Top 5 ways to save tax without investment in Fin. Yr. 2021-21

The deadline (31st March 2021) for investment declaration to claim tax deduction for FY 2020-21 is fast approaching. Hence, earning individuals are busy finding ways to save their hard earned money meant for income tax outgo. While some people are busy buying insurance policies some are found investing in Section 80C investment options like Public Provident Fund (PPF), Post Office Saving Schemes, etc. However, for information to such earning individuals, one can save income tax without making any investments. They can claim income tax benefits for some of their regular expenses like tuition fees paid for their children at their school, home loan, health insurance and health checkups, etc. These are some of the expenses that one needs to add before making any investment to claim income tax relaxation.

Speaking on the income tax benefit offered by the Income Tax Department on other than investment options Pankaj Mathpal, Managing Director at Optima Money Managers said, "Regular payments like tuition fee of one's children paid at their school, medical check up of one's dependent, principal paid on home loan, medical expenses on one's parents (if they are not insured), interest paid on education loan, etc. are some of the heads that qualifies for income tax exemption." Mathpal advised earning individuals to mention these expenses in their tax deduction investments for the financial year 2020-21.

1] Tuition Fee: For those who have expenses related to the tuition fee of children can claim up to Rs 1.5 lakh incurred on the same under Section 80C of the Income Tax Act. This means if a parent pays Rs 60,000 each for two children then Rs 1.2 lakh can be claimed under the deduction. The tuition fee paid to any college, school, university, college or any educational institute in India can be availed for upto two children for a given financial year and is an effective way for reducing your burden.

2] Home Loan Principal Repayment: An amount of Rs 1.5 lakh can also be claimed under Section 80C against repayment of the principal amount of a home loan taken during a financial year. In fact, if you have bought the house in FY 2020-21, then you can claim income tax benefit on the stamp duty payment too. However, after claiming this income tax deduction, one won't be able to sell the property within five years.

3] Education Loan Interest Repayment: If an earning individual has availed education loan for its children or for itself, then in that case, one can claim income tax exemption on 100 per cent education loan interest repayment under Section 80E of the Income Tax Act.

4] Health Checkups: If the earning individual has spent on the health checkups of oneself and other dependents of the family like wife and children, then they can claim income tax deduction under Section 80D of the Income Tax Act.

5] Health Checkup Expense on Parents: If the earning individual's parents are not covered by any insurance, in that case health checkup expenses up to Rs 50,000 is exempted from any income tax outgo under Section 80D.

Source: ZeeBusiness

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No Change on Interest Rates for Small Savings Schemes.

F.No.1/04/2016-NS.II

Government of India

Ministry of Finance

Department of Economic Affairs

(Budget Division)

North Block, New Delhi

Dated: December 30,2016

OFFICE MEMORANDUM

Subject:  Revision of Interest Rates for Small Savings Schemes.

The undersigned in directed to refer to this Department's OM of even number dated 16th February, 2016, vide which the various decisions taken by the Government regarding interest fixation for small savings schemes were communicated to all concerned.

2.  On the basis of the decision of the Government, interest rates for small savings schemes are to be notified on quarterly basis.  Accordingly, the rates of interest on various small savings schemes for the fourth quarter of Financial Year 2016-17 starting on 1st January, 2017 and ending on 31st March 2017, on the basis of the interest compounding/payment built-in the schemes, shall be as under :

* No change

3.  This has the approval of Finance Minister.

Sd/-

(Vyasan R.)

Deputy Secretary to Government of India

Tele: 01123092326

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Impact of LIC Premium Deduction on Income Tax

DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIA, ETC.

The following payments/investments qualify for deduction under this section. The total amount of investments made during the P.Y. under these below mentioned schemes is known as Gross Qualifying Amount (GQA).

• Life Insurance premium paid on a policy taken on his own life, life of the spouse or any child (child may be dependent/ independent ). In the case of a Hindu undivided family, policy may be taken on the life of any member of the family. The premium paid should be maximum of 20% of sum assured.
• Any sum deducted from salary payable to a Government employee for the purpose of securing him a deferred annuity (subject to a maximum of 20% of salary).
• Contribution towards statutory provident fund and recognized provident fund.
• Contribution towards 15 year public provident fund (maximum of Rs 70,000).
• Contribution towards an approved superannuation fund.
• Subscription to National Savings Certificates, VIII Issue.
• Contribution for participating in the Unit-Linked Insurance Plan (ULIP) of Unit.
• Contribution for participating in the unit-linked insurance plan (ULIP) of LIC Mutual Fund (i.e. Dhanraksha plan of LIC Mutual Fund).
  
• Payment for notified annuity plan of LIC (i.e. Jeevan Dhara, Jeevan Akshay New Jeevan Dhara , etc ) or any other insurer.
• Subscription towards notified units of Mutual Fund or UTI.
• Contribution to notified pension fund set up by Mutual Fund or UTI.
• Any sum paid (including accrued interest) as subscription to Home Loan Account Scheme of the National Housing Bank.
• Any sum paid as tuition fees to any university/college/educational institution in India for full time education.

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EPF Interest Rate Again Reduced from 8.8% to 8.65%

Interest on EPF balances lowered to 8.65% for 2016-17

You will get 8.65 percent interest on your Employee Provident Fund (EPF) balances for 2016-17, which is 0.15 percent points lower than what your EPF balances earned for 2015-16.

The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) is understood to have arrived at 8.65 percent as the rate of interest payable for 2016-17 at its meeting in Bengaluru on Monday. The CBT is the highest decision making body of the EPFO.

The move is likely to disappoint over 4 crore members of the EPF who would have been looking forward to the CBT suggesting at least retaining the 8.8 percent rate of interest for the year. In fact, Union representatives at CBT had told Moneycontrol during the run-up to its meeting that they might press for an interest rate higher than 8.8 percent for 2016-17.

According to reports, the Finance, Investment and Audit Committee (FAIC) of EPFO has suggested 8.62 percent as the feasible rate of interest for 2016-17. The FAIC arrives at its suggestion of the feasible rate of interest for the consideration of CBT based on analysis of the balance sheet for the year under consideration.

Incidentally, the earlier suggestion by the Finance Ministry to lower the EPF interest rate for 2015-16 by 0.1 percent had met with stiff resistance and had to be eventually rolled back.

