Old V/s New Tax Regime (FY 2020-21)- Choose Right Option ???

New section 115BAC is inserted in Income Tax Act by the Finance Act 2020 and it is applicable w.e.f 1st April 2020 and will be applicable on Individuals and HUFs for assessment year 2021-22 and subsequent assessment years. 

Under this section taxpayers i.e Individuals and HUFs has an option to pay the tax on the basis of concessional slab rates subject to some conditions. 

The new income tax slab rates as per section 115BAC are as follows: 

So, it is pretty evident that while the old regime had different tax slabs for different age groups, new tax does not provide the varied tax slabs on basis the age groups. 

Conditions to opt new tax scheme - 

In order to avail the benefit of section 115BAC, an individual/HUF assessee has to forgo the ‘specified Exemptions and Deductions’ under various chapters and sections of the Income Tax Act which are as follows:

· Leave travel concession as contained in clause (5) of section 10; 

· House rent allowance as contained in clause (13A) of section 10; 

· Some of the allowance as contained in clause (14) of section 10; 

· Allowances to MPs/MLAs as contained in clause (17) of section 10; 

· Allowance for income of minor as contained in clause (32) of section 10; 

· Exemption for SEZ unit contained in section 10AA; 

· Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16; 

· Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law); 

· Additional deprecation under clause (iia) of sub-section (1) of section 32; 

· Deductions under section 32AD, 33AB, 33ABA; 

· Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35; 

· Deduction under section 35AD or section 35CCC; 

· Deduction from family pension under clause (iia) of section 57; 

· Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). 

However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed. 

Examples for Comparative analysis of Old Vs New Tax regime: 

-Assume 60 years of age group- 

-Deductions Applicable: Rs 1.5 Lakh u/s 80C; Rs. 50,000 standard deduction; Rs. 25,000 u/s 80D; Rs. 2 Lakh home loan interest u/s 24. Total of Rs 425000/- 

-Total Tax Calculated is including Tax+ Edu Cess ( Surcharge is not Calculated) 

Income: Rs. 10 Lakh (with 4.25 Lakh Deduction)

                                               

Particular	Old Regime with Deductions(in Rs.)	New Regime (in Rs.)
Income	10.00 Lakh	10.00 Lakh
Exemptions/ Deductions	4.25 Lakh	Nil
Taxable Income	5.75 Lakh	10.00 Lakh
Total Tax	28,600	78,000

Income: Rs. 10 Lakh (with 1.00 Lakh Deduction)

Particular	Old Regime with Deductions (in Rs.)	New Regime (in Rs.)
Income	10.00 Lakh	10.00 Lakh
Exemptions/ Deductions	1.00 Lakh	Nil
Taxable Income	9.00 Lakh	10.00 Lakh
Total Tax	96,200	78,000

Income: Rs. 25 Lakh (with 4.25 Lakh Deduction)
                                              

Particular	Old Regime with Deductions (in Rs.)	New Regime (in Rs.)
Income	25.00 Lakh	25.00 Lakh
Exemptions/ Deductions	4.25 Lakh	Nil
Taxable Income	20.75 Lakh	25.00 Lakh
Total Tax	4,52,400	5,07,000

Income: Rs. 25 Lakh (with 1.00 Lakh Deduction)

Particular	Old Regime with Deductions (in Rs.)	New Regime (in Rs.)
Income	25.00 Lakh	25.00 Lakh
Exemptions/ Deductions	1.00 Lakh	Nil
Taxable Income	24.00 Lakh	25.00 Lakh
Total Tax	5,53,800	5,07,000

Selection of New or Old Tax Regime depends upon some factors which are explained as follows: 

1. Nature of Income:- Whether assesse’s of Income is only from the “Salary” or it will include income from other heads later in the current financial year i.e between 01.04.2020 to 31.03.2021. If assessee is expecting his income from other heads for which amount can’t be determined in the beginning of financial year or any time before the end of relevant financial year then assessee should not make hurry to opting the tax regime old or 

For example generally a salaried employee receive some incomes from his employer in the mid or by the end of financial year like Bonus, Performance related pay etc. for which employee don’t know the exact amount which is expected to be received in the mid or by the end of relevant financial year. 

So income is a variable factor while opting old or new Tax Regime and must be considered & properly analyzed by the assessee. 

