Hirannya

Category: Tax

  • Tax planning tools for Indian taxpayers

    tax planning

    Tax planning tools for Indian taxpayers

    Today, in the year 2016-17, the government has provided various schemes in the budget for taxpayers. Tax planning can be done according to the benefits and the schemes that are beneficial to save tax. Tax planning can be a good way of investing money by using the schemes provided by the government in various ways so that people can benefit from the schemes and also pay tax eagerly.

    Equity Linked Savings Scheme

    Compared to traditional tax saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC) and bank fixed deposits; the lock in period of an ELSS fund is much lower. While ELSS investment is locked in to 3 years, PPF investment are locked in for 15 years, NSC investment is locked in for 6 years, and bank fixed deposits eligible for tax deduction are locked in for 5 years. As ELSS is an investment in equity markets and investing in this for a long term can give you better returns compared to other asset classes over the long term. You can also get income from your investment amount in the lock in period if you opt for dividend schemes.

    Life insurance

    Life insurance policy is today, both popular and widely adapted tool for tax saving and also for life insurance. Various plans are available in life insurance policy as per the requirement of the individual. The government as well as private companies are participants in life insurance business. For saving taxes, the section 80C of the income tax act provides benefits like the deduction for a maximum of Rs. 1,50,000 from the total income of the person.

    Public provident fund

    The public provident fund or the PPF is another popular income tax saving scheme in the country and provides an investment that provides assured returns along with tax benefits. It is governed by PPFS and PPFA. The scheme is available to those who have their own account or has minor children. The maturity period is 15 years and can be extended up to 5 years.

    Residential housing property

    This scheme provides tax benefits of different kinds which are important. The maximum deduction allowed here is Rs. 1,50,000. It is available to individual or HUF. A tax deduction is available for repayment of the principal amount that has been borrowed in section 80C. The payment of installment due to the company or other institutions, in which the assesses is member, towards the cost of property that is allotted to him, Registration fee or stamp duty for transfer of property to the assessee. Deduction for interest on housing loan is also possible under section 24B where an amount of Rs. 30,000 is allowable for maintenance of house or the repairs.

    Sukanya Samridhi Account

    In this scheme tax deduction is an application for up to two to three girls in case of twins in the first case or second case only. Here one can get a maximum deduction of Rs. 1,50,000. The min. initial deposit is 1000 with another one hundred rupees thereafter with the annual ceiling of Rs. 1,50,000 in a financial year. The interest rate is 9.20 % w.e.f. the maturity is 21 years from opening the account. The period of deposits is made up to 14 years from the date of account opening.

    Children education

    Tax planning and deduction can be done through education of the children. One can get tax exemption on tuition fee of the children to any university or school or college or other institution in India for the sole purpose of education.

    Health insurance India

    The Medi-claim policy or health insurance in India covers the expenditure towards the medical treatment and the hospitalization. There are terms and conditions for the policies from different companies. The tax deduction available is Rs. 15,000 and on senior citizen it is Rs.20, 000.

    Considerations

    People are aware that they can save tax by investing and proper tax planning in various schemes. Investment should be made any time of the financial year. On the basis of proof, one can submit the income tax by the specified date. Those from a business background or professionals are liable to pay the tax in advance during the financial year. The salaried individual’s tax is deducted at the source directly from the salary itself. There are different taxes like fixed deposit, house property or the capital gain. It is you who will have to pay tax on these additional income taxes after doing a perfect tax planning.

     

  • Things that you should know about tax deductions

    Tax

    Tax deductions– Things that you should know

    A tax deduction is nothing but reducing the taxable income of individuals who pay income tax regularly. It helps to reduce the overall tax liabilities, and you save money, according to the type of claim that you make on the tax deduction type. The amount of deduction depends on the tax. You can claim the tax amount spent on the children’s education, medical expenses and also charitable contributions. Besides, one can also save tax by investing in several schemes like Equity linked savings scheme, PPF, Fixed Deposits ( 5 Year ), life insurance plans, national saving schemes and more. There are tax exemptions for several expenses that occur during different activities relating to social benefits.

    Get to know tax deductions better.

