First reaction on Union Budget 2016-17

First reaction on Union Budget 2016-17

The finance minister has proposed the budget for financial year 2016-17 in the Lok Sabha today. However, it is very early to provide reaction without reading in detail about the budget. Overall it is balance budget and truly reflects to PM Modi’s vision of India’s growth.

In this budget, it has been clearly seen that government has totally focused towards rural economy and boosting infrastructure like highway, roads. It is very good that 20,000 crore has been allocated for irrigation. Irrigation is very vital thing for our county’s farmer and I myself come from farmer background can know its importance very well. It is very good step towards improve agriculture yields which directly benefit to farmer and our economy also.

Apart from irrigation there is 2.7 lakh crore allocated for village which is highest ever allocation in Indian budget history and 288% more from last year budget provision. By May 2018 all village would be electrified and all village roads connected with states both f these are very impressive mandate in this budget.

There are insurance scheme and LPG connection scheme for poor families. It shows the seriousness of the government for social sector. There is also scheme to open 3000 generic medical shop across India to provide medicine in cheap rate for common citizen.

There are many tax reform has been introduced in this budget which would make life easier of tax payers. There is no change in tax slab but introduce additional tax rebate of Rs 3000 up to Rs 5 lakh income slab. HRA limit has been increased from Rs 24,000 to Rs 60,000 which is big relief for employees. There is also additional Rs 50,000 tax exemption for first time home buyer within Rs 35 lakh loan provided the home cost within Rs 50 lakh.

There is minor hike in service tax earlier it was 14.5% and now it would be 15%. There is increase of tax on tobacco products except Bidi. There has been hiked in surcharge up to 15% for the income of above Rs 1 crore. The above Rs 10 lakh cars would be costly now.

The most important things are that FM has been stick on fiscal deficit target and no increment in non plan expenditure. It will increase govt’s credibility among foreign , institutional and domestic investors. There are many other points in budget which we will discuss in next article.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Strict new norm for claiming HRA

Strict Rule for claiming HRA Exemption

A few days back, the income tax department has tightened the norms for claiming tax exemption for house rent allowance (HRA). HRA is the payment given by an employer to an employee for to meet the requirement of house rent.

Now, it has become mandatory to submit the PAN (Permanent Account Number) of the landlord to the employer if annual rent paid by employee more than Rs. 1 Lakh per annum. The central government has lowered the exemption limit for reporting the rent. Earlier, taxpayer had to report the PAN of the landlord, if the monthly rent more than Ra 15,000 or Rs 1.8 lakh per annum.

If the landlord does not have a PAN, the assessee has to submit a declaration to this effect along with name and address of the landlord. Even if an employee pays rent below Rs 8,333 per month, he/she has to produce the rent receipts availing the rent receipts availing deduction under HRA. However, for thos emplyee who are drawing HRA up to Rs 3,000 per month will now be exempted from producing rent receipt. The new norm has come into effect from the financial year 2013-14 or Assessment Year 2014-15.

The new rule is aimed at people claiming HRA exemption for living in their own house and claim HRA exemption. HRA granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. 

For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Do you know about your HRA exemption.?.

How to get benefit of HRA in Tax Planning..?

For a salaried individual, HRA (House Rent Allowance) is important part of the salary slip. In our taxation rule, there are 3 type of tax deduction. First is the amount paid as a rent, the second is amount paid as principal amount of home loan and last is interest paid on home loan. Most of time, they don’t know how to calculate the exempted amount of HRA. For this they totally depend on their office accountant or friends. I am getting many friends and client call about HRA calculation. So today, I am going to discuss in detail about the HRA.

There are many doubts in the people’s mind about home loan and home rent exemption. I am taking one by one those doubts. The most common doubt that is HRA exemption applicable for both salaried individuals and self- employed. The answer is HRA benefit is not available to self-employed professional, as they don’t earn salary but they can claim benefits of house rent expenses according under section 80GG with subject to certain conditions.

The other most asked query is can anyone take both HRA and home loan benefit. The answer is yes. If you are paying rent, you can claim HRA benefit and if you are earning rent income from in the name of your property you can also claim the interest benefit. There is no direct connection between HRA and home loan tax benefit.

Some common situation faced by salaried person:

·         If the person live in own house then he cannot claim HR exemption. If he is paying home loan and paying EMI then he can claim tax benefit on principal mount and interest paid portion.

·         If the person has bought under construction property and staying in rented home in the same city then he can avail tax benefit of HRA and principal paid but cannot get benefit of interest till construction completed. Once construction complete, he can claim all interest paid during construction in 5 equal installment in the next 5 year from complete construction year.

·         If the person has bought home in other city and stayed in rent in the other city then he can claim HRA exemption and will get benefit of paying home loan of principal amount and interest paid.

·         If the person is paying home loan for home which is ready for occupation but not residing in it due to some reason like work place far away then he can claim tax exemption on HRA and tax benefit of home loan including principal and interest. You have to still pay tax on notional rent income even if your home remains vacant during the year. If you are getting rent then the rent income will add in income from other sources and taxable according to specific rule.

How to calculate the HRA exemption amount:

Lets take an example to understand how to calculate HRA exemption amount. Mr. A gets basic salary Rs 50,000 and HRA Rs 30,000 per month. He resides in mumbai and pays rent Rs 25,000 per month. Calculate the tax exemption amount of HRA?

There are 3 conditions and the least amount of these 3 is eligible for HRA exemption:

(A)  Actual HRA received: 30,000

(B)  50% of basic salary as he resides in metro city: 25,000 (For non-metro city it is 40% of basic salary)

(C) (Actual rent paid) - (10% of basic salary) it means (25,000- 10% of      50,000) = 25000-5000 = 20,000

According to the rule the least of the above 3 figure is eligible for tax exemption so exempted tax mount of HR is Rs 20,000 and taxable HR 30,000-20,000= 10,000.

You can pay rent to your parent and can still claim HRA exemption but in case of spouse you cannot claim HRA benefit.

One more important thing to remember, you have to submit the rent slip signed by owner as rent proof to your employer.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com