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Saturday, December 13, 2014

Condition for claiming deduction of interest on loan against income from house properrty

Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-

(i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.

(ii) the quantum of deduction allowed as per table below:

Purpose of borrowing capital

Date of borrowing capital

Maximum Deduction allowable

Repair or renewal or reconstruction of the house

Anytime
30000.00
Acquisition or construction of the house

Before 01.04.1999

30000.00
Acquisition or construction of the house

On or after 01.04.1999

Rs. 1,50,000/-
(upto AY 2014-15)

Rs. 2,00,000/-
(w. e. f. AY 2015-16)


(a) The acquisition or construction of the house should be completed within3 years from the end of the FY in which the capital was borrowed. Hence it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.

(b) Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.

(c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.

Adjustment for Excess or Shortfall of Deduction:
The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself.

Salary Paid in Foreign Currency:
For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source ( see Rule 26).

Friday, December 12, 2014

TDS on salary relief when salary paid in arrears or advance

Relief When Salary Paid in Arrear or Advance:
3.4.1 Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under Section 89(1) he may furnish to the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E duly verified by him, and thereupon the person responsible, as aforesaid, shall compute the relief on the basis of such particulars and take the same into account in making the deduction under Para(3.1) above.

3.4.2 With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.

Thursday, December 11, 2014

TDS on salary for FY 2014-15 circular dated 10 December 2014

CBDT issued a circular no. 17/2014 dated 10 December 2014 about TDS on salary during the financial year 2014-15 u/s 192 of income tax act. Full circular is as under.

Reference is invited to Circular No.08/2013 dated 25.10.2013 whereby the rates of deduction of income-tax from the payment of income under the head "Salaries" under Section192 of the Income-tax Act, 1961 (hereinafter ‗the Act‘), during the financial year 2013-14,were intimated. The present Circular contains the rates of deduction of income-tax from thepayment of income chargeable under the head "Salaries" during the financial year 2014-15 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules).

The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax
Department- www.incometaxindia.gov.in.
2. RATES OF INCOME-TAX AS PER FINANCE (No. 2) ACT, 2014:

As per the Finance (No. 2) Act, 2014, income-tax is required to be deducted under Section 192 of
the Act from income chargeable under the head "Salaries" for the financial year 2014-15 (i.e.
Assessment Year 2015-16) at the following rates:
A:Normal rate of tax

Total Income
Rate of tax
Where the total income does not exceed Rs.
2,50,000/-.
NIL
Where the total income exceeds Rs. 2,50,000
but does not exceed Rs. 5,00,000/-.
10 per cent of the amount by which the
total income exceeds Rs. 2,50,000/-
Where the total income exceeds Rs.
5,00,000/- but does not exceed Rs. 10,00,000/-
Rs. 25,000/- plus 20 per cent of the
amount by which the total income
exceeds Rs. 5,00,000/-.
Where the total income exceeds Rs.
10,00,000/-.
Rs. 1,25,000/- plus 30 per cent of the
amount by which the total income
exceeds Rs. 10,00,000/-

B. Rates of tax for every individual, resident in India, who is of the age of sixty years or
more but less than eighty years at any time during the financial year:
Total Income
Rate of tax
Where the total income does not exceed Rs.
3,00,000/-
NIL
Where the total income exceeds Rs. 3,00,000
but does not exceed Rs. 5,00,000/-
10 per cent of the amount by which the
total income exceeds Rs. 3,00,000/-
Where the total income exceeds Rs. 5,00,000/-
but does not exceed Rs. 10,00,000/-
Rs. 20,000/- plus 20 per cent of the
amount by which the total income
exceeds Rs. 5,00,000/-.
Where the total income exceeds Rs. 10,00,000/-
Rs. 1,20,000/- plus 30 per cent of the
amount by which the total income
exceeds Rs. 10,00,000/-


C. In case of every individual being a resident in India, who is of the age of eighty years or
more at any time during the financial year:

Total Income
Rate of tax
Where the total income does not exceed Rs.
5,00,000/-
NIL
Where the total income exceeds Rs. 5,00,000
but does not exceed Rs. 10,00,000/-
20 per cent of the amount by which the
total income exceeds Rs. 5,00,000/-
Where the total income exceeds Rs. 10,00,000/-
Rs. 1,00,000/- plus 30 per cent of the
amount by which the total income
exceeds Rs. 10,00,000/-
2.2 Surcharge on Income tax:
The amount of income-tax shall be increased by a surcharge @10% of the income-tax on payments to
an individual taxpayer, if the total income of the individual exceeds Rs 1 crore during FY 2014-15
(AY 2015-16). However the amount of Surcharge shall not exceed the amount by which the
individual‘s total income exceeds Rs 1 crore and if surcharge so arrived at, exceeds such amount
(assessee‘s total income minus one crore) then it will be restricted to the amount of total income
minus Rupees one crore.

