What is HRA? What is House Rent Allowance?

House Rent Allowance or HRA is given by the employer to the employee to meet the expenses of rent of the accommodation which the employee has taken for his residential purpose. Salaried individuals who live in a rented house can claim House Rent Allowance or HRA to lower taxes. This can be partially or completely exempt from taxes. The allowance is for expenses related to rented accommodation. If you don’t live in a rented accommodation, this allowance is fully taxable. House Rent Allowance (HRA) Exemption would be calculated by your employer and shown in Form 16 if rent receipt is submitted on time.

Self-employed professionals cannot be considered for HRA exemption under this act, as they do not earn a salary. However, they can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10 (13A) but is subject to certain conditions.

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Understanding 80GG

What is section 80GG?

Section 80GG provides for Deductions for House Rent paid, provided that a deduction for payment of House Rent has not been claimed under any other section of the income tax act. In other words, if a salaried employee is being given house rent allowance by his employer and he is claiming a deduction from the same, he won’t be eligible to claim deduction under Section 80GG for payment of Rent. All other taxpayers who are neither getting the benefit of House Rent Allowance and nor have they claimed the expense for rent paid under any other section of the income tax act, can claim deduction under Section 80GG. HRA limit under section 80GG has been proposed to be increased from 24,000 to Rs.60,000/- from the F.Y.2016-17

What is Form 10BA?

If the taxpayer is claiming deduction under Section 80GG, he would also be required to furnish a declaration in Form 10BA that he satisfies all the conditions stated above. An image below shows the Form 10BA . You can Download Form 10BA.

On December 05, 2016 by www.taxexcel.net

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The Finance Budget 2016  has to introduce or extend the Tax Deduction limits Under few Sections of the Income Tax Act. For the Financial Year 2016-17 & Assessment Year 2017-18.

Let us understand all the important sections and new introduce in respect to ‘Income Tax Deductions 2016-17′. This list will help you in planning your taxes.

Income Tax Deductions 2016

Section 80C

The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues under this section are;

• PPF (Public Provident Fund)
• EPF (Employees’ Provident Fund)
• Five year Bank or Post office Tax saving Deposits
• NSC (National Savings Certificates)
• ELSS Mutual Funds (Equity Linked Savings Schemes)
• Kid’s Tuition Fees
• SCSS (Post office Senior Citizen Savings Scheme)
• Principal repayment of Home Loan
• NPS (National Pension System)
• Life Insurance Premium
• Sukanya Samriddhi Account Deposit Scheme

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Section 80CCC (1)

Contribution to the Pension Fund by the Employee Max Rs. 1.5 Lakh.

Section 80CCD(2)

Employer’s Contribution to the Employee’s Pension Fund Max 10% of employees Basic salary.This deduction can be made out of 1.5 Lakh U/s 80C

80CCD(1B) :- additional exemption of Rs 50,000 u/s 80CCD (1b) will be allowed. ( To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS).This Deduction can be made out of 1.5 Lakh of U/s 80C

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Section 80D

Deduction u/s 80D on health insurance premium will be Rs 25,000, increased from Rs 15000. For Senior Citizens it has been increased to Rs 30,000 from the existing Rs 20,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, the deduction is allowed for Rs 30,000 toward medical expenditure.

Section 80DDB

An individual (less than 60 years of age) can claim up to Rs 80,000 for the treatment of specified critical ailments.

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Section 24 (B) H.B.L.Interest

You can claim up to Rs 2 Lakh as a tax deduction on the home loan interest payment. If your property is a let-out one then the entire interest amount can be claimed as a tax deduction.

Section 80EE Additional H.B.L.Interest.

You can claim up to Rs 1.5 Lakh as a tax deduction on the home loan interest payment Excluding the Section 24(B).

Section 80U

You can claim up to Rs 75,000 (increased from the existing Rs 50,000) for spending  who have up to 80% disability. It is also been Introduce  to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of above 80% severe disability.

The other sections are – Section 80E (tax deduction benefit on the interest payment of an education loan), Section 80 G (Donations), Section 80GG (when HRA is not paid by the company but you incur rental expenses) and 100% TAX DEDUCTION on contributions made to SWACHH BHARAT & CLEAN GANGA initiatives have also been proposed.

The above ‘Income Tax Deductions 2015′ are applicable for Financial year 2015-2016 (or Assessment Year 2016-2017).

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Section 80TTA:- Interest from Bank up to Rs. 10,000/- who’s taxable income less than 5 Lakh.

