Important Keyword: Income Tax, Section 80EEB, Tax Benefits, tax deductions.
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Section 80EEB: Deduction for Interest paid on E-Vehicle loan
The Government of India has introduced significant measures to reduce pollution and promote environmentally friendly growth. A key initiative within these efforts is a scheme focused on electric vehicles (EVs) and their components. Additionally, under Section 80EEB, individuals can claim deductions in their income tax returns for loans taken to finance electric vehicles.
Purpose of Providing a Deduction
The Union Cabinet has approved Phase II of the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme to promote electric mobility across India. The primary objective of this program is to increase the adoption of electric vehicles by offering financial incentives for their purchase and developing the necessary infrastructure for charging and transportation. This policy includes incentives for electric two-wheelers, three-wheelers, and four-wheelers. To further encourage the use of electric vehicles, the government provides deductions for purchasing them on loan.
Eligibility for Claiming Deduction u/s 80EEB
Only individuals are eligible to claim deductions under Section 80EEB of the Income Tax Act. Other entities, such as partnership firms, Hindu Undivided Families (HUF), companies, or Associations of Persons (AOP), cannot claim this deduction.
Definition of an Eligible Electric Vehicle
An “electric vehicle” is defined as a vehicle powered solely by an electric motor, with traction energy supplied exclusively by the traction battery installed in the vehicle. It must also have an electric regenerative braking system, which converts vehicle kinetic energy into electrical energy during braking.
Conditions to Claim Deductions u/s 80EEB
The electric vehicle loan must be taken from a financial institution or a Non-Banking Financial Company (NBFC).
The loan must be sanctioned between April 1, 2019, and March 31, 2023.
The taxpayer can claim a deduction on the loan for the purchase of both two-wheelers and four-wheelers.
The interest claimed under this section cannot be claimed under any other section.
Deduction Amount Available u/s 80EEB
Individual taxpayers can claim a deduction of up to INR 1.5 lakh on the interest paid on a loan taken for an electric vehicle. This deduction is available for all years until the loan is fully repaid. Taxpayers must have all necessary documents when filing their income tax return.
Electric Vehicles Used for Business Purposes
If an electric vehicle is used for business purposes, the business must report the vehicle as an asset and the loan as a liability. In such cases, the business can claim the interest on the loan as a business expense. Additionally, the business owner can claim depreciation on the electric vehicle. To qualify for these claims, the vehicle must be registered in the name of the business or the business owner.
Example
Mr. Swapnil is a salaried individual who purchased an electric vehicle for personal use. He took a loan from a public sector bank, sanctioned on May 25, 2022, and disbursed on July 7, 2022. Since the loan was disbursed before March 31, 2023, he can claim a deduction for the interest paid on the loan under Section 80EEB when filing his ITR for FY 2022-23.
Important Keyword: 80GGC, Chapter VI-A, Income Tax, Tax Benefits.
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Section 80GGC: Deduction on Donation to Political Parties
Political donations enable individuals to show their support for a particular party or candidate. These contributions are crucial for funding the operations of political parties. The government recognizes this and provides tax deductions on such donations. Under Section 80GGC of the Income Tax Act, taxpayers can receive tax benefits for their contributions to political parties. Therefore, if you meet the eligibility criteria, you can claim an 80GGC deduction when filing your Income Tax Return (ITR).
Eligibility Criteria for Claiming 80GGC Deduction
Individuals, Hindu Undivided Families (HUF), firms, Associations of Persons (AOP) not funded by the government, Bodies of Individuals (BOI), and artificial juridical persons not funded by the government can claim a deduction under Section 80GGC. However, companies, local authorities, and artificial juridical persons receiving government funding are not eligible for this deduction.
Eligible Entities for the Deduction
To claim the deduction under Section 80GGC, taxpayers must donate to:
A registered political party under Section 29A of the Representation of the People Act, 1951.
An electoral trust.
Section 80GGC Deduction Limits
Taxpayers can claim 100% of their contributions made through legitimate banking channels, such as internet banking, credit/debit cards, and other online payment methods, as a deduction under this section. This deduction falls under Chapter VI A, meaning the total tax deduction cannot exceed the individual’s total assessable income.
Exceptions to 80GGC Deduction
Donations in cash are not eligible under this section. Only contributions made through non-cash modes are eligible. Donations in the form of gifts or kind cannot be claimed as deductions under this section.
How to Claim the Deduction?
Eligible persons can claim an 80GGC deduction while filing their Income Tax Return (ITR), provided all conditions are met. This deduction can be claimed in ITR forms 1, 2, 3, and 4, depending on the income sources.
When filing an ITR, the taxpayer must provide:
Date of the contribution
Amounts (both in cash and through other modes)
Eligible amount of contribution
Transaction reference number for UPI transfer or cheque number/IMPS/NEFT/RTGS
IFS code of the bank
Supporting Documents Required
As proof of the donation, the political party will issue a receipt containing the name and address of the party, the amount donated, the PAN of the party, the mode of payment, and the donor’s name. These details must be submitted to the employer for inclusion in Form 16 or mentioned in the designated column when submitting tax returns.
