Really, I hate Tax!!

ITR filing for 2011

2011-07-13T22:08:00.000-07:00

To file ITR (for salaried personnel with form 16 available), two ways you can follow -

1) Online - Just keep your form 16 handy and fill all details on net itself. [read below for details].
2) Offline - Fill sahej form available at IT dept website (http://incometaxindia.gov.in/download_all.asp)& submit at nearest IT office. You can also check for ITR camps frequently organised by IT dept in month on July.

For Online ITR, again you have two ways -
1) Using IT Dept Excel sheet - offline tool to calculate your tax refund/payable. Can be used in case you have just one source or one form 16. else you have to calculate all at your own. [https://incometaxindiaefiling.gov.in/portal/downloads.do]

2) Use tax filing sites - Use diff tax filing sites, some of them are free as well. Like www.taxyogi.com

To use this site follow like -

a) Create login on this site.
b) Do fill all the details as per your form 16. In case you have more than one form 16 or form 16A, just fill one by one. It will ask for more details later, so no need to calculate anything by yourself.
c) See how much you need to pay more or get refund. In case you need to pay, fill challan 280 online and fill self assessment tax in your details as advised by site.
d) generate and mail xml file to yourself along with filled sahej form with your details. Verify details in sahej form and correct in case you find anything to be.
e) Create login on it Dept website and upload xml there [https://incometaxindiaefiling.gov.in/portal/login.do].
f) download and print IVR doc. Send it to IT office banglore.
g) heyyyyyyyy, you are done, congrats!!

Budget 2011 & Income tax

2011-03-01T03:12:00.001-08:00

In Union Budget, finance Minister Mr. Mukherjee proposed to raise the income tax exemption limit for general tax payers to Rs 1.80 lakh per annum from Rs 1.60 lakh at present and introduced a high new tax slab for senior citizens of 80 years and above. Also, he proposed to reduce the age limit for consideration as senior citizens from 65 years to 60.

The new exemption for Senior citizens will be for income up to Rs 2.5 lakh, higher from Rs 2.4 lakh now.

Forex tips for IT guys

2011-02-01T03:16:00.000-08:00

While moving on a business trip to abraod location, employee gets forex as daily allowance.

Legally its like daily allowance and is not taxable as per India or foreign tax laws UNLESS spent as a whole at business trip itself. But most of time we bring some forex back as our savings. :)

Here the story begins.. Now as you have not spent the amount at your foreign trip, you need to pay taxes on that (Legally). But most of the people don't follow it.

This can bring you under the scrutiny, so here are some tips to play safe -

1. Before travel, keep some money here in india itself after discussion with your other colleugues abroad. Most of the time, total amount is not required. Why to carry more, if less is more than enough.

2. Prefer to spend Travellers cheque (TC) on business trip first and then switch to cash. TCs are more subject to legal catch as you need to necessarily submit your passport & other details to encash them.

3. On return to india, exchange forex as and when required and avoid encashing big amount in one go.

4. Keep withdrawing some amount from your salary account too. Don't depend on forex totally for daily expenses.

5. Don't deposit big amounts in your account at once, divide it in chunks of < 50000 and deposit then.

6. Prefer to exchange money with local vendors and avoid banks for two fold advantage. First, you will get good exchange rate and second you need not to show documents if you have good understanding with vendor.

Filing tax for salaried Employee

2011-01-15T20:49:00.000-08:00

Lets learn this in 4 steps for the sake of easiness -
1. Sumbmitting details to company's finance dept. - Here TDS (tax deduction on source) will be calculated based on your income & tax saving intuments used. They calculate your final tax libility (only for the salary earned) & provide FORM 16 which contains details about your earning, exemptions & taxes.
2. Computing final tax libility - You should add your other sources of income in whatever comes out in form 16 (like income from bank interest etc, banks will issue a FORM 16A for that) to compute your final tax to be paid.
3. Filing ITR - Now the final thing is to file ITR[income tax return] using data collected. find my earlier posts to know the process and its components.
4. Collecting ITR ack - most of the time posted to the address you mentioned in your ITR.

