted is Rs. 50,000.

   • A taxpayer can claim a separate deduction for health insurance premiums paid for parents. Here, the maximum deduction permitted in a financial year is the amount of premium paid or Rs. 25,000, whichever is lower.

Here too, If one or both parents are senior citizens, the maximum deduction amount permitted is Rs. 50,000.

4: Avail Home Loan Benefits Under Section 24B:

Section 24B of the Income Tax Act permits the deduction of interest on home loans from taxable income. This loan should be taken for the purchase, construction, repair, or reconstruction of the house property. Deduction on this loan is allowed on an accrual basis, not on a paid basis.

1. • An individual can claim a tax deduction (on interest amount) up to a maximum limit of Rs.2,00,000 for a self-occupied house or a rented house. This deduction amount reduces to Rs. 30,000 if the loan was taken before 1st April 1999 for housing purposes.

   • In the case of renting a newly purchased home, the entire interest component is exempt from annual income tax computations.

   • Indian citizens who buy a property for building their home can avail of tax exemption from Section 24B, only if the construction process for the same is completed within five years.

5: Restructure your Salary:

Have a word with your employer and convince him to restructure your salary to avail the benefit of paying reduced taxes.

6:Timely Submission of Investment Proofs:

Ensure timely submission of investment proofs and other vital documents to avoid tax penalties and other unnecessary taxation charges.

7:Capital Gains Tax Management:

There are two major investment avenues wherein capital gains tax is saved or minimised. Both factors can be wisely addressed, to lessen the capital gain tax.

1. • Bond Investment:

To avail of maximum (capital gain) tax exemption on bond investment, you should invest the sum earned in Capital Gains Bond which are issued by the National Highway Authority of India and the Rural Electrification Corporation within 6 months of the transfer of the sum and realization of gains. Additionally, the funds need to be invested in these bonds for a minimum of five years as a lock-in period and the maximum amount which can be invested is Rs. 50 Lacs.

1. • Property Investment:

To avail of maximum (capital gains) tax exemption on property investment, the taxpayer can either reinvest the proceeds in another property subject to other terms and conditions.

You can also sell unwanted assets to offset the gains and losses.

8:Stay Informed about the Latest Tax Norms:

It is vital to keep yourself updated about the latest tax exemption rules to avail of majority tax deductions on income earned. Check out for potential tax-saving tips from experts so that you can enhance your revenues.

9:Plan Charitable Contributions:

All the donations are not eligible for tax deductions, but charities given to specific relief funds as well as charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act.
The tax deduction can be claimed on the amount donated to eligible institutions or funds. The deduction can be claimed up to a maximum of 50% or 100% of the donated amount, depending on the institution or fund to which the donation has been made.

10:Tax Benefits on Savings Account:

As per Section 80TTA, a taxpayer is eligible for tax exemption in case of interest earned on a savings account balance. This deduction applies to all savings accounts that are maintained with public sector banks, private sector banks, cooperative banks, and post offices.
The maximum deduction allowed in a financial year is the amount of interest earned or Rs. 10,000, whichever is lower.
The provisions of Section 80TTA apply to individuals (less than 60 years old) and Hindu Undivided Families (HUF).
As per Section 80TTA, a taxpayer is eligible for tax exemption in case of interest earned on a savings account balance, interst earned from Fixed deposits with Banks, Post office etc. This deduction applies to all savings accounts that are maintained with public sector banks, private sector banks, cooperative banks, and post offices.
The maximum deduction allowed in a financial year is the amount of interest earned or Rs. 50,000, whichever is lower.
The provisions of Section 80TTB apply to individuals aged 60 years and above.

11:Defer your Income:

Any income received in a financial year will be taxed in the same year. So, many taxpayers doubt that if they can linger a tax payment for tomorrow, why pay today?
Deferring income can put you in a lower tax bracket. You need to check the deferred amount each year along with your income for the current year and ensure that you are not pushed into a higher tax bracket for the next year.
If that is the case, it is advisable to pay tax instantly on the lower tax bracket, rather than paying it later in the higher tax bracket.

12:Take Advantage of Tax Deferral:

Rather than paying taxes directly on the earnings, take benefits of tax deferral. Tax-deferred means you do not pay taxes until you withdraw your funds, i.e., not to pay at the time of making contributions, but at the time of its withdrawal. With tax-deferred accounts, your contributions are deductible now, but you will only pay applicable taxes on the money you withdraw at the time of retirement.
Tax-deferred investments are beneficial to investors who avail tax-free growth of their earnings. These tax savings are a boon for investments and are held until retirement. Thus, the retiree will be in a lower tax bracket and no longer be subject to premature tax and product withdrawal penalties.

➨ How to Plan Your Tax-saving Investments for the Year?

The most ideal time to commence the planning of your tax-saving investments is at the start of the financial year.
Most taxpayers linger on with this tax-saving planning till the last quarter of the year, which at times results in wrong or hurried decisions. Prior planning of investments at the start of the year, can not only help in compounding your investments but can also help in achieving long-term goals.
Few more tips to plan your tax savings for the year:

1. 1. • Check out the tax-saving expenses like insurance premiums, children’s tuition fees, contributions to the Employee’s Provident Fund, home loan repayments, etc.
      • Deduct this amount from Rs 1.5 lakh to get your investment amount. You need not invest the entire amount if the expenses are covering the limit.
      • Select tax-saving investments based on your goals and risk profile.

Wrapping Up:

Implement these tax-saving tips for better revenues since they can effectively reduce your tax burdens thus enhancing your wealth.

All Indian citizens who earn income above the specified Income-tax slab need to mandatorily file their ITR (income-tax return) form. It’s a sort of document which needs to be submitted to the IT department. The Income-tax filing process is incomplete without the verification process, i.e., an Assessee needs to verify the return filed by him.

