Tag: Tax

Most of the investors are not aware of how income tax is calculated and the basic understanding of tax related concepts when they start their career. In this guide, you will learn how to calculate income tax in a very simple and easy to understand way without involving any complicated jargons.

What is Income tax?

Income tax is a tax imposed by the government on the income of an individual in every financial year. To calculate your income, all the income sources like salary, business income, rent, dividends, etc are considered. Every citizen of the nation or even a non-residential individual also has to pay this tax to the government if he is earning any income in India.

The govt of any country has various kinds of expenses like paying pension to govt employees, building roads and infrastructure, start various schemes for the citizens benefit etc etc. For all this, they need money and income tax is one of the ways for the govt to earn the money.

The same money eventually is used to run the nation and its development. So when we pay the income tax, we get back various facilities like roads, public parks, and poor people also get various free services in health and education.

Every individual, who has yearly income more than a limit (current limit of 2018-19 is 2,50,000 per year) has to pay some part of their earning as tax to the Income-tax Department.

How to calculate income tax?

Calculating income tax is a little detailed, but simple procedure and it depends on 2 basic factors.

1. Taxable income
2. Age Slab

Let’s see the first factor i.e. taxable income.

What is taxable income?

Tax is paid on “Taxable Income” and not your full income. There is something called “Exemptions” and “Deductions” which are reduced from your income to arrive at “Taxable Income”. Formula to calculate taxable income is given below:

#1: What is Gross income?

Gross income is your total earning. It is the entire amount of your income without any deduction or exemptions. Gross income is not only your salaried income. It is the income you earn from all your earning sources.

For example: In one month, If you earn Rs.50,000 as salary, Rs 25,000 from your house rent and Rs.20,000 from your other business.

Then your gross monthly income will be : 50,000 + 25,000 + 20,000 = Rs. 95,000

There are various sources of income which are classified into 5 categories. The categories are called 5 heads of income.

5 heads of Income:

Each and every source of earning from where you are getting money is considered as your income. There are 5 main sources which are also called as 5 heads of income which are considered as the main income sources. These 5 heads are as bellow:

Let me tell about these sources in detail.

1. Income from salary

The first head is “Income from Salary”, so if you are a salaried employee, then your whole year salary has to be added, less exempt HRA and other perquisites (covered below in this article) which are allowed to be tax-exempt. So, this amount is to be shown under the head of the salary. It does not matter if you are a govt employee or work in the private sector.

2. Income from house property:

If you have a property and you have given it on rent, then all the rent earned in a year will be considered as your “Income from House Property”.

3. Income from profit or gains from business:

If you have your own business, then all the profits you generate from that business will be considered under this head. For example, if you have a shop, and your revenue is 5 lacs a year, but your expenses in shop is 3 lacs, then your profit is Rs 2 lacs. This 2 lacs will be considered as your income under this head.

4. Income from Capital Gains:

Capital assets can be simply defined as the property you own, which includes Stocks, mutual funds, real estate, gold, etc.  So the profit you earn through the sale of these assets is considered as a capital gain and it will be taxable depending upon the class of asset from which capital gain occurred. For example gain on capital assets like equity stocks or equity mutual funds is taxable at 10% above Rs 1 lacs profits in a financial year.

5. Income from other sources:

The sources of income other than the above-mentioned classes are considered under 5th head of income. For example –  the money you receive from any relative or friend as a gift above Rs 50,000 or any award prize or lottery you won, etc will come under this head.

Most of the people who are salaried will not have to deal with the other 4 heads of income for many years.

#2: What are deductions and exemptions?

Now let’s understand the very important concept of “deductions” and “exemptions”. These two things can be reduced from your gross income and your taxable income can come down, which will result in lower taxes

In this article, we have covered exemption available to salaried employees on receipt of allowances and perquisites from employer. Let’s see the examples of Tax Exemptions and deduction:

Tax Exemptions

“Exemptions” are some of the defined benefits or heads which can be deducted from income. A person spends on some of the necessities in life like paying rent, spending money on children’s fees, and basic living expenses. So some of the exemptions allowed are

• HRA (house rent allowance)
• Standard Deduction of Rs 50,000 per year
• Children Education Allowance + Hostel Allowance
• LTA (Leave travel allowance)

Let’s understand these 3 things.

