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

EXPERT ADVICE

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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
SwapR: I\'m 31 years old State govt. employee, earning is 5.52 p.a. after deduction At this moment, how can I save tax..?? and how can I invest..?? Please assist me..

Arnav Pandya

Financial Planner

You should ensure that several deductions available in the form of Section 80C where a sum of Rs 1.5 lakh is available plus under Section 80D for payment of health insurance premium is taken. Also if you have a housing loan then Rs 2 lakh of interest paid during the year would be available as a deduction and hence all these should be taken if these are possible.

Arnav Pandya

Financial Planner

Amount gifted to a spouse and then invested would result in the income arising from this being added to your income. There is no implication from the first gift to the spouse but if this leads to some income then this would be clubbed.
sudhirsahu: Sir, I bought REC tax free bonds for 2 lakhs one month before the interest payout date. And sold the bonds few days after that for about 1.94 lakhs. I assume there would be no tax on the interest paid out since it is tax free bonds. And there would also be no capital gains as my sell value is less than the buy value. Am i correct in my understanding of the rules?

Arnav Pandya

Financial Planner

There would not be any tax on the interest because the interest is tax free and there would also not be any tax on capital gains as there is no capital gains that has been earned.
raj8023: Sir, I am Working in offshore Diving industries last few years. I have NRE account. Some year i complete NRE days and some year not able to do that. Our job is day rate basic contract job. The contract maximum valid for 60 Day. Salary earned approx 18 Lacs / PA. * My Salary came USD from Singapore / Africa / Dubai. * As i heard there is some low which is called NRE Labour Act , which said If the job is contract basic and you earn Foreign currency and you not able to complete NRE days then also you not need to pay TAX on your Income. But you have to pay tax on Interest from your your Income amount. Is that True ? Should i Pay Tax 33% those years which i not able to complete NRE days ?

Arnav Pandya

Financial Planner

You should consult a practising chartered accountant with the exact details of your situation for each particular year to ensure that the exact position on the tax front can be known and the tax implication details are worked out.
nuvneet: Sir , I wish to buy a flat of around Rs. 25 lakh from govt authority.For that I want to take around half of the amount from my brother who lives abroad and works there,.So i wan tto know , if the amount taken would be taxable and if there is any upper limit on the amount that can be taken.I am a govt employee and tax payee.

Arnav Pandya

Financial Planner

Amount that is taken as a loan would not be considered as income and hence there would not be any tax implication of this move. Also if the amount is taken as a gift from your brother then this would fulfill the condition of being a relative and hence this would not be considered as income.

Arnav Pandya

Financial Planner

The tax on the gains that have been made on the mutual fund investment depends upon the nature of the fund where the investment has been made. If the fund is an equity oriented fund then the tax rate on long term capital gains will be zero per cent. While filing the income tax return the details have to be mentioned under the exempt income head.
mohanlal52: Sir. I have inherited 2 adjoining residential plots of 200 sq. yards situated now within Municipal Committee area purchased by my father in or about 1959 at a cost of Rs.1600 each. I propose to sell the plots for a sum of around Rs. 10 Lacs. Kindly advise me the LTCG tax liability and how can I save by investing the amount. Thanks Mohan

Balwant Jain

CFO, apnapaisa.com

For computing capital gains in case the property is acquired through inheritance, the cost to the previous owner is taken into account. However in case the asset is acquired prior to 1st Aril 1981, you have the option to take the market value of the same as on 1st April 1981 in stead of the cost to the previous owner. Since your father had bought the plots in 1959 it is beneficial for you to take the market value of the plots as on 31st March 1981 as your cost. Going by the way the law is worded toady the your indexed cost of acquisition will be calculated by taking the cost inflation index for the first year. You have two options to save the capital gains. Under first option you have to either purchase a residential house property within a period of two years from the date of sale of the plots or construct a residential house property within a period of three years from the date of sale of the plots. For claiming the exemption, you have to invest the sale consideration for residential property. So the amount of exemption from long term capital gains available here shall be in the ratio of the amount invested which bears to the amount of full sale consideration.The second option to salve the capital gain arising on transfer of plots is to invest the indexed capital gains in specified bonds (NHAI/REC). The maximum investment in a year can not exceed Rs. 50 lacs. These bonds have a lock in period of 3 years from the date of acquisition. The investment in bonds has to be made within a period of 6 months from the date of sale of the plots.

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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