Medical Expenditure – 80D

John Billings has rightly said “Health is like Money, we never have a true idea of its value until we loss it”. In the fast moving economy, there is a vast increase in the amount paid towards medical expenditure. Day by day the medical treatment is getting more and more expensive and health insurance is turning out to be a mandatory thing rather than the optional one.

In order to boost the individual for health insurance, Government is providing deduction under section 80D of the Income Tax Act, 1961 towards the premium paid towards health insurance. Deduction under section 80D is available to individual and Hindu Undivided Family. The article highlights the provisions of section 80D of the Income Tax Act, 1961 as applicable for the assessment year 2019-2020.

Deduction under Section 80D Available to Individual –

1.    Amount paid towards insurance premium or amount paid for preventive health check-up of self or his family up to a maximum amount of INR 25,000;

2.    Amount paid towards insurance premium or amount paid for preventive health check-up of parents of the assessee up to a maximum amount of INR 25,000;

3.    Amount paid towards medical expenditure for self or any member of the family of the assessee up to a maximum amount of INR 50,000;

4.    Amount paid towards medical expenditure for parents of the assessee up to a maximum amount of INR 50,000.

It must be noted that in case of preventive health check-up (as mentioned at point 1 and 2 above) the maximum amount of INR 5000 is allowed as deduction.

Further it must also be noted that deduction under section 80D is available on medical expenditure suffered by an individual on the health of senior citizen provided that no amount has been paid to effect or to keep in force an insurance on the health of such person.

Allowable Mode of Payment For Claiming Deduction –

Amount paid towards preventive health check-up –

Any mode of payment, including cash, is allowed for claiming deduction towards amount paid in case of preventive health check-up.

Amount paid towards any other case –

In any other case, any mode of payment is allowable except cash payment. In other words, cash payment is not an allowable mode of payment.

Deduction Under Section 80D Available to Hindu Undivided Family –

1.    Amount paid towards insurance premium of any member of the Hindu Undivided Family up to a maximum amount of INR 25,000;

2.    Amount paid towards medical expenditure of any member of the Hindu Undivided Family up to a maximum amount of INR 50,000.

Treatment of Insurance Premium Paid in Lumpsum –

In order to give corrective deduction in case of the insurance premium which is paid on the lump-sum basis, sub-section (4A) has been inserted to section 80D. The said newly inserted sub-section (4A) to section 80D is effective from 1^st April, 2019.

According to said sub-section, in case of lump-sum payment of insurance premium, in a previous year to effect or to keep in force an insurance on the health of specified person for more than a year, in such case, deduction shall be allowed equal to the appropriate fraction of the amount for each of the relevant previous year.

Applicability of Secretarial Audit

The secretarial audit is basically a compliance audit which is part of the total compliance management in an organization. The main objective of the secretarial audit is to ensure that all the legal and procedural aspects have been complied with by the company and in case of any noncompliance, the same is timely and duly detected along with corrective measures.

The secretarial audit can be conducted only by the practicing company secretary who is being appointed as Secretarial Auditor of the company.

The provisions relating to secretarial audit is contained under section 204 (1) of the Companies Act, 2013.

 Applicability Criteria of Secretarial Audit –

Below mentioned list of companies are required to obtain ‘Secretarial Audit Report’, as per provisions of section 204 of the Companies Act, 2013 read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 –

1.    Every listed company (as per section 204 (1) of the Companies Act, 2013);

2.    Every public company having a paid up share capital of INR 50 Crore or more [as per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014];

3.    Ever public company having a turnover of INR 250 Crore or more [as per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014].

Other Important Aspects of Secretarial Audit –

·  The company needs to give complete assistance and facilities to the company secretary in practice in order to carry out the audit of the secretarial and related records of the company.

·     In case of any qualification, observation or any other remarks made by the company secretary in his secretarial audit report, the board of directors are required to explain the same in full in their board’s report as required in terms of section 134 (3) of the Companies Act, 2013.

·     In case of any default on the part of the company or any officer of the company or the company secretary in practice, the same would be punishable with the fine of minimum INR 1 lakhs and maximum up to INR 5 Lakhs.