Exemption #1 – House Rent Allowance (HRA)

If you are receiving HRA as part of your salary and also pay rent for residential accommodation then you can claim the HRA paid to you as exempt from tax subject to certain limits and restrictions. These are as follows:

Minimum of the following HRA is exempt from tax –

(i) Actual HRA received

(ii) 50% of annual salary* if living in metro cities or else 40%

(iii) Actual Rent paid less 10% of Basic + DA

Exemption #2 –  Standard Deduction of Rs 50,000

Once can directly deduct a standard deduction of Rs 50,000 and bring down their income by that margin. Before Financial Year 2018-19, there was a deduction available for Travel Allowance (Rs 19,200) and Medical expenses (Rs 15,000) when you produced the bills, but now there is no requirement of producing any proof of expenses. One can directly take the benefit of Rs 50,000 standard deduction (for FY 2018-19, this was Rs 40,000, but later it was increased to Rs 50,000)

Exemption #3 – Children Education Allowance + Hostel Allowance

If you are receiving children education allowance or hostel allowance from your employer then you are eligible to claim a tax exemption under the Income Tax Act. However, here are the limits for these two exemptions

• Children’s Education Allowance: INR 100 per month per child up to a maximum of 2 children.
• Hostel Expenditure Allowance: INR 300 per month per child up to a maximum of 2 children.

Exemption #4 – LTA (Leave Travel Allowance)

A lot of employers give an allowance to employees for traveling on leave dates. An employee may travel for his holidays or vacations (alone or family) and will incur some expenses related to that. So this allowance is given for that on producing the bills and on doing the actual travel by taking leaves.

The actual rules for LTA are quite detailed, hence we are not covering it here in this article. Right now you just need to know that the employer can define the LTA allowance limit like Rs 50,000 (for example), so that employee can do travel expenses upto that limit twice in a block of 4 yrs and claim this exemption.

Tax Deductions

There are various deductions that are available under different sections of the income tax act. This deduction is against amounts that you have invested in some specific products like Insurance, ELSS, or ULIP and it also considers specific types of expenses that you incurred during a financial year like Principal repayment of loan, donations or health insurance premiums, etc.

Here is the table given below in which you can see various sections covered under section 80 (from 80C, 80D up to 80U), their meaning, maximum limit of deductions and who can avail the benefit of these deductions.

[su_table responsive=”yes”]

SECTIONS	MEANING	MAXIMUM LIMIT (IN RS.)	Who can claim?
80C	Deduction on investment made in LIC, PPF, ELSS, ULIP, Payment towards Loan principal, tuition fee, etc.	1.5 Lac (for 80C, 80CCC, 80CCD)	HUF & Individual
80CCC	Deductions for premium paid for annuity	1.5 Lac aggregate	Individual
80CCD	Contribution to National pension scheme	50,000 above Rs. 1.5 Lac limit	Individual
80CCF	Deduction on investments in infrastructure and other tax-saving bonds	20000	Individual & HUF
80CCG	Rajiv Gandhi equity savings scheme (RGESS)	25000	Individual & HUF
80D	Deduction on premium paid for Medical  insurance	25000 (50,000 in case of senior citizen)	Individual & HUF
80DD	Deduction on medical expenses of   dependent  handicapped relatives	75,000 in case of general  disability (1.25 Lac in case of severe disability	Resident Individual & HUF
80DDB	Deduction on medical expenses of self or  dependent relative	40,000 ( 80,000 in case of  senior citizen)	Resident Individual & HUF
80E	Deduction for interest on education loan for  higher studies	There is no limit on the maximum amount that is allowed as deduction.	Individual
80EE	Deduction on interest paid for   home loan only  for first-time homeowners	Up to 3 Lac	Individual
80G	Deduction on donations for social causes	Limits are based on donations	All assesses
80GG	Deduction on House Rent when   HRA is not  paid	2,000 per month	Person who is not getting   HRA
80GGA	Deductions for donations made towards scientific research or rural development.	Limits are based on donations	Taxpayers who have income from salary or property or capital gains and not from business
80GGB	Deduction on the amount paid to   any political parties by companies	Limits are based on donations	Indian companies
80GGC	Deduction on the amount paid to   any political parties by an   individual	Limits are based on donations	Non-corporate assesses or taxpayers
80IA	Deductions in respect of profits and gains  from industrial undertakings or   enterprises engaged in infrastructure development	NA	All assesses
80IAB	Deductions in respect of profits and gains by an undertaking or enterprise engaged in the development of Special Economic Zone.	NA	All assesses
80IB	Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings	NA	All assesses
80IC	Special provisions in respect of certain undertakings or enterprises in certain special category States	NA	All assesses
80ID	Deduction in respect of profits and gains from business of hotels and convention centers in specified area	NA	All assesses
80IE	Special provisions in respect of certain undertakings in North-Eastern States	NA	All assesses
80JJA	Deduction in respect of profit and gains from business of collecting and processing of bio-degradable waste	100% of profit for 5 successive  assessment years	All assesses
80JJAA	Deduction in respect of employment of new workmen.	30% salary of full-time employees for 3 years	Indian companies
80LA	Deduction in respect of certain incomes of Offshore Banking Units	Rs.12000 (plus additional 3000)	scheduled banks, IFSC and   banks established outside  India
80P	Deductions in respect of income of co-operative societies	NA	Co-operative Societies
80QQB	Deduction in respect of royalty income, etc., of authors of certain books other than text-books.	3,00,000	Resident Indian authors
80RRB	Deduction on the income of Royalty of a Patent	3,00,000	Resident individuals
80TTA	Deduction from gross income for interest on savings accounts	10,000 per year	HUF and Individual  taxpayer
80U	Deduction in case of physical disability	75,000 in case of general  disability (1.25 Lac in case of   severe disability	Resident individuals
24	Home Loan Interest	Rs.2 lakh (for self-occupied house) No limit (for let-out property)	Individuals