➨ Income Tax Verification:

Once an income tax return is filed by the Assessee, he/she needs to verify the same within 30 days of filing the return. This is a compulsory process and if an Assessee fails to do the same within the specified time, the IT returns which are filed by him will be considered invalid and a late fee will be applied by the IT (income-tax) department.

The quickest way to check/verify your ITR is via the e-verification process.

After the Assessee completes the IT verification process, the IT department will commence the processing of the returns as well as the refund process.

Other Requests/Services which can be E-verified to Complete their Process are:

1. • Income Tax Forms

   • E-proceedings

   • Refund Reissue Requests

➨ Methods of Income Tax Verification:

Previously ITR was verified physically (via a physical ITR-V form), but now with the growth of digitalization, there are varied online methods through which an individual, a company, LLPs or partnership firms, etc. can verify their ITR form.

The ITR verification of individuals, partnership firms, LLP (Limited Liability Partnership), and HUF (Hindu Undivided Family), can be done using Aadhar OTP, Net banking, Demat account verification, etc.

In the case of Private Limited companies or Person Companies, the return e-verification is done using Digital Signature Certificates (DSC) only.

The ITR e-verification process is not only simple but quick and hassle-free too.

Let’s check out these verification processes in detail.

1: ITR Verification via Aadhar OTP

1. • This is the commonly used method for ITR verification.

   • Your mobile number must be linked to your Aadhar card. This will help in verifying your ITR using the Aadhaar card OTP, wherein a one-time password (OTP) is sent to your linked mobile number.

   • Your mobile number must be registered in the Unique Identification Authority of India (UIDAI) database.

   • For ITR e-verification, your PAN should also be linked to your Aadhaar card.

   • E-verify your ITR using the OTP sent on your registered mobile number

2: Generating EVC (Electronic Verification Code) via Net Banking:

1. • ITR verification is possible in cases where an individual or a company has availed the Net banking facility of their bank account.

   • You should be aware that all banks don’t permit e-verification of ITR and hence your bank account must be created in those selected banks which permit this process.

   • Before you log in to your bank account, ensure that you are not logged in on the e-filing website.

   • Ensure that your PAN is also registered with the bank.

   • Firstly, log in to your bank account > Click on the “e-Verify” link located under the Tax tab. Once you click on this link, your bank’s website will automatically redirect you to the e-filing portal.

   • In the E-filing portal, go to the “My Account” tab and below that, you will have the option to generate the Electronic Verification Code (EVC).

   • Once generated, this code will be sent to your registered mobile number and email-id.

   • E-verify your ITR using this EVC

3: Generating EVC via Bank account:

1. • As stated previously, the IT department permits you to e-verify your ITR via your bank account. However, this facility is restricted to selected banks only.

   • To validate your bank account on the e-filing portal, log in to your e-filing account > go to the “Profile Settings menu” > Prevalidate your Bank Account.

   • In this field, enter the required details like your bank’s IFSC code, bank name, account number, and mobile number.

   • Lastly, ensure that the PAN stated in your bank account matches the one mentioned in your IT records

   • Click on the “Prevalidate your Bank Account” button and later click “Yes” to generate your EVC.

   • E-verify your ITR using this EVC.

4: Generating EVC through your Bank ATM:

1. • The IT department offers the facility to generate the EVC code through the ATMs of the selected banks.

   • To generate EVC, visit your bank’s ATM and swipe your ATM card.

   • Click the ‘Pin for Income Tax filing’ button. An EVC will be sent to your registered mobile number which will be valid for 72 hours.

5: Verifying Tax-returns through Demat Account:

1. • If you are a Demat account holder, you can use this account to verify your ITR.

   • There is a similarity between verifying tax returns through a Demat account and the bank account. Your Demat account must be pre-validated for verifying your tax return.

   • Go to profile settings > Prevalidate your Demat Account. Enter the required details in this field, such as your mobile number, email ID, and your depository name, i.e., NSDL or CDSL.

   • Here too, your mobile number and email ID must be linked to the Demat account for mentioning the same in your profile settings.

   • Click the “Prevalidate your Demat Account” button and click “Yes” to generate your EVC. Utilize this EVC for the e-verification of your ITR.

6: Verifying ITR through DSC:

1. • A digital signature is an electronic signature that authenticates the signatory of a document.

   • A Digital Signature Certificate (DSC) is the electronic format of a physical certificate that serves as identity proof for an individual.

➨ Some more points on guide for E-Verification of ITR:

• • Go to the e-filing portal of the Income tax department and log in using your user id and password.
  • Click on “e-Verify Returns”.
• 
  • On this e-Verify return page, submit the relevant details like PAN, Acknowledgement number, Assessment year, mobile number, etc., and continue.
• 
  • Enter the 6-digit OTP received on your mobile number entered in Step-2 and later click “Submit”.
• 
  • If you are e-verifying your ITR after 30 days of filing, click “Ok”.
• 
  • For submitting a condonation delay request, select the Reason of Delay from the dropdown and click Continue.
• 
  • Select the e-Verification mode to proceed further.
  • After completing the verification, a success message page displays ‘Successfully verified” along with the verification date.

Note: All the images for this sub-title have been taken from Tax2Win.

➨ How to Know if the E-verification is Complete or Not?

Your ITR will be either e-verified by you or by an Authorised Signatory/Representative Assessee. In both cases, a success message along with the transaction ID will be displayed.

As far as an e-mail confirmation of successful e-verification is concerned, it will be sent to your registered e-mail ID (stated on the e-Filing portal). If a representative or another authorized person is e-verifying your ITR on your behalf, then an e-mail confirmation will be sent to two e-mail ids, i.e., your registered e-mail id and the authorized representative’s registered e-mail id (stated on the e-Filing portal).