2.3.1 Education Cess on Income tax:
The amount of income-tax including the surcharge if any, shall be increased by Education Cess on
Income Tax at the rate of two percent of the income-tax.
2.3.2 Secondary and Higher Education Cess on Income-tax:
An additional education cess is chargeable at the rate of one percent of income-tax including the
surcharge if any, but not including the education cess on income-tax as in 2.3.1.
Download full circular

Friday, December 5, 2014

Bank is liable for ATM fraud withdrawl

There are instances of unscrupulous bank officials defrauding depositors. Here is a case of how Bank of India officials violated all banking norms, resulting in a customer’s account being wiped clean through illegal ATM withdrawals.

Bilquis Bano had opened a savings account with Bank of India’s Satna Branch in Madhya Pradesh. She had another account with the same bank where her salary used to be credited.

When Bano attempted to withdraw some cash from her account on June 22, 2009, she was informed by the bank that there was no balance in it. On checking the bank statement, she found over Rs. 4 lakh had been withdrawn from the account on several dates between April 20 and June 18, 2009. The matter was reported to the police but no one was arrested.

The bank claimed the ATMcumdebit card had been collected by Bano’s representative, while the PIN had been mailed to her on March 22, 2007. She denied having collected the card or having authorised anyone else to do so on her behalf. She also stated she had never received the PIN.

Bano filed a complaint before the District Forum to direct the bank to credit her account with the amount fraudulently withdrawn. She also sought compensation of Rs. 2.50 lakh. The bank contested, alleging Bano’s companion had covered his face with acloth while withdrawing money from the ATM, leaving a balance of only Rs. 925. The forum directed the bank to credit her account with around Rs. 4.30 lakh along with nine per cent interest and pay a compensation of Rs. 50,000.

The bank challenged this order before the Madhya Pradesh State Commission. Bano also appealed for enhancement of compensation. The State Commission found the actual amount siphoned off from the account was Rs. 4.55 lakh. The bank was ordered to credit this amount to Bano’s account but the Commission set aside the compensation of Rs. 50,000.

The bank filed a revision petition in the National Commission, which observed the crux of the dispute was whether or not the ATM card had been received by Bano or her representative.

The bank had admittedly not handed over the card to Bano but could not produce any letter from her authorising someone to collect the card on her behalf. The bank could not produce any acknowledgment to show Bano had received the card. It could not even produce the acknowledgment for receipt of the PIN which it claimed had been mailed to Bano. Hence, the Commission concluded the ATM card had been handed over by the bank to some unauthorised person, which constituted a deficiency in service.

The Commission indicted the bank for having permitted the fraud to take place due to its own negligence on two counts. First, by handing over the card to an unknown person whose identity could not be established. Second, there was no proof whatsoever of the PIN having been delivered to any person at all.

Accordingly, by an order dated November 25, 2014 Justice V K Jain dismissed the bank’s revision, holding it devoid of merit.

Limit of pre paid payment instruments has been raised to 1 Lakh

Reserve Bank of India has raised the limit of pre paid payment instruments from 50000 to 100000. RBI issued a note no. 980 dated 3 December 2014 regarding this increment of limit of pre paid payment instrument. Full note is as under.

Issuance and Operation of Pre-paid Payment Instruments (PPIs) in India- Relaxations

A reference is invited to the circular issued vide RBI/2014-2015/105 DPSS.CO.PD.PPI.No. 3/02.14.006/2014-15 July 1, 2014 on the Master Circular – Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India.

2. Based on a comprehensive internal review and the feedback received from the entities currently authorized to issue prepaid payment instruments, it has been considered necessary to amend certain provisions of the existing guidelines/issue additional guidelines for ensuring growth of the prepaid payment industry.

