SENSEX NIFTY

Cost Inflation Index

Financial Year (CII)
1981-82 100
1982-83 109
1983-84 116
1984-85 125
1985-86 133
1986-87 140
1987-88 150
1988-89 161
1989-90 172
1990-91 182
1991-92 199
1992-93 223
Financial Year (CII)
1993-94 244
1994-95 259
1995-96 281
1996-97 305
1997-98 331
1998-99 351
1999-2000 389
2000-2001 406
2001-02 426
2002-03 447
2003-04 463
2004-05 480
Financial Year (CII)
2005-06 497
2006-07 519
2007-08 551
2008-09 582
2009-10 632
2010-11 711
2011-12 785
2012-13 852
2013-14 939
2014-15 1024

Tax Saving Instruments

Tax Planning

Pains you to see a chunk of your salary getting deducted towards taxes?

Here are tips to minimise your tax

ASK THE EXPERT

Choose Expert

Subhash Lakhotia

Tax Consultant

Anil Rego

Founder and CEO, Right Horizons

Lovaii Navlakhi

MD & Chief Financial Planner, International Money Matters

Arnav Pandya

Financial Planner

Balwant Jain

CFO, apnapaisa.com

Suresh Sadagopan

Certified Financial Planner, Ladder7 Financial Advisories

Umesh Rathi

CFPcm, Arihant Capital

Expert Comments

Arnav Pandya

Financial Planner

The landlords PAN would not be required since the rent does not cross Rs 1 lakh in the year but it is better to provide this as it would not lead to any problems later on.
sanoj_nambiar: Hi, I am planning to invest about 40k through ELSS mode. This is my first step towards mutual fund. I already realise, that I have made the mistake of not starting it in SIP earlier. I am considering to put it in dividend scheme so that I can recover portion of the amount quickly and average out the risk. My goal is purely tax saving with sufficient liquidity. Does this approach make sense. Can you suggest me good ELSS options Any guidelines on how to evaluate mutual funds based on their portfolio

Arnav Pandya

Financial Planner

The option of choosing the dividend option is appropriate since you have a three year lock in for the investment. The approach of using an ELSS makes sense if you are able to bear the risk and are not worried by the fluctuation in the value due to the movements of the equity markets. Look at long term figures to see how the fund has performed during times both good and bad. In terms of the portfolio see the kind of stocks that it holds and whether they are large cap or mid cap and the sectors where there is a larger exposure.

Arnav Pandya

Financial Planner

There is only one benefit of ELSS funds which is under Section 80C so if the fund that you are considering falls under this category like the SBI Tax Advantage then this can be claimed.

Arnav Pandya

Financial Planner

Long term capital gains tax would be taxable at zero rate which will not entail any liability while the short term capital gains would be taxable at 15 per cent plus cess.
vela4807: Sir, I am 18 years old girl , studying First year BE , My mother and father expired on few months back, their holding around Rs.10 lac in their SB Account. and I will get awaiting for around Rs.240000 p.a Family Pension? My BE degree Expenses around 2 lakh p.a , Then what can i do planning for my future financial planning , and any income tax are paid for me?

Arnav Pandya

Financial Planner

The amount that you get as family pension would be taxable in your hands but this would not entail any tax at the current rates and slabs of taxation. You should ensure that the amount available with you is invested for the long term that will generate income depending upon your requirement and at the same time also lead to some accumulation of wealth.
sivagadoo: Hi, i am 34 yrs old software professional and ctc is 13 laks p.a. i have 1 lack 80c investment and no other investments, i am paying 18k as tax per month. pls help me to invest on good products which will give me tax saving.

Arnav Pandya

Financial Planner

This year you can invest upto Rs 1.5 lakh in various eligible instruments under Section 80C to ensure that there is a deduction from the taxable income. In addition premium paid on health insurance policies is also eligible for a deduction. Depending on your risk taking ability you can choose the appropriate products from either the debt or equity space.
neeraj6333: Sir, I have invested 3600 Rs. in 1993-94 in Deep Discount Bond issued by Sardar Sarovar Narmada Nigam ltd. I have received redemption amount 50,000 in 2014-15. My query is that this amount will come under other income and submit ITR-1 or will be treat as long term capital gain and submit ITR-2. If it will come under LTCG then in which manner I will pay tax and what is correct? 1)When I include in my total income I come under 20% tax slab 2) or I should exclude it from total income and calculate tax separately on salary and on redemption amount 10% or 20% (with indexation). your guidelines are deeply required. Plz..

Arnav Pandya

Financial Planner

Taxation of deep discount bonds guidelines state that if the bond is redeemed then the difference that would arise would be taxable as interest income.

