.png)
TDS & TCS Provisions as per Section 194Q and Section 206C(1H)
TDS u/s 194Q and TCS u/s 206C(1H)a Introduction of Provisions – Section 194Q was introduced and inserted in the Income Tax Act, 1961 vide the Finance Act, 2021 and it is applied from 1st July, 2021. While Section 206C(1H) was introduced and inserted in the Income Tax Act, 1961 vide the Finance Act, 2020 and it is applied from 1st October, 2020. Applicability of Section 194Q It is applicable on buyer who is responsible to pay any sum to any resident seller for purchase of any goods including capital goods of the value or aggregate of such value is more than Rs. 50 lakhs in any previous year. Buyer – For this section buyer will be the person whose total sales, gross receipts or turnover from the business carried on by the buyer is more than ten crore rupees in the immediately preceding financial year in which specified purchase of goods take place. Time of Deducting TDS TDS under this section will be deducted by the buyer within earlier of the following time provided below: - TDS under this section will be deducted at the time of credit of such sum to the account of the seller, even if such sum is credited to the suspense account or any other account by any other name in the books of the person liable to pay such income or at the time of payment of such sum by buyer by any mode Rate of deduction of TDS TDS shall be deducted by the buyer at 0.1% on amount in excess of Rs. 50 lakhs and in case PAN of seller is not available then buyer shall deduct tax at 5% rate on such some. Exception to this section The provisions of this section shall not be applicable on transactions on which TDS is deductible in any other provisions of Income Tax Act, 1961 and transactions on which TCS is collectable under section 206C. However, in case of transactions where TCS is collectable under section 206C(1H) provisions of section 194Q will override. Example – Mr. Raju purchased goods worth Rs. 60 lakhs plus GST @5% from Mr. Darshan and credits the same in his books of account on 28-07-2021. Turnover of business carried on by Mr. Raju in FY 2020-21 was Rs. 12 crores. Compute TDS under section 194Q. Case (1) Where Mr. Raju makes payment on 15-07-2021. Case (2) Where section 206C(1H) is also applicable. Case (3) Where section 194O is also applicable. Case (4) Where Mr. Darshan is not furnishing his PAN. Solution – Mr. Raju purchased goods worth Rs. 60 lakhs which exceeds Rs. 50 lakhs and turnover of business carried on by Mr. Raju is also more than Rs. 10 crores in previous year which satisfies both the conditions for applicability of section 194Q. TDS will be deducted on amount in excess of Rs. 50 lakhs, which is Rs. 10 lakhs. Therefore, TDS will be Rs. 1000. Case (1) TDS will be deducted on 15-07-2021 because date on which such sum is credited in books of account or date of payment of such sum whichever is earlier will be the date of deduction of TDS. Case (2) In case section 206C(1H) is also applicable, section 194Q will override. Case (3) In case TDS is deductible in any other section as well except under section 206C(1H), TDS will be deducted in that other section. Therefore, TDS shall be deducted under section 194O. Case (4) Where PAN of seller is not available TDS will be deducted @5%. In this case TDS shall be Rs. 50,000. Applicability of Section 206C(1H) It is applicable on seller for sale of any goods of value or aggregate of such value exceeding Rs. 50 lakhs in any previous year received as sale consideration from the buyer. Seller – For this section seller will be the person whose total sales, gross receipts or turnover of the business carried on by him exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which such sale of goods is carried out. Buyer – For this purpose buyer means any person who purchases any goods, but does not include- the Central Government, a state Government, an embassy, a High Commission, legislation, commission, consulate the trade representation of a foreign trade; or a local authority; or a person importing goods into India Time of collecting TCS Here, TCS under this section shall be collected at the time of receipt of sale consideration from the buyer. Rate of collection of TCS TCS shall be collected by the seller on a sum equal to 0.1% of the sale consideration exceeding Rs. 50 lakhs. However, if the buyer has not provided PAN or Aadhar number to the seller then TCS shall be collected at 1% under section 206CC. Circular no. 20/2017 No adjustment is required to be made for sales return, discount or indirect taxes including GST for the purpose of collection of tax under this section. Exception to this section TCS will not be applicable in the following cases- Goods being exported out of India Sale of goods under section 206C(1) – TCS on sale of tendu leaves, alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, any other forest produce not being timber or tendu leaves, scrap, minerals being coal or lignite or iron ore Section 206C(1F) – TCS on sale of motor vehicles Section 206C(1G) – TCS on foreign remittance Where buyer is required to deduct TDS on goods purchased from the seller. Example – Mr. Darshan sold goods to Mr. Raju worth Rs. 60 lakhs. Mr. Raju makes payment on 12-07-2021 for the same. Turnover of business carried on by Mr. Darshan was Rs. 12 crores FY 2020-21. Compute TCS under section 206C(1H). Case (1) – Where Mr. Raju is importing goods into India. Case (2) – Where Mr. Darshan is exporting goods outside India. Case (3) – Where Mr. Raju purchased alcoholic liquor for human consumption from Mr. Darshan. Case (4) – Where Mr. Darshan sold car to Mr. Raju. Case (5) – Where Mr. Raju (NRI) remitted sum to Mr. Darshan, a dealer in India. Case (6) – Where TDS is deductible under section 194Q. Case (7) – Where Pan or Aadhar number of buyer is not provided. Solution – Mr. Darshan sold goods to Mr. Raju worth Rs. 60 lakhs which exceeds Rs. 50 lakhs and turnover of business carried on by Mr. Darshan is Rs. 12 crores which exceeds Rs. 10 crores. So, both the conditions are satisfied by Mr. Darshan. Hence, Mr. Darshan is liable to collect TCS on amount in excess of Rs. 50 lakhs. TCS for the above transaction will be Rs. 1000. Case (1) – In case of importing of goods into India TCS will not be collected as it is exception of this section. Case (2) – In case of exporting of goods outside India TCS will not be collected as it is exception of this section. Case (3) – Purchase of alcoholic liquor for human consumption is collected under section 206C(1). Therefore, TCS will not be collected under section. Case (4) – TCS shall not be collected on sale of car as it is collected under section 206C(1F). Case (5) – TCS shall not be collected on foreign remittance as it is collected under section 206C(1G). Case (6) – TCS shall not be deducted under this section where TDS is required to be deducted by the buyer. Case (7) – TCS shall be collected at 1% rate if Pan or Aadhar number is not provided by the buyer. Therefore, TCS will be Rs. 10000 Example – Mr. Darshan sold goods to Mr. Raju worth Rs. 55 lakhs and 60 lakhs plus 5% GST respectively. Compute TCS for second transaction under section 206C(1H). Mr. Raju makes payment on 12-07-2021 for the same. Turnover of business carried on by Mr. Darshan was Rs. 12 crores FY 2020-21. Solution – As goods sold to Mr. Raju already exceeded Rs. 50 lakhs in first transaction, TCS will be collected on full amount of Rs. 63 lakhs (including GST). TCS under this section shall be Rs. 6300 followed by circular no. 20/2017.