Now keep DIN with you for income tax purpose

2010-11-28T21:49:00.000-08:00

The government has made it mandatory for taxpayers as well as collectors to quote a unique document identification number (DIN) on every communication with the income tax (I-T) department.

The unique Document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11.

I-T department generates DIN (Document Identification Number) which is essentially useful for error filling of income tax returns, for claiming refunds and other communication with the department by the assesses. Assesses will not be put to any trouble, as the numbers will be generated and allotted by the department itself.

According to section 282B of the Income Tax Act that deals with DIN, if the document sent to the tax authority does not bear this unique computer-generated number then "such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received."

Direct Tax code from 1April, 2012

2010-08-30T05:11:00.000-07:00

The Bill seeks to increase tax exemption on income from Rs. 1.6 lakh to Rs. 2 lakh and fix the corporate tax at a flat 30 per cent. As per the Bill, income from Rs. 2-5 lakh will be taxed at 10 per cent; Rs. 5-10 lakh at 20 per cent and 30 per cent thereafter.

The changes, when they take effect, will help save up to Rs. 41,040 for people earning more than Rs. 10 lakh a year. The exemption on savings and payment of interest up to Rs. 1.5 lakh on housing loan have been retained in the proposed DTC Bill.

Currently, income from Rs. 1.6-5 lakh attracts 10 per cent tax; from Rs. 5-8 lakh, 20 per cent and beyond Rs. 8 lakh, 30 per cent. The proposed tax slabs are much lower than originally suggested in the draft DTC bill -- 10 per cent for Rs. 1.6 lakh to Rs. 10 lakh, 20 per cent from Rs. 10-25 lakh and 30 per cent for income above Rs. 30 lakh.

Income tax return - all inclusive

2010-08-05T05:15:00.000-07:00

Income tax return

The first thing you should know is, its always good to file Income tax return when you have any source of income no matter if you have any taxable income or not.

Some comman concerns about income Tax -

1) Why Pan Card??

A PAN number has been made compulsory for every transaction with the Income Tax department. Now a days Pan Card is mandatory for many financial transactions including opening of bank accounts, taking institutional financial credits , purchase of high-end consumer item, foreign travel, transaction of immovable properties, dealing in securities etc. A PAN card is a valuable means of photo identification accepted by all government and non-government institutions in the country.

2) Is Income tax return filing is mandatory, if I have a PAN card?

No. Return is to be filed only if you have taxable income.

3)Income tax return can be filled online & offline. For online filing (e-filing), various ITR filing services are available. Some good ones are -

itrust.in

taxsmile.com

incometaxindiaefiling.gov.in

All you need is details regarding your income and deductions applicable (like tax saving intuments etc).

For Offline filing, you can fill up ITR-1 form yourself and visit any nearest Income tax office to submit it and get acknowledgement. Still probnlems then visit any agent or CA. They may charge anything from Rs. 100 to Rs. 1000 and provide you full assistence in filing ITR.

4) What is form 16 ?

Form 16 is a summary certificate for all your tax related details from your employer mentioning all your income and tax saving expenses. You should have this document with you and everything from this you can mention in ITR-1 form.

5) What If I don't reveive Form-16 from my employer?

Its always better to have all your documents with you as a proof so best thing is to get Form-16 from the employer. Still, if there is any issue, then you can still file income tax return and you need to keep all proofs (salary slips, saving documents, House rent receipts, medical, ULIP documents etc) with you in case of any enquiry by IT dept.

6) What if all tax saving details or any source of income not mentioned in my Form-16?

You can add them in your ITR-1 form or mention that to agent at the time of ITR filing.

7) I am confused in terms financial year and assessment year?

See. Financial year is for what you are going to file the income tax and assessment year is the next year of financial year.

eg, If you are planning to file income tax in june-2010, then your financial year will be from 1st April 2009 to 31 March 2010, and assessment year will be 2010-2011.

8)What is corporate tax then??

When companies pay income tax, its corporate tax. :)

9)What are different sources of income with respect to income tax ?

Categorized in mainly 5 types as below -

Income from Salary

Income from House property

Income from Business or Profession

Income from capital gains

Income from other sources

10) How can I apply for PAN?

