Tax Rss

Supreme Court to Rule on Trump’s Controversial Global Tariffs

Insurance FAQs — Wed, 10 Sep 2025 22:21:00 +0000

On Tuesday, the US Supreme Court agreed to weigh the legality of Donald Trump’s sweeping global tariffs, launching a high-stakes showdown over one of the Republican president’s most aggressive uses of executive power—a pillar of his economic and trade agenda.

The justices agreed to hear the Justice Department’s appeal of a lower court decision that found Trump exceeded his authority by imposing most of his tariffs under a law reserved for emergencies. The court moved quickly, taking up the case just a week after the administration’s request—one that could shape the fate of trillions of dollars in customs duties over the next decade.

The court, set to open its new nine-month term on October 6, has fast-tracked the case, scheduling oral arguments for the first week of November.

The justices also agreed to take up a separate challenge to Trump’s tariffs, this one brought by Learning Resources, a family-owned toy company.

On August 29, the US Court of Appeals for the Federal Circuit in Washington ruled that Trump overstepped his authority by invoking the 1977 International Emergency Economic Powers Act (IEEPA) to impose the tariffs—striking at a central pillar of his second-term agenda. The tariffs, however, remain in force as the case heads to the Supreme Court.

The tariffs are a centerpiece of the trade war Trump reignited upon returning to the presidency in January—one that has strained relations with US trading partners, roiled financial markets, and deepened global economic uncertainty.

Trump has wielded tariffs as a central instrument of foreign policy, deploying them to rewrite trade deals, force concessions, and apply political pressure abroad.

In April, Trump invoked the 1977 law to impose tariffs on imports from specific countries to tackle trade deficits, building on separate tariffs announced in February aimed at China, Canada, and Mexico as economic leverage to curb the flow of fentanyl and other illicit drugs into the US.

The law grants the president authority to act against "an unusual and extraordinary threat" during a national emergency. Historically, it has been applied to impose sanctions on adversaries or freeze their assets—but never, until Trump, to levy tariffs.

Trump’s Justice Department has argued that the law permits tariffs under emergency provisions, granting the president authority to "regulate" imports. "The stakes in this case could not be higher," the department warned in court filings, asserting that denying Trump’s tariff powers “would expose our nation to trade retaliation without effective defenses and thrust America back to the brink of economic catastrophe.”

Trump has warned that a loss in the case could force the U.S. to unravel trade deals, leaving the country to "suffer so greatly."

In August, the nonpartisan Congressional Budget Office reported that higher import duties could trim the U.S. national deficit by $4 trillion over the next decade.

Trump’s Tariffs on the Line: Will the Supreme Court Give Him the Win He Wants?

Insurance FAQs — Tue, 09 Sep 2025 22:33:00 +0000

Donald Trump has shaken the global economy, slapping steep tariffs on both allies and rivals, brushing off warnings of rising prices, and pledging that his approach will usher in a new "golden age." Now, the only hurdle left is for the president to prove he has the authority to carry it out.

Legal experts warn that he could be facing a formidable uphill battle.

In May, the US Court of International Trade ruled that the majority of Trump’s tariffs “exceed any authority granted to the president.” Then, last Friday, the US Court of Appeals for the Federal Circuit found that his levies “assert an expansive authority that is beyond the express limitations” of the law his administration has relied upon.

Now, Trump is escalating the case to the Supreme Court, insisting that any ruling against him would "destroy" the United States.

The appeals court has temporarily paused its ruling, keeping the tariffs in place until October 14. The administration is urging the Supreme Court to act quickly: Solicitor General D. John Sauer has asked the justices to decide by Wednesday, September 10, whether to take up the case. He indicated that oral arguments could be scheduled for the first week of November.

In a filing this week, Sauer argued that the appeals court’s 'erroneous' ruling had “disrupted highly impactful sensitive ongoing diplomatic trade negotiations and cast pall of legal uncertainty over the President’s efforts to protect our country by preventing an unprecedented economic and foreign policy crisis”.

It paves the way for the most consequential legal challenge yet to Trump’s controversial overhaul of US trade policy, which has raised tariffs on foreign goods to levels not seen in nearly a century.

Mark Graber, a prominent constitutional law and politics scholar at the University of Maryland, predicts that the administration is likely to lose the case. “This is an issue that really splits the Trump coalition,” he said. “If it splits the Trump coalition, it probably splits the Trump coalition on the bench.”

The US Supreme Court is dominated by conservative justices, with six of the nine appointed by Republican presidents, including three by Trump. This conservative supermajority has delivered 18 consecutive victories for the administration’s emergency requests—and drawn sharp criticism from liberal-leaning Justice Sonia Sotomayor, who warned it threatens the core principle that America is a "government of laws, not of men."

“It won’t surprise me if a number of Republicans on the supreme bench actually jump on this one,” continued Graber, who believes four of the court’s conservative voices could be persuaded to vote against the tariffs, perhaps in part to counter the narrative that the court has been hijacked by the right. “I don’t think the [John] Roberts, [Amy Coney] Barrett, [Brett] Kavanaugh people are really very thrilled about tariffs. Probably not [Neil] Gorsuch, either.

“I think this court would love to have a case where it doesn’t side with the administration,” he said. “This strikes me as a perfect case” to counter the perception that the supreme court is stacked with “stooges for Trump”.

At the center of the case is the 1977 International Emergency Economic Powers Act (IEEPA), the federal law invoked by Trump. The administration has pointed to the influx of fentanyl into the US and the country’s trade deficits—where imports exceed exports—as justification for declaring an emergency.

The term "tariff" is notably absent from the law, fueling doubts over whether it actually grants the president the authority he claims.

The IEEPA “bestows significant authority on the president to undertake a number of actions in response to a declared national emergency”, the appeals court majority wrote, “but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax”.

While Congress has long delegated the authority to impose or adjust tariffs, it has typically done so in clear, explicit terms. The IEEPA, however, allows presidents to "regulate importation," and Trump’s allies contend that this language grants sweeping powers—including the ability to impose tariffs.

Jonathan Adler, a professor at William & Mary Law School, wrote in the Wall Street Journal that the Supreme Court could be persuaded by this reasoning: "The whole point of enacting statutes like IEEPA is to give the president broad authority to address emergencies when they arise."

Presidential powers tend to be at their strongest on foreign policy and national security, Adler noted, adding: “While IEEPA provides that such actions may ‘only be exercised’ to address such declared emergencies ‘and may not be exercised for any other purpose’, courts have rarely felt competent to second-guess the executive branch’s national-security determinations.”

If the Supreme Court ultimately rules in Trump’s favor, it could empower the administration to push forward with its bold economic agenda. Conversely, should the justices declare his tariffs illegal, the president has warned that the “financial fabric of our country” could be at stake.

Despite these dire warnings, some observers question whether Trump’s fiery rhetoric on tariffs truly mirrors his intentions. “We normally think people litigate to win. But in fact, quite frequently people litigate to lose,” said Graber of the University of Maryland. “The point was publicity.”

Trump “will not mind a loss” in this case, claimed Graber. “One of the virtues Trump gets by litigating this loser of a case is he can tell everybody: ‘I fought for tariffs, I fought for you, it’s just those elitist judges who stopped me,’” he said. “He gets credit for the tariffs, and he doesn’t get the fallout that tariffs would actually create, because they’re declared illegal.”

Regardless of the outcome, the wheels of justice move slowly. A Supreme Court ruling could be months away, and in the meantime, Trump’s tariffs continue to take effect.

The administration contends that higher tariffs are bolstering the world’s largest economy, prompting other nations to rush into trade agreements with the US Yet early signs of strain are emerging, and the deals that have been struck so far offer limited impact.

In a report released this week, Michael Negron of the Center for American Progress, a prominent liberal think tank, contended that Trump’s “irrational, unpredictable” approach to policymaking has imposed a “turbulence tax” on U.S. consumers and businesses.

“It’s just something that everybody’s paying,” Negron, an economic adviser in the Biden White House, said. “At the root of it is this unstable, unpredictable way in which he does his business.”

He added: “If he had said at the beginning of this process, ‘I am setting a 15% tariff … you can take that to the bank’, and he wasn’t changing the policy every couple of weeks, and he wasn’t issuing new threats, and he wasn’t announcing deals that when you look into them aren’t actually significant – just one, flat number – I think that would have been received much better, and would have proven less costly, than the ups and downs, and the ups and downs, and the ups and downs.”

For small-business owners grappling with the rising cost of imports, or shoppers staring at ever-growing grocery bills, the uncertainty of what comes next is palpable.

One thing is certain: regardless of how this case is resolved, the economic turbulence is unlikely to ease.

Fiscal Watchdog Forecasts $4 Trillion Tariff Windfall to Shrink U.S. Deficits Over the Next Decade

Insurance FAQs — Sun, 24 Aug 2025 22:25:00 +0000

Donald Trump’s push for tariffs is projected to slash U.S. deficits by $4 trillion over the next decade, according to the Congressional Budget Office, easing fears that his tax overhaul could further strain the nation’s finances.

The Congressional Budget Office (CBO) reported Friday that tariffs imposed so far this year are expected to shrink primary deficits by $3.3 trillion through 2035, with interest payments projected to decline by an additional $700 billion.

“As a result, the changes in tariffs will reduce total deficits by $4tn altogether,” said Phillip Swagel, director of the non-partisan CBO, which operates within the legislative branch.

The total impact of the tariffs on debt over the period is roughly one-third greater than the $3 trillion previously projected by the CBO, based on measures announced between January and mid-May.

Recent estimates indicate that revenue from tariffs will help offset the fiscal impact of Trump’s landmark spending law, the One Big Beautiful Bill Act, which is expected to drive up debt by $4.1 trillion over the period.

The president highlighted the report on Friday, asserting that it proved “that Trump was right” and that tariff revenues “are going to reduce the deficit by numbers far greater than they ever expected — unheard of”.

Public finances in the U.S. have become a focal point for investors in recent months, with some fund managers warning that the nation’s debt-to-GDP ratio—hovering around 100 percent—has dimmed the appeal of Treasury securities.

The CBO’s analysis does not factor in the tariffs’ effect on overall economic growth, which economists anticipate will be negatively impacted by the levies.

Swagel also warned that the estimates remain “subject to significant uncertainty” pointing to “questions about timing, possible exceptions, and a lack of precedents”.

The report nevertheless provides a boost for Trump and his administration, who have consistently maintained that the tariffs would generate sufficient revenue to counterbalance the impact of increased government spending.

Treasury Secretary Scott Bessent said on Tuesday that he now expects tariff revenues this year to increase "substantially" beyond his earlier projections.

“We’re going to bring down the deficit to GDP. We’ll start paying down the debt, and then at that point that can be used as an offset to the American people,” he told CNBC.

According to the CBO, current tariffs are projected to generate roughly $200 billion in revenue this year alone, a significant jump from the $80 billion average collected annually over the past five years.

This week, credit rating agency S&P Global cited the boost from tariff revenues in its decision to maintain its rating on U.S. government debt, despite the fiscal pressures from the spending bill.

Lisa Schineller, S&P’s director of sovereign ratings, acknowledged that considerable uncertainties remain regarding the tariffs “you’re going to have what we think is some pretty important tariff revenue”.

“We think . . . that the tariff revenue could potentially offset some of what we see as the fiscal deterioration or weakness that would come from that bill,” said Schineller.

Fitch, another credit rating agency, highlighted the impact of a "surge in tariff revenues" on government finances in its Friday decision to maintain its rating on U.S. debt. However, it warned that "large fiscal deficits" are likely to continue, with the overall government deficit projected to rise again in 2026 and 2027 after declining this year.

Some analysts warned that the long-term impact of tariffs may be overstated, with their beneficial effect on U.S. public finances likely to diminish over time.

“It’s a temporary fillip, but not something that’s really going to change the overall story,” said Thomas Torgerson, managing director at Morningstar. “There’s not a lot of clarity on how much of that revenue will actually be durable and be received year after year after year.”

He warned that once tariff rates stabilize, there is a risk of "trade diversion," with exporters redirecting their focus away from the U.S. toward countries with lower levies. “So what you ultimately have is weaker revenue flow over the medium term.”

U.S. President Donald Trump holds a chart next to U.S. Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., U.S., April 2, 2025. REUTERS/Carlos Barria/File Photo Purchase Licensing Rights

10 Tax Advantages Every Person Over 50 Should Know

Insurance FAQs — Thu, 21 Aug 2025 22:55:00 +0000

As they approach retirement, individuals over 50 can tap into a range of tax breaks designed to ease their financial journey.

Turning 50—and particularly reaching 65—can unlock a host of additional tax benefits. Older adults enjoy a larger standard deduction and higher income thresholds before filing is required. Those over 50 can also defer or reduce taxes on significant sums through retirement and health savings accounts, maximizing their financial flexibility as they approach retirement.

Here are 10 tax breaks for people over 50:

Bigger standard deduction
Higher tax-filing threshold
Property tax breaks
Credit for the elderly and disabled
Additional IRA deduction
401(k) catch-up contributions
No more early withdrawal penalty
Qualified charitable distributions
Higher HSA contribution limit
Free tax help

Bigger Standard Deduction for Seniors 65 and Older

If you don’t itemize deductions, reaching 65—or having a spouse who has—lets you claim a larger standard deduction. For 2025, seniors filing as individuals can add $2,000 to the standard deduction compared with those under 65. Married couples see an increase of $1,600 if one spouse is 65 or older, and $3,200 if both meet that age threshold. Additionally, taxpayers who are blind—or have a blind spouse—may qualify for an even higher standard deduction, further boosting their tax advantage.

