Way to save tax
INCOME TAX
‘‘The hardest thing to understand in the world is the income tax.’’
Albert Einstein
In fact what is more surprising is that all our lives are around taxes?
We earn, we pay tax; we buy, we pay tax; we invest, we pay tax; moreover we even pay taxes for gifts!
The further account is about the principles of levying the tax and comparing the Indian tax system
SECTION 80C
Section 80C of Income Tax Act, 1961 talks about deductions of tax. The section 80C directly reduces the taxble income because of the section 80C the tax liability comes down drastically. Most of the person enjoys the fruits of the section 80C directly or indirectly. The maximum rebate of tax is upto rupees 1.5 lakh. prensently an individual who is less then 60 years and his income rupees 2.5 lakh or less is exempted from paying tax but through section 80C exemptions can be increased upto 4 lakhs however there are several conditions also on section 80C.
WHAT IS TAX DEDUCTION ?
Tax deduction helps in reducing the taxable income it decreases your overall tax liabilities and helps you save tax, however depending on the type of tax deduction you claim the amount of deduction varies. In other words, it could be said that it is subtracting the tax liability or increasing the exemptions.
WHO CAN CLAIM DEDUCTION ?
1- HUF and Individual can take benefit under section 80C
2- Non Resident individual can take benefit under section 80C
MAXIMUM LIMIT UNDER SECTION 80C
- 2,00,000 (Including 80 CCD 1B)
- 80C includes 80CCD(1) & 80CCD(2)
INVESTMENTS UNDER SECTION 80C
- Employee Provident Fund ( EPF)
- National Saving Certificate (NSC)
- Sukanya Samriddhi yojna (SSY)
- Tax Saving Fixed Deposite
- Senior Citizen Saving Scheme (SCSS)
- Equity Linked Saving Scheme ( ELSS)
- National Pension Scheme (NPS)
- Life Insurance Premium ( LIC)
- Public Provident Fund (PPF)
10-Unit Link Insurance Plan (ULIP)
11-Infrastrcture Bond
12- Repayment Towards Principal Home Loan
13- Children Tution fees
14- Contribution pension Plans By Insurers
EMPLOYEE PROVIDENT FUND
EPF is a retirement benefit schemethst is available to all salaried employee. This amount to 12% of basic salary + DA.
Can be open by employee grater than salary 15000 per month
Entire PF is tax free if withdrawn after continous service of 5 years
Only employee contribution is elegible not employer contribution.
NATIONAL SAVING CERTIFICATE
The National Savings Certificate is a fixed income investment scheme that you can open with any post office. A Government of India initiative, it is a savings bond that encourages subscribers – mainly small to mid-income investors – to invest while saving on income tax
It can be open at post office for 5 years lockdown period.
Intrest of NSC is accured intrest & accured intrest is taxable in income from other sources & accured intrest can claim deduction under section 80C.
SUKANYA SAMRIDDHI YOJNA
This scheme is one of the most popular schemes by the government of india because of the betterment of the girl child in the country
Parents/ guardians can open an account in the name of a girl child till she attains the age of 10 years
It can open in post office.
Tenor of this policy is 21 years or girl child get married after 18 years .
Maturity amount with ROI is tax free.
TAX SAVING FIXED DEPOSITE
Lockdown period of this policy is 5 years.
Intrest is taxable at maturity.
FD intrest rate across different bank ranges from 5.5%-7.75%
Minimum investment limit is Rs 1000
You can open it in any bank.
SENIOR CITIZEN SAVING SCHEME
Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings instrument for individuals above the age of 60. The Government of India introduced this scheme in 2004 intending to provide senior citizens with a steady and secure source of income for their post-retirement phase.
It is open in the bank and post office for 5 years lockdown period open by senior citizen above 60 years.
Intrest will taxable at maturity.
EQUITY LINK SAVING SCHEME
It is open by mutual fund companies for 3 years lockdown period .
If return is more than 1 lakh then it will be taxable LTCG @10%.
Minimum 80% is invested in equity return is not fixed.
LIC
As per the rule, for a life insurance policy issued on or after April 1, 2012, if the premium paid exceeds 10 per cent of the sum assured, then the deduction (from the gross total income) will be available to the extent of 10 per cent of the sum assured and the premium paid in excess of this amount cannot be claimed as deduction
PUBLIC PROVIDENT FUND
Lock down period for ppf is 15 years intrest on the ppf should be exempted. But it can be futher extended by 5 years. Partial withdrawals are allow after 7 years
Minimum investment limit 500 Rs
It can open in any bank account.
TUTION FEES
Up to 2 childern only
REPAYMENT TOWARDS PRINCIPAL HOME LOAN
An individual is entitled to tax deductions on the amount paid as repayment of the principal component on the housing loan. An amount up to Rs. 1.50 lakh can be claimed as tax deductions under section 80C
Loan can taken from Banks
Principal amount of loan is tax free under section 80C.
Stamp duty/ registration charges & any other expenses for purchase of house property claim as deduction
NATIONAL PENSION SCHEME
The NPS is a pension scheme that has been started by the Indian government to allow the unreocgnised sector and working professnionals to have a pension after retirement
Can be open by every Indian citizen between the age of 18 to 60
Return rate of NPS varies between 12%-14%
Employer contribution is tax free
INVESTMENT IN ULIP
ULIP’s are a mixed of insurance and investments. A part of the invested amount in ULIP’s is used to provide insurance and the rest of the amount invested in the stock markets
A investor can buy ULIP for self or spouse or children
Investment and withdrawals & maturity amount is tax free
NOTE
- Any individual or huf invested more than 1.5 lakh in section 80C it will be restrict to 1.5 lakh rupees
SECTION 80CCD(1)
Individual who makes deposite to his/her pension account maximum deduction is allowed is 10 % of salary if employed
Or
20% of gross total income if self employed or 150000 which ever is less
SECTION 80CCD(2)
Addititional deduction is allow for employer contribution to employee pension account of up to 10% of the salary of the employee
A new section 80CCD (1B) has been introduce for an additional deduction of upto Rs 50000 for the amount deposited by a taxpayer to their NPS account
SECTION 80CCE
The aggregrate amount of deduction under section 80C, section 80CCC and sub section (1) of section 80CCD shall not in any case exceed 150000 Rupees
How ever, there is no monetary ceiling on section 80CCD(2).
Written By -Rahul pandey