3. Amendments to existing guidelines

3.1 PPIs issued with full KYC- enhanced value

Attention is invited to Para 7.1 of the aforesaid guidelines wherein it was stated that the maximum value of any pre-paid payment instruments (where specific limits have not been prescribed including the amount transferred as per paragraph 10.2) shall not exceed Rs. 50,000/-. Para 7.2 of the guidelines highlighted that the following types of semi closed pre-paid payment instruments can be issued on carrying out Customer Due Diligence as detailed below:-

upto Rs.10,000/- by accepting minimum details of the customer provided the amount outstanding at any point of time does not exceed Rs 10,000/- and the total value of reloads during any given month also does not exceed Rs 10,000/-. These can be issued only in electronic form;

from Rs.10,001/- to Rs.50,000/- by accepting any ‘officially valid document’ defined under Rule 2(d) of the PML Rules 2005, as amended from time to time. Such PPIs can be issued only in electronic form and should be non-reloadable in nature;

upto Rs.50,000/- with full KYC and can be reloadable in nature. The balance in the PPI should not exceed Rs.50,000/- at any point of time.

The limit of PPI that can be issued under Para 7.2 (iii) has now been enhanced from Rs. 50,000 to Rs.1,00,000/- The balance in the PPI should not exceed Rs. 1,00,000/- at any point of time.

3.2 Gift Cards

The maximum validity of the gift cards has been enhanced from one year to three years. Other provisions of PPI guidelines with respect to Gift Cards will continue to be applicable.

4. Additional guidelines - introduction of new categories of PPIs issued by banks

4.1 Issue of multiple PPIs by banks from fully-KYC compliant bank accounts for dependent/family members

It has been decided to introduce a new category of open system prepaid payment instrument subject to following conditions:

Such PPIs may be issued only by loading the value from fully KYC-compliant bank account of the purchasers. Beneficiary has to be a dependent/family member.

The account holders purchasing the PPIs need to provide the minimum details (such as name, address and contact details) of the intended beneficiary/ies who are his/her dependents and family members.

Only one card can be issued to one beneficiary.

The transaction and monthly limits as applicable for cash pay-out arrangements under DMT guidelines issued from time to time (currently Rs 10,000/- per transaction with a monthly ceiling of Rs 25,000/-) will be applicable for such PPIs.

The bank may put in place mechanisms to monitor and report suspicious transactions on these PPIs to Financial Intelligence Unit India (FIU IND).

The other guidelines as applicable to open system PPIs will also be applicable to these cards.

Such PPIs shall be issued only in electronic form.

4.2 Rupee denominated PPIs issued by banks for visiting foreign nationals and NRIs

Banks are permitted to issue open system rupee denominated non-reloadable (a) PPIs to NRIs and foreign nationals visiting India & (b) PPIs co-branded with exchange houses/money transmitters (approved by RBI) to NRIs and foreign nationals visiting India subject to the following conditions:

The cards can be issued by overseas branches of banks in India directly or by cobranding with the exchange houses/money transmitters upto a maximum amount of Rs.2 lakhs by loading from a KYC compliant bank account.

Such PPIs should be activated by the bank only after the traveller arrives in India.

Cash withdrawal from such PPIs will be restricted to Rs 50,000/- per month.

The cards should be issued strictly for use in India and transactions settled in INR.

The banks should ensure compliance to relevant KYC/AML/CFT requirements issued from time to time.

An individual can hold only one card at a time and the card should be non- transferable. The issuing bank has to put in place necessary arrangements to ensure the same.

These PPIs may be used only for transactions permissible under the extant foreign exchange regulations.

Transaction history have to be maintained by the banks.

The process put in place by the bank for refund of unutilised portion of the PPI amount in India has to adhere to the extant foreign exchange regulations.

Such PPIs shall be issued only in electronic form.

5. The above changes will come into effect from the date of issue of circular. The other provisions of Master Circular dated July 1, 2014 will remain unchanged.

6. This directive is issued under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007 (Act 51 of 2007).

Thursday, November 27, 2014

Modified DBTL scheme for LPG Gas cylinders

 The DBTL scheme was earlier launched on 1st June 2013 and finally covered 291 districts. It required the consumer to mandatorily have an Aadhaar number for availing LPG Subsidy. The government has comprehensively reviewed the scheme and after examining the difficulties faced by the consumer substantively modified the scheme prior to launch. The modified scheme is now being re-launched in 54 districts on 15.11.2014 in the 1st Phase and in the rest of the country on 1.1.2015. The modified scheme is given as under:

Options to receive LPG subsidy
Under the modified scheme, the LPG consumer can now receive subsidy in his bank account by two methods. Such a consumer will be called CTC (Cash Transfer Compliant) once he joins the scheme and is ready to receive subsidy in the bank account. The two options are:

Option I (Primary): Wherever Aadhaar number is available it will remain the medium of cash transfer. Thus, an LPG consumer who has an Aadhaar Number has to link it to the bank account number and to the LPG consumer number.