Higher Tax-Filing Threshold

Seniors can earn more than younger workers before they are required to file a tax return. For 2024, individuals aged 65 and older can report up to $16,550 in gross income without filing—$1,950 higher than their younger counterparts. For couples, the filing threshold rises to $32,300 if both spouses are 65 or older, or $30,750 if only one meets that age, compared with $29,200 for younger couples. Even so, those below the threshold may still choose to file to claim tax credits or receive refunds on withheld income taxes, making it a potentially valuable financial move.

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Property Tax Breaks

Property tax regulations differ widely across states and local jurisdictions. In certain areas, seniors with incomes below specified thresholds may qualify for deferrals or exemptions on property or school taxes, offering valuable financial relief.

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In Texas, for instance, homeowners aged 65 and older can receive a $10,000 homestead exemption on school district taxes, in addition to the standard exemption available to all homeowners. Local jurisdictions may offer additional senior-specific exemptions, so it’s important to review your area’s eligibility rules carefully. Claiming these benefits often requires submitting extra tax forms or a formal application.

Credit for the Elderly and Disabled

Seniors with limited income—age 65 or older, or with a spouse in that age group—may qualify for a valuable tax credit. To claim it, retirees must have an adjusted gross income below $17,500, or $25,000 if both spouses meet the age requirement, with nontaxable Social Security and pension income under $5,000, or $7,500 for couples. If only one spouse qualifies, the income limit rises to $20,000. Younger individuals who are permanently disabled may also be eligible, with the credit ranging from $3,750 to $7,500.

Additional IRA Deduction

Older workers have the advantage of deferring income taxes on larger contributions to an individual retirement account. Those aged 50 and above can add an extra $1,000 to their IRA, allowing a total contribution of $8,000 in 2025.

A 50-year-old worker in the 24% tax bracket who maxes out their IRA could reduce their current tax bill by $1,920—$240 more than the maximum $1,680 tax break available to younger savers in the same bracket. Additionally, low- and moderate-income seniors contributing to a retirement account may qualify for the Saver’s Credit, further enhancing their retirement savings benefits.

401(k) Catch-Up Contributions

Older employees with a 401(k) plan have the advantage of making catch-up contributions. Workers aged 50 and above can defer income taxes on an additional $7,500 beyond what younger employees can contribute, bringing the total 401(k) contribution limit to $31,000 in 2025.

A 24% tax-bracket worker aged 50 or older who maxes out their 401(k) could reduce their current tax bill by $7,440—$1,800 more than a younger employee in the same bracket. Taxes on these contributions are deferred until the money is withdrawn, allowing for greater immediate savings and long-term growth.

No More Early Withdrawal Penalty

Younger workers who tap into their retirement accounts face a 10% early withdrawal penalty, except for certain qualifying circumstances. But once you reach 59 ½, IRA funds can be withdrawn for any reason without incurring this penalty. Workers who leave a job at age 55 or older can take penalty-free distributions from the 401(k) linked to their most recent employer. Public safety officers with at least 25 years of service in a plan-sponsored position may begin penalty-free withdrawals at age 50. Keep in mind, however, that income taxes still apply to distributions from traditional retirement accounts at any age.

Qualified Charitable Distributions

Retirees are generally obligated to take withdrawals from traditional retirement accounts and pay the associated income taxes. However, if the funds aren’t needed, a qualified charitable distribution from an IRA allows retirees to bypass income tax on the withdrawal while supporting a charitable cause.

Retirees aged 70 ½ and older can transfer up to $108,000 directly from their IRA to a qualified charity in 2025 without owing income tax on the transaction. Even modest contributions offer significant tax benefits: a $5,000 charitable IRA transfer could reduce a 24% taxpayer’s bill by $1,200, while a $1,000 donation could save $240 in taxes.

Higher HSA Contribution Limit

Workers with high-deductible health plans can deduct contributions to a Health Savings Account (HSA), with withdrawals remaining tax-free when used for qualifying medical expenses. Individuals aged 55 or older by the end of 2025 can contribute up to $5,300—$1,000 more than younger account holders. However, HSA contributions are no longer permitted once you enroll in Medicare.

Free Tax Help

Seniors can access tax-filing assistance without incurring steep hourly fees. The Tax Counseling for the Elderly (TCE) program offers free support to individuals aged 60 and older. IRS-certified volunteers help older taxpayers prepare basic returns and file electronically from January 1 through April 15 each year. The program focuses on the tax issues seniors most often encounter, including questions about pensions and retirement benefits.

Tax Plan Targeting Litigation Funders Excluded from Final Budget

Insurance FAQs — Tue, 08 Jul 2025 09:12:00 +0000

The One Big Beautiful Bill (OBBB) initially included provisions to tax litigation funders' earnings at nearly 41%. Critics argued that the litigation finance industry has long enjoyed minimal taxation—or none at all in some cases—particularly when it comes to foreign investors.

The insurance industry has consistently pointed to third-party litigation funding (TPLF)—where investors finance lawsuits in return for a share of the settlement or judgment—as a key driver of rising litigation costs. A new consumer guide on legal system abuse, published by the Insurance Information Institute (Triple-I) and Munich Re US, estimates that such abuse adds approximately $6,664 to the cost of goods and services for the average American family and imposes $160 billion in tort-related expenses on small businesses.

The insurance industry has actively lobbied to restrict the practice, framing upcoming tax reform as a timely avenue for intervention.

In a statement to Faq Insurances, Jimi Grande, senior vice president of federal and political affairs at the National Association of Mutual Insurance Companies (NAMIC), said the provisions previously included in the bill would have represented a "win for Congress, the Trump Administration, and American consumers and businesses."

Instead, just ahead of the House vote, the Senate parliamentarian determined that the proposed tax hikes on profits tied to third-party litigation funding (TPLF) violated key budgetary rules. As a result, the provisions were stripped from the sweeping bill.

“Due to some misinformation, partisanship, and efforts of those who profit off the U.S. court system, the Senate Parliamentarian decided to rule against the closing of the tax loophole, which led to its removal from the OBBB,” Grande said. “Keeping this foreign funder loophole open means additional billions will fuel legal system abuse, and these foreign entities will continue paying nothing in U.S. taxes. American citizens will keep footing the bill as trial lawyers and litigation funders are incentivized to keep doing business as usual, contributing to a more litigious society and out of control tort costs impacting nearly the entire economy.”

Last month, NAMIC praised Republican lawmakers for their efforts to close what it described as a "tax loophole… weaponized by predatory funders."

Meanwhile, the International Legal Finance Association (ILFA) called the decision to omit the tax on TPLF a “clear victory for Americans.” The ILFA said litigation funding is “a vital mechanism that enables individuals and small businesses to seek justice against well-funded defendants.”

“Rather than curbing ‘predatory’ behavior, this bill would shift power away from consumers and small businesses and into the hands of the very industries—Big Tech, Big Pharma, and Big Insurance—that most often seek to avoid liability for their misconduct,” said the global TPLF trade association.

G7 Reaches Deal to Shield US and UK Firms from Tax Hikes

Insurance FAQs — Wed, 02 Jul 2025 09:16:00 +0000

In response to the U.S. administration’s decision to withdraw the Section 899 retaliatory tax proposal from former President Donald Trump’s tax and spending bill, the group has established a "side-by-side" system, according to a statement issued by Canada, which currently holds the rotating G7 presidency.

The G7 stated that the plan acknowledges current U.S. minimum tax regulations and seeks to enhance stability within the global tax system.

The U.S. Treasury Department stated that, with Section 899 removed from the Senate version of the tax and spending bill, there is now a shared understanding that a side-by-side system could help preserve key progress made by jurisdictions within the Inclusive Framework in addressing base erosion and profit shifting.

“We look forward to discussing and developing this understanding within the Inclusive Framework,” the Department said in a post on X on Saturday.

UK businesses are also shielded from higher taxes following the removal of Section 899 from former President Donald Trump’s tax and spending bill.

The UK government stated that the agreement would provide businesses with greater certainty and stability. In recent weeks, some British companies had expressed concerns about facing significant additional tax liabilities due to the inclusion of Section 899, which has since been removed.

Finance Minister Rachel Reeves stated that “Today’s agreement provides much-needed certainty and stability for those businesses after they had raised their concerns,” while also emphasizing that further efforts are necessary to address aggressive tax planning and avoidance.

G7 officials said that they look forward to discussing a solution that is “acceptable and implementable to all.”

In January, former President Trump issued an executive order declaring that the global minimum corporate tax agreement would not apply in the United States, effectively withdrawing from the landmark 2021 deal negotiated by the Biden administration and nearly 140 other countries.

He also pledged to implement a retaliatory tax on countries that levy taxes on U.S. companies under the 2021 global tax agreement. This measure was viewed as harmful to numerous foreign businesses operating within the United States.

Lloyd’s Welcomes Repeal of Controversial Section 899 Tax Proposal

Insurance FAQs — Tue, 01 Jul 2025 21:18:00 +0000

UK businesses had characterized Section 899 as a form of "retaliatory tax measures,” targeting them unfairly.

“We are very grateful for the chancellor’s leadership, working with her G-7 Finance Minister colleagues, to secure the announcement from the United States Treasury and Congress that Section 899 has been removed from the reconciliation bill,” said Lloyd’s Chair Sir Charles Roxburgh, in a statement.

“This greatly supports not only Lloyd’s business in the United States but all British companies with interests in the United States and will enable international investment in the United States to serve domestic businesses and communities,” Roxburgh continued.

“Lloyd’s has been providing insurance capacity to support the economy of the United States — our largest market — for over a century, and we are pleased to continue to do so,” he said.

With Section 899 now removed from the so-called “One Big Beautiful Bill Act” (OBBBA), the UK and other G-7 nations can move forward in shaping a coordinated approach to the global minimum tax and addressing aggressive tax avoidance—free from the shadow of a proposed retaliatory measure, according to a June 28 statement from the UK Treasury and Chancellor of the Exchequer Rachel Reeves.

“I will always represent the best interests of British businesses on the world stage. Today’s agreement provides much-needed certainty and stability for those businesses after they had raised their concerns,” Reeves said.

“The G7 agrees there is work to be done in tackling aggressive tax planning and avoidance and ensuring a level-playing field. The right environment for this work to happen is without the prospect of retaliatory taxation hanging over these talks, so the removal of Section 899 is welcome,” she added.

Pillar 2, which seeks to establish a global minimum corporate tax rate of 15%, is a key component of the Economic Cooperation and Development’s (OECD) initiative to combat tax avoidance by multinational corporations. The two-pillar reform framework was agreed upon by OECD member countries in October 2021, though the United States has yet to implement it.

“The US commitment to drop retaliatory tax measures proposed in the One Big Beautiful Bill removes a major source of uncertainty for UK-headquartered multinationals,” according to Rain Newton-Smith, chief executive, Confederation of British Industry, in the Treasury statement.

“The CBI has been clear – there are no winners in an economic standoff. Avoiding disruption to transatlantic investment, financial flows and jobs benefits both the US and UK economies,” Newton-Smith said. “Avoiding disruption to transatlantic investment, financial flows and jobs benefits both the US and UK economies.”

Newton-Smith noted, however, that “uncertainty remains around the bill’s final passage and other potential Congressional actions later down the line alongside the UK’s Digital Services Tax under scrutiny….”

“Looking ahead, global tax rules must now be rebalanced through multilateral agreement while ensuring UK companies remain competitively positioned. This is a pivotal opportunity for the OECD to deliver a genuinely simpler, fairer regime – one that goes much further in reducing excessive compliance burdens and upholds a level playing field for all,” she added.

A Step-by-Step Guide to Using Form 1095-A

Insurance FAQs — Tue, 24 Jun 2025 22:08:00 +0000

You must have your Form 1095-A before you file.

Make sure you have an accurate Form 1095-A before filing your taxes. If you notice any errors in your coverage or household information, contact the Marketplace Call Center for assistance.

Your Form 1095-A provides details about the Marketplace plans that anyone in your household had in 2024.
It is issued by the Marketplace, not the IRS.
Keep your Form 1095-A with your other important tax documents, such as W-2s and other financial records.

How to find your 1095-A online

Log into your Marketplace account.
Under "Your applications," select your 2024 application — not your 2025 application.
Select “Tax Forms."
Download all 1095-As.

Get screen-by-screen directions, with pictures (PDF, 499 KB).

Note: If you can't find your 1095-A in your Marketplace account, contact the Marketplace Call Center.

