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Senior Advisor - Direct & International Tax
On February 1, 2024, Hon. Finance Minister Mrs. Nirmala Sitharaman presented an interim union budget for fiscal year 2024-2025, which is the final budget of the Modi Government 2.0.
With the general elections around the corner, taxpayers had massive expectations from this budget. However, the Hon’ble Finance Minister announced in her Budget Speech that rates of direct and indirect taxes remain unchanged. This is a little surprising, particularly for individual taxpayers who were expecting some relief in personal income tax from the government.
When the newly elected government presents the full union budget for fiscal year 2024-2025 in and around July 2024, we can only hope to have relief in direct tax matters.
Coming to this month’s, Taxation Times, here’s what we have :
We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in
Happy Reading!
Best Regards,
UJA Tax Team
Section 80GG is covered under Chapter VI-A of the Income Tax Act, 1961 and is instrumental in offering deduction in tax to individuals who do not receive any House Rent Allowance (HRA) but are paying monthly rent for the accommodation. Thus, an individual can claim a deduction for rent paid even if he or she does not get house rent allowance.
An individual, to claim deduction under this section, should be self-employed or a salaried one. 80GG allows the individuals to claim a deduction in respect of house rent paid. Such house rent paid shall be for his or her own stay.
This provision acknowledges the financial burden of such individuals and provides a means to ease their tax liabilities.
In computing the total income of an assessee, not being an assessee having any income falling within clause (13A) of section 10, there shall be deducted any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent (by whatever name called) in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, to the extent to which such excess expenditure does not exceed [five] thousand rupees per month or twenty-five per cent of his total income for the year, whichever is less, and subject to such other conditions or limitations as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations :
Provided that nothing in this section shall apply to an assessee in any case where any residential accommodation is –
(i) | Owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family, by such family at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession; or |
(ii) | Owned by the assessee at any other place, being accommodation in the occupation of the assessee, the value of which is to be determined [under clause (a) of sub-section (2) or, as the case may be, clause (a) of sub-section (4) of section 23]. |
Explanation.—In this section, the expressions “ten per cent of his total income” and “twenty-five per cent of his total income” shall mean ten per cent or twenty-five per cent, as the case may be, of the assessee’s total income before allowing deduction for any expenditure under this section.]
To avail of the benefits under Section 80GG, individuals must meet certain eligibility criteria:
The deduction under Section 80GG is calculated as the lower of the following three amounts:
Mr. A, a self-employed individual, pays Rs. 15,000 per month as rent. His total annual income is Rs. 6,00,000. Calculate the deduction under section 80GG in the hands of Mr. A
Calculation of Deduction Under Section 80GG
| Rent paid minus 10% of total income | Annual Rent Rs. 1,80,000/- (15,000*12) | A |
| 10% of Total Income Rs. 60,000 | ||
| Rs. 1,20,000/- | ||
| Rs. 5,000 per month | Rs. 60,000/- (5,000*12) | B |
| 25% of total income | Rs. 1,50,000/- (25% of 6,00,000) | C |
Deduction under section 80GG would be lower of A, B or C above, i.e., Rs. 60,000/-
Section 80GG is a crucial provision for individuals facing the challenge of not receiving HRA but still incurring rental expenses. By providing this deduction, the Income Tax Act recognizes the financial burden of such individuals and seeks to alleviate their tax liabilities. Taxpayers should ensure compliance with the eligibility criteria and maintain proper documentation to avail themselves of the benefits under Section 80GG effectively.
Facts:
The assessee, an employee of an Indian company, was deputed to work on a project awarded by IAEA, Vienna, Austria, was stationed in Vienna, and was a non-resident.
The salary and the compensatory allowances were paid to the assessee in Vienna by the company in India, which were permissible to be utilized through a credit card that was valid only in Austria.
The assessing officer made additions on account of salary and allowances as the assessee did not furnish a tax residency certificate (TRC).
Held:
As per the provision of Section 9(1)(ii), the income earned under the heading “Salaries” is taxable in India “if it is earned” in India. The explanation issued for the removal of doubts declares that’salaries if they are earned’ meet services rendered in India.
In the instant case, the assessee neither had any rest period nor leave period, which was preceded and succeeded by services rendered outside India. Since the assessee has rendered services outside India, the salary cannot be taxable in India.
As per the definition, the salary paid or the advances received are to be included in the total income of the person when the salary becomes due.
From the concurrent reading of Section 5 dealing with scope of total income, Section 15 dealing with computation of total income under the head salary and chargeability thereof, and Section 9 dealing with income arising or accruing in India with reference to the salaries and the services rendered in India, we hold that no taxability arises on the salary/allowances received by the assessee since the assessee is a non-resident and has rendered services outside India.
In Favour of: The Assessee
Facts:
The Assessing Officer issued a reopening notice on the ground that the assessee had violated the provisions of Section 50C.
In an instant petition, the assessee challenged the impugned reopening notice.
Held :
The assessing officer issued the assessee a notice under section 148A(b) seeking approval for reopening of assessment – Subsequently, the assessing officer passed order under section 148A(d) and issued the assessee a notice under section 148 seeking to reopen assessment – Mr. Basu, learned counsel for assessee submitted that there had been total non-application of mind while issuing order under section 148A(d), inasmuch as in said order it was mentioned that assessee was buyer of property and if only sanctioning authority had read order, he would not have granted sanction because section 50C did not apply to buyers – Whether Assessing Officer before issuing a notice must have satisfied himself that what he wrote made sense, and even Principal Commissioner, who granted sanction, should have also applied his mind and satisfied himself that order passed under section 148A(d) was being issued correctly by applying mind – Held, yes – Since there was nothing in notice to explain as to how, if transaction amount was less than stamp duty value, there could be escapement of any income, particularly in hands of a buyer, impugned notices and order were to be set aside
In Favour of: The Assessee.
CBDT notifies ITR 6 AY 2024-25
CBDT notifies ITR-2 & ITR-3 for AY 2024-25; Individuals/HUFs subject to tax audit can verify ITR using EVC
A record of over 8.18 crore Income Tax Returns (ITRs) filed for A.Y. 2023-2024 upto 31.12.2023; Y-o-Y increase of 9%
Due date for issue of TDS Certificate for tax deducted under section 194-IB/194-IA/194M/194S in the month of November, 2023
Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending December 31, 2023
France affirms the applicability of Most Favored Nation (MFN) clause to dividend income with Kenya