The lowering of EPF rate comes in the wake of general lowering interest rates in the system including that of other small savings schemes. The government had in September announced a reduction in the interest rates on small savings schemes by 0.1 percent for the October-December quarter of 2016-17.

Thus, the interest rate on PPF was reduced to 8 percent in the third quarter of the current fiscal as against 8.1 percent in the previous three months period, while the rate on Kisan Vikas Patra was brought down to 7.7 percent from 7.8 percent resulting in KVP now maturing in 112 months instead of 110 months.

Source: www.moneycontrol.com

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Important Tax Planning Tips for Salaried Employees for Fin. Year 2016-17

Tax planning for the salaried employees is a matter of planning and discipline. Planning involves making a set of decisions at the start of the financial year and discipline comes in when you are required to adhere to the plan come what may.

If an Individual has done proper Tax Planning to save tax, such deductions would be subtracted from the gross total income and income tax would be levied on the balance income as per the income tax slabs in force

USE THESE BENEFITS TO BOOST YOUR TAKE HOME SALARY

Irrespective of whether it is your first job or whether you have conquered the corner office, income-tax duly deducted from your monthly salary pinches.

The key CTC components which could help reduce your tax liability and boost your take home pay are outlined below. These apply to all non-government employees.

1. House Rent Allowance (HRA)

HRA is the most common CTC component. Those staying in rented accommodation can avail of an exemption against the HRA received and only the balance would be taxable. The exemption is limited to -

(a) rent paid less 10% of basic salary or 

(b) 50% of basic salary where the house is situated in any of the four cities of Delhi, Mumbai, Kolkata or Chennai, and 40% of basic salary in other cities or 

(c) actual HRA received, whichever is the lowest. 

If your CTC doesn't contain an HRA component, deduction for rent paid is available from gross taxable income, subject to various limits (maximum deduction Rs 5,000 per month or Rs 60,000 per annum).

Caution point:

For claiming HRA exemption, if your annual rent exceeds Rs 1 lakh, you should obtain not just the rental receipts but a copy of your landlord's PAN card for submission to your accounts department.

2. Leave travel concession (LTC):

It's more than a vacation, it's a tax break Your annual holiday within India can get you a tax break. The tax exemption on any reimbursement of your travel expense while on leave is limited to the economy class air fare for the shortest route available to your vacation destination. No exemption is available for expenses such as hotel, local conveyance, etc. Keep the travel bill handy to submit to your accounts department to claim the exemption.

Hot tip:

LTC is allowed to you as a salaried employee in respect of two journeys performed in a block of four calendar years. The current block of four years commenced on January 1, 2014. So if you haven't taken that much-needed break last year, do so now. Keep proper tabs, retain relevant travel bills and claim your LTC.

Caution point:

Your travel expenses for a holiday abroad are not eligible for a tax break. If you are planning a long vacation covering destinations in India as well as a foreign country with one air-ticket, the tax man may not allow a tax break even for your cost of journey within India.

3. Medical Allowance:

Medical Allowance is levied up to Rs.15,000 provided all bills for the same are furnished by the employees to the employer.

4. Conveyance Allowance:

For conveyance allowance to be made tax free you need to do nothing to prove. Attending work is good enough we guess! 

INVESTING/SAVINGS FOR TAX BENEFITS.

You can plan to maximize your tax savings and reduce income tax liability by availing the benefit of provisions relating to deduction from taxable income under various sections of Income Tax Act. 

Income Tax Deductions for FY 2016-17, this list can help you in planning your taxes -

1. Section 80C

The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only.  The various investment avenues or expenses that can be claimed as tax deductions under section 80C are as Insurance, PPF, Mutual Funds, 5 years Tax saving Deposits, Tuition Fees, Housing loan repayments Etc.

2. Section 80CCC

Contribution to annuity plan of Life Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.

3. Section 80CCD

Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.

Kindly note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit. 

4. Section 80D Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.

Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, dependent children and parents).

5. Section 24 (B)

The interest component of home loans is allowed as deduction under Section 24B for up to Rs 2 lakh in case of a self-occupied house. If your property is a let-out one then the entire  interest amount can be claimed as tax deduction. (Read: Understanding Tax Implications of Income from house property)

6. Section 80EE

This is a new proposal which has been made in Budget 2016-17. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE. 

1. The home loan should have been sanctioned in FY 2016-17.

2. Loan amount should be less than Rs 35 Lakh.

3. The value of the house should not be more than Rs 50 Lakh &

4. The home buyer should not have any other existing residential house in his name.

7. Section 80GG

As per the budget 2016 proposal, the Tax Deduction amount under 80GG has been increased from Rs 24,000 per annum to Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).

Conclusion:

It is prudent to avoid last minute tax planning. Do not invest in unwanted life insurance policies or in any other financial products just to save taxes. It is better you plan your taxes based on your financial goals at the beginning of the Financial Year itself. Plan your taxes now, instead of waiting until late December 2016 (or) January 2017.

It is OK to pay some taxes when you cannot save or cannot invest in right financial products.

But, do not invest just to save TAXES. The cost of buying wrong financial products may outweigh the cost of taxes. Tax Planning is not a goal but a tool. Remember “Tax Planning alone is not Financial Planning.”

Also, kindly understand the tax treatment of the selected investment products across the different investment stages (i.e., investment, accrual & withdrawal) and then invest. I believe that the above list is useful for your Tax Planning purposes. The above ‘Income Tax Deductions 2016-17’ are applicable for financial year 2016-2017 (Assessment Year 2017- 2018).

Note:

The above stated exemptions/deductions for salaried employees are the most useful exemptions. However, there are various other exemptions as well but are not commonly used.

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Deposit of old demonetized notes of 500 and 1000 in Small Savings Scheme - M.F.

Old demonetized notes of Rs. 500 and 1000 Deposits in Small Savings Scheme

F.No.1/042016-NS

Ministry of Finance

Department of Economic Affairs

(Budget Divisional)

North Block, New Delhi

Dated 22nd November 2016

To

1. The Chief General Manager
Reserve Bank of India
Department of Government & Bank Accounts
Central Office, Byculla Office Accounts
4th floor, Opposite Mumbai Central Railway Station
Byculla, Mumbai - 400008

2. The Deputy Director General (FS)
Department of Posts
Dak Bhawan, Sansad Marg, New Delhi

3. The Joint Director & HOD
National Savings Institute
ICCW Building

4, Deen Dayal Upadhyay Marg
New Delhi-110003

Subject: Deposit of old demonetized notes of 500 and 1000 in Small Savings Scheme

Sir,

I am directed to state that Ministry of Finance has received references from Banks whether currency notes of Rs.500 and Rs.1000, discontinued w.e.f.9.11.2016, can be deposited in accounts opened under small savings schemes. The matter was examined in this Ministry and it has been decided that subscribers of Small Savings Scheme may not be allowed to deposit old currency note of Rs.500 and Rs.1000, in Small Savings Schemes.