[/su_table]

Let me show you an example of calculation of taxable income of a person who’s total earning is Rs.12,60,000. See the table given below.

**Examples in this article are mainly for salaried class of individuals having no other source of income like house property or capital gains.

[su_table responsive=”yes”]

Person ‘A’s gross salary	Rs. 12,60,000
His deduction under 80(C) act	Rs.1,50,000
HRA benefit	Rs.60,000
Standard Deduction	Rs.50,000
Taxable income formula	Gross income – exemption – deduction
	12,60,000 (Gross income) – 1,50,000 (Deduction) -[60,000 – 50,000 (Exemption)]
Total taxable income	10,00,000

[/su_table]

So from this example we got Rs.10,00,000 as a taxable income of that person.

You must have got an idea of calculating taxable income. So now let’s move toward calculating income tax applied on that taxable income.

The second factor essential for income tax calculation is your age. According to the age groups, there are three tax slabs and each tax slab has different tax rates. See below these three tax slabs and yours.

1) Tax slab below 60 years of age group:

In this group comes the youngsters both men and women having age below 60 years. Individuals in this group have to pay more tax than the other groups. Here the tax rate is highest among all three groups. See the table below to understand the tax rate –

2) Tax slab between 60 to 80 years of age:

This is the group of individuals most of whom are already retired. In this group tax charges are different i.e. lower than the first group. The percentage of tax is given below.

3) Tax slab above 80 years of age:

This is the last and most aged tax payer’s slab. The tax rates are lower here than the other two groups. The percentage of tax is given in the following table.

Income tax calculation

Let’s take the same above example of taxable income of Rs 10 lacs and considering this person in 1st tax slab, his income tax can be calculated as follows.

Income upto Rs.2,50,000 is tax free.

(between Rs. 2,50,001 to 5,00,000) 5% tax = 5% of Rs. 2,50,000 = Rs.12,500

(between Rs 5,00,001 to 10,00,000) 20% tax that means 10,00,000 – 500000 = 5,00,000

Tax at 20% on 5,00,000 will be = Rs. 1,00,000

So the total income tax of this person will be –

Rs. 12,500 + Rs. 1,00,000 = Rs. 1,12,500 (plus Education cess of 4%)

The GIF given below will explain you complete tax calculation:

If the person is earning more than 10 lacs, than on the amount above Rs 10,00,000, it will be taxed at 30%.

What is TDS?

When you earn an income beyond a specified limit, the govt has mandated the person paying you the income to deduct one part of it as your advance tax on your behalf is called TDS. If you look at its full form its Tax deducted at SOURCE (whoever is paying it).

If you want to find out all the TDS deducted for you at one place, there is a form called form 26AS which can be downloaded from TRACES website. You can claim the TDS amount against the total tax payable by you. Incase your TDS amount is more than the tax payable, you can apply for the tax refund when you file your ITR.

