Housing Loan Interest Not Claimed in ITR: Can It Increase Property Cost and Reduce Capital Gains Tax

 By CA Surekha Ahuja

Section 24(b), Section 48 & Section 54 Explained With Practical Taxpayer Cases

“An expense ignored during the ownership period may become a valuable tax consideration when the property is eventually sold.”

Many taxpayers purchase residential property through housing loans and pay substantial interest over several years. However, due to lack of awareness, low taxable income, or incomplete tax planning, the interest deduction under Section 24(b) may not be claimed in earlier Income Tax Returns.

At the time of sale of the property, a critical question arises:

Can such unclaimed housing loan interest be added to the cost of acquisition and reduce capital gains tax?

The answer requires analysis of:

• Section 24(b) deduction history,
• Section 48 capital gains computation,
• judicial principles,
• and the rule against double benefit.

Housing Loan Interest: Two Different Tax Stages

Stage	Provision	Tax Impact
During ownership	Section 24(b)	Deduction against income from house property
At the time of sale	Section 48	Possible consideration while computing capital gains

The same expenditure cannot be allowed twice.

The key question is not whether interest was paid, but whether the taxpayer has already received tax benefit for that interest.

Can Unclaimed Interest Become Part of Property Cost?

Where borrowed funds are used for acquiring a property and the related interest has not already been claimed as deduction, an argument may exist that such interest forms part of the acquisition cost.

The Supreme Court in CIT v. Mithlesh Kumari (92 ITR 9) recognised the principle that interest paid on borrowings utilised for acquisition of property may be considered as part of acquisition cost.

However, the claim depends on facts, documentation and absence of double deduction.

Practical Tax Position

Situation	Position
Interest fully claimed under Section 24(b)	Cannot be added again
Interest paid but never claimed	Possible claim, subject to facts
Interest partly claimed	Only unclaimed portion requires examination
No proof of payment available	Claim may face challenge
Joint ownership	Owner-wise analysis required

Ticklish Case Studies

Case 1: Retired Person Never Claimed Interest

Facts- Property purchased: ₹80 lakh- Housing loan: ₹60 lakh - Interest paid: ₹45 lakh  -Interest claimed earlier: Nil

The taxpayer never claimed deduction due to low taxable income.

Professional View -  The taxpayer has a stronger position because:

✔ interest was actually paid;
✔ loan was used for acquisition;
✔ no earlier tax benefit was taken.

However, bank certificates and old ITR records are essential.

Case 2: Interest Claimed Only Up To Section 24(b) Limit

Facts - Total interest paid: ₹60 lakh -Deduction claimed: ₹30 lakh- Balance: ₹30 lakh

Issue - Can the balance be added to cost?

Professional View-  This requires careful review.

The amount already allowed cannot be claimed again. The treatment of the balance depends upon facts, applicable provisions and judicial interpretation.

A blanket claim of the entire balance may invite scrutiny.

Case 3: Joint Ownership With Different Tax Positions

Facts - A property is jointly owned by husband and wife.

• Husband claimed his interest deduction.
• Wife never claimed her share.

Professional View

Capital gains are calculated separately for each owner. The tax position of one co-owner does not automatically decide the treatment for another co-owner.

Case 4: Repayment of Existing Housing Loan From Sale Proceeds

Facts - Property sold: ₹1.75 crore -Outstanding loan: ₹50 lakh

The seller repays the bank loan from sale proceeds.

Position

Repayment of existing loan is repayment of liability. It generally does not reduce capital gains.

Case 5: Section 54 Planning

Where sale proceeds are invested in another eligible residential property, Section 54 may apply subject to: ✔ eligibility conditions, ✔ timelines, ✔ investment proof.

Section 54 exemption is independent of the treatment of housing loan interest.

Documents Required for a Defensible Claim

Maintain:

✅ Housing loan sanction letter
✅ Bank interest certificates
✅ Loan account statements
✅ Previous ITR computations
✅ Proof of deductions claimed earlier
✅ Purchase and sale documents

Common Mistakes

❌ Adding interest already claimed under Section 24(b)
❌ Treating loan repayment as capital gain deduction
❌ Ignoring old ITR records
❌ Not separating co-owner calculations
❌ Losing loan documents after many years

Final Advisory View

Housing loan interest not claimed in earlier Income Tax Returns may not automatically disappear as a tax benefit. Where:

✔ borrowing was used for acquiring the property,
✔ interest was actually paid,
✔ no deduction was already claimed, and
✔ proper evidence exists,

a taxpayer may have a sustainable position to consider such interest while computing capital gains.

