Monday, January 5, 2009
Infrastructure Bonds
Wednesday, December 31, 2008
Happy New Year
Thursday, December 25, 2008
Ways to Reduce Your Taxes
Section 80C : Deduction in respect of Life Insurance Premium, Contribution to PF/EPF/PPF, NSC Bonds, Fixed Deposits etc click here to know more.
Section 80E : Deduction in Respect of repayment of loan taken for higher education.
Section 80D : DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIUM.
Section 10(10D) : Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy. For more details click here.
INSERT (AY 2008-09) Coir Board included in Section 10(29A) and exempted from income tax. |
Other than these you can clime the tax savings on your interest payed to wards your home loan upto 1.5lakh, Initial stages the amount paying towards contains majority part of the interest so you can clime that amount also for tax savings, but only the problem with this is once you own a house you HR may not come under tax benefit option.
Sunday, December 21, 2008
Section 80C save your tax
- Deduction in respect of Life Insurance Premium, Contribution to Provident Fund, etc.
- Rs 1 lakh can be invested under this section without any individual sub-limits except in the case of Rs 10,000 in pension funds.
- Sections 88, 80L, 80CCC and 80CCD is clubbed in.
It is proposed to insert clause (xxi) in sub-section (2) of this section in order to provide that the investment in a term deposit for a fixed period of not less than five years with any scheduled bank shall be eligible for a deduction under this section.
- Fixed Deposits
- Life Insurance (Term, Endowment, Unit Linked Plans)
- Mutual Funds - ELSS,
- NSC Bonds
- PF/EPF/PPF
- Post Office Time Deposit Account
- 88 (Rebate on Life Insurance Premia, Contribution to Provident Fund, etc.)
- 80L (Deductions in respect to Interest on certain Securities, Dividends, etc.)
- Note : Rebate of Rs 5,000 for women and Rs 20,000 for senior citizens have been wiped off.
Tuesday, September 23, 2008
National Savings Certificates (NSC)
Hear are few points regarding National Savings Certificates (NSC) which you can use for your TAX PLANNING.
* Scheme specially designed for Government employees, Businessmen and other salaried classes who are IT assesses.
* No maximum limit for investment.
* No tax deduction at source. (Interest on NSC is taxable)
* Certificates can be kept as collateral security to get loan from banks.
* Investment up to Rs. 1,00,000/- per annum qualifies for IT Rebate under section 80C of IT Act.
* Trust and HUF cannot invest.
* PPF – A good way of saving for your old age.
* Buy National Savings Certificates (NSC) & Kisan Vikas Patras (KVP) every month for six years – Reinvest on maturity and relax - On retirement it will fetch you monthly pension as the NSC/KVP matures.
National Savings Certificate Act
How to calculate tax
There are so many confusion about the calculation of tax in this new financial year, please find the details below which will help you in calculation of your tax.
Let us take a case where the assessee's income is Rs. 5,10,000. (For men)
Case 1: Men
* According to the Income Tax Slab, the first 1,50,000 is not taxable.
* The next Rs. 1,50,000 is taxable @10%.
* 10% of Rs. 1,50,000 is Rs. 15,000.
* The next Rs. 2,00,000 is taxable @20%.
* 20% of Rs. 2,00,000 is Rs. 40,000.
* Rest of the amount is taxable @30%.
* The remaining Rs. 10,000 i.e. 5,10,000 - (1,50,000+1,50,000+2,00,000) is taxable @30%.
* 30% of Rs. 10,000 is Rs. 3,000.
* Therefore, the net Income Tax Payable is Rs. 15,000 + Rs. 40,000 + Rs.3000 i.e. Rs. 58,000.
Case 2: Women
* According to the Income Tax Slab, the first 1,80,000 is not taxable.
* The next Rs. 1,20,000 is taxable @10%.
* 10% of Rs. 1,20,000 is Rs. 12,000.
* The next Rs. 2,00,000 is taxable @20%.
* 20% of Rs. 2,00,000 is Rs. 40,000.
* Rest of the amount is taxable @30%.
* The remaining Rs. 10,000 i.e. 5,10,000 - (1,80,000+1,20,000+2,00,00) is taxable @30%.
* 30% of Rs. 10,000 is Rs. 3,000.
* Therefore, the net Income Tax Payable is Rs. 12,000 + Rs. 40,000 + Rs. 3000 i.e. Rs. 55,000.
* According to the Income Tax Slab, the first 2,25,000 is not taxable.