2. This may be compiled strictly.

3. This has the approval of Secretary (Economic Affaris).

Yours faithfully,
sd/-
(Padam Singh)
Regional Director(Sr.)

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How to boost Take Home Salary by Best Tax Planning Tips for Salaried Employee for Asstt. Year 2017-18 ?

Tax planning for the salaried employees is a matter of planning and discipline. Planning involves making a set of decisions at the start of the financial year and discipline comes in when you are required to adhere to the plan come what may.

If an Individual has done proper Tax Planning to save tax, such deductions would be subtracted from the gross total income and income tax would be levied on the balance income as per the income tax slabs in force -

USE THESE BENEFITS TO BOOST YOUR TAKE HOME SALARY

Irrespective of whether it is your first job or whether you have conquered the corner office, income-tax duly deducted from your monthly salary pinches. The key CTC components which could help reduce your tax liability and boost your take home pay are outlined below. These apply to all non-government employees.

1. House Rent Allowance (HRA)
HRA is the most common CTC component. Those staying in rented accommodation can avail of an exemption against the HRA received and only the balance would be taxable. The exemption is limited to (a) rent paid less 10% of basic salary or (b) 50% of basic salary where the house is situated in any of the four cities of Delhi, Mumbai, Kolkata or Chennai, and 40% of basic salary in other cities or (c) actual HRA received, whichever is the lowest.

If your CTC doesn't contain an HRA component, deduction for rent paid is available from gross taxable income, subject to various limits (maximum deduction Rs 5,000 per month or Rs 60,000 per annum).

Caution point:
For claiming HRA exemption, if your annual rent exceeds Rs 1 lakh, you should obtain not just the rental receipts but a copy of your landlord's PAN card for submission to your accounts department.

2. Leave travel concession (LTC):
It's more than a vacation, it's a tax break -
Your annual holiday within India can get you a tax break. The tax exemption on any reimbursement of your travel expense while on leave is limited to the economy class air fare for the shortest route available to your vacation destination. No exemption is available for expenses such as hotel, local conveyance, etc. Keep the travel bill handy to submit to your accounts department to claim the exemption.

Hot tip:
LTC is allowed to you as a salaried employee in respect of two journeys performed in a block of four calendar years. The current block of four years commenced on January 1, 2014. So if you haven't taken that much-needed break last year, do so now. Keep proper tabs, retain relevant travel bills and claim your LTC.

Caution point:
Your travel expenses for a holiday abroad are not eligible for a tax break. If you are planning a long vacation covering destinations in India as well as a foreign country with one air-ticket, the tax man may not allow a tax break even for your cost of journey within India.

3. Medical Allowance:
Medical Allowance is levied up to Rs.15,000 provided all bills for the same are furnished by the employees to the employer.

4. Conveyance Allowance:
For conveyance allowance to be made tax free you need to do nothing to prove. Attending work is good enough we guess!

INVESTING/SAVINGS FOR TAX BENEFITS.

You can plan to maximize your tax savings and reduce income tax liability by availing the benefit of provisions relating to deduction from taxable income under various sections of Income Tax Act.

Income Tax Deductions for Fin. Year 2016-17, this list can help you in planning your taxes

1. Section 80C
The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues or expenses that can be claimed as tax deductions under section 80C are as Insurance, PPF, Mutual Funds, 5 years Tax saving Deposits, Tuition Fees, Housing loan repayments Etc.

2. Section 80CCC
Contribution to annuity plan of Life Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.

3. Section 80CCD
Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015. Kindly note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.

4. Section 80D
Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure. Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, dependent children and parents).

5. Section 24 (B)
The interest component of home loans is allowed as deduction under Section 24B for up to Rs 2 lakh in case of a self-occupied house. If your property is a let-out one then the entire interest amount can be claimed as tax deduction. (Read: Understanding Tax Implications of Income from house property)

6. Section 80EE
This is a new proposal which has been made in Budget 2016-17. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.
1. The home loan should have been sanctioned in FY 2016-17.
2. Loan amount should be less than Rs 35 Lakh.
3. The value of the house should not be more than Rs 50 Lakh &
4. The home buyer should not have any other existing residential house in his name.

7. Section 80GG
As per the budget 2016 proposal, the Tax Deduction amount under 80GG has been increased from Rs 24,000 per annum to Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).

Conclusion:
It is prudent to avoid last minute tax planning. Do not invest in unwanted life insurance policies or in any other financial products just to save taxes. It is better you plan your taxes based on your financial goals at the beginning of the Financial Year itself. Plan your taxes now, instead of waiting until late December 2016 (or) January 2017.

It is OK to pay some taxes when you cannot save or cannot invest in right financial products.  But, do not invest just to save TAXES. The cost of buying wrong financial products may outweigh the cost of taxes. Tax Planning is not a goal but a tool. Remember “Tax Planning alone is not Financial Planning.” Also, kindly understand the tax treatment of the selected investment products across the different investment stages (i.e., investment, accrual & withdrawal) and then invest.  I believe that the above list is useful for your Tax Planning purposes. The above ‘Income Tax Deductions 2016-17’ are applicable for financial year 2016-2017 (Assessment Year 2017- 2018).

Note:
The above stated exemptions/deductions for salaried employees are the most useful exemptions. However, there are various other exemptions as well but are not commonly used.

Source: CAclubindia

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KVP and NSC Certificates in Physical Form not issue from 1st July, 2016 - Government

Recently, Government of India has issued OM to discontinuation of Physical Pre-printed NSC and KVP Certificate for Small Savings Schemes.

As the Department of Posts has shown difficulty vide D.O.letter No. 61-01/2016-SB dated 07.04.2016. Government may be noted that no physically pre-printed KVP and NSC Certificates may be issued on or after 01st July, 2016 by banks or Post Offices.

Government decided to issue of NSC/KVP certificates on and after 01.07.2016 in Two Modes i.e. 1. Exclusive e-mode and 2. Passbook Mode (e-mode format printed or recorded on a passbook).

