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Section 80C of the Income Tax Act

In computing the total income of an assessee, being an individual or a Hindu…

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In computing the total income of an assessee, being an individual or a Hindu divided family (HUF), section 80C deductions are applicable. This section tells us that if we invest our money into specific investment avenues like life insurance, subscription to certain equity mutual funds or debentures, etc., you will get a reduction in your tax payable amount by way of deduction from tax computable income. The deduction does not exceed Rs. 1,50,000/-.

But the question arises where to invest or if any expenses are made then which are the expenses which will get a deduction, right? So here is the list…

1. Life Insurance: Premiums paid toward all life insurance policies are eligible for tax benefits under Section 80C. This deduction can be claimed for premiums paid towards ensuring self, spouse or wife, dependent children and any member of Hindu Undivided Family (HUF).

2. Public Provident Fund: Public Provident Fund (PPF) contributions are eligible for tax deductions under Section 80C. PPF accounts have a maximum or utmost deposit limit of Rs. 1,50,000/- p.a., therefore, we can claim a deduction of the amount deposited in PPF account under Section 80C.

3. Stamp Duty and Registration Charges: While buying a property, one of the largest expenses you will have to bear is the 4.9% stamp duty and 1% registration charges of sale deed value in Gujarat. To give some benefit to the taxpayers or people are eligible to pay tax, the government has included these expenses under Section 80C of the Income Tax Act, 1961. To the benefit of taxpayers.

4. Sukanya Samriddhi Yojana: Investments made in Sukanya Samriddhi Yojana, which is a saving scheme for the girl child, are to be claimed for tax deduction under Section 80C of the Income Tax Act, 1961. A parent or legal guardian of a girl child, who has not crossed the age of 10 years, can open this account. Sukanya Samriddhi Yojana account can be opened for two girl children. We can open one account per one girl child and can be extended to a third if twins are involved.

5. As tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter-
(a). To any university, college, school or other educational institutions situated within India;
(b). For the purpose of full-time education of any of the persons as specified in the act.

6. As subscription of any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board of an application by such mutual fund in the prescribed form.

7. As subscription to such bonds issued by the National Bank for Agriculture and Rural Development.

8. In an account under the Senior Citizens Savings Scheme Rules, 2004.

9. The insurance, deferred annuity, provident fund & superannuation fund.

10. Unit-linked insurance plan and an annuity plan.

11. Pension fund and subscription to any deposit schemes as specified.

12. Principal repayment of the amount borrowed for purchase or construction of a residential house.

To learn more about taxation (income tax), join our classes Super20. S20 is well known for the Best Tally Classes and #1 Taxation Institute in Ahmedabad.

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Taxes Benefits for Salaried Individuals

As soon as the filing season begins, salaried class are frenzy about taxes they…

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Taxes-Benefits-for--Salaried--Individuals

As soon as the filing season begins, salaried class are frenzy about taxes they must pay for the said financial year. It is important to understand tax slab and what each of salary breakup component means. This can help to figure out how to save on taxes. Here are the important things to understand.

Standard Deduction: Salaried person are given a standard deduction of Rs. 40,000/- from their salary income irrespective of their salary per annum.

House Rent Allowance: This allowance can be claimed by those individuals who live in rented house. This can be partially or completely exempted from tax. Method for computing HRA is given in the income tax act that can be claimed as exemption. Also note that, if you received HRA and don’t live on rent, then it is fully taxable.

Leave Travel Allowance (LTA): Salaried employees can avail exemption for a travelling expenses, i.e., travel fare within India under LTA if the same is reimbursed by the employer. This allowance can only be claimed for a trip taken with your spouse, children, and parents, but not with other relatives. This particular exemption is up to the actual expenses, therefore unless you actually take the trip and incur these expenses, you cannot claim it. It can be avail only 2 times in block of 4 years. Submit the bills to your employer to claim this exemption.

Professional Tax: In our income tax return, professional tax is allowed as a deduction from our salary income. It is usually deducted by the employer and deposited with the state government. The maximum amount of professional tax that can be levied by a state is Rs. 2,500.

Food Allowance: The amount given as food allowance upto Approx. Rs. 15000/-per annum is non-taxable in the hands of employees.

Donation to Political Parties U/s 80GGC: Any Donation made to political parties is exempt from tax if it satisfies certain conditions.

Donation to Charitable Trust u/s 80G: Any donation made to registered charitable trust by cheque is exempt upto 50% of donation amount from tax if it satisfies certain conditions.

