Points to be considered before using Credit Cards

In this era of Plastic money, all of us use credit cards, probably from more than one bank. This blog is intended to draw your attention on following charges levied on credit card holders:

Google to bring YouTube to television screens in India via DTH providers

Google is planning to bring its video-sharing service YouTube to television screens in India. The technology giant is already in talks with a few DTH (direct-to-home) providers in the country to make it a reality.

TDS on Fixed Deposit

Bank Fixed deposit is an all-time favorite investment in India as it provides a decent fixed return for the fixed period and relatively safer as compared to other forms of investment products.

Specially, in current interest rate scenario, the fixed deposit rates are quite lucrative (8.5 – 10%). However, it is likely that rates will go down further, so it is advisable to lock-in your interest rates if you want to invest in FD for longer term.

Banks are required to deduct Tax (TDS) @ 10 % if the interest earned on FD exceeds Rs. 10,000 in a financial year. This could have a significant impact on the amount received at maturity. I am sure that everyone wants to save tax and to avoid any deduction from their hard earned money.

Let me try to explain answer to above queries in addition to few ways to avoid TDS on Interest on fixed deposits.

Interest earned on Bank FD is Taxable

First of all, you should know that any interest earned on bank FD is taxable & should be included in your taxable income.

Even if the TDS has not been deducted by bank, you need to include the income from fixed deposits in your tax returns and pay the tax as per your tax slab.

If TDS has been deducted by bank @ 10 %, you still need to include the income from fixed deposits in your tax returns and claim the TDS amount in appropriate column. For e.g if you are already in 30% tax slab, any interest earned on FD will also be attract 30% tax (even if tax is deducted by banks @10%).

Tax Deducted by Banks (TDS)

Banks are required to deduct TDS at 10%, if the total interest earned on your fixed deposits in a bank branch exceeds Rs 10,000 in a financial year.

Make sure than your PAN is updated with the Bank otherwise TDS will be deducted @ 20%.

TDS is also applicable on the interest accrued. At the end of fiscal year (31-Mar), tax is deducted on the interest accrued on the fixed deposit(s), even if this interest has not been paid / credited. Check your 26AS to ensure that tax is deducted and paid by bank before you file your return.

 So, is there any way to avoid TDS?

Yes. An investor can save TDS by following ways:

a. By submitting Form 15G/15H

If the investor’s estimated total income is below exemption limit, he can submit Form 15G, then the bank would not deduct any TDS from the interest earned. For senior citizens, the requisite form is 15H to avoid TDS.

You need to fill this form at the beginning of each financial year providing details of fixed deposits and submit to your bank.

b. By splitting FD across Banks & branches

Another easy way adopted by many investors to avoid TDS, is to split their FD across banks so that the interest earned does not exceed the Rs 10,000 limits.

You can also spread FD across various branches so that the interest earned in a particular branch is below Rs 10,000 in a financial year.

However, please note that this will just avoid TDS. You will still need to include this while filing your income tax returns for the year. So, if your income is taxable, then you will need to pay taxes according to your income tax slab.

Suppose you want to invest Rs 1.5 lacs in FD giving 10% interest. If you open FD in one bank / branch, the interest earned per annum will be Rs 15000 and TDS will be deducted. However, you split your investment across 2 banks – Rs 75000 each, then the interest earned on each FD will be Rs. 7500 only which will be below TDS limit and no TDS will be deducted by Banks.

c. by Timing the FD

You can also avoid TDS by timing your FD so that the interest earned in one financial year does not exceed Rs 10000.

Suppose you want to invest Rs 1.5 lacs in FD giving 10% interest. If you start this FD for 1 year on 01-April-2013, then the interest earned in one financial year (April 13 – March 14) will be Rs 15000 and TDS will be deducted.

However, if you open this FD in Oct 13, then the interest will be split in 2 financial years (Oct13-Mar14 & Apr14-Sep15) and no TDS will be deducted.