However: Tax law recognises genuine acquisition cost but does not permit the same expenditure to create multiple tax benefits.

The right question is not: “How much interest did I pay?”

The right question is: “How much of that interest has already received tax recognition?”

DDA Renovation & Alteration Rules 2026: Major Relief for Flat Owners, But Existing Illegal Modifications Are Not Automatically Legal

 By CA Surekha Ahuja

The revised DDA Renovation and Alteration Framework 2026 brings much-needed clarity and relief for DDA flat owners. However, one critical misunderstanding must be avoided:

Relaxation in renovation rules does not mean blanket regularisation of every past unauthorised alteration.

The new framework aims to simplify genuine home improvements while continuing to protect structural safety, sanctioned building plans, common areas and essential services.

DDA’s New Approach: From Blanket Restrictions to Risk-Based Regulation

Earlier, many homeowners faced uncertainty even for routine improvements. The revised approach attempts to create a practical distinction between:

Generally Easier / Permitted Improvements	Still Regulated / Approval or Verification Required
Routine repairs and maintenance	Removal of structural walls
Internal non-structural modifications	Extension of balconies
Improvement of interiors without affecting structure	Terrace covering or enclosure
Approved grills, glazing and similar works within norms	Creation of additional covered area
Modern utility improvements	Shifting kitchen, toilet or wet areas
Accessibility-related improvements	Alterations affecting drainage, plumbing or common services

The Biggest Relief — And the Biggest Misunderstanding

The biggest relief for homeowners is that DDA has recognised the practical need for modern living requirements.

However, the biggest mistake is assuming:

“My alteration was done years ago, and now DDA has relaxed rules, therefore my alteration is automatically approved.”

This assumption can create future legal and financial problems.

The revised framework does not mean that every previous unauthorised modification has become lawful. Existing alterations may still need examination based on:

• Nature of modification
• Structural impact
• Increase in built-up area
• Impact on common facilities
• Compliance with revised norms
• Requirement of approval or regularisation

Already Modified Your DDA Flat? Check These 7 Critical Points

Before considering your alteration safe, evaluate:

Question	Why It Matters
Did you remove any wall?	May affect structural stability
Did you extend or enclose the balcony?	May violate sanctioned layout and common area rights
Did you cover terrace/open space?	May amount to additional construction
Did you increase covered area?	Could create planning violations
Did you shift kitchen or bathroom?	May affect plumbing and drainage systems
Did you alter external elevation?	May affect building uniformity and approvals
Did the work affect common services?	May impact other residents’ rights

If any answer is Yes, verification under the applicable DDA norms becomes important.

Why Did DDA Need a Revised Framework?

Thousands of DDA flats constructed decades ago no longer match modern lifestyle requirements.

Families now require:

• Better kitchens
• Improved bathrooms
• Safety grills
• Accessibility features
• Modern utility arrangements
• Better internal space utilisation

At the same time, uncontrolled alterations have created serious concerns:

• Structural safety risks
• Water leakage and drainage problems
• Damage to common areas
• Disputes between residents
• Deviation from approved plans

The revised policy attempts to balance both realities:

Homeowner Requirement	Regulatory Objective
Modernisation of old flats	Structural safety
Better utilisation of space	Planned development
Easier renovation process	Protection of common areas
Practical living requirements	Compliance with approved plans

Professional Insight: The Real Change Is Not More Construction Permission

The important shift is not that DDA has permitted unlimited alterations.

The real change is the recognition that every modification cannot be treated equally.

The framework attempts to differentiate between:

1. Repair vs Alteration

Replacing flooring or repairing interiors is fundamentally different from removing structural walls.

2. Private Ownership vs Common Safety

A flat owner has ownership rights, but those rights cannot compromise the building structure or common facilities.

3. Modernisation vs Illegal Expansion

Improving a home is different from creating additional unauthorised built-up space.

Special Caution for Buyers of DDA Flats

The revised policy is also important for property buyers.

Before purchasing a DDA flat, do not rely only on:

✔ Interior photographs
✔ Seller’s statement
✔ Long existence of alteration

A modification existing for many years does not automatically mean it is legally compliant.

A buyer should verify:

• Original sanctioned plan
• Nature of alterations
• Availability of approvals, if required
• Structural impact
• Regularisation possibilities

Unauthorised modifications can affect:

• Future resale
• Bank financing
• Buyer confidence
• Dispute risk

The 2026 DDA renovation framework is a positive step for genuine homeowners.

But the correct interpretation is:

DDA has made renovation compliance easier — it has not made compliance optional.