Read Full Article.png)
TDS Provisions as per Sections 194R and 194S
Introduction – In Finance Act 2022, two new TDS sections have been inserted in Income Tax Act, which are effective from 01-07-2022. Applicability of Section 194R It is applicable on any person whether resident or non-resident responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from a business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, deduct TDS in respect of such benefit or perquisite under section 194R. Rate and amount of Deduction Any person resident or non-resident responsible for providing any benefit or perquisite to a resident, shall deduct TDS at a rate of 10% of the value or aggregate of the value of such benefit or perquisite provided or likely to be provided to such resident. TDS under section 194R is to be deducted on fair market value of the benefit or perquisite and if the benefit or perquisite has been purchased by the deductor then the purchase price or actual cost shall be the value on which TDS will be deducted. In case such item is manufactured by the deductor himself then the price charged by the deductor to its customer shall be the value on which TDS will be deducted. Time of deducting TDS TDS under this section shall be deducted at the time of providing benefit or perquisite to the deductee by the deductor. In case where the benefit or perquisite is wholly in kind or partly in cash and partly in kind but such part in cash is not enough to deduct TDS in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that TDS required to be deducted has been paid in respect of the benefit or perquisite. Exception to this section Provisions of this section shall not apply where value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed Rs. 20 thousand. Provisions of this section shall not apply where being an individual or Hindu undivided family, whose total sales, gross receipts or turnover does not exceed Rs. 1 crore in case of business or Rs. 50 lakhs in case of profession, during the previous year of the financial year in which such benefit or perquisite, as the case may be, is provided by such person. Example Mr. Darshan provided following benefits and perquisite to Mr. Raju. Define TDS deductibility in each of the following cases: In case where Mr. Darshan transferred ownership of his car to Mr. Raju, who is employee of Mr. Darshan. In case where target base payment is done by Mr. Darshan to Mr. Raju on achieving the target provided to him. In case where Dr. Raju gets free samples of medicine provided by Mr. Darshan. Solution- Deductibility in following cases are as follows: Transfer of capital assets is covered under section 194R, therefore TDS will be deducted. Section 194 provided that TDS will be deducted on incentive or gift on target completion. TDS will be deducted on fair market value of such item. Applicability of Section 194S Under this section any person responsible for paying to any resident any sum as it’s consideration for transfer of a virtual digital asset shall deduct TDS. In case where the consideration for transfer of virtual digital asset is wholly in kind or in exchange of another virtual digital asset, where there is no part in cash or partly in cash and partly in kind but the part in cash paid is not enough to pay TDS liability of such transfer, the person responsible for paying such consideration shall, before releasing the consideration, ensure that TDS required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset. If TDS under section 194O is applicable on a transaction along with section 194S then provisions of section 194S will be applicable. Time of deducting TDS Earlier of the following shall be the time of deducting TDS under this section: - At the time of credit of such sum to the account of the resident even if such sum is credited to the suspense account or any other account by different name in the books of the person liable to pay such income at the time of payment of such some by any mode Rate of Deducting TDS TDS under this section on consideration for transfer of virtual digital asset shall be deducted at 1% rate of such sum. Exception to this section Following are the exceptions on which TDS under section 194S is not applicable: - TDS shall not be deducted under this section if consideration is payable by a specified person and the value or aggregate of such value does not exceed Rs. 50 thousand during the financial year. TDS shall not be deducted under this section if consideration is payable by any person other than specified person and the value or aggregate of value of such consideration does not exceed Rs. 10 thousand during the financial year. For this section specified person means a person being an individual or a Hindu Undivided Family, whose total sales, gross receipts or turnover, from the business carried on by him does not exceed Rs. 1 crore and in case of profession exercised by him does not exceed Rs. 50 lakhs during the financial year immediately preceding the financial year in which such virtual digital asset is transferred. being an individual or Hindu Undivided Family, not having any income under the head “Profits and gains of business or profession.
Read Full Article.png)
Depreciation Under the Companies Act, 2013 vs Depreciation Under the Income Tax Act,1961
Depreciation is a crucial accounting concept that reflects the reduction in value of a fixed asset over time due to usage, wear and tear, or obsolescence. Both the Companies Act, 2013 and the Income Tax Act, 1961 address depreciation, but they differ significantly in terms of methods, rates, and applicability. This blog will compare depreciation as per the Companies Act, 2013 and the Income Tax Act, 1961, providing an in-depth understanding of their differences and implications. 1.Depreciation Under the Companies Act, 2013 : The Companies Act, 2013 mandates the accounting treatment for depreciation for companies in India. Depreciation is accounted for as per the provisions laid down in Schedule II of the Companies Act, which outlines the rates, methods, and other criteria for depreciation on various fixed assets. Key Features of Depreciation as per the Companies Act, 2013: a) Method of Depreciation: The Companies Act allows two methods of depreciation: the Straight-Line Method (SLM) and the Written Down Value (WDV) Method. SLM is used where the asset’s benefit is expected to be uniform over its useful life. WDV is used when the asset’s usage or benefit decreases over time at a higher rate in the earlier years. b) Useful Life of Assets: Schedule II provides specific useful lives for different classes of assets, which companies must adhere to while calculating depreciation. The useful life may be reviewed periodically, and adjustments can be made if required. c) Residual Value: A residual value is considered in calculating depreciation, and the minimum residual value is generally taken as 5% of the original cost of the asset. The residual value should not exceed the asset's cost, unless specifically indicated. d) Depreciation on Revalued Assets: If an asset is revalued, depreciation must be calculated based on the revalued amount, with the accumulated depreciation adjusted accordingly. Revaluation surplus may be credited to a revaluation reserve e) Transition to New Provisions : For assets existing as of April 1, 2014, companies were required to adopt the provisions of Schedule II for depreciation calculation, considering the remaining useful life of assets. Rates of Depreciation : The rates for depreciation are provided for various categories of assets under Part C of Schedule II of the Companies Act, 2013. For example: Buildings: 5% (SLM) or 10% (WDV) Furniture & Fixtures: 10% (SLM) or 20% (WDV) Machinery: 15% (SLM) or 25% (WDV) 2. Depreciation Under the Income Tax Act, 1961 : Depreciation under the Income Tax Act, 1961 is governed by Section 32 of the Act. The Income Tax Act provides specific rates of depreciation on assets used for business or professional purposes, primarily to calculate taxable income. Key Features of Depreciation as per the Income Tax Act, 1961: 1. Method of Depreciation: The Income Tax Act mandates the Written Down Value (WDV) method for calculating depreciation. SLM is not allowed for tax purposes. Depreciation is deducted from the WDV of the asset each year. 2. Rates of Depreciation: The Income Tax Act specifies different rates for various categories of assets, which are subject to change through Finance Acts. These rates are typically higher compared to the Companies Act to encourage investment. Example of depreciation rates under the Income Tax Act: Buildings: 10% (if used for business or office) Furniture and Fittings: 10% Machinery and Plant: 15% (general category), 40% (computers and related equipment) 3. Accelerated Depreciation: The Income Tax Act offers higher depreciation rates on certain assets (e.g., computers, windmills, and solar power systems) to incentivize businesses to invest in specific assets. This is designed to promote capital investment and growth in sectors like technology and renewable energy. 