Friends,
The Financial Year 2014-15 is going on and have almost reached to its end. This is the proper time to calculate your Tax Liability for this financial year and plan " How to Save Tax". There are lots of schemes to save tax. Here we will discuss all about the schemes. But before that one have to calculate its tax liability and accordingly make planning to save tax by making investment. The tax calculations can be made on the basis of Tax Calculation Table given below:
Income Tax Slab Rates (Financial Year 2014-15)
Income
|
Tax Rates
| |
i)
|
Income up to 2.5 lakh
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NIL
|
ii)
|
Income From 2.5 Lakh to 5 Lakh
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10% on income over Rs. 2.5 Lakh
|
iii)
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Income from 5 Lakh to 10 Lakh
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Rs. 25,000/- plus 20% on above income 5 lakh
|
iv)
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Income above 10 lakh
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Rs. 1 lakh 25 thousand plus 30% on income above 10 lakh
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v)
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Surcharge will be applicable @ 10% when total taxable income is over 1 crore
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vi)
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3% Education Cess, Secondary & Higher Education Cess will be applicable on income tax & surcharge
| |
Income Tax Slabs for Individuals for 60 years or above but below 80 years A.Y.2015-16
Income
|
Tax Rates
| |
i)
|
Income up to 3 lakh
|
NIL
|
ii)
|
Income From 3 Lakh to 5 Lakh
|
10% on income over Rs. 3 Lakh
|
iii)
|
Income from 5 Lakh to 10 Lakh
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Rs. 20,000/- plus 20% on above income 5 lakh
|
iv)
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Income above 10 lakh
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Rs. 1 lakh 20 thousand plus 30% on income above 10 lakh
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Surcharge will be applicable @ 10% when total taxable income is over 1 crore.
| ||
3% education cess will be applicable on income tax & surcharge
| ||
Income Tax Slab for Individuals Over 80 Years A.Y.2015-16
Income
|
Tax Rates
| |
i)
|
Income up to 5 Lakh
|
NIL
|
ii)
|
Income From 5 Lakh to 10 Lakh
|
20% on income over Rs.5 Lakh
|
iii)
|
Income above 10 lakh
|
Rs. 1 lakh plus 30% on income above 10 lakh
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Surcharge will be applicable @ 10% when total taxable income is over 1 crore.
| ||
3% education cess will be applicable on income tax & surcharge
| ||
Now about the Rebates and Deductions admissible by the Income Tax Department which are as under:
HRA Exemption : The calculation of HRA Exemption will be calculated as under :
a) Actual House Rent received
b) Rent paid in excess of 1/10th of the Salary (B.P.+D.A.)
c) 40% of the Salary.
Least of the above is exempted)
Transport Allowance : Transport allowance is exempt up to Rs.800/- per month during the month. (Expenditure incurred for covering journey between office and residence.) For people having permanent physical disability, the exemption is 1,600/- per month.
Reimbursement of Medical : Reimbursement of Medical bills are exempt for self and dependent family, up to Rs.15,000/- per annum u/s(5) LTA is exempt to the tune of economy class Train/ Air /Recognised public Transport fare for the family to any destination in India, by the shortest route.
Leave Travel Allowance : LTA can be claimed twice in a block of 4 calendar years. The current block is from 01.01.2010 to 31.12.2013. For claim, it is must to provide originals tickets etc.
Interest paid for Housing Loan : U/s 24 There is an Exemption for interest on housing loan. (for Self occupied Residence). If the loan was taken before Apr 1, 1999 exemption is limited to Rs. 30,000/- per year. If the loan was taken after Apr 1, 1999 exemption is limited to Rs. 2,00,000/- per year if the house is self-occupied; There is no limit if the house is rented out.
This exemption is available on accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether you've paid it or not.. "
If you have rented out your house, enter the total income / loss from the house (after deducting property tax and standard maintenance expenses).
Section 80CCE : Maximum Exemption up to Rs. 150000/- Investments up to Rs. 1.5 lac in PF, VPF, PPF, Employee contribution in NPS,Insurance Premium, Housing loan principal repayment, NSC, ELSS, long term bank Fixed Deposit, Post Office Term Deposit, etc. are deductible from the taxable income. There is no limit on individual items, (for example) all 1 lac can be invested in NSC or PPF etc.
Section 80CCD : The Finance Act, 2011 provides that contribution made by the Central Government or any other employer to NPS (up to 10 per cent of the salary of the employee in the previous year)shall be excluded while computing the limit of Rs. 1,50,000.The contribution by the employee to the NPS will be subject to the limit of Rs. 1,00,000.