Exclusive e-Mode :
The format for e-mode is given in Annex I for KVP and NSC.  The Part A of the format is to be made accessible for viewing by a customer online in a non-printable form and part B of the format needs to be maintained as part of the database only.  Any customer can apply for viewing of NSC or KVP through online secure system for which he/she has to open saving account (if Savings Account is not already opened) and apply for Internet Banking before purchase of NSC or KVP.  A customer shall have access of viewing only his/her own deposit under this mode at all times.

Passbook made (e-mode format printed or recorded on a passbook) :
Under this mode, the format for e-mode as given in Part A of Annex I for KVP and NSC, shall be either printed or entered manually on a passbook and such Passbook should be issued with physical signature (in blue ink) of the authorized official.  Manual entries should be made only if either printer is not supplied or it is not in a working condition.  Efforts should be made to provided adequate Passbook printers to all Post Offices and bank branches authorized to handle Small Saving Schemes.

Download Office Memorandum

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Tax-saving investment can be done within calendar month.

Taxpayers looking to save taxes on long-term capital gains, but not willing to invest in a house property, are eligible to invest the capital gains in specified bonds of public sector undertakings like National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC) and save capital gains taxes under section 54EC of the Income Tax (I-T) Act. These bonds offer a lock-in period of three years beyond which they can be liquidated. The interest rate offered by the bonds is approximately 6 per cent and the interest earned on the bonds is taxable.

These bonds are a good option available for taxpayers to save capital gains taxes without committing money over the long term. The section, however, restricts the amount of exemption to Rs 50 lakh invested in these bonds per financial year.

Section 54EC of the I-T Act provides that where the long-term capital gain is invested by a taxpayer, at any time within a period of six months after the date of transfer of the capital asset, in the specified bonds, then the resulting capital gains will be exempt to the extent of amount invested in the bonds. Recently, in a case that came up before the Special Bench of Income

Tax Appellate Tribunal, Ahmedabad, a taxpayer had sold his flat for a total consideration of Rs 64 lakh. In his return of income, the taxpayer had computed the capital gains as nil. The basis for the nil capital gains was that the gain was stated to be approximately Rs 56 lakh; however, he had made the investment in NHAI bonds to the tune of Rs 45 lakh and claimed a deduction under section 54EC of the Act. The balance gains of Rs 12 lakh were invested in a capital gain account scheme.

During the course of assessment proceedings, the tax officer observed that the investment in NHAI bonds of Rs 45 lakh for the purpose of claim of deduction u/s 54EC was purchased on December 17, 2008 as per the entry in the bank pass book. The tax officer further observed that the sale document was registered on June 10, 2008 and hence the taxpayer was required to purchase the bonds within six months of the date of registration.

The taxpayer informed the tax officer that the last date of expiry of six months from the date of transfer of the house property was December 10, 2008; however, he had tendered the cheque along with the application for the bonds on December 8, 2008 to the bank, which was within the period of six months from the date of sale. The taxpayer put up another stand that the time limit for investment in bonds is available till the end of month of December 2008. But tax officer denied the exemption to the taxpayer in the assessment order.

The taxpayer then preferred an appeal with first appellate authority, where he submitted that as the application was submitted to the bank along with the cheque before the last day of the expiry of six months from the date of sale, he was entitled to the deduction u/s 54EC. However, as the date and time stamp on the application copy was not clear, the appellate authority could not ascertain its validity. Hence, the authority too rejected the taxpayer's claim. When the matter came up before the Special Bench, the taxpayer argued that the term 'month' as used in the section 54EC has not been defined in the Act. Consequently, the same should be interpreted as per the definition given under the General Clauses Act where the term 'month' is reckoned as per the British calendar.

The tax officers argued that in respect of the computation of period for the purpose of prescribing a limitation under the Act, the wordings are unambiguous. As per the language, a particular date is to be taken into account for the purpose of calculation of days/months. In view of the same, there was no necessity to take the help of "General Clauses Act". Therefore, the tax officers claimed that for the purpose of section 54EC, a month is a period from specified date in a month to the date numerically corresponding to the date in the following months less one.

The Special Bench observed that the crux of the issue at hand is whether for the purposes of section 54EC, the period of investment should be calculated as six months after the date of transfer or to be reckoned as 180 days from the date of transfer. The Bench observed that the phrase "within a period of six months after the date of transfer" has not been used in the Act for any other provisions and is used only for the purpose of investment in certain specified assets in respect of computation of capital gains. It observed that the Act has provided an incentive to a taxpayer, who has earned long-term capital gains, to get relief if the gains are invested in any specified assets, provided the investment has been made at any time within a period of six months after the date of such transfer.

The Bench relied on other judgements on the interpretation of the term month and it was observed that in majority of the cases, the expression six months means six calendar months and not 180 days. In the absence of the definition of the word 'month' in the Act, the one given in the General Clauses Act shall prevail. As there was no dispute that the taxpayer had invested the money in capital gains bonds, the claim that the investment was done with a delay of few days does not support the purpose of the incentive offered by the section. Accordingly, the Special Bench allowed the taxpayer's claim.

Source: www.business-standard.com

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How to select right investment for tax savings u/s 80C?

An individual / HUF can save taxes up to Rs.30,900/- for taxable income up to Rs 1 crore in FY 2013-14. Tax savings would be Rs.33,990/- in case the taxable income exceeds Rs 1 crore.

Death, taxes and childbirth! There's never any convenient time for any of them. Margaret Mitchell’s dialogue in the movie Gone with the Wind rings true as one sits down to do his tax planning as the year end looms closer. And what better way to save tax than by investing?

Around this time of the year, our investment decisions are more linked to what Section 80C of the Income Tax Act, 1961 (‘Act’) says than by the historical trends of the investment. For the uninitiated, Section 80C lists down certain investments / expenses which can be deducted by an individual (or a Hindu Undivided Family) in computing his taxable income. This deduction, clubbed with investments under sections 80CCA, 80CCB and 80CCD of the Act, is subject to a limit of Rs.1,00,000/- per financial year  (‘FY’). Simply put, if Mr. Nayak earns an income of Rs.10,00,000/- in FY 2013-14 and invests / spends Rs.1,00,000/- in products eligible for Section 80C deduction, he would be liable to pay taxes only on the balance Rs.9,00,000/-.

