How to claim income tax deduction for investments made in April – July 2020

One of the key points to note while accounting for these investments made from April to July is that a deduction once claimed in FY20 on an investment made, cannot be claimed again for FY21

The government had imposed a nationwide lockdown in March due to the coronavirus pandemic outbreak across India. As a result of this lockdown that began in March, days before the close of the financial year, several taxpayers had been denied the opportunity to make tax saving investment for financial year 2019-20 (FY20). The government had hence extended the due date up to June 30, 2020, and has recently given a further extension until July 31, 2020 for making tax saving investments pertaining to FY20. This move has given taxpayers more time to invest and save tax.

Taking the above example into consideration, it is entirely up to the taxpayer to decide which financial year he wants to claim the deduction for investments made in the months of April to July 2020. However, another point to consider is that the government has introduced a new tax regime in Budget 2020, where taxpayers can pay taxes at reduced tax rates, if they opt to not claim any deductions from their income.

If a tax filer decides to pay tax under this new regime for FY21, then it would be prudent to plan ahead and claim whatever investments are possible for FY20 only. The remaining unclaimed investments will not be able to be carried forward in such cases.

How to claim?

Those who want to claim deductions for investments made in April, May, June and July 2020 in FY20, are required to file schedule DI, or Details of Investments, in their ITR forms for FY20, which are due on November 30, 2020. Schedule DI will contain details relating to investments, deposits and payments made under section 80C to section 80GGC of the Income Tax Act, where the eligible amount of deduction for FY20 is to be disclosed. Further, deductions attributable to any investment or expenditure made during April 1, 2020 and July 31, 2020 need to be separately specified. Any amount utilised out of the capital gains account for FY20 for investments in schedule 54 to 54GB will also need to be specified in this schedule…Read More

Before you file your tax return, note the key changes in Form 16

Part B of Form 16 has been amended seeking more details about the allowances exempt under section 10 such as HRA, LTA, etc and deductions allowed under Chapter VI-A of the Income Tax Act, 1961.

Form 16 is the annual salary TDS certificate issued by an employer to an employee. The Central Board of Direct Taxes (CBDT) has notified amendments in Form 16. The new Form 16 is made effective from 12 May 2019. Employers issuing Form 16 for the financial year 2018-19 will have to issue them in the new format.

Part B of Form 16 has been amended seeking more details about the allowances exempt under section 10 such as HRA, LTA, gratuity etc and deductions allowed under Chapter VI-A of the Income Tax Act, 1961 i.e. section 80 deductions. The important changes are discussed below:

Exemptions under section 10:

Presently, an employer has the option to mention the nature of the allowances exempt under section 10 with the respective amounts. While some employers provided complete disclosure, others aggregated the allowances and disclosed the net amount exempt under section 10. ..(Read More)

Deductions under Chapter VI-A:

Presently, employers have the option to present the details of deductions under section 80C to section 80U of the Act. Similar to the disclosure of exempt allowances, some employers provided complete disclosure of the deductions, and others aggregated the allowances and disclosed the total amount of deductions allowed as a single line item in Form 16..(Read More)