Showing posts with label Income tax act. Show all posts
Showing posts with label Income tax act. Show all posts

Wednesday, July 2, 2014

Tax Savings Options

Income tax returns: 9 tax saving options other than Section 80C-NDTV


Before you calculate your tax liabilities, remember to analyze the various sections of tax deductions under the Income Tax Act as tax planning does not end with Section 80C. 
80D:
Tax deduction under section 80D qualifies for mediclaim policies. The premium, which is paid for medical insurance policy for self and family members to protect them from sudden medical expenses, comes under this section. The maximum amount allowed for exemption annually for self, spouse and dependent parents/children is Rs. 15,000. In case of a senior citizen, the maximum amount extends up to Rs. 20,000. If you are paying the premium for your parents (whether dependent or not), you can claim an additional maximum deduction of Rs. 15,000.
80DD:
According to the Income Tax Act, if you are paying a premium to LIC or any other insurance company (approved by the Income Tax board) for the medical treatment of a dependent physically disabled person, you can avail exemption under the section 80DD. Here, the dependent should be none other than your spouse, children, parents or sibling. If the person is suffering from 40 per cent of any disability, a fixed sum of Rs. 50,000 can be claimed in a year. Similarly, if the disability is 80 per cent, the fixed sum goes up to Rs. 1,00,000 per year. For initiating the process of deduction you need to submit the medical certificate issued by a medical authority along with the return of income.
80DDB:
If you have incurred expenses for the medical treatment of self or your dependents, you can claim a deduction of up to Rs. 40,000 or the actual amount paid, whichever is less, under the section 80DDB. For a senior citizen, the maximum exempted amount is Rs. 60,000, or the amount actually paid for medical expenses. To claim a deduction under this section, you need to submit a medical certificate from a doctor working in a government hospital.
80E:
The interest paid on loan taken for pursuing higher education of self or any dependent is exempted from tax under section 80E. An education loan can be taken for wife, children and minors for whom you are the legal guardian. This deduction is applicable for a period of eight years or till the interest is paid, whichever is earlier. The deduction is only approved for higher studies, which means full-time graduate or postgraduate courses in engineering, management or applied sciences, pure sciences including mathematics or statistics. However, from 2011 onwards, the scope of this exemption has been extended to cover all fields of studies including vocational studies pursued after completing the senior secondary examination or equivalent. No exemption is applicable for part-time courses.
80G:
One often donates on philanthropic grounds to help the destitute. Such an amount can be donated to trusts, charitable institutions and approved educational institutions, and qualifies for deduction under Section 80G. The exemptions can be up to 50 per cent or 100 per cent of the donations made. Funds in which the donations are eligible for tax exemptions include the National Defence Fund, Prime Minister Drought Relief Fund, National Foundation for Communal Harmony, National Children's Fund, Prime Minister's National Relief Fund, etc.
80GG:
If a salaried or self-employed person staying in a rented house does not receive any kind of HRA, they can claim a deduction under this section. However, you cannot avail any such benefit if you, your spouse and/or your child owns any residential accommodation in India or abroad. You can claim the least of the following under Section 80GG: 25 per cent of the total income, or Rs. 2000 per month, or excess of rent paid over 10 per cent of total income.
80GGC:
Any monetary contribution to any political party or electoral trust is eligible for tax exemption. Thus, your contribution, as a matter of appreciation for their work, will serve both the purposes.
80U:
A resident of India suffering from any kind of specified disability is eligible to claim tax deduction under this section. In order to enjoy this opportunity, one should be suffering from not less than 40 per cent of the following diseases: blindness, low vision, mental illness, mental retardation, hearing impairment. The deduction provided is flat Rs. 50,000, irrespective of the expense incurred. If the disability is severe, the deduction can be up to Rs. 1 lakh. One needs to provide a copy of all the certificates issued by a medical authority in order to avail this benefit.
80CCG:
The Finance Act 2012 introduced a new Section 80CCG to offer 50 per cent tax break to new investors who invest up to Rs. 50,000 and whose GTI is less than or equal to Rs. 10 lakh. It has been introduced for budding investors entering the equity markets for the first time and is a once-in-a-lifetime benefit.
Hence, there are several sections apart from 80C that can help an individual benefit from tax exemptions. It is time to start looking beyond 80C for tax savings.


