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Form 16 – What are the latest changes that you should know?

Form 16 is a certificate issued by an employer to his employee under Section 203 of the Income-tax Act, 1961 and contains all the details about the amount received by the employee as salary, Tax Deducted at Source (TDS) on salary, and any other deduction claimed by the employee during the year. The Income Tax Department has revised the format of Form 16 and notified the new format that will have more essential details about an employee’s income and deductions.

The amended format of Form 16 will come into effect from May 12, 2019. Thus, the Income Tax Return for the current financial year must be filed by an assessee on the basis of revised Form 16. This form is usually issued on or before 15th June of the financial year following the year in which the tax was deducted by the employer.

Parts of Form 16:

Form 16 is divided into the following 2 important sections:

  • ‘Part A’ that contains the basic details about the employer and employee like name, address, Permanent Account Number, duration of employment of employee with the current employer, details of Tax Deducted at Source, etc.  
  • ‘Part B’ that contains the details of the income of an employee and deductions claimed by the employee under sections 80C, 80CCC and 80CCD, 80D, 80E (interest on education loan), 80G (donations), 80T, 80U, etc.

Key changes made in Form 16:

The Income Tax Department has announced the new Form 16 with the following changes.

  • Detailed break up of income and tax breaks claimed by the employee must be provided in Form 16.
  • The new Form 16 enables reporting of all the allowance paid to the employees that are exempted under Section 10 of the Income tax Act to be reported in Form 16. This is a change from the previous rule where such allowance were clubbed under the same head
  • Salaried Employees can see a separate row in Form 16 which should be used for disclosing standard deduction of Rs.40000
  • Details of income received as salary from the previous employer or employers must also be provided in a separate row.
  • Income or loss from house property and income from other sources must be specified in Form 16 to claim TDS on such incomes.
  • Details of various deductions claimed under sections 80C, 80CCC and 80CCD, 80D, 80E, and 80G and any other deductions must be disclosed separately.

The additional details in Form 16 would, therefore, provide ease to the tax authorities to check tax avoidance or evasion and to conduct scrutiny in a better manner. It would be easier now for the employees to file Income Tax returns more accurately. Further, the Income Tax Authorities would also be able to understand better the income and deductions claimed by the Income tax payee.

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UDIN – Everything a CA needs to know

UDIN or unique Document Identification Number is a 15-digits unique no. introduced and developed by Professional Development Committee of the Institute of Chartered Accountants of India which would be generated by the system for every document certified and attested by a practicing Chartered Accountant. UDIN system was implemented by ICAI on a re commendatory basis on 1st July 2018 but in view of the increasing instances of fraud and forgery involving the stamp and signature of Chartered Accountants, ICAI has made it mandatory for all the practicing Chartered Accountants with effect from 1st January 2019, to quote UDIN on all the certificates issued.

What you need to know

Hence, every CA in practice who would be certifying or attesting any document would have to sign up on the UDIN portal to register it and generate a UDIN. Especially, when the Chartered Accountants are supposed to certify that the Financial Information or related contents are true and fair, the use of UDIN is mandatory and the users or stakeholders can verify the same. This move was necessary to curb the malicious practices and also to bring more transparency into the system. 

UDIN once generated can be withdrawn or canceled anytime with narration. There is no restriction on the number of UDINs to be generated online by a CA. UDIN that have been generated would be displayed as watermarked on documents else the UDIN can be mentioned on the documents using a pen. The 15 digits of UDIN comprises of the Membership Number of the Member who is attesting the document or certificate, date when the certificate is issued and a document serial number that is allotted by the system.

UDIN can also be generated in the specific area of certificates like Goods & Service Tax Act, Companies Act, Income-tax Act, public finance and government accounting, etc. To register the certificate for generation of UDIN, the members have to compulsorily provide some important values, which are found in the attested document or certificate generated such as Turnover, Net profit, Import amount, Export amount, Input tax credit, Loan amount, Net loss, Total capital investment, etc. But all the details shall be provided very carefully as the data once submitted in the application cannot be modified by the members.