Final Words:

E-verification of ITR is beneficial because it not only eliminates the sending of physical ITR copies by saving transit time but also quickens the verification process.

Multiple methods for e-verifying income-tax returns are a boon in disguise and any common man can e-verify the same by choosing their desired method. Refunds if any, can be quickly processed, and late fees can be avoided since the consequences of not/late e-verifying the ITR are nil.

In case of any unawareness, confusion, or queries, hire tax experts from Choksi Tax Services (CTS) who can easily e-verify your income tax returns on a timely basis with a nominal fee.

Are you aware that income earned by a minor (below 18 years) is also taxable?

If not, this article is meant for you. Minor’s income is to be clubbed with their parent’s/guardian’s income as per Section 64(1A) of the Income Tax Act.

The rise in technology has not only inspired adults but also children. Previously, minor children had limited opportunities for their growth, but now with the advancement in technology, minors are exposed to varied fields.

Teenagers love to take up odd jobs along with their studies, thus becoming more independent day by day. Many teenagers have commenced their businesses and have attractive earnings.

In a nutshell, any child who is aged below 18 years, is a minor, and any minor who is earning above the tax slab is liable to pay tax.

It will be the liability of the parents/guardians to file the taxes of their child. This proves that the filing of income tax returns is not restricted by an age bar.

➨ Income Earned  by Minors:

The income of a minor child is classified into two types, i.e., earned income and unearned income.

Example:

Prize money received by a minor by winning competitions, money earned from the business, or any other part-time job is termed as earned money of the minor.

Money received by a minor in the form of gifts from family members or relatives, etc. is termed as unearned income.

Both these incomes include the interest earned on this money through a savings bank account, income from other investments, or fixed deposits which are done in their name by their parents.

➨ Tax Payable on Minor’s Income:

As per Section 64(1A), any money received by the minor will be clubbed with the parent’s/guardian’s income. The same will be taxed as per the tax slabs.

Exemption Rules:

Tax exemption of Rs. 1500 per child per month is available every year. Parents of the minor can avail exemption facility on the minor’s income and this rule applies to a maximum of two children.

If a minor is earning more than Rs. 1500 per month then he/she is liable to pay taxes. In such cases, the parents will have to pay tax for the minor’s income along with their taxes, since that income will be defined as parent income.

➨ Clubbing of Income:

1. • If both the parents are working, then the income of the minor will be clubbed with the parent whose income is higher.
   • In the case of an orphan (both parents deceased) minor, his/her income tax returns will be filed separately (not with a guardian) and tax will be paid separately.
   • If the parents are divorced, then the minor’s income will be clubbed by the parent who has the child’s custody. The same rule applies to stepchildren and adopted children.
   • The parent with whose income the minor’s income is clubbed can also claim credit of Tax Deducted at Source (TDS) from minor’s income.

Exceptions when Minor’s Income is not Clubbed with Parents:

1. • There are certain exceptions wherein the minor’s income is not clubbed with a parent/guardian. They are:
   • A minor earning an income by working or by showcasing his specialized talent or knowledge will have to file an income tax return on his own.

Example: A Junior Master Chef Winner or a Junior Dance Talent would have to pay taxes of his own and the same will not be clubbed with his parent’s income.

1. • Any manual work done by a minor will be considered his own and hence, he will have to pay his taxes, without clubbing them.
   • Any minor child suffering from physical disability or mental illness (specified as per Section 80U) will not qualify for clubbing of his/her income with their parent.

Hiring taxation experts from Choksi Tax Services (CTS) will not only help in the consultation of your minor’s income, but also in gaining professional guidance and in the filing of their income tax returns.

➨ Basic Documents of a Minor Required for Filing Tax Returns of Minor:

1: PAN Card:

A minor needs to and can have a PAN card for filing tax returns. For obtaining the PAN card, the minor’s parents or guardian need to apply for the same.

In cases where the minor’s tax returns are filed independently, his bank account details, details of his income, and e-mail account and mobile number for correspondence are essential.

The minor also needs to have an income tax portal login and password for submitting these details.

2: Income Details:

Cash or cheque received by a minor as well as the cash deposits in the bank account of a minor will be needed for filing their tax returns.

3: Details of Savings:

Details of the savings account, interest received on fixed deposit, interest received on savings, funds received, etc. are essential for filing the tax returns.

4: Tax Credit :

Minor can claim credit of  Tax Deducted at Source (TDS) deducted from their income

5: Other Information:

1. • Email id of the minor and their Active mobile number
   • Login details of the E-filing portal

Bank Account Details like Name of the bank, IFSC code, and Bank Account number)

➨ Can a Minor Get a Refund on Income Taxes?

Yes, a minor can get a refund on excess taxes paid, just like adults. As per the Income Tax Act, an adult or a minor is eligible for an income tax refund only if they file their return.

In short, if the minor’s income tax returns are filed in their name and all tax requirements are met,  they too can receive their tax refund in due time, just like any other Indian taxpayer.

Wrapping Up:

Before plunging into the process of tax payments, parents/guardians should go through the tax structure since it’s always subject to changes. They should be aware of the claims, and benefits, before filing the tax returns of their minor or clubbing the income with their income.You can also consult the tax experts from Choksi Tax Services, to have your queries resolved. Not only will they enlighten your knowledge on the subject, but they will also guide you in the best possible way for minor’s income.

“Education is the most powerful weapon which you can use to change the world” – Nelson Mandela.”

Education plays a vital role in the economy of the country. High rates of education in a country are better in all aspects, i.e., better health, better civic involvement, better communication, better thinking skills, better discipline, etc.

This noble task of giving education is carried out by educational institutions.

What is an Educational Institution?