2. Exemptions/Deductions to be availed:- Before opting the old or new Tax Regime assessee must review all the exemptions/deductions which are to be availed by him like number of exemptions/deductions, quantum/amount of exemptions/deductions and their impact on taxable income i.e whether is there any change in slab of his income such due to exemptions/deductions. 

For example sometimes assessee has less number of exemptions/deductions with very low impact on taxable income like an assessee may or may not have interest on housing loan which is available for deduction U/S 24(b) of Income Tax Act 1961 or if assessee has the same but amount is not as much as it will change the slab of Income after considering the same. 

Hence it is advice to all the taxpayers covers u/s 115BAC that make proper analysis of your Tax liability before opting old or new Tax Regime, even this section also provided that assessee can opt old or new Tax Regime before filing his return of income. 

So it is advised to all taxpayers that they should opt the old or new Tax Regime only while file your income tax return. 

Note: 

To calculate/access your tax liability under both old and new Tax Regime you may refer income tax calculator F.Y 2020-21 which is available at incometaxindiaefiling.gov.in 

https://www.incometaxindiaefiling.gov.in/Tax_Calculator/index.html?lang=eng

What are the conditions to avail the new regime and who can opt it? 

1) Any Individual can opt the new tax regime, meaning to say that the new regime is an optional regime and Individual taxpayers can choose between the old & new tax regime. 

2) Further, where the taxpayer earning income from business has opted for the new regime for any year and withdraws it in any subsequent year, cannot opt for the new regime again and has to follow the old tax slabs only. However, other Individual taxpayers can choose between the regimes every year. 

3) CBDT circular issued on April 13, 2020 has directed all the employers to obtain a declaration from employees, if they wish to opt for the new tax regime. However, employees will still continue to have the right to choose between the tax regimes at the time of filing the return. 

Individuals opting for the new regime has to forego certain exemptions and deductions which were available with the old regime. 

CBDT has issued a circular C1 of 2020 dated 13th April on clarification of TDS under section 115BAC . 

Main points which are clarified by CBDT through this circular are as follows: 

1. If an employee having Income from other than Income under the head “ Profits & Gains of Business or Profession” and willing to opt new Tax Regime U/S 115BAC may intimate the duductor being his employer of such intention on each financial year and upon such intimation the deductor shall compute his total income and deduct TDS accordingly. 

If such intimation is not made by employee the employer shall make TDS without considering the provisions of section 115BAC. 

2. It is also clarified that if intimation made by employee to opt new Tax Regime U/S 115 BAC and willing to deduct TDS accordingly during the financial year in such case the employee can’t modify his option during financial year to opt old Tax Regime. 

However at the time of filing of return of income the option could be different from the intimation that made by such employee to the employer for that financial year.

For Query Reach at - unificonsultancy@gmail.com

CIBIL- The Fundamental Report for Bank Loan

CIBIL stands for Credit Information Bureau (India) Limited which is a part of “transunion” an american multinational group. It maintains credit files of around 600 million individuals and 32 million businesses. TransUnion is one of four credit bureaus operating in India and is majorly trusted by banks and Financial institutions due to its greater reliability and popularity in the Indian financial sector.

As from above it is clear that CIBIL is an agency that mainly collects and maintain credit information of customers and uses it for information purposes of lenders, borrowers and ultimately the economy. 

Now let us understand that how CIBIL works and why it is so important ?

i) All the banks and financial institutions operating in india are under an obligation to provide monthly reporting to CIBIL about their borrowers credit history whether they had repaid the loan, credit cards bills, etc on time or had defaulted in either repayment /interest payment.

ii) Based on such credit information from banks it uses it for further dissemination to lenders for credit evaluation process because whenever a prospective customer approaches any lender for availing credit then such lender prima-facie asks that customer to submit the CIBIL report in order to analysis his credit worthiness.

iii) CIBIL does the rating of both Institutional and Individual Customers based on their credit history and rate them based on CIBIL’s internal rating parameters.

iv) It must be noted here that the CIBIL score is not only useful for the lenders but also for the customers in planning their credit requirements accordingly.

v) A CIBIL score is basically a three digit numeric score of your credit history ranging from300-900.It is calculated by analyzing the credit history and enquiries made by lenders on behalf of borrowers. The Score indicates the ‘probability of default’ by the borrower in future.