Interest On Housing Loan: Under Section 24 of the Income Tax Act, an individual can claim tax deduction of the interest payment on the housing loan up to a maximum amount of Rs. 2,00,000.

Deduction u/s 80C: Following expenses are claimed as exemption u/s 80C. Maximum amount which can be claimed as deduction for the following expenses is Rs. 1,50,000/- per annum.

  • Tuition fees of school or college
  • Life Insurance premium
  • National Saving certificate and Kisan Vikas Patra
  • Employee Linked Saving Scheme
  • Principal Repayment Towards Housing Loan
  • Sukanya Samridhhi Scheme (It is only for those who has girl child)
  • Public Provident Fund
  • Statutory Provident fund
  • Stamp duty and registration charges of house purchase, etc.

NPS: An individual can avail an exemption of Rs.50,000 if he invested in National Pension Scheme under section 80CCD regardless to the deduction of 1,50,000 in 80C.

Mediclaim u/s 80D: This deduction can be avail by an assesse upto Rs.25000 for his family. However, if any of the parents covered by the mediclaim policy is a senior citizen, then the deduction amount is increased to Rs. 30,000.

Education Loan u/s 80E: The deduction allowed is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction. You, however, need to obtain a certificate from your Bank.

You can also write to us at info@s20.in. We provide people of any background a simple, effective and practical training in Accounting, Taxation, GST, Tally. You can know more about our courses at www.s20.in/courses.

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Accounting Reserves: Concept

Several times we have heard the word reserve in accounting but the exact meaning…

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Several times we have heard the word reserve in accounting but the exact meaning is at times not explained in various accounting classes and also most of the classes are not covering in the accounting courses. And even if it is explained in various accounting classes by learned faculties, students fail to understand the basics. They know it’s accounting effect. Do they really know what is it? Or why it is created for?

Let us understand the concept of reserves and their types:

Profit earned by any business is payable to its proprietor. But the proprietor does not withdraw the whole amount of profit. He leaves some amount of profit to maintain the liquidity and strengthen the financial position of the business. This amount is known as the reserve. Reserve is profits, appropriated for a particular purpose.

There is a long list of reserves created for in the books of accounts as explained in various accounting classes. And truly, it is so. However, primarily we can classify reserves in two categories:

  • Revenue reserve
  • Capital reserve

Revenue reserves can be further classified into:

  1. General reserve: Profit determined by the profit and loss statement at the end of the year, the proportion of such profit is not aid to the proprietor, but kept apart is known as revenue reserve. General reserve is created to maintain the liquidity of the business resources, meeting any known contingencies, liabilities, etc.
  2. Specific reserve: If the provision is created for any specific period it is known as a specific reserve. This reserve cannot be utilized for any other purposes. For example- Reserve for Repairs and Maintenance, Reserve for Outstanding Expenses.

On the other hand, Capital Reserve refers to the profit that arises from the sources other than the normal trading activities. Such profit is known as capital profit. A capital reserve is an account on the balance sheet which can be used for contingencies or to offset capital losses. It is built out of capital profit and not out of business profit.

Hence, we can infer that reserve is a great source for financing any long-term project of any company, and if a company which isn’t keen to go for debt, term loan etc. can use this reserve to fully finance their new projects. There are many sub-classifications we focus during our accounting classes on reserves. For more such details you can attend our free demo classes.

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Understanding Methods of Depreciation

Generally, methods for providing depreciation are based on the formula developed on a study of…

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depreciation method - Best accounting classes in ahmedabad

Generally, methods for providing depreciation are based on the formula developed on a study of the behavior of the assets over a period of years for readily computing the amount of depreciation suffered by different forms of assets. However, various accounting institutes focus on a few methods and overlook the other methods. Due to space constraint, we will explain only two most commonly used depreciation methods here.

The two methods for providing depreciation are the Straight Line Method and the Reducing Balance Method. The Straight Line Method is the most suitable and accurate method to adapt in most case. The income tax rules, however, prescribe the Reducing Balance Method except in the case of assets of an undertaking engaged in generation and distribution of power.

Straight Line Method: An equal amount is written off every year during the working life of an asset so as to reduce the cost of the asset to nil or its residual value at end of its useful life. The advantages of this method are that it is simple to apply and give accurate result results especially in the case of leases, patent and copyrights, and also in case of plant and machinery. This method is even known as Fixed Instalment Method.