What’s on Form 1095-A and why you need it

Your 1095-A has information about Marketplace plans any member of your household had in 2024, including:
- Premiums paid
- Premium tax credits used
- A figure called "Second lowest cost Silver plan" (SLCSP) (Affects the premium tax credit if you used it to lower your premiums during the year. Find the SLCSP on Form 1095-A, sent by the Marketplace annually, or use the HealthCare.gov tax tool.)
You’ll use information from your 1095-A to fill out tax Form 8962, Premium Tax Credit (PDF, 115 KB). This is how you'll "reconcile" (Use IRS Form 8962 to find out if you used the right amount of premium tax credit during the year. Use the form to compare the advance amount you use to the amount you qualify for based on your final income. If you used too much, you’ll repay it via taxes. If you used too little, claim the difference as a credit.)— find out if there's any difference between the premium tax credit you used and the amount you qualify for. Find instructions for Form 8962 (PDF, 348 KB).
If you had Marketplace coverage but didn't use the prenium tax credit (A tax credit you can use to lower your monthly insurance payment (your “premium”)).
Learn more about Form 1095-A from the IRS.

Check that your 1095-A is correct

Carefully read the instructions on the back.
Make sure it’s correct. If anything about your coverage or household is wrong, contact the Marketplace Call Center.
Make sure the information about the “second lowest cost Silver Plan” (SLCSP) is correct.

I think my "monthly enrollment premium" is wrong.

The "monthly enrollment premium" on Form 1095-A (Part III, Column A) may be different from the monthly premium you paid. This doesn't always mean this amount is wrong because:

Your plan included benefits in addition to the essential health benefits required by the health care law, like adult dental or vision benefits. In this case, the monthly enrollment premium on your Form 1095-A may show only the amount of your premium that applied to essential health benefits.
You or a household member started or ended coverage mid-month. In this case, your Form 1095-A will show only the premium for the parts of the month you had coverage.
You were enrolled in a stand-alone dental plan and a dependent under 18 was enrolled in it. In this case, the monthly enrollment premium on your Form 1095-A may be higher than you expect because it includes a portion of the dental plan premiums for pediatric benefits.

If any of these applied, the premium on your 1095-A is probably correct. If you think it's wrong, contact the Marketplace Call Center. If the form has errors, we'll send you a corrected version.

How to know if your second lowest cost Silver plan information is correct

Look at Part III, column B of your 1095-A, titled “Monthly second lowest cost silver plan (SLCSP) premium.” It should show figures for each month any household member had the Marketplace plan.

The SLCSP premium is incorrect if:

Part III, Column B has a “0” or is blank for any month someone in your household had the Marketplace plan
You had changes in your household that you didn’t tell the Marketplace about — like having a baby, moving, getting married or divorced, or losing a dependent

If either applies to you, use our tax tool to get the premium for your second lowest cost Silver plan.

Use the information from your 1095-A to reconcile

Once you have an accurate 1095-A and second lowest cost Silver plan premium, you’re ready to fill out Form 8962, Premium Tax Credit.

Get a step-by-step guide to reconciling your premium tax credit.

How Accountants Are Leveraging AI in the Real World

Insurance FAQs — Fri, 13 Jun 2025 23:58:00 +0000

With advancements in language processing, decision-making, and automation now more accessible than ever, accountants have a wide array of innovative AI applications to choose from.

“There are so many new tools,” said Tricia Katebini, CPA, a partner at GRF CPAs & Advisors in Bethesda, Md. She has helped the firm implement numerous new AI-based tools. “It’s nice to see, but it’s overwhelming.”

To navigate the buzz and overwhelming range of new tools, the JofA invited six CPAs to share the most compelling AI use cases they’ve encountered — from tailored solutions to ready-made software (see the sidebar 'How to Determine AI Technology Needs').

Here are their stories.

CASE 1: SNAIL MAIL AUTOMATION

Karl Spanbauer, CPA, oversees finances at Capital Area Food Bank, a leading nonprofit that distributes around 60 million meals each year to residents in and around Washington, D.C.

After stepping into the role, one major frustration stood out for him: the mail. Not emails, but stacks of physical mail — vendor invoices, tax notices, statements, and more — that flooded his small accounting team.

“I lost a couple documents. It was literally hundreds of pieces of mail,” Spanbauer said. “I knew we had to automate it somehow.”

Leveraging his expertise with Microsoft Power Automate and other tools, Spanbauer developed a custom solution to scan, summarize, and respond to incoming mail.

Here’s how it works:

1. Staffers run all business-related mail through a scanner.

2. The scanned file is automatically saved to a shared drive.

3. An image analyzer extracts the text of the image.

4. The text is analyzed by a secure large language model (LLM), which generates a summary.

5. A ticket is opened in Jira, the team’s workflow system, which includes the summary and the original mail.

6. The team tackles the tickets, responding to the mail as needed.

He has expanded the system with more automations, allowing for quicker access to invoice statuses and smoother execution of follow-up actions.

Case 1 at a glance

Degree of difficulty: Drawing on extensive experience with Power Automate and other tools, Spanbauer swiftly implemented the solution—built upon months of groundwork to integrate systems and consolidate data.

Cost: The project incurred no extra implementation costs, as it utilized the team’s existing software licenses.

Payoff: The team now handles mail in focused 20-minute sessions every 'Mail Monday,' saving approximately four hours of collective staff time each week.

The takeaway: The project succeeded because Spanbauer already had a strong digital infrastructure—what he needed was a way to integrate physical mail into it. 'AI can’t interact with a piece of paper sitting on my desk. I had to get that piece of mail into that ecosystem,' he explained.

CASE 2: TECHNICAL ACCOUNTING MEMOS

Glenn Hopper leads AI research and development at Eventus Advisory Group in Memphis, Tennessee. His firm provides a diverse range of services, including fractional CFO and controllership roles, catering to both private enterprises and small to mid-sized public companies.

One of his recent initiatives includes developing a specialized bot capable of drafting detailed technical accounting memos.

We get asked to do these accounting memos all the time, Hopper explained. For instance, a memo might address the issue of goodwill impairment during an acquisition. He noted the challenge lies in striking a balance: ““You have to get very technical, and you want to make it clear and understandable.”

Leveraging his expertise in generative AI, Hopper processed the organization’s extensive collection of accounting memos for analysis by a large language model, employing a method called retrieval-augmented generation (RAG).

“We’ve been writing these forever,” Hopper said, “and we have a style we use for them.”

This process entailed breaking the memos into smaller, thematically focused segments that a large language model can more easily interpret. Hopper then transformed these segments through vectorization and stored them in a vector database powered by OpenAI technology.

"The final outcome is a rich repository of information that the bot can access to deliver responses that are both coherent and contextually accurate," Hopper explained. This memo generator is built on OpenAI’s Assistants API platform, enabling organizations to develop sophisticated, tailor-made bots.

Hopper noted that he worked diligently to “pound out any possibility for hallucination,” a common issue in generative AI where the model invents information when data is lacking. “I think we’ve minimized it a lot by giving it very specific examples to refer to, very specific instructions,” he said. This fine-tuning process involved training the custom bot on hundreds of examples. However, Hopper declined to share further details, citing Eventus’ proprietary methods.

Once the tool produces a draft of the accounting memo, Eventus ensures a “human-in-the-loop” approach, with experts reviewing and refining the content as necessary.

“The people who are using it are kind of blown away — and for many of them, it was their first foray into even using ChatGPT,” he said.

Case 2 at a glance

Degree of difficulty: This implementation of OpenAI’s technology was highly tailored, demanding approximately 60 hours of Hopper’s time and drawing heavily on his deep expertise.

Cost: In addition to the cost of ChatGPT licenses, running the memo-generating bot—and similar advanced bots—can cost several dollars per use. Paid ChatGPT plans begin at $20 per month for individual users and $25 per user in team environments.

Payoff: Hopper estimates that generating accounting memos has gone from a four-hour task to just 30 minutes—including thorough human review. He has also developed additional bots capable of handling complex tasks, such as analyzing 10-K filings.

The takeaway: While the memo bot proved to be a success, it was only made possible through Hopper’s specialized expertise. For many other organizations, a more practical and cost-effective approach may be to wait for an off-the-shelf solution from a vendor. “It takes time to do, and you need to have a certain skill set to do it,” Hopper said. “It’s not cheap to get these things done.”

CASE 3: MARKETING THE BUSINESS

Barrett E. Young, CPA, serves as the marketing partner at GWCPA in La Plata, Maryland, a firm dedicated to guiding family-owned businesses through leadership transitions. Since joining GWCPA in 2017, Young has led its 15-member team in embracing technology more effectively—including the integration of ChatGPT and related AI tools over the past year.

The firm has also launched a client-facing tool called the GWCPA Generations Advisor—a tailored ChatGPT implementation that provides guidance on ownership transitions. While it requires an active ChatGPT license to use, it doesn’t carry per-use fees, as it’s less complex than the Eventus bot discussed earlier.

“I’m using ChatGPT every night when I have ideas in my brain at two in the morning,” Young said. “I’m asking it questions and making notes, ‘What if I gave that to my customers?'”

Creating a custom GPT like this is relatively simple: the developer provides written instructions to ChatGPT, outlining the bot’s purpose, preferred tone, response structure, and other relevant guidelines.

The goal was to create “something I could give away to our target audience that would start conversations and add value in their lives,” Young said.

To enhance the custom GPT, Young uploaded GWCPA’s marketing materials, enabling the bot to reference key information and mirror the firm’s communication style—an application of the retrieval-augmented generation (RAG) approach. Access is granted through a simple sign-up to GWCPA’s free marketing email list, which Young also uses to share weekly prompt suggestions with subscribers. The goal is for the GPT to handle basic succession planning questions, increase awareness of GWCPA’s services, and help pave the way for more meaningful conversations when clients are ready to engage with the team."

Case 3 at a glance

Degree of difficulty: For Young, implementing the Generations Advisor was a swift and straightforward process, building on his prior experience creating custom GPTs for personal use. These more basic custom GPTs can be easily developed within the ChatGPT interface using simple, plain-language instructions.

Cost: Building a custom GPT necessitates a paid ChatGPT subscription, with pricing starting at $20 per month and rising to $200 per month based on the required level of access.

Payoff: Young’s mailing list has seen steady growth, with the custom GPT contributing around 50 new subscribers over the past three months. It consistently attracts a modest but targeted group each month. Although the audience remains relatively small, Young emphasizes that it’s reaching the right individuals. ‘One or two clients from that makes the entire thing worth it because we’re high-value, high-touch services,’ he explained."

The takeaway: Generations Advisor represents a modest customization of the core ChatGPT platform, leveraging its capabilities to deliver a valuable tool for clients that Young hopes will spark greater interest in the firm’s services.

CASE 4: DATA ANALYSIS WITH AI-ASSISTED CODING

Don Tomoff, CPA, a director at Invenio Advisors in Cleveland, leverages ChatGPT for coding and data analysis as a consultant for executives and companies, helping to save time and reduce costs while enabling more efficient project delivery.

“I used to outsource coding for projects, and I haven’t had to do that since January of 2023,” Tomoff said. “That’s been just a huge win.”

He now relies on platforms like ChatGPT to generate code for tasks in Excel and other software. For instance, when he needed a script to locate a specific piece of text and delete all rows above it in an Excel spreadsheet—regardless of its position—Tomoff simply described the problem in natural language to ChatGPT, which then produced functional Visual Basic for Applications (VBA) code. Other AI models, such as Anthropic’s Claude and Google’s Gemini, offer similar capabilities. For an example prompt used with Claude, see the sidebar "Claude AI Prompt for VBA."

Tomoff approaches larger projects by breaking his requests into multiple stages. He first asks ChatGPT to outline the necessary steps for a given task, then directs it to generate code for each step. If errors occur, he describes the issues and requests corrections, enabling iterative refinement.

According to Tomoff, outsourcing coding used to cost as much as $150 per hour, totaling up to $2,000 for a typical project. Additionally, the time required to develop, test, and refine solutions has been reduced from days to just hours.

“You want to explain as precisely as you can what you want,” he said. “You don’t want to eat the elephant in one effort, because it will stop on you if you give it too much to digest. It’s iterative.”

Brianne Smith, CPA/PFS, Ph.D.—a financial adviser, managing member of her own accounting firm, and assistant professor of accounting at Auburn University at Montgomery, Alabama—guides her accounting students through four key phases of data analysis when using ChatGPT: "Ask the question, master the data, perform the analytics, and share the story."

Smith explained: “You wouldn’t load ChatGPT and ask it to do all four things at the same time — but we would focus in on various areas and chunk them out into intermediary goals at the end.”

ChatGPT and similar tools can directly analyze and transform files, going beyond merely generating code for users to run.

Case 4 at a glance

Degree of difficulty: The learning curve is low, provided the user has some familiarity with generative AI bots. Success hinges on clearly defining the problem and having the patience to experiment and troubleshoot.

Cost: While code generation is available in the free versions of major generative AI models, paid versions often offer greater convenience and enhanced capabilities.

Payoff: TTomoff is now able to handle more complex projects independently. “Projects that I either would not undertake or would take too long that I would undertake, I’m doing in minutes,” he said.

The takeaway: Tomoff advises embracing the bot as a powerful extension of your skills. “If you’re an accountant, you no longer can say, ‘I don’t know how to do this,'” he said.

CASE 5: BRAINSTORMING AND RESEARCH

LLMs can be powerful research assistants — when they’re used correctly.

When researching a topic, Tomoff often inputs an outline into ChatGPT or Perplexity, an LLM-powered search engine, and asks: “What other areas would you add, and why would you add them?”

The responses can reveal research gaps he might have missed, while follow-up questions offer foundational insights into those topics. According to Tomoff, the true strength lies in the sheer volume of ideas these bots can generate.