Its very simple to apply for PAN now. Either fill the form online (https://tin.tin.nsdl.com/pan/index.html) and send Pan Ack & supporting docs via Normal post to NSDL, or you can also fill the form (hardcopy) and send/deposit the same at UTI center.

Alternatively you can go to any agent for filling up PAN form.

2010-07-09T00:28:00.000-07:00

So here comes a basic understanding of daily use terms in money issues. The idea is to give an insight into the different technical terms that one comes across while going for online trading, in a layman’s language.

SENSEX: Sensex is the short form of Sensitivity Index, and like any other index, it is nothing but a measure of the average change in the share price of a group of selected companies over two different situations, generally the closing price of previous day and current price of the day.

In India, the index of Bombay Stock Exchange (BSE), which is compiled on the basis of 30 selected stocks, is called Sensex whereas that of National Stock Exchange (NSE), based on 50 selected stocks, is called NIFTY.

BULL: An investor who believes that a particular share or group of shares, or the overall stock market, is about to rise. When the Sensex, for instance, rises regularly it’s said to be a bull market.

BEAR: Opposite of bull, consistent declining trend of the Sensex. Bear believes in that the market will go down and down and down constantly.

MUTUAL FUND: Fund operated by an investment company, which raises money from the public and invests in a group of assets.

DEMAT: Demat means De-Materialize, something which is non-material. In share market, Demat means possession of share, but in non-paper form. Demat is the instrument which has replaced the earlier concept of holding of shares in physical form, i.e. in paper. Your Demat account will give you the details of share you possess at that point of time.

LTP: Last Traded Price (LTP) is that price on which the last transaction has taken place pertaining to that specified stock. From LTP, you get the idea, in what price you may get to buy/sell your stock.

Offer Price: Offer price is the price at what the seller is ready to sell the stocks. When you are going to buy the shares, this price is very important to you, because ultimately your deed will be executed only when your buying price will match the offer price.

Offer Quantity: The number of shares available at the Offer price.

Bid Price: It’s nothing but the buying price at which buyer is ready to buy.

Bid Quantity: The number of shares available at a certain Bid Price.

LIMIT: During online trading, Limit price gives one the facility of bargaining. The system (software for trading) needs to know the top or bottom price you are ready to afford while buying and selling respectively. There comes the concept of Limit price. While buying, Limit is the price on or below of which you are ready to buy. The same way, while selling, Limit is the price, on or above of which you are ready to sell.

MARKET PRICE: The current price of a stock at a certain point of time during the trading hour.

You need to sell/buy either in Market price or in Limit price. When you don’t have time to bargain, you can still do the trading in the Market price, where your deed is executed then and there.

MARGIN: Margin is a kind of leverage. Leverage, comes from the term Lever, is nothing but a tool to multiply effort to accomplish a bigger task easily. Margin, a kind of leverage, gives one the facility to trade bigger amount with less amount of money.

There are other kinds of leverages too in share market, like Derivatives, Future, Options etc., which we are not going to discuss in this article.

P-E RATIO: Price to Earning (PE) ratio of a company is the market price of the company’s share divided by its earning per share.

P-E Ratio= Market price per share/Earning per share

The range of P-E ratio varies from industry to industry. However within one industry group, a share with less P-E ratio is considered a better stock to invest.

New IRDA rules for ULIP, effective from Sep 1, 2010

2010-07-02T00:52:00.000-07:00

IRDA announced new rules for ULIP to highlight the insurance side of it.

So from now on, ULIPs will have a lock-in period minimum of 5 years than that of exisiting 3 years. Also, the PPT (Payment paying Term) would also be 5 years.

As per IRDA, these are required to lighten the burdon of customers coz in initial years ULIPs have more changes compared to later years. ULIPs are always a long term investment (or rather call it insurance) and this change will boost this fact more.

Also, the sum insured would be 10 times of the first premium instead of current 5 times. So it looks like a good 80C tool if you are looking for insurance actually than investment.

One good thing included here is the facility to avail loan on ULIP. Its to ensure if insurer is in need on money, he can take benefit of this new ULIP feature.