vi) The lower the score the poor it is and closer the score to 900 the higher are the chances that your loan application will be approved. It is important to note that nearly 90% of individuals loans are granted with score greater than 750 which is considered to be a fair score in most of the cases by the lenders.

vii) CIBIL RANK– It is a specialized facility designed only for institutional customers that have outstanding loans of Rs. 10 lakhs to Rs. 50 crores in which CIBIL provides a Rank ranging from 10 to 1. It can be obtained only by the lenders for taking rational decisions but subject to non disclosure to any third party and by the company itself. A score of 10 is considered to the worst and 1 is the best.

viii) We can say that it is forecasting future based on historical data of borrowers.

ix) CIBIL Score impacts your borrowing power because a good CIBIL score may fetch you credit at comparatively lower prices.

Therefore from the above factors we understood that how important is the CIBIL score whether you are going to apply for a loan for your business or a personal loan or even a small credit card application. Hence it is very crucial to keep your CIBIL score good so as to not to face any rejection of credit application.

WHAT IF YOU ARE UNABLE TO VIEW YOUR CREDIT SCORE OR GENERATE YOUR CIBIL REPORT ON CIBIL WEBSITE:

If you are unable to get your CIBIL score or report, then this is not a case to worry about because CIBIL displays the credit information of only such borrowers who have a considerable credit history with lenders.

Say it is written as NA or NH then it might be that the customer is a new having no credit history or he has not done any transactions in past 24 months. 

In such a case you not to worry and you can start/resume your credit history by availing a fresh loan/credit card to appear in CIBIL database. However it is quite often seen that lenders prefer borrowers with a credit history.

Basic points to improve or to maintain your credit score intact:

i) Pay your dues on time:Late payments are viewed negatively by lenders. 

ii) Keep your balances low:Always be prudent to not use too much credit, control your utilization.

iii) Maintain a healthy credit mix: It is better to have a healthy mix of secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards). Too many unsecured loans may be viewed negatively.

iv) Do not apply in excitement:You should not apply here and there and everywhere very frequently and excessively. It may impact your history. 

v) Monitor your co-signed, guaranteed and joint accounts monthly:In co-signed guaranteed or jointly held accounts, you are held equally liable for missed payments. Your joint holder’s (or the guaranteed individual) negligence could affect your ability to access credit when you need it.

vi) Review you credit history frequently throughout the year:Monitor your CIBIL Score and Report regularly to avoid unpleasant surprises in the form of a rejected loan application.

You can trace your CIBIL score and generate CIBIL report by paying a nominal amount of Rs 550/-, Rs 800/- and Rs 1200/- for 1 month, 6 months and 1 year subscription respectively on CIBIL website(www.CIBIL.com) However viewing your credit score and one credit report with limited features per calendar year is absolutely free.

DISPUTES/ERRORS with CIBIL

It is quite possible that there might be certain errors in your CIBIL report which can be related to your Personal Information, Loan history, Income, etc then in such cases you have an option to directly raise a dispute with CIBIL by filing online Dispute resolution form which will be processed within 30 days of raising the dispute.

Your CIBIL information will be updated accordingly after rectifying the errors.

An important thing to note here is that CIBIL considers only your credit history pertaining to any loans and doesn’t have any bearing on your Income, asset or any other factors to determine your credit score.

Therefore it is correct to say that CIBIL Score is a lender’s very important thermometer with the help of which they diagnose their borrowers.

Financial Audit Under Covid-19

Impact of Corona Virus on Audit of Financial Statements for the Financial Year 

ending March 31, 2020

COVID-19 has already had a significant impact on Indian and global trade and economy. This may also have accounting, disclosure, internal control and auditing implications for many entities. There is a great deal of uncertainty as to how the COVID-19 situation will continue to evolve and the scenario is rapidly changing. 

To enable the auditors to perform audits, additional care may be required and alternate audit procedures may need to be performed in order to obtain sufficient appropriate audit evidence. 

Areas which require special attention of auditors in current scenario are mentioned below along with reference of relevant Standards on Auditing (SAs): 

1. SA 315 & SA 320-Identifying and Assessing the Risk of Material Misstatement and Materiality in Planning and Performing Audit 

The auditor should also discuss with those charged with governance and management whether the impact of the COVID-19 has been incorporated into their risk assessment processes and how they have identified and assessed the significance of the emerging business risks. 