Educational institutions are noble service providers who perform the task of providing literacy to children as well as adults for a bright future. In India, education is provided by the public as well as the private sector.

The main motto of the Indian Government is to provide education to all at low costs. Taxing on the education sector is visualized as a social privilege rather than a business deal and hence this sector enjoys varied tax exemptions.

Since the government promotes free education in villages and other rural areas, these services are devoid of tax payments. However, the commercialization of education is also prevalent, and hence when GST was introduced, it tried to maintain a fine balancing line by ensuring that all the core educational services are fully exempt from GST, whereas other services are taxed at a standard rate of 18%.

What is an Educational Institute under GST?

As per the GST norms, the “educational institution” is defined as an institution that provides services by way of:

1. • Pre-school education and education up to higher secondary school or equivalent
   • Education is a part of a curriculum for obtaining a qualification recognized by any law for the time being in force.
   • Education as a part of an approved vocational education course.

Exemptions Available:

The following services provided by an educational services is exempt from GST

1. • Services provided by an educational institution to its students, faculty and staff
   • Services provided by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee

The following services provided to an educational services is exempt from GST by way of –

Exemptions available to Institutions also include:

• The government/local authority/government authority who is carrying on the activity of education is exempted from GST as this is not included in the ambit of the supply of services.

Example: Municipal schools / Government schools.

• • Services provided below is also Exempted Under GST:

1. • National skill development corporation set up by the Indian government
   • National skill development corporation approved Sector skill councils
   • National skill development corporation approved Assessment agencies
   • National skill development programs approved by the NSDC Vocational skill development program approved under national skill certification and monetary reward scheme
   • Any scheme implemented by NSDC with training partners

GST Applicability:

Let’s check out the GST applicability for:

1. Higher Educational Institutions:

• 1. Services provided by Higher Educational Institution as a part of curriculum for obtaining a qualification recognised by any law are exempt from GST.

  2. Services which are provided to higher educational institutions are taxable. The supply of services such as transportation, catering, housekeeping, and security services to higher education institutions will have to face GST charges. They will be borne by the higher educational institution.

1. Private Coaching Centres :

Though private coaching centers, unrecognized institutions, private tutorials, etc. are educational institutions, they don’t fall under the approved vocational education course and hence will not be considered educational institutions under GST.

They are refrained from GST exemptions and the services provided by them are taxable at a GST rate of 18%.

1. Distant Education:

Distant education mainly opted for higher studies is taxable at a rate of 18%.

1. Boarding/Lodging in Hostels:

Educational institutions which offer preschool education or any other equivalent education leading to qualification by law, and that offer output services like boarding/lodging facilities in hostels are fully exempt from GST.

In short, annual fees/subscriptions which are charged as lodging/boarding charges to the students by these institutions don’t come under the GST regime since they are exempt from the same.

In case these services are bundled by boarding schools, i.e. value of education, lodging, and boarding are attached, then their taxability will be determined as per the defined norms. If the fee structure is well defined for all these three factors then these services will be evaluated separately.

1. Training Programmes, Camps, or Yoga Programmes:

These above-stated events are considered commercial events and hence fall under the GST regime.

1. Books/Stationary given to Students:

Books distributed to students is exempt under GST but, school uniform, stationery items, and other non-academic related supplies are taxable under GST.

Supplies provided by third parties like computers, sports equipment, musical instruments, and other after-school activities offered directly by third parties are liable for GST, thus being taxable.

Other factors like:

1. • Advertisement services provided to educational institutions for brand promotions are taxable.
   • Other services like music, swimming, karate, etc. provided to students directly by the educational institution are exempt from tax, but if these services are provided by third-party vendors, the same is taxable.
   • Admission services for enrolling students are exempt from GST.
   • Campus placement services which are provided by educational institutions are taxable.

Eligibility of Input Tax Credit (ITC) to an Educational Institution:

1. • Education institution is not eligible to avail ITC on inputs/input services which are exclusively used for effecting exempt supplies.
   • However, such institutions are eligible to avail of the input tax credit on input/input services that are used for effecting taxable supplies.
   • On inputs/inputs services that are used for effecting both taxable and exempt supplies, ITC eligible to be availed will be calculated as per Rule 42/43.

Example:

Suppose:

C = Common credit, i.e., input tax credit on input/input services which is used for effecting both taxable and exempt supplies>/P>

E = Aggregate value of exempt supplies during the tax period (Period for which return is filed)

F = Aggregate value of Taxable supplies during the tax period

1. • Amount of Ineligible Credit = C*E/F

   • Amount of Eligible Credit = C – Amount of Ineligible Credit

Wrapping Up:

GST has made its way into Class X, ICSE syllabus from 2020, thus expanding the knowledge of the students and briefing them about the newly introduced tax reforms.

To know more about GST compliances and to avail expert guidance for the same, kindly approach Choksi Tax Services (CTS).

Dealing with tax issues is a tedious and complex task. Many Indian citizens paying taxes regularly, are ignorant about the taxation laws and hence can’t handle issues when they arise.

In this blog, we will discuss income tax refunds, the reasons for their delay, and how to generate a refund re-issuance request if necessary. Without further ado, let’s commence on the most common, but ignorant topic.

Didn’t get your Income Tax Refund?

An income tax refund is normally received within 20-45 days after the ITR (Income tax return) is processed.

But if an individual/company has not received the same within the stipulated time, then they need to check out the below-stated steps before approaching the Central Processing Centre (CPC) for the same.

Steps to be Confirmed:

1: Eligibility for Income Tax Refund:

Firstly, check whether are you eligible for an Income Tax refund or not. Has the Income Tax department processed your ITR (Income tax return) and given you a confirmation for the same? You will be eligible for an IT refund only if the IT department confirms the same.

