Save Tax - Saving Schemes to Save Income Tax in the Financial Year 2014-15 (Assessment Year 2015-16)

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	NIL
ii)	Income From 2.5 Lakh to 5 Lakh	10% on income over Rs. 2.5 Lakh
iii)	Income from 5 Lakh to 10 Lakh	Rs. 25,000/- plus 20% on above income 5 lakh
iv)	Income above 10 lakh	Rs. 1 lakh 25 thousand plus 30% on income above 10 lakh
v)	Surcharge will be applicable @ 10% when total taxable income is over 1 crore
vi)	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	Rs. 20,000/- plus 20% on above income 5 lakh
iv)	Income above 10 lakh	Rs. 1 lakh 20 thousand plus 30% on income above 10 lakh
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
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. 

Save Income Tax by 7 Ways for Salaried Employees (Financial Year 2014-15)

Friends,

At the end of every financial year, many tax payers frantically make investments to minimize taxes, without adequate knowledge of the various available options. The Income Tax Act offers many more incentives and allowances, apart from the popular 80C, which could reduce tax liability substantially for the salaried individuals. Here are seven smart tips to help you save more and reduce taxes. 

1. Salary Restructuring 

Restructuring your salary may not always be possible. But if your company permits, or if you are on good terms with your HR department, restructuring a few components could reduce your tax liability. 

• Opt for food coupons instead of lunch allowances, as they are exempt from tax up to Rs. 50 per meal 
• Include medical allowance, transport allowance, education allowance, uniform expenses (if any), and telephone expenses as part of salary. Produce bills of actual expenses incurred for these allowances to reduce tax 
• Opt for the company car instead of using your own car, to reduce high prerequisite taxation. 

2. Utilizing Section 80C 

Section 80C offers a maximum deduction of up to Rs. 1,00,000. Utilize this section to the fullest by investing in any of the available investment options. A few of the options are as follows: 

• Public Provident Fund 
• Life Insurance Premium 
• National Savings Certificate 
• Equity Linked Savings Scheme, 5 year fixed deposits with banks and post office
• Tuition fees paid for children's education, up to a maximum of 2 children 

3. Options beyond 80C 

If you have exhausted your limit of Rs. 1,00,000 under section 80C, here are a few more options: 

• Section 80D - Deduction of Rs. 15,000 for medical insurance of self, spouse and dependent children and Rs. 20,000 for medical insurance of parents above 65 years 
• Section 80G- Donations to specified funds or charitable institutions. 

4. House Rent Allowance 

Are you paying rent, yet not receiving any HRA from your company? The least of the following could be claimed under Section 80GG: 

• 25 per cent of the total income or 
• Rs. 2,000 per month or 
• Excess of rent paid over 10 per cent of total income This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform office duties. 

If HRA forms part of your salary, then the minimum of the following three is available as exemption: 

• The actual HRA received from your employer 
• The actual rent paid by you for the house, minus 10 per cent of your salary (this includes basic dearness allowance, if any) 
• 50 per cent of your basic salary (for a metro) or 40 per cent of your basic salary (for non-metro).  

5. Tax Saving from Home Loans 

Use your home loan efficiently to save more tax. The principal component  of your loan, is included under Section 80C, offering a deduction up to Rs. 1,00,000. The interest portion offers a deduction up to Rs. 1,50,000 separately under Section 24. 

6. Leave Travel Allowance 

Use your Leave Travel Allowance for your holidays, which is available twice in a block of four years. In case you have been unable to claim the benefit in a particular four- year block, you could now carry forward one journey to the succeeding block and claim it in the first calendar year of that block. Thus, you may be eligible for three exemptions in that block. 

7. Tax on Bonus 

A bonus from your employer is fully taxable in the year in which you receive it. However request your employer for the following: 

• If you anticipate tax rates to be reduced or slabs to be modified in the subsequent year, see if you could push the bonus payment to the subsequent year 
• Produce your tax investment details well before, to prevent your employer from deducting tax on bonus before handing it over.

NO INCOME TAX RETURN UP TO 5 LAKH SALARY NOTIFICATION

AN INDIVIDUAL HAVING INCOME NOT EXCEEDING RS. 5 LACS FROM SALARIES/OTHER SOURCES FOR A.Y. 2011-12 IS NOT REQUIRED TO FILE RETURN U/S 139(1)