“People will say it’s not any more creative than you and me,” he said. “It can sit and come up with ideas 100 times faster.” He also highlighted ChatGPT’s recent introduction of a ‘deep research’ feature, a more advanced tool available to paid users.

However, Tomoff warned that chatbots typically bring users about 90% of the way to a solution. Due to the possibility of hallucinations, users must always verify any facts derived from the responses.

Meanwhile, a new generation of research tools is customizing LLMs to meet the specific demands of accounting. Young’s firm recently began using Ask Blue J, a bot designed exclusively for federal and state tax laws. It provides precise answers and citations for detailed tax inquiries and can also draft memos and client emails. However, it isn’t without flaws. According to Young, the answers are about “95%” accurate, but the model frequently has difficulty producing correct calculations when dealing with frequently changing, inflation-adjusted figures.

“I’m always telling my staff, ‘Double-check that,'” he said.

Case 5 at a glance

Degree of difficulty: Chatbots offer intuitive research support, yet preventing hallucinations demands a combination of subject expertise and familiarity with the bots.

Cost: Free chatbot versions are useful for brainstorming and general research, while costs for more advanced or industry-specific solutions can vary widely.

Payoff: At their best, chatbots enable accountants to swiftly address inquiries and uncover new avenues for research. “This is the tax manager I always wish I had, where I could ask any question and not get judged,” Young said.

The takeaway: Chatbots aren’t magical genies that can instantly solve every question, but they serve as valuable tools to expand one’s knowledge. “It just augments what you know,” Tomoff said.

CASE 6: AUDIT AUTOMATION AND ASSISTANCE

Katebini serves as an adviser to not-for-profit organizations at GRF CPAs & Advisors, where she has guided clients through the recent surge of automation and AI-driven tools, particularly in the field of auditing

The firm has recently adopted Trullion’s Audit Suite, a platform offering a variety of valuable features. It is capable of:

1. Search through documentation to find evidence related to an audit sample. “You’re not scouring through 80 pages of a bulk PDF. It’s very easy in that respect,” Katebini said. This technology enables staff to quickly determine if any evidence is missing for a specific audit point.

2. Generate concise summaries from documents like board minutes and lease agreements.

3. Automate various aspects of financial statements, such as footings and linking disclosures directly to the corresponding statement balances. “Our production team doesn’t have to go through the process of manually footing everything,” Katebini said.

Trullion is just one among many audit-focused solutions available today. For example, the AICPA’s Dynamic Audit Solution examines large datasets to detect patterns and potential risks. Other tools can automatically identify discrepancies and missing information or quickly reformat data when it’s submitted in an incorrect format.

“It’s the press of a button for us now,” Katebini said.

Collectively, the firm’s new tools are enhancing staff capabilities to perform advanced analyses and strengthen client relationships.

“Our staff is so inundated, there’s so much work to be done, it’s hard to take a step back and talk with your client sometimes, and technology advancements in assurance engagements is creating efficiencies to allow us more time to advise,” Katebini said.

Case 6 at a glance

Degree of difficulty: While off-the-shelf products are becoming more widely available, successfully selecting and implementing these solutions demands a strong understanding of the technology, its practical applications, and solid project management skills.

Cost: Varies by product.

Payoff: Significantly enhanced efficiency in handling and producing documentation.

The takeaway: A new generation of technological solutions is emerging, along with a growing role for finance technologists to deploy them.

How to determine AI technology needs

With the rapid expansion of artificial intelligence (AI) technologies, navigating the myriad of options can be overwhelming. Tricia Katebini, CPA and partner at GRF CPAs & Advisors in Bethesda, Md., shared that she dedicates a significant amount of time to technology, explaining, “I’m a person in the firm that has been designated to head up and lead the technology implementations, the vetting.”

Katebini offered the following guidance for discovering and deploying new solutions:

Identifying pain points: Instead of looking for what “looks cool,” Katebini said, the firm began by asking staff about the tasks and work that were the most time-consuming and unexciting — such as creating note disclosures or getting data in the right format. “How can we solve that problem?”

Seeking solutions: The team looks for solutions, including by asking vendors directly. “We’re bringing our pain points and problems to our vendors, too, and they’re very willing to listen.”

Making a choice: The right tool is a matter of cost, utility, and compatibility with the rest of an organization’s tech stack.

Brianne Smith, CPA/PFS, Ph.D., who manages her own accounting practice and financial advisory firm while serving as an assistant professor of accounting at Auburn University’s Montgomery campus in Alabama, noted that consulting on technology implementation can even evolve into a standalone line of business for a firm.

“My firm and other firms are starting to consult on this type of process,” Smith said. “We make sure that they have proper security and privacy. We also recommend various tools for pain points.”

She and others recommended beginning modestly with AI—perhaps simply by experimenting for personal use—and seeking input and assistance from others throughout the process.

“There’s a whole community. We are all very willing to collaborate and talk about what tools we use,” Katebini said. “It’s kind of exciting to be at the crossroads.”

Claude AI prompt for VBA

Below is an Invenio Advisors LLC prompt instructing the Claude AI model to create a visual basic (VBA) bot to move items from one list to another list in Excel.

Prompt Structure

ClaudeAI PROMPT to move items from a list to another list (VBA)

You are an Excel VBA expert. I would like your help in creating a VBA macro that will MOVE (not copy) rows from one table to another when they’ve been checked. Specifically:

Source worksheet: {INSERT WORKSHEET NAME} with table named {INSERT EXCEL TABLE NAME}
Destination worksheet: {INSERT WORKSHEET NAME} with table named {INSERT EXCEL TABLE NAME} (create these if they doesn’t exist).
The destination table should start at cell A10 if it needs to be created
Move only rows where a checkbox in the last column is checked
Transfer all columns EXCEPT the last 3 columns from the source table
Prevent duplicates based on the video title (column 2) in the destination table
After moving a row, DELETE it from the source table
Include error handling for cases where tables don’t exist
Alert the user with a message upon completion

The macro should first check if items are already in the saved list before moving them.

Once you have created the code, please advise if you have any recommendations for improvement. I will then let you know if I want to make any changes to the code you provide.

After you complete this task, please provide instructions on how to implement the process in my workbook. Take a deep breath and let’s do this!

Source: Invenio Advisors LLC

Form 16 TDS Certificate: Due to the income tax changes made in the FY 2024-25 (AY 2025-26), Form 16 will show certain changes this year

Faqs of Insurances — Wed, 04 Jun 2025 02:41:00 +0000

By June 15, 2025, salaried employees should receive their Form 16 for the financial year 2024-25 from their employer. This year, Form 16 will undergo certain changes due to the changes announced in the July 2024 Budget.

Your Form 16 will change in the following three ways this year:

1. Taxes deducted from other incomes: Your Form 16 will show the tax deducted from your other sources of income and also the Tax Collected at Source (TCS) on expenditures on specified items. This will happen if you have submitted Form 12BBA to your employer.

Budget 2024 amended the income tax rules to allow salaried individuals to inform their employers of the TDS on the individual's other sources of income, as well as TCS from specified expenses of the individual. This TDS and TCS can then be adjusted against (subtracted from) the total tax deductible from the employee's salary. This would help the employee as total TDS from salary would be reduced accordingly.

Suresh Surana, a practising chartered accountant, says, "This year, Form 16 will show not only tax deducted by the employer on the salary income, but will also show tax deducted on other sources of income such as interest on fixed deposits or tax paid as TCS on foreign travel expenditure, etc. However, this will happen only if a salaried employee has shared the details of other taxes deducted (TDS/TCS) via Form 12BB."

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Also Read: New form to reduce TDS on salary

2. Higher standard deduction from salary under new tax regime: From FY 2024-25 (AY 2025-26), the standard deduction from salary has been increased from Rs 50,000 to Rs 75,000 under the new tax regime.

In Form 16, if you have opted for the new tax regime for FY 2024-25 (AY 2025-26) for TDS on salary, you will receive a higher amount of Standard Deduction from your salary when your employer deducts tax at source. Income tax laws for FY2024-25 allow a Standard Deduction of Rs 75,000 under the new tax regime.

However, while filing ITR for FY 2024-25 (AY 2025-26), if an individual switches from the new tax regime to the old tax regime, then only standard deduction of Rs 50,000 will be allowed to be claimed from the salary income.

Also Read: Last date to receive Form 16 by salaried employees

3. Higher NPS deduction on employer's contribution: From FY 2024-25, the new tax regime allows a higher deduction from gross taxable income to the employee on the employer's contribution to NPS.

An employee can claim a deduction of up to 14% of their basic salary under Section 80CCD (2) in the new tax regime. This deduction can be claimed on the employer's contribution to the National Pension System (NPS) account of the employee. This higher deduction would reflect in your Form 16 only if you are under new tax regime for TDS from salary.

Here also, if the tax regime is switched from the new to the old tax regime while filing ITR, then the deduction will be reduced. An employee will be eligible to claim a deduction of only 10% of their basic salary under Section 80CCD (2) on the employer's contribution to NPS in the old tax regime.

This story originally appeared on: India Times - Author:Faqs of Insurances

Income Tax Return Forms of ITR-1 and ITR-4 are now enabled to file through Online mode with prefilled data for Assessment Year 2025-26 for taxpayers

Faqs of Insurances — Wed, 04 Jun 2025 01:56:00 +0000

The Income Tax Department has started enabling online utility for filing income tax returns online. This means now eligible taxpayers can start filing their ITR through the e-filing online portal for FY 2024-25 (AY 2025-26). However, as of today only ITR-1 and ITR-4 forms are enabled for online filing, which means those who need to file ITR-2 or ITR-3 need to wait for the time being.

Read below to know who is eligible for filing ITR-1 and 4 and who needs to file ITR-2 and ITR-3.

Who needs to file ITR-1?

ITR-1 can be filed by an Indian resident individual whose:

Total income does not exceed Rs 50 lakh during the financial year
Income is from salary, one house property, family pension income, agricultural income (up to Rs 5000), and other sources, which include:
Interest from Savings Accounts
Interest from Deposits (Bank / Post Office / Cooperative Society)
Interest from Income Tax Refund
Interest received on Enhanced Compensation
Any other Interest Income
Family Pension

“Income of Spouse (other than those covered under Portuguese Civil Code) or Minor is clubbed (only if the source of income is within the specified limits as mentioned above),” said the Income Tax Department in its frequently asked question (FAQ ).

What are the types of income that don't form part of ITR 1 form?

Following are the types of income that shall not form part of ITR 1 form:-

(a) Profits and gains from business and professions;

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(b) Capital gains;

(c) Income from more than one house property;

(d) Income under the head other sources which is of following nature:-

(i) winnings from lottery;

(ii) Activity of owning and maintaining race horses;

(iii) Income taxable at special rates under section 115BBDA or section 115BBE;

— IncomeTaxIndia (@IncomeTaxIndia)

Who is eligible to file ITR-2?

According to an income tax department FAQ, ITR-2 can be filed by individuals or HUFs who:

Are not eligible to file ITR-1 (Sahaj)
Do not have income from profit and gains of business or profession and also do not have income from profits and gains of business or profession in the nature of:
interest
salary
bonus
commission or remuneration, by whatever name called, due to, or received by him from a partnership firm
Have the income of another person like spouse, minor child, etc., to be clubbed with their income – if income to be clubbed falls in any of the above categories.

Who is not eligible to file ITR-2?

ITR-2 cannot be filed by any individual or HUF, whose total income for the year includes income from profit and gains from business or profession, and also who has income in the nature of:

Interest
salary
bonus
commission or remuneration, by whatever name called, due to, or received by him from a partnership firm.

Who is eligible to file ITR-3?

The ITR-3 form is mainly used by those individuals who are engaged in a business or any profession and in some cases are required to maintain a books of accounts. Those who do not have income from business or profession are not eligible to file under ITR-3.

Who is eligible to file ITR-4 for AY 2024-25?

ITR-4 can be filed by a Resident Individual / HUF / Firm (other than LLP) who has:

Income not exceeding Rs 50 Lakh during the FY
Income from Business and Profession which is computed on a presumptive basis u/s 44AD, 44ADA or 44AE
Income from Salary/Pension, one House Property, Agricultural Income (up to ₹ 5000/-)
Other Sources which include (excluding winning from Lottery and Income from Race Horses):
- Interest from Savings Account
- Interest from Deposit (Bank / Post Office / Cooperative Society)
- Interest from Income Tax Refund
- Family Pension
- Interest received on enhanced compensation
- Any other Interest Income (e.g., Interest Income from Unsecured Loan)

Who is not eligible to file ITR-4 for AY 2024-25?
ITR-4 cannot be filed by an individual / HUF / Firm (Other than LLP) who:

is a Resident but Not Ordinarily Resident (RNOR), or Non-Resident Indian
has total income exceeding ₹ 50 Lakh
has agricultural income in excess of ₹5,000/-
is a Director in a Company
has income from more than one House Property;
has income of the following nature:winnings from lottery;
activity of owning and maintaining race horses;
income taxable at special rates u/s115BBDA or Section 115BBE;
has held any unlisted equity shares at any time during the previous year
has deferred income tax on ESOP received from employer being an eligible start-up
is not covered under the eligibility conditions for ITR-4

This story originally appeared on: India Times - Author:Faqs of Insurances

7 prominent changes in ITR excel utilities for FY 2024-25, which taxpayers including salaried should know

Faqs of Insurances — Mon, 02 Jun 2025 23:41:00 +0000

The income tax department has made several changes in the income tax return (ITR) validation rules for reporting income earned during FY 2024-25 (AY 2025-26). As on date only the excel based ITR filing utilities for ITR-1 and 4 have been released. A brief look at these forms suggests that most of these changes are relevant for salaried persons, or those taxpayers who have any electric car loan, home loan, house rent, etc i.e. those who need to file ITR-1.