TAX CALCULATOR

This calculator helps you to calculate the tax you owe on your taxable income after considering all eligible tax deductions under section 80C.

Tax Deductions

80CCC

Nature of Deduction:

Payment of premium for annunity plan of LIC or any other insurer Deduction is available upto a maximum of Rs.10,000/-

Remarks:

The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund.The Finance Act 2006 has enhanced the ceiling of deduction under Section 80CCC from Rs.10,000 to Rs.1,00,000 with effect from 1.4.2007.

80CCD

Nature of Deduction:

Deposit made by an employee in his pension account to the extent of 10% of his salary.

Remarks:

Where the Central Government makes any contribution to the pension account, deduction of such contribution to the extent of 10% of salary shall be allowed. Further, in any year where any amount is received from the pension account such amount shall be charged to tax as income of that previous year. The Finance Act, 2009 has extended benefit to any individual assesse, not being a Central Government employee.

80CCF

Nature of Deduction:

Subscription to long term infrastructure bonds.

Remarks:

Subscription made by individual or HUF to the extent of Rs. 20,000 to notified long term infrastructure bonds was exempt for the financial year 2010-11 and 2011-12. However, the exemption is no longer present from financial year 2012-13.

80D

Nature of Deduction:

Payment of medical insurance premium. Deduction is available upto Rs.15,000/ for self/ family and also upto Rs. 15,000/- for insurance in respect of parent/ parents of the assessee.

Remarks:

The premium is to be paid by any mode of payment other than cash and the insurance scheme should be framed by the General Insurance Corporation of India & approved by the Central Govt. or Scheme framed by any other insurer and approved by the Insurance Regulatory & Development Authority. The premium should be paid in respect of health insurance of the assessee or his family members. The Finance Act 2008 has also provided deduction upto Rs. 15,000/- in respect of health insurance premium paid by the assessee towards his parent/parents. W.e.f. 01.04.2011, contributions made to the Central Government Health Scheme is also covered under this section.

80DD

Nature of Deduction:

Deduction of Rs.40,000/ - in respect of (a) expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependant relative. (b) Payment or deposit to specified scheme for maintenance of dependant handicapped relative. W.e.f. 01.04.2004 the deduction under this section has been enhanced to Rs.50,000/-. Further, if the dependant is a person with severe disability a deduction of Rs.1,00,000/- shall be available under this section.

Remarks:

The handicapped dependant should be a dependant relative suffering from a permanent disability (including blindness) or mentally retarded, as certified by a specified physician or psychiatrist. Note: A person with severe disability means a person with 80% or more of one or more disabilities as outlined in section 56(4) of the “Persons with Disabilities (Equal opportunities, Protection of Rights and Full Participation) Act.

80DDB

Nature of Deduction:

Deduction of Rs.40,000 in respect of medical expenditure incurred. W.e.f. 01.04.2004, deduction under this section shall be available to the extent of Rs.40,000/- or the amount actually paid, whichever is less. In case of senior citizens, a deduction upto Rs.60,000/- shall be available under this Section.

Remarks:

Expenditure must be actually incurred by resident assessee on himself or dependent relative for medical treatment of specified disease or ailment. The diseases have been specified in Rule 11DD. A certificate in form 10 I is to be furnished by the assessee from a specialist working in a Government hospital.

80E

Nature of Deduction:

Deduction in respect of payment in the previous year of interest on loan taken from a financial institution or approved charitable institution for higher studies.

Remarks:

This provision has been introduced to provide relief to students taking loans for higher studies. The payment of the interest thereon will be allowed as deduction over a period of upto 8 years. Further, by Finance Act, 2007 deduction under this section shall be available not only in respect of loan for pursuing higher education by self but also by spouse or children of the assessee. W.e.f.01.04.2010 higher education means any course of study pursued after passing the senior secondary examination or its equivalent from any recognized school, board or university.

80G

Nature of Deduction:

Donation to certain funds, charitable institutions etc.

Remarks:

The various donations specified in Sec. 80G are eligible for deduction upto either 100% or 50% with or without restriction as provided in Sec. 80G

80GG

Nature of Deduction:

Deduction available is the least of (i) Rent paid less 10% of total income (ii) Rs.2000 per month (iii) 25% of total income

Remarks:

(1) Assessee or his spouse or minor child should not own residential accommodation at the place of employment. (2) He should not be in receipt of house rent allowance. (3) He should not have a self occupied residential premises in any other place.

80U

Nature of Deduction:

Deduction of Rs.50,000/- to an individual who suffers from a physical disability (including blindness) or mental retardation.Further, if the individual is a person with severe disability, deduction of Rs.75,000/- shall be available u/s 80U. W.e.f. 01.04.2010 this limit has been raised to Rs. 1 lakh.