Thus, an individual / HUF can save taxes up to Rs.30,900/- for taxable income up to Rs.1 crore in FY 2013-14. Tax savings would be Rs.33,990/- in case the taxable income exceeds Rs.1 crore.

Here we have identified the appropriate investments under sections 80C, 80CCA, 80CCB and 80CCD.
Mandatory Investments / Expenses :

1. Contribution to Employee’s Provident Fund (‘EPF’) – For a salaried person, this is an automatic deduction from the salary. And if you are lucky enough that this amount exceeds Rs.1,00,000/-, fret no more as your investment for 80C is done! EPF deposits yielded tax free interest of 8.75% per annum in FY 2013-14.
2. Repayment of Home Loan – Repayment of the principal portion of a home loan to any institutions specified u/s 80C is eligible for Section 80C deduction and should be accounted for before deciding on further 80C investments. Such a house cannot be sold for 5 years from the end of the FY in which it was purchased; else the 80C deduction claimed in earlier years will be taxed in the year of sale.  Institutions specified u/s 80C include banks, LIC, National Housing Bank, public companies providing long term finance to construct / purchase residential houses, housing finance companies or your employer, if it is established under any law.  
3. Children’s Education – Tuition fees to any educational institution in India for full time education of any 2 children is eligible for 80C deduction.

Voluntary (but necessary) Investments / Expenses
If after the above investments, 80C limit still remains, look at the following expenses which are necessary but can be entirely planned by you.

• Public Provident Fund – PPF is an important retirement planning tool, especially if you are not eligible for EPF. PPF yielded a tax free interest of 8.70% in FY 2013-14 and is subject to a lock in of 15 years but can be partially withdrawn after 5 years or borrowed against. One can annually invest up to Rs.1,00,000/- in PPF. 
• LIC Premium – You haven’t planned smart if you and your family members aren’t insured. The premium, if it is less than 10% of the actual sum assured, is eligible for 80C deduction. In certain cases, premium up to 15% of the sum assured can be used.
• Senior Citizens Savings Scheme (‘SCSS’) – For persons above 60 years or those who have taken voluntary retirement and are older than 55 years, this is the safest investment avenue. Deposits in SCSS earned a pre-tax interest of 9.2% in FY 2013-14. Lock in period is 5 years but account can be closed prematurely after 3 years. 
• Equity Linked Savings Scheme (‘ELSS’) – While SCSS is best suited for senior citizens, ELSS offers to youngsters the potential to earn high returns; albeit with higher risks. Lock in period for 80C purpose is 3 years and dividends and capital gains are tax exempt. CRISIL-AMFI ELSS Fund Performance Index computes a 3-year annualized return of 2.73%  as at 31st December 2013 from ELSS schemes forming its part. 
• National Savings Certificate (‘NSC’) – NSCs, which earned an annual pre-tax interest of 8.5% and 8.8% on 5 and 10 year certificates respectively, with a lock in of 5 years, are also a good alternative.

Other Voluntary Investments / Expenses
Apart from the above, investment options available are Fixed Deposits, NABARD Bonds, ULIPs, Post Office Time Deposits, etc.
 

The annual inflation rate was 9.13%  as at December 2013. As a thumb rule, an investment which earns post tax return higher than inflation would increase the real value of your money. Also bear in mind that the rate of return on 80C investments will always be higher on account of the taxes saved. For example, on a PPF Deposit of Rs.1,00,000/-, one could save tax of Rs.30,900/- and also earn a tax free interest of Rs.8,700/- in the 1st year. This would mean a return of almost 40% in the 1st year.
 

One needs to look at the return offered, the lock in period vis-à-vis the need for funds and investment objective; and the security of the money invested before zeroing in on any investment.
Wishing all a happy new financial year with loads of tax savings!

Source: www.moneycontrol.com

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What says Tax Rule before investment declaration ?

KNOW THE TAX RULES BEFORE MAKING INVESTMENT DECLARATION

Many salaried individuals are in the process of finalizing their tax-saving investments and other deductions they intend to claim this financial year, as most companies ask their employees to file their investment declaration along with proof by January. If you fail to submit the details along with the proof, be prepared for huge cuts from the monthly salary. The company will deduct applicable tax deducted at source (TDS) from your salary in the remaining months in the financial year, though you have the option of claiming a refund later from the Income Tax department. Here's a list of some new tax rules and deductions you need to be aware of while submitting your declarations this year:

PAN OF LANDLORD IS MANDATORY:

Perhaps this is the most important change in rules this year that could impact many salaried persons who claim house rent allowance. As per I-T department's circular, you have to mention the PAN of your landlord, if you are paying an annual rent of more than Rs 1 lakh.

"If your monthly rent is more than Rs 8,333, it is mandatory to quote the PAN of landlord. If the landlord doesn't have a PAN, a declaration to stating this along  with the name and address of the landlord should be filed," explains Vineet Agarwal, director, KPMG. The new rule could be bothersome for many individuals paying rent, as landlords may refuse to part with their PAN.

EXTRA BENEFIT FOR FIRST-TIME HOME BUYERS:

First-time home buyers can look forward to some additional tax savings this year. However, the loan amount has to be under Rs 25 lakh to claim the benefit. "Also, the value of the residential house should not exceed Rs 40 lakh. In addition, the deduction is available, only if the assessee does not own any residential house property on the date of sanction of the loan," says Suresh Surana, founder of tax consulting firm RSM Astute Consulting. If you have obtained a home loan this year (financial year 2013-14), you can claim an additional tax deduction of Rs 1 lakh on the interest paid on that loan under section 80EEE. Moreover, if interest paid during the year is less than Rs 1 lakh, the unclaimed deduction can be utilised in the subsequent year.

ADDITIONAL TAX RELIEF FOR LOWER INCOME CATEGORIES:

If your annual taxable income is under Rs 5 lakh, you will be entitled to a tax rebate of Rs 2,000 this year. "The lower of Rs 2,000 or the entire tax liability (tax payable) will be allowed as a rebate under section 87A of the Income tax Act," says Agarwal.

TAX BENEFIT ON DONATIONS:

While this is not exactly a rule introduced this year, many employers and employees are still unclear about tax treatment of donations. Typically, most employers do not take into account the donations made by employees, which qualify for tax deduction under section 80G. Because of this, individuals will have to claim refund when they file their returns for tax deductions on these donations.