The auditor should consider the implications of below matters when obtaining an understanding of the entity and its environment, in light of its objectives and other business risks. 

Entities and auditors would have to evaluate risks arising from the following areas: 

· Operational disruption resulting arising from significant drop in demand, reduced customer base, disruption in supply chain, employee’s absence or work from home, public lock down etc. 

· Contractual non-compliance resulting in contractual breaches 

· Liquidity and working capital issues due to possible lower cash flows. 

· Asset valuations – downward asset valuations 

2. SA 540-Assessing Financial Impact and their Reasonable Estimation 

While accounting some specific accounting issues related to estimates arise and those are to be made by the management. For Eg 

a) Impairment of Goodwill, Property Plant and Equipment, Intangible Assets and Valuation & impairment of receivables, loans and advances. 

b) Valuation of defined benefit plans and obligations – due to significant changes in employee strength. 

c) Employment termination benefits 

d) Insurance recoveries related to business interruptions Etc 

Significant assumptions including projected cash flows, used in these accounting estimates may be affected by the impact of COVID-19. Hence, the auditor should use procedures as prescribed by SA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures to check whether : 

(a) the accounting estimates, including fair value accounting estimates, in the financial statements, whether recognised or disclosed, are reasonable; 

(b) related disclosures in the financial statements are adequate 

3. SA 501-Valuation of Inventory on date other than date of financial statements i.e 31 st March 2020 

Due to government-imposed shutdowns or due to unavailability of the client, it may not be practicable for most of the business entities to conduct physical verification of inventory as on the date of the financial statements i.e. 31st March, 2020. 

The auditor would need to comply with the procedures given in SA 501 which says that If physical inventory counting is conducted at a date other than the date of the financial statements, the auditor shall, in addition to the procedures prescribed, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial statements are properly recorded. 

4. 560-Subsequent Events or Events occurring after reporting Date 

Entities must disclose significant recognition and measurement uncertainties that might have been created by the outbreak of the COVID -19 in measuring various assets and liabilities. They should also disclose how they have dealt with the impact of COVID -19 on the financial position of the entity. 

Adjustments to assets and liabilities are required to be made for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date. 

However, adjustments to assets and liabilities are not appropriate for events occurring after the balance sheet date, if such events do not relate to conditions existing at the balance sheet date. Disclosure should be made in the report of the approving authority of those events occurring after the balance sheet date that represent material changes and commitments affecting the financial position of the enterprise. 

5. SA 570- Going Concern 

COVID-19 is resulting in significant operational disruption and presents a threat for many businesses. Entities and audit teams need to consider the implications on the assessment of going concern and viability in the financial report and whether these circumstances will result in prolonged operational disruption which will significantly erode the financial position of the entity or otherwise result in failure. This is critically important for the going concern assessment. 

Auditors will need to consider whether the threat to liquidity as a result of supply/demand disruption presents a material uncertainty to the going concern status for the 12 months look forward period. SA 570(Revised) also requires auditors to consider events that may cast significant doubt on the entity’s ability to continue as a going concern beyond the period of management’s assessment. Audit teams should robustly assess the going concern and viability risks relating to COVID-19 threat in compliance with SA 570(Revised). This includes evaluating whether there is adequate support for the assumptions underlying management’s assessment and the consistency of these assumptions across the entity’s business activities. 

6. SA 580- Written Representation  

As per SA 580, the auditor should obtain written representations from the management regarding the various estimates and assessments made by the management. 

The written representations should be exhaustive, containing the occurrence, method of measurement, completeness of transactions recorded and the disclosure of financial impacts in the financial statements. 

Auditors need to assess whether any specific representations may be required to be obtained from the Management in relation to Managements’ assessment of impact from the ongoing outbreak of COVID-19 on the financial statements for the year ending March 31, 2020 as well as for the reasonable foreseeable future. 

7. SA 700, SA 705, SA 706- Auditor’s Opinion 

Some situations where the Auditor may need to express a modified opinion due to COVID-19 are cited below: 

The auditor is unable to obtain sufficient appropriate audit evidence relating to material component audited by the other auditor as per SA 600 due to COVID-19. 

The financial impact arising out of the COVID-19 outbreak are not accounted or reported or disclosed as per the prescribed AS, in the financial statements. 