All of these changes are in the nature of enhanced declarations. Experts say this has been done to stop the instances of false claims of income tax deductions at the time of ITR filing. Earlier, the tax department used to check the tax deduction’s authenticity manually at the time of processing the ITR. Now this process is automated and brought at the ITR filing level, which means less chances of errors in ITR and possible faster processing of ITR.

What are the changes in ITR validation rules for FY 2024-25 (AY 2025-26)?

Most of the changes in validation rules relate to tax deductions that can be claimed under the old tax regime. Here are seven changes introduced in the ITR filing utility for FY 2024-25 (AY 2025-26):

1. Enhanced Disclosure for House Rent Allowance (HRA): Taxpayers claiming HRA exemption must now provide comprehensive details, including:

Place of Work
Actual HRA Received
Actual Rent Paid
Basic Salary and Dearness Allowance
50% or 40% of Basic Salary, depending on whether the city is metro or non-metro.

Source: ITR-1 excel utility

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2. Section 80C Deduction: Taxpayers now have to disclose the policy number or document identification number to claim Section 80C tax deduction. Do note under Section 80C eligible taxpayers can claim up to Rs 1.5 lakh as tax deduction for investing in various instruments like PPF, tax savings FD, life insurance policies, etc.

Source: ITR-1 excel utility

3. Section 80D: Health Insurance Details Taxpayers claiming deductions under Section 80D for medical/health insurance must now provide:
•Name of the Insurance Company
•Policy or Document Number

Source: ITR-1 excel utility

4. Section 80E: Education Loan Interest For deductions on interest paid on education loans under Section 80E, the following details are now mandatory:

Name of the Lender
Bank Name
Loan Account Number
Date of Loan Sanction
Total Loan Amount
Loan Outstanding as on 31st March
Interest of the loan

5. Section 80EE / 80EEA: Interest on Home Loan Similar disclosures are required for interest deductions under Section 80EE or 80EEA for residential house property:

Name of the Lender
Bank Name
Loan Account Number
Date of Loan Sanction
Total Loan Amount
Loan Outstanding as on 31st March

6. Section 80EEB: Electric Vehicle Loan Interest For interest paid on loans taken for the purchase of electric vehicles under Section 80EEB, taxpayers must provide:
•Name of the Lender
•Bank Name
•Loan Account Number
•Date of Loan Sanction
•Total Loan Amount
•Loan Outstanding as on 31st March

7. Section 80DDB: Treatment of Specified Diseases Taxpayers claiming deductions under Section 80DDB for medical treatment of specified diseases are now required to mention the:
•Name of the Specified Disease

Chartered Accountant Abhishek Soni, co-founder, Tax2Win, says: “The above mentioned new requirements are introduced in the ITR-1 and ITR-4 forms for Assessment Year 2025–26, and they were not part of the old forms in this level of detail.”

Soni explains using an example: “For example, for HRA exemption, previously only the exemption amount was entered manually and for claiming the deductions, only deduction amount was entered. In technical terms, in earlier ITR forms, only aggregate deduction amounts were entered, and supporting documentation was needed only upon scrutiny. Now, the ITR utility is capturing this information upfront, indicating a shift toward pre-validation and increased compliance transparency.”

Experts say the tax deduction system was abused, which is why the tax department may have introduced these changes. Chartered Accountant Ashish Niraj, Partner, A S N & Company, says: " In recent past income tax department has detected many cases where Income Tax Refund was obtained on the basis of false claims or forged documents, hence additional information are being sought now in ITR 1 for cross verification purpose at the time of assessment if required.”

This story originally appeared on: India Times - Author:Faqs of Insurances

Polls project the country will pick a leftwing leader in Tuesday’s presidential vote

Faqs of Insurances — Mon, 02 Jun 2025 00:00:00 +0000

Your browser does not support playing this file but you can still download the MP3 file to play locally.

Private equity dealmaking around the world slowed down in the second quarter of 2025, and South Korea holds elections on Tuesday after months of political instability. Plus, office space construction in the UK has reached a ten-year low, and Wall Street is warning that a little-publicised foreign tax provision in Donald Trump’s budget bill could upend markets.

Mentioned in this podcast:

Trump tariffs cut off recovery in private equity dealmaking

Leftwing ‘brawler’ on verge of South Korea presidency

The ‘quiet’ crisis brewing between the US and South Korea

Foreign tax provision in Trump budget bill spooks Wall Street

UK office construction drops to 10-year low

Today’s FT News Briefing was produced by Sonja Hutson, Ethan Plotkin, Kasia Broussalian, Henry Larson, and Marc Filippino. Additional help from Peter Barber. Topher Forhecz is the FT’s acting co-head of audio. The show’s theme song is by Metaphor Music.

Read a transcript of this episode on FT.com

View our accessibility guide.

This story originally appeared on: Financial Times - Author:Faqs of Insurances

While filing income tax returns, it is important to select the correct ITR form

Faqs of Insurances — Sun, 01 Jun 2025 21:00:00 +0000

Choosing the right ITR form is the first and most crucial step, as a wrong form can lead to defective returns, penalties, or refund delays. The Income Tax Department has notified the updated forms for Assessment Year 2025-26. Here’s a quick guide to help you identify the correct form based on your income type and tax situation.

ITR 1 (Sahaj)

For salaried individuals with simple income
YOU CAN USE THIS IF
You are a resident individual (not HUF or NRI/RNOR).
Your total income is less than or equal to Rs.50 lakh.
Your income includes:
Salary or pension.

One house property (no carry-forward loss).
Interest or other sources (excluding lottery/racehorses).
Agricultural income up to Rs.5,000.
Capital gains up to Rs.1.25 lakh from shares/mutual funds (Section 112A, new from FY 2024-25). No carry-forward loss allowed.

You cannot use this if:

You're a director in a company.
Hold ESOP/unlisted shares.
Profit from virtual digital assets (crypto).
Have foreign assets or income.
Own more than one house.
Have business or professional income.
Have capital losses to carry forward.

New for this year

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You can now declare up to Rs.1.25 lakh in LTCG from shares or equity mutual funds in ITR 1 without needing ITR 2 or ITR 3.

ITR 2

For investors, NRIs, and those with capital gains or multiple properties
YOU CAN USE THIS IF
You are an individual or HUF.
Your income includes:

Salary/pension.
Income from multiple house properties.
Capital gains (any amount).
Foreign income or assets.
Agricultural income > Rs.5,000.
You’re an RNOR/NRI.
You’re a director or hold unlisted shares.
You have clubbing of income (spouse’s income).

You cannot use this if:

You have income from business or profession.

New feature:
The Excel utility now supports filing revised returns under Section 139(8A).

ITR 3

For business owners, freelancers, and partners in firms
YOU MUST USE THIS IF
You are an individual or HUF with:

Income from business or profession (proprietorship).
You are a partner in a firm (not an LLP).
Income includes capital gains (any amount or with carry-forward loss).
You hold unlisted equity shares.
Income/loss from futures & options.
You also earn salary, rent, or other income along with business income.

Use this if you cannot file ITR 1, ITR 2, or ITR 4 due to your income mix.
If you’re opting out of the new tax regime, Form 10-IEA confirmation is required

ITR 4 (Sugam)

For small businesses and professionals under presumptive tax
YOU CAN USE THIS IF
You are a resident individual, HUF, or partnership firm (not LLP).
Your total income is less than or equal to Rs.50 lakh.
You earn from:

Presumptives (Section 44AD or 44AE).
Presumptiven (Section 44ADA).
One house property.
Salary/pension.
Other sources (excluding lottery/racehorses).
LTCG under Section 112A: Rs.1.25 lakh (no carry-forward loss).

You cannot use this if:

Income is > Rs.50 lakh.
You have foreign assets or income.
You are an RNOR or NRI.
You’re a company director or hold unlisted equity.
Your business turnover is > Rs.2 crore.
You have capital losses to carry forward.

Freelancer tip
Use ITR 4 only if you’re under presumptive taxation (44ADA). Otherwise, file using ITR 3.

ITR 5

For LLPs, AOPs, co-operative societies, and others
You can use this if you are:

A partnership firm (excluding proprietorships).
An LLP.
Association of Persons (AOP).
Body of Individuals (BOI).
Estate of a deceased or insolvent person.
Business trust or investment fund.
Certain cooperative societies or trusts (not filing ITR 7).

You cannot use this if:

You are an individual, HUF, or company.
You are a trust required to file ITR 7.

Note
If you opt out of the new tax regime, submit Form 10-IEA

Don’t forget...

If you’ve received ESOPs or hold startup shares not listed on stock exchanges, you own unlisted equity even if you haven’t sold it. This disqualifies you from using ITR 1 or ITR 4.
Even if your salary is under Rs.50 lakh, having capital gains above Rs. 1.25 lakh or owning more than one property requires ITR 2. Using ITR 1 here can lead to a defective return notice.
Only ITR 2 or ITR 3 lets you carry forward capital losses to offset future gains. If you use ITR 1/4, these losses lapse, potentially costing you thousands in future tax savings.
If you’ve returned to India recently after living abroad, you may be an RNOR, not a regular resident. You are an RNOR if you were an NRI in nine out of the last 10 years or stayed in India for 729 days or less in the last seven years.
If you’re a freelancer, small business owner, or professional with modest income, you can opt for presumptive taxation to simplify filing. Under this, you declare a fixed percentage of your total receipts as income. There’s no need to maintain detailed books or get audited. Use this only if your turnover is within limits (Rs.2 crore for business, Rs.50 lakh for profession).
If you’re salaried and traded in F&O, you must file ITR 3. F&O income is treated as business income, not capital gains, even if it’s just a side activity.

This story originally appeared on: India Times - Author:Faqs of Insurances

Taxpayers stand to benefit from a 45-day extension for filing returns due to significant ITR form changes in Budget 2024

Faqs of Insurances — Sun, 01 Jun 2025 21:00:00 +0000

At the very onset of the tax filing season, taxpayers have received a bonus—a 45-day extension for filing returns. The deadline has been shifted from 31 July to 15 September to accommodate the extensive structural changes in ITR forms introduced by the Budget 2024. While the extension may be welcomed by many, you could still end up with errors in your returns due to these changes.

Non-compliance with new changes may not be the only mistake you make. Despite technological improvement in online tax filing, taxpayers end up with several errors. “The pre-filled data from Form 16, 26AS, AIS/TIS, real-time validation and auto-calculations have reduced the chances of errors, but if the data you provide and confirm is not correct, it may lead to mistakes in the return,” says Kuldip Kumar, Partner, Mainstay Tax Advisors.

These mistakes cover a wide gamut, ranging from picking wrong ITR forms, misreporting or not reporting income, not reconciling income and taxes, to making mistakes in HRA claims or while changing jobs. These can result in faulty tax computation, income tax notices, penalties, re-filing of returns and delayed refunds. To help you avoid these, we list some such mistakes.

1.Using wrong ITR forms,not filing returns

Some of the most common mistakes are seemingly simple, yet problematic—picking the wrong ITR form, not verifying the submitted return, not adhering to deadlines, or assuming one doesn’t need to file returns at all.

“Different income sources and taxpayer categories require specific ITR forms and using an incorrect form can lead to rejection or processing delays,” says Umesh Kumar Jethani, Founder, ApkiReturn.

Live Events

While picking ITR forms this year, remember that you can use ITR 1 form if you have up to Rs.1.25 lakh in long-term capital gains (LTCG) from shares or equity mutual funds, instead of the more complicated ITR 2 or 3 mandated earlier.

Another common mistake is thinking that you are exempt from filing returns because you have zero tax liability. A full tax rebate under Section 87A is available for individuals with taxable incomes up to Rs.7 lakh in the new tax regime and Rs.5 lakh in the old regime, making income up to Rs.7 lakh (or Rs.5 lakh) tax-free. This doesn’t mean you may not have to file tax returns. If you have incurred certain expenses (over Rs.2 lakh in foreign travel, Rs.1 lakh in power consumption, among others), it is mandatory for you to file returns. Similarly, if you are eligible for a tax/TDS refund or have to carry forward losses, you will not be able to claim it without filing returns.

“Only individuals with total taxable income below the basic exemption limit are not required to file returns. Under the new tax regime, this limit is Rs.3 lakh, and Rs.2.5 lakh in the old regime for those below 60,” says Amit Maheshwari, Tax Partner, AKM Global.