* The next Rs. 75,000 is taxable @10%
* 10% of Rs. 75,000 is Rs. 7,500
* The next Rs. 2,00,000 is taxable @20%.
* 20% of Rs. 2,00,000 is Rs. 40,000.
* Rest of the amount is taxable @30%.
* The next Rs. 10,000 i.e. 3,90,000 - (2,25,000+75,000+2,00,000) is taxable @30%
* 30% of Rs. 10,000 is Rs. 3,000.
* Therefore, the net Income Tax Payable is Rs. 7,500 + Rs. 40,000 + Rs. 3,000 i.e. Rs. 50,500
(If the assess claims any rebate/ exemption, the claimed amount will be deducted from his income with reference to the law of Income Tax Act before calculating the tax.)
Note:
* Surcharge @ 10% applicable if total income exceeds Rs. 8.5 lakh for A.Y. 2005-06 and Rs. 10 lakh for A.Y. 2006-07.
* There is a new section 80C according to which a person can get rebate upto Rs. 1,00,000 against insurance premium, PF contributions and other such schemes.
* In case of higher education there is a deduction in tax for a maximum period of 8 years.
* Marginal relief would be provided to ensure that the additional income tax payable including surcharge, on the excess of income over Rs. 10,00,000 (Rs. 8.5 lakh for A.Y. 2005-06) is limited to the amount by which the income is more than Rs. 10 lakh (Rs. 8.5 lakh for A.Y. 2005-06).
* Education cess @ 2% on tax plus surcharge.
Sunday, March 30, 2008
Early tax planning why?
Why plan early
There are several merits to having your tax planning in place early. Here are some benefits:
Hidden tax planning you do throughout the year
You may not realize it but you are already doing your tax planning throughout the year. Though you may not be investing in tax-saving instruments, there are several expenses that are deductible and often go unnoticed in our calculations for tax planning. Here are some common expenses that can be used as tax-planning tools:
#
Being charitable helps you too. Money donated to tax-approved charitable institutions is deductible to the extent of 50%, subject to conditions. Deduction of 100% is available in the case of payment to certain specified funds like Prime Minister’s National Relief Fund.
#
Repayments of your home loan EMIs give you tax relief. As per the provisions contained in Section 24 of the Income Tax Act, 1961, a deduction equal to Rs 1,50,000 is permissible for every individual in respect of interest on loan for residential self-occupied house property. This interest on loan is allowed as a deduction irrespective of the person from whom you take the loan. Hence, even if you have taken a loan not from a banker but from a relative or your spouse, the interest payable on the loan would be eligible for tax rebate. The maximum amount of deduction as per Section 24 in respect of interest on loan for residential house property is Rs 1,50,000 per year.
#
Parents can claim a deduction for tuition fees for a maximum of two children within the overall limit of Rs 1 lakh.
#
Compulsory payments you may be making if you are salaried. They may be deduction towards PPF or EPF, payments in a pension plan and insurance those are directly paid from your salary. These payments can be used in your tax-saving calculations too.
The best tax saving instruments
After taking into account these hidden gems, if you have any deduction amount left then there is a vast choice of investments that the finance minister has laid down for you. Here is how to make the choice.
If you are below 30
Your tax investment should revolve round ULIP or ELSS mainly. It can be as high as 50%. Some part of it should be allocated to term insurance(which covers more insurance) and health insurance. You can also invest a part in retirement plans for retirement planning.
If you are between 30-45
Your insurance cover should increase with your responsibilities at least 25% of your tax-saving money should go to insurance. So, a higher amount needs to be allocated to life as well as health insurance. You need to maintain or increase your retirement planning with retirement planning. Simultaneously your exposure to mutual funds should not be more than 35%.
If you are between 45-60
If you fall in this age group then your focus should be in retirement products and Annuity. 50% of the amount can go towards this. Your ELSS must be at its lowest and you must maintain your life and health insurance cover.
If you are retired
Choose safe products that can be easily accessed. Fixed deposits fit the bill perfectly. You are likely to move to a lower tax bracket now so you can invest with greater ease.
Do remember that you have a long time ahead waiting for you upto 31st March, 2009 to make your investment in tax-saving instruments but surely it makes better sense to invest now, relax and save tax right now. You can also opt for making the investment not at one go but in installments.
If you have some small money available right now you may better invest now the money in tax saving instrument and as and when you have balance money available at your disposal then make investment at a later date but surely before 31st March, 2009.