"Over the last few years, TDS circulars were issued expressly stating the intention of the government to allow deduction by the employer only if donations were made to certain specific funds through the employer. However, in the recent couple of TDS circulars, no such restrictions have been made. This relaxation is a welcome step as employees can provide donation receipts to the employer," explains Agarwal.

However, not all tax experts are convinced that the change in rules will help employees immediately. "The employers have been given an option to factor in the 80G donations. However, it is not mandatory. Many employers may choose not to give the benefit while deducting tax at source, as it is not easy to verify whether the donations made are actually eligible for deduction due to lack of documentary evidence submitted. Not many would want to take on the liability," cautions Surana. Get in touch with your organisation and ask about its policy on donations. Also, remember, you will not be able to claim this deduction if your donation is made in cash and exceeds Rs 10,000.

Source:  The Economics Times

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Invest your money in Right Scheme to Save on Tax.

PUT YOUR MONEY IN RIGHT SCHEMES TO SAVE ON TAX

Prashant Mahesh takes a look at some of the schemes that offer tax benefits for individuals Investors are wary of investing in tax-saving mutual funds (equity-linked savings schemes or ELSS in mutual fund parlance) this tax-planning season, say financial advisors. The abysmal performance of these schemes in the past three years and the current higher level of the market are cited as the reasons for investor disinterest. According to Value Research, a mutual fund tracking entity, ELSS funds, as a category, have given a mere 0.33% returns in the last three years. With the tax planning season beginning in December, most companies ask their employees to submit investment declarations around this time. Investors can avail of a tax deduction of up to. 1 lakh under Section 80C by investing in a host of options like ELSS, tax-saving 5-year bank fixed deposits, the Public Provident Fund (PPF) or National Savings Certificate (NSC), among others. Investors, who invested in ELSS three years ago, are disappointed with lower returns. Clearly, they are not keen to invest in tax-saving mutual funds again and they prefer to invest in either PPF or taxsaving bank deposits, says Abhishek Gupta, certified financial planner, Moat Wealth Advisors. Investors have also become cautious about investing in stocks due to weak economic fundamentals, say experts. Since investors have not made money for three years, they have turned risk averse, and want to protect capital, says Anup Bhaiya, MD and CEO, Money Honey Financial Services. That is the main reason why many investors would flock to PPF or tax-saving bank deposits.

Invest as per asset allocation

However, experts frown upon such random tax-planning exercise. They argue that investors should consider tax planning as part of their overall financial plan and choose products accordingly. They say picking tax planning instruments on the basis of past performance alone wont help one reach the right conclusions. Make a financial plan based on your earnings, liabilities and goals. This financial plan will tell you how much money would go into various assets like equity, debt or gold. Some part of the equity portion of this plan could go into ELSS, says Mukund Seshadri, founder, MSV Financial Planners. Advocates of ELSS also claim that it is the right time to get into stocks due to attractive valuations. The Sensex trades at a P/E of 18 times, making valuations attractive and leaving scope for appreciation over a 3-5-year period, says Rupesh Bhansali, head (distribution ), GEPL Capital. Experts also say that investors should also try to find out the details of the product they are investing. For example, consider the case of these disenchanted investors opting for PPF or 5-year bank deposits. Chances are that most of them havent thought about the different lock-in periods in these options. If you have a time-frame of five years, opt for tax-saving bank deposits. Opt for PPF only if you can wait for 15 years, says Abhishek Gupta. Sure, you can withdraw from PPF after five years, but for some specific purposes only. Also, you have to keep your PPF account alive by investing a minimum of Rs. 500 every year. Currently, a tax-saving deposit in SBI for five years will give you an interest rate of 9%, while PPF gives you 8.7%. However, financial planners suggest you keep tax treatment in mind while making these investments, as interest income is taxed differently. Interest earned from PPF is tax free, whereas interest income from bank FDs and NSCs are taxable. Hence, if you are in the 30% tax bracket, PPF may be a better investment from a tax perspective, says Harshvardhan Roongta, chief financial planner, Roongta Securities.

Source – www.economictimes.indiatimes.com

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How to calculate investment value on various Interest Rates ?

The future value of an investment is the function of the cash outflow (one-time or at regular, defined intervals), interest rate, and the tenure. Of these, the interest rate is the most volatile and is influenced by numerous macroeconomic factors, such as inflation, exchange rate, government deficit, current account deficit, money supply, etc. We mostly assume a constant interest rate while calculating the future value of our investments.

In the first part of this series, we had explained the FV function, which assumes a constant interest rate. Such an assumption may work in the case of fixed deposits or government bonds, where the interest rate is for a specified tenure. However, the same assumption appears fabricated when the investments are made in direct equities and mutual funds (equity or debt). The interest rates or returns offered by stocks and mutual funds are subject to market risks and, hence, cannot be assumed constan  for any time period. A stock, say, XYZ Ltd, has given the following returns in the past three years: 10%, -20%, 35%. If one tries to use the simple or arithmetic average of three years, it works out to 8.33% [(10-20+35)/3]. If one had invested Rs 1,000 at the beginning of the first year and wants to check the value of the investment at the end of third year, the use of a simple average of 8.33% in the FV function of MS Excel will provide a misleading result of Rs 1,271.41. The arithmetic or simple average is simple to calculate, but does not reflect the effect of compounding.

The question is how to estimate the future value of an investment under such varying interest rates. One can do so with MS Excel's in-built FVSCHEDULE function. This is extremely simple to use and requires only two inputs—the principal invested and the stream of interest rates or returns. The function takes into account the geometric average, which considers the effect of compounding and, thereby, provides more accurate results. The geometric average, also known as geometric mean, is calculated by multiplying the rate of return for n time intervals; (1/n)th root of the product gives the geometric mean. The geometric mean of the stock XYZ Ltd is 5.91% [((1.10) X (0.80) X (1.35))^(1/3)]-1.

Open an Excel sheet and go to formulas. Select the 'insert' function and select 'financial' from the drop-box menu. In the 'financial' function, select FVSCHEDULE. The following box (Box 1) will appear after selecting it:

One can estimate future values by evaluating the stream of returns of stock indices, stocks, and equity or debt funds. Such stream of returns can be weekly, monthly, quarterly or yearly. We have demonstrated the function by using 3- and 4-year annual returns, but one can use returns for several years, quarters, months or weeks.

Similarly, the principal can be varied depending on the requirements. The FVSCHEDULE function is extremely useful for investors to assess investment options that are prone to market uncertainties, volatility and external factors.

