Beware! For tax benefit, investments during extended period can’t exceed amount invested in the FY

A close scrutiny of the Excel Utility of ITR-1 depicts the actual structure of Schedule DI.

The deadline for various compliances, including that of tax-saving investments, have been extended from March 31, 2020 to June 30, 2020 to provide relief to investors, many of whom have missed the deadline because the Financial Year 2019-20 ended in the midst of the nationwide lockdown that was imposed to contain the spread of highly contagious Novel Coronavirus COVID-19.

The extension provided opportunity to the investors not only to make up any shortfall in investments, including minimum investments, but to claim tax benefits on the investments made during the extended period as well.

As the annual limit of Rs 1.5 lakh u/s 80C gets exhausted due to a number of investment options and expenditures like tuition fee of children, interest on home loan as well as mandatory PF/NPS deductions etc crowd the section, many people make voluntary investments in Tier 1 Account of National Pension System (NPS) to get additional tax benefits up to Rs 50,000 over and above the 80C limit.

Accordingly Nitesh (name changed), who missed NPS investment due to some issue in his bank account, looks to invest in the extended period as offices open after relaxation in lockdown. Similarly, burdened by large tax outgo, Asish (name changed) opened a new NPS Account during the extension period to reduce his tax burden a bit.

Even the fresh Notification May 29, 2020 notifying all the Income Tax Return (ITR) Forms contains Schedule DI – Details of Investment with a list of 12 sections containing Investment/ Deposit/ Payments for the purpose of claiming deduction under Part B of Chapter VIA.

Also Read: Invested during extended period? You have to mention details separately in ITR

However, a close scrutiny of the Excel Utility of ITR-1, uploaded on the income tax portal on June 2, 2020, depicts the actual structure of Schedule DI and reveals the restrictions on investment limits during the extension period for claiming tax benefits.

While the table under Schedule DI in a blank Excel Utility of ITR-1 only contains the headings, rows of different sections that provide tax benefits appear only when the figures of investments made during the FY 2019-20 till March 31, 2020 are entered against the respective sections on the page containing Income Details.

Blank Schedule DI, when no investment is made up to March 31, 2020.

If no investment is made under any section till March 31, 2020, there will be no row under the Schedule DI for that particular section to put the figure of investment made during the extension period to claim tax benefits.

For example, if a person didn’t invest in NPS till March 31, he/she can’t claim any tax benefit by investing during the extended deadline from April 1, 2020 to June 30, 2020.

Schedule DI with rows containing sections under which investments were made till March 31, 2020.

Although the rows do appear under Schedule DI for the sections that contain investments during FY 2019-20, the investment figures during the extended period for the respective sections can’t exceed the amount invested till March 31, 2020.

An alert pops up if an investment figure during extended period (in Column 2) exceeds the correspondent investment figure till March 31, 2020 (in Column 1) .

For example, in case a person has invested Rs 10,000 till March 31, 2020 and Rs 40,000 during the extended period, he/she may claim additional tax benefit on only Rs 10,000 during the extended period and not on Rs 40,000.

So, unless the ITR schema is changed, for the purpose of availing tax benefits, investment during the extended period (i.e. from April 1, 2020 to June 30, 2020) under any section can’t exceed the investment made under the respective section till March 31, 2020.