Extension of the timeline for Section 80C investments

Extension of the timeline for Section 80C investments

If salary is computed or paid before investment by the employer

By April or maximum May, the salary for the previous financial year would have already been paid. Additionally, the employers would have also closed the income tax computation for the employee’s TDS. Therefore, the employer will now not be able to consider the additional investment which is made during this extended period. Any additional investment made during the extended period is allowed to be claimed for at the time of filing the ITR for FY 2019-2020, and a refund for the same can be claimed for higher tax deducted. 

If the salary is not paid or computed by the employer before investment

If the employer has not paid the salary yet, and the employee has made an investment before that date, the employee then has the choice to claim the deduction in any year. However, you need to be careful that double deduction is not claimed; that is to say that benefits should not be claimed in both years. 

Contribution to PF

Banks also need to align systems to accept deposits for a previous financial year. For instance, in the ongoing financial year, you might have two entries that reflect in your PPF bank account; one of which pertains to investment for the previous year and one for this year. Usually, after the maximum limit of INR 1.5 lakh is breached, PPF banking systems do not accept cheques or deposits. Banks now need to make changes to ensure that PPF deposits are accepted for the next financial year. 

Medical insurance paid between April 1 and June 30, 2020

It is impossible to pay for health policy to cover a period that has already elapsed. Policy payments made now will only cover the upcoming period. Thus, payments made towards health insurance between April 1 and June 30, 2020, will be eligible for claiming a deduction for the present financial year. Only those policies whose payment became due before 31 March would be considered for deduction u/s 80C for the previous financial year. 

Contribution to PM Care Fund under 80G

Section 80G allows 100 percent deduction for whatever amount has been contributed to the fund. All contributions that were made between April 1 and June 30, 2020, will be eligible for a deduction for only one financial year, which can either be previous or the ongoing on, as per section 80G (5A). 

Investment for benefit under Section 54 to 54GB

Any investment, purchase, or construction that has been made up to June 30, 2020; will be eligible for claiming a deduction from capital gains during the previous financial year. 

The benefit of Housing Loan Interest

Interest on housing loan is eligible for a deduction on an accrual basis. Whatever interest has been accrued till March 31, 2020, is eligible for deduction.