Option II (Secondary): If LPG consumer does not have an Aadhaar number, then he can directly receive subsidy in his bank account without the use of Aadhaar number. This option which has now been introduced in the modified scheme ensures that LPG subsidy is not denied to an LPG consumer on account of lack of Aadhaar number. In this option,Either consumer canPresent bank account information (bank account holder name /account number /IFSC code) to the LPG distributor for capture in LPG database OR Present LPG consumer information (17 digit LPG consumer ID) to his bank

LPG Consumers who are already CTC prior to launch on modified DBTL
Domestic LPG Consumer who had already joined the earlier DBTL scheme by linking their Aadhaar to bank and LPG database don’t need to take fresh action for receiving subsidy as the subsidy will be transferred to their bank accounts via Aadhaar based on the previous seeding. Such CTC consumers cannot exercise Option II above.

Pricing under DBTL
In the DBTL district(s), domestic LPG cylinders will be sold to CTC domestic LPG consumers at Market Determined Price (does not include subsidy) from the date of launch of the scheme.
Amount transferred to consumer 

The total cash applicable on LPG cylinder will then be transferred to the CTC consumer for each subsidized cylinder delivered (up to the cap) as per his entitlement. 

Grace Period
Non-CTC consumers will be allowed 3 months from the date of launch of DBTL to become CTC. During this period such consumers will receive their entitlement of subsidized cylinders at the then applicable subsidized retail selling price. 

Parking Period
After the grace period of 3 months, all non-CTC LPG consumers will get an additional 3 month Parking Period, during which the sale will happen at Market Determined Price for all LPG consumers..

But for non-CTC consumers the total cash on the sale made to such consumers (as per their entitlement) shall be held back with the respective OMC to be transferred to the LPG consumers’ bank account in case consumer becomes CTC anytime during the Parking Period.

In case consumer does not become CTC during this Parking Period, the parked funds will lapse and consumer shall become ineligible to receive the parked funds and sale will continue at market determined price till consumer becomes CTC.

After the expiry of the Grace Period of 3 months, and thereafter an additional Parking Period of 3 months, all non-CTC consumers will receive cylinders at marker determined price and will not be entitled to total cash until they become CTC. When non-CTC consumers become CTC beyond the parking period they will be eligible to get one time permanent advance and total cash entitlement on balance subsidized cylinders in that financial year.

Permanent Advance
A one-time Advance will be provided to every CTC consumer joining DBTL.

The Advance will be notified, from time to time and will remain fixed for a financial year.
It will remain with the consumer till the time of termination of connection, when it will be finally adjusted.

LPG consumers who were provided permanent advance on a previous scale will not be eligible for any differential payment on account of the revision in the permanent advance.

RBI make more easy to take loans for low cost home

Reserve bank of India make more easy to take home loans for low cost home as allowed banks to extend loans against long term infrastructure bonds. RBI issued a note dated 27 November 2014 regarding this issue. Full note is as under.

Please refer to our circular DBOD.BP.BC.No.25/08.12.014/2014-15 dated July 15, 2014 on the captioned subject. In continuation of the same, banks are advised as under:

2. In order to provide liquidity to retail investors in such bonds, it has been decided that banks can extend loans to individuals against long-term bonds issued by them under the provisions of the above-mentioned circular. Boards of the banks should lay down a policy in this regard prescribing suitable margins, purpose of the loan and other safeguards. Further, such loans should be subject to a ceiling, say, Rs.10 lakh per borrower, and tenure of loan should be within the maturity period of the bonds. It is also clarified that banks are not permitted to lend against such bonds issued by other banks.

3. Further, in the formula for ‘Eligible Credit (EC)’ as given in paragraph 7 of the above-mentioned circular dated July 15, 2014, ‘B’ (one of the two factors of EC) has been explained as Outstanding ‘standard’ loans to Infrastructure sector (project loans) and affordable housing on the date of issuance of the bonds. On a review, it has been decided that ‘B’ should be read as Outstanding ‘standard’ loans to the Infrastructure sector (project loans) and affordable housing on the date of reporting to RBI (reporting Fridays for reserve requirements and March 31 of a year for computing priority sector obligation). Other instructions in this regard remain unchanged.