Important Keyword: Income Tax, Refund & Notices, Section 245.
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The Income Tax Department sends various notices and intimations to taxpayers for different reasons. One specific type of intimation is under Section 245 of the Income Tax Act. This notice is sent when there is an unpaid tax liability from previous years. In such cases, the department plans to adjust this unpaid amount against any tax refund that is due for the current financial year. The Assessing Officer (AO) has the power to use the tax refund to pay off the outstanding tax from earlier years.
Intimation under Section 245 of Income Tax
An intimation under Section 245 of the Income Tax Act is sent by the Income Tax Department to notify the taxpayer that their previous year’s pending tax dues are being offset against the current year’s refund. These details can be found in the taxpayer’s income tax login account. If the taxpayer agrees with the notice, they can pay the outstanding demand. If they disagree, they can submit a response. If the taxpayer does not respond, the Assessing Officer (AO) will adjust the refund against the outstanding tax demand.
Viewing Details of the Outstanding Tax Demand
Taxpayers can check the details of their outstanding tax demands on the Income Tax e-Filing portal. To do this, they need to log in to the portal and navigate to the “Pending Actions” section, then select “Response to Outstanding Demand.” Here, they can view the intimation and submit their response to the IT Department.
Responses to Notice under Section 245 of the Income Tax Act
When you receive an intimation under Section 245 from the Income Tax Department, it’s crucial to review the details carefully. You must also respond to this notice within 30 days. If you miss this deadline, the outstanding demand as of that date will be adjusted against your refund. Here are the possible responses:
Demand is Correct
If you agree with the outstanding demand, log in to the income tax e-filing portal and submit a response indicating that the demand is correct.
Disagree with Demand (Either in Full or in Part)
If you disagree with the outstanding tax demand, either fully or partially, log in to the portal and submit a response stating your disagreement. In this case, you will also need to provide reasons for your disagreement.
How to Respond:
Login: Access the income tax e-filing portal.
Navigate: Go to “Pending Actions” and select “Response to Outstanding Demand.”
Respond: Choose the appropriate response option (agree or disagree) and provide necessary details and reasons if you disagree.
How to Respond to Intimation u/s 245 of Income Tax?
The steps to submit a response u/s 245 are:
Visit the e-filing portal Visit the e-filing and log in using valid credentials.
Navigate to e-Proceedings Click on Pending Actions > e-Proceedings
View Notice u/s 245 Click on the option to view the notice under the “Self” tab.
Notice or Letter pdf Click on the notice/letter pdf option.
Submit Response Click on the option to submit a response.
Options to Respond to the Notice Details of Outstanding Demand related to 245 demand will be displayed. You can either select Demand is correct or Disagree with Demand (Either full or Part)
Demand is Correct If you select Demand is correct, you will be required to select the checkbox and provide an answer to Have you already paid the demand amount and add the challan details, if already paid click Save.
Disagree with Demand If you select Disagree with Demand (Either full or Part), you will have to add reason(s) for disagreement and click Save.
Declaration Select the Declaration checkbox and click Proceed to E-Verify.
Consequences of No Response to the Intimation u/s 245
Upon receiving an intimation under Section 245 of the Income Tax Act, the taxpayer must submit a response within 30 days. If the taxpayer fails to respond within this period, the outstanding demand, along with the applicable interest, will be adjusted against any refund due. The interest is charged on the principal demand pending for the relevant assessment year (AY). Therefore, both the principal demand and the interest will be deducted from the refund.
Important Keyword: Income Tax, IT Notice, Notice u/s 142(1).
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Section 142(1): Inquiry Before Assessment
Section 142(1) notices are issued by the Income Tax Department for various reasons, including non-filing of returns, discrepancies in tax returns, incomplete information, underreported income, suspicions of tax evasion, reassessment, and statute of limitations. These notices serve as a means for the department to request additional information or clarification regarding the disclosures made in the tax returns.
Purpose of Notice under section 142(1) of Income Tax Act
Section 142(1) of the Income Tax Act empowers the Income Tax Department to issue notices for various purposes, primarily to ensure compliance and accuracy in tax filings. Let’s delve into these purposes in a simplified manner:
Filing of Income Tax Return: If an individual or entity fails to file their income tax return within the stipulated time frame or by the end of the relevant assessment year, the Income Tax Department may issue a notice under section 142(1) prompting them to do so. It’s crucial to note that merely filing the return isn’t sufficient; it must also be electronically verified within 30 days to avoid it being deemed invalid.
Submission of Specific Documents: Even after filing the return, the Assessing Officer (AO) may require the taxpayer to furnish specific accounts and documents to validate the information provided. These could include evidence supporting claimed deductions, invoices related to business expenses, or any other documents deemed necessary for assessment.