Various ITR forms

After paying the income tax, one also has to file the IT return which is to declare your income earned from various sources, tax paid in advance, your TDS deducted in the financial year. It is also useful for claiming income tax refund.

There are different ITR forms for each class of individual i.e. salaried, or business/professional individual. Following is a brief classification of ITR forms –

ITR 1 or Sahaj :

This form is for an individual (Resident) earning less than Rs. 50 Lakhs in a financial year under heads of Salary or pension, one house property, Other sources (excluding winning from Lottery and Income from Race Horses) and agricultural income less than Rs. 5000 in F.Y.

ITR 2 :

This form is for HUF and an individual (including non-resident/resident not ordinarily resident)  who is earning more than Rs. 50 lakhs under head of Salary, House property, Other Sources (including Winning from Lottery and Income from Race Horses), agricultural income more than Rs. 5000 in F.Y. and also capital gains.

ITR 3 :

This form is used by HUF and resident individuals who have income under the head of Profit & Gains from business or profession. This return may also include income from house property, salary/pension and income from other sources.

ITR 4 :

This return form is to be used by an individual or HUF, who is resident other than not ordinarily resident, or a Firm (other than LLP) which is resident, whose total income for the assessment year 2019-20 does not exceed Rs.50 lakh and who has income computed on presumptive basis under section 44AD or 44AE or 44ADA.

Conclusion

In this article, we tried to cover various income tax-related concept in nutshell, I hope it was beneficial for those who had no idea about it. We will try to cover this information in detail in various other articles dedicated to individual topics. Please ask your questions in the comments section so that we can answer those.

Now a days various restaurants and businesses are putting fake GST number on the bills and charging extra from the customers without registering with the GST department. In this article, we will teach you how you can check the validity of the GST number and its really valid of not in just 30 seconds. It’s a simple process that can be done with 2 clicks.

GST is now a reality and almost everywhere GST is charged. You can see that suddenly those restaurants who never mentioned any taxes in their bills have also started adding 18% more on the bill on the name of CGST and SGST (more on that later)

How fake GST number on bills is creating a hole in your pocket?

GST is a big reform in the country and while govt claims that it’s a simple tax, there are lots of inherent complications to this taxation system. A common man thinks that now everything has got costly by an extra 12% or 18% (especially in smaller cities)

One of my friend in Varanasi told me that a small shop near his place is charging extra Rs 2 on a packet of biscuits now telling the poor customers that its GST tax which is now to be paid.

While that’s an example of a mid-level city, many restaurants have also started putting fake GST number on the bill and have started charging extra taxes which they will never deposit to anyone.

How to verify the GST number?

Verifying the GST number online is a very simple procedure. First of all check the GST number on the receipt. It’s 100% mandatory to mention the GST number on the invoice or bill.

If someone is charging GST, without mentioning the GST number, then it’s illegal. Earlier it was service tax, now it’s GST number which is mandatory to put on the invoice.

Here is how to check if GST number is real or fake?

1. Check the GST number on the bill and note it down
2. Visit this page of GST website and enter the GST number as shown below
3. Enter Captcha and press Submit.
4. You will see the business name registered, match it with the name of the business on invoice

What if I don’t have a GST number?

Some businesses still don’t have the registration number confirmed, but they have the provisional GST number with them, so you can also check the provisional GST number online and verify them. Even you can verify the business based on their PAN.

Here the steps to verify GST number in this case

Go to this link and you will be asked various details which you need to enter.

 

Here you need to fill the data required correctly i.e. state, ID type (PAN number, GST number or Provisional ID), ID number and verification code. At last click on submit and then scroll down to see the details of the registered business.

This is how you can verify if GST number is valid or not with the help of a provisional ID or PAN number. As of now, there is no way of finding or verifying the GST number just by entering the name of the business entity.

GST is a 15 character code

It’s an important point to know that GST number is 15 characters which are a combination of numbers and characters. These 15 digits are broken into 5 parts as follows

• First 2 digits are state code where the business is registered
• Next 10 digits are PAN number of the business
• 13th digit is registration number of that store or business with same PAN number
• 14th digit is Z by default for right now
• And the last i.e. 15th digit is a check code

What is someone says “I have applied for GST number”?