Existing modifications must still be examined on their own facts. A legally sustainable renovation is not merely one that improves appearance; it is one that remains defensible years later during resale, inspection or dispute.

Modernise your home — but ensure the modification survives legal scrutiny.

RBI Extends FLA Return Filing Deadline for FY 2025–26 to July 31, 2026

 By CA Surekha Ahuja

Due Date Extended from 15 July 2026 to 31 July 2026

Important FEMA Compliance Update

The Reserve Bank of India (RBI) has provided relief to entities required to file the Annual Foreign Liabilities and Assets (FLA) Return for FY 2025–26 by extending the filing deadline from:

Original Due Date: 15 July 2026
Revised Due Date: 31 July 2026

The FLA Return is required to report the foreign assets and liabilities position as on 31 March 2026 and is filed through the RBI’s FLAIR Portal.

Key Changes at a Glance

Particulars	Updated Position
Compliance	Annual Foreign Liabilities and Assets (FLA) Return
Applicable Year	FY 2025–26
Reporting Date	31 March 2026
Earlier Due Date	15 July 2026
Extended Due Date	31 July 2026
Filing Platform	RBI FLAIR Portal
RBI Query Email	flareturn@rbi.org.in

Who Should Take Note?

The extension is relevant for Indian entities having outstanding foreign exposure, including:

• Foreign Direct Investment (FDI) received
• Overseas Direct Investment (ODI) made
• Foreign assets or liabilities appearing in the balance sheet

The requirement may continue even where there is no fresh foreign investment transaction during FY 2025–26, if foreign assets or liabilities continue to remain outstanding.

Important Compliance Actions

✔ Do not treat the extension as a reason for delay.
✔ Complete foreign investment reconciliation before filing.
✔ Verify FDI, ODI, foreign loans, guarantees, receivables and payables.
✔ Ensure FLAIR portal access is active.
✔ Where audited financial statements are not available, entities should consider filing with provisional figures and revise after finalisation of accounts as permitted.

Professional Alert for CFOs and Compliance Teams

FLA Return is not merely a routine annual filing. Incorrect reporting of foreign assets, liabilities, ownership details or inter-company balances may lead to FEMA compliance issues in future.

Recommended Action:
Complete the FLA Return review well before 31 July 2026 to avoid last-minute technical issues, data reconciliation challenges and possible FEMA consequences.

Extension gives additional time — but accurate filing remains the responsibility of the reporting entity

FLA Return 2026 Under FEMA: RBI FLAIR Portal, Foreign Assets & Liabilities Reporting, Common Mistakes and Best Practices

 By CA Surekha Ahuja

Complete guide to FLA Return 2026 under FEMA covering RBI FLAIR Portal filing, foreign assets and liabilities reporting, FDI classification, ownership changes, intercompany balances, guarantees, common mistakes and CFO compliance checklist.

“The FLA Return does not create your foreign exposure story. It only reflects the story your company has already created.”

Foreign Liabilities and Assets (FLA) Return is often considered a routine annual compliance exercise:

Login to RBI FLAIR Portal → update figures → submit before the due date.

However, for businesses with foreign investment, overseas operations, foreign borrowings or cross-border transactions, FLA compliance is not merely a filing exercise. It is a reflection of the company’s entire foreign exposure position as on 31 March.

For FY 2025-26 (FLA Return 2026), eligible entities are required to submit their FLA Return through the RBI FLAIR Portal within the prescribed timeline.

The real challenge is not submitting the return.

The real challenge is answering critical questions before filing:

• Is this instrument equity or debt?
• Has a foreign ownership change occurred?
• Does an intercompany balance represent normal trade or foreign funding?
• Does a guarantee create foreign liability exposure?
• Should the entity continue filing or has foreign exposure ceased?

A wrong judgement repeated over multiple years can create inconsistencies between:

• FLA Return
• FC-GPR
• FC-TRS
• ECB reporting
• Overseas Investment filings
• Audited financial statements
• Shareholding records

Such gaps often become visible during:

• Investment due diligence
• Mergers and acquisitions
• Bank financing
• FEMA review
• Regulatory scrutiny

This article explains the five critical pillars of advanced FLA compliance that every CFO, Finance Head and Chartered Accountant should master.

FLA Return 2026: The Five Pillars of Professional Compliance

Pillar	Key Compliance Question
1. Applicability	Does the entity actually have foreign assets or liabilities requiring FLA reporting?
2. Instruments	Is the foreign exposure correctly classified as equity, debt or other liability?
3. Ownership Changes	Are transfers, gifts, ESOPs, buybacks and restructuring reflected correctly?
4. Intercompany Balances	Are foreign receivables and payables properly evaluated?
5. Guarantees and Foreign Operations	Are non-share and non-loan foreign risks captured?