How to get TDS refund.
If your bank has deducted tax on the interest earned and your tax liability is nil, then you can claim refund by filing your income tax return. Check your form 26AS to ensure that tax is deducted and paid by bank before you file your return.

No Tax on Interest on Savings Bank Account

Over and above deductions under Chapter VI-A of the Income Tax Act, 1961, Finance Act, 2012 has inserted a new section 80TTA to give deduction for Interest earned on Savings Bank Account with Bank, Co-operative Bank and Post office to the extent of Rs. 10,000/-. Benefit of Section 80TTA is available to Individual and HUF.

Bonus Shares - Taxability

Introduction:

Prime motive of long term investors is to earn healthy dividends on their investment regularly. Investee Companies declare dividends in two form i.e. Cash Dividend and Stock Dividend (Bonus shares). Cash dividends are tax free in the hands of investors as Company declaring the dividend pays Dividend Distribution Tax on it. There is less clarity regarding tax implication of stock dividend/bonus shares. In this article, we will discuss the tax treatment of bonus shares:

Reverse Charge Mechanism under Service Tax

Introduction: In the Finance Act, 2012, several amendments were made to the provisions governing Service Tax. One of such amendment was introduction of Reverse Charge Mechanism in Service Tax.

Understanding the Concept of Reverse Charge Mechanism: Under normal circumstances, a service provider is liable to pay Service Tax. However, after Finance Bill 2012, in certain cases, the liability is shifted to service recipient and thus service tax is to be paid by service recipient. This is commonly known as ‘Reverse charge mechanism’ or ‘Joint charge mechanism’ as in certain cases, both service provider and service receiver are liable to pay Service Tax.

New Income Tax Return Form for financial year 2012-13

People sitting on huge assets but paying little income tax may have reason to worry. In an ambitious bid to counter tax evasion, the government has decided to introduce a new income tax return form effective financial year 2012-13, that will require individuals to disclose all their assets and liabilities, rather than just annual income from various sources. The new return, therefore, will be a comprehensive balance sheet of assets and liabilities, disclosing ownership of houses, jewellery, urban land, motor cars and other personal effects such as yachts and aircraft, along with outstanding debt.

The idea is to extend the scope of tax return to include information that is in the domain of wealth tax — a levy that has poor compliance history in the country. The department wants to zero in on individuals, mainly traders and businessmen, who disclose modest income, but own fancy SUVs, houses at posh locations and other assets that clearly do not agree with the reported income.

Brief Note on Domestic Transfer Pricing

Under Section 40A(2) of Income Tax Act, 1961 in case of any transaction with a related party, the Assessing Officer can disallow the expenditure while computing income from business or profession which in his opinion is excessive or unreasonable having regard to the Fair market value of the goods, services or facilities for which expenditure has been incurred. In case the Assessing Officer is of the opinion that such income is low considering the market value, there is NO mechanism to re-compute the income received from a related party, since this section focuses on EXPENDITURE. In order to address this issue, the provisions of Transfer Pricing are being amended to extend the scope to “Specified Domestic Transactions” by amending Section 92 of the Act.

Private Equity deal of Shree Shubham Logistics Limited

Shree Shubham Logistics, an Agri-logistics company, has concluded an agreement to raise Rs. 80 Crores with Tano India Pvt Equity Fund. The company proposes to utilize these funds for its warehousing capacity expansion.

Extension of Due Date of filing Form ST-3

As per F.No.137/99/2011-Service Tax, Order No.02/2013-Service Tax dated 12^th April, 2013, due date for filing of the Form ST-3 for the period 1^st July, 2012 to 30^th Sept, 2012 has been extended to 30^th April, 2013.

Nokia Tax Evasion Case

The Income Tax department has served a more than Rs 2,000 crore demand notice on Finnish mobile firm maker Nokia for alleged evasion of taxes in its business transactions in the country.