NOTIFICATION NO. 36/2011 [F. NO. 142/09/2011 (TPL)], DATED 23-6-2011

In exercise of the powers conferred by sub-section (1C) of section 139 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby exempts the following class of persons, subject to the conditions specified hereinafter, from the requirement of furnishing a return of income under sub-section (1) of section 139 for the assessment year 2011-12, namely :—
Class of Persons
1. An Individual whose total income for the relevant assessment year does not exceed five lakh rupees and consists of only income chargeable to income-tax under the following head,—
(A) "Salaries";
(B) "Income from other sources", by way of interest from a savings account in a bank, not exceeding ten thousand rupees.
Conditions
2. The individual referred to in para 1,—
(i) has reported to his employer his Permanent Account Number (PAN);
(ii) has reported to his employer, the incomes mentioned in sub-para (B) of para 1 and the employer has deducted the tax thereon;
(iii) has received a certificate of tax deduction in Form 16 from his employer which mentions the PAN, details of income and the tax deducted at source and deposited to the credit of the Central Government;
(iv) has discharged his total tax liability for the assessment year through tax deduction at source and its deposit by the employer to the Central Government;
(v) has no claim of refund of taxes due to him for the income of the assessment year; and
(vi) has received salary from only one employer for the assessment year.
3. The exemption from the requirement of furnishing a return of income-tax shall not be available where a notice under section 142(1) or section 148 or section 153A or section 153C of the Income-tax Act has been issued for filing a return of income for the relevant assessment year.
4. This notification shall come into force from the date of its publication in the Official Gazette.
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Press Release
Salaried Taxpayers with total Income up to Rs.5 lakh Exempted from filing Income Tax Return for Assessment Year 2011-12
The Central Board of Direct Taxes has notified the scheme exempting salaried taxpayers with total income up to Rs.5 lakh from filing income tax return for assessment year 2011-12, which will be due on July 31, 2011.

Individuals having total income up to Rs.5,00,000 for FY 2010-11, after allowable deductions, consisting of salary from a single employer and interest income from deposits in a saving bank account up to Rs.10,000 are not required to file their income tax return. Such individuals must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form No.16.

Persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims shall not be covered under the scheme.
The scheme shall also not be applicable in cases wherein notices are issued for filing the income tax return under section 142(1) or section 148 or section 153A or section 153C of the Income Tax Act 1961.

If you still want to file your return then CLICK HERE to Download forms.

Best Options of Investment for Lump sum Investors

Friends,

You just got that BIG bonus you deserve but plucked up the courage not to treat yourself that 150 inch plasma television and save for a rainy day. You already have some systematic investment plans that you are steadily investing into, if not start now.  Now, let's look at options to park that big chunk of money you got.

1. Pay off a debt

Make a list of all of your debts and their interest rates. This includes housing loans, credit cards and student loans. If the interest on the debt is high you should pay off this debt before investing the money.

2. Park your funds into a fixed deposit

A person can invest an amount for a fixed duration. The banks provide interest rates depending on this loan amount and the tenure of deposit. Pick a bank that offers the highest interest rate and invest your lump sum.

3. Invest in the stock market

Indian private equities promise satisfactory returns and have more than 365 equity investments firms functioning under it.  Investing in the share market yields higher profits. Influenced by unanticipated turn of market events, stock market to some extent cannot be considered as the safest investment options. Do, remember that even old experienced hands have lost out on massive sums of money with one miscalculation, so tread carefully.

4. Invest in Mutual Funds

A mutual fund company pools the money of many investors and invests it for them in a collection of securities by purchasing stocks, bonds, money markets and/or other securities. Mutual funds are subject to market risks so be prepared in case you find your NAV lower than the sum invested. Conduct a thorough research on the best mutual fund and select a well balanced fund (in case you are risk averse) before you invest. The advantage you have when investing in a mutual fund is that an expert makes the investments for you.

5. A good down payment for real estate

Everyone should think of their home as an investment and if you have a sizeable enough chunk to make a down payment for a house. This is probably the largest and best asset to look at. Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle.  There are, of course, blemishes on the face of what seems like an ideal investment. When you invest in real estate, money is made or lost behind the scenes, not when the final deal is made.

6. Invest in government securities

These are government debt obligation backed by the credit and taxing power of a country with very little risk of default. This includes short-term Treasury bills, medium-term Treasury notes, and long-term Treasury bonds. Government securities are one of the safest in the market. G-secs can be bought either in the primary market (through RBI auctions) or from the secondary market. G-secs are available for tenure of three months (counting T-bills) to 30 years.

7. Investments in National Saving Certificate (NSC)

National Savings Certificate is a post-office savings scheme, backed by the government. The minimum amount of investment is Rs 100, with no upper cap. NSCs are sold in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. The rate of interest is 8 percent per annum compounded half yearly. The amount invested in NSCs is eligible for tax deductions under Section 80C; however, the interest you earn would be taxable.

8. Investments in Public Provident Fund (PPF)

PPF is a government-guaranteed fixed income security. It provides regular savings by ensuring that contributions (which can vary from Rs.500 to Rs.70,000 per year) are made every year. An interest rate of 8% p.a. (compounded annually) is credited to the PPF account at the end of each financial year. The account matures in 15 years from the date of initial investment. One can then exercise an option of continuing the account for an additional block of 5 years or closing it.