If the auditor is unable to obtain sufficient appropriate audit evidence relating to the impact of COVID-19 in the financial statements and is of opinion that there are misstatements that are material to the financial statements. The auditor has communicated misstatements to the management and those charged with governance relating to COVID-19 and the management or TCWG refuses to correct such misstatements, that are individually or in aggregate, material to the financial statements. 

8. SA 505- External Confirmation 

SA 505, External Confirmations provides guidance regarding the process of seeking external confirmations and evaluating the results of the process. Due to the impact of COVID-19 it is more likely that this key audit procedure which provides significant independent audit evidence may be ineffective due to the inadequate responses or nonresponses to the confirmation request sent out. 

In the case of each non-response, the auditor shall perform alternative audit procedures to obtain relevant and reliable audit evidence as per the procedures prescribed under  SA 505. 

9. SA 240- Risk of Fraud 

SA 240 states that “An auditor conducting an audit in accordance with SAs is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the SAs.” 

The auditor shall maintain professional skepticism throughout the audit, recognizing the  possibility that a material misstatement due to fraud could exist, notwithstanding the auditor’s past experience of the honesty and integrity of the entity’s management and those charged with governance. 

The impact of COVID-19 on businesses could be very significant and could put pressures on management to meet performance targets or market expectations. This raises the risk of the likelihood of fraud in the financial statements to a higher level which requires the auditor to exercise a much higher degree of skepticism and carry out extended audit procedures to eliminate the possibility of fraud or material error in the financial statements. 

Conclusion 

The role of auditors at times like this is under increased scrutiny as the auditors have a public interest obligation to complete the audit work in accordance with professional standards and ethics requirements. Under the current circumstances, auditors must recognise that the manner in which they conducted the audits in the past may need significant modification to address the challenges and uncertainties arising out of the impact of COVID-19. 

Irrespective of the challenges and uncertainties, there should not be any dilution or noncompliance with the auditing standards in carrying out the audits. 

Source- https://resource.cdn.icai.org/58829icai47941.pdf   & www.taxguru.in

काय देशात आर्थिक आणीबाणी लागू होणार ??? जाणून घेऊ आर्थिक आणीबाणी म्हणजे काय ???

कोरोनामुळे येणाऱ्या आर्थिक संकटाचा सामना करण्यासाठी केंद्र सरकारने आर्थिक आणीबाणी जाहीर करण्याची शक्यता वर्तवली जाते पण अशी काही घोषणा आतापर्यंत केलेली नाही  पंतप्रधान मोदी यांनी यांसंदर्भात कोविड कृती दलाशी चर्चा केली. कलम ३६० अन्वये राष्ट्रपती आणीबाणी जाहीर करतील. आणीबाणी मध्ये  राज्यांचे आर्थिक अधिकार गोठतील व खर्चाचे अधिकार केवळ केंद्र सरकारकडे असलीत. राज्यांच्या सर्व खर्चावर केंद्राचेच नियंत्रण असेल.

Image-आर्थिक आणीबाणी

जाणून घेऊ आर्थिक आणीबाणी म्हणजे काय ???

देशाचे प्रथम नागरिक आणि घटनात्मक प्रमुख म्हणून राष्ट्रपती आणीबाणी जाहीर करू शकतात.

राष्ट्रपती तीन प्रकारच्या आणीबाणी लागू करू शकतात.

१) राष्ट्रीय आणीबाणी - युद्ध, बाह्य आक्रमण, सहत्र उठाव यामुळे देशात आणीबाणी लावली जाऊ शकते. या घोषणेविषयी न्यायलायात दाद मागता येत नाही. १९६२- चीन युद्ध, १९७१- पाकिस्तान युद्ध, १९७५ -इंदिरा गांधी यांनी आणीबाणी लागू केली होती.

२) राज्यातील राष्ट्रपती राजवट - एखाद्या राज्यात पेचप्रसंग निर्माण झाल्यास राज्यात ‘राष्ट्रपती राजवट’ लावली जाते .

३) आर्थिक आणीबाणी - देशाची आर्थिक स्थिती धोक्यात आल्यास ही आणीबाणी लावली जाते. भारतात आर्थिक आणीबाणी अजून लागलेली नाही.

