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TAX PLANNING

A penny saved is a penny earned.

- Benjamin Franklin

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INCOME-TAX FOR INDIVIDUAL

A New Option for Taxpayer!

Income-Tax Slab

Old Regime New Regime
in lakh (Rs.) in (%) in lakh (Rs.)  in (%) 
Up to 2,50000 Nil Up to 2,50000 Nil
2,50,000 to 5,00,000   5 2,50,000 to 5,00,000   5 (Tax Rebate of Rs 12,500 available under section 87A)   
 5,00,000 to 10,00,000  20  5,00,000 to 7,50,000  10
10,00,000 and above 30  7,50,000 to 10,00,000   15
     10,00,000 TO 12,50,000  20
    12,50,000 to 15,00,000  25
     15,00,000 and above  30
 

Savings u/s 80C your Tax-Saving Window...

Income-Tax Act allows exemption of Investment or spending from Income-tax.
Those with taxable income at 30% can save Rs. 45,000/- by claiming Rs. 1,50,000/- as deduction under Section 80C and not opting for the new 'simplified' personal income tax regime.

Some Investments and Spending you can make

  • Your provident fund (PF) contribution.

  • Principal component of your housing loan for prescribed institutions.

  • You can invest Rs. 500/- to Rs. 1,50,000/- every year in a public provident fund (PPF) account.

  • Life insurance premiums for yourself, spouse and kids.

  • Contribution to unit-linked insurance plan (ULIP) for self, spouse and children.

  • Tuition fees of your 2 children.

  • Investment in National Saving Certificate (NSC) schemes (through post offices).

  • If you make a 5-year term deposit with a bank under a notified scheme or a post office.

  • Investment up to Rs.1,50,000/- a year in Sukanya Samriddhi account in the name of your daughter (limited to two children).

...And Savings Beyond u/s 80C

If you have not opted for the new 'simplified' personal income tax regime and your basic salary is over Rs. 1,00,000/- a month, your 80C limit will be used up by provident fund contributions alone. Want to save more? You can save up to Rs. 82,500/- a year in taxes (excluding surcharge and education cess) over and above the Rs. 1,50,000/- limit allowed under 80C if you invest Rs. 50,000/- in NPS, pay Rs. 25,000/- for medical insurance, and also repay the interest of Rs. 2,00,000/- on a housing loan for a self-occupied property.

A few more deductions are also available :

  • Up to  Rs. 10,000/- as interest earned on saving account with a bank or post office. If you are above 60,  Rs. 50,000/-. Interest from Fixed Deposit is also exempted for senior citizens.

  • Interest on education loan. No limit, but for maximum of 8 years.

  • Disability-related tax benefits Rs. 75,000/- (Rs. 1,25,000/- in case of severe disability) for expenditure in self, dependent spouse, child, parent or even sibling. as 

  • Treatment for certain diseases: Such as AIDS or malignant cancers for self and dependents up to Rs. 40,000/- (up to Rs. 1,00,000/- for patients who are 60 year or more). 

  • Donation: 100% or 50% of the amount donated (subject to conditions), depending on the institute/fund to which contribution is made, No deduction is allowed if donation is made cash over Rs. 2,000/-.

  • Invest in NPS: Employee’s contribution to NPS up to 10% of salary or self-employed individual’s contribution up to 20% of gross total income is deductible subject to overall cap of Rs. 1,50,000 (which includes investments under Section 80C). An additional deduction of Rs. 50,000/- is also available. This deduction is not available under the new ‘simplified’ personal income tax regime. Employer’s contribution is exempt up to 10% of salary (with an overall cap of Rs. 7.5 Lakh, which includes employer’s contribution to PF and superannuation fund). You may claim this deduction even if you opt for the new ‘simplified’ personal income tax regime.

  • Medical Insurance: An Individual can claim deduction up to Rs. 25000/-( Rs. 50000/- if a senior citizen is covered) under Section 80D for medical insurance paid for the person and his/her family. If the person insures his/her parents, there is an additional deduction of  Rs. 25,000/-(Rs.50,000/- if they are above 60) that is available. No such deduction is allowed for parents-in-law. If premium has been paid on the policy providing cover for more than a year, the deduction shall be allowed on a proportionate basis, subject to the specified monetary limit. This deduction is not available if you opt for the new ‘simplified’ personal income tax regime

 

Know About Capital Gains

Long-Term Capital Gains (LTCG )

Capital gain on sale of listed securities, of a unit of UTI/ equity-oriented fund, or a zero-coupon bond held for more than 12 months is treated as LTCG. Unlisted share of a company and immovable property (land/building) have to be held 24 months to qualify for LTCG.. In all other types of capital assets, sale after 36 months will qualify as LTCG.

Short-Term Capital Gains (STCG)

When securities (listed other than a unit/equity oriented MF/zero coupon bonds) are held for up to a year, the gain is treated as STCG. For all other type of capital assets, holding up to 24/36 months will qualify as STCG.

Set-off Provisions for Capital Losses are rather restrictive

  • Loss from transfer of a long-term capital asset can be set off against gain from transfer of any other long-term capital asset in the same year.

  • Loss from transfer of a short-term capital asset can be set off against gain from transfer of any other capital asset in the same year.

  • Any unutilised capital loss after absorption in the same year can be further carried forward to next eight years and be utilised under the same conditions as above.

Tax implication...  

