How to claim House Rent Allowance to save taxes?

If you are a salaried individual who lives in a rented house, the rent you pay can help you lower your taxable income. There is something called the House Rent Allowance (HRA) that you can use to save taxes. HRA is usually received as a part of your salary and it can be completely or partially exempt from tax. Even if you have not been able to submit rent receipts to your employer to claim exemption on HRA, it still can be claimed at the time of filing tax returns.

House-Rent-Alllowance-1 

You can use HRA to lower taxes even if you don’t live on rent. If you live with your parents, you can pay rent to your parents and claim tax-saving deductions on the HRA. To do this, you need to get into a rental agreement with them and transfer the rent amount to them as well. But remember, your parents will have to show the rent they receive from you as a part of their income.

The HRA deduction that you can claim can be the minimum amount of the following:

  • Actual HRA received
  • 50% of basic salary plus DA in metro cities or 40% of the same in non-metro cities
  • Actual rent less 10% of salary

One important aspect of claiming HRA is that you need you landlord’s PAN to claim the same. You cannot claim HRA with your landlord’s PAN if the rent you pay is in excess of ₹8,333 per month.

HRA is usually received as a part of salary, but you can still claim tax-saving deductions on the rent you pay if HRA is not a part of your salary breakup. To do this, you will need to make the claim under Section 80GG. Under Section 80GG, the lowest amount of the following three can be claimed:

  • ₹5,000 a month
  • 25% of total income
  • Actual rent less 10% of total income

If you are paying interest on a home loan and also living on rent, you can claim tax-saving deductions on both home loan interest and HRA.

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GST IMPACT ON TRADING SECTOR

 

For the past few years and more so recently we have been hearing a lot about GST  in India. With the GST being finally being passed in both the houses let’s discuss the impact of GST on the trade & distribution fraternity of India. Let’s not forget a huge number of small and medium businesses (dealing with Trading/Wholesaling/Distributing/Retailing of goods in India) would be impacted due to this new Tax reform.

GST Cleartax

 

POSITIVE IMPACT

 

1) Clarity on Goods and services

 

Businesses like restaurants, which fall under both sales and service taxation, have to calculate the VAT and service tax on both items separately. But now there will be a clarity on whether the same will be considered as  goods or services. Yes, restaurant business will now be considered under Services.

 

2) Removal of Cascading effect of taxes

Under the current regime, VAT/CST (state tax) is levied on the value inclusive of excise duty (Central Tax). Hence there is tax on tax. But the same will be changed with the One common base for charging GST i.e no SGST shall be levied on CGST thereby reducing the price of goods.

 

3) Composition scheme

Huge benefit for small traders, as they have the option of discharging tax on %age of turnover without maintenance of any invoice level records as required to any supplier under the GST law.  

Compliances for a supplier under the composition scheme will reduce.  

Needs to file only one return GSTR-4 per quarter instead of three returns GSTR-1, 2 & 3 per month applicable for other suppliers. All small traders who are transacting only within the state, small Kirana shops have benefit of opting for Composition scheme.

4) Time of supply under continuous supply of goods

There are the specific provisions available for determination of time of supply under continuous supply of goods in GST regime, which will help the traders in determining the date on which  invoice need to be issued in respect to the current regime when there was no such concept.

 

5) Valuation

There is the MRP based valuation for Central/ State laws under the current regime. Also, the  Post clearances/sale discount is not allowed but the same will be been changed to Transaction value based valuation along with the clarity  on the inclusion/ exclusion of specific transaction under the GST regime. There will be the positive impact due inclusion of post-sale discount in calculating the transaction value.

 

6) Applicability variances and tax differentials

There is the large variances and differential tax rates for the VAT applicability across states which will change to Uniform rates and single system of applicability under GST thereby introducing the Simplified system of taxability.

 

7) Cross utilisation of credits

Traders were not eligible to claim input tax credit on service tax but now under the GST since there is only one tax i.e GST so, the traders will be eligible to take the credit on both goods and services due to which there will be a huge benefit to the trader community as the impact on working capital will be reduced due to allowance of service tax paid.

 

8) Credit of input CST on Interstate transactions.

Currently,Input CST is a cost to the trader but the same will be available as a credit under the GST Regime.

 

9) Credit of CVD

Currently, the credit of CVD is available only to a manufacturer and service provider due to which it becomes a cost to the trader but after the GST the traders will also be eligible to take the credit of such tax.