Some shopkeepers and business owners are playing the trick of “I have already applied for GST number, It’s not yet approved?”. This is to give a feeling to customers that they are rightfully charging GST. But this is again a fraud.

Because when they apply for GST number, they get a provisional GST number anyways and they need to either put a GST number or provisional GST number on the invoice/bill

Don’t fall for this trap and demand to see the GST number.

Where to complain about fake GST number?

GST department has dedicated the helplines for you to complain or ask any queries regarding GST. Here are the emails and phone numbers

• GST Complaint mail id: [email protected]
• GST Helpline Number: 0124-4688999 or 0120-4888999

Let us know if you have more questions on how to check if the GST number is valid or fake?

Earlier RTI filing was too much pain, because it was very much time-consuming as it was an offline process.

A form was to be filled and then a Rs 10 stamp was to be attached and the entire form had to be sent by post to the required department of the government. The form took approximately 3 to 4 days to reach the concerned department.

So many people who wanted to file RTI refrained from doing it.

However now filling RTI is just a click away because we can file it online. I will tell you 4 SIMPLE and EASY steps to file RTI ONLINE without any hassle. But before that, let me explain to you in brief what is an RTI act.

What is the RTI?

The Right to Information Act 2005 commonly known as RTI is a law using which an Indian citizen can request for information from state or central government departments and offices. And such a request should be processed in a timely way as mandated by the RTI Act.

Let me now share what steps you should take to file RTI form online.

Step #1 – Create your free login or file RTI as a guest

To create a login, visit RTI website and click on sign up option.

If you do not want to create login then continue as a guest (by directly clicking to submit request button). To make it simpler I have attached the screenshot of the login page.

When we log in or even directly click on “submit request”, then the below image will appear and you just have to tick on “I have read and understood the guideline and click on submit button”. Below is a snapshot!

Step #2 – Fill the RTI form

The next step is to fill the main RTI form, you can access it directly by clicking here.

Filling an RTI form is a bit tricky. There are lots of things you should take care. There are dozens of govt departments and ministries which handle a different kind of work. So it’s important to know which department or ministry handles your RTI form.

Whatever is your complaint, it is important to write to the point and not hit around the bushes and also to write in bullet points because it will be very easy and eye-catching for the RTI OFFICER to understand your query and reply you even faster.

Let me make it easier for you by giving an example.

CASE STUDY – Mr. Shyam wants to file RTI for reasons for delay in roads repairs.

After the rainy season was over, Shyam noticed that the road was not at all in good shape. He also noticed that there were frequent accidents on that road and many people were losing their precious lives. He complained to the authorities, but no actions were taken and 3 months had already passed.

Shyam finally decided to file an RTI to know what is the reason behind so much delay.

If you are not sure which ministry you should choose while filing the RTI, then just Google search about it, and most probably you will find that information.

Step #3 – Make the fees payment

Once you click on submit, then the final step is to make the fees payment. The Fees for filing RTI is Rs 10 only. Two modes of payment are mentioned as

1. Internet Banking (only SBI bank option in there)
2. Credit or Debit Card / Rupay Card

Step #4 – Submit your application

The last and final step

1. Once you have made the payment click on to the submit your application. A unique registration number is generated. (please save it for future reference).
2. Now, wait and watch for a maximum of 30 days and you will mostly get a reply for your query.
3. If you have not received the reply or you are not satisfied with the answer from RTI department, then you can file the first appeal, which is free of cost for the first time. Learn more about first appeal here

You can’t File RTI to State Govt departments online

Note that the facility of filing online RTI is available only for central govt departments and ministries. You can’t file RTI for State govt departments through this online portal. For that, you should follow the offline process of RTI only.

I hope this article has taught you about filing RTI online and answered most of your basic queries. Please feel free to ask any questions in the comments section below.

Do you get HRA as part your salary? If yes, then it’s critical for you to understand how the HRA exemption amount is calculated?

In this article, we will talk about things like what is HRA? How to calculate HRA? And various other things related to house rent allowance. You can check out the video below to quickly understand everything about HRA

What is HRA?

HRA i.e. House Rent Allowance is the amount paid as a part of salary by the employer to the employee. Employee can get tax benefit on this HRA amount if he is living in rented house and paying rent. This simply means that if your salary skip has HRA component, then you don’t have to pay income tax on this amount. However you can’t save income tax on the full amount.