Section 87A :- Tax Rebate Rs.5,000/- can be availed from the F.Y.2016-17 as this Rebate was in F.Y.2015-16 Rs.2,000/-

On October 01, 2016 by www.taxexcel.net

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Click here to Download the Automated All in One TDS on Salary for Govt & Non-Govt Employees for F.Y.2016-17 ( Prepare at a time Tax Calculation + Individual Salary Sheet + Salary Structure +Automated Arrears Relief Calculation with Form 10E +HRA Exemption Calculation + Form 16 Part A&B and Form 16 Part B for the Financial year 2016-17)

Income Tax F.Y.2016-17 – what are all the changes affecting Salaried Employees ? – Highlights of Changes announced in Budget 2016 and Finance Bill 2016 as far as Income Tax Provisions relating to Salaried Employees,

(1)Tax Rebate Rs. 5,000/-U/s 87A is available in the Financial Year 2016-17

(2)Up to Rs. 10 Thousand can get relief from Savings Bank Interest also U/s 80TTA.

(3) U/s 80CCD(1B) can get extra benefits up to Rs. 50,000/-

 Income Tax 2016-17 (Assessment year 2017-18)

In case of individual (other than II and III below) and HUF

 II. In case of an individual resident who is of the age of 60 years or more at any time during the previous year:-

Income-tax Act relating to deductions from income from house property (section 24B)

The existing provisions contained in section 24B provide that in a case of a self-occupied property where the acquisition or construction of the property is completed within three years from the end of financial year in which the capital is borrowed, the amount of deduction under that clause shall not exceed Two lakh thousand rupees.

Income Tax Exemption under Section 80 C in respect of Savings / Insurance Premium / Housing Loan Principal etc

Clause 27 of the Bill seeks to amend section 80C of the Income-tax Act relating to deduction in respect of life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.

The existing provisions of sub-section (1) of section 80C provide for deduction of Rs.Two lakh rupees.

Income-tax Act relating to deduction in respect of contribution to pension scheme of Central Government under Section 80 CCD(1) & CCD (2)

Clause 28 of the Bill seeks to amend section 80CCD of the Income-tax Act relating to deduction in respect of contribution to pension scheme of Central Government.

The existing provisions contained in sub-section (1) of section 80CCD, inter alia, provide that in the case of an individual, employed by the Central Government or any other employer on or after 1st January, 2004, who has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, a deduction of such amount not exceeding ten per cent. of salary is allowed.  This is subject to a limit of one lakh Fifty Thousand rupees provided under section 80CCE,excluding Rs. 50,000/- U/s 80CCD(1B).

It is proposed to amend sub-section (1) of the said section so as to provide that an individual employed by the Central Government on or after 1st January, 2004 or, being an individual employed by any other employer shall be allowed a deduction of the amount deposited by him in his account under a pension scheme notified or as may be notified by the Central Government to the extent it does not exceed ten per cent. of his salary.

It is further proposed to insert the new subsection (1A) so as to provide that a number of deductions shall not exceed One Lakh  Fifty Thousand rupees.

Income-tax Act relating to limit on deductions under sections 80C, 80CCC and 80CCD under Section 80 CCE

Clause 29 of the Bill seeks to amend section 80CCE of the Income-tax Act relating to limit on deductions under sections 80C, 80CCC, and 80CCD.

80CCD(1B):- Additional deduction shall be allowed Max Rs.50,000/- as New National Pension Scheme 2016. This Amount out of 1.5 Lakh U/s 80C.

Click to Download the Automated H.R.A. Exemption Calculator U/s 10(13A)

Section 80 D of Income Tax Act:

There is no change in the income Tax Exemption available in respect of Health Insurance Premium which can be deducted at source.

As such, with a maximum limit of Rs.25,000, an individual can deduct at source the Health Insurance premium paid by him / her in a financial year (2015-16 and onwards)

Download Automatic Arrears Relief Calculator U/s 89(1) with Form 10E up to F.Y.2016-17 ( Updated Version) 

In addition to Income tax exemption availed for Health Insurance relating to individual and his / her family, health Insurance Premium paid by the individual for covering health of his / her parents can also be deducted from the total income subject to a maximum of Rs. 25,000. In the case of Health Insurance cover in these cases pertains to Senior Citizen then the maximum limit of deduction under Section 80D would be Rs. 30,000

Deduction for preventive health check-up

Under Section 80D, a deduction of Rs 5,000 is allowed for expenditure incurred during the year by a taxpayer on account of preventive health check-up of self, spouse, dependent children or parents

The above deduction to be within the overall limits of Rs 15,000 / Rs 20,000 prescribed under the said Section of the Act.

Click hereto Download the Automated All in One TDS on Salary for Non-Govt Employees F.Y.2016-17 ( Prepare at a time Tax Calculation + Individual Salary Sheet + Salary Structure + HRA Exemption + Form 16 Part A&B and Part B for the Financial year 2016-17)

On September 01, 2016 by www.taxexcel.net

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1) Download Master of Form 16 Part B for F.Y. 2015-16 [ This Excel Based Utility can prepare at a time 100 employees Form 16 Part B ]

On July 15, 2016 by www.taxexcel.net

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Download All in One TDS on Salary for Govt & Non-Govt Employees for F.Y.2016-17 & AssessmentYear 2017-18 [This Excel Utility can prepare at a time Tax Computed Sheet + Individual Salary Structure + Automated H.R.A. Exemption Calculation U/s 10(13A) + Automated Arrears Relief Calculation U/s 89(1) with Form 10E + Automated Form 16 Part A&B + Automated Form 16 Part B for F.Y.2016-17 with all amended as per Budget 2016]

Many of us take a home loan to buy the dream home. However, we hardly know the tax benefits associated with Home loan. In this post, I will throw light on Home loan tax benefits. I will also cover 10 less known facts which are not known to a majority of people.