भारतीय घटनेमध्ये 360 या कलमामध्ये तशी तरतूद आहे.वेगवेगळ्या देशामध्ये याचे वेगळे नियम आहेत. राष्ट्रपतींना असे वाटले की देशामध्ये कोणत्याही भागात आर्थिक स्थैर्य किंवा वित्त नियोजनात कमतरता जाणवत आहे अथवा वित्त जीवन विस्कळीत किंवा कमकुवत झाले आहे अशा परिस्थितीमध्ये आर्थिक आणिबाणी लावली जावू शकते.

राष्ट्रपती राज्याचे सर्व मौद्रिक (Monetary) आणि वित्तीय(Financial) बिलाचे मसुदे स्वतःच्या देखरेखेखाली ठेवतात. आणि कोणताही आर्थिक निर्णय घेण्यापूर्वी त्यांची मंजुरी आवश्यक ठरते

आर्थिक आणिबाणीचा आपल्यावर काय परिणाम होतो ?

थेट परिणाम व्यवस्थेवर होतो. आर्थिक व्यवस्था चक्र थांबते. काही वेळेला नोकरदार आणि इतर कामगार वर्गाची पगार कपात केली जाते.यामध्ये कुणालाही सूट दिली जात नाही.

सरकारी नोकरदारांच्या पगारवाढीवर निर्बंध घातले जातात. तर सार्वजनिक सेवा देणाऱ्या कोणत्याही कर्मचाऱ्यांची वेळेवर पगार होण्याची कोणतीही शाश्वती नसते. याचा अप्रत्यक्ष परिणाम त्या वर्गावर किंवा तो वर्ग देत असलेल्या सेवेवर होत असतो.

उदाहरणार्थ -

शेजारच्याची नोकरी गेली तर मंदी येणार आहे असे आपण म्हणू शकतो. त्याच्याबरोबर आपली स्वतःची नोकरी गेली तर मंदी आलीच आहे असे आपण म्हणू शकतो. आपल्याला आर्थिक सल्ला देणाऱ्याची नोकरी गेली तर आर्थिक मंदी आली आहे असे आपण म्हणू शकतो. आणि शेवटी आपल्याला आर्थिक मदत करणाऱ्याची नोकरी गेली तर आर्थिक आणिबाणी दूर नाही असे म्हणायला हरकत नाही. अर्थात हे चक्र सुरळीत चालू असणाऱ्या व्यवस्थेला लागू होते.

Govt Action on Pending Income Tax Refunds

Govt immediate action on income tax refunds up to Rs 5 lakh due to covid_ 19 impact

      The Income Tax Department, on its official Twitter handle, announced that it will issue all pending income tax refunds up to Rs 5 lakh immediately to individuals and business entities. The decision has come in the due to the coronavirus lockdown in the country. According to press note of the department, this decision would benefit around 14 lakh taxpayers.

The decision will come as relief for individuals who are facing cash crunch due to pay cuts or job loss or waiting for their salaries or wages to be released by their employers.

According to the announcement made, "In context of COVID-19 situation and to grant immediate relief to taxpayers, GOI has decided to issue all pending income tax refunds up to Rs 5 lakh & GST custom refunds with immediate effect.

The income tax refund issued by the department will help people get their money which is stuck with the department. An income tax refund is due to an individual when the tax deducted from an individual's income in a particular financial year is higher than his/her total income tax liability.

To get the excess tax as refund, an individual is required to file income tax return. The refund is given if in a financial year total income claim made by an individual via his/her tax return matches with that of tax-department's calculations. The refund will be credited to his/her bank account (as opted while filing tax return) once the tax department has processed the tax return.

So check your pending income tax refund for earlier years.Remember your bank account must be validated on the income tax e-filing website to receive the credit of ITR refund in your bank account.

Link to check the refund status-

https://tin.tin.nsdl.com/oltas/refund-status-pan.html

Govt slashes interest rates of Small Saving Schemes

Govt slashes interest rate on PPF, other small savings schemes: What it means for you 

The government on March 31, 2020 announced a steep cut in the interest rates on small savings schemes for the first quarter (April to June) of FY 2020-21. Interest rates on various small savings schemes have been cut by between 70 basis points and 140 basis points (100 basis points = 1 per cent).

For instance, interest rates on Public Provident Fund (PPF) and Sukanya Samriddhi Yojana have been cut by 0.8% or 80 bps, each. Post office time deposits (of certain tenors) have seen the sharpest cut of 1.4 per cent or 140 bps. After the latest reduction, PPF will earn 7.1 per cent (down from 7.9 per cent), Sukanya Samriddhi Yojana 7.6 per cent (8.4 per cent), and time deposits will earn 5.5-6.7 per cent for the April-June quarter.