How to generate UDIN?

To generate a UDIN, the member needs to log in on the UDIN portal and enter the required details such as Document Issued, Document Description, Date of Document, Key Values etc. Now, enter the OTP received on the mobile and email id registered with the ICAI and click on “Preview” to check the details provided for generating the UDIN. Click on “Submit”. A UDIN will be generated and the member can use that UDIN on the document for which it has been generated.

UDIN will help the banks or third parties to check the authenticity of certificates or documents uploaded as these documents are relied upon and trusted by the end users and also to trace forged documents that are prepared or uploaded by any person other than Chartered Accountants.

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Here is the Revised Income Tax Slab for 2019-20

Income tax slabs are the rates on the basis of which individual taxpayers are required to pay tax to the Government of India. The applicable rates for the relevant assessment year are announced by the finance minister in the interim budget. Likewise, the income tax slab rates for Financial Year 2019-20 and assessment year 2020-21 was announced on 1st Feb 2019 by Mr. Piyush Goyal in the interim budget in the Parliament. The income tax slab rates are directly related to an increase in the income slab.

Income tax slab rate for an assessee depends on many factors such as the amount of income, nature of income, source of income and age of individual taxpayer etc. Considering all these factors, there are 4 basic categories of tax slabs, out of which 3 are for individual taxpayers and one is for domestic companies.

The 3 categories of individual taxpayers are:

  • Individuals (residents as well as non-residents) and Hindu Undivided Family who are below the age of 60 years.
  • Senior Citizens whose age is more than 60 years, but less than 80 years.
  • Senior Citizens who are above 80 years of age.

The applicable tax slab rate for an assessee depends on the category under which he falls.

Income Tax Slab Rate for FY 2019-20.

The income tax slab rates for an individual taxpayer according to different age group and categories are briefly described here:

  •  Individuals (residents as well as non-residents) and Hindu Undivided Family (HUF) who are below the age of 60 years:

1) If annual income is less than INR 2,50,000 – no tax and no health and education cess is to be paid.

2) Individual taxpayers and HUF whose income is more than INR 2,50,000 but less than INR 5,00,000 – 5 % of the total amount exceeding INR 2,50,000 shall be paid as tax.

3) Individual taxpayers and HUF whose income is more than INR 5 Lakh but less than INR 10 Lakh – Rs. 12,500 + 20% of total income exceeding Rs.5,00,000 is to be paid as tax amount.

4) if total income of an individual is above Rs.10 lakh – 1,12,500 + 30% of total income exceeding Rs.10 lakh is required to be paid as tax.

  • Senior Citizens whose age is more than 60 years, but less than 80 years:
  • If income is less than INR 3 Lakh – no tax and cess are to be paid.
  • If income is more than INR 3 Lakh but less than INR 5 Lakh – 5 % of the amount exceeding INR 3 lakh is to be paid as tax.
  • If income is more than INR 5 Lakh but less than INR 10 lakh- 20% of the amount exceeding Rs. 5 Lakh must be paid as tax.
  • If income is higher than INR 10 lakh – tax amount is 30% of the amount exceeding Rs. 10 Lakh.

Ø Income Tax Slabs for Senior Citizens who are above 80 Years of age :

For such citizens, the basic exemption limit is INR 5 Lakh, i.e. no income tax shall be paid if annual income of senior citizen is up to Rs. 5 Lakh and if the income is between INR 5 to 10 Lakh and above Rs. 10 Lakh, 20 % of the total amount and 30% of the excess amount shall be paid as tax respectively.

  • In any of the above three categories of individual taxpayers, if the total income exceeds the basic exemption limit, then in all such cases, 4 % of the income tax amount is to be paid as health and education cess and if the total income is Rs. 50 lakh or more but less than Rs.1 crore, then an additional amount of 10% of the income tax must be paid as a surcharge. Also, if the total income is more than Rs.1 crore, then the amount of surcharge is 15% of the income tax.