Pillar 1: Applicability — FLA Is Based on Foreign Exposure, Not Past History

One of the most common misconceptions is:

“Once a company receives FDI, FLA filing is required forever.”

This is not the correct approach.

FLA applicability needs to be evaluated every year based on whether the entity has relevant foreign assets or liabilities outstanding as on 31 March.

Companies should examine whether they have:

• Non-resident shareholding
• Foreign direct investment outstanding
• Foreign loans or borrowings
• Overseas investment exposure
• Foreign branch/project office assets
• Foreign receivables or payables
• Other foreign financial liabilities

If foreign exposure exists on the reporting date, FLA compliance generally continues. If foreign exposure has completely ceased, the entity should maintain proper documentation supporting the conclusion.

Common Question: We Received FDI Earlier But The Investor Has Completely Exited. Do We Continue Filing FLA?

Not necessarily. The company should verify: 

• Date of exit
• Transfer documentation
• FC-TRS compliance wherever applicable
• No remaining foreign liabilities or assets

A documented internal note explaining why FLA is discontinued is strongly recommended.

The decision should be based on current foreign exposure and not historical events.

Share Application Money From Non-Resident Investor

A common practical issue is: “A non-resident has remitted funds, but shares have not yet been allotted. Should FLA be reported?”

Such cases require evaluation based on: 

• FEMA reporting requirements
• Status of allotment
• Accounting treatment
• Existence of any other foreign exposure

The company should avoid assumptions and maintain a written conclusion based on facts.

LLPs and Other Entities

FLA applicability should not be decided only by legal form. The key question is:

Does the entity fall within RBI reporting requirements due to foreign assets or liabilities?

Therefore, eligible entities such as LLPs and other structures having foreign investment or overseas exposure should independently evaluate FLA applicability.

Assuming: “No company means no FLA” can result in compliance gaps.

Pillar 2: Instruments — Equity, Debt or Other Liability?

The most difficult part of FLA reporting is often not calculation but classification. Foreign exposure may arise through:

• Equity shares
• Preference shares
• Convertible instruments
• Debentures
• Foreign loans
• Trade credits
• Long outstanding foreign payables

The classification should not be based only on the name of the instrument. Two important tests should be applied:

Test 1: FEMA Regulatory Classification

Consider:

• Was the instrument issued under FDI framework?
• Does it qualify as a debt instrument?
• Does it fall under borrowing regulations?

Test 2: Economic Substance

Ask: Does it behave like equity? Indicators:

• Conversion into shares
• Participation in business growth
• No fixed repayment obligation

Or does it behave like debt?

Indicators:

• Fixed repayment date
• Interest obligation
• Priority repayment rights

The FLA classification should remain consistent with:

• FEMA treatment
• Financial statements
• Other RBI filings

Trade Credits and Quasi Loans: The Hidden Foreign Liability

A foreign payable may appear as a normal trade balance but require deeper evaluation.

CFOs should examine:

• Age of outstanding balance
• Relationship with foreign party
• Settlement pattern
• Whether repayment is repeatedly postponed

A balance described as:

“Reimbursement payable”

may economically function as:

“Foreign funding.”

The substance of the transaction matters more than the accounting description.

Pillar 3: Ownership Changes — Where FLA Errors Commonly Occur

FLA reflects the foreign ownership position as on 31 March.

Many companies miss reporting changes because: “No money changed hands.”

However, foreign ownership can change through:

• Gifts
• Share transfers
• Secondary transactions
• ESOP exercise
• Buyback
• Group restructuring

Transaction	Common Assumption	Correct FLA Approach
Resident gifts shares to NRI	No consideration means no impact	Foreign ownership arises and should be evaluated
NRI transfers shares to resident	Foreign connection immediately ends	Reflect exit position with documentation
Foreign fund sells to another foreign fund	Same investment amount, no impact	Investor details and country may change
Non-resident employee exercises ESOP	Only employee matter	Creates foreign shareholder exposure
Buyback from foreign investor	Only capital reduction	Foreign equity position changes
Foreign parent changes through restructuring	Ultimate owner same	Immediate investor details matter

FLA follows ownership position, not commercial intention.

Pillar 4: Intercompany Balances — Labels Do Not Decide, Balances Do

Multinational groups frequently have balances with overseas entities.

The description in the ledger does not determine FLA treatment.

The actual outstanding foreign exposure matters.