Methods of Depreciation - best tally classes in ahmedabad

So, it is very simple. And it is like apportioning some expenses every year. So, no need to attend any accounting institute for this purpose.

Reducing Balance Method: Under this method, a fixed percentage of diminishing value of the asset is written off each year, so as to the asset to its break – up value at the end of its life, repairs and small renewals being charged to revenue. This method is commonly used for plants, fixtures, etc. Under this system, the annual charge for depreciation decreases from year to year, so that the earlier years suffer to the benefit of the later years. Also, under this method, the value of the asset can never be completely extinguished, which happens in the early explained Straight Line Method.

Many accounting institutes and academies stop at this juncture instead of teaching students exact formulae of arriving at the proper depreciation rate. But our accounting training in Ahmedabad focuses on every nitty-gritty of this method since this method is generally the only allowed method of calculating income tax applicable to the firm.

In this method, Depreciation goes on decreasing every year. The formula is –

best accounting classes in ahmedabad 2018-12-19

Suppose that the fixed asset purchase price is 10,000, the scrap value is 1,000, and the depreciation rate is 30%.

Using the Reducing balance method, 30% of the depreciation base (net book value minus scrap value) is calculated at the end of the previous depreciation period. Calculation of depreciation for the first three years is shown in the following table.

Understanding Methods of Depreciation - accounting classes in ahmedabad

If you have any questions related to this topic, we will be happy to revert to you or you can visit our accounting institute in Ahmedabad and attend a free demo class of depreciation accounting.

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Double Entry System

Double entry system of book keeping is the most popular scientific system of accounting.…

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double-entry-system | Best Accounting Classes in Ahmedabad

Double entry system of book keeping is the most popular scientific system of accounting. According to it, every transaction has two-fold aspects – debit & credit and both aspects are to be recorded in the books of accounts. This system has been found of great use for recording the financial affairs for all institutions.

How Double book-keeping is helpful?
– By the use of this system the accuracy of the accounting work can be established, through the device of trial balance,
– Profit earned of loss suffered during the period can be ascertained together with details &
– The position of a firm can be ascertained.

For the conceptual clarity, one must know the basic of accounting and the reason why they are used in the way we do. Because at S20, we want things to remain simple people joining our accounting classes, tally classes or GST classes will definitely appreciate this. So, let’s understand the concept of double entry system with an example –

A person starts his business with Rs. 10,000; capital and cash are both 10,000. Transactions entered into by the firm will alter the cash balance in two ways, one will increase the cash balance and other will reduce it. Payment for goods purchased, for salaries and rent etc., will reduce it; sales of goods for cash and collection from customers will increase it.

We can change the cash balance with each transaction but this will not be easy to tally at the end of the financial year. Instead it would be better if all the transaction that lead to an increase are recorded in one column and those that reduce the cash balance in another column; then their net result can be ascertained, if we add all increases to the opening balance of cash and then deduct the total if all decreased we shall know the closing balance. In this manner, significant information will be available relating to cash.

The two columns which are referred above are put usually in the firm of an account, called the ‘T’ form.

This is illustrated below by taking imaginary figures:

Best tally classes in ahmedabad

What we have done is to put the increase of cash on the left-hand side and the increase on the right side; the closing balance has been ascertained by deducting the total of payment, Rs. 2,000 from the total of the left – hand side. Such a treatment of receipt and payment of cash is very convenient.

The proper form of an account is as follows:

Best tally courses in Ahmedabad

The columns are self-explanatory except that the column for reference (Ref.) is meant to indicate the source where information about the entry is available.

The aforementioned outflow and inflow of cash have their specific nature in wider terms which is explained in the next article Rule of debit and credit. Your feedback on this article may be shared at info@s20.in. we are known as premier accounting institute in Ahmedabad. Our flagship Executive of Commerce Course is known for its detailed coverage of accounting topics.

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IL&FS Fiasco and Accounting Statements

Recently, the entire nation has been shocked to see that the institution of the…

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Recently, the entire nation has been shocked to see that the institution of the size, scale and reputation like IL&FS has defaulted on its interest obligations.

It is noteworthy that IL&FS was considered to be one of the most reputed borrowers in India and perceived to be a Government backed institution. We have to understand that what makes such a large institution fail. There may be many reasons, but in the context of this article let us look at the accounting statements only.

Following is a summarized consolidated financial statements highlights of IL&FS in recent past.