New Base landing rate for all Loans

2010-06-28T21:07:00.000-07:00

The RBI mandated new Base Rate lending system for all banks which facilitates a fixed minimum base rate system for loans instead of the old PLR system. The base rate will be the new reference rate for determining lending rates for banks, and will be implemented three months later than earlier planned.

"It will start from July 1. After the RBI met with heads of state-run banks, Usha Thorat, Deputy Governor of Reserve Bank of India" told reporters that banks wanted some time.

Banks in India tend to charge their biggest corporate borrowers less than published prime rates, which they would no longer be able to do on new loans from July 1. The RBI has expressed concern over banks offering short-term loans well below their prime rates to companies and mortgage borrowers as the banking system is flush with liquidity. The actual lending rate charged to borrowers would be the base rate plus borrower-specific charges including operating costs, according to draft guidelines on the RBI website.

After the implementation of the new loan pricing system, existing borrowers would continue to pay at existing rates, while the base rate would apply to new customers. The new base rate system is intended to allow cuts in interest rates by banks to be passed on to all customers rather than a few large corporate clients.

The move ultimately will have a good impact over loan markets & retail customers as now they can also enjoy minimum rates instead of paying higher than what banks offer to large corporates.

Direct Tax Code : second draft

2010-06-16T21:38:00.000-07:00

So here comes the another draft of Direct tax code as mentioned in the Budget-2010 by Pranav dada. Its applicable on every tax payer but here I am just putting highlights how it'll affect a service man.

- As of now, 80c includes pension funds, ULIPS, FD, ELSS and other means. But in Direct tax code, FDs and ELSS wouldn't help in reducing tax burdon.

- The first bracket is proposed to be upto 10Lakhs and is subject to a flat applicable tax of 10%(or 20%, to be decided in monsoon session later).

- Another important thing, now tax exemption would be raised upto 3Lakhs and that includes everything from your 80C investments to your home loan interest of 1.5Lakhs.

will keep posting about any updation/addition as it comes.

While switching job..

2010-06-14T08:57:00.000-07:00

So, you are looking for a job change or recently switched?? Then read on..

Negotiating your Cost to Company (CTC): Even if the actual CTC is the same as your previous job, structure your CTC so that your cash in hand can be higher than what it might have been at the previous job. This might be particularly important given the new rules announced in the Budget in July 2009 under which fringe benefits offered to you are now going to be taxable in your hands as perquisites. Understand how you can maximize your take home pay, because that is what matters at the end of the day. :)

Form 16 and tax issues: At the end of the financial year take your Form 16 from your previous employer and share that with your new employer, so that the right amount of tax is being deducted and that you are not getting more deductions than you are entitled to. Remember to also take a no dues certificate, relieving letter, salary slips for the duration you have stayed.

Shifting your PF balance and Superannuation: This can be a big administrative issue for you if you have not moved over your retiral accounts to your new firm. Take care of the necessary paperwork to facilitate a smooth transition of your account to your new employer. Form 16 is being used for transfer of PF account. Withdrwal may be another option but remember, its taxable if it has not being maintaioned at least for 5 years.

ESOPs: Don't leave a lot of value on the table if you have worked hard to earn incentives. If your current employer gave you ESOPs, understand if you are eligible to encash these at all. If you are giving up a lot of value because not all your shares have vested, you might want to ask your new employer to offer you similar upside as an incentive to move to the new job.

Insurance: If your current employer was offering you and your family life and health insurance coveragerecognize that you might need this from your new employer as well. Do not remain uninsured during the transition period from one job to another. Accidents and emergencies come unannounced and don't put yourself or your family at risk by not having appropriate insurance coverage. Additionally, understand what are the insurance benefits you will be eligible for at your new job and whether you will have to serve for a minimum few months before your coverage kicks in.

All about ULIPs

2010-06-08T04:23:00.000-07:00

As I mentioned in my earlier post, ULIPs are more insurance kinda thing than an investment option. So if the motive is to invest NEVER opt for ULIP due to its heavy charges and load structure, but if you are looking for an insurance plan then ULIP is best to get investment benefit too. Also, ULIPs are helpful only in long term plan. Most ULIPs return in negative in case of withdrawl before 5 ( or 7 sometimes) years coz of two fold reason
1. Heavy changes imposed
2. withdrawl penalty

Although ULIPs offered by different insurers have varying charge structures broadly, important charges that you should know are -

Policy administration charges - These charges are deducted on a monthly basis to recover the expenses incurred by the insurer on servicing and maintaining the life insurance policy like paperwork , work force etc.