Example 1: Foreign Parent Charges Indian Subsidiary

Services:

• Technology support
• Management services
• IT support
• Marketing assistance

If payment remains outstanding on 31 March: It may represent a foreign liability.

Example 2: Indian Entity Pays Costs for Foreign Affiliate

If reimbursement remains outstanding: It may represent a foreign asset.

Long Outstanding Group Balances

Review:

• Is it genuinely trade-related?
• Is repayment expected?
• Has it become permanent financing?

A long-standing balance with a foreign related party may require evaluation as a quasi-loan.

Pillar 5: Guarantees, Foreign Branches and Entities Under Closure

Foreign exposure is not limited to shares and loans. Important areas often missed are:

• Guarantees
• Foreign branches
• Project offices
• Entities under liquidation

Cross-Border Guarantees

Companies should evaluate:

• Guarantees issued for foreign group entities
• Guarantees received from foreign entities
• Invoked guarantees
• Potential obligations

FLA reporting should remain consistent with applicable FEMA reporting requirements.

Foreign Branches and Project Offices

Foreign branches may have:

• Bank balances
• Receivables
• Fixed assets
• Local liabilities

These represent foreign assets and liabilities of the Indian entity and require appropriate evaluation.

Company Under Strike-Off or Liquidation: Does FLA Stop Automatically?

No. Business closure and foreign exposure closure are different.

FLA evaluation continues if the entity still has:

• Foreign shareholder
• Foreign loan
• Foreign receivable/payable
• Foreign assets

Filing should stop only after foreign exposure has been completely extinguished and appropriate records are maintained.

Top 10 Mistakes Companies Make While Filing FLA Return 2026

No.	Common Mistake
1	Copying previous year figures without fresh analysis
2	Ignoring foreign shareholder changes
3	Incorrect classification of hybrid instruments
4	Missing foreign group balances
5	Not reconciling with FC-GPR and FC-TRS
6	Ignoring foreign guarantees
7	Treating old payables as simple trade balances
8	Continuing or stopping filing without documentation
9	Ignoring foreign branch/project office exposure
10	Not maintaining FEMA reasoning notes

Professional FLA Compliance Checklist Before Filing

Review Area	Status
Foreign shareholding reviewed as on 31 March 2026	✓
Foreign loans and liabilities reconciled	✓
Foreign assets verified	✓
Intercompany balances reviewed	✓
FC-GPR and FC-TRS matched	✓
Overseas investment position checked	✓
Guarantees reviewed	✓
FEMA judgement notes prepared	✓
Financial statements reconciled	✓

Final Takeaway: FLA Is Not a Form. It Is a Foreign Exposure Statement.

The best CFO question before submitting FLA Return 2026 should be:

“Does our FLA Return tell the same story as our FEMA filings, financial statements and ownership records?”

If the answer is yes, FLA becomes a routine compliance exercise.

If the answer is no, the mismatch itself becomes the risk.

For Chartered Accountants and advisors, the right approach is:

Do not begin with the FLA form. Begin with understanding the foreign exposure.

Because:

The FLA Return does not lie.
It only repeats what the company has reported.

GST ITC on Rooftop Solar Power Plants: Strategic Guide to Successfully Claim and Defend Input Tax Credit

Practical Roadmap for Industries, Commercial Buildings, CAM Structures, Leasing Models and Business Owners (Part 2)

By CA Surekha S. Ahuja

"A successful GST Input Tax Credit claim is not created when a notice is received. It is created when the solar project is planned, structured, documented and operated correctly from the beginning."

In Part 1A of this series, we discussed the legal foundation governing GST Input Tax Credit (ITC) on rooftop solar power plants and examined the importance of Sections 16 and 17 of the CGST Act.

The key principle emerging from the discussion was:

The GST treatment of a rooftop solar power plant depends not merely on the installation of solar equipment, but on the purpose for which the electricity generated is used and its connection with taxable business activities.

However, for businesses, the practical question begins after understanding the law:

How should a taxpayer structure the solar project so that the ITC claim is commercially and legally sustainable?

A rooftop solar project may involve significant investment and substantial GST outflow on:

• Solar modules;
• Inverters;
• Transformers;
• Mounting structures;
• Electrical equipment;
• Engineering, procurement and construction (EPC) services;
• Installation and commissioning activities.

A well-planned structure can preserve valuable ITC, whereas poor documentation or an inappropriate business arrangement may result in avoidable disputes.

This article provides a practical roadmap for industries, commercial property owners, landlords and business operators.

Start With the Business Model: Who Will Consume the Solar Power?