Source: www.economictimes.indiatimes.com

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Investment of Rs. 1 crore in bonds specified u/s. 54EC.

Investment of Rs. 1 crore in bonds specified under section 54EC- Whether Possible:

Limit of investment for the purposes of section 54EC is Rs. 50 lakhs in a financial year. Investment within 06 months is the investment for that financial year in which transfer has taken place. But, any subsequent investment is to be considered as part of the investment of financial year in which transfer has taken place. Therefore, even if the assessee manages his affairs in such a way that investment of Rs. 50 lakh is made in one financial year and investment of another Rs. 50 lakh is made in another financial year but within the period of six months from date of transfer then also deduction under section 54EC cannot exceed Rs. 50 lakhs.- Vide Asstt. CIT v. Raj Kumar Jain & Sons (HUF) (2012) 48 (II) ITCL 2 (JP-Trib)

Source: The Hitwada News Paper

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Key features of Investments, Deposits to Save Income Tax in Asstt. Year 2013-14.

Every Salaried Employee (Taxpayee) would like to search the best Investment and Deposits to save Income Tax during Asstt. Year 2013-14.  In according to save Income Tax by Salaried Employee some small savings/Investments/Deposits help. To save Income Tax. In the financial year 2012-13 the salaried employee must plan for saving of Income Tax. Regarding this matter some saving planning tips and tricks are describe below and for this purpose some suggestions you have adopt following method to save money & income tax and escape from unwanted expenses freely.

The Following point are helpful for Salaried Employee those who are Taxpayee and Plan to Save Income Tax:

1) Proper Allocation of Annual compensation : Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

• Transport allowance to the extend of Rs.800 is exempt.
• Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000/-.
• Food coupons like sodexo or ticket restaurant are exempt from tax up to 50 Per meal .No of meal in day can be up to 1-2 per Day.
• Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary.
• Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.(read taxable and exempted allowance)(valuation of perquisites)

2) Effective Utilization of Tax Exemption : As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.

3) Properly Structure your Housing Loan : The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilize the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan.

4) Tax Plan in Sync with Overall Financial Plan : You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.

5) Avoid Last Minute Rush : In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6) Invest Some Quality Time : Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.

7) Check for Future Commitments : Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8) Changed Your Job; Redo your Tax Plan : Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.

Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively.

With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

Read More

Apply and Save of Income Tax in the Assessment Year 2013-14?

Every salaried employee plan that how to save Income Tax with small savings/Investments/Deposits. The financial year 2012-13 is just starts and thus the salaried employee must plan to save tax. Regarding this matter some saving planning tips and tricks are describe below and for this purpose some suggestions you have adopt following method to save money & income tax and escape from unwanted expenses freely.

The Following point are helpful for Salaried Employee those who are Taxpayee and Plan to Save Income Tax:

1) Proper Allocation of Annual compensation : Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

• Transport allowance to the extend of Rs.800 is exempt.
• Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000/-.
• Food coupons like sodexo or ticket restaurant are exempt from tax up to 50 Per meal .No of meal in day can be up to 1-2 per Day.
• Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary.
• Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.(read taxable and exempted allowance)(valuation of perquisites)

2) Effective Utilization of Tax Exemption : As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.

3) Properly Structure your Housing Loan : The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilize the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan.

4) Tax Plan in Sync with Overall Financial Plan : You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.

5) Avoid Last Minute Rush : In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6) Invest Some Quality Time : Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.

7) Check for Future Commitments : Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8) Changed Your Job; Redo your Tax Plan : Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.

Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively.

With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

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Plan, Invest and Save Income Tax in the Assessment Year 2013-14 by Salaried Employee, How?

Salaried Taxpayee Employee always search to save Income Tax, but they not Plan and Invest the money  to save Income Tax.  Employee go with small savings/Investments/Deposits it should help to save Income Tax. In the financial year 2012-13 is just starts and thus the salaried employee must plan to save tax. Regarding this matter some saving planning tips and tricks are describe below and for this purpose some suggestions you have adopt following method to save money & income tax and escape from unwanted expenses freely.

The Following point are helpful for Salaried Employee those who are Taxpayee and Plan to Save Income Tax:

1) Proper Allocation of Annual compensation : Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

• Transport allowance to the extend of Rs.800 is exempt.
• Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000/-.
• Food coupons like sodexo or ticket restaurant are exempt from tax up to 50 Per meal .No of meal in day can be up to 1-2 per Day.
• Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary.
• Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.(read taxable and exempted allowance)(valuation of perquisites)

2) Effective Utilization of Tax Exemption : As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.

3) Properly Structure your Housing Loan : The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilize the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan.

4) Tax Plan in Sync with Overall Financial Plan : You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.

5) Avoid Last Minute Rush : In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6) Invest Some Quality Time : Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.

7) Check for Future Commitments : Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8) Changed Your Job; Redo your Tax Plan : Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.

Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively.

With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

Read More

Helpful Tips for filing/e-filing of Income Tax Return to Taxpayee.

Income-tax return is a legal document and it should be filed by the assessee with due care and caution. There should be no corrections or overwriting and it should be properly signed and verified by the person authorized to do so under the provisions of the Income-tax Act. The following important points may be taken care of while filling up the return forms:

Assessment year to which New Forms are applicable:
The new ITRs notified are applicable for the assessment years 2008-09 onwards only, for return of income relating to earlier assessment years return is to be furnished in the appropriate form as applicable in that assessment year. Each assessee has to identify the correct ITR Form applicable in its case before filing the return of Income.

No enclosures to the return:
Rule 12(2) of the I.T Rules provides that the return of income and return of fringe benefits required to be furnished in Form No. ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, or ITR-8 shall not be accompanied by a statement showing the computation of tax payable on the basis of return, or proof of tax, if any, claimed deducted or collected at source or the advance tax or tax on self assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income or return of fringe benefits under any provisions of the Act.

For timely delivery of refunds, ensure correct address and account number on your Return of Income:
From 1.10.07 onwards, all income tax refunds in Bangalore, Chennai, Delhi, Kolkata and Mumbai will be delivered by the Refund Banker directly at the communication address mentioned on the Return of Income. Taxpayers are requested to fill in the correct address (available during working hours for delivery) to ensure speedy delivery of refunds. In the case of taxpayers who opt for refunds through ECS, it will be credited directly to the bank account for which correct MICR code/ Bank Account Number has to be furnished on the Return.