    Tax deduction details for those who pay income tax

    Section 80C is very useful for the people who are into jobs or into business. There is a reduction available in this section for up to Rs. 1, 50,000 whose gross salary is Rs. 2, 50,000 or more and are entitled to utilize Rs. 1, 50,000 limits. One can enjoy deduction of taxes when it comes to tuition fees of children and the principal amount that they have to pay towards a home loan that is paid during the financial year. The deduction is also available to those who contribute to employee provident fund or the public provident fund, accrued interest on the National saving certificate, Life insurance Premium, 5 years fixed deposits with banks and post office and equity-linked savings schemes.

    Tax deduction under 80C

    • Under section 80 CCD the individual who contributes in NPS can claim the deduction and the amount should not exceed Rs. 1,50,000.
    • 80CCC – the deduction is arising from the various contributions to LIC or other insurance companies of up to Rs. 1,50,000 is available.
    • 80CCD – the deduction that is related to the pension scheme from the Central Government can get a deduction of up to 10% of the salary.
    • 80CCF – in this section one can get a tax deduction of Rs. 20,000 for a subscription to the notified long term infrastructure bonds.
    • 80 CCG – deduction of Rs. 25,000 is possible when one notifies for an equity, savings scheme for those who are in the Hindu undivided family.

    Tax deduction under 80D

    Under this section, one can get a tax deduction for medical premiums for self and dependents but, by other means of payment apart from LIC or insurance providers.

    • 80D– you get the benefit of deduction of Rs. 25,000 is allowed to those who have paid health insurance policy for dependents as well as self. Another Rs. 25,000 deduction for a premium on health insurance policy of the parents is available. The limit is Rs. 30000 for senior citizens.
    • 80DDB – deduction is possible on medical treatment in illness like cancer, AIDS and neurological diseases of Rs. 40,000. For senior citizens, the deduction is available for up to Rs. 60,000 and for super senior citizen Rs. 80,000.

    Tax deduction under 80E, 80G, 80TTA, 80U

    • 80E provides for taking a loan for education from financial intuitions.
    • 80G helps when donations are paid but to a certain limit of up to Rs. 10,000.
    • 80TTA section provides a tax deduction to those in the HUF only. The interest earned around Rs. 10,000 from bank savings can be deducted from total income.
    • 80 U sections allow a 40% deduction for those who have a disability of any kind on Rs. 75,000 and in severe disability, there is a tax deduction of Rs. 1, 25,000.

    There are several other tax deductions under various schemes that should be learnt from the reliable offices of the government. it helps to save tax, and there are various benefits that the government provides for the taxpayers in various forms of a tax deduction.

    Our Tax calculator will make your income tax calculation very easy. Calculate income tax with our free income tax calculator, according to latest assessment year http://hirannyafinplan.com/income-tax/

     

     

     

  • NPS – 10 Point Guide

    NPS – 10 Point Guide

    Off late, lot of inquiries are coming in relation to NPS (National Pension System). We would be happy to answer them individually. But here is a quick 10 point guide in regards to the same. This may answer few of your doubts. But if the below guide does not answer your query, please mention the same using comment section below this article. We will surely get back. Here you go –

    NPS1

     

    1) NPS Contribution can be made by all of us voluntarily or can be made as part of your salary structure i.e. by restructuring your CTC (Cost to Company) involving your employer. Please note that NPS contribution is mandatory for govt. employees joining service on or after 1st January 2004.

    2) Contribution, when part of salary structure, is capped till 10% of your (Basic +DA).

    3) Voluntary contribution or employee’s contribution of amount up to Rs. 1.50 lakhs is available for tax deduction U/S 80CCD(1), which is part of overall 80C limit of Rs. 1.50 lakhs.

    4) From 1st April, 2015, an additional amount of Rs. 50,000 investment in NPS can be claimed for tax deduction U/S 80CCD(1B). This is over and above 80C limit of Rs. 1.50 lakhs.

    5) The employer’s contribution (this is basically part of your CTC only. After restructuring your CTC gets reduced by the same amount.) falls U/S 80CCD(2) and this amount can also be claimed beyond 80C limit.

    NPS2

    6) Under NPS two investment choices are available – Active choice and Auto choice. Under Active choice, three options are there – E, C and G. Under asset class E, investments are predominantly in equities (maximum up to 50%). Under asset class C, investments are into fixed income instruments other than GOI securities. Under asset class G, investments are in GOI securities. Under Auto choice, investments will be made in a life cycle fund in a pre-defined portfolio based on your age.

    7) Maturity amount is taxable – not only gain, but the entire maturity amount.

    8) Maturity of Tier-I a/c of NPS will happen at the age of 60 only. At least 40% of the maturity amount has to be used to buy annuity. If amount are withdrawn before age 60, then 80% of the maturity amount is to be compulsorily used to buy annuity only.

    9) E, C and G asset class portfolios are now being manged by ICICI, Reliance, Kotak, HDFC, UTI, LIC and SBI Pension Funds. Switch between scheme and fund manager is possible.

    10) NPS is administered and regulated by PFRDA (Pension Fund Regulatory and Development Authority)

     

  • How to save tax in F.Y. 2014-15?

    How to save tax in F.Y. 2014-15?

    That time of the year has come. You receive a reminder from your employer to furnish details of your tax saving investments. It comes with a deadline, e.g. you need to give the details maximum by 1st week of January or February. Then 3 things happen –

    1. You ask and take opinion of the most profound expert in this field – your colleague!
    2. You feel great if someone takes effort to come to your desk and helps you making the investment … even if it is not at all suitable for you!
    3. You forget all these as mandatory year-end tasks and carry on as if nothing happened!

    I recommend you to first take note of the following 3 things instead –

    1. Tax saving investments can be made… err sorry… can be planned at the start of the financialyear itself i.e. in the month of April and not when you are asked to furnish details.
    2. Know your tax liability first. And it is easy; you need not even consult a CA for the same. Numerous websites are there to help you, just Google. Or even a simpler way is there – visit our website www.hirannyafinplan.com and try ‘tax calculator’.
    3. Make plan to achieve all your financial goals – short term, medium term and long term. Take care of your contingency. Make sure you bought adequate term cover and health cover and renew the same without fail. If all these investments also allow you to claim tax benefit – fine! If not, then also follow the plan ditto and pay tax instead.

    You can save taxes under various sections – 80C to 80U. You can check the details of all these sections in our website very soon. Before that I would like to bring your attention in the following 3 sections – most discussed and popular –

    80C

    Limit raised this year up to Rs. 1,50,000. Tax exemption on the amount invested can be claimed if investment is done in any of the following – Life insurance premium paid (only if yearly premium is less than 10% of sum assured), ELSS Mutual Fund, Tax Saving FD of 5 years tenure, NSC. REMEMBER first to find out the total EPF contribution that you make in the whole year + term insurance renewal premium that you pay + PPF investment if you make any + principal component of all your home loan EMIs + tuition fees part of school fees paid on children’s education. If the total is equal to or more than Rs. 1,50,000 then you need not to make any investment under this section. If the total is less than Rs. 1,50,000 – you can make investment of differentiate amount under this section –provided it makes sense or in line with your planned investment.

    80D

    You should always have adequate health cover. Ideally it should be a family floater cover of amount 5 lakh or more depending on the city you live in or likely cost that you may incur in case of hospitalization. The premium that you pay for this cover could be less or more than Rs.15,000 (the maximum amount that can be claimed as tax benefit). Even if it is less, you should not feel bad as long as you have bought a good and adequate health cover. You can buy health insurance cover for your senior citizen parents also and claim tax benefit up to Rs. 20,000. Here again, the focus should be on right insurance product and adequate insurance cover, and not on tax saving.

    Section 24B

    Most of the young families today, have a home loan to pay. Govt. encourages you to buy home and hence doles out tax benefits. Whereas principal component of your home loan EMI qualifies for tax benefit u/s 80C, interest component qualifies for tax benefit u/s 24B. Here there could be two scenarios – either the home that you have bought is put on rent or you are staying there. If you are staying there, then you can claim tax benefit up to Rs. 2,00,000 of interest paid. For let out properties, there is no such limit.

    Hope the above guidelines will help you in making right decision at right time. If you have any queries whatsoever please ask. Do comment. We are all ears.

    icon