Before installing the solar plant, management should answer the most important question:

Who will ultimately consume the electricity generated from the solar plant?

The GST position can vary significantly depending upon the answer.

Model 1: Manufacturing Unit – Captive Consumption

This is generally one of the strongest factual situations.

Example: A manufacturing company installs rooftop solar panels on its factory premises. The electricity generated is used for:

• Production machinery;
• Factory operations;
• Processing activities;
• Storage facilities;
• Other manufacturing support functions.

The business chain is clear:

Solar Plant → Electricity Generation → Manufacturing Activity → Taxable Goods → GST-Paid Supply

Professional View

Where solar power directly supports the manufacture of taxable goods, the business nexus is generally easier to establish.

The taxpayer should maintain evidence demonstrating that the solar power contributes to taxable manufacturing operations.

Commercial Buildings: The CAM and Renting Strategy

For commercial properties, the analysis requires greater planning.

The strongest position generally arises where the solar power plant supports facilities maintained by the landlord as part of taxable renting services.

Examples:

• Common area lighting;
• Lifts and escalators;
• Fire safety systems;
• Security systems;
• Water pumps;
• Common HVAC systems;
• Parking facilities;
• Other shared amenities.

The commercial linkage can be demonstrated as:

Solar Plant → Common Facilities → Maintenance of Commercial Property → Taxable Renting/CAM Services

Why CAM Documentation Becomes Critical

For commercial properties, GST officers often examine the relationship between:

• Lease agreements;
• CAM agreements;
• Electricity arrangements;
• Tenant billing.

A properly drafted CAM structure should clearly establish:

• The landlord is providing taxable maintenance and facility services;
• Common facilities are maintained by the landlord;
• Solar power supports those common facilities;
• The arrangement is not merely a separate supply of electricity.

Practical CAM Precautions

Avoid vague descriptions such as: 

"Electricity reimbursement"

or

"Solar electricity charges"

without explaining the underlying service.

Such wording may create questions regarding whether the landlord is making an independent supply of electricity.

Preferable Documentation Approach

CAM agreements should clearly identify services such as:

• Maintenance of common areas;
• Operation of lifts;
• Security services;
• Common electricity consumption;
• Facility management.

The commercial substance should reflect taxable facility management services.

Tenant Electricity Arrangement: A Critical Decision Point

Commercial property owners should carefully evaluate:

Stronger position:

• Tenants obtain electricity directly from the distribution company;
• Solar power is consumed for landlord-controlled common facilities;
• Rent and CAM charges are subject to GST.

Higher complexity:

• Landlord generates solar electricity;
• Electricity is separately supplied or recovered from tenants.

The second arrangement requires careful GST evaluation.

Build the Plant and Machinery Position Properly

A rooftop location alone should not determine the character of the asset. The taxpayer should maintain evidence that the solar installation functions as an independent electricity generation system. Important documents include:

• EPC agreement;
• Technical specifications;
• Single-line electrical diagram;
• Layout drawings;
• Commissioning certificate;
• Photographs;
• Equipment details.

The objective is to demonstrate the commercial and technical identity of the solar plant.

Accounting and GST Records Must Tell the Same Story

A frequent weakness during audits is inconsistency.

For example:

EPC Contract: "Solar Power Generation System"

Fixed Asset Register: "Building Improvement"

Such inconsistencies invite unnecessary questions. The description should be aligned across:

• Agreements;
• Invoices;
• Fixed asset register;
• Financial statements;
• GST records.

Create a Solar ITC Defence File

Large projects should maintain a dedicated documentation file.

Document	Purpose
EPC Agreement	Establish nature of project
Tax invoices	Evidence of GST payment
Technical drawings	Support Plant and Machinery position
Commissioning report	Evidence of completion
Electricity generation reports	Establish actual use
Meter records	Demonstrate consumption
Lease agreements	Establish renting activity
CAM agreements	Establish taxable services
Internal approval note	Explain business purpose
Photographs	Physical evidence

Pre-Implementation GST Review for High-Value Projects

For projects involving substantial GST amounts, businesses should consider reviewing:

• Ownership structure;
• EPC contract;
• Electricity flow;
• Tenant arrangements;
• CAM structure;
• Accounting treatment.

A preventive review is generally more valuable than defending a dispute later.

Practical Decision Matrix

Solar Usage Model	ITC Position	Key Consideration
Manufacturing captive consumption	Strong	Direct link with taxable production
Warehouse/logistics operations	Strong	Business use needs documentation
Commercial common facilities	Strong with proper CAM structure	Taxable renting linkage
Separate electricity supply to tenants	Complex	Requires detailed analysis
Mixed taxable and exempt usage	Requires review	Possible reversal implications
Third-party supply	Higher complexity	Nature of outward supply

Comprehensive FAQs

Can ITC be claimed on the complete rooftop solar project?