2: Check your ITR Status:

Once the checking of the tax refund confirmation by the IT department is positive, the next step will be to check the ITR status. The same can be checked on the income-tax e-filling website.

Steps:

• Go to the IT e-filing portal and login into your account.

• Click on e-File < Income Tax Returns < View Filed Returns
• Select the assessment year for which the refund needs to be received. Check the ITR status also. The below image clearly states that the refund for AY 2021-22 is processed. Click “View Details” to check the refund status.

• The refund status will be displayed in a new window.

• The above image states “Processed with a refund due” which means that the ITR is processed but the refund is yet to be issued.
• In case the IT refund status displays “No Records Found”, then there is a possibility that the refund details are yet to be issued by the IT department.

You can also check the IT refund status by visiting the tin-nsdl website (https://tin.nsdl.com/oltas/refundstatuslogin.html). Enter your PAN, AY, and Captcha code and view your refund status.

3: Was the Refund Issued, Failed, or Kept on Hold?

The refund status can have multiple options:

• Refund Issued – which shows the payment mode, refund amount, and date of refund.
• Refund Failure – which specifies the reason for the failure of refund, the registered e-mail id as well as the communication date.
• Refund Kept on Hold – which specifies the reason for hold, communication data, and the registered e-mail id on which the same has been communicated.

If the refund is issued, just wait for the same, but if your tax refund is kept on hold due to any reason, or is rejected, you need to eliminate the reason, for getting the same.

Reasons for Tax Refund Failure:

1: Eligibility:

The first and foremost reason for failure to receive a tax refund is eligibility. You may not be eligible for a tax refund. Some miscalculations or wrong entries may show that you can avail of a refund, but the IT department may have traced the same and rejected your refund request.

2: Outstanding Taxes:

When an individual or a company has outstanding taxes (unpaid taxes) and initiates a tax refund request, the same is bound to be rejected by the Income tax department. The IT department will issue a notice to the taxpayer to pay the outstanding amount.

Once the same is paid by the taxpayer within the stipulated deadline, they can re-apply for the tax refund.

3:Invalid Bank Account:

An invalid bank account may be the cause of the rejection of the IT refund.

The taxpayer’s bank account must be prevalidated to receive the refund. Multiple tasks like e-verification, ITR password modification, secured login, etc. can be carried out only on a prevalidated bank account.

4:Unverified ITR:

One more cause for the delay in tax refund may be the unverified ITR process. In case of absence of verification, the ITR is considered invalid. Electronic verification of ITR must be carried out within 30 days of the filing of the same.

5:Additional Documents:

If you wish to have a speedy refund, then additional documents need to be provided to the IT department. If the taxpayer fails to submit the necessary documents via e-mail or post, then they may face issues in getting the ITR refund.

6:Your Refund was sent to a Wrong Bank Account:

Electronically filing a refund request may quicken the speed of getting a refund, but your refund is bound to delay, if you have mistakenly written the wrong bank account number, or the IT team has wrongly sent your refund to another account.

In both these cases, you need to sort the matter with the bank, since the IT department will not compel the bank to exchange the transaction.

Other Reasons for Delay in getting Refund:

• Tax Return comprises inaccurate/incomplete information
• Tax frauds
• Amendments are made in tax returns
• A wrong claim of tax credits
• Defective Tax Return

Now that you are aware of the reasons why your refund is delayed, rejected, or cancelled, eliminate the cause and raise a refund re-issue request.

How to Raise a Refund Re-Issue Request?

After ruling out all the possibilities of refund delay, you can raise a refund re-issue request with the IT department.

The same can be initiated only when the IT department has processed your ITR and there is a refund credit failure.

In short, if the reason for rejection is not visible, you cannot raise a refund re-issue request.

Steps:

• Log in to the ‘e-Filing’ Portal incometaxindiaefiling.gov.in
• Click on the ‘Services’ menu and click the ‘Refund Reissue’ link.
• Click on ‘Create Refund Reissue Request’.
• Details such as PAN, Type of Return, Assessment Year (A.Y), Acknowledgement No, Communication Reference Number, Reason for Refund Failure are displayed.
• Click on the Acknowledgement no for which the refund reissue request is to submitted. Click on ‘Continue’. Here all the prevalidated bank accounts with status validated/validated and EVC enabled, will be displayed.

Select the bank account which is validated and eligible for refund and then click ‘Proceed to Verification’. When options for e-verification appear in the dialogue box, select your desired mode of e-Verification, generate and enter Electronic Verification Code (EVC)/Aadhaar OTP as applicable, and proceed with the request submission. If Digital Signature Certificate (DSC) is registered in the profile, generate the signature file by downloading the ‘DSC Management Utility’ and uploading the same to proceed with the submission.

• A confirmation of your refund re-issue request submission will be acknowledged with a display of a success message on your e-mail id or your registered mobile number.

In absence of a prevalidated bank account, the taxpayer is directed to the prevalidate bank account screen and then follow the above mentioned steps. Here, the taxpayer needs to submit all the relevant details of the bank account where the refund needs to be sent.

The refund re-issue will be processed in this bank account automatically since the account details will be visible in the e-Filing portal and displayed under Pre-validated bank accounts.

Wrapping Up:

It’s advisable to file your returns on time, in fact, the earlier you file them, the sooner you are eligible to get your refund amount.

Many salaried individuals/companies who have completed the ITR process, are still waiting for their refunds. There were some technical glitches in the new portal, but the issue has been resolved.

For all those who find this process complicated, it’s advisable to hire tax experts from Choksi Tax Services (CTS), who can not only help you in raising a refund re-issue request but also help in getting your tax refund at the earliest.

What is Cryptocurrency? Is Cryptocurrency taxed in India?