...of income  

Long-Term Capital Gains (... of sale)  

Short-Term Capital Gains (...of sale)  

EQUITY SHARES

Dividends are taxable at slab rates

Gains up to Rs. 1,00,000 /-are exempt. Balance taxable at 10% without indexation *  

15% **

EQUITY MUTUAL FUNDS  

Dividends are taxable at slab rates

Gains up to Rs. 1,00,000 /-are exempt. Balance taxable at 10% without indexation *

15% ***

DEBT MUTUAL FUNDS  

Dividends are taxable at slab rates



20% with indexation

Tax at slab rate  

LISTED TAX-FREE BONDS  

Interest from notified tax-free bonds is exempt from tax  



10% without indexation

Tax at slab rate

LISTED DEBENTURES

Taxable, unless notified  


10% without indexation

Tax at slab rate
* Exemption available if securities transaction tax paid on sale and STT also paid on purchase, in case of equity shares acquired on or after Oct 1, 2004 (subject to certain exceptions notified.  
 ** If STT of 0.1% each is paid by seller and buyer in both cases  
 *** If STT of 0.001% each is paid by seller STT rates mentioned above are delivery-based transactions only 
 

Awaken the force for more money in the pocket

YOUR INCOME

SALARY

HOUSE PROPERTY

BUSINESS

CAPITAL GAINS

OTHERS

Is from 5 Broad Sources

Income from employer, including perks and allowances  
Income from rent  
Net profit from business or profession  
Profit or loss from sale of assets, investments, jewellery, property etc.  
Miscellaneous income, like dividend, bank interest and lottery earnings.  

Deductions /Exemptions available

Standard deduction (Rs. 50,000), HRA, LTC, etc, if you don't opt for the new 'simplified' personal income tax regime.  
Standard deduction (30% of income post house tax); interest paid on home loans and losses from previous years  
Business related expenditure incurred and brought forwarded losses (subject to conditions).  
Depends on holding period pf asset, availability of indexation benefit and investments in eligible options and brought forward losses  
Specified gifts from relatives or those received on certain occasions like wedding are tax-free. Interest for PPF is also tax-free.
Note : Clubbing will add to your Income  
(In Certain cases, the income of the spouses or child is clubbed with that of the taxpayers who has to bear the tax for instance)
  1. Income from investments in the name of child (below 18 years). In this case, the minor's income is clubbed with that of the parent who earns more.

  2. Income from investments made from the taxpayer's funds in the spouse's name.

 

Faceless Tax Troopers to Keep you Earn

Here are the key points that you need to know about faceless assessments:

  • All notices will be issued only in electronic mode in your e-filling account on the income –tax department’s portal. You may also receive intimation on your registered email ID. Do keep personal details like email id and mobile number updated on the income tax department’s portal for timely receipt of such notices.

  • Keep login credentials of your account on income tax portal handy to check on such notices and for filling timely responses.

  • The response to notices and all the documents are to be filled electronically on the income tax department’s portal within 15 days of issuance of the notice.

  • You should keep handy Form 16 and Form12BA (annual withholding tax certificate) issued by the employer, monthly salary slips and proof of all expenses reimbursed by your employer.

  • In addition, do ensure that documents for all deductions and exemptions claimed by you in the tax return form are readily available. These could include evidence of investments, including purchase of immovable property, copy of rent agreement, receipt of   municipal tax(if you have let out your house on rent),interest certificate for home loan , details of loans/gifts taken or received, copy of bank statements and demat account statements.

  • Under the new scheme, there is no face-to face interaction between the tax officer and the individual. The individual would not know details of tax officer who would be conducting the audit of his /her return.

  • There is no requirement to visit the tax office. In rare cases when personal interaction is required, hearing will be conducted only through video conferencing.

 

Tax Benefits on Principal and Interest Paid

 Interest payable on ‘self-occupied’ property is subject to a maximum deduction of Rs. 2 lakh under the head ‘Income from house property’. It can be set off against other heads of income, which includes salary income, in the same year.

This reduces your total tax liability. But to claim this, it is essential that the acquisition or construction is completed within 5 years from the end of the financial year in which the loan was taken; else the deduction will be limited to Rs. 30,000.

An additional tax deduction of up to Rs.1.5 lakh is available for interest on home loan taken during the period April 1, 2019 to March 31, 2022 for purchase of residential house with stamp duty value up to Rs. 45 lakh. However, the individual should not own any other residential property at the time of sanction of loan. If you still haven’t purchased your first home, do so at the earliest.

If you have rented out your property, the difference between the rent you get after adjustment of municipal taxes paid by you, standard deduction and the entire interest on housing loan is your ‘loss from house property’ which you can set off up to Rs. 2 lakh against your other income, say salary.

  • Deduction of interest on housing loan from a self-occupied house property is not available under new ‘simplified’ personal income tax regime.

  • Loss under head house property shall not be allowed to set off from any other head of income and cannot be carried forward under new ‘simplified’ personal income tax regime.

  • Please not that no notional rent will be added to the taxable income of your second self-occupied house property. Thus, if you don’t find a ready tenant you can keep it self-occupied. Also, do note that this leeway is available only for up to two houses.

    Scenario 1 Scenario 2
    House 1 Let out House 2 Self occupied Total House 1 Self occupied House 2 Self occupied Total
Net Annual value = Rent less municipal taxes less 30% standard deduction A 8,00,000 Nil Nil Nil Nil
Interest on housing loan B -10,00,000 -6,00000 -10,00,000 -6,00,000 -16,00,000
Deduction for interest C -10,00,000 -2,00,000 Nil Nil -2,00,000
Net Income/loss from House Property (HP) D = A-C (2,00,000) (2,00,000) -4,00,000 Nil Nil -2,00,000
Loss from HP set off available  E -2,00,000 Nil Nil -2,00,000
Loss eligibleto be carried  forward to next year for set off with HP Income -2,00,000 Nil Nil Nil
Salary income of current year F 12,00,000 Nil Nil 12,00,000
Total taxable income G = E+F 10,00,000 Nil Nil 10,00,000

Applicable to a taxpayer who has opted for old regime.