The analysis is not restricted only to solar panels. It may cover eligible goods and services forming part of the solar project, subject to GST conditions and applicable restrictions.

Is captive consumption by manufacturers the safest model?

Captive consumption for taxable manufacturing generally provides a strong factual basis because the nexus between input and taxable output is direct.

Can commercial landlords claim ITC on rooftop solar plants?

Yes, where the solar power supports taxable renting activities and common facilities, subject to fulfilment of GST conditions and proper documentation.

Can ITC be claimed where tenants consume electricity?

The facts are critical.

The arrangement should be examined carefully, particularly where electricity is separately supplied or recovered from tenants.

Can a tenant claim ITC on a solar plant installed on rented premises?

It depends upon:

• Ownership;
• Control;
• Business use;
• Contractual rights;
• Nature of installation.

What if solar power is partly used for taxable and exempt activities?

The taxpayer should evaluate proportionate reversal requirements and maintain proper records.

What if excess electricity is exported to the grid?

The GST implications depend upon the arrangement and nature of the transaction.

Separate analysis may be required.

Can ITC be claimed under a RESCO/OPEX solar model?

The analysis differs because ownership of the plant and nature of services received become relevant.

Is technical documentation really important?

Yes. During scrutiny, technical evidence often becomes as important as legal arguments.

Should businesses obtain a GST opinion before installation?

For large projects, a documented GST position note is advisable.

Final Professional Checklist

Before claiming ITC, ensure:

✓ Business use is established.
✓ Electricity flow is documented.
✓ EPC agreement is reviewed.
✓ Plant and Machinery position is supported.
✓ CAM agreements are aligned.
✓ Tenant arrangements are analysed.
✓ Accounting records are consistent.
✓ Generation and consumption records are maintained.
✓ GST position is documented.

Professional Conclusion

Rooftop solar projects represent a significant opportunity for businesses to reduce energy costs while supporting sustainability goals. However, from a GST perspective, the success of an ITC claim depends upon much more than payment of GST on solar equipment.

A sustainable ITC position requires alignment of:

Project Structure + Electricity Usage + Taxable Business Nexus + Documentation

For manufacturers, captive consumption of solar power for taxable production generally provides the clearest pathway.

For commercial property owners, properly structured renting and CAM arrangements can significantly strengthen the ITC position.

The most important lesson is:

GST planning should begin before the solar plant is installed. The strongest ITC claims are built through proactive structuring, not reactive litigation.

New Tax Regime FY 2026-27: Smart Salary Restructuring & Tax Planning Guide for Salaried Employees - Part 4

By CA  Surekha Ahuja 

"In the new tax regime, the biggest tax-saving opportunity is not hidden in investments. It is hidden in how intelligently your salary is structured."

In the previous parts of this series, we discussed an important transformation in salary tax planning under the new tax regime.

The old approach was:

"Invest to save tax."

The new approach is:

"Structure your income intelligently to achieve tax efficiency."

The new tax regime has reduced the relevance of traditional deductions such as:

• Section 80C investments
• Section 80D medical insurance
• HRA exemption
• LTA exemption

However, it has not eliminated tax planning.

Instead, the focus has shifted towards:

✓ Employer-sponsored retirement benefits
✓ Salary restructuring
✓ Genuine duty-related allowances
✓ Retirement benefit planning
✓ Better compensation decisions

Among these opportunities, smart salary restructuring has become one of the most important areas for salaried employees.

The same Cost to Company (CTC) can result in completely different tax outcomes depending on how the salary package is designed.

Same CTC, Different Tax: Why Salary Structure Matters

Many employees focus only on:

"What is my annual package?"

However, the more important question is:

"How is my annual package structured?"

A salary package may contain:

• Basic salary
• Allowances
• Employer NPS contribution
• Reimbursements
• Retirement benefits
• Other employment-related benefits

Each component may have a different tax impact.

Therefore:

Tax efficiency begins before salary is received — at the stage of salary design.

Employer NPS Contribution: The Foundation of New Regime Tax Planning

As discussed in Part 2, employer contribution to NPS under Section 80CCD(2) has become one of the most valuable benefits under the new tax regime.

It provides:

✓ Deduction from taxable income
✓ Retirement corpus creation
✓ No requirement of personal investment
✓ Benefit even under the new tax regime

Employees should proactively discuss with employers whether this option is available as part of the compensation package.