Don’t miss these tax filing deadlines

31 March 2030
Last date for filing updated return for financial year 2024-25.
15 Sep 2025
Last date to file tax return for salaried taxpayers and those not requiring an audit, for financial year 2024-25 (assessment year 2025-26).
If you miss it...
You can file a belated tax return till 31 December 2025, though you will have to pay a penalty and interest. The late filing fee is Rs.1,000 if your income is less than Rs.5 lakh, and Rs.5,000 if the income is more than Rs.5 lakh. The interest will be 1% per month on the unpaid tax from the due date till the return is filed.
31 Oct 2025
For individuals and professionals requiring audit for financial year 2024-25 (assessment year 2025-26).
If you miss it...
You can file a belated tax return till 31 December 2025, though you will be charged the same penalty as that for breaching the 15 September deadline. In addition to this, the assessing officer can levy a penalty of `1.5 lakh or 0.5% of turnover, whichever is lower.
31 Dec 2025
Last date to file revised or belated tax return if you miss the 15 September deadline.
If you miss it...
You can file an updated return till four years from the end of the relevant assessment year. However, you will have to pay an additional tax at the rate of 25%, 50%, 60% and 70% of the tax for the first, second, third and fourth years, respectively, depending on the year in which you file.

“In case of wilful default, even prosecution proceedings may be initiated under Section 276CC. There is a provision of imprisonment of six months to seven years with a fine, where tax evaded is more than Rs.25 lakh, and from three months to two years with a fine, in other cases,” says Kumar.

Where the tax return has been filed after the due date (15 September this year), you can be penalised up to Rs.5,000 under Section 234F (see ‘Don’t miss these tax filing deadlines’). This is besides the 1% per month interest you will be levied for unpaid tax. As far as updated returns are concerned, you can file till four years after the relevant assessment year, as per the change announced in last year’s Budget.

Who needs to file income tax returns?
Find out the conditions under which you are exempted from filing returns and when it’s compulsory to do so.
You’re exempt from filing if..

Your annual income before deductions and exemptions is…
Less than Rs.2.5 lakh in old tax regime.
Less than Rs.3 lakh in old tax regime if you are between 60 and 80.
Less than Rs.5 lakh in old tax regime if you are over 80.
Less than Rs.3 lakh in new tax regime.
You are over 75, with only income being pension and interest from the same bank, and the bank has deducted tax.

Even if you’re exempt,file a return if…

You have a tax refund due.
You have a TDS/ TCS refund due.
You need to apply for a loan, passport or visa.
You want to carry forward losses from business/ profession or under capital gains head in the future.

Even if you’re exempt, it is mandatory to file a return if …

You have a foreign income or hold foreign assets.
You are a company or a firm, regardless of profit or loss.
You have deposited Rs.50 lakh or more in savings account, or Rs.1 crore or more in current account.
You have spent Rs.2 lakh or more on foreign travel.
Your electricity consumption is over Rs.1 lakh.
Your aggregate TDS/ TCS is more than Rs.25,000 (Rs.50,000 for senior citizens).
You have a business turnover of over Rs.60 lakh, or professional turnover of more than Rs.10 lakh.

2.Not incorporating Budget 2024 changes

The most likely mistakes this year could be related to the changes introduced by the Budget 2024. There are not only structural changes in the ITR forms that require compliance by taxpayers (see ‘Comply with these Budget 2024 changes’), but also deductions and capital gain taxation changes that could lead to calculation errors.

“Removal of indexation from long-term capital gain calculation is the biggest change from Budget 2024, for which the cut-off date is 23 July 2024,” says Shubham Agrawal, Senior Taxation Adviser, TaxFile. in. Both the capital gain taxation rates and holding periods have been rationalised (see ‘Capital gain rates…’). While long-term gains from listed shares and equity funds will be taxed at 12.5% without indexation, short-term gains will be taxed at 20%, up from 15% earlier.

Importantly, the capital gains schedule has also been modified to report gains separately for periods before and on or after 23 July 2024. What this means is that taxpayers will now have to bifurcate their gains based on whether the transfer occurred before or after this date.

Among other changes, remember that while using ITR forms 1, 2, 3 and 5, you can only use your Aadhaar number, not the Aadhaar enrolment ID. “Besides, the new tax regime has become the default tax regime, and if you wish to opt for the old tax regime, you will have to explicitly choose it by filing Form 10-IEA before filing your ITR,” says Jethani.

3.Not checking AIS & Form 26AS

Another mistake many people make before filing their tax returns is not checking the Annual Information Statement (AIS) and Form 26AS, which provide a summary of all their transactions and taxes.

“Form 26AS is a tax credit statement that primarily serves as a summary of taxes credited against a taxpayer’s PAN,” says Raj Lakhotia, Managing Partner, LABH & Associates. It includes details such as tax deducted at source (TDS), tax collected at source (TCS), advance tax and self-assessment tax payments, refunds issued by the Income Tax Department, and details of specified high-value transactions like property purchases, mutual fund investments, etc.

The AIS, on the other hand, is more comprehensive and reflects both the reported value and that accepted or modified by the taxpayer, enabling users to verify the information and submit feedback, in case of discrepancies. This information includes interest income from savings accounts, fixed deposits and recurring deposits, dividend income, securities transactions like purchase and sale of shares, mutual funds, rent received, foreign remittances, high-value credit card spends, among others.

To reconcile the data, first compare the information in AIS and Form 26AS with your own financial statements, Form 16, bank statements, and investment proofs. “If there are any mismatches (TDS not reflected, incorrect income figures), contact the deductor (employer, bank) to get it rectified,” says Jethani.

“Reconciliation of both with the ITR helps avoid discrepancies, prevents underreporting or duplicate claims, facilitates faster processing of returns and refunds, and avoids tax notices,” says Maheshwari.

4.Not disclosing all sources of income

Whether you fail to list all your incomes by mistake or intentionally, it can prove very expensive. “Since most filings are based on AIS and TIS, people only refer to these, but there is the risk of missing out incomes on which TDS is not deducted, such as interest on sovereign gold bonds or rent for residential property if it is less than Rs.50,000 a month,” says Agrawal.

“It’s also easy to miss out on interest from savings accounts, fixed and recurring deposits, crypto, or freelance, rental and foreign incomes,” says Sudhir Kaushik, Founder & CEO, TaxSpanner.com.

“Taxpayers frequently overlook categories of income that are accrued but not received, or not actively tracked, such as capital gains from sale or redemption of shares, mutual funds, real estate, or other capital assets, and dividend income, especially when credited without TDS or reinvested,” says Lakhotia.

Another income that is typically not included is the one derived from assets transferred to the spouse without consideration, or income from minor children. “Also, in case of sale of jointly owned property with spouse but funded only by one, people report capital gains proportionately in both the returns, rather than in the return of the spouse who funded it,” says Kumar.

After Budget 2024
Capital gain rates & holding periods have changed

Depending on whether it is underreporting or misreporting of income, it can result in a penalty of 50-200% of the due tax, besides interest liability and even risk of prosecution in extreme cases.

5.Not reporting exempt income

While exempt income is not a part of your total taxable income, it is mandatory to report it under the appropriate section (Schedule EI). “Non-reporting of such income may lead to a defective return, and if the defect is not rectified within the prescribed timeline,the return may be treated as invalid,” says Lakhotia. Agrees Kumar: “With automated processes in place, it is likely to get noticed. This may result in waste of time and energy responding to notices and giving explanations why it was missed.”

Exempt income that needs to be reported includes agricultural income; share of profit from a partnership firm; interest income from Public Provident Fund (PPF); interest income from tax-free bonds; gratuity and leave encashment (up to specified limits under Section 10(10AA)); maturity proceeds of life insurance policies (subject to conditions under Section 10(10D)); exempt portion of house rent allowance (HRA) under Section 10(13A); exempt portion of leave travel allowance/concession (LTA/LTC) under Section 10(5); commuted pension (up to specified limits under Section 10(10A)); Sukanya Samriddhi proceeds and interest earned; interest and maturity proceeds from Employees’ Provident Fund (EPF), subject to specified conditions; and income of a minor child clubbed with the parent (exempt up to specified limit under Section 10(32)).

6.Not adding income from former employer

When people change jobs within a financial year, they are likely to make the following accounting mistakes.

Claiming basic exemption & deduction twice: “Both new and previous employers may independently apply basic exemption limit, standard deduction, and deductions under Chapter VI-A, especially if investment declarations have been submitted twice, resulting in double claiming of tax benefits and lower TDS deducted,” says Lakhotia.

“Where such tax liability, net of TDS/TCS, is more than Rs.10,000, the employee will end up paying interest under Sections 234B and 234C if he doesn’t pay advance tax,” cautions Kumar. “Also, irrespective of the number of employers during the year, the standard deduction is capped at Rs.75,000 in the new regime,” says Agrawal.

Not consolidating Form 16s, incomes: Obtain Form 16 from all employers and consolidate income and tax details as it can lead to incomplete income reporting and inaccuracies in TDS credits. “Ensure all income, including any arrears, bonuses, or final settlement from the previous employer, is included,” says Jethani.

Not reconciling Form 16 & Form 26AS : Failure to check the TDS details in Form 16 and those reflected in Form 26AS may lead to missing mismatches, which can result in delays or tax notices.

Ignoring taxability of gratuity, leave encashment: “The other common mistake is claiming exemption for gratuity or leave encashment exceeding the maximum amount specified in the Act if the employee does not keep track of claims in the previous employments,” says Kumar. Failure to account for these can cause errors in tax liability computation.

7.Mistakes in HRA claims

Last year, the Income Tax Department uncovered rent receipts worth Rs.1 crore by a single employee and bore down on the company employees who had used the same PAN multiple times to claim HRA exemption. Don’t make the mistake of conducting fraud as it can result in hefty penalties, including a fine of up to 200% of the misreported amount.

HRA exemption is available under the old tax regime to salaried employees as part of their salary structure. To claim it, you need to provide documentary proof, including a formal rent agreement, rent receipts and landlord’s PAN (if annual rent exceeds Rs.1 lakh), to the employer, besides actually staying in a rented accommodation.

The usage of fake or incorrect PAN details can be easily detected via PAN verification systems, while any mismatch in the rent paid by you and that received by the landlord is bound to get a tax notice. Another red flag for the tax authorites is a mismatch in the rental address and the one linked to Aadhaar or other official records.

If an employee fails to declare or submit proof to the employer, he can still claim HRA exemption at the time of filing returns under Section 10(13A). “However, tax authorities could audit the return to verify the claim. So, preserve supporting documents, such as rent agreement, rent receipts, bank statements reflecting the payment of rent, and where the rent paid exceeds Rs.50,000 a month, evidence of tax deducted at source by the employee,” says Kumar.

“You cannot claim exemption if you stay in your own house or with parents, unless you pay them rent with a valid formal agreement and genuine bank transactions for rent transfers,” says Kaushik.

If the taxpayer pays rent but doesn’t receive HRA from employer, a separate deduction under Section 80GG is available up to Rs.5,000 a month, but is subject to conditions.

HRA claim mistakes: Red flags for tax authorities

Mistake

You have no formal rent agreement.
You have no proof of bank transactions.
Incorrect PAN of landlord (for over Rs.1 lakh a year rent).
Rental address is not authentic.
Your HRA claim differs from that of employer.

How it’s caught

It may not always be mandatory, but its absence can raise suspicion.
Tax department can check bank statements.
It’s easily caught through PAN verification.
Mismatch with address in Aadhaar card or other official records can catch it.
Employer submits details of HRA exemption in Form 16.

Comply with these Budget 2024 changes
The following alterations need to be incorporated by taxpayers in their returns this year.
Capital gains & IT forms
Taxpayers who have long-term capital gains of up to Rs.1.25 lakh and are not carrying forward capital losses can now file using simpler ITR 1 form, instead of the previously mandated complex ITR 2 or ITR 3 forms. This is after the increase in LTCG exemption limit on listed equity shares and equity-oriented mutual funds from Rs.1 lakh to Rs.1.25 lakh in a financial year.
Capital gain split
From 23 July 2024, the LTCG on listed equity shares and equity-oriented mutual funds will be taxed at 12.5% without indexation, from 10% earlier, while the short-term capital gains (STCG) will be taxed at 20%, from the earlier 15%. Taxpayers will have to bifurcate their gains based on whether the transfer occurred before or after this date.
Buyback as dividend
Buying back of shares on or after 1 October 2024 will be considered as dividend in the hands of shareholders and should be reported as ‘Income from other sources’, instead of capital gains. It will be taxed at applicable slab rate without any deduction of the cost of acquisition.
TDS schedule
This year, you will need to mention the TDS section under which tax was deducted for income in 2024-25 if you are using forms ITR 1, 2, 3, or 5.
Actual Aadhaar
You can file the tax returns this year for forms ITR 1, 2, 3 and 5 using only the actual Aadhaar number, not the Aadhaar enrolment ID.
Updated return timeline
The timeline for filing updated returns (ITR-U) has been extended from 24 months to 48 months.
Asset-liability threshold
The threshold for reporting assets and liabilities in the tax return has been increased from Rs.50 lakh earlier to Rs.1 crore now.
Disability certificate
For disabled individuals, taxpayers could earlier claim deduction under Section 80DD or Section 80U in the old regime by quoting Form 10-IA. Now, they will have to give acknowledgement number of disability certificates as well.