4. Depreciation on Revalued Assets: Revaluation of assets does not affect depreciation for tax purposes. Depreciation is calculated on the original cost of the asset, irrespective of any revaluation. 5. Additional Depreciation: A business can claim additional depreciation of 20% on new machinery and plant (excluding office buildings) in the first year of purchase, subject to certain conditions. 6. Block of Assets: Depreciation is calculated on a block of assets, where assets of similar nature are grouped together. The block is depreciated at a prescribed rate on the aggregate cost of the block rather than individual asset cost. Key Differences Between Depreciation under the Companies Act, 2013 and the Income Tax Act, 1961 : Aspect Companies Act, 2013 Income Tax Act, 1961 Method of Depreciation Straight Line Method (SLM) and Written Down Value (WDV) Only Written Down Value (WDV) Rate of Depreciation As per Schedule II of the Companies Act (specific rates) Prescribed under Income Tax Act (usually higher rates) Asset Classification Specific life for each class of asset (Schedule II) Assets grouped into blocks (e.g., machinery, building) Revaluation Depreciation is recalculated based on revalued amount Depreciation is based on original cost, even if assets are revalued Additional Depreciation Not available Available for new machinery (20% in the first year) Treatment of Residual Value Minimum residual value of 5% is considered No specific residual value; depreciation is calculated on WDV Conclusion : Both the Companies Act, 2013 and the Income Tax Act, 1961 provide mechanisms for calculating depreciation, but with different objectives. The Companies Act governs the accounting of depreciation for financial reporting, while the Income Tax Act focuses on providing tax benefits to businesses. For businesses, it is essential to understand both frameworks to ensure compliance with financial reporting standards and optimize tax planning. In most cases, the depreciation calculated under the Income Tax Act will differ from the depreciation under the Companies Act due to differences in rates, methods, and criteria For more information you can contact us at Groomtax
Read Full Article.png)
Online CA Services in India: Complete Guide to ITR Filing, Net Worth Certificates, Accounting, and More
Managing taxes and financial compliance can be stressful for both individuals and businesses. With increasing regulations, digital filings, and strict deadlines, the need for professional Chartered Accountant (CA) services in India has grown significantly. From ITR filing to GST returns, company incorporation, TDS filings, and CA certificates, having expert support ensures accuracy, compliance, and peace of mind. This guide explains everything you need to know about Income Tax Return filing in India, the benefits of timely filing, required documents, due dates, and how online CA services can make the entire process easier. What is ITR? An Income Tax Return (ITR) is a form that taxpayers submit to the Income Tax Department of India to declare their income, expenses, deductions, and tax liabilities. Filing ITR is a legal requirement for those who earn above the basic exemption limit. In simple terms, ITR is a declaration of: Income from salary, business, capital gains, or other sources Deductions claimed under provisions like 80C and 80D Taxes already paid, such as TDS, advance tax, or self-assessment tax Balance tax payable or refund due from the government Types of ITR Forms in India The Income Tax Department has introduced multiple ITR forms for different taxpayers. Here is a quick breakdown: Form Applicable For ITR-1 (Sahaj) Salaried individuals with income up to ₹50 lakh ITR-2 Individuals and HUFs with capital gains or foreign assets ITR-3 Individuals earning from business or profession ITR-4 (Sugam) Presumptive income for small businesses and professionals ITR-5 to ITR-7 Firms, LLPs, companies, and trusts Choosing the correct ITR form is important, as filing under the wrong form can lead to rejection and penalties. Due Dates for ITR Filing (FY 2024–25) Taxpayers must be aware of the ITR filing deadlines to avoid penalties. Below are the due dates for Financial Year 2024–25: Category Due Date Individuals & HUFs (not requiring audit) 31st July 2025 (extended to 15th September 2025) Taxpayers requiring a Transfer Pricing (TP) audit 31st October 2025 Companies 31st October 2025 Taxpayers requiring Transfer Pricing (TP) audit 30th November 2025 Note: These deadlines may be extended by the government in special cases. Benefits of Filing ITR on Time Filing ITR is more than just a legal responsibility. It offers multiple advantages: Legal Compliance – Mandatory for individuals and businesses crossing the basic exemption limit. Loan & Visa Applications – Banks and embassies often require ITR as proof of income. Claiming Tax Refunds – Excess TDS can only be refunded through ITR filing. Carrying Forward Losses – Capital and business losses can be carried forward only if ITR is filed before the deadline. Avoiding Penalties – Late filing attracts a penalty of up to ₹5,000 under Section 234F. Documents Required for ITR Filing To ensure smooth filing, keep these documents ready: PAN Card and Aadhaar Card Form 16 for salaried employees Salary slips Bank account details Form 26AS, AIS, and TIS (tax statements) Investment proofs under sections like 80C and 80D Capital gain statements (if applicable) Business income details for professionals and entrepreneurs Having these documents ensures accurate filing and reduces the risk of notices from the Income Tax Department. How to File ITR in India There are two main methods of filing ITR: 1. Online Filing (E-Filing Portal) Taxpayers can log in to the official e-filing portal and file ITR using pre-filled forms. This method is convenient, faster, and widely used. 2. Offline Filing (Utility Tools) Taxpayers can download the utility in Excel or JSON format, fill in details offline, and upload it later. This is often preferred by professionals and businesses with complex income structures. Many taxpayers also choose to file through online CA services, where experts handle the process at affordable prices. This ensures accuracy, compliance, and timely submission. Consequences of Not Filing ITR Failing to file ITR can create multiple problems: Penalty under Section 234F – Up to ₹5,000 for late filing. Loss of Refunds – You cannot claim a refund if the ITR is not filed. Loss of Carry-Forward Benefits – Losses like capital losses cannot be carried forward. Interest Charges – Interest under Sections 234A, 234B, and 234C may be applied. Legal Consequences – In severe cases, non-filing can lead to scrutiny and prosecution. Why Choose Online CA Services? Online CA services in India make taxation and compliance simpler for individuals and businesses. Key services include: ITR Filing – Hassle-free income tax return filing with expert support. Net Worth Certificates – Required for visa processing, tenders, and financial assessments. CA Certificates – For various compliance requirements, including tax and audit. Accounting & Bookkeeping – Maintaining proper records for businesses and startups. Company Incorporation – Helping entrepreneurs register companies with ease. TDS Return Filing – Ensuring tax deducted at source is filed correctly. GST Return Filing – Managing monthly or quarterly GST returns for businesses. With everything available on one platform, online CA services save time, reduce stress, and ensure compliance with Indian tax laws. To Sum It Up Filing your Income Tax Return is not just a legal obligation but a reflection of financial discipline. It builds credibility, helps in securing loans and visas, and ensures compliance with Indian tax laws. With the rise of online CA services in India, the process has become simpler, faster, and more accurate. Whether you are a salaried individual, self-employed professional, or business owner, timely filing of ITR and other compliance tasks is essential for your financial stability. By choosing expert support, you can focus on your growth while leaving the paperwork and deadlines to professionals. For professional help in ITR filing, Net Worth Certificates, CA Certificates, Accounting, TDS, GST registration, and company incorporation, you can trust Groom Tax.