Here is a look how much each small savings scheme will earn for the quarter ending June 30, 2020.

What it Means To You-

This is bad news for those investing in these small savings schemes, especially senior citizens who are invested in fixed income schemes. 

Fixed-income investors, which include a large number of senior citizens, will now earn a lower rate of interest. That the development comes during the novel coronavirus outbreak makes matters worse for senior citizens who will see a drop in their regular income. 

Some of these smalls savings schemes are widely availed by people across the country and they now may have to revisit their entire investment plan as they will now fetch much lower returns. 

In light of the recent interest rate cuts, experts have recommended investors in small savings schemes to diversify their portfolio and look at hybrid or balanced funds, which offer more than one type of investment security. 

SBI reduces Savings Account Interest rate & MCLR

SBI reduces Savings Account Interest rate to 2.75% & MCLR cut by 35 bps.

Short Summary- 
· The one-year MCLR comes down to 7.40% from 7.75% with effect from 10 April
· The cut in savings deposit rates will be effective from 15 April

The State Bank of India (SBI) on April 7 announced a reduction of 35 basis points in its marginal cost of funds-based lending rate (MCLR) across all tenors making home and other retail loans cheaper. 

The bank also revised interest rates on savings accounts lower to 2.75 percent from 3 percent, to be effective April 15. This is the 11th consecutive time the bank has cut rates. 

The bank said in a release that the one-year MCLR has now come down to 7.40 percent from the earlier 7.75 percent per annum, starting April 10, 2020. 

"Consequently, EMIs on eligible home loan accounts (linked to MCLR) will get cheaper by around Rs. 24.00 per 1 lakh on a 30-year loan," SBI added. 

In line with this, the bank has also revised the interest rates on savings bank deposits, keeping in view the liquidity in the system. These will be effective from April 15, 2020. The interest rates for balances up to Rs 1 lakh and above Rs 1 lakh will now accrue at 2.75 percent as against the earlier 3 percent. 

No minimum balance needed for SBI savings bank accounts-

Last month, SBI had waived the requirement of holding average monthly balance for savings accounts. From March month all SBI customers are getting the zero balance facility in their savings bank accounts. This, according to the SBI press release, will benefit 44.51 crore savings bank account holders.

EMI Moratorium Facility Will Increase Cost of Loan ???

EMI Moratorium Facility Will Increase

Cost of Loan ???

RBI announced 3 months EMI Moratorium on loans. People rejoiced and there was a big relief on many thinking they are now safe for the next 3 months. However, the reality is entirely different.

What is the meaning of 3 Months Moratorium?

As per the definition of the dictionary, Moratorium means “A legal authorization to debtors to POSTPONE the payment”. You are just allowed to postpone your EMI for 3 months but your EMIs were NOT WAIVED OFF.

Due to the 21 days lockdown across the country, many businesses are suffering. Hence, to give a rest for loan repayment for retail borrowers, RBI announced this 3 months moratorium.

If due to financial problems during these three months, you are unable to pay the EMI, then such non-repayment is not considered as DEFAULT.

3 Months EMI Moratorium on loans – What it is actually?

• Banks which are eligible for providing 3 months EMI Moratorium-

All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all installments.

• It is not WAIVER but DEFERING-

Many thought that it is a waiver of your EMI for the next 3 months from Government. However, it is just deferring your EMIs. Hence, you can’t run away from these 3 months EMI.

• Types of loans eligible under 3 months EMI moratorium-

Term loans, including agriculture term loans and crop loans besides retail loans, are part of this moratorium.Retail loans are typically home loans, personal loans, education loans, auto and any loans that have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc.

• Credit card payments are also part of this 3 months EMI moratorium-

Earlier there was confusion on whether the credit card payments are also the part of 3 months EMI moratorium or not. However, later RBI cleared this doubt and such credit card payments are also now part of this 3 months EMI moratorium.

• Your loan tenure will increase by 3 months-

If you opted the 3 months EMI moratorium, your loan tenure will increase by 3 months. Suppose your loan tenure is 20 years, then now the loan tenure is 20 years and 3 months.