Home Loan Tax Benefits

Home Loan EMI payment has two components (1) Principal (2) Interest (Section 24). You can avail tax benefit on both these components.

·                                 Principal – You can claim tax deduction on the Home loan principal paid by you. The limit for this deduction is 1.5 Lac (Section 80C). You can get details about principal amount paid by you from your lender.

·                                 Interest – You can also avail tax benefit on the interest component of the home loan. The total deduction allowed on interest component is up to 2 Lac. The condition of availing this tax benefit is owner should live in the house for which home loan is taken or house should be vacant.

Total Tax Benefit = 1.5 Lac Principal (80 C) + 2 Lac Interest (Section 24) = 3.5 Lac

Now let’s take a look at 10 less known facts about home loan tax benefit section 24.

10 Less Known facts about Home Loan Tax Benefits

First time home buyers can claim additional tax deduction of Rs 50,000 on Home Loan Interest

In budget 2016 new section 80EE is introduced for the first time home buyers. As per the new section 80EE, first time home buyers can claim an additional tax deduction of Rs 50,000 on home loan interest. This deduction is over and above tax deduction of 2 Lac under section 24 and 1.5 Lac under section 80C.

So, maximum tax benefit shall be 4 Lac per year. This new benefit is applicable under following conditions.

·                                 You are first time home owner.

·                                 No other house is owned by you.

·                                 The value of the loan is less than 35 lacs and property value is less than 50 lacs.

·                                 The loan should be sanction between 1^st April 2016 and 31^st March 2017.

This benefit shall be extended till the time repayment of home loan continues.

Deduction is allowed to the borrower and co-borrower

Home loan deduction on principal and interest is extended to the  borrow and co-borrower both. This means if you have taken a home loan on your and your wife’s name you and your wife both can claim these tax deductions. So, effectively you and your wife both can enjoy tax benefit applicable on a home loan.

No benefit on principal payment during construction on property

As per income tax law, you can not avail any tax benefit on principal payment during the construction of the property. You are eligible for this benefit only after the project is completed and property possession is given to you.

Preconstruction period interest is also deductible in 5 equal proportion  in 5 years.

You can claim home loan benefit only on the possession of the property. Any preconstruction payment towards principal cannot be claimed. However, you can claim preconstruction period interest payment once you received possession of the property. The tax deduction benefit on such interest is available equally over a period of 5 years starting from the year of possession.

Tax benefit on Home Protection Insurance premium payment

Many banks offer home protection insurance scheme. If you opt to take home protection scheme, an insurance premium paid towards this scheme can be claimed for tax deduction under section 80C. For home protection scheme sum assured and premium changes with the time.

Principal and repayment tax benefit shall be reversed if you to sell the property before 5 years.

You cannot sell the property before 5 years. If you sell the property before 5 years, all principal paid by you in last five years shall be reversed and added to your income. In addition to this, you may need to pay capital gain tax.

Loan from relative and friends is also eligible for tax benefits

You can take home loan from your friends and relatives and avail tax benefits. However, you will not get any tax benefit on the principal amount.

Let me explain, if you take home loan from your friend you can claim a tax deduction on interest paid to your friend (Under section 24). The following condition should be fulfilled in order to avail this tax benefits.

·                                 You need to submit proof that you have paid interest to your friend. This may be in the form of a certificate.

·                                 Your friend needs to show this interest income and he/she need to pay income tax on this income.

You can not avail tax benefit on principal payment under such case.

Benefit of section 80 C, section 24 and HRA

You can not avail the benefit of HRA if you are living in your own house and getting tax benefit towards section 80 c and section 24. However, if you are living in rented house despite owning your own house you can avail the benefit of section 80 C, section 24 and HRA also.

Buying multiple homes using home loan

You can purchase multiple home and avail tax benefits. The benefit under section 80 C for the principal payment shall be capped at 1.5 Lacs for all loans. The benefit under section 24 for the interest payment for the self-occupied property shall be 2 Lacs.  For the house which is given on rent, there is no limit on interest payment claim.

Stamp Duty, Registration fee, Processing Fee and Tax Deduction

In addition to principal and interest component other expenses can also be claimed for the tax benefit. These expenses include stamp duty, registration fee expenses etc. All these expenses can be claimed as tax benefit under section 80C. Any processing fees for getting home loan sanction can also be claimed for tax benefit.

On June 01, 2016 by www.taxexcel.net

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