Ø Income Tax Slabs for Domestic Companies for FY 2019-20:

Income tax slab for domestic companies in India depends on the annual gross turnover of the company.

If the gross turnover in the previous year is less than INR 250 crore, 25 % of the amount is to be paid as tax and when the gross turnover in the previous year exceeds INR 250 crore, 30% of the amount is to be paid as tax.

4% of corporate tax must be paid as cess in both the above cases and applicable surcharge is 7% if the taxable income is more than INR 1 Crore but less than 10 Crore and whenever the taxable income is higher than Rs.10 crore, the applicable surcharge will be 12%.

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What is e-Pan and how to apply for it?

e-Pan Card facility has been launched by the Income tax department for the ease of the citizens who want instant PAN card, simply by applying online. The card facility is free of cost and as of now Beta version has been rolled out.

Eligibility

For someone to get the ePan, it is mandatory to have an Aadhar Card. Also, those who have Pan card already cannot apply for the ePan facility. Further, it is not possible to get ePan for company or LLP or partnership firm. Only Indian residents can apply ePan except the minors and people who do not fall under section 160 of the Income Tax act. ePan is not meant for Hindu Undivided Families, firms, trusts, companies and so on.

Aadhar is mandatory because the ePan would be created based on the details of Aadhar. In case the Aadhar card is not correct, information on ePan will also be incorrect. In case, the details on the Aadhar are wrong, first the mistakes should be rectified by visiting UIDAI after which an individual should apply for ePAN.

Procedure to apply for ePAN

Step 1 – Login to the Income tax India e-filing website and click on ‘Apply Instant e-Pan.

ePan Home Page

ePan Home Page

Step 2 – Next page would talk about all the guidelines  for the application of an e-Pan. Once, you are through with the guidelines, click on ‘Next’

e-Pan details page

e-Pan details page

Step 3 – Feed all the details as per Aadhar card and after checking the acknowledgement number, click on submit.

e-Pan details Page

e-Pan details Page

Step 4 – After entering all the details, the procedure of ePan would be taken ahead. In order to complete the application, the applicant needs to sign in on a blank paper and scan it. Specifications for scanning are as mentioned:

  • Resolution should be 200 DPI
  • File type should be JPEG
  • Type should be color
  • Size should be maximum10 KB
  • Dimension should be 2cmx4.5 cm

Step 5 – After scanning the copy, the electronic application is complete. Upon completion, a 15 digit acknowledgement number is sent on the email ID or the registered mobile number mentioned in the application. After the allotment of e-Pan, alert would be sent through SMS or email.

Step 6 – In case you want to check the status of the ePan, click the option below apply for ePan

e-Pan Status page

e-Pan Status page

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How to check ITR status through acknowledgement number and credentials

After filing the Income tax return, the income tax department starts the verifying and processing the return. In case, the tax payer is looking entitled to refund, same would be credited in his account after the ITR is successfully verified. Once the processing is complete, the individual would be able to see the ITR status as ‘ITR processed’.

Once the complete information is processed and the IT department would inform the tax payer if there is some tax payable or the individual is entitled to the refund. The notice under section 143(1) would be sent in case the individual needs to pay more tax.

You would want to monitor the ITR status on regular basis after filing it. There is a due process that an individual has to follow. Below is the step wise process that should be followed.

Acknowledgement Number

Step 1. On the home page of the e-filing, under the heading services, there is an option for ITR status.

ITR Status 1

ITR Status 1

Step 2. After clicking the option, the individual would be directed to the next page to fill the PAN number, ITR acknowledgement number and the captcha code.

ITR Status 2

ITR Status 2

Step 3 – Once the details has been filled in, the status would be displayed on the screen.

ITR Status 3

ITR Status 3

ITR Status 4

ITR Status 4

Credentials

In case the tax payer has the login credentials, he can check the status through that also.