Form of Secretarial Audit Report –

The Company secretary in practice is required to provide the secretarial audit report in Form No. MR-3.

Time Period of Submission of Secretarial Audit Report –

The Company secretary in practice is required to submit the secretarial audit report within a period of 30 days from the date of appointment.

Surcharge for Assessment Year 2019-2020

In simple terms, surcharge means an additional charge or an additional tax. Under the income tax, surcharge becomes applicable in case the taxable income of the assessee exceeds the specified limit.

The basic motto behind the levy of the surcharge, under the income tax, is to ensure that the higher income earner contributes more towards the taxes rather than the lower income earner.

Under Income Tax, the rates of surcharge vary on the basis of the different class of taxpayers (i.e. assessee). Below table provides surcharge rates as applicable to difference assessee –

ASSESSEE	SPECIFIED LIMIT FOR APPLICABILITY OF SURCHARGE	RATE OF SURCHARGE
INDIVIDUAL	Cases wherein taxable income is between INR 50 Lakhs to INR 1 Crore	10% on the amount of income tax
	Cases wherein taxable income is more than INR 1 Crore	15% on the amount of income tax
NON-RESIDENT INDIVIDUAL	Cases wherein taxable income is between INR 50 Lakhs to INR 1 Crore	10% on the amount of income tax
	Cases wherein taxable income is more than INR 1 Crore	15% on the amount of income tax
HINDU UNDIVIDED FAMILY (HUF)	Cases wherein taxable income is between INR 50 Lakhs to INR 1 Crore	10% on the amount of income tax
	Cases wherein taxable income is more than INR 1 Crore	15% on the amount of income tax
ARTIFICIAL JURIDICAL PERSON / AOP / BOI	Cases wherein taxable income is between INR 50 Lakhs to INR 1 Crore	10% on the amount of income tax
	Cases wherein taxable income is more than INR 1 Crore	15% on the amount of income tax
FIRM	Cases wherein taxable income is more than INR 1 Crore	12% on the amount of income tax
DOMESTIC COMPANY	Cases wherein taxable income is between INR 1 Crore to INR 10 Crore	7% on the amount of income tax
	Cases wherein taxable income is more than INR 10 Crore	12% on the amount of income tax
FOREIGN COMPANIES	Cases wherein taxable income is between INR 1 Crore to INR 10 Crore	2% on the amount of income tax
	Cases wherein taxable income is more than INR 10 Crore	5% on the amount of income tax
CO-OPERATIVE SOCIETIES	Cases wherein taxable income is more than INR 1 Crore	12% on the amount of income tax
LOCAL AUTHORITIES	Cases wherein taxable income is more than INR 1 Crore	12% on the amount of income tax

ILLUSTRATION –

Let us take an example on surcharge for ay 2019-20 just to understand the levy of surcharge taking the income of say Mr. X (an individual), a salaried person, into consideration. The following table would help to understand the calculation of surcharge –

PARTICULARS	AMOUNT
Total Taxable Income of Mr. X	53,00,000
Total Tax Payable on above Income	14,02,500
Since Total Taxable Income of Mr. X is above INR 50 Lakhs surcharge would be applicable
Surcharge Payable (10% of INR 14,02,500)	1,40,250
Total Tax Payable (including surcharge)	15,42,750

It must be noted here that the surcharge is levied on the total income tax and not on the income of the assessee. Further, the Health & Education Cess payable @ 4% would be levied on the aggregate of both income tax payable and surcharge.

IND as Applicability

In 2015, the Ministry of Corporate Affairs notified the Companies (Indian Accounting Standards i.e. IND AS) Rules, 2015. Till date three Amendment Rules have already been issued by MCA amending thereby the said rules in the year 2016, 2017 and 2018.