There is a rule on how much HRA you can claim and save tax on it. In this article, we will look at the rules and calculations. But before we move ahead, here is one good news.

If an employee does get HRA as part his salary, but paying rent, even then he/she can claim some part of HRA for saving tax and there is separate calculation for that. We will also look at that today.

How to Calculate HRA amount?

Lets now see how the HRA is calculated, but the calculation depends whether you are getting salary component from your employer or not (it should be mentioned in your salary slip).

Case #1 – When you get HRA from employer

Actual HRA offered will be the lowest of the following 3 things:

1. Actual HRA received.
2. 40% (in non-metro city) or 50% (in metro city) of your salary.
3. Actual paid rend is reduced from 10% of basic salary.

Let’s take an example of how HRA is calculated.

Example: An employee who lives in a metro city, has basic salary Rs.30,000 per month and the HRA part is Rs.15,000. The actual rent he pays is Rs.10000 per month. Then the exemption he will get is –

• Actual HRA received = (15,000 x 12) = 1,80,000
• Actual rent paid – 10% of basic salary = (10,000 x 12) – [(10/100) x (30,000 x 12)] = 84,000
• 50% of basic salary = (30,000 x 12) x 50/100 = 1,80,000

Now the lowest amount in above calculation is 84,000. So the employee will get exemption of Rs.84,000.

Case #2 – When you don’t get HRA from employer

If you are living in a rental house or paying for your accommodation and do not get HRA from your employer then also you are applicable for the tax deduction in income tax return. These people can also claim for HRA exemption under section 80(GG) of IT act.

Actual HRA offered will be the lowest of the following 3 provisions:

1. Rs.5000 per month
2. 25% of your total income
3. Actual paid rend is reduced from 10% of basic salary.

Though there are some conditions which should be fulfilled if you want tax deduction in this case. The criteria are as bellow:

• You should be salaried or self-employed and paying rent for accommodation.
• You haven’t received any HRA in the financial year in which you are claiming for HRA exemption.
• As per HUF our spouse or minor child should not own house registered on their name.

If you do not meet any of the above criteria then you can’t claim for HRA. Here is chart which explains the same thing which we talked above.Important points regarding HRA?

• HRA is applicable only to the salaried person and not to those who are self-employed. If a person is living in his/her own house then also he/she can’t claim for HRA benefits.
• If the employee living in a rented house is paying more than Rs.1 lac on rent in one financial year then he has to submit PAN details of landlord along with HRA claim.
• If a person is living in his parents’ house and paying rent to them, he is applicable for HRA claim. However he cannot claim if he states that he is paying rent to his spouse or child.

Documents required for claiming HRA

The first thing you need to know is that you don’t need to submit anything to Income tax department to claim HRA. You only need to submit the documents to your employer and your employer will verify documents and give you the exemption and then issue form 16 and include these details in that form.

If there is any enquiry by the income tax department, only in that case you need to present further documents asked by them.

So basically at the start of the year, you need to update your employer on the rent you are paying each month and based on that data the employer will deduct the TDS from your salary. Finally at the end of the year, you will have to submit following documents

• Rent receipts or the proof of paying rent
• Form 12BB (here is more details)
• PAN card of landlord if the amount is above Rs.,1,00,000.
• Some employers may ask for lease and license agreement

Also, In last few years, many tax payers were found submitting fake documents for HRA claim in many cases. This is the reason that IT department is asking for more and document while claiming for HRA exemption. If there is any scrutiny by income tax department, you might have to submit some more documents like

• Electricity bills
• Water supply bill
• Agreement or a letter from housing society

Some cases when charges of IT department can make enquiry are

• If a person has a house loan and also applying for HRA.
• If a person living with parents without paying any rent but still apply for HRA and says that he pay rent.
• Adding higher amount in receipt than he actually pays.

Download HRA Calculator

We have created a nice HRA calculator and analysis tool, which will help you to calculate your HRA and also help you know how much HRA are you not able to utilize and how much is it covering your rent paid.

If you look at the same example which is mentioned above in this article (salary = Rs 30,000 per month, HRA = Rs 15,000 per month, and Rent paid = Rs 10,000 per month, and living in metro) and if you do the HRA analysis , you will find out two things

• He is only able to claim 46% of his HRA provided to him (84k our of 1,80,000)
• He is able to cover 70% part of his rent paid through HRA (84k out of 1,20,000)

Here is a snapshot of our HRA calculator

Click here to download HRA calculator

Can you claim both HRA & deduction on home loan interest?