TAX REBATE & RELIEF
The total income of an assessee is determined after deductions from the gross total income are made as discussed in the previous chapter. It is on this total income that the tax payable is computed at the rates in force. The Income Tax Act further provides for rebate from the tax payable as computed above, if certain investments or payments are made. Rebates provided u/s 88 of the Act must be distinguished from deductions provided in Chapter VIA of the Act. While the latter reduces the gross total income, rebate is a reduction from the tax payable.
  • Rebate u/s 88 is available @ 20% on certain investments. For  author, playwright,   artist, musician, actor, sportsman, a higher rate of 25% is available.
  • The  maximum  amount of investment  qualifying for rebate u/s 88 is Rs. 60,000. However, additional rebate on investment upto Rs. 20,000 is available in respect of subscription to specified infrastructural equity shares/ debentures.
  • Further, the Finance Act, 2001 has provided that an individual whose income under the head 'Salaries' is below   Rs.1  lakh   during  the previous year  and constitutes atleast 90% of his gross total income, shall be   entitled   to   rebate   @   30%   on   the   investments/ payments specified u/s 88.
  • Section 88B: An assessee, being an individual resident in India, who is of the age of 65 years or more at any time during the previous year shall be entitled to a deduction from the amount of income tax (as computed before allowing the deductions under this Chapter VIII) on his total income, of an amount equal to 100% of such income tax or an amount of fifteen thousand rupees, whichever is less.
  • Investment qualifying for rebate u/s 88 must be out of income chargeable to tax in the relevant previous year.
  • With effect from assessment year 2001-02 onwards a new section 88C has been inserted. It provides that in case of an assessee being a woman resident in India and below 65 years of age, tax rebate of an amount of Rs. 5,000 or 100% of tax, whichever is less, shall be available. The above rebate is to be allowed from the amount of income tax computed before allowing for tax rebate u/s 88 as discussed below :
    • The Drawing and Disbursing Officer should satisfy himself about the actual deposits / subscriptions / payments made by the employees, by calling for such particulars / information as they deem necessary before allowing the aforesaid rebate. In case the DDO is not satisfied about the genuineness of the employee's claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith to the satisfaction of the assessing officer.
The details of investments qualifying for rebate are being given below :-
NATURE OF INVESTMENT
REMARKS
Life insurance PremiumFor individual, policy must be in self or spouse's or any child's name.
Sum paid under contract for a deferred annuityFor individual, on life of self,spouse or any child.
Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self/spouse or childPayment limited to 20% of salary,
Contribution made under Employees' Provident Fund Scheme.
-
Contribution to PPFFor individual, it can be in the name of self/spouse, any child and for HUF, it can be in the name of any member of the family.
Contribution by employee to a Recognised Provident Fund.-
Sum deposited in 10 year/15 year account of Post Office Saving Bank.-
Subscription to any notified securities/notified deposits scheme
e.g. NSS
Subscription to any notified savings certificates. Unit Linked Savings certificatese.g., NSC VIII & NSC VI issue accrued interest on these issues is deemed investment and also qualifies for rebate.
Contribution to Unit Linked Insurance Plan of UTI.
Contribution to Unit Linked Insurance Plan of LIC Mutual Funde.g., Dhanraksha 1989.
Contribution to notified deposit scheme/pension fund Schemee.g., pension fund setup by mutual set up by the National Housing fund notified u/s 10(23D), pension fund set up by UTI or of National Housing Bank.
Certain payments made by way of instalment or part payment of loan taken for purchase/ construction of residential house property The income from which is chargeable to tax under the head income from House propertyQualifying amount limited to Rs. 20,000. Repayment of loan should be towards self finance scheme of development authority housing board etc or towards loan borrowed from Govt, any Bank. LIC, National Housing Bank or loan from the employer which a public sector company university local authority etc.
Contribution to notified annuity Plan of LIC (e.g. Jeevan Dhara) or units of UTI/notified Mutual Fund.If in respect of such contribution, deduction u/s 80CCC, has been availed of, rebate u/s 88 would then not be allowable.
Subscription to units of a Mutual Fund notified u/s 10(23D).
Subscription to deposit scheme of a Public Sector Company/ Authorised Authority providing long term house financing
Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made by a public company or public financial institutionsIn respect of it, a higher limit of qualifying investment of Rs. 70,000 (Rs. 80,000 w.e.f., A.Y. 2001-2002) is available as against Rs. 60,000 in case of other investments.


7.2 RELIEF UNDER SECTIOIN 89(1)
Relief u/s 89(1) is available to an employee when he receives salary in advance or in arrear or when in one financial year, he receives salary of more than 12 months, or receives 'profit in lieu of salary' covered u/s 17(3). W.e.f. 1.6.89 89(1) relief can be granted at the time of TDS by employers in the following conditions :
(1)If the employee is a Government Servant.
(2)He is employee in a 
(a)PSU,
(b)Company,
(c)Co-operative  Society,  
(d)Local Authority,
(e)University,
(f)Institution or Body.