Accounting statement

Now we have to understand the items line by line. Because, at Super 20 Training Institute, our aim is to understand these items from a practical perspective. And you are aware that it is the best accounting institute in Ahmedabad. Many accounting institutes in Ahmedabad focus on teaching books. Rather S20 as an Accounting Training Institute has set a benchmark by focussing on such case study based practical approach in learning accounting, taxation, tally, GST etc.

It is apparent that the company was the anyways troubled one looking at the above numbers. The company was borrowing at a fast pace and this has resulted into the highest ever interest expenses being borne by the company. The company’s operating profits are decreasing on one side and on the other side the company’s interest expenses shot up drastically by 21%. The sole reason for this difference was that the company continued to borrow funds from the markets and mostly they were short-term borrowings. As you may be aware that in recent past the short-term interest rates are much higher compared to long-term interest rates. Company’s projects were mostly long-term in nature so they had to ideally raise funds from longer term papers. But the company did the contrary.

So, net if you see revenues of the firm were up by 9% in last one year. That looks quite rosy. Now if we look at the operating profits we have a doubt. Operating profits were down by -13%. That means something is seriously wrong. On rising revenues, the company had negative operating profits.

The company’s depreciation was also not in line with the expectations. It was up about 20%. There also somebody needs to dig deeper. And ultimately that has resulted into the company making cash losses as well as accounting losses. This is very alarming and fishy and only some drastic or magical steps can save this company that we can infer.

Friends, we will examine this case from a financial and accounting ratio analysis perspective in my next article. But as of now what we have understood is that the company was troubled operationally as well as financially. If you do not understand any of this topic discussed above you can approach team S20 for more clarity and understanding. You can also write to us at info@s20.in. We provide people of any background a simple, effective and practical training in Accounting, Taxation, GST, Tally. You can know more about our courses at www.s20.in/courses

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IL&FS fiasco and accounting ratios

We have a space constraint, so let us not discuss what was discusses in…

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We have a space constraint, so let us not discuss what was discusses in the previous article. But you can refer my article IL&FS fiasco and accounting statements for basic understanding.

Now let us straight away understand what are accounting ratios or financial ratios as they are famously referred to.

I have produced direct ratios as calculated by me in MS Excel. If you do not know how to calculate financial ratios or how to arrive at accounting ratios you can approach Super 20 Training Institute – Ahmedabad. We provide such case based, practical and detailed understanding of various topics in our Accounting Courses, Taxation Courses, GST Courses, Tally Courses etc. at our training institute in Ahmedabad.

Now let us look at Operating Profit Margin. In FY1617, Operating Profit Margin was 49%, whereas, in FY1718, Operating Profit Margin was 39%. Such a big erosion in margins is worrisome. That means the company has some serious operating issue which needs to be looked at. Or the figures may be misleading for the previous years.

The next important accounting ratio is EBIT margin. That is Earning Before Interest and Taxes Margin. In FY1617, EBIT Margin was 42%, whereas, in FY1718, EBIT Margin was 31%. This is the significant decline. That means the company has less amount of money to meet their interest expenses.

Finally, we are staring at Net Profit Margin. In FY1617, Net Profit Margin was 1%, whereas, in FY1718, Net Profit Margin was -10%. The company was barely profitable in the previous year. Hence, everything was not ok even in FY1617 also. It was not ignored by everyone concerned with the company. And now we are staring at a big loss in FY1718. Signals were there, but they were ignored.

How default is evident from the above analysis. It is from Interest Coverage Ratio. In FY1617, the company was barely able to meet its interest obligations. On the other side, in FY1718 the interest cover was less than 1.

That means that the company did not have sufficient funds to service their interest obligations. Still, the company kept raising funds from the markets. All these funds were short-term funds basically to see the day has gone off or passed. The management was doing time pass all these days. The regulators were sleeping. The Government thought that the investors like LIC, SBI are taking care of IL&FS. LIC, SBI and other foreign investors were thinking that the management was very much able and worthy. Credit rating agencies were giving AAA rating blindly. Lenders took money from public and loaned to IL&FS thinking it is backed by the Government and anyways AAA. But it was written on the wall that IL&FS is not functioning well. And the worst came true. The institution of this size, scale and reputation are staring at bankruptcy.

Friends, these are the easy tools to analyse the company’s accounting records. Anyone, who wants to understand such topics in detail may contact us at info@s20.in. or visit our website. We are proud to be known as the best accounting training institute in Ahmedabad. All the best.

