Income Tax

Tax benefits in india

Income Tax, among the largest revenue generators for the Union Government, is a form of direct tax that is levied on individuals as well as firms and companies, whereby a portion of their income (or profits incase of non-individuals) is chargable as income tax.

While this tax collected by the Government is used for development of the country, there are various provisions in the law that can be used to reduce our tax liability. In order to minimise our tax, we need to plan well and use as many tax saving techniques as possible.

An individual A, with a CTC of Rs 10 lacs pays a tax of Rs 80,000 while Mr B, who has the same CTC pays a mere Rs 40,000. This is because Mr B has planned his taxes well, and hence ends up with a much lower tax burden, in a legal manner.

The above situation illustrates the importance of tax benefit, tax planning for individuals, and as a smart individual you must take the help of professionals to reduce your tax liability.

Section 80C is the most popular under which individuals save tax, though it isn’t the only one. To understand where else an individual can save taxes please contact to our Tax expert.

In an era of specialisation, like all other spheres of life, even for effective tax planning we need the advice of experts. For individual tax advice, you may also consult our expert team.
To discuss your tax planning, simply fill in the query form above or write to us at info@mgracesolution.com

India Income tax slabs 2015 – 2016 for General tax payers

Overall

Income Tax Slab (In Rs) Tax
0 to 2,50,000 Nil
2,50,001 to 5,00,000 10%
5,00,001 to 10,00,000 20%
Above 10,00,000 30%

Senior citizens (Aged 60 years but less than 80 years)

Income Tax Slab (In Rs) Tax
0 to 3