Premium allocation charges These charges are deducted upfront from the premium paid by the client. These charges account for the initial expenses incurred by the company in issuing the policy- eg. Cost of underwriting, medicals & expenses related to distributor fees. After these charges are deducted the money gets invested in the chosen fund. eg, the allocation charges may be 60% or 70% which directly means that if you are paying Rs. 100 to insurer, only Rs. 40 or Rs. 30 is going in your account and rest is commission.

Mortality charges Mortality expenses are charged by life insurance companies for providing a life cover to the individual. The expenses vary with the age and either the sum assured or the sum-at-risk which is the difference between sum assured and fund value of the insurance policy of an individual. Mortality charges are deducted on a monthly basis.

Fund management charges A portion of the ULIP premium, depending on the fund chosen, is invested either in equities, bonds, g-secs or money market instruments. Sometimes it is a combination of these. Managing these investments incurs a fund management charge (FMC). The FMC varies from fund to fund even within the same insurance company depending on the underlying assets in the fund. Usually a fund with higher equity component will have a higher FMC

The important thing to note about ULIPs is that the overall charge structure for the plan comes down substantially over a long term. However it may be noted that insurers have the right to revise fees and charges over a period of time. Better is to have a close look at the terms and conditions. Also, most agents also make fake promises at the time of selling policy, so better is to ask evidence of whatever he promised before entering into transaction. You can do some bargain too with the agent, if you have done some research for other ULIP products.

Permanent Account Number (PAN)

2010-06-07T03:19:00.000-07:00

Permanent Account Number (PAN) refers to a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department in India. It is a must to have a PANnumber for all those who file their income tax returns, because from 2005 onwards, it has been made mandatory by the Income Tax Department to quote the PAN on return of income as well as on all correspondence with any income tax authority in the country.

Also, it is now compulsory to quote PAN in all documents pertaining to financial transactions notified from time to time by the Central Board of Direct Taxes, such as sale and purchase of immovable property or motor vehicle or payments in cash, of amounts exceeding a certain limit to hotels and restaurants, or in connection with travel to any foreign country. It is also mandatory to mention PAN for obtaining a telephone or cellular telephone connection. Likewise, PAN has to be mentioned for making a time deposit exceedingRs. 50,000/- with a Bank or Post Office or for depositing cash of Rs. 50,000/- or more in aBank.

How to apply for a PAN ?

(Manual Application)
Applying for PAN is a simple and convenient procedure. All you need to do is submit the application form 49A . The PAN application can also be downloaded from the website of UTI Investor Services Ltd (the authorised agency to manage IT PAN service Centres in various cities) or from the website of National Securities Depository Ltd (NSDL) or printed by local printers or photocopied (on A4 size 70 GSM paper) or obtained from any other source. The form is also available at IT PAN Service Centres and TIN Facilitation Centres.
You will need a recent colour photograph (stamp size: 3.5 cm x 2.5 cm) to attach on the form. You must mention the designation and code of the concerned Assessing Officer of theIncome Tax department in Form 49A. You can get this from the IT PAN Service Centresmentioned in the websites listed above. Also, the application shall have to be accompanied by a proof of identity as well as a proof of residence.
The filled application form has to be submitted at your nearest IT PAN Service Centre orTIN Facilitation Centre along with the requisite fee (INR 95 currently) . The location of such centres can be searched online by using the facility given below :
- IT PAN Service Centres (http://www.utitsl.co.in/pan/search.php )
- TIN Facilitation Centres(http://www.tin-nsdl.com/TINFaciliCenter.asp )

(Online Application)

Applications for fresh allotment of PAN can also be submitted through the Net. Further, requests for changes or correction in PAN data or a request for a newPAN card (for an existing PAN) may also be made through the Internet (https://tin.tin.nsdl.com/pan/index.html ). If an application for allotment of PAN is submitted through theInternet and payment made through a 'nominated' credit card, the PAN is allotted on priority and communicated through email.
To track PANcard application status visit https://tin.tin.nsdl.com/tan/StatusTrack.html. A complete application with paper work & successful payment usually takes 7-10 days for a PAN card to be recieved.