Read Full Article.png)
ITR Last Date 2026: Essential Tax Filing Deadlines for Individuals and Businesses
Filing your Income Tax Return (ITR) on time is essential for every taxpayer, including salaried employees, professionals, freelancers, business owners, and companies. Being aware of the applicable ITR deadlines helps taxpayers stay compliant and avoid unnecessary financial consequences. Importance of Filing ITR Before the Due Date Income Tax Return filing is not merely a legal obligation; it also offers several financial and compliance benefits. Benefits of Timely ITR Filing Avoid late filing fees and penalties. Claim tax refunds faster. Carry forward eligible business and capital losses. Improve financial credibility. Facilitate loan and visa applications. Maintain compliance with tax regulations. Why Early Filing is Recommended Early filing reduces the risk of errors, allows sufficient time for corrections, and ensures faster processing of refunds. ITR Filing Due Dates for FY 2025-26 (AY 2026-27) Different categories of taxpayers have different filing deadlines. Individuals, Salaried Employees, and HUFs Due Date – 31 July 2026 This category generally includes salaried individuals, pensioners, and taxpayers who are not required to get their accounts audited. Businesses and Professionals Requiring Tax Audit Due Date – 31 October 2026 Businesses and professionals covered under tax audit provisions are required to file their returns by this date. Taxpayers Covered Under Transfer Pricing Provisions Due Date – 30 November 2026 This deadline generally applies to entities involved in specified international or domestic transactions requiring transfer pricing reports. Consequences of Missing the ITR Filing Deadline Failing to file your ITR within the prescribed due date can result in financial and legal consequences. Late Filing Fee A late filing fee may be levied under the Income Tax Act based on the taxpayer's income and filing date. Interest on Tax Liability Interest may be charged on unpaid taxes until the date of payment. Loss of Certain Tax Benefits Taxpayers may lose the opportunity to carry forward specific losses if returns are not filed on time. Increased Compliance Burden Delayed filing may result in additional notices, scrutiny, and documentation requirements. Documents Required for ITR Filing Organizing your tax documents in advance can make the return filing process faster and more accurate. Essential Documents PAN Card Aadhaar Card Form 16 Bank Statements Investment Proofs TDS Certificates AIS and Form 26AS Capital Gain Statements Business Income Records Choosing the Correct ITR Form Selecting the correct ITR form is important for accurate filing. Common ITR Forms ITR-1 (Sahaj) Suitable for salaried individuals meeting prescribed conditions. ITR-2 Applicable to individuals and HUFs without business income. ITR-3 Used by taxpayers having income from business or profession. ITR-4 (Sugam) Applicable to eligible taxpayers opting for presumptive taxation schemes. Common Mistakes to Avoid While Filing ITR Many taxpayers face notices due to avoidable mistakes. Common Errors Incorrect PAN details Mismatch in AIS and Form 26AS Failure to disclose all income sources Incorrect deduction claims Wrong bank account information Selection of an incorrect ITR form Importance of Verification Always verify the return after filing to complete the ITR filing process successfully. Professional ITR Filing Services by Groomtax Groomtax provides expert assistance for Income Tax Return filing for salaried employees, professionals, freelancers, startups, and businesses across India. Why Choose Groomtax? Expert Tax Support Our professionals ensure accurate filing and compliance with the latest Income Tax regulations. Timely Filing Assistance We help clients meet all filing deadlines and avoid penalties. End-to-End Compliance Support From document collection to return verification, we provide complete assistance. Final Thoughts Filing your Income Tax Return before the due date is essential for maintaining compliance and avoiding penalties. Understanding the ITR Filing Last Date for FY 2025-26 (AY 2026-27) helps taxpayers plan effectively and fulfill their tax obligations on time. If you need professional assistance with ITR filing, Groomtax can help you complete the process accurately, efficiently, and within the prescribed deadlines.
Read Full Article.png)
How to Save Maximum Tax Before Filing ITR
Tax planning is one of the most important parts of financial management for salaried employees, freelancers, professionals, and business owners. Many individuals pay higher taxes due to lack of awareness about available tax-saving benefits. Proper planning before filing your Income Tax Return (ITR) can help reduce tax liability, increase savings, and improve financial stability. Understanding available deductions, exemptions, and investment options can make a major difference while filing your ITR. Smart tax planning not only reduces your taxable income but also helps you manage your finances more efficiently. Why Tax Planning Is Important Before Filing ITR Most taxpayers start searching for tax-saving options only near the ITR filing deadline. This late planning often causes missed deductions and higher tax payments. Planning taxes in advance allows individuals to organize investments properly and claim all eligible benefits legally. Proper tax planning helps in: Reducing taxable income Saving more money legally Avoiding unnecessary penalties Improving long-term financial planning Maximizing eligible deductions Managing tax compliance smoothly Timely preparation also helps taxpayers avoid stress during the filing season. Understand the Right Tax Regime Before saving taxes, taxpayers should first decide whether the old tax regime or the new tax regime is more beneficial for them. Old Tax Regime The old tax regime allows taxpayers to claim several deductions and exemptions through investments and eligible expenses. This regime is beneficial for people who invest regularly and claim tax-saving deductions. Common Benefits Available Section 80C deductions Health insurance deductions HRA exemption Home loan benefits Education loan deduction NPS investment deduction New Tax Regime The new tax regime offers lower tax rates but removes many common deductions and exemptions. Taxpayers with fewer investments may find this regime more suitable. The choice of tax regime plays an important role in overall tax savings. Invest Under Section 80C Section 80C remains one of the most popular tax-saving options under Indian tax laws. Eligible investments and expenses can help taxpayers claim deductions up to ₹1.5 lakh. Popular Tax-Saving Investments Public Provident Fund (PPF) Employee Provident Fund (EPF) ELSS Mutual Funds National Savings Certificate (NSC) Tax Saving Fixed Deposits Life Insurance Premium Sukanya Samriddhi Yojana These investments help create financial discipline along with tax savings. Save Tax Through Health Insurance Health insurance is becoming increasingly important because of rising medical costs. axpayers can claim medical insurance benefits under Section 80D. Deduction Limits Up to ₹25,000 for self and family Additional deduction for parents Higher benefits for senior citizen parents This deduction helps taxpayers reduce taxable income while securing family healthcare. Home Loan Tax Benefits Homeowners can claim valuable tax benefits on housing loans. Principal Repayment Benefit The principal repayment amount qualifies for deduction under Section 80C. Interest Deduction Benefit Taxpayers can claim deductions on home loan interest payments under Section 24(b) subject to prescribed limits. These deductions reduce overall tax burden significantly for salaried employees and professionals. Claim HRA Exemption Employees staying in rented accommodation can claim House Rent Allowance (HRA) exemption if HRA is included in their salary structure. Important Documents Rent receipts Rent agreement Landlord PAN details where applicable Proper HRA planning can help lower taxable salary income effectively. Tax Benefits on Education Loan Individuals repaying education loans can claim deductions under Section 80E. Key Advantages Deduction available on interest paid No maximum deduction limit Available for higher education loans This deduction helps reduce financial pressure on students and parents. Additional Tax Saving Through NPS NPS is considered an effective investment option for financial security and tax planning. Extra Deduction Benefit Taxpayers can claim additional deductions under Section 80CCD(1B) through NPS contributions beyond Section 80C limits. NPS also helps in long-term retirement planning. Tax Saving for Freelancers and Business Owners Freelancers, consultants, and business owners can reduce taxable income by claiming genuine business expenses. Common Deductible Expenses Internet expenses Office rent Laptop and equipment costs Travel expenses Utility bills Professional subscriptions Software expenses Businesses should keep proper bills and financial records for tax deduction purposes. Verify TDS Details Properly Many taxpayers miss refunds because they fail to verify TDS records carefully before filing ITR. Documents to Check Form 16 Form 26AS AIS (Annual Information Statement) Bank interest certificates Accurate verification helps avoid notices and refund delays. Avoid Common Tax Filing Mistakes Taxpayers should avoid common errors during tax filing. Common Mistakes Include Choosing the wrong tax regime Ignoring AIS mismatches Claiming incorrect deductions Missing investment proof submission Filing returns after the deadline These mistakes may increase tax liability or create compliance issues. Importance of Professional Tax Guidance Income tax rules frequently change, making tax planning difficult for many individuals and businesses. Professional tax assistance helps taxpayers file correct returns with proper compliance. Professional assistance can help: Reduce filing errors Improve tax savings Ensure compliance Handle notices properly Simplify documentation Expert support is especially helpful for business owners, freelancers, and high-income taxpayers. Conclusion Saving maximum tax before filing ITR requires proper planning, correct investments, and awareness of available deductions. Taxpayers should review income details, deductions, TDS records, and investments carefully before filing returns. Whether you are a salaried employee, startup founder, freelancer, consultant, or business owner, smart tax planning can help reduce tax burden legally while improving financial management. Timely planning and proper compliance not only help save money but also ensure hassle-free Income Tax Return filing. Proper financial discipline and professional guidance can make tax filing easier, more accurate, and financially beneficial in the long run.