Step 1 – Login with the valid credentials and there would be an option of ‘View Returns/Forms’.

Login Credentials 1

Login Credentials 1

Step 2 – Go to the ‘View Returns/Form’ option, select the income tax return and assessment year from the dropdown menu and click submit.

Login Credentials 2

Login Credentials 2

Step 3 – Once, you have submitted the details, the status would show on the stating if the ITR is only verified or has to be processed.

Login credentials 4

Login credentials 4

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How to import and view Form 26AS ?

Form 26AS is the tax credit statement which is a very useful document, required for filing the tax. The information of Form 26 AS can be imported directly, while filing the Income Tax Returns. Let us understand about the Form 26 AS and how to download it.

What is Form 26 AS?

It is the details of tax collected by the collectors

Self-assessment of tax payment

It contains the details of the high value transaction related to shares, mutual funds and so on.

Details of advance tax paid by the taxpayer

Refund received by the tax payer during the financial year

It is also important to understand different parts of the Form 26AS. The form usually consists of seven broad categories. These categories are:

Part A – Details of TDS

Part B – Tax collected at source

Part C – Tax Paid

Part D – Details of Paid Refund

Part E – AIR transactions

Part F – Tax deducted on sale of immovable property  under section  194 IA

Part G – TDS default

Process of downloading the Form 26 AS

26 AS Home Page

26 AS Home Page

  • After logging in, enter PAN number, password and date of birth/ date of incorporation in the DD/MM/YY format. It would prompt for Captcha code. Enter the code and login. Thereafter, enter PAN e filing website.

Form 26AS Pan Page

Form 26AS Pan Page

  • On the next up screen, go to My account. Click on view 26AS in the drop down and view form 26 AS.

26 AS My Account Page

26 AS My Account Page

  • Click the ‘confirm’ tab after which you would be directed to the TRACES website. TRACES website would look like this.

Form 26 AS Traces page

Form 26 AS Traces page

  • On the TRACES website, select the box on the screen and click Proceed which would migrate you to the TRACES TDS-CPC website.

Form 26 AS Traces Page

Form 26 AS Traces Page

  • On the TRACES website, click the link given below the page which reads ‘ Click View tax Credit to view Form 26AS.

Form 26 AS Tax Credit Page

Form 26 AS Tax Credit Page

  • Select the assessment year in addition to the format which you find suitable to see the Form 26 A-S. In case you want to see the form online, leave the format as HTML. For those who want to keep the manual form can download it in PDF format. Once the choice has been made, enter the ‘Verification code’ and press the ‘View/Download’. Button

26 AS PDF Page

26 AS PDF Page

  • For opening the document, one needs to enter the password. Password for Form 26AS would be the date of birth in DDMMYY.

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How to file the Income tax return without Form 16?

Salaried Individual need to have the Form 16 from the employer before filing the income tax return. It is the duty of the employer to furnish the form 16 to every employee. However, there are some cases wherein the employer has not given the Form 16 to the employee. In such cases however, the employee does not need to fear for not getting the form 16 because it is possible to fill the income tax return.

Before panicking, you need to understand what the Form 16 is? The Form 16 is basically a TDS certificate and the total taxable income. There are few things need to calculate the taxable income. They are:

  • Deductions
  • Payslips to calculate the Taxable Income
  • Tax Credit/ 26-AS to calculate the exact amount deducted as Tax
  • Claiming the deductions
  • Income from other sources
  • Paying the additional tax when required
  • Finally, file the income tax return

ITR without Form 16

Taxable Income through payslips – Calculate the net salary from the payslips obtained from the employer in the financial year. In case you have changed more than one job during the financial year, the payslips should be included from all the employers for who you have worked.

Tax Credit. 26- AS Form – After calculating the TDS by the employer, you would need to match it with the 26AS form. In case there is some mismatch, the next step should be contacting the employer and asking him to fix the error.