If you have bought a house in a different city and you are doing job in different city, then in that case, you can claim HRA benefits as well as home loan interest too. However if you have the house in the same city of your job, you cannot claim the HRA benefits.

Housing.com has explained it in a nice way.

Are you claiming HRA tax benefits? Do you follow any other process which is not part of this article? Can you share some more HRA related tricks which you have learned over part few years?

Government has decided to make it compulsory for every individual to link their Aadhaar Card with PAN card by 31st July, 2017. This is part of the digital India campaign and an attempt to digitalize everything.

Why it is mandatory to link Aadhaar with PAN?

There is a great chance that there are a lot of fake PAN cards in India, because it can be easily applied online with fake identities and anyone with a little luck can get a duplicate PAN card. Hence in order to identify those fake PAN cards, govt wants to link Aadhaar card with PAN.

Because each person will have only one Aadhaar card, they will only be able to link it with a single PAN. Rest other PAN cards will be of no use after this process. This is an important move and is necessary for an orderly society and also to keep pace with the technology.

Importance of linking Aadhaar with PAN

PAN card and aadhaar card are the unique identification cards which can be used for verifying a person’s income and address respectively. Let’s have a quick view why this linking is important.

Some reasons behind linking aadhaar with PAN in details are as below:

• Fraud PAN cards– Because of this linking a person can use only one PAN card wherever it is necessary which is linked with his aadhaar card. Though he has any fraud/duplicate PAN card, it will be of no use.
• Tax Evasion – with the help of this, government will be able to track on the taxable transactions of an individual or an entity.
• Tracing money launders- Aadhaar card is a full-proof identification of an individual and it cannot be duplicated easily so that linking of aadhaar with PAN can also be useful for tracing money launders.
• There are fewer chances to have a duplicate aadhaar card as it is a more secured source of identification. Because Aadhaar card is the only identity proof which has all the possible information including Bio-metric. So it is little bit difficult to have a fake aadhaar card as compared to PAN Card and voter ID.
• Curb corruption: This is also useful to curb corruption to a significant level as the record of each transaction will be verified by the government.
• ITR-V: While paying tax, now you don’t need to send your ITR-V acknowledgement if your Aadhaar card is linked with your PAN Card.

Also, the government wants to get every individual identified by their Name, Address and also their income. A lot of PAN cards were very old, and many people have changed their address, contact details etc which were given to govt at the time of applying for the PAN card decades earlier. With this linking, all the data will also get updated.

What is the process to link aadhaar card with PAN?

If you are unable to link your aadhaar card with PAN, no need to worry. Here are the steps to link your aadhaar card with PAN.

• Visit the page of Income tax e-filling portal & register if you are not registered with it. If you have your registration already then just login.
• Login with the details i.e. registration ID, Password or date of birth.
• Your PAN no. will be your registration ID
• once you login you will immediately get a pop-up to link your aadhaar with PAN
• If you don’t get a pop message then check the blue bar above and click on “Profile setting” and then on “Link aadhaar” in the list.

• Or you can also see the option “Link Aadhaar” on the left side of the site when you open it without logging in. Simply click on it.

 

 

• The details like your name, gender and date of birth will be given there already as per the registration. Just check that the details available there are same as on your aadhaar Card.
• If the details match with aadhaar card then fill your aadhaar card number and captcha code and click on “Link Aadhaar”.
• Once you submit you will get a pop-up that your aadhaar has been linked with your PAN successfully.

What happens in case of name mismatch between Aadhaar and PAN?

UPDATE: Now you can link your aadhaar card with PAN without changing your name as the option “Name on Aadhaar” has given there.

Now it’s suggested that you first decide what is the exact name you want to keep for future, in case you have different names on various documents.

If your aadhaar card has the name which you want to keep, then you should change your name in PAN. However if your PAN has the desired name, then change it in Aadhaar card.

Now, for those who want to change their name in aadhaar card, they can follow this process or watch the video below.

And if you want to change your name in PAN, follow this link

We really feel that one should have the proper name in Aadhaar card, because it’s going to be the universal documents in future.

UPDATE: New Feature by IT department

Besides this, there is also a new option on the e-filling site from where you can link you Aadhaar card with you PAN card without changing your name.