The employee may furnish to the DDO or the person responsible for making payment such particulars in Form 10E (read with Rule 21 AA) which should be duly verified by him. Thereupon the DDO/Person responsible for making payment is required to compute the relief u/s 89(1) on the basis of such particulars and take into account this relief while making tax deduction u/s 192. In case of an employee of category other than the stated above, such relief can only be allowed by the Assessing Officer.


Highlights of Income Tax amendment announced In Budget March 2013 which are applicable for Financial Year 2013-14 and Assessment Year 2014-15
Click Here to read details of changes for Assessment Year 2014-15

Income Tax Relief In Budget

Little tax relief on the cards-Business Standard

Finance Minister Arun Jaitley may not raise I­T exemption limit to Rs 5 lakh
 
When Finance Minister Arun Jaitley turns to part-B of his Budget speech on July 10, the common man may be left disappointed. Taxpayers expecting the income tax exemption limit will be raised to Rs 5 lakh or the deduction limit to Rs 2 lakh might have to settle for a marginal adjustment in the slabs.

While reports have said ahead of Assembly elections in a few states, the government wants to give some tax relief to individuals, the disposable incomes of whom have been depleted by the high
inflation, the trade-off between this and keeping the government's fiscal deficit low will be difficult.

Even if the tax exemption limit is increased to Rs 3 lakh, the loss to the exchequer will be Rs 30,000 crore. Similarly, if the deduction limit under section 80C of the
Income Tax Act is doubled to Rs 2 lakh, there will be an additional loss of about Rs 30,000 crore.

Tax experts say the government might not increase both the limits substantially, though a total increase of at least Rs 1 lakh crore is needed, as persistently high inflation had eroded household savings. "The government should give some benefit to people; there might be other ways to offset the revenue loss by cutting subsidies, higher disinvestment or improving compliance. If it is raised to Rs 3 lakh, it is a nominal increase," said Divya Baweja, senior director, Deloitte.

Vikas Vasal, partner, KPMG, said either the exemption limit or deduction limit should be raised. He added the latter would serve the dual purposes of providing relief to taxpayers and giving a push to the infrastructure sector. Currently, the government allows tax-free investment up to Rs 20,000 in infra bonds.

Besides infrastructure, the government might also consider increasing the limit for health insurance. Currently, deduction is allowed for health insurance premium up to Rs 15,000 for self, and an equal amount for dependent parents. While the government will aim to give tax relief to the inflation­struck small taxpayer, an across-the-board increase in the exemption limit will benefit all taxpayers.

As such, the
finance ministry

could replicate a step taken in last year's Budget, when the government had proposed to provide a tax credit of Rs 2,000 to every person with a total income of up to Rs 5 lakh, benefiting 18 million taxpayers. The exchequer, however, took a hit of about Rs 3,600 crore.

If tax slabs are adjusted according to the recommendations of a standing committee - Rs 3­10 lakh (10 per cent tax), Rs 10­20 lakh (20 per cent), and Rs 20 lakh or more (30 per cent) -, the government will take a hit of Rs 60,000 crore. This recommendation was turned down by the finance ministry under the previous regime. A concern is the move will further erode the already-low (about 33 million) tax base. If the slab is raised to Rs 3 lakh, 87 per cent taxpayers will escape the tax net, against the current 72 per cent (with annual income of up to Rs 2 lakh).

"Given the high inflation, the tax exemption limit should go up by Rs 1 lakh. I recognise the fact that a huge number of taxpayers will go out of tax net, but they don't contribute much to the total tax collections," said Amarpal Chadha, partner, EY.
The tax collected from the Rs 2­10 lakh income bracket is about Rs 21,094 crore (from about 27 million taxpayers), while that collected from about 335,000 taxpayers in the Rs 10­20 lakh income group is Rs 10,185 crore. About 185,000 taxpayers in the income group of more than Rs 20 lakh contribute Rs 53,170 crore.

What worries the finance ministry more than a section of taxpayers going out of the tax net is the fact that it won't get a lot of information that comes with returns. And, if the ministry makes it mandatory for everyone to file returns, there won't be a fall in administrative costs.

To cut the government's administration costs and focus on higher income-group taxpayers, a parliamentary standing committee headed by Bharatiya Janata Party leader Yashwant Sinha had suggested four slabs. It had also proposed the deduction limit for investment in long-term savings be increased from Rs 1 lakh to Rs 1.5 lakh, while the deduction limit towards life insurance premium, health insurance premium and tuition fee be increased to Rs 1 lakh. Currently, deduction is allowed for health insurance premium up to Rs 15,000 for self and Rs 20,000 for dependent parents.