Applicability of IND as –

Due to the new introduction, the applicability of IND AS had been introduced phase-wise. The following table would help to understand the applicability of IND AS –

EFFECTIVE DATE	PARTICULARS	REMARKS
1st April, 2016	IND AS applicable to following – The company (whether listed or not listed) having net worth for greater than or equal to INR 500 Crore. It must be noted that the holding, joint venture, subsidiary or associate companies of the company shall be covered above.	Net worth shall be checked on the basis of the preceding three previous years i.e. 2013-14, 2014-15 and 2015-16.
1st April, 2017	IND AS applicable to following – The company whose equity shares or debt securities are either listed or is in the process of being listed on any stock exchange in India or Outside India as on 31st March, 2016. Unlisted companies having net worth for greater than or equal to INR 250 Crore. It must be noted that the holding, joint venture, subsidiary or associate companies of the company shall be covered above.	Net worth shall be checked on the basis of the preceding four previous years i.e. 2013-14, 2014-15, 2015-16 and 2016-17.
1st April, 2018	IND AS applicable to all the Banks, insurance companies and NBFCs having the net worth of more than or equal to INR 500 Crore. NBFCs include stock brokers, core investment companies, venture capital etc. It must be noted that the holding, joint venture, subsidiary or associate companies of the company shall be covered above.	Net worth shall be checked on the basis of the preceding three previous years i.e. 2015-16, 2016-17 and 2017-18.
1st April, 2019	NBFCs whose equity or debt securities are listed or is in the process of listing on any of the stock exchange in India or outside India and the said NBFCs is having the net worth of less than INR 500 Crore. Unlisted NBFCs having the net worth greater than or equal to INR 250 Crore but less than INR 500 Crore. It must be noted that the holding, joint venture, subsidiary or associate companies of the company shall be covered above.

It must be noted that IND AS was made applicable from 1^st April, 2018 for all the banks, however, the Reserve Bank of India has postponed the applicability of IND AS on commercial banks (except regional rural banks) and the same would be applicable from 1^st April, 2019.

Similarly, IND AS was made applicable from 1^st April, 2018 on insurance companies, however, the Insurance Regulatory and Development Authority of India has postponed the applicability of IND AS in the insurance sector for two years and the same would be applicable from 1^st April, 2020.

Net worth calculation will be based on the accounts of the company as on 31^st March, 2014 or the first audited period ending after that date. Net worth shall be total of the following –

Net Worth = Paid up share capital + all the reserves out of the profits & securities premium account – (accumulated losses + deferred expenditure + miscellaneous expenditure not written off).

Companies are allowed to voluntarily select incorporation of IND AS in their accounting period beginning on or after 1^st April, 2015, however, it is important to note here that once the company opts to report their financial statement as per IND AS, they will have to apply it consistently for the rest of the year in future as well.

Time to know your GST

It’s been more than a year and people are still trying to figure out the difference GST has brought to their budget. How good is GST? What is Income Tax Credit? How to calculate GST? Here, in this article, we have tried to answer some of these queries. 

Goods and Service Tax is regarded as the biggest indirect tax reform in India. It came into effect on 1st July 2017 and replaced major indirect taxes like Service tax, VAT, Excise duty etc. 

What is GST? 

GST is an indirect tax which is levied on the supply of goods and services. It is a comprehensive, destination-based tax levied on sale, consumption, and manufacturing of goods or rendering of services. 
GST is a value added tax where tax is levied on every point of production. It has replaced almost all indirect taxes levied by state and central government. Replacement of several indirect taxes with one tax will help mitigate double taxation, cascading effect of taxes, tax evasion, etc. and help our economy to create a national front for movement of goods and services all over India. 

GST has adopted a dual GST model in which both central and state government levy tax on goods and services. There are four components of GST which are as follows :

• SGST or State GST, which is collected by the state government and is levied on an intra-state movement of goods and services.
 
• CGST or Central GST, which is collected by the central government and is levied on an intra-state movement of goods and services along with SGST. 

Example: A dealer in Maharashtra sells goods to another dealer in Maharashtra worth INR 70,000. The rate of GST on these goods is 12%. CGST @6% and SGST @6% will be levied and the total GST will amount to INR 8,000. 

• IGST or Integrated GST, which is collected by central government and is shared between central and state government. It is levied on an inter-State movement of goods and services. 
Example: If the same dealer sells goods to another dealer in Gujarat. Then IGST @12% will be charged. 