There are many Indians who are unaware of cryptocurrency, how cryptocurrency works and how it can lead to massive gains. Many who know about cryptocurrency are ignorant about the taxation policies regarding the same.

In this article, we will discuss everything about cryptocurrency and how the Income-tax department views these digital currencies and assets.

• Crypto Currencies & Virtual Digital Assets:

Crypto or cryptocurrency as it is termed, is a form of digital currency that exists virtually. This currency is specially designed for digital exchanges carried out between various networks. It is not related to any government, bank, or any other authority. The transactions are done via cryptocurrencies and are recorded in a public ledger.

Crypto gifts are investments or equivalent to cash used for online purchases.

On the other hand, a digital asset refers to anything which is stored and available in digital form. These assets are uniquely identifiable and come with a distinct usage right. The data which do not possess this right is not considered a digital asset.

These assets can be used for web, marketing gimmicks, and prints. Examples of digital assets include audio files, video files, documents, graphic files, slide presentations, etc.

Now that we have a fair idea about cryptocurrencies and digital assets, let’s check out the tax implications of the same.

• How Crypto Gifts will be Taxed?

The DEA (Department of Economic Affairs), the Revenue Department, and the Reserve Bank are working together to ensure that the concept of taxation is clear for both the concerned parties, i.e., the tax experts as well as the people who deal with cryptocurrencies and other virtual digital assets.

As per the Budget 2022-23, a lot of clarity has been made in context to the percentage of income tax to be applied to crypto assets.

Commencing from April 1^st, an income tax plus cess and surcharges amounting to 30% will be levied on profits received from trading, selling, or spending crypto. This tax will be levied in the same manner as the tax charged on winnings from horse races or on other speculative transactions.

The 2022-23 budget also proposed a 1% TDS (tax deducted at source) on the sale of crypto assets exceedingly more than Rs. 50,000 in a single financial year. This threshold limit is for specified persons which include all the individuals/HUFs whose accounts are audited under the I-T Act.

You also need to pay Income Tax upon receipt at your tax rate in case you are earning income in crypto.

The provisions related to 1% TDS have come into effect from July 1, 2022, while the gains will be taxed effectively on April 1.

As far as the GST (Goods & Service Tax) rate is concerned, it is levied on the service provided by crypto exchanges and is taxed at 18%.

In a nutshell, if an individual receives crypto gifts, whether they are coins, tokens, or NFT, they are liable to pay income tax as per the stated slab rate, depending on the fair market value of the gift.

• How Cryptocurrency Assets will be Taxed?

Cryptocurrency assets will be taxed at a 30% rate plus a surcharge and cess on the transfer of any VDA (Virtual Digital Asset).

Example: Transfer of VDA like Bitcoin or Ethereum will be charged at 30% as per the IT ACT, 1961.

This entire tax of 30% levied on crypto assets will be deducted from the profits earned via various crypto tokens in an entire financial year. This implementation of this tax will commence from the Assessment of the FY 2023-24.

• Taxation Rules that Crypto Investors should Follow:

The Budget 2022, has come with revolutionary changes for the virtual asset class. Our Honourable Finance Minister Mrs. Nirmala Sitharaman along with the Government of India has officially termed digital assets including crypto assets as “Virtual Digital Assets”.

These VDAs comprise cryptos like Bitcoin, Ethereum, etc, and other digital assets such as non-fungible tokens (NFTs).

The Budget 2022 states that discussions are ongoing and the Indian Government has yet to set the regulations for VDAs. But, there are some pointers that crypto investors should be aware of.

• Income from the transfer of virtual digital assets such as crypto and NFTs will be taxed at 30% at the end of each financial year.

• No deduction, except the cost of acquisition, will be allowed while reporting income from the transfer of digital assets.

• The gifting of digital assets will attract tax in the hands of the receiver. Losses incurred from one virtual digital currency cannot be set off against income from another digital currency.

Section 206AB of the IT Act, 1961 states:

• If any user has not filed their Income Tax Return in the last two years and the amount of TDS is ₹50,000 or more in each of these two previous years, then the tax (TDS) to be deducted for Crypto related transactions will be levied at 5%.

• If an order is placed before 1st July 2022, but the trade is executed on or after 1st July 2022, then TDS provisions will apply.

How is 30% Crypto Tax Calculated in India?

A flat rate of 30% is levied for crypto investors who are transferring crypto assets, irrespective of short-term or long-term gains. In short, a 30% tax rate is levied on profits made from the transfer of such VDAs.

The same rule and rate apply to the nature of crypto income, i.e., irrespective of business income or investment income gained from these virtual digital assets, the tax rate of 30% is stagnant.

Example:

An investment of Rs. 2,00,000 is made in crypto by Mr. Raj at the start of the financial year 2022. He sold the crypto for Rs. 3,00,000 before the end of the year.

A flat rate of 30% will be applicable on the income gain of Rs. 1,00,000. Thus, Raj has to pay Rs. 30,000 (plus surcharge and cess) as the tax on crypto in the year 2022.

Note:

Any income arising on transactions relating to crypto shall be taxed only at the time of transfer of such crypto. Hence, if a person holds the asset, the holding is not taxable on such unrealized gains.

Highlights:

• 30% tax on crypto assets will be deducted from profits earned via cryptocurrencies and tokens during the entire year. This will commence from FY 2022-23.

• Crypto tax can not be avoided and the crypto investor is liable to pay tax for the same.

• 1% TDS is applicable on all crypto transactions. This TDS will be calculated on the final sale price of the crypto and not on the gains.

• In case of loss incurred on transfer of virtual digital assets, the same cannot be set off against any other income and vice versa, i.e., the loss incurred in business cannot be set off against income from crypto.

• Loss from the transfer of crypto cannot be carried forward to the next year.