Additional Information as Required: The AO reserves the right to seek additional information, notes, or workings from the taxpayer pertaining to specific aspects of their financial affairs. This could include details on assets and liabilities or any other relevant information essential for a thorough assessment.
Receiving a notice under section 142(1) is not uncommon and doesn’t necessarily indicate wrongdoing. It’s primarily a means for the tax authorities to ensure accuracy and completeness in tax filings, thereby fostering transparency and compliance within the tax system.
Sample Notice under section 142(1) of Income Tax Act
Consequences of non-compliance
When a taxpayer receives a notice under section 142(1), it’s imperative to respond promptly. Ignoring such notices can lead to serious consequences, including:
Best Judgment Assessment under section 144: If the taxpayer fails to respond, the assessing officer may resort to Best Judgment Assessment, wherein the officer assesses the taxpayer’s income to the best of their judgment based on available information.
Penalty Imposition of ₹10,000: Non-compliance with the notice may result in the imposition of a penalty of ₹10,000.
Warrant for Search under section 132: In severe cases of non-compliance, the Income Tax Department may issue a warrant for a search operation under section 132 to gather necessary information.
Possibility of Imprisonment: Failure to comply with the notice can also lead to imprisonment for up to 1 year, with or without a fine.
To streamline the assessment process and ensure transparency, the Income Tax Department has introduced E-assessment through the ‘Faceless Assessment Scheme, 2019’. Under this scheme, assessments are conducted in a faceless manner, with exceptions. If the assessing officer remains unsatisfied with the response to the notice issued under section 142(1), they may proceed with scrutiny assessment under this scheme.
Responding to the notice can be done online through the following steps:
Log in to the Income Tax e-filing portal.
Select “Pending Action” and then “E-Proceeding”.
Choose “View Notices” and select the notice for which a response is required.
Submit a response by clicking on “Select Response type for Notice” and choose between Partial Response or Full Response as per the requirement.
Adhering to these steps ensures timely and accurate responses to notices issued under section 142(1), thereby avoiding any potential penalties or legal repercussions.
Important Keyword: Income Tax, IT Notice, Section 143(2).
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Section 143(2): Notice for Scrutiny Assessment
After a taxpayer files their income tax return, the Income Tax Department initiates the review and assessment process. This involves carefully examining the returns to ensure accuracy and authenticity. If there are any discrepancies or additional information is required, the department can issue various notices such as Notice under section 143(1)(a) or Notice under section 142(1), among others.
Failure to respond to these notices or to provide the requested information may lead to further assessment procedures. One such procedure is known as scrutiny assessment, which is initiated when the department issues a notice to scrutinize the return under section of the Income Tax Act. This allows the department to conduct a more detailed examination of the taxpayer’s income and deductions to ensure compliance with tax laws.
Why Notice under section 143(2) is issued?
Under Section 143(2) of the Income Tax Act, the department issues formal notices to conduct scrutiny assessments, typically under Section 143(3).
Scrutiny assessment, or detailed assessment under Section 143(3), involves verifying the accuracy and genuineness of various claims and deductions made in Income Tax Returns. The aim is to ensure that the taxpayer has accurately reported their income and deductions and paid the corresponding taxes.
There are three types of notices under Section 143(2):
Limited Scrutiny: Cases are selected based on specific parameters, often through Computer-Assisted Scrutiny Selection (CASS). This scrutiny focuses on particular areas mentioned in the notice, such as discrepancies in tax credits or property sales.
Complete Scrutiny: A thorough review is conducted of the filed ITR and supporting documents. While cases are still identified through CASS, this scrutiny is not limited to specific areas. However, the assessing officer can only inspect documents relevant to the specific assessment year.
Manual Scrutiny: Cases for manual scrutiny are selected based on criteria defined by the Central Board of Direct Taxes (CBDT). These criteria may change annually and aim to ensure comprehensive examination of relevant cases.
Sample Notice u/s 143(2)
Under Section 143(2) of the Income Tax Act, the notice must be issued within 3 months from the end of the financial year in which the return of income is filed. For example, if a taxpayer files their return for the financial year 2022-23 on July 25, 2023, the AO can issue a notice under Section 143(2) until June 30, 2024, which is three months from the end of FY 2023-24.
Upon receiving the notice, the taxpayer must respond by submitting the necessary documents online or appearing before the AO to provide arguments and evidence.
The AO will then proceed to issue an assessment order after examining the submitted documents. The time period to issue a final assessment order under Section 143(3) is 9 months from the end of the relevant Assessment Year.
Non-compliance with the notice can lead to penalties under Section 272A, amounting to ₹10,000 for each failure. Additionally, the AO may conduct a best judgment assessment under Section 144 and, if the taxpayer is found guilty, imprisonment may be imposed.