 

10) Passing-on of CENVAT Credit

Under the current regime, traders passes on the CVD and SAD credit to his customers when he is not in a position to utilise it due to which Customer gets to know his purchase price.There will be no such concept under the GST Regime of passing-on the CVD and SAD credit, due to the levy of GST on the ‘Point of Supply’ (POS) i.e the purchaser is entitled to take the credit, thereby a positive impact for traders.

 

11) Entry tax/ Octroi

Currently many states charge the entry tax with the rate between 1 to 5% but the same will be subsumed once the GST comes into force.

 

12) Penalty

General events like fraud, collusion etc. which attract penalty have been prescribed under the current regime which will changed to penalty for 20 specific situations thereby reducing the  ambiguity with reference to events for levy of penalty.

 

NEGATIVE IMPACT

 

1) Registration

 

Under the current regime, multiple registrations need to be taken separately under different laws, subject to different threshold limits but the same has been changed to single threshold limit for all the states i.e registration has to be obtained in every State of operation if the aggregate turnover crosses 20lakh(others)/10 lakh(specified areas)  This will increase compliances.

 

2) Time of supply of goods under forward charge

Specific dates prescribed under the GST law for movable goods and goods not required to be removed.Also, the advances are subject to GST thereby effecting the Cash flow and working capital

 

3) Time of supply of goods under reverse charge

Applying the concept of Reverse Charge Mechanism on goods, currently applicable for specified services is going to hugely impact the trader community.

 

4) Time of supply of goods when goods are removed before it is known whether such supply will take place.

Under the GST regime,any goods sent as sample or for approval will now be taxed if not brought back within six months of date of removal irrespective of whether, the same has been actually converted into a supply or not.

 

5) Stock transfer

Inter-State Stock transfer under the current regime is not taxable but the same will be construed as ‘supply’ under the GST regime and accordingly would be leviable to GST.

 

6) Compliances

Under the current regime,not all states have the mandate to match the seller and purchaser’s records but there will be a greater compliance under the  GST  regime as the seller’s data is to matched with the purchaser’s data.

 

7) Returns

Number of returns to be filed will go up substantially i.e 3 returns every month plus annual return. Also, there is no concept of revised return under the GST regime due to which compliance will be increased and entity should have robust accounting and inter controls to ensure correct filing of returns.

 

So, we can conclude that overall there would be positive impact apart from the compliance which would adversely affect the traders.

Common Income Tax Return Filing Mistakes To Avoid

Filing Income Tax Returns can be tricky. The calculations are difficult, the terms are confusing and the documentation is seemingly endless. Yet, even though it can be tiresome, we have to file our income tax returns. The deadline to file returns for AY 2017-18 is 31st July 2017. The sooner you finish this task, the better it will be for you. To make it easier for you, here are some common income tax return filing mistakes that you should try avoiding.

E-file your Tax Returns with ClearTax

Calculating Interest Income Correctly

Taxpayers earn interest income from sources like savings bank account or fixed deposits. This interest income can be calculated by going through your bank pass book. Make sure you enter the correct interest income in your tax returns to avoid getting an income tax notice.

Match FD interest with Form 26AS

The interest earned from fixed deposits is paid after deduction of TDS. There is often a mismatch regarding this in the Form 26AS. This mismatch can lead to a problem in your tax return, which is why you should look at your Form 26AS and correct any TDS-related mistakes.

Enter correct bank account information

Taxpayers often don’t know or don’t remember which bank account is associated with their income tax returns. This is a problem because people have many bank accounts and the right one has to be given while filing returns.

Using the correct email address

Taxpayers often sign up with their work ID but then require the ID to be changed to their personal email. This is why it is best to use your personal email ID when you sign up on the Income Tax Department’s website.

Figuring out the correct amount of deductions

If taxpayers have multiple Form 16s then they have difficulties in figuring out how much tax saving deductions to enter in their tax returns. You should make sure that the deductions are not repeated twice. Calculate the deductions from the investment proofs and other documents you have to be doubly sure.

Quote personal information in the right formats

Taxpayers need to quote their personal info like PAN, DOB, etc correctly in the right format as prescribed by the department. If the right formats are not followed, your income tax returns might not get processed.

Computing capital gains correctly

Another problem that taxpayers face is computing their income from short-term and long-term capital gains and filling it out in the tax returns. Capital gains from different types of assets are taxed differently and the right tax rate has to be applied to them. Seek the help of a CA if required to avoid making mistakes here.
These are some common mistakes that taxpayers make while filing income tax returns. You can avoid these mistakes and income tax notices that can come to you because of them by understanding the aspects properly while e-filing income tax returns.