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Creation and Submission of GSTR- 3B | GST Part-V

This is a Part-V of our ongoing GST series of articles. Today we will…

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This is a Part-V of our ongoing GST series of articles. Today we will discuss about GSTR-3B in this article. Though we have an institute which specializes in GST Training, Taxation Training, we believe that the same knowledge should be shared to common public though they are not part of our GST Course or Taxation Course. Ok let us discuss about GSTR-3B.

GSTR-3B is a simplified summary return and the purpose of the return is for taxpayers to declare their summary GST liabilities for the tax period and the discharge of these liabilities in a timely manner

A normal taxpayer is required to file GSTR-1, 2, & 3 returns for every tax period. In case of extension of due dates for filing of GSTR-1 and GSTR-2, GSTR-3B needs to be filed and subsequently if there is any discrepancy between the system generated 3B and earlier filed 3B the taxpayer will have to pay additional tax, liability and other dues. Looks simple huh…? Actually my accountants / professionals find it very difficult to prepare this due to lack of their GST Training and Taxation Training. Hence, they join various GST Courses or Taxation Courses. Hence, as the best GST Training Institute in Ahmedabad and the best Taxation Training Institute in Ahmedabad, we feel that it is our social responsibility to spread such articles among general public for their benefit.

Who needs to file the GSTR-3B?
All normal taxpayers and casual taxpayers are required to file the GSTR-3B every time there is an extension of due dates of filing for GSTR-1 and GSTR-2. At present as per 27th GST Council meeting, GSTR-3B is to be filled till 30th September, 2018.

Where can I file GSTR-3B?
GSTR-3B can be filed from the returns section of the GST Portal. In the post-login mode, you can access it by going to Services > Returns > Returns Dashboard. After selecting the financial year and tax period, GSTR-3B, (if applicable), in the given period will be displayed.

What is the due date for filing the GSTR-3B?
GSTR-3B is to be filed on 20th day from the end of the month for which return is to be filed.

Details in Section – 3.1 Tax on outward and reverse charge inward supplies
Enter the Total Taxable value, Integrated Tax, Central Tax, State/UT Tax and Cess under respective nature of supplies column. In case of other outward supplies (Nil Rated, exempted) and Non-GST outward supplies, the total taxable value imply the total values of such supplies, excluding taxes. In certain cases reverse charge is also applicable. The same is to be filled under reverse charge inward supplies row of section 3.1.

Details in Section – 3.2 Inter-state supplies
In the section Supplies made to Unregistered Persons or Registered persons or composition scheme holder as applicable following information is to be filled.

– From the Place of Supply (State/UT) drop-down list, select the place of supply.

– In the Total Taxable Value field, enter the total taxable value for each State/UT.

– In the Amount of Integrated Tax field, enter the amount of integrated tax. Please ensure that the integrated tax amount provided here does not exceed the integrated tax liability declared. Only integrated tax amount has to be declared, cess amount is not required to be mentioned.

Details in Section – 4. Eligible ITC
Eligible ITC tile in GSTR-3B will reflect the total value of Integrated Tax, Central Tax, State/UT Tax and Cess net ITCs. There are various types of ITC available for the eligible inputs. Normal ITC on purchase of goods is to be filled up in row no. 5 all other ITC.

Details in Section – 5. Exempt, Nil and Non GST inward supplies
Exempt, Nil and Non GST inward supplies tile in GSTR-3B will reflect the total value of Inter-state and Intra-state supplies.

Details in Section – 5.1 Interest and Late Fee

Interest and Late Fee tile in GSTR-3B total value of Integrated Tax, Central Tax, State/UT Tax and Cess.

Note: Late fee for the month includes previous month’s late fee charged due to delay in filing of return. The calculation is [Date of Filing –Due date of Filing)] * 25/day * per Act (CGST/SGST). Late of late fee is Rs. 10/- if no liability accrues during the month. The late filing fees are auto populated and need not to be calculated manually.

File GSTR-3B
From the Authorised Signatory drop-down list, select the authorized signatory then we can file GSTR-3B either by EVC or by digital signature of the signatory.

So guys, next time whenever you have any doubts in this regard, feel free to contact us. We are into Tally Training, Accounting Training, Taxation Training, GST Training. Our Institute is located at Ashram Road, Ahmedabad. We do have Taxation Courses, Tally Courses, Accounting Courses, GST Courses in Ahmedabad for various aspirants.