Section 80CCG : Rajiv Gandhi Equity Savings Scheme is a new exemption available for investment in stock markets (direct equity). Avaialble only for those with gross income less than 12 lacs and only for first time investors in stock market. Exemption available at 50% of investment subject to maximum of Rs.50,000/- invested. Investments are locked-in for three years
Section 80D : Medical Insurance Premium (such as Mediclaim & Critical illness Cover)& Health Check up Upto Rs. 5000, premium is exempt up to Rs. 30,000/ per year (Rs.15,000/- for self,spouse and children ) (Rs. 15000/- for Parents. If the premium includes for a dependent who is (Senior Citizen) above 60 years of age, an extra Rs. 5,000//- can be claimed.
Section 80DD : Deduction in respect of medical treatment of handicapped dependents is limited to Rs. 50,000/- per year if the disability is less than 80% and Rs. 1,00,000/- per year if the disability is more than 80%
Section 80DDB : Deduction in respect of medical treatment for specified ailments or diseases for the assesse or dependent can be claimed up to Rs. 40,000/- per year. If the person being treated is a senior citizen, the exemption can go up to Rs. 60,000/-. but any amount received under Medical Insurance Policy will be reduced from the amount of deduction allowed. The Diseases and ailments specified under rule 11DD are neurological diseases being demetia, dystonia musculorum deformans, motor neuron disease, ataxia, chorea, hemiballismus, aphasia and parkisons disease, cancer, AIDS, Chronic renal failure, hemophilia, and thalassaemia.
Section 80E : Interest repayment on education loan (taken for higher education from a university of self & dependents) is completely tax exempt
Section 80G : Donations given for certain charities are tax exempt. Some(NGO,Trust etc.) are exempt to the tune of 50%, whereas Govt funds are 100%.
Section 80GG : If you are not getting HRA, but living in rented house, an exemption is available. This will be calculated as minimum of (25% of total income or rent paid - 10% of total income or Rs. 24,000/- per year)
Section 80U : Who suffers from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 50,000/- and in case of severe disability to the extent of Rs. 100,000/-
Section 80TTA : Introduced through Finance Act, 2012. Section 80TTA provides a deduction of up to Rs. 10,000 on your income from interest on saving bank accounts.
DEDUCTION u/s. 80C and chapter VIA :
Section 80C : Of the Income Tax Act allows certain investments and expenditure to be deduct from total income. One must plan investments well and spread it out across the various instruments specified under this section to avail maximum tax benefit. There are no sub-limits and is irrespective of how much you earn and under which tax bracket you fall. Most of the Income Tax payee try to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section in total. so that one can make best use of the options available for deduction under income tax Act. One important point to note that one can not only save tax by undertaking the specified investments, but some expenditure which you normally incur can also give you the tax exemptions.
Qualifying Investments u/s 80CCE
Provident Fund (PF) & Voluntary Provident Fund (VPF) PF is automatically deducted from your salary. your contribution [12% of Basic] (i.e., employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF). Current rate of interest is 8.5% per annum (p.a.) and is tax-free.
Life Insurance Premiums: Any amount that you pay towards life insurance premium in Life Insurance Corporation (LIC) or any other Insurance CO.for yourself, your spouse or your children can also be included in Section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums will be included. also premium paid for ULIP will also be treated as Premium paid for Life Insurance Policies.
Unit linked Insurance Plan : ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with benefits of equity investments.They have attracted the attention of investors and tax-savers not only because they help us save tax but they also perform well to give decent returns in the long-term.
Important Point : Total Amount Received at Maturity, Survival Benefits, Withdrawal in Insurance Policies is Tax Free and fully exempted u/s 10(10D).
Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. Current rate of interest is 8% tax-free and the normal maturity period is 15 years. Minimum amount of contribution is Rs. 500 and maximum is Rs. 1,50,000.(New Change) from Budget 2014.
National Savings Certificate (NSC): National Savings Certificate (NSC) is a 5-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is 8.58% compounded half-yearly, i.e. If you invest Rs.100, it becomes Rs.150.90 after five years. The interest accrued every year is liable to tax (i.e. to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
House Building Loan : Home Loan Principal Repayment & Stamp Duty and Registration Charges for a home Loan The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest.The principal component of the EMI qualifies for deduction under Sec 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act. The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house.
Tuition Fees : Tuition fees for 2 children Apart form the above major investments expenses for children’s education (Only Tution Fee (for which you need receipts)), can be claimed as deductions under Sec 80C.
Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction. 5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two year, three year and five year, only 5-Yr post-office time deposit (POTD) – which currently offers 7.5 per cent rate of interest –qualifies for tax saving under section 80C. Effective rate works out to be 7.71% per annum (p.a.) as the rate of interest is compounded quarterly but paid annually. The Interest is entirely taxable.
Pension Funds or Pension Policies : Section 80CCC: This section – Sec 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs 1.5 Lakh.This also means that your investment in pension funds upto Rs.1.5 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs.1.5 Lakh.
Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.
NABARD rural bonds: There are two types of Bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C.
Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax.