Wrapping Up:

Crypto exchanges are carried out in a Government-compliant environment, wherein all the trades and investments are transparent. The Government’s tax measures on Cryptocurrency are quite thorough which makes tax evasion almost impossible.

To avoid last-minute tax confusion on crypto exchanges and gains, it’s advisable to approach a reputable taxation company and hire their services.

Choksi Tax Services (CTS) is one such company having a team of taxation experts who can guide you throughout your entire taxation journey. This suggestion stands true, not only for gains received from crypto exchanges but also for your business gains.

GST is the acronym for Goods and Services Tax. It is an indirect tax that is applied to the supply of goods and services all over India. This tax was implemented to replace multiple indirect taxes like purchase tax, value-added tax, service tax, excise duty, etc.

GST has eliminated varied tax inefficiencies thus preventing cascading of taxes, i.e., ‘tax on tax’.

This destination-based tax is levied on every value addition since it is the sole domestic indirect tax law applicable to the whole country.

How GST Works in India?

• Manufacturer: The manufacturer will pay GST on the raw material that is purchased and the value that has been added to make the product.

• Service Provider: The service provider will pay GST on the product’s purchase price as well as the value which is added to it. However, the manufacturer’s tax payment will be deducted from the total GST that must be paid.

• Retailer: The retailer will pay GST on the product they bought from the distributor as well as the margin added by them. However, the retailer’s tax payment will be deducted from the total GST that must be paid.

• Consumer: The consumer will pay GST on the product that has been purchased by them.

Types of GST in India:

There are four different types of GST as stated below. They are:

• Central Goods and Services Tax (CGST): CGST is charged on the intra-state supply of products and services.

• State Goods and Services Tax (SGST): SGST is charged on the sale of products or services within a state.

• Integrated Goods and Services Tax (IGST): IGST is charged on inter-state transactions of products and services.

• Union Territory Goods and Services Tax (UTGST): UTGST is levied on the supply of products and services in any of the Union Territories in the country, namely, Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh. UTGST is levied along with CGST.

Who is Liable to pay GST?

The buyer will pay the GST amount to the seller/supplier who will later transfer the same amount to the government. Since this system is nationalized, there is only one tax applicable for all. In short, GST helps prevent double taxation.

Businesses/traders who are having an annual sale of more than Rs. 20 lakhs are liable to pay GST. The threshold for paying GST is Rs. 10 lakhs in North-Eastern and Special Category States. The threshold limit is Rs 40 lakhs for GST registration for every person who is engaged in the exclusive supply of goods.

There are mainly four slabs of GST rates (5%, 12%, 18%, and 28%) and which are categorized as per the goods and services.

Example of GST Calculation:

Suppose the GST is set at a rate of 18%. Let’s assume that Dealer A sells his Goods to Dealer B for Rs. 5000 and charges GST of Rs. 900. Dealer B pays Rs. 5900 to Dealer A and Dealer A  pays GST of Rs. 900 to the Government. Now Dealer B adds his margin and sells the Goods to Dealer C at Rs. 7000 and charges GST of Rs. 1260. Dealer C will pay Rs. 8260 to Dealer B. Dealer B will get an input tax credit of Rs. 900 and he will have to pay Rs. 360 as GST to the Government. Now Dealer C adds his margin and sells the goods to Dealer D at Rs. 10000 and charges GST of Rs. 1800. Dealer D will pay Rs. 11800 to Dealer C . Dealer C will get an input credit of Rs. 1260 and will pay Rs. 540 as GST to the Government.

This nullifies the cascading effect of taxes as seen in the above example.

What are the Existing Taxes Subsumed into GST?

State taxes that would be subsumed under the GST are State VAT, Central Sales Tax, Luxury Tax, Entry Tax (all forms), Entertainment and Amusement Tax (except when levied by the local bodies), Taxes on Advertisements, Purchase Tax, Taxes on Lotteries, Betting and Gambling, State Surcharges, and Cesses as they relate to supply of goods and services.

Taxes on production such as central excise duty and additional excise duty, import duties such as additional customs duty known as countervailing duty and special additional customs duty, service tax, central cesses, and surcharges are also subsumed under GST.

Note: Basic customs duty, which includes the tariff barrier on imports, is not part of GST.

What are the Objectives of GST?

The main objectives of GST are:

• It functions on the ideology of “one nation, one tax”.

• It helps subsume many indirect taxes in India as stated in the above article.

• It helps eliminate the cascading effect of taxes since tax is levied only on the amount added at each step of the supply chain.

• It prevents tax evasion since it minimizes the chances of claiming input tax credits on fake invoices.

• GST helps enhance the taxpayer base since a single tax is levied on goods and services.

• GST has improved the logistics and distribution systems by minimizing transportation cycles and warehousing costs.

What are the Benefits of GST:

GST comes with varied benefits for varied entities. Let’s check them out.

For Central and State Government:

• Simple and easy to administer, since multiple indirect taxes at the central and state levels are replaced with a single tax “GST”.

• Good control of tax leakage is ensured since GST brings transparency to tax payments and better tax compliance for traders.

• Higher revenue efficiency is maintained, since the decline in the collection cost with an increase in the ease of compliance, leads to higher tax revenue.

For the Consumer:

• Since GST is the sole tax to be paid, it will help lower the inflation rate.

• The overall tax burden is reduced.

• Since luxury items are taxed more and basic goods become tax-free, this tax is beneficial for customers as well as the government.

For the Business Class:

• Tax compliance becomes easy for business owners who can now run their businesses with ease.

• Uniformity of tax rate and structure is possible and hence business decisions and future investments can be carried out in a better way.

• Removal of cascading effects of taxes is an added advantage.

• Reduction in transactional costs leads to better competitiveness in business.