Calculate the HRA  living on rent – Employees who are living on the rent ask for HRA deduction from the employer. In order to claim the deduction, the employer would need the receipt to the payroll department in advance. However, in case you did not submit the slip to the HRA department in time, you can claim the deductions while filing. Take help of an expert in case you have not idea as how to show the deductions.

Deductions – There are certain investments made by an individual that are tax deductible. Before filing, all the investment documents should be with you and the exact amount eligible for the deduction under section 80C should also be known. Certain investments such as Employee Provident fund, Public Provident Fund, Life Insurance come under 80C.

When you are claiming the deduction on the Provident Fund, claim the deductions only the contribution made by you in the PF and not the employer’s contribution.

Income from other sources – You should also collect the income earned from other sources and calculate it under the taxable income. Such income could be anything from interest on the Fixed deposit to the rent from the owned property.

Transport and medical allowances – If you are getting the transport and medical allowances, the exemption limit is up to Rs 34,200 – Medical allowances limit 15,000 and Transport allowances limit of 19,200 annually for the computation of Income tax.

File the ITR – Once you have paid the extra tax if any then file the income tax return online.

Looking to file your tax return visit www.saidigitalsignature.com or call 09902977233

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Salary Components that Can Save Your Income Tax

There are various salary components and the breakup is given to you by the organizations. These components can help us save tax some or other way if we know how to manage it. Apart from the investments that we make, there are other things which also help us save big on Income Tax. Let us see how to manage various items in order to get the easy rebate on the Income tax that we pay every fiscal.

Salary Components

Reimbursements – It is up to your employer to reimburse the expenses that has been incurred by you for the official purposes. Take for instance, you take cab from home to office and if your employee decides to reimburse that then it would save your tax. Similarly, phone bills can also be reimbursed by the employer. You might ask your employer to convert a portion of your salary as reimbursement. Government has ruled that a monthly reimbursement of Rs 2,000 would help you  in saving tax of Rs 8,000 on annual basis for the individuals who come in the tax bracket of 30%. Reimbursement can for the part of Salary components and you can save tax.

Rent Vs own Home – You might have noticed HRA allowance in the salary breakup which is given as the part of the salary. The fixed HRA can save the tax that you are paying. In order to take the tax rebate, you should pay the rent and keep the receipt of the same. Further, the agreement made with the landlord should also be submitted as a proof that you are paying the rent on the house. If you own a house then the interest rate would be high. But at the same tome you can also get the rebate of 2 lakhs annually on the house.

Vacation – Another important part in the salary components is Leave travel allowance. You can claim LTA for spending the money on the ticket. However, the cost incurred for travelling via air or the railway can be claimed as LTA. If you are taking road trip in your personal vehicle, it cannot be claimed under Leave Travel Allowance. For claiming LTA on the air ticket, the price should not exceed the cost of the ticket on the national career for the same route. Also, the employee can make the claim only twice in a year.

Take for instance, you have planned trip to Shimla and the ticket for two is costing around 18000. So, if you fall in the 30% tax slab, then you can save 6000 on the travel. Further the LTA can only be claimed for travelling within India.

Food Coupons – There are various food coupon services that tie up with the organizations. Employees can take these food coupons and save on the taxes. Maximum exemption on food coupons is Rs 50 per day. You can ask the employer to issue these food coupons as the part of your salary for 22 days which would save 2200 per month and somewhere around Rs 7,920 annually.

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Income tax treatment for different types of Provident funds

Any contribution in the provident fund is made for the welfare of the employee. The contribution is made by both employee and the employer and deduction for the same is available under section 80C. In the provident fund, a part of the salary of the employees is contributed and the other part is contributed by the employer on the behalf of their employees. As per the section 10(11) and 10(12) of the Income Tax Act, the definition of the exemption on the amount added to the provident fund has been mentioned. Also, the amount deducted on contribution to the provident fund comes under the purview of 80C of the Income Tax Act. Provident fund is categorized into four types namely :

Income TaxIncome Tax

Recognized Provident fund – It is recognized by the commissioner of Income Tax under EPF and Miscellaneous Provision Act, 1952. Recognized provident fund is applicable to at least 20 employees.