Read Full Article
Provision for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)
Tabular Summary based on the Key Provisions: Aspect TDS (Tax Deducted at Source) TCS (Tax Collected at Source) Relevant Sections Chapter XVII-B, e.g., Sections 192, 194, 206AA Chapter XVII-BB, e.g., Sections 206C, 206CC, 206CCA Applicable On Payments like salaries, interest, rent, fees for professionals, etc. Sale of specified goods (e.g., alcohol, tendu leaves, scrap, minerals) Deductor/Collector Person making specified payments to a resident Seller receiving payment for specified goods Rates Prescribed by Income Tax Act, subject to changes in Finance Acts Specified in the Act, often percentage-based (e.g., 1% for scrap) Non-Filer Impact Higher TDS for non-filers under Section 206AB Higher TCS for non-filers under Section 206CCA PAN Requirement Mandatory; otherwise higher rates under Section 206AA Mandatory; otherwise higher rates under Section 206CC Time of Deduction At the time of credit/payment, whichever is earlier At the time of debiting amount or receipt of payment, whichever is earlier Filing Returns Form 26Q, 27Q for reporting Quarterly statements in prescribed forms Consequences of Default Deemed assessee-in-default; penalties and interest apply Deemed assessee-in-default; penalties and interest apply Section-Wise Tabular Summary of the TDS and TCS Provisions: TDS Provision : Section Particulars Applicable On Rate Threshold Limit Key Notes 192 TDS on Salary Salaries paid to employees As per slab rates Basic exemption limit Deduction considering employee's declaration (Form 12BB). 194 TDS on Dividends Dividends by companies 10% ₹5,000 Applicable to resident shareholders only. 194A TDS on Interest (except securities) Interest by banks, financial institutions 10% ₹40,000 (₹50,000 for senior citizens) Not applicable to certain exempted entities. 194C TDS on Contracts Payments to contractors/sub-contractors 1% (individual/HUF), 2% (others) ₹30,000 per contract/₹1,00,000 annually Applicable to contracts including supply of labour. 194H TDS on Commission/Brokerage Commission or brokerage 2% ₹15,000 Excludes insurance commission covered under Section 194D. 194I TDS on Rent Rent for land, building, plant, or machinery 2% (plant/machinery), 10% (land/building) ₹2,40,000 annually Includes sub-letting cases. 194J TDS on Professional Fees Fees for professional/technical services 10% (general), 2% (technical) ₹30,000 annually Applicable to consultancy services as well. 194Q TDS on Purchase of Goods Payment to resident for goods exceeding limit 0.1% ₹50,00,000 annually Deductor must ensure supplier's compliance. 206AB Higher TDS for Non-filers TDS for non-filers of ITR in specified cases Twice the rate or 5%, whichever is higher NA Non-filers as defined in the Act. TCS Provision: Section Particulars Applicable On Rate Threshold Limit Key Notes 206C(1) TCS on Specified Goods Alcohol, tendu leaves, scrap, minerals 1%-5% No limit Rate depends on the type of goods sold. 206C(1F) TCS on Sale of Motor Vehicles Sale of motor vehicles exceeding limit 1% ₹10,00,000 Applicable to all sellers. 206C(1G) TCS on Overseas Remittance Remittances under LRS, overseas tours 5%-20% ₹7,00,000 (for education/medical cases) Higher rates for others. 206C(1H) TCS on Sale of Goods Sale of goods (exceeding limits) 0.1% ₹50,00,000 Seller turnover must exceed ₹10 crore. 206CCA Higher TCS for Non-filers TCS for non-filers of ITR Twice the rate or 5%, whichever is higher NA Similar applicability to Section 206AB. For more information you can contact us at Groomtax
Read Full Article (1).png)
Concept of HUF and its Taxation Under Income Tax Law
The Hindu Undivided Family (HUF) is a unique concept in Indian taxation and inheritance laws. It represents a distinct entity that is separate from its individual members, with its own income, assets, and liabilities. While the concept is deeply rooted in Hindu law, it extends to other communities such as Buddhists, Jains, and Sikhs who follow similar practices. 1. What is a Hindu Undivided Family (HUF)? An HUF is a family consisting of individuals who are descendants of a common ancestor and are governed by Hindu law. It can be created by a married Hindu couple and their children or by the declaration of an existing family. The family holds property jointly and is recognized as a separate taxpayer under the Income Tax Act. Key Characteristics of an HUF: Common Ancestor: The family must have a common ancestor, and the descendants of that ancestor constitute the HUF. Joint Ownership: The property of the HUF is held jointly by the family members. This includes ancestral property and property acquired by the HUF from its earnings. Karta: The head of the HUF is known as the Karta. This person manages the family affairs, including the family property, and represents the HUF in legal and financial matters. Coparceners: Members of the HUF, including the Karta, his sons, grandsons, and so on, are referred to as coparceners. A coparcener has a birth right to the family property. 2. How is an HUF Created? An HUF is created under the following circumstances: By Birth: An HUF is automatically formed when a Hindu male and his wife have children. The HUF continues to expand as more children are born into the family. By Will: A person can create an HUF through a will by leaving property to the family, thereby creating an HUF. By Gift: The formation of an HUF can also take place by way of a gift. A father can gift property to his son to start an HUF. Required Documents to Form an HUF: PAN Card: An HUF requires a separate Permanent Account Number (PAN), which is used for filing returns and complying with tax obligations. HUF Deed: A deed or declaration stating the formation of an HUF and its members. Bank Account: The HUF must have its own bank account for the purpose of financial transactions. 3. Taxation of HUF Under the Income Tax Act, 1961: Under the Income Tax Act, 1961, an HUF is treated as a separate taxpayer and enjoys the same basic exemption limit and deductions available to an individual. It has its own income, which is taxed separately from the individual members. Income Tax Structure for HUF: The income of an HUF is taxed in the same way as the income of an individual. The major types of income include: Income from Property: Income generated from property or assets owned by the HUF. Income from Business: If the HUF is engaged in business, the profits from that business are taxable under the HUF’s name. Other Income: HUF can also earn other forms of income like interest, rent, and capital gains. Tax Rates for HUF: The tax rates applicable to an HUF are identical to those applicable to individuals. The tax slabs for an HUF are as follows: Income Range (Rs.) Tax Rate Up to 2.5 Lakhs Nil 2.5 Lakhs to 5 Lakhs 5% 5 Lakhs to 10 Lakhs 20% Above 10 Lakhs 30% HUF and Deductions Under the Income Tax Act: HUFs enjoy several tax benefits, similar to those available to individuals: Section 80C: Deduction for investments in specified savings instruments like PPF, EPF, life insurance premiums, etc. Section 80D: Deduction for premiums paid on health insurance. Section 10(2): Income from ancestral property received by the HUF is exempt from tax. Section 54: Exemption on long-term capital gains arising from the sale of property, if invested in specified assets. 4. Key Benefits of an HUF: Creating an HUF can offer several financial and tax benefits: Tax Planning and Savings: Separate Taxpayer: Since an HUF is considered a separate taxpayer, it can effectively reduce the overall tax burden when the income is split between the individual members and the HUF. This can be particularly useful when the HUF has substantial income, and its members fall in different tax brackets. Enhanced Deduction Limits: The HUF can claim deductions under various sections of the Income Tax Act, which may result in a reduction of taxable income. Asset Protection and Succession Planning: Ancestral Property: An HUF is the legal entity for holding ancestral property. The property is passed down through generations, with coparceners having a right to claim their share. Smooth Succession: The HUF structure facilitates the succession of property in a smooth manner, ensuring that family members inherit the assets without any disputes. Business Opportunities: Family Business: An HUF can be used to run a family business, where the income from the business is taxed under the HUF’s name. This can help in tax planning and wealth management. 