This story originally appeared on: India Times - Author:Faqs of Insurances

Income tax notices can be daunting, but understanding them is crucial

Faqs of Insurances — Sat, 31 May 2025 02:17:00 +0000

Filing the income tax return (ITR) isn’t always the end of your tax journey. Even after submission and verification of returns, you may get a notice from the Income Tax Department. While this can seem intimidating, most notices are routine and manageable. Understanding these and responding correctly can help avoid penalties, save time, and maintain peace of mind. If you do get a notice, following these tips can keep you from panicking and inviting further trouble.

DON’T IGNORE: Every notice has a deadline; missing it can result in penalties.
USE FORM 26AS & AIS: These will help you to verify and reconcile your income and TDS data.
BE ACCURATE: Mismatches can lead to additional scrutiny or tax demands.
ACT PROMPTLY: Even minor notices can lead to complications if unaddressed.
SEEK EXPERT HELP: For complex notices, consult a chartered accountant or a tax professional immediately.

Here is a simple guide to common income tax notices and how to deal with them.

Section 143(1)

Intimation after return processing
This is the most frequent notice. It compares your filed return with the department’s records. It is sent if there is a TDS mismatch, calculation errors, incorrect deductions, or in case of delayed filing.

What to do

Log in to the income tax portal and review the notice.
If correct, no action is needed.
If tax is payable, pay within 30 days.
If incorrect, file a rectification with documents.

Section 245

Adjustment against previous dues

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If you’re eligible for a refund, but have pending tax dues from previous years, the department may adjust it.
What to do

Check the notice in your portal under ‘e-Proceedings’.
Agree or disagree with the reasons within 15 days.
No response leads to the automatic adjustment of your refund.

Section 142(1)

Inquiry before assessment
This is a preliminary inquiry when your return isn’t filed or the department needs extra details.
What to do

File your return, if pending.
Submit the requested documents by the given deadline.
Ignoring this can lead to penalties or scrutiny.

Section 139(9)

Defective return
If your return has errors or is missing data, it’s considered defective. The common issues it deals with are missing income details and incorrect deduction entries.
What to do

You have 15 days to correct and re-file.
Log in, access the notice under ‘e-Proceedings’, and respond.
Failing to act may make your return invalid.

Section 133(6)

Request for financial information
This notice seeks clarification on transactions like high-value cash deposits or property purchases.
What to do

Share relevant documents, such as bank statements or agreements.
Submit within the deadline to avoid further scrutiny.

HRA and TDS mismatch notices

These are sent when your house rent allowance (HRA) claim or TDS details don’t align with the department’s records.
What to do

Ensure tenant TDS compliance if rent exceeds Rs. .50,000 a month.
Keep rent receipts and the landlord’s PAN.
If the mismatch is real, file an updated return and retain documents for future reference.

Section 143(2)

Scrutiny notice
This notice means your return has been selected for a detailed check.
What to do

Cooperate by submitting all proofs, including income, deductions, or expense claims.
Attend hearings if called, or respond through the portal.
No response may lead to tax assessments based on estimates.

Section 148

Income escaping assessment
It is issued when the department believes some income was left undisclosed in previous returns.
What to do

File a revised return or give explanation as per the notice.
Justify the source of income and submit relevant proof.
Ignoring this can lead to the reopening of past assessments and penalties.

Section 271AAC(1)

Penalty for unexplained income
If unexplained income, like sudden large deposits, is found during scrutiny, this notice may be issued.
What to do

Provide documentation explaining the source of income.
Penalties of up to 60% apply if the income is found to be unexplained.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

This story originally appeared on: India Times - Author:Faqs of Insurances

The Income Tax Department has released the Excel utility versions of ITR Forms 1 and 4 for AY 2025-26, enabling taxpayers to prepare for FY 2024-25 filings

Faqs of Insurances — Fri, 30 May 2025 03:15:00 +0000

The Income Tax Department has released the Excel utility versions of Income Tax Return (ITR) Forms 1 and 4 for the Assessment Year 2025–26. These tools are now available for download on the official income tax e-filing portal, allowing eligible taxpayers to start preparation for filing of income tax returns for FY 2024-25 (AY 2025-26).

The Income Tax Department has announced the release of excel utilities via a post on X (formerly Twitter). “Attention taxpayers! The Excel Utility for ITR-1 and ITR-4 for AY 2025-26 has been enabled and is now available for taxpayers,” the Income Tax Department said on X.

— IncomeTaxIndia (@IncomeTaxIndia)

Himank Singhla, Partner at SBHS & Associates, says, “It’s a big relief to see that the Excel Utilities for ITR-1 and ITR-4 for Assessment Year 2025–26 have been released by the Income Tax Department. I have already filed ITR-4 using Excel Utility, and I am happy to share that the process was smooth - there are no major changes in the ITR-4 schema compared to last year, which makes it even easier for regular filers and tax professionals. However, a very important change has been made in the schema for ITR-1. A new validation rule has been introduced in the utility itself: if certain TDS section codes appear in Schedule TDS2 or TDS3—such as 194B, 194BB, 194S, 194LA, 195, 196A, 194Q, 194R and others—the income tax return will now be considered invalid for filing under ITR-1. This means taxpayers having income under special rates or from sources like online games, lotteries, crypto, property transfers, must use ITR-2 or other appropriate forms.This is a very welcome and practical change. In past years, many taxpayers unknowingly filed ITR-1 with such incomes, only to face defective return notices from CPC. By building this validation directly into the utility, the Department has helped prevent incorrect filings at source, saving both time and confusion.”

Also read: When will salaried employees get Form 16 to file income tax return for FY 2024-25 (AY 2025-26)?

Choose right income tax return form for ITR filing FY 2024-25 (AY 2025-26)

Taxpayers are advised to carefully check the eligibility criteria before selecting and filing their income tax return FY 2024-25 (AY 2025-26). Choosing the incorrect form may lead to complications or rejection of the ITR by the Income Tax Department. Tax experts recommend thorough reading of the instructions to avoid errors in ITR filing.

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Who is eligible to file ITR 1 for FY 2024-25 (AY 2025-26)?

For the financial year 2024–25 (assessment year 2025–26), resident individuals (excluding those classified as not ordinarily resident) with a total income of up to Rs 50 lakh — including income from salary, one house property, other sources such as interest, long-term capital gains under Section 112A up to Rs 1.25 lakh, and agricultural income not exceeding Rs 5,000 — are eligible to file ITR-1.

ITR filing last date extended from July 31, 2025, for FY 2024-25 (AY 2025-26): Check the new date here

Who cannot use ITR 1 to file income tax return for FY 2024-25 (AY 2025-26)?

ITR-1 cannot be used taxpayers who are either Director in a company or have invested in unlisted equity shares or in cases where TDS has been deducted u/s 194N or if income-tax is deferred on ESOP or has assets (including financial interest in any entity) located outside India.

Who is eligible to file ITR 4 for FY 2024-25 (AY 2025-26)?

For individuals, Hindu Undivided Families (HUFs) and Firms (other than LLP) being a resident having total income up to Rs 50 lakh and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE, and having long-term capital gains under section 112A up to Rs 1.25 lakh for FY 2024-25 (AY 2025-26).

How to file ITR Excel utilities forms

These ITR forms are editable forms that can be downloaded from the income tax website. Individuals can download these forms, fill them up and upload them back onto the e-filing income tax website. These forms are available in Excel and JSON (JavaScript Object Notation) format.

Steps to download ITR-1 and ITR-4 for FY 2024-25 (AY 2025-26)

The Excel utility forms for ITR 1 and 4 are editable tools that can be downloaded, filled offline, and uploaded on the income tax e-filing website. Here are some steps you can follow to download forms ITR-1 and ITR-4
Step 1: Visit the Income Tax e-filing portal
Step 2: Download the applicable ITR form (Excel version)
Step 3: Fill in the details as per your income profile
Step 4: Validate the form and generate the XML or JSON file
Step 5: Upload it on the portal to complete the filing process

With the release of these utilities, it’s time for eligible taxpayers to begin gathering their financial documents and start filing their returns well before the due date of September 15, 2025 for FY 2024-25 (AY 2025-26).

This story originally appeared on: India Times - Author:Faqs of Insurances

Last date to get Form 16: Form 16 is a TDS Certificate, which is received by the employee from the employer

Faqs of Insurances — Thu, 29 May 2025 02:38:00 +0000

Many salaried employees are waiting to receive Form 16, a TDS Certificate, from their employer. Form 16 is an important TDS certificate that contains details of the salary income paid to the employee during the financial year, tax regime opted for tax deduction at source, and deductions and exemptions that the employee has claimed from the salary income (depending on the tax regime). The certificate, of course, contains details of the TDS from the salary, which is one of the main reasons it is needed for filing one's Income Tax Return (ITR).

ET Wealth Online tells you when you can expect to get Form 16, what to check in it, and what to do if you do not get it.

Is there a last date for employers to issue Form 16 to salaried employees?

According to income tax rules, employers must file their e-TDS return for the January-March quarter of a financial year, latest by May 31 of the next FY. Once the e-TDS return is filed, the tax deductor is required to issue the TDS certificate within 15 days of filing the eTDS return, i.e. latest by June 15.

Also Read: ITR filing deadline extended to September 15, 2025, for FY 2024-25 (AY 2025-26)

Shubham Jain, Associate Director, Nangia Andersen India - a tax consulting firm, says, "Form 16 is a certificate of tax deducted at source by the employer on behalf of the employee. In cases where an employer deducts tax at source on salaries, it is mandatory to issue Form 16 by June 15. Failure to issue Form 16 in a timely manner attracts a penalty of Rs 500 per day for each day of default. The maximum penalty can be up to the amount of TDS deducted by the employer. The employer is required to deposit the penalty amount directly into the credit of the Central Government. The penalty is a cost to the employer but not really available for claim by the employee."

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Can you file ITR without Form 16?

Filing income tax return with Form 16 is easier. However, a taxpayer can file income tax return without having Form 16. If you do not have Form 16, then you must collect and rely on other documents for information/proof such as salary slips, Annual Information Statement (AIS) and Form 26AS to file income tax return.

Can you download Form 16 from the Income Tax Department's website using PAN?

A salaried employee cannot download Form 16 from the Income Tax Department's website, either by using his/her PAN or the deductor's PAN. Only the deductor can issue Form 16 to the employee or the deductee. The deductor can also issue the Form 16 only after downloading it from the TRACES portal.

To put it simply, Form 16 of all employees of a single employer is generated from and only after the e-TDS return is filed by the employer. This is because the information in the Form 16 is sourced from the e-TDS return filed by the employer.

Also Read: Can you claim LTA tax exemption in new tax regime?

Who will get Form 16 from their employer?

An employer will issue Form 16 to its employee if the former has deducted tax on the salary income paid to the employee. As per the income tax rules applicable for FY 2024-25 (between April 1, 2024, and March 31, 2025), zero tax is payable under the new tax regime if taxable income does not exceed Rs 7 lakh. Similarly, if the taxable income does not exceed Rs 5 lakh, then no tax will be deducted by the employer if the employee has opted for the old tax regime for FY 2024-25.

Hence, depending on your net taxable salary and tax regime chosen by you, if there is no tax deducted by the employer, then it may not issue Form 16 to you.

Jain says, "Form 16 is a certificate showing TDS deducted by the employer; accordingly, in case no tax is required to be deducted because of low salary, issuance of Form 16 by the employer is also not mandatory. Thus, though legally not required, an employer may still choose to issue a NIL TDS Form 16 to the employee."

What to check in Form 16 and other TDS certificates

An employee should check certain things in the Form 16 received. There are two parts of Form 16 - Part A and Part B. Part A of Form 16 contains details of the employee and employer, such as name, address, PAN, TAN, etc., and tax deducted in the four quarters of the financial year. Part B of Form 16 contains details of the total income paid by the employer to the employee during the financial year. It also contains the tax regime opted for, deducting tax on salary during the financial year, deductions and exemptions that are claimed, as per the tax regime.

Both parts of Form 16 will have the TRACES logo if they have been downloaded from that site, which is a legal requirement.

What is the password to open Form 16?

Form 16 is usually, but not always, a password-protected file. The password can be your PAN (in lower or uppercase), your date of birth (DD/MM/YY), or a combination of PAN (lower or uppercase) and date of birth. You should check your email to see if Form 16 is password protected and what the password is.

Can you have two Form 16s for a single financial year?

Yes, a salaried employee can have two or more Form 16s in a single financial year. This will happen if you have switched jobs during the relevant financial year. In such a case, each employer would issue you a separate Form 16 for the time period that you worked with that employer.

This story originally appeared on: India Times - Author:Faqs of Insurances

NRIs to pay lower LTCG tax on these equity shares due to proposed forex fluctuation benefit in New Income Tax Bill 2025

Faqs of Insurances — Wed, 28 May 2025 23:32:00 +0000

The New Income Tax Bill, 2025 has a provision with which non-residents individuals (excluding FIIs) can effectively pay a lower capital gains tax than allowed under the Income Tax Act, 1961. This provision is called ‘forex fluctuation benefit’ and using it NRIs can pay a lower long term capital gains tax (LTCG) on sale of unlisted equity shares of an Indian company.

As per calculations, if this beneficial provision in the new tax bill, 2025 is incorporated by the Indian government in the final act, then NRIs can pay as much as 72% lower long term capital gains tax when compared to before. The reason for this high percentage of savings in capital gains tax payment for NRIs is earlier under the old tax act of 1961, NRIs had to pay income tax on artificially high income due to depreciation of Indian Rupee (INR). This disadvantage is now removed and NRIs are only required to pay income tax on their actual gains in USD terms.