Unrecognized Provident Fund – It is not recognized by the commissioner of Income Tax and started by the employers and employees.

Public Provident Fund – Under the PPF Act 1968, it is yet another way of contributing to the provident fund. It is basically suitable for the self-employed people wherein the minimum contribution limit is set at Rs 500 per annum and a maximum of 150000 per annum.

Statutory Provident Fund – It is meant for the Government employees or the employees of Universities or Education Institutes affiliated to university.

Here are the tax treatment for different type of Provident Fund:

ParticularsRecognized PFUnrecognized PFStatutory   PFPublic PF
 

 

Employer’s Contribution

Contribution to 12% of salary does not attract tax and above that is added to the salary income of the employee. 

 

 

Not taxable

 

 

 

Not taxable

 

 

 

Not taxable

Employee’s ContributionSection 80C Deduction 

Not taxable

Section 80C DeductionSection 80C Deduction
 

 

Interest on PF

If the interest is over 9.5%, it is added to Income from Salaries. Until 9.5% interest is exempt. 

 

 

Not taxable

 

 

Exempt

 

 

Exempt

 

 

 

 

 

Amount withdrew at retirement time

 

 

 

 

 

Exempt subject to certain conditions*

Contribution from employer and interest on that is taxable under the head Income from Salaries; Contribution by an employee is not taxable, and employee’s contribution interest is taxable under the head Income from Other Sources. 

 

 

 

 

 

Exempt

 

 

 

 

 

 

Exempt

*Conditions:-

  • In case the employee has quit the job after five years of employment
  • The RPF balance is reassigned to RPF with a new employer in the case of re-employment
  • If the service period is less than five years the reason for termination is the health of the employer or his business
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How To Pay Income Tax On The Inherited Property

Income Tax payment has always been a complicated subject for layman. We often do not know while paying the Income Tax that what would come under the ambit of Tax and what would not. Often, this leads to confusion and lot of paperwork. One of the most common questions that is asked by an Income Tax Payer is that whether the tax should be paid on the sale of Inherited Property or not.

Income Tax on Inherited Property

Income Tax on Inherited Property

While some Individuals think that the sale proceed from the inherited property is fully exempt, other think that it is fully taxable. So, the fact is that there is no tax liability tax at the incidence of inheritance but the profit made on the sale of an inherited house would be taxable as capital gains.

How the Capital Gains Is Calculated?

Capital Gain could be both long term and short term subjected to the period for which the asset was held. If an individual is holding the house for more than 36 months, it would be considered as the long-term asset. This 36 months include the time for which the house was held by the taxpayer along with the time for which it was held by the previous owner who had paid for it.

In case the house has been held for less than 36 months, the actual cost of acquisition clubbed with the cost of improvement would be subtracted and the residual amount would be treated as the short-term gains. The short-term gains realized out of the incident would be taxable as per the tax slab applicable to the tax payer. In case the combined holding period is more than 36 months, the cost of acquisition and the cost of improvement can be deducted by the cost inflation. You can arrive at the cost inflation multiplier based on the cost inflation index of the year of purchase and the year of sale.

What is Cost of Acquisition?

It would be the amount paid by the previous owners to purchase the house. So for instance, if the father of an Individual has inherited the house from his father who purchased the house at One Lakh INR, then the cost of acquisition for all the tax purpose would be that One lakh rupees. If the house has been inherited before April 1st 1981, the fair market property value would be calculated as on April 1st 1981 for the ‘cost of acquisition’ and apply the cost inflation index multiplier on that value.

Saving Tax On the Long Term Capital Gain

In case of long term asset, there are two ways in which you can save the taxes. The first solution is to invest the capital gains if you have bought the house within two years or construct one house within three years. Second option is to invest the capital gains of maximum Rs 50 lakhs in bonds of NHAI or REC within six months of its accrual

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