For more details visit http://www.tin-nsdl.com .

Govt has decided to follow biometric identifications for new PAN card applicants from Jan 2011. So as of now, its not required to visit NSDL centers to apply a PAN card but from Jan'2011 onwards, it would be mandatory.

All about Provident Fund

2010-06-07T02:33:00.000-07:00

What is Provident Fund (PF)?
The Employee Provident Fund(EPF), or provident fund as it is normally referred to, is a retirement benefit scheme that is available to salaried employees.
Under this scheme, a stipulated amount (currently 12%) is deducted from the employee’s salary and contributed towards the fund. This amount is decided by the government. The employer also contributes an equal amount to the fund. However, an employee can contribute more than the stipulated amount if the scheme allows for it. So, let’s say the employee decides 15% must be deducted towards the EPF. In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12%. If you urgently need the money, you can take a loan on your PF. You can also make a premature withdrawal on the condition that you are withdrawing the money for your daughter’s wedding (not son or not even yours) or you are buying a home. To find out the details, you will have to talk to your employer and then get in touch with the EPF office (your employer will help you out with this).

Return on Investment
Interest will be calculated for the amount deposited into the PF scheme. The rate of interest is 8.5% at present, this rate will be decided by the govt. on the budget times. The interest payable also will be added into the PF amount.

Tax Exemption on PF
The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C. If you have worked continuously for a period of five years, the withdrawal of PF is not taxed. If you have not worked for at least five years, but the PF has been transferred to the new employer, then too it is not taxed. The tenure of employment with the new employer is included in computing the total of five years. If you withdraw it before completion of five years, it is taxed. But if your employment is terminated due to ill-health, the PF withdrawal is not taxed.

What is Form 13?
Form 13 is used for transferring your PF account from one employer to the another employer. You can download the form 13 from http://www.epfindia.nic.in/forms/13revised.PDF. Just fill up with required deatils and submit to your present employer. Your present employer will complete it and then will send to your previous employer who will initiate the transfer.

Some Employers maintain EPS & PF as two different accounts and some only PF account. So when you need to mention the EPS account number in the PF transfer form itself while initiating the transfer.

80C tools explored

2010-06-06T23:37:00.000-07:00

These tools you can use to get a quick idea of what to do & how to do for 80C deductions. For details, just ping me up.

Equity Linked Savings Scheme (ELSS) - Some mutual fund (MF) schemes specially created for offering you tax savings, are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C. Most popular are - SBI Magnum Tax gain, BNP paribas Tax saver, Canara Robecco Tax saver etc.
Recommendation - It's famous for its good returns but as it's totally dependend on share market, its more risk prone too. So the point here is, if you can invest some time into share market too, this is one of the best option for tax saving. Best thing here is unlimited profit & unlimited loss.

Provident Fund (PF) & Voluntary Provident Fund (VPF) - PF is automatically deducted from your salary (currently 12%). Both you and your employer contribute to it. While employer’s contribution is exempt from tax, your contribution (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 if withdrawn after 5 years.
Recommendation - The usual way of regular savings. Better to go for default PF percentage deduction only. Best thing in this is, its risk free & assured returns kind of thing.

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 70,000. A point worth noting is that interest rate is assured but not fixed. You can go to post office or bank ( SBI & Allahabad bank) to open one for you
Recommendation - If you feel yourself cool while dealing with Govt banks/offices staff, or luckily you have a nearby SBI branch where at least one employee is happy with his/her job or like your face to the extent that he/she can listen to you, go for it.

Life Insurance Premiums - Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here. Here you can also go for ULIPs. ULIP is again a share market linked plan so you need to keep a watch on the NAVs. 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.
Recommedation - Opting to it means you are more intrested in insurance than savings. Also, make sure you have read all terms & conditions before investing coz it also attracts heavy charges (mostly in ULIP).