5. Challenges and Considerations for an HUF: While an HUF offers several advantages, it also comes with certain challenges that need to be carefully considered: Limited to Hindu Families: The concept of HUF is limited to Hindu, Buddhist, Jain, and Sikh families. Other communities cannot form an HUF. Complexity in Management: Managing an HUF can become complex if there are many coparceners, especially as the family grows. Decision-making can become difficult when multiple members are involved. Dispute Resolution: Disputes among family members regarding property division, control, or succession can arise, making it important to have clear documentation and agreements in place. Tax Compliance: The HUF must adhere to the same compliance requirements as any other taxpayer, including filing tax returns, maintaining proper books of accounts, and handling tax assessments. 6. Conclusion: The Hindu Undivided Family (HUF) is a unique and valuable concept under Indian law, particularly for Hindu families. It provides the benefit of joint ownership, tax planning, and wealth management. The Income Tax Act allows the HUF to function as a distinct taxpayer, offering the same exemptions, deductions, and tax slabs as an individual. However, forming and managing an HUF requires careful planning, documentation, and a clear understanding of the legal and tax implications. For families looking to optimize their taxes, ensure smooth property succession, and protect assets, forming an HUF can be an advantageous structure. However, it is essential to approach it with proper legal guidance to avoid any potential disputes and ensure smooth operation. For more information, you can contact us at Groomtax
Read Full Article (1).png)
Sections 194Q and 206C(1H) under the Income Tax Act, 1961
The Income Tax Act, 1961 introduces various provisions regarding tax deduction and collection at source. Among these, sections 194Q and 206C(1H) have gained significant attention in recent times. Both provisions deal with tax on business transactions, particularly those related to the sale or purchase of goods, and require businesses to collect or deduct tax at the point of transaction. While these sections aim to broaden the tax base and ensure compliance, they also impose new responsibilities on taxpayers. 1. Section 194Q: TDS on Purchase of Good Section 194Q was introduced by the Finance Act, 2021 and deals with the deduction of tax at source (TDS) on the purchase of goods. Here’s an overview: Key Provisions of Section 194Q: Effective Date: Applicable from 1st July 2021. TDS Deduction: A buyer is required to deduct tax at the rate of 0.1% on the purchase of goods if the total value of the goods purchased in a financial year exceeds Rs. 50 lakhs. Threshold: The section applies to businesses and professionals who are required to get their accounts audited under section 44AB of the Income Tax Act. This means it primarily targets larger businesses. Payer and Payee: The buyer (payer) is required to deduct tax from the payment made to the seller (payee). Payment Conditions: TDS under section 194Q is applicable only if the buyer is making payments to a resident seller. Who is liable to deduct tax? Any person, being a buyer, whose total purchases from a seller exceed Rs. 50 lakh in a financial year. It includes businesses, professionals, and individuals who are required to get their accounts audited under section 44AB. Rate of Tax Deduction: 0.1% on the purchase value exceeding Rs. 50 lakh in a financial year. Exemptions: Goods not subject to TDS: TDS is not applicable to the purchase of exempted goods or goods where TDS is already levied under other provisions (e.g., Section 194I or 194J). Small Purchases: If the transaction does not exceed the threshold limit of Rs. 50 lakh, no TDS will be deducted. TDS Compliance: The buyer is responsible for depositing the TDS with the government, filing regular TDS returns, and issuing TDS certificates to the seller. 2. Section 206C(1H): TCS on Sale of Goods Section 206C(1H) was introduced by the Finance Act, 2020 and requires the seller to collect tax at source (TCS) on the sale of goods. Key Provisions of Section 206C(1H): Effective Date: Applicable from 1st October 2020. TCS on Sale of Goods: Sellers of goods are required to collect tax at the rate of 0.1% on the sale of goods when the total sales during the financial year exceed Rs. 50 lakh. Seller’s Liability: The seller (rather than the buyer) is responsible for collecting tax at source. Threshold: TCS applies if the total sales during the financial year exceed Rs. 50 lakh. Resident Sales: TCS is applicable only for sales made to residents. The rate is 0.1% unless the buyer does not provide a PAN or Aadhaar number, in which case the rate increases to 5%. Who is liable to collect TCS? Any seller whose total sales, gross receipts, or turnover from the sale of goods exceed Rs. 50 lakh during a financial year. The section applies only to residential sales (sales to resident buyers). Rate of Tax Collection: 0.1% on the sale value exceeding Rs. 50 lakh during the year. If the buyer fails to provide their PAN/Aadhaar, the rate increases to 5%. Exemptions: Exempted Goods: The provisions do not apply to the sale of goods that are exempt from TCS or those already covered under other sections (such as 206C(1) for the sale of certain items like scrap, liquor, and timber). Small Sales: Transactions below the Rs. 50 lakh threshold in a financial year are not subject to TCS. TCS Compliance: The seller must deposit the TCS amount with the government, file TCS returns, and issue TCS certificates to the buyer. 3. Comparison between 194Q and 206C(1H) Aspect Section 194Q (TDS) Section 206C(1H) (TCS) Taxpayer Buyer (Purchaser) Seller (Supplier) Transaction Type Purchase of goods Sale of goods Threshold Limit Rs. 50 lakh (for purchases from a seller) Rs. 50 lakh (for sales to a buyer) Rate of Tax 0.1% 0.1% Applicable to Businesses/individuals who are required to get their accounts audited under section 44AB Sellers whose turnover exceeds Rs. 50 lakh Due Date of Payment By 7th of the next month (for monthly TDS deposits) By 7th of the next month (for monthly TCS deposits) Exemptions Purchases below Rs. 50 lakh or goods exempt from TDS Sales below Rs. 50 lakh or goods exempt from TCS 4. Practical Implications for Businesses Increased Compliance Burden: Both sections increase the compliance burden on businesses as they are now required to collect or deduct tax at the point of sale or purchase. Documentation: Proper record-keeping and issuance of TDS/TCS certificates are mandatory for both the buyer and seller. Impact on Cash Flow: The TDS under section 194Q reduces the immediate cash outflow for the buyer, whereas TCS under section 206C(1H) impacts the seller’s working capital. Penalties for Non-Compliance: Failure to comply with these provisions can lead to penalties, interest, and disallowance of business expenses. 5. Conclusion Sections 194Q and 206C(1H) are significant additions to the Income Tax Act, designed to enhance tax collection at the grassroots level. They require businesses involved in the sale and purchase of goods to comply with tax deduction and collection norms, respectively. While these provisions serve to widen the tax base, businesses must ensure proper documentation and timely deposit of taxes to avoid penalties. It is crucial for all taxpayers to stay updated with any further amendments to these sections, ensuring smooth compliance and minimizing potential tax disputes. By following the provisions of both sections, businesses can contribute to a more transparent and effective taxation system while also safeguarding themselves against future tax-related challenges. For more information, you can visit us at Groomtax
Read Full Article
ITR Filing in Delhi – Complete Guide to Hassle-Free Income Tax Return