Read below to understand what the forex fluctuation benefit about which Income Tax Bill 2025 talks is about and how NRIs stand to gain from this benefit if the government implements it in the final income tax act.

What is the forex fluctuation benefit which can result in lower LTCG tax outgo for NRIs?

When NRIs invest in unlisted Indian equity shares, the USD is exchanged for INR, but when the same shares are sold, NRIs exchange INR for USD to take the gains back to their resident country.

Now a situation may arise when an NRI who invested in an Indian share when 1 USD was Rs 60 and at the time of sale 1 USD became Rs 80, so this NRI gained Rs 20 due to depreciation of INR. But if the share price also rose from Rs 60 to Rs 80 during this period then from the NRI’s perspective he earned zero income since he invested 1 USD for one share and got back 1 USD only after selling one share. But despite this fact, the said NRI used to pay capital gains tax, as in INR terms he earned Rs 20. This exact problem is what the forex fluctuation benefit solves under the new Income Tax Bill, 2025.

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If the forex fluctuation benefits feature is implemented in the final tax act, then NRIs will only pay income tax on the actual gains in United States Dollar (USD) terms and not INR terms.

“Currently, Income Tax Act, 1961 does not allow the forex fluctuation benefit to non-residents for sale of unlisted equity shares. This leads to a higher taxable gain, especially where Indian Rupee depreciates significantly during the holding period,” says Pavan Sisodia, Tax Partner, EY India.

The table below shows how an NRI can potentially save as much as 72% tax when forex fluctuation benefit is given to the LTCG transaction.

Particulars	INR	INR/ USD	Converted in USD
Full value of Consideration (assumed sold in 2026) [A]	8,50,000	85	10,000
Cost of Acquisition (assumed acquired in 2014) [B]	5,40,000	60	9,000

Without benefit of foreign exchange fluctuation
Taxable capital gains [C = A-B]	3,10,000
Tax on capital gains (@12.5%* on C)	38,750

With the benefit of foreign exchange fluctuation
Capital gains [D = A - B]			1,000
Taxable capital gains (converted in INR)			85,000
Tax on capital gains (@12.5%* on D)			10,625

Source: EY India

Chartered Accountant (Dr.) Suresh Surana says this benefit- forex fluctuation ensures investors are not overtaxed.

“This method intends to ensure that the capital gains reflect the real economic gain or loss in the investor’s home currency, thereby neutralising the distorting impact of currency fluctuations. As such, it prevents over-taxation that may result from rupee depreciation and aligns the tax liability more closely with the actual financial outcome realised by the non-resident,” says Surana.

What did the New Income Tax Bill 2025 say about giving NRIs forex fluctuation benefit?

The New Income Tax Bill, 2025 said that the forex fluctuation benefits as explained above is applicable to NRIs only for unlisted Indian equity shares like NSE, etc and not for listed equity shares like BSE, etc.

Clause 72(6) of the New Income Tax Bill 2025 said: “ In the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company (other than equity shares referred to in section 198) shall be computed–– by converting the cost of acquisition, expenditure incurred, wholly and exclusively, in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures; ….”

The above legal provision in the new income tax bill, 2025 means forex fluctuation benefit is available only for Indian unlisted equity shares and not for listed equity shares under Section 198.

Surana, says: “The proposed change in the new Income-tax Bill, 2025, seeks to extend the benefit of foreign exchange fluctuation to non-residents (other than foreign institutional investors) in respect of LTCG arising from the transfer of unlisted shares.”

Surana explains: “In accordance with the proposed mechanism i.e. clause 72(6) of the new Income Tax Bill 2025, the cost of acquisition, sale consideration, and transfer-related expenses are first converted into the same foreign currency that was initially utilised for the acquisition of the unlisted shares or debentures. Capital gains are then computed in such foreign currency and subsequently reconverted into INR for tax purposes.”

How can this provision in the new tax bill help NRIs?

Here is a calculation to show how exactly NRIs are going to benefit from forex fluctuation feature:

Example 1

Particulars	Existing Regime (Without Forex Benefit)	Proposed Regime (With Forex Benefit – Sec 72(6)
Currency of Computation	Indian Rupees (INR)	US Dollars (USD), then reconverted to INR
Amount Invested	USD 1 million	USD 1 million
Exchange Rate at Time of Purchase	Rs 70/USD	Rs 70/USD
Cost of Acquisition (INR equivalent)	Rs 7 crore	USD 1 million
Sale Consideration	USD 1.5 million	USD 1.5 million
Exchange Rate at Time of Sale	Rs 90/USD	Rs 90/USD
Sale Value in INR	Rs 13.50 crore	USD 1.5 million
Capital Gain (computed)	Rs. 6.50 crore (Rs 13.50 crore less Rs 7.00 cr)	Rs. 4.50 crore [(USD 1.5 mn less USD 1 mn) Rs. 90/USD)]
Tax Rate on LTCG	12.5%	12.5%
Tax Payable in INR	Rs. 81.25 lakh (Rs. 6.50 crore * 12.5%)	Rs. 56.25 lakh (Rs.4.50 crore * 12.5%)
Effective Tax Saving Due to Forex Benefit	Not applicable	Rs 25 lakh

Source: Chartered Accountant (Dr.) Suresh Surana

CA J Jambukeswaran, Founder, CEO & Managing Director of Uniqey by JJ tax, says: "The introduction of this benefit through the new Section 42 – “Variation in Liability” is a strategic move that strengthens India’s position as an attractive investment destination for private equity, venture capital, and international strategic investors. So far, while the concessional LTCG tax rate of 12.5% did apply to non-residents, it did not account for currency fluctuations—especially the depreciation of the Indian rupee against the investor's home currency. This created a situation where tax was levied on inflated capital gains that were notional in nature and not reflective of true economic benefit."

Jambukeswaran explains how this helps NRIs:

Fair Valuation of Capital Gains: Non-residents investing in India using foreign currency can now adjust the acquisition cost based on exchange rate movement. So, if the rupee depreciates during the holding period, their cost in INR terms increases—leading to a lower taxable gain. This ensures tax is applied only on real, economic gains, not on notional appreciation due to currency erosion.
Higher Net Returns for Long-Term Investors:Private equity and venture capital funds, which typically operate on 5–7-year investment cycles, benefit significantly. By reducing the tax outgo on paper gains inflated by forex movements, the amendment improves post-tax internal rate of return (IRR) and makes India more competitive for long-term strategic capital.

Surana says this proposed change in the New Income Tax Bill, 2025 enhances India’s competitiveness as an investment destination by removing a structural disincentive for long-term non-resident and NRI investors.

Surana says: “By proposing this relief under clause 197 read with 72(6) of the new Income Tax Bill, 2025 the government seeks to address a longstanding concern faced by foreign investors namely, the inflation of taxable gains due to depreciation in the Indian rupee over the holding period.”

Surana adds: “It tends to ensure tax neutrality for currency fluctuations, enabling non-resident investors to compute their capital gains in the same foreign currency used for the initial investment. This aligns the tax outcome with the investor’s economic reality, as gains are taxed only to the extent of the actual increase in value measured in their base currency. It eliminates artificial gains caused solely by INR depreciation, which had the effect of increasing the tax burden even in cases where real returns were modest or flat in foreign currency terms.”

This story originally appeared on: India Times - Author:Faqs of Insurances

ITR filing deadline extended: 33% more interest on tax refund this year for all eligible taxpayers; Know how

Faqs of Insurances — Wed, 28 May 2025 03:15:00 +0000

The Income Tax Department has extended the due date for Income Tax Return (ITR) filing from July 31, 2025, to September 15, 2025. However, there is an unintended consequence of ITR filing deadline extension by income tax department for FY 2024-25 (AY 2025-26). This deadline extension may result in higher interest payout for many people claiming income tax refund this year including both Indian and NRI taxpayers.

Taxpayers can claim an income tax refund in their ITR, when their income tax liability is lower than the tax amount already deposited by them through TDS deduction, advance tax, etc. Under Section 244A, the income tax department has to pay simple interest of 0.5% interest on the whole or the excess amount of tax refund so refunded, for every month or part of a month. However, one has to remember that this interest on tax refund is taxable as income from other sources in the relevant year of earning. Many taxpayers won’t mind this increased income as this income may still remain tax-free for them. This is because from FY 2025-26 (AY 2026-27), non-salaried and salaried individuals can enjoy completely tax-free income for levels up to Rs 12 lakh and Rs 12.75 lakh respectively due to increased Section 87A tax rebate.

How can taxpayers get extra tax refund interest due to ITR filing deadline being extended to September 15, 2025

S. Sriram, Partner, Lakshmikumaran and Sridharan attorneys, says: “Though the due date is extended till September 15, 2025, if the tax-payer files the return by July 31, 2025, the CPC can process the return immediately and grant the tax refund. But the delay in filing of return by taxpayers till September 15, 2025 will certainly entitle them additional interest, till the time the income tax return so filed, is processed by the Centralised Processing Centre.”

Sriram adds: “Granting of refund of taxes is not dependent upon the due date for filing of tax returns, but actual filing of return by the taxpayer, and the processing of return by the CPC.”

Chartered Accountant (Dr.) Suresh Surana agrees with Sriram and adds: “In furtherance to the press release dated 27th May 2025, the CBDT has issued Circular No. 6 of 2025, also dated 27 May, 2025, clarifying that the due date for filing an ITR under Section 139(1) stands extended from July 31, 2025 to 15 September 15, 2025. Accordingly, when an assessee furnishes their ITR on or before 15th September 2025, such ITR will be treated as filed within the time allowed under Section 139(1). As a result, interest under Section 244A on eligible tax refund amounts will be payable from April 1, 2025, even if the ITR is furnished after July 31, 2025 but within the extended due date of September 15, 2025.

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“Delay in releasing utility means delay in ITR filing, resulting in delay in refund. All the refunds which are being stuck will get delayed. Also, the government will have a huge bill of paying additional interest on tax refunds, which will be funded again by the taxpayer’s money,” says Chartered Accountant Chirag Chauhan.

Also read: ITR filing last date extended from July 31, 2025, for FY 2024-25 (AY 2025-26): Check the new date here

How much extra money can taxpayers get due to the ITR deadline extension for FY 2024-25?

For this calculation we have taken five possible scenarios and assumed that the taxpayer filed his/her ITR on September 15, 2025, and e-verified it. There is also another assumption which is that the tax refund is out of TDS deducted on the income. Interest on the tax refunds is also assumed to be paid by September 30, 2025:

Scenario Tax Refund Interest @0.5% per month from 01st April till September 30, 2025 Interest @0.5% per month from 01st April till July 31, 2025

Scenario	Tax Refund (in INR)	Interest@0.5% per month from April 1, 2025 till July 31, 2025 (in INR)	Interest@0.5% per month from April 1, 2025 till September 30, 2025 (in INR)
A	25,000	500	750
B	50,000	1000	1500
C	1,00,000	2000	3000
D	1,50,000	3000	4500
E	2,00,000	4000	6000

Source: Chartered Accountant (Dr.) Suresh Surana

If we calculate the extra percentage of tax refunds on account of interest, then it comes to be 33% in each case. With the previous deadline of 31 July a taxpayer, who is eligible for Rs 25000 tax refund and filed ITR by July 15, would have received an interest amount of Rs 500 if refund was processed on July 31. However, due to deadline extension if he now files the ITR by September 15 and refund is processed on September 31 he would now receive Rs 750 as interest on this refund amount of Rs 25,000, which is 33% more than Rs 500.

Interest given on tax refund amount is taxable for all taxpayers

According to Surana, “Interest received on income tax refund is taxable in the hands of all categories of taxpayers. Such interest is granted under Section 244A and is chargeable to tax under the head "Income from Other Sources" in the year in which it is actually received, irrespective of the assessment year to which the refund pertains. Accordingly, taxpayers are required to report this interest income in their ITR and discharge the applicable tax liability thereon.”

This means that the interest granted on tax refund amount is taxable for FY 2025-26 (AY 2026-27). For FY 2025-26 (AY 2026-27), taxpayers can enjoy up to Rs 12 lakh completely tax free due to application of enhanced limit of Section 87A tax rebate. This will result in many taxpayers being eligible to pay no income tax on the interest amount that they receive with their income tax refund.

Manmeet Kaur, Partner at Karanjawala & Co, explains how interest on tax refund is computed. "Till the tax refund amount is refunded, the Income Tax Department shall pay interest over and above this amount that is to be refunded. This component of interest on income tax refund is computed from the date of filing of income tax returns. In case the return is filed on or before the due date, interest begins to be computed from 1st April of the Assessment Year till the grant of refund. If the return is filed after the due date, the interest shall be computed from the date of return filing to the date of grant of refund. Section 244A of the Income Tax Act, 1961 provides for the modalities and computation of interest payments to taxpayers on the refund amount pending after filing of ITR. Therefore, the interest on refund may be dependent upon verification of the income tax refund claimed by the taxpayer by the Income Tax Department, and the extension of due date might or might not matter at all."

This story originally appeared on: India Times - Author:Faqs of Insurances