• GST is a boon for exporters, manufacturers, and customers since the burden to pay multiple taxes is reduced.

• It is expected to raise the GDP (Gross Domestic Product) ratio, thus benefitting the overall economy of our country.

Other Benefits:

• Easy Compliance

• Easy to Manage

• Good Control on Tax Leakage

• High Revenue Efficiency
  Transparency

• Relief in Payment of Taxes

Which Products are Excluded from GST?

Diesel, petrol, crude oil, natural gas, electricity, fresh fruits, fresh milk, curd, bread, salt, grains, jaggery, etc. are all excluded from GST as of now.
Even liquor is exempt from GST and can be added only after an amendment is done by the constitution or the GST council.

How are Decisions taken at the GST Council?

All the decisions taken at the GST council are taken in consensus with both the Central and State Governments.
Decisions are finalized taking into consideration a majority of not less than three-fourths of the ‘weighted votes of the members present and voting’, wherein the Central Government would have the weightage of one-third of the total vote cast and the State Governments would have a weightage of two-thirds of the total votes cast.

What is Input Tax Credit?

Input Tax Credit (ITC) is one of the key features of GST. ITC is a mechanism to prevent cascading of taxes. It helps ensure that the tax which is levied is only on the amount of value addition occurring at each stage of the supply chain, and credit is granted for the taxes levied at previous stages.

Example:

If the tax payable on the final product (output) is Rs. 450 and the tax paid on the purchase amount (input) is Rs. 300. You can claim an ITC of Rs. 300 and need to deposit Rs. 150 in taxes.

Bottom Line:

GST is one of the major changes made in the taxation system of India. Embracing this change is challenging, but its success will not only ease the burden of taxes on the public but will also enhance the Indian economy and the GDP ratio.

Hiring a professional firm that can guide you regarding these GST compliances is preferred since they can help the business owners in easing this challenge. Approach Choksi Tax Services (CTS), which comprises a team of experts, who are always ready to enhance and guide you regarding tax and GST compliances.

New Income Tax Rules for PFfrom 1^st April 2021 that you should know

The financial year 2021-22, brought varied changes in the income tax norms. Some new tax norms were introduced, whereas somemodifications were made to the current income tax norms. The same was announced in the union budget for 2021 and has become applicablefrom 1^st April, 2021.

Hence,a taxpayer needs to be aware of the new modifications made in the income tax rules since they are now applicable and need to be implemented.

One of the tax norms that taxpayers need to checkout is the Taxation on Provident Fund contributions. Specific amendments have been madeto Provident Fund tax rules, that state the amount to be paid on the Provident Fund interest.

After the rationalization of the Provident Fund announced in budget 2021, the Central Board of Direct Taxes (CBDT) inserted Rule 9D of Income Tax Rules, 1962. The amendment in the IT rule 1962, specified that the threshold limit is Rs. 2.5 lakh and Rs. 5 lakhs for a fund in which there is no contribution by employer.

Under this rule, each Employees Provident Fund Organisation (EPFO) subscriber will have two PF/EPF accounts whereas the second account can have PF contribution beyond the threshold limit.

In a nutshell:

• The interest earned on the employee’s contribution to the provident fund account will be taxed if the contribution amount in a financial year exceeds ₹2.5 lakh.

• If there is no employer contribution in the provident fund account, the threshold will be ₹5 lakh a year.

What is a Provident Fund?

Provident Fund is an account maintained as per the EPF Act, where both employer and employee make a fixed percentage of contribution for the long term retirement benefit of employees.

The percentage of interest of ProvidenFund is modified periodically keeping as per the authorities’ regulations. However, the current rate of interest of ProvdentFund is 8.10% (i.e., April 2022 to March 2023).

When an employee applies for the Provident Fund, they need to make a cash contribution which continues until the employee’s retirement date.

Who will have to pay tax on PF?

According to rule 9D of Income-tax Rules, 1962:

• All non-government employees — where the employee is contributing to a provident fund amounting above Rs 2.5 lakh then employee will have to pay tax on interest earnings on contribution exceeding Rs. 2.5 lakhs.

• All government employees — where the employer isnot contributing to a provident fund and if the employee’s contribution to Provident fund is above Rs. 5 lakhs (threshold limit) then employee has to pay tax on interest on contribution exceeding Rs. 5 lakhs.

How will the Tax on Provident Fund be computed?

Two separate accounts within the Provident Fund accounts need to be maintained from FY 2021-22 onwards, for segregating the taxable and non-taxable contributions. Below-stated is an explanation of taxable and non-taxable contributions:-

Non-taxable Contribution Account will be the Aggregate of — 

1. Closing balance in the account as of the 31st day of March 2021

2. Any contribution made by the person in the account during the previous year 2021-2022 and subsequent previous years, which is not included in the taxable contribution account

3. Interest accrued as per (a) and (b).

The Taxable Contribution Account will be the Aggregate of —

• Any contribution made by the person in a previous year in the account during the previous year 2021-2022 and subsequent previous years, which is more than the threshold limit

• Interest accrued as per (a).

In short, all the contributions made by employees until March 31, 2021, will be non-taxable contributions and all the income from contributions above the specified threshold limits made in FY2021-22 will be taxable.

Conclusion:

Many high-income earners were taking advantage of Income Tax norms to earn huge tax free income in the form of interest. The income tax authorities felt the need to tax interest income since there was huge investment by high income earners in EPF as the interest earned was tax-free and also no tax was levied during the withdrawal stage.

Since the tax laws are complex, it’s advisable to hire taxation experts who can guide you in making proper investments and in timely payment of taxes.

Our taxation experts at Choksi Tax Services are always willing to guide you in all the steps commencing from investing funds, paying taxes, and also in withdrawing investments when required.