Exploring the Option- Do You Want to Avail the Tax Benefit Under Section 115H-

Do you want to claim the benefit under section 115h? This question often arises for individuals and businesses seeking to take advantage of tax incentives provided by the Income Tax Act. Section 115h pertains to specific provisions aimed at promoting investment in certain sectors, thereby fostering economic growth and development. In this article, we will delve into the details of section 115h, its benefits, and the process of claiming this tax advantage.

Section 115h of the Income Tax Act, 1961, allows individuals and Hindu Undivided Families (HUFs) to claim a deduction from their taxable income for investments made in specified bonds or debentures issued by certain public sector undertakings (PSUs), state-owned banks, and insurance companies. This provision was introduced to encourage investment in infrastructure and social sectors, thereby creating employment opportunities and enhancing the country’s economic growth.

The key features of section 115h are as follows:

1. Eligible Investments: Under section 115h, investments can be made in bonds or debentures issued by PSUs, state-owned banks, and insurance companies that are engaged in specified infrastructure and social sectors, such as power, roads, ports, airports, education, and healthcare.

2. Deduction Limit: The maximum deduction available under section 115h is Rs. 50,000 (USD 670) per financial year. However, this limit is subject to change as per the provisions of the Income Tax Act.

3. Taxation of Returns: If the investment is held for a period of three years or more, the income from these bonds or debentures will be taxed at a concessional rate of 5.5% (subject to surcharge and cess, if applicable). In case the investment is sold before the expiry of three years, the income will be taxed as per the applicable slab rate.

4. Transferability: The bonds or debentures issued under section 115h are transferable, which means they can be sold or transferred to another person during their term.

To claim the benefit under section 115h, the following steps must be followed:

1. Make the investment in the eligible bonds or debentures as per the terms and conditions specified by the issuing company.

2. Obtain a certificate of investment from the issuing company, which will serve as proof for claiming the deduction.

3. Fill up the relevant section (Schedule E) in the Income Tax Return (ITR) and attach the certificate of investment.

4. Compute the deduction allowed under section 115h and subtract it from the taxable income.

5. Pay the taxes due on the remaining taxable income as per the applicable tax rates.

In conclusion, claiming the benefit under section 115h can be a lucrative option for individuals and HUFs looking to invest in the specified sectors while enjoying tax benefits. It is essential to carefully assess the eligibility criteria and follow the necessary procedures to ensure a smooth claiming process.