• Only RETAIL loans are covered but not BUSINESS loans-

This 3 months EMI moratorium covers only retail loans but not any business loans. For Business Loan or Working Capital Loan, Central bank has deferred the payment of interest for period as on March 1, 2020 up to May 31, 2020. Businesses will be required to pay off the entire accumulated interest after the expiry of moratorium or deferment period.

• Eligibility EMIS Moratorium-

EMIs due between 1st March 12020 to 31st May 2020 are eligible for such moratorium.

• It is not a DEFAULT option but you have to approach the bank to avail this moratorium-

Banks may provide this moratorium on their own. However, as of now, it is clear this it is not a default option on all EMIs. You as a borrower have to approach the bank and opt for this moratorium by mentioning the reasons of difficulty in paying the EMI.

However, considering the severity, we think banks will not look for reasons but provide this moratorium to all those who wish to opt.

However, as of now, RBI is clear in this regard with this sentence” accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.”

•  Impact on Credit Score-

As this is considered as a deferment than the default, such moratorium will not affect your credit score. Hence, no need to worry on credit score front.

3 Months EMI Moratorium on loans – Don’t opt-

Why we should not opt this 3 months EMI moratorium on loans? The reasons are as below. The biggest reason for saying DON”T OPT is the below lines from RBI notification.

> It is not a WAIVER but a DEFER-

As mentioned above, RBI not waiving your 3 months EMI. However, provided you an option to defer it. Hence, no such benefit for all of you. You are just deferring your EMI.

In general terms if we say, if your loan tenure is 120 months, then it will increase to 123 months. But in real sense it is not simple as it is. Lets see the example,

Outstanding Term(Months)	Moratorium Term (Months)	Effective Revised Term(Months)	Extra EMI (Nos)
36	3	40	1
60	3	65	2
120	3	128	5
180	3	191	8
240	3	258	15

** (EMI- Number of Moths Assums-8.50% Home Loan Interest Rate. As Interest rate increases EMI will also Increases).See how many Extra EMI required to pay and take the decision.

> You pay HIGHER interest-

Assume that you have Rs. 30 Lakh loan with 8% interest. Assume you opted for this 3 months EMI moratorium, then during such moratorium period, banks will calculate the interest on this outstanding Rs.20 lakh at 8% and the monthly interest of Rs. 20,000/- (Rs.30,00,000*8%*1/12).

Hence, if you opted for this 3 months moratorium, you have to additionally pay Rs. 60,000/- interest for 3 months on your outstanding just because you deferred your EMI. Interests due in 3 Months will be added to principal on July 2020 Onwards.

However, as of now, it is not clear how you have to pay this interest. They will adjust to your EMI and your EMI may slightly get increased.Hence, this is nothing but deferring your credit card payment dues for 3 months.

>Heavy Interest on Credit card payments for 3 months EMI moratorium-

All credit card holders will charge heavy interest after opting for 3 months moratorium period. Generally credit card companied will charge 18% to 24% p. a. interest for late settlement of credit card dues.

> Deferment of interest payments for Business loans-

The central bank has deferred the payment of interest for all business loans working capital loans outstanding as on March 1, 2020 up to May 31, 2020. Businesses will be required to pay off the entire accumulated interest after the expiry of moratorium or deferment period. This will increase the burden on corporate borrowers.

>Available for those whose income affected due to Coronavirus-

All are not eligible to avail this 3 months moratorium. If your salary or income affected due to this Coronavirus outbreak, then you have to approach the bank and convince the reality. Based on that only banks can offer you such moratorium.

However, considering the impact of Coronavirus on all of us, banks may provide this to all who approach the bank. But remember, it cost you more.

Conclusion:-It is clear now that there is no point in opting for this moratorium. If your income is intact or you have sufficient emergency fund placed to face such a situation, it is far better to let the EMI continues than opting for EMI moratorium. In the end, banks are not under loss by providing this moratorium but you will be under loss by opting this.

IF YOUR INCOME IS INTACT OR YOU HAVE SUFFICIENT EMERGENCY FUND PLACED TO COVER INCOME LOSS, THEN DON’T OPT FOR THIS 3 MONTHS EMI MORATORIUM. LET YOUR EMI CONTINUE.

1) Refer- For RBI Announcement-
https://thefinancebuzz.blogspot.com/2020/03/covid-19.html

2) EMI Moratorium Explained by Banking Editor Latha Venkatesh, CNBC TV18-