Computation of Income from House Property- Deduction of Interest u/s 24(b)

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Income like rent on house property, annual value of property “deemed” to be let out are considered as income from House Property and is taxable in hands the hand of the Assessee.

Deduction of interest on borrowed capital while computing the Income from House Property is allowed as follows:

  • House Property is self-occupied: Deduction of up to Rs 2.00 Lakhs can be availed
  • House Property is let-out: Full amount of interest can be claimed as deduction. With effect from FY 2017-18 if the deduction of interest results in a loss then only up to Rs 2,00,000 can be set off from the other heads of income, balance can be carried forward for up to 8 assessment years.

Section 80EE and Sec 80EEA have been introduced in lately to provide deduction of interest over and above Sec 24(b). The deduction in this case shall be provided from the Gross Total Income.

  1. Section 80EE – Deduction amounting to Rs 50,000 is allowed in addition to deduction under section 24(b)
  • The loan should be sanctioned between 1st April 2016 – 31st March 2017.
  • The value for the property should not exceed Rs 50 lacs and the sanctioned loan amount should not exceed Rs 35 lacs.
  • The purchaser should be a first time homebuyer also; this is applicable only in case of residential house property.
  • The benefit will be applicable till the time of repayment of loan continues.
  • Deduction can only be claimed by individuals for the house purchases jointly or singly
  1. Section 80EEA – Additional deduction amounting to Rs 1,50,000 is allowed in addition to deduction under section 24(b)
  • The loan should be sanctioned between 1st April 2019 – 31st March 2020.
  • The stamp duty value of the house should not exceed Rs 45 lacs.
  • The carpet area of the house should not exceed 60 sqmtr in metro cities and 90 sqmtr in other cities.
  • Only an individual is allowed to claim the deduction under this section provided he does not own any other house property.
  • Deduction can only be claimed by individuals for the house purchases jointly or singly
Authored By – CA Anushka Saraogi 

⇒Section 89(1) Relief on Salary Arrears and Salary in Advance⇐

TDS under section 194N

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In an endeavor to reduce cash payments/withdrawals the Budget of 2019 introduced Section 194N; which states that TDS shall be deducted by the payer in case of cash withdrawal above a given threshold.

Applicability:

  • Applies in case of cash withdrawals of more than Rs 1 crore during a financial year.
  • Applies to sum of money or an aggregate of sums withdrawn from a particular payer in a financial year.
  • The deduction shall be made only on the excess amount (i.e. Above Rs.1 Cr withdrawal).
  • Exception: The threshold for an Individual who has not filled has not filed income tax return for three years immediately preceding years shall be Rs.20L instead of Rs. 1Cr.

Deduction By Whom?

The payer making the cash payment will have to deduct TDS under Section 194N:

  • Any bank (private or public sector)
  • A co-operative bank
  • A post office

The threshold shall apply individually for each payer i.e. a person having 3 bank accounts can withdraw up to Rs 1Cr each from each bank account without Section 194N being applicable.

Rate of Deduction:

  • The payer will have to deduct TDS at the rate of 2% on the cash payments/withdrawals of more than Rs 1 crore in a financial year under Section 194N.

Thus, if aggregate withdrawal in one FY is Rs. 1.15Cr, TDS would be on Rs 1,50,000 at 2% i.e. Rs 3,000.

 

  • Exception: If an Individual receiving money has not filled the income tax return for three years immediately preceding the previous year- Then TDS rate is 2% on the cash payments/withdrawals of more than Rs 20 lakh and up to Rs 1 crore, and 5% for withdrawal exceeding Rs 1 crore.

Thus, if aggregate withdrawal in one FY is Rs. 1.15Cr, TDS would be Rs. 2.35L (2%*Rs.80L + 5%*Rs.15L)

Exceptions:

This section is not applicable in case the payee is-

  • Any government body
  • Any bank including co-operative banks
  • Any business correspondent of a banking company (including co-operative banks)
  • Any white label ATM operator of any bank (including co-operative banks)
  • Any other person notified by the government

How the Deductor can verify the applicability of TDS u/s 194N?

A functionality is added to the e-filing portal of the Income Tax Department for Verification of Applicability u/s 194N. The payer/deductor needs to fill the PAN and mobile number and it will show the applicability.

˜Authored by – CA Anushka Saraogi˜

⇒Tax on Salary – Popular Exemptions & Deductions⇐

Section 194C – TDS on Transporter

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Section 194C of the Income Tax Act, 1961 states that any payment to a transporter is subject to a Tax Deduction at Source (TDS) at the rate of:

–1% in case if the payee is an Individual or a Hindu Undivided Family (HUF), and
–2% in case of other payees (i.e. partnership firm, company, trust, body of individuals or association of persons)

TDS on transporter during the course of plying, hiring and leasing goods carriage

Previously, payment to transporters carrying on the business of plying, hiring, or, leasing of goods carriages was not liable to withholding tax if the transporter furnishes her/his permanent account number (PAN) to the payer.

It seems that the intention of having this provision was to exclude small transporters from the rigors of TDS provisions. But because of the way the section was drafted transporters were excluded from the TDS provisions if they had a PAN.

With a view to bring back the big transporters back into the TDS fold, from 1st June 2015 onward, Department made an exemption. This exemption would be available only to those transporters who own ten or less goods carriages at any time during the previous year. Such a transporter would also need to furnish a declaration to that effect to the payer along with the PAN.

There was also some bit of confusion in the minds of a few people as to whether the said section (and exclusion) applied to payers engaged in the business of transport or to payees engaged in the business of transport. To remove this confusion, it has now been clarified in the Memorandum to the Finance Bill that this exemption is available whether such amount is paid by a person engaged in the business of transport or otherwise.

With this addition to the Act, reporting all deductions w.r.t Nil TDS on transporter payment in quarterly return (26Q) is made compulsory.

Following are the documents which a Deductor is supposed to collect for such transactions:
– Self-attested copy of PAN Card
– Declaration of neither the contractor is registered nor is he the owner of more than 10 goods carriages.

⇒Online TDS / TCS / Demand Payment using Challan ITNS 281⇐

TDS in case of Salary Payment made in Foreign Currency

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As per Section 192 of the Income Tax Act, “any person responsible for paying any amount under the head salaries is required to deduct tax at source at the time of payment”

In case of salary is payable in foreign currency, the amount of TDS deducted is to be calculated after converting the salary payable into Indian Currency at the ‘Telegraphic Transfer Buying Rate’ as adopted by State Bank of India on the date of deduction of tax in Rule No. 26, under Section 192(6).

It is to be noted, that this rule is applicable only for determination of TDS.

However, in the case of computing the salary income, the rate of conversion to be applied is the telegraphic transfer-buying rate on the last day of month immediately preceding the month in which the salary is due or is paid in advance or arrears, as under Rule No. 115.

⇒TDS / TCS Compliances for June 2021⇐