• UTGST or Union Territory GST, which is collected on the supply of goods and services in any of the Union Territories. 
GST slabs are fixed at the rates 5%, 12%, 18% and 28%, where goods under the tax bracket of 5% contain goods of mass consumption like spices, oils etc. Goods under the tax bracket of 12% contain processed foods. Under 18% tax bracket we have FMCG goods, refrigerators etc., and under the tax bracket of 28% we have luxury items like cars etc. 

Income Tax Credit 

Income Tax Credit or ITC means you can avail credit of the tax paid on input while paying tax on output. Suppose you have paid INR 350 as the tax on input and your tax liability on output comes out to be INR 500. Now you can avail tax credit of INR 350 earlier paid as tax and pay INR 150 (500-350) as tax. 

GST and ITC explained with an example 
Particulars Dealer 1 Dealer 2 Dealer 3 

Selling Price
6000
8000
12000 
GST @ 18% 
• CGST @ 9% 
• SGST @ 9%
540 
540
720 
720
1080 
1080 

Selling Price + GST 

7080 
(6000 + 1080)
9440 
(8000 + 1440)
14160 
(12000 + 2160) 


Income Tax Credit
0
1080
1440 
(1080 + 360) 

Total Tax Payable
1080
360
720 

The total amount of tax in this whole process will be INR 2,160. This process continues until the product is finally consumed by the ultimate consumer. 

Section 80E –Deduction for Education Loan

Section 80E of the Income Tax Act provides a tax deduction from the total income in respect of educational loans. The deduction under section 80E can be claimed in respect to educational loans taken for higher studies of the children or spouse of a taxpayer. However, it is important to note that the deduction under section 80E is available only on the interest component of an educational loan. The principal repayment of the loan is not allowed as deduction. 

Deductions under Section 80E 

As per the Income Tax Act, “higher education” implies any course of study pursued after qualifying the Senior Secondary Examination or equivalent from any board or recognized university of the Central or State Government or any authority authorised by the Central or State Government or local authority to do so. An educational loan taken for foreign studies are also eligible as a deduction under section 80E of the IT Act. Section 80E also provides a deduction on loan availed for vocational training. 
Section 80E Deduction Eligibility Criteria. 

Following are the eligibility criteria for availing deduction under section 80E: 

• Only individuals are eligible to claim the deductions under section 80E. Companies and HUF cannot claim this deduction. 
• The deduction available under 80E is can be claimed for the interest component of an educational loan. 
• Education loans obtained from charitable organisations and recognised financial institutions are eligible for deduction under 80E. Education loans or any other loans taken from relatives or friends are not eligible for deduction under this section. 
•The deduction under this section is allowed only if the taxpayer has availed education loans himself/herself or his/her spouse or children. 
•The deduction under section 80E can be claimed only if the loan is taken for purpose of higher education. 
•The deduction under this section can be availed only for 8 years only, beginning from repayment from the first year. 
•The tax deduction under this section can be claimed only if the loan is taken on the taxpayer's name. 

Deduction amount under section 80E 

• The deduction under this section is available for the interest amount only on the education loan taken for higher studies and there is no upper limit. A taxpayer can avail tax deduction on entire interest paid on such loan but not the Principal Amount. 
• The deduction under section 80E is only available if interest is paid out of taxable income chargeable to income tax (i.e., deduction under 80E cannot exceed the taxable income). 

Section 80E Foreign Education 

The deduction under section 80E can be availed for interest component of an educational loan even when the loan is taken for a student studied abroad. Hence, the deduction allowed under 80E for education loan is a major incentive to the taxpayers for educating either himself/herself, children or spouse in India or abroad. 

Exclusive nature of Deduction 

Deduction available under Section 80E is over and above other deductions available under Chapter VI A of the Income Tax Act. That is, even if a taxpayer has availed the deduction of Rs, 1,50,000 U/s 80C of the Income Tax Act, the taxpayer an still claim the deduction under Section 80E. 

Thus, a taxpayer being an individual availing education loan for higher education should avail the tax benefit in form of deduction provided by Section 80E of the Income Tax Act 1961.