Only date of birth, Name and Gender on both the documents should match, however we feel that as a long term solutions it’s a good idea to have the same name on both the documents.

What to do if I don’t have one of the documents (Either PAN or Aadhaar)

Now a days, almost all the people at least in urban areas have both aadhaar and PAN, very rarely it happens that someone does not have both the documents. However incase one of the documents is missing, here is what you should do ..

For those who do not have PAN

If you don’t have PAN card, then this rule is not applicable to you right now. You don’t need to take any action at the moment.

When you apply for PAN in future, at that time you can give your Aadhaar details as the address proof while applying for PAN offline or you can choose an option called digital e-kyc and e-sign, where you will be asked for aadhaar number and it will be automatically linked to your PAN. Below is a snapshot of the e-KYC looks like.

What do you if you don’t have Aadhaar?

If you don’t have Aadhaar card then you should apply for it soon, because anyways it’s going to be the universal mandatory documents very soon and every PAN has to be anyways linked with aadhaar. You can apply for aadhaar card by online or by visiting its office and providing you essential documents.

How to Check whether your PAN card is linked with Aadhaar card or not?

For some people their PAN might be already linked with Aadhaar card. To check this you just have to visit the official page of e-filling and click on the login button on the right corner of the site. Fill your PAN number and captcha code and click on OK.

If your card is already linked then it will show “Your Aadhaar is already linked with PAN” and if your card is not linked then it will show “User ID does not exist”.

Below is the demo of this process

Is it safe to link your PAN details with Aadhaar?

Recently there was a news that M. S. Dhoni’s Aadhaar details were leaked somehow, which shows that aadhaar details are not 100% secured. If this can happen to a big celebrity, this can happen to anyone.

Many people are wondering if it’s safe to link their Aadhaar with their PAN?

• Will their bank details be exposed ?
• Will there be any fraud involved?
• Will others get access to their income tax data ?
• Will others get access to my personal data like Mobile number, Email and Bio-metric details?

But, you don’t need to worry!

The solution to problem is here. There is no need to worry about the security of your PAN after linking with Aadhaar. UIDAI has introduced safety features of aadhaar Card.

Now there is a facility of “Lock” and “Unlock” of aadhaar details.

If you “Lock” your aadhaar details, all your data will be freezed and the access to any third party will be blocked. All you will need to do is, verify the OTP which is sent to you when you apply for this “Lock” feature online. If you want to get details about all the safety features, you can download this PDF.

What will happen if your Aadhaar card is not linked with PAN card?

• As per this amendment if a person do not link his aadhaar with PAN card then there is possibility that he could lose his access to the PAN card after December 31,2017 as per Hindustan Times.
• You will be unable to file IT returns and pay the dues or claim the IT returns.
• It’s been also said that the use of PAN cards may stop in upcoming days as Aadhaar card will be the unique Identity proof. So if you don’t link it now you have to link it with your PAN in future in any ways.
• Because your PAN card will be blocked, and for higher value transactions PAN is mandatory, you will not be able to do many high value transactions online as the bank will keep asking for PAN

UPDATE:   What if I have both the documents but don’t have any Income Tax Returns?

If you don’t file any Income Tax Return then this rule is not for you. It will not affect either you link your Aadhaar card with PAN or not.

But if you have both the documents, we suggest to link the documents.

UPDATE:   What if I’m an NRI and have only PAN card?

NRI’s can also apply for the Aadhaar card. The procedure and documents required for NRI and Foreigners are same as Indian residential’s. Only thing is they have to be physically present at any of the Aadhaar card center in India.

But it is not mandatory for NRI’s till date because as per Indian Government Aadhaar is an unique identity for the person who is living on Indian soil. Read this PDF by UIDAI.

How can I apply for Aadhaar if I’m out of India?

If you are not in India currently and wanted to apply for Aadhar crad then the procedure is almost same. But you should have an introducer who can introduce you by providing his/her own Aadhaar card.

The verification of your identity will then become the responsibility of the introducer.

So, what are you waiting for ?

You should quickly complete this whole process as it’s just a 5-10 min work. Not completing this can impact you in negative way, so do not wait for the last minute.

Also you should spread this news among your friends and help others to complete this important step in their financial life.

In case you have any questions, I will be happy to answer them in comments section