Remarks:

Certificate should be obtained on prescribed format from a notified ‘Medical authority’.

80RRB

Nature of Deduction:

Deduction in respect of any income by way of royalty in respect of a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available as :-Rs. 3 lacs or the income received, whichever is less.

Remarks:

The assessee who is a patentee must be an individual resident in India. The assessee must furnish a certificate in the prescribed form duly signed by the prescribed authority alongwith the return of income.

80QQB

Nature of Deduction:

Deduction in respect of royalty or copyright income received in consideration for authoring any book of literary, artistic or scientific nature other than text book shall be available to the extent of Rs. 3 lacs or income received, whichever is less.

Remarks:

The assessee must be an individual resident in India who receives such income in exercise of his profession. To avail of this deduction, the assessee must furnish a certificate in the prescribed form along with the return of income.

80C

Nature of Deduction:

This section has been introduced by the Finance Act, 2005. Broadly speaking, this section provides deduction from total income in respect of various investments/expenditures/payments in respect of which tax rebate u/s 88 was earlier available. The total deduction under this section is limited to Rs.1 lakh only.

Tax Slabs
Income tax slab (in Rs.)
Tax
0 to 2,00,000
No Tax
2,00,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,000
30%
Education Cess 2%
Secondary and Higher Education Cess 1%
GLOSSARY

Allowance

Allowance is generally defined as fixed quantity of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirement connected with the services rendered by the employee or as compensation for unusual conditions of that service. It is fixed, pre-determined and given irrespective of actual expenditure.

Assessment year

Assessment year means the period of twelve months starting from April 1 of every year and ending on March 31 of the year. The period of assessment year is fixed by statute. Income of previous year of an assessee is taxed during the following assessment year at the rates prescribed for such assessment year by the relevant Finance Act.

Assessee

Assessee means a person by whom any tax or any other sum of money (i.e., penalty or interest) is payable under the Act.

Approved gratuity fund

It means a gratuity fund which has been and continues to be approved by the Commissioner of Income-tax in accordance with the rules. Tax treatment of contribution to and payment from the fund is employer’s contribution is exempt from tax and actual payment received by the employee is exempt from tax within the limits.

Business

Meaning of business includes any trade, commerce, manufacture, or any adventure or concern in the nature of trade, commerce or manufacture.

Capital asset

The expression "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession.

Company

The expression "company" is defined to mean the following 1. any Indian company ; or 2.any body corporate incorporated under the laws of a foreign country ; or 3.any institution, association or a body which is assessed or was assessable / assessed as a company for any assessment year commencing on or before April 1, 1970 ; or 4.any institution, association or a body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Central Board of Direct Taxes to be a company.

Depreciation

Depreciation means loss or decline in value which occurs gradually over useful life of a material thing, due to physical wear, tear and decay, and is generally limited to losses or decline in value which cannot be restored by current repairs and maintenance.

Employees provident fund

Provident fund scheme is a retirement benefit scheme. Under this scheme, a stipulated sum is deducted from the salary of the employee as his contribution towards the fund. The employer also generally contributes simultaneously an equal amount out of its pocket to the fund. The contributions of employee and employer are invested in gilt-edged securities. Interest earned thereon is also credited to the provident fund account of employees.

Fair market value

Fair market value in relation to a capital asset means the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date. Where, however, such price is not ascertainable, it may be determined in accordance with the prescribed rules.

Gross total income

Income of a person is computed under the heads of Salaries, Income from house property, Profits and gains of business or profession, Capital gains and Income from other sources. The aggregate income under these five heads is termed as "gross total income".

Insurance Premium

The amount of any premium paid in respect of insurance against risk of damage or destruction of stocks or stores, used for the purpose of business or profession, is allowable as deduction.

Perquisites

The term "perquisites" is defined as a gain or profit incidentally made from employment in addition to regular salary or wages, especially one of a kind expected or promised. Thus, the phrase "perquisites" signifies some benefit in addition to the amount that may be legally due by way of contract for services rendered.

Salary Income

Income under the head 'salary' comprises of remuneration in any form (including perquisites) received by an employee from employer. Thus, there should be contractual employer-employee relationship. The contract may be express, oral or implied. Salary is chargeable on due or receipt basis. Arrears of salary paid or allowed are includible if not charged to income tax for any earlier previous year. 'Salary' includes wages, dearness allowance, Bonus. gratuity, annuity or pension, advance of salary, Fees / Commissions perquisites/ profits received from employer in addition to salary, Leave encashment while in service, Employer's contribution to provident fund in excess of 12% of salary of employee, profit in lieu of salary.

Total Income

Total income of an assessee is gross total income as reduced by amount deductible under various sections.

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