Illustration: Impact of Salary Restructuring

Salary Structure Before Planning

Particulars	Amount
Annual CTC	₹30,00,000
Taxable salary components	₹30,00,000
Employer retirement contribution	Nil

In this structure, most of the CTC becomes taxable salary.

Salary Structure After Planning

Particulars	Amount
Annual CTC	₹30,00,000
Salary components	₹27,90,000
Employer NPS contribution	₹2,10,000

Benefits:

Impact	Result
Taxable income reduces	Yes
Retirement savings increase	Yes
Employee personal investment required	No
Overall CTC changes	No

The employee receives the same CTC but with improved tax efficiency.

Choosing Between Old and New Tax Regime: A Practical Approach

The right tax regime depends on individual circumstances.

There is no universal answer.

Employees should compare both regimes after considering:

• Salary structure
• Existing investments
• Housing loan benefits
• Medical insurance deductions
• Employer NPS contribution
• Other eligible benefits

Broad Comparison

Particulars	Old Tax Regime	New Tax Regime
Tax rates	Higher	Lower
Section 80C benefits	Available	Generally not available
Section 80D benefits	Available	Generally not available
HRA exemption	Available subject to conditions	Generally not available
Standard deduction	Available	Available
Employer NPS benefit	Available	Available
Importance of salary structure	Moderate	Very High

The mistake many employees make is comparing only deductions.

The correct approach is:

Compare final tax liability after considering the complete salary structure.

3. Salary Planning Mistakes Employees Should Avoid

Mistake 1: Treating CTC as Take-Home Salary

CTC includes several components that may not directly become monthly cash income.

Employees should understand:

• Taxable components
• Employer contributions
• Retirement benefits
• Deferred benefits

before comparing job offers.

Mistake 2: Ignoring Employer Benefits

Many employees focus only on fixed monthly salary and ignore:

• Employer NPS contribution
• Retirement benefits
• Reimbursements
• Other structured benefits

A slightly lower monthly salary with better tax-efficient benefits may actually provide higher overall value.

Mistake 3: Making Tax Decisions at Year End

Tax planning should not begin in March.

By the time the financial year is closing:

• Salary structure may already be fixed
• Payroll changes may not be possible
• Tax-saving opportunities may be lost

The ideal time is:

At the beginning of the financial year or during salary revision discussions.

4. Practical Checklist for Salaried Employees FY 2026-27

Employees should review the following:

Action Point	Importance
Compare old and new tax regimes	Essential
Check employer NPS availability	High
Review salary structure	High
Understand eligible allowances	Important
Maintain previous employment records	Important
Track retirement benefits received	Essential
Review Form 16 before filing ITR	Essential

5. Checklist for Employers and HR Teams

Salary planning is not only an employee responsibility.

Employers should ensure:

✓ Tax-efficient compensation design
✓ Correct payroll implementation
✓ Proper documentation of benefits
✓ Correct TDS calculation
✓ Employee awareness about available options

A well-designed compensation structure improves:

• Employee satisfaction
• Retention
• Financial wellness

6. The New Era of Salary Tax Planning

The direction of tax planning has changed.

Earlier:

Investment → Deduction → Tax Saving

Now:

Salary Design → Tax Efficiency → Wealth Creation

The employee who understands this shift will make better decisions regarding:

• Job offers
• Salary negotiations
• Annual increments
• Retirement planning

Final Takeaway

The new tax regime does not mean:

"No tax planning is possible."

It means:

"Tax planning requires smarter decisions."

For salaried employees, the most important tax-saving decision may not be selecting an investment.

It may be selecting the right salary structure.

A carefully designed compensation package can help employees:

✓ Reduce tax legally
✓ Build retirement wealth
✓ Maximise the value of their CTC
✓ Make informed financial decisions

The future of salary tax planning belongs to those who understand that:

A smart salary structure is not just about earning more. It is about keeping more and building more.

Complete Series: New Tax Regime FY 2026-27 – Salaried Employee Tax Planning Guide

Part 1

New Tax Regime FY 2026-27: What Still Saves Tax for Salaried Employees? The Truth Every Employee Should Know

Part 2

Section 80CCD(2) Under New Tax Regime: The Hidden Tax Saving Opportunity Through Employer NPS Contribution

Part 3

New Tax Regime FY 2026-27: Standard Deduction, Section 10(14), Leave Encashment & Gratuity Exemption

Part 4

New Tax Regime FY 2026-27: Smart Salary Restructuring & Tax Planning Guide for Salaried Employee