Manner of filing the new Forms :
These Forms can be submitted in the following manner:

1. a paper form;
2. e-filing
3. a bar-coded paper return.
   

Returns can be e-filed through the internet. E-filing of return is mandatory for companies and firms requiring statutory audit u/s 44AB. E-filing can be done with or without digital signaturea):

• If the returns are filed using digital signature, then no further action is required from the tax payers.
• If the returns are filed without using digital signature, then the tax payers have to file ITR-V with the department within 15 days of e-filing.
• The tax payers can e-file the returns through an e-intermediary who would e-file and assist him in filing of ITR-V within 15 days.
  

Where the form is furnished by using bar coded paper return then the tax payers need to print two copies of Form ITR-V. Both copies should be verified and submitted. The receiving official shall return one copy after affixing the stamp and seal.

Filling out acknowledgement:
Where the return is furnished in paper format, acknowledgement slip attached with the return should be duly filled in. The new forms are not required to be filed in duplicate.

Intimation of processing under section 143(1):
The acknowledgement of the return is deemed to be the intimation of processing under section 143(1). No separate intimation will be sent to the taxpayer unless there is a demand or refund.

Furnishing details of high value transactions:
In the return the details of high value transactions need to be compulsorily stated, which are ordinarily reported through the annual information return (AIR) and these details are cross checked and matched with the data in the AIR.

Filing your return through Tax Return Preparers (TRPs):
If you are an individual or an HUF assessee and you are not required to get your accounts audited (called ‘eligible person’) under the provisions of the Income Tax Act, then you can use the services of a Tax Return Preparer (TRP). However, if the ‘eligible person’ is not a resident in India during the previous year relevant to such assessment year, he can not avail of the services of a TRP.

If you are filing your returns through a TRP then you should ensure that:

1. You are eligible to file return of Income under this Scheme;
2. You give your consent to any Tax Return Preparer to prepare your return of income for any assessment year;
3. You verify that the facts mentioned in the return are true and correct before you sign the return;
4. You certify the amount which has been paid by you under this Scheme to the Tax Return Preparer for preparing and furnishing of the return of income; and
5. You take a receipt of the payment made to the Tax Return Preparer and produce the same before the Resource Centre or Assessing Officer, if required,
   

Incentive to Tax Return Preparers:
The Tax Return Preparer shall charge a fee of two hundred and fifty rupees for any assessment year from the eligible person for preparing and furnishing his return of income for that assessment year:

Provided that he will charge no fees for preparing and furnishing the return for any eligible assessment year if the amount disbursable to him as per the scheme notified by the government for that eligible assessment year exceeds two hundred and fifty rupees. If the amount disbursable is less than two hundred and fifty rupees, we can charge the difference between rupees two hundred fifty and the amount disbursable.

Verification:
The verification must be signed by the authorized person before furnishing the return and the name and designation of the person signing the return should also be written. Any person making false statement is liable to be prosecuted under section 277 of the Act.

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Tips to become an investing expert!

All life insurance companies in India have term plans in their bouquet of offerings. The rates are also quite competitive. So it really does not matter which company you take the cover from (IRDA has done a pretty good job at regulating the insurance companies – all of them are safe). Based on your comfort level with the sales person and the previous experience with the company, you may choose to take your term plan.

Have we all met our favorite life insurance agent selling to us insurance plans for our children, for our retirement, for our parents, for our house and so on and so forth? Oh Yes, of course. Have any of the agents suggested a plan called as a term plan to you? If your answer is NO, its time you looked for somebody else for your insurance requirements.

What is it? And…

Why is the term plan so important? Because, it is the most basic of all plans. Term plans are products which are plain vanilla (no frills/bread) that give us very high life covers for very low premiums. But term plans do not give any thing back at the end of the term (life cover period) if you outlive it. Agents / sales persons de-sell these plans using this feature to tempt us to high premium plans that do give us something back. However, term plans are able to give us high covers exactly because of this feature.

Most of the other insurance plans are built around the Term Plans or have the term plans as a part of them. As the features get added, the premium also increases. But many times the premium increase is very steep as the commission (to the agent) and company charges increase as a percentage of the premium. This increases the premium rapidly in value terms. Let me explain with an example: 10% on Rs.100/- is Rs.10 which most of us could afford. The same 10% on Rs.20,000/- is Rs.2,000/- which is a big amount for most of us.

Insurance Buying Scenarios

Since most of the agents / sales persons are taught to sell the cream (not the bread), we end up among any of the 3 following scenarios:

Take an insurance plan that we need but at premiums that we could not afford
Take a plan that we do not really need
Do not take any plan; effectively postponing a need.

The fourth possible scenario is to ask the sales person for a term plan.

Premium Amount Comparison

Let us compare term plans with one other product which also does not give anything back at the end of the term – Vehicle Insurance. Though the basic features and coverage are different, I have found that the perspective got from the comparison is an eye opener for my clients and my training participants.

The two wheeler full cover (third party + owner accident cover for Rs.1,00,000/-) insurance premium for a vehicle with Rs.35,000/- vehicle value will come to about Rs.900/- per year.

A four wheeler full cover insurance premium for a vehicle with over 1500 CC engine capacity and current value of Rs.10,00,000/- (Rs. Ten Lakhs) will cost about Rs.28,000/- per year. (Less than 1500CC engine capacity will set us back by about Rs.25,000/- per year.)

Compare that with the premium for a life cover of Rs.10,00,000 (Rupees Ten Lakhs only) for a 35 year old male. The premium here will come to only about Rs.4,300/- per year.

Perspective Compared to Vehicle Insurance

See the difference in rates? I do take up insurance for my vehicle because it is mandatory and the traffic police man at the next corner may charge me for not having one. And anyway I don’t get the premium back, unless there is an accident.

But for my own life, I don’t take up a term plan (which costs only 17% that of my vehicle) because the plan does not give anything back?????? Common sense, where art thou? Do we love our car and bikes more than our family members??? Or is it that we are so used to the police man at the next corner that we have forgotten to think?

Jai Ho Term Plans

All life insurance companies in India have term plans in their bouquet of offerings. The rates are also quite competitive. So it really does not matter which company you take the cover from (IRDA has done a pretty good job at regulating the insurance companies – all of them are safe). Based on your comfort level with the sales person and the previous experience with the company, you may choose to take your term plan.

There is no monetary value for peace of mind. For everything else do take a term insurance cover.

Source: www.bankbazaar.com

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