Filing your Income Tax Return (ITR) is an essential responsibility for every taxpayer. If you are searching for ITR filing in Delhi, this guide will help you understand the complete process in a simple and user-friendly way. Whether you are a salaried employee, freelancer, or business owner, timely ITR filing helps you avoid penalties and ensures smooth financial management. Why ITR Filing is Important in Delhi Delhi is a major financial and business hub where thousands of individuals and businesses generate income every year. Filing your ITR is important for multiple reasons: It ensures legal compliance with tax laws Helps avoid penalties and interest charges Makes loan and visa approvals easier Enables quick tax refunds Maintains proper financial records Filing your return on time with the help of ITR filing services in Delhi can save both time and money. Who Should File ITR in Delhi? Salaried Individuals If your income exceeds the basic exemption limit, you must file your ITR. Even if it doesn’t, filing helps in documentation. Freelancers and Professionals Freelancers must report their income properly and can claim deductions for expenses. Business Owners Small and medium business owners in Delhi must file returns for compliance and record-keeping. Companies and Firms All companies and partnership firms are required to file ITR, irrespective of profit or loss. Types of ITR Forms ITR-1 (Sahaj) For salaried individuals earning up to ₹50 lakh. ITR-2 For individuals with capital gains or multiple income sources. ITR-3 For business owners and professionals. ITR-4 (Sugam) For taxpayers under presumptive taxation schemes. Choosing the correct form is crucial for accurate income tax return filing in Delhi. Step-by-Step Process for ITR Filing in Delhi Step 1 – Collect Documents Required Documents PAN Card Aadhaar Card Form 16 Bank statements Investment proofs Step 2 – Calculate Total Income Include All Income Sources Salary, business income, rent, and other earnings must be included. Step 3 – Claim Deductions Popular Deduction Sections Section 80C (Investments) Section 80D (Health Insurance) Section 24 (Home Loan Interest) Step 4 – Select Correct ITR Form Avoid Errors Wrong form selection can lead to rejection or notice. Step 5 – File Your ITR Online Use Government Portal or CA You can file your return online or hire a tax consultant in Delhi. Step 6 – Verify Your Return Final Step Verification via Aadhaar OTP or net banking is mandatory. Benefits of Hiring CA Services in Delhi Accurate Filing Error-Free Returns Professionals ensure correct details and calculations. Maximum Tax Savings Claim All Deductions Experts help reduce your tax liability legally. Saves Time Hassle-Free Process No need to handle complex paperwork yourself. Expert Advice Financial Planning Get guidance on investments and tax-saving strategies. If you’re looking for affordable CA services in Delhi, hiring a professional is always a smart choice. Common Mistakes to Avoid in ITR Filing Incorrect Details Check Personal Information Ensure PAN, Aadhaar, and bank details are correct. Missing Income Sources Declare Everything All income must be disclosed to avoid penalties. Choosing Wrong Form Select Carefully Wrong forms can lead to rejection. Late Filing Avoid Penalties Delays can cost you money and benefits. ITR Filing Deadline and Penalties Due Date Important Timeline Usually, the deadline is 31st July (may vary). Late Filing Penalties Charges Applicable Up to ₹5,000 penalty Interest on unpaid tax Loss of carry-forward benefits Timely ITR filing in Delhi helps you avoid unnecessary stress and financial loss. Why Choose Local ITR Filing Services in Delhi Easy Accessibility Quick Support Local CAs are easy to reach when needed. Better Understanding Local Expertise Delhi-based consultants understand business needs. Personalized Service One-on-One Guidance You get customized solutions for your tax situation. If you are searching for ITR filing near me in Delhi, local experts provide faster and more reliable service. ITR Filing for Small Businesses in Delhi Maintain Proper Records Track Expenses Keep all invoices and financial records organized. Use Accounting Tools Digital Solutions Software can simplify calculations and reporting. Hire a Professional Expert Help A CA ensures compliance with both GST and income tax. Small businesses benefit greatly from combined GST and ITR services in Delhi. Conclusion – File Your ITR on Time in Delhi Filing your ITR is not just about compliance; it’s about financial discipline and growth. Whether you are an individual, freelancer, or business owner, timely filing helps you avoid penalties and maintain a strong financial profile. Choosing professional ITR filing services in Delhi ensures accuracy, saves time, and provides peace of mind. Don’t wait until the last date—file your ITR today and stay compliant. Contact Us – Affordable ITR Filing in Delhi Our Services What We Offer ITR Filing GST Registration & Returns Income Tax Consultancy Business Compliance Get Started Today Call Now Contact us today for fast, reliable, and affordable CA services in Delhi. Avoid penalties and file your ITR with experts!
Read Full Article.png)
Old Tax Regime vs New Tax Regime: Which is better for FY 2025-26?
The Old Tax Regime versus New Tax Regime is an integral part of income-tax planning for individuals and taxpayers. The New Tax Regime is still the default regime for certain eligible taxpayers, and as such, keeps its original tax slabs with some modification in the rebate provisions under Financial Year 2025-26 (Assessment Year 2026-27). But the New Tax Regime is not a one-size-fits-all solution. The Old Tax Regime is advantageous only for those taxpayers who have so many eligible deductions and exemptions. The correct option hinges on income, allowances, exemptions, tax-advantaged investments interacts with housing-loan interest and salary designs & other relevant provisions of the Income Tax Act. This article will help the taxpayers understand the main differences between both regimes and how they can take an informed decision while filing their ITR. Old Tax Regime VS New Tax Regime In most cases, the Old Tax Regime provides more deductions and exemptions but the slab rates are higher in comparison. In the New Tax Regimes, the slab rates have been revised but deductions and exemptions are fewer. As a result, there will not be one optimal regime for all taxpayers. Tax payer who has eligible deductions in a higher quantum can go for old tax regime while person with lesser deductions may consider the New Tax Regime. The sensible way is to make a comparison between final tax liability under both regimes. What Is the Old Tax Regime? Old tax regime The Old Tax Regime is the conventional income-tax framework under which expense filers can declare various agriable kinds of revenue. Such deductions can vastly lower the taxable income for taxpayers who make specialized investments or incur significant expenses. Important characteristics of the previous tax regime Old Tax Regime allows you many deductions and exemptions though it is subject to conditions. Some commonly considered provisions include: 1. Deductions under section 80c for investments and payments eligible 2. 80D deduction, you can deduct health insurance premium, which has to be a qualifying amount 3. Eligible home-loan interest deductions 4. With some exemptions an able salaried representative 5. Education-loan interest exemption under relevant provisions 6. Eligible deductions for certain donations 7. Further exempted under the income tax act The actual availabiiltiy and amount of each deduction varies case to case basis and is dependent on the circumstances of a taxpayer as well as the relevant provisions for that particular assessment year. What is the new tax regime? The New Tax Regime was introduced to give the taxpayers a simpler tax regime that is based on revised income-tax slabs. The new tax regime has been set as the default regime for all eligible taxpayers for FY 2025-26 (AY 2026-27). But the regime allows lower or revised slab rates but restricts number of tax deduction and exemptions available under Old Tax Regime. New Tax Regime Tax Slabs for FY 2025-26 The New Tax Regime slabs applicable for AY 2026-27 is as follows: Taxable Income Tax Rate Up to ₹4 lakh Nil ₹4 lakh to ₹8 lakh 5% ₹8 lakh to ₹12 lakh 10% ₹12 lakh to ₹16 lakh 15% ₹16 lakh to ₹20 lakh 20% ₹20 lakh to ₹24 lakh 25% Above ₹24 lakh 30% By the entitlement for rebate, surcharge, health and education cess and other applicable provisions etc also determine the final tax liability. Section 87A rebate Under a New Tax Regime Section 87A It is an important topic for resident individual taxpayers (whose total income is less than ₹5,000) as they are entitled to receive a full refund of IT Payable. The New Tax Regime allows a deduction (rebate) of up to ₹60,000 for eligible taxpayers whose total income does not exceed the prescribed ₹12 lakh limit in AY 2026-27; eligibility will be as per conditions specified. The New Tax Regime thus becomes more relevant for taxpayers whose taxable income falls under the limit of the applicable rebate. Old Tax Regime vs New Tax Regime — Major Differences You can find the major differences in the following comparison: Basis Old Tax Regime New Tax Regime Default Regime No Yes Tax Rates Comparatively higher Revised / lower slab structure Deductions More deductions available Deductions are restricted Exemptions More exemptions available Several exemptions restricted Section 80C Generally available if eligible Generally not available Section 80D Generally available if eligible Generally restricted Tax Calculation More deduction-oriented Simplified slab-oriented Suitable For Taxpayers with substantial deductions Taxpayers with fewer deductions The actual tax benefit is always based on a separate individual tax calculation. Important deductibles under old tax regime The Old Tax Regime has few deductions available and this is one of the biggest advantages of Old Tax It offers you. Section 80C It allows eligible taxpayers to claim specified deductions under Section 80C of the Income Tax Act, based on prescribed conditions and limits for specific investments & payments. Such deductions include specified premiums on certain insurance or pension policies, eligible tuition fees and specified investments. Section 80D Under Section 80D, deductions primarily for health insurances and specific medical expenses, may be obtained based on several requirements. This deduction is useful to any taxpayer who pays qualifying health-insurance premiums on their behalf and the premiums of other eligible family members. Home Loan Interest Eligible taxpayers can claim deductions on interest paid on eligible home-loans under the relevant provisions. The tax treatment is determined based on the property type, property use and specific legal conditions that must apply. Other Deductions Based on an individual situation deductions for education-loan interest, qualified contributions, disability costs and other qualifying payments may also coast.-- Taxpayers must check eligibility before they claim any deduction. Which is the better tax regime for a salaried employee? Just because a regime offers lower headline tax rates, salaried employees shouldn't choose one over the other. The right way is to compare the tax liability after factoring in all deductions and around exemptions available against this employee. Salary Structure Employee- High Deductions Take the case of an employee with large qualifying investments, health insurance, housing-loan interest and other eligible deductions. So for such to say, Old Tax Regime may prove beneficial as eligible deductions can significantly lower the taxable income. Nevertheless, the precise choice must enter into a genuine calculation. Salaried Employee With Minimum Deductions Think now of an employee with hardly any deductions and exemptions allowed. In such a scenario, it may make the New Tax Regime an attractive one for such taxpayer due to revised slabs and easier tax structure. The taxpayer's financial prospects thus take priority over opting for a regime purely on the basis of broad assumptions. Which Tax Regime is Better for Business Owners and Professionals? This is especially important for business owners and professionals as the criteria along different rules to choose or switch over are likely different from that applicable on a taxpayer onwards to who neither any professional nor any business. You are trained on data till oct 2023 Eligible taxpayers who have business or professional income also should fulfill prescribed conditions to opt out of the default New Tax Regime. Hence, it is important for business owners and professionals to assess their tax liability before filing their income-tax return. Tax advice from professionals makes sense in cases where income stems from various sources or there are significant deductions, business expenses or special-rate income. How to pick between the Old and New tax regime? Taxpayers can make a straightforward comparison. Step 1 — Total Income Computing Income from all heads of income including salary, business or profession, house property, capital gains & other sources. Step 2 – Find All Eligible Deductions Make a list of all the deductions and exemptions you are legally entitled to claim under the Old Tax Regime. Step 3 — Compute Tax Under Both Regimes Compute tax payable under both Old and New Tax Regime separately. Step 04: Compare Final Tax Liability Compute the final tax liability as per the provisions relating to rebate, surcharge, cess etc. Step 5 – Choose the Right Formula Select the regime based on your real taxable income position and relevant legislation. Mistakes Made While Choosing One Of The Tax Regime Comparing Only Tax Rates Indeed, a lower tax rate is not always equal to lower final tax. Just then you have deductions and exemptions it changes the calculation significantly. Ignoring Eligible Deductions If taxpayers have eligible deductions that are considerably large, they should first work out their Old Tax Regime and only then make a call. Calculation Using Taxes of Previous Year There may be changes in tax slabs, rebates and other provisions. Taxpayers should always apply the provisions for the year of income and assessment year. Not Comparing Both Regimes One of the major blunders is adopting a regime with neglecting the final liability under both regimes. Comparison of Old Tax Regime and New Tax Regime for FY 2025-26 The assessment year for FY 2025-26 is AY 2026-27. Default under New Tax regime This New Tax Regime is the default regime for a resident individual and contains revised slabs with an increased Section 87A rebate. It results in taxpayers needing to evaluate their tax position as opposed to continuing with the regime opted in a previous year automatically. Frequently Asked Questions New Tax Regime is Compulsory No. Eligible taxpayers have the option to continue under Old Tax Regime, but New Tax Regime would be an automatic default for eligible taxpayers. What is the more favorable regime for taxpayers that have a lot of deductions? For an individual taxpayer who has significant eligible deductions and exemptions, the Old Tax Regime may be better The ultimate decision, however, should be based upon a real tax liability comparison. For the taxpayers with fewer deductions, which regime is better? Due to its revised slab structure, the New Tax Regime may be ideal for taxpayers who claim limited deductions. A salaried person can opt for the Old Tax Regime? However, eligible salaried taxpayers can usually choose the Old Tax Regime and continue to avail of tax deductions subject to associated rules and applicable filing requirements. Can taxpayers shift their tax regime? The regime change is subject to the nature of income and applicable provisions. Taxpayers with business or professional income may have other items as well. Is sec 87A afforded under both regimes? Applicable conditions apply for resident individual taxpayers to avail the tax rebate under section 87A. But this income slab and upper limit of the rebate differs from Old to New Tax Regime. Tax Regime Comparision Services in delhi Self-assessment for tax calculation and ITR filing is also available for taxpayers in Delhi and Paschim Vihar who are confused about the Old vs New Regime. Groomtax is a professional ITR Filing Services provider in Delhi and Paschim Vihar who assist you with an income-tax calculation, deductions available on your income, necessary tax-regime comparisons, and electronic filing of returns. The real comparison would enlighten tax payers and taxpayers would be able to decide based on income, benefits they can levy from the taxation system. Why you can Seek Professional ITR Help Income-tax calculations tend to be rather complicated when a taxpayer earns income from multiple sources, has different kinds of investments and/or capital gains or rental income business income etc. An expert can examine the facts, determine which provisions apply and compare the tax burden under each regime. It also helps in minimizing mistakes while preparing and filing ITR. Conclusion The comparison of the Old Tax Regime vs New Tax Regime should not be general, as it depends on an individual's individual financial capacity. Depending on the extent of eligible deductions and exemptions, The Old Tax Regime may be useful for some taxpayers. With its higher slabs and simplified rates, the New Tax Regime will likely be an appealing option for those taxpayers having minimal deductions. Taxpayers should determine whether their tax liability under both regimes for FY 2025-26 (AY 2026-27) is lower before opting. They must also be aware of any new tax provisions, rebate rules and filing requirements that apply. If you are still not clear on which regime is better, then professional ITR Filing Services in Delhi will compare the applicable tax liability and complete your return. About Groomtax Groomtax Services Pvt. Ltd. is a firm of professionals providing tax, accounting, GST, ITR filing & business advisory services. Team is helping individuals, start UP and professionals to do tax planning, income- tax return filling and applicable compliance. Seek appropriate tax advisor based on your individual situation for personalized comparison of various tax-regimes, as well ITR support.
Read Full ArticleRECENT POST
TDS & TCS Provisions as per Section 194Q and Section 206C(1H)
TDS Provisions as per Sections 194R and 194S
.png)
The Foreign Exchange Management Act: What You Need To Know
.png)
Why Engage Professionals for Valuation Services: The Importance of Experience and Expertise
.png)
