Tax saving deadline extended for FY2019-20: Here's how it impacts you

The government has extended the last date for tax saving for FY2019-20 from March 31, 2020 to June 30, 2020. The ordinance amending the income tax laws was issued late night yesterday. Here are some common questions regarding this answered by Sonu Iyer, Tax Partner and National Leader - People Advisory Services, EY India and Siddharth Deb, Senior Manager - People Advisory Services, EY India.

1. If I submit proof of tax saving investments to my employer in the month of May 2020, then will the employer give me the benefit of deduction from my salary income and cut less TDS for FY19-20? How will TDS from salary work? For example, I invested Rs 25,000 in PPF/NSC in Jan 2020 and submitted proof to employer. Then I invest Rs 50,000 more in same instrument in May 2020 then will employer deduct this Rs 50,000 from my gross salary income of FY2019-20 before TDS? If so, how will the employer do this as the TDS accounts would have closed by end of FY19-20 and TDS certificate would have been or be under finalisation. How will I get the tax saving benefit in this situation.
   TDS for FY 2019-20 can be deducted only from salary paid for FY 2019-20. By Apr 2020 / May 2020, salary for FY 2019-20 would have been already paid and the employer would have closed the Income-tax computation for TDS of the employee. Hence, the employer may not be able to consider the additional investment made during the extended period.Any additional investment made during the extended period can be claimed at the time of filing of Income-tax Return for FY 2019-20 and refund can be claimed for FY2019-20 for higher tax deducted.
2. EPF which has been deducted from my salary in the month of April, May, Jun, 2020 will be eligible for deduction under section 80C in the FY 2019-20 or FY 2020-21?
   EPF deductions for April 2020, May 2020 and June 2020 are eligible for deduction under Section 80C for FY 2019-20 if the limit for Section 80C (i.e. INR 150,000) is not exhausted. Otherwise, the employee can claim in FY 2020-21. But care should be taken that no double deduction across both FY is claimed on the same investment.If a person opts for the new tax regime (sans deductions) offered for FY 2020-21 then the EPF contributions by the employee during April to June 2020 can be claimed as deductions only for FY2019-20 subject to the limit for FY2019-20.
3. The tax-saving investments done by me in the first quarter of FY 2020-21 will be eligible for deduction in FY 2019-20 or FY 2020-21? Will I have an option in which FY I want to claim or will it be mandatory for a particular financial year?
   Yes. The tax-saving investments done in the first quarter of FY 2020-21 will be eligible for deduction either in FY 2019-20 or FY 2020-21. You have an option in which FY you want to claim deduction. But care should be taken that no double deduction across both years is claimed on the same investment.If a person opts for the new tax regime (sans deductions) offered for FY 2020-21 then the EPF contributions by the employee during April to June 2020 can be claimed as deductions only for FY2019-20 subject to the limit for FY2019-20.
4. If I buy medical insurance in the month of April/May/June 2020, then will the premium be eligible for deduction under section 80D for FY 2019-20 or FY 2020-21? If it is for FY 2019-20, then how will tax saving work for FY 2020-21?
   Medical insurance premium paid in the month of April/May/June 2020 will be eligible for deduction under Section 80D either in FY 2019-20 or FY 2020-21. You have an option in which FY you want to claim deduction. But care should be taken that no double deduction across both years is claimed on the same insurance premium.If deduction is claimed in FY 2019-20, you will lose deduction in FY 2020-21. You will need to make additional payment in FY 2020-21 to claim full deduction.However, if a person opts for the new tax regime (sans deductions) offered for FY2020-21 then the premium paid during April to June 2020 can be claimed as deduction under section 80D only for FY2019-20 subject to the limit for the FY 2019-20.
5. What are the specified instruments that are eligible for tax-savings for FY 2019-20 as per ordinance? Does that include home loan repayment, tuition fees and other expenses that are eligible under section 80C? What if I opt for moratorium under the RBI scheme? Also, expenses incurred in April/May/June (allowed as deductions under section 80C) will be eligible for FY 2019-20 or FY 2020-21?
   The date for making various investment/payment for claiming deduction under Section 80C (LIC, PPF, NSC etc.), 80D (Mediclaim), 80G (Donations), etc. has been extended to 30 June 2020. Hence the investment/payment can be made up to 30 June 2020 for claiming the deduction under these sections for FY 2019-20.Hence, anything that falls within scope of Section 80C to Section 80GGC is eligible. Optional to claim between FY 2019-20 or FY 2020-21 subject to avoiding double deduction.If a person opts for the new tax regime (sans deductions) offered for FY 2020-21 then the tax saving investments/payments made during April to June 2020 can be claimed as deductions only for FY2019-20 subject to the limit for the FY 2019-20.
6. I invest Rs 1 lakh in PPF in Jan 2020 and again Rs 1 lakh in May 2020 then if I want to claim the 80C deduction for this for FY2019-20, how much can I claim i.e. max Rs 1.5 lakh or more?
   The total deduction under Section 80C is INR 150,000 in FY 2019-20 even if investment is made between April 2020 to June 2020.
7. If I make a tax saving investment in May 2020 from income earned in the same month then will it qualify for claiming deduction for FY2019-20?
   Yes. The tax saving investment in May 2020 from income earned in May 2020 will qualify for claiming deduction for FY 2019-20.