Home Loan Principal Repayment - 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. Please read “Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”, which presents a full analysis of how you can save income tax through a home loan.
Recommendation - Obviously go for it, if you are elegible.

National Savings Certificate (NSC) - National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded half-yearly, i.e., the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs 1601 after six 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.
Recommendation - Again, its a slow way of growth. totally your call.

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.

Pension Funds – Section 80CCC - 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 maeans that the total deduction available for 80CCC and 80C is Rs. 1 Lakh.This also means that your investment in pension funds upto Rs. 1 Lakh can be claimed as deduction u/s 80CCC.
Recommendation - same as for ULIP.

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.
Recommendation - Again, its a slow way of growth. Point to be noted is, interest is also taxable here. so returns is also less.

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.

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.

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.

Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.

Income tax Exemptions

2010-06-06T23:16:00.000-07:00

Tax saving is directly proportional to knowledge of tax saving intruments. So here is the list for all available tax saving clauses you can use to get max tax benefits -

Income Tax deduction - Section 80C
Tools - Provident Funds, Life Insurance premia, ELSS, Bank deposits (>5 yr.), tution fees, principal part of EMI on housing loan, etc.
Max Exemption limit - Rs. 1,00,000.

In budget 2010, the FM has also increased the limit of deduction available under section 80C. He has allowed an additional investment of Rs 20,000 for infrastructure bonds taking the total of the limit under section 80C from the current Rs 1 lakh to Rs 1.2 lakh

Income Tax deduction - Section 80D
Tools - Premium in health insurance of you, your spouse, children or dependent parents
Maximum Exemption limit - Rs. 15000(for senior citizen Rs. 20000)

Income Tax deduction - Section 80DD
Tools - Medical treatment (including insurance) of disabled dependent
Maximum tax exemption limit - Rs. 50000 (Rs. 75000 if disability is severe,e.g. >80%)

Income Tax deduction - Section 80E
Tools - Interest paid on educational loan taken for higher education of you, your spouse or children.
Maximum tax exemption limit - no limit :)

Income Tax deduction - Section 80GG
Tools - House rent in excess of 10% of income, if no HRA is received.
Maximum tax exemption limit - Rs. 2000 per month or 25% of your gross salary, whichever is less.

Income Tax deduction - Section 24
Tools - Interest paid on housing loan.
Maximum tax exemption limit - Rs. 1,50,000

Income Tax deduction - Section 80G
Tools - Donations
Maximum tax exemption limit - 100% of donation amount for special funds , 50% of donation amount for all other donations.

This is just a brief idea of what exactly you can think of regarding tax savings. you'll see detailed analysis of all the above in coming posts.

Income Tax Slabs (FY 2010-2011)

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Finance minister,Pranab Mukherjee, has announced the new tax slabs for finance year 2010-11. In new tax slab,basic tax exemption limits are same as in the old tax slabs but finance ministry has broaden the tax slabs.

The new and revised tax slabs/rates for the financial year (FY) 2010-11 / Assessment year (AY) 2011-12 are as follows:

New Income Tax Slabs/Rates for individaul Men (below the age of 65 years) -
Up to Rs 1,60,000 ------ No tax / Total Exemption
1,60,001 to 5,00,000 --- 10%
5,00,001 to 8,00,000 --- 20%
Above 8,00,000 --- -----30%

New Income Tax Slabs/Rates for Resident Senior Citizens -
Up to Rs 2,40,000 -----No tax/Total Exemption
2,40,001 to 5,00,000 -- 10%
5,00,001 to 8,00,000 ---20%
Above 8,00,000 ---------30%

New Income Tax Slabs/Rates for induvidual Women (below the age of 65 years) -
Up to Rs 1,90,000 -------No tax / Total Exemption
1,90,001 to 5,00,000 ----10%
5,00,001 to 8,00,00 -----20%
Above 8,00,000 ---------30%

Don't snatch my money, plss

2010-06-06T22:18:00.000-07:00

Growing income also leads to worries and this happens most of the time coz of income tax. Through this blog, I am trying to discuss basics of income tax in india and some insights to get maximum exemption with minimum efforts. It covers all from income tax slabs to tax saving tools & other relevent details.
Will love to see your views, queries and suggestions here.