With 31st July round the corner, tax payers are gearing up for filing their income tax returns for the financial year 2017-18. Although there is no room for any fresh tax planning now, here are a few breaks which you should keep in mind while filing your returns for this year:
1. Deduction for Rent paid
It is generally understood that only salaried employees receiving House Rent Allowance from their employers get a tax benefit in respect of rent paid. However, Section 80GG of the Income-Tax Act, 1961 provides deduction for rent paid for accommodation by other tax payer as well wherein the least of the following is allowed as a deduction:
# Rent Paid minus 10% of the total income
# Rs 5,000 per month
# 25% of the total income
However, it is pertinent to note that one cannot claim this benefit in case either one’s spouse / minor child / HUF owns a house at the place of employment/ business/ profession or himself owned a house at any other place which is occupied by him.
Further, you are required to submit a declaration in Form 10BA along with your income tax return to claim this benefit.
2. Deduction for qualifying donations u/s. 80G of the Act
Many employers do not provide tax deduction for donations given by their employees at the time of deducting tax at source on salary. However, there is no restriction in the Act for claiming deduction at 50%/ 100% of donation amount depending upon the approval granted to the institution to whom the donation is made.
Deductions in respect of donation amount exceeding Rs 2,000 will be available if the amount is paid through banking channel. One will also be required to furnish the Name, Address and PAN of the institution to whom the contribution is made in the ITR.
3. Deductions under Chapter VIA missed out in Form 16
In an event you being a salaried employee were not able to submit all the documentary evidences related to deductions u/s 80C, 80CCD, 80D etc. to your employer which has resulted into excess tax being deducted by your employer, you still have the chance to claim benefits of such investments. The only thing you are required to do is disclose the correct investment amounts in your income tax returns which will enable you to claim the refund of the excess tax deducted even though it has not been considered by your employer in the Form 16.
Similarly, Section 80TTA of the Act provides a deduction of up to Rs 10,000 for interest earned on savings bank / post office savings account by individual taxpayers and only the excess amount is chargeable to tax.
4. Carry forward and Set off of losses:
Although the stock market had been on a roll during FY 2017-18, some tax payers may also have suffered losses in their share trading / investment activities. In order to carry forward any losses other than loss under the head “income from house property” to subsequent years, it is necessary to file the income tax return on or before the due date so that set off can be claimed in the subsequent years. The loss under the head “income from house property” can be carried forward even in case of belated return.
Similarly, tax payers can also set off brought forward losses of earlier years against the income of the current year as per the applicable provisions of the Act. For example, brought forward short-term capital loss can be set off against the current year’s long-term and short-term capital gain, brought forward long-term capital loss can be set off only against current year’s long term capital gain and similarly brought forward house property loss can be set off against current year’s house property income.
(By Ashok Shah, Partner–Direct Tax and Aniket Sheth, Qualified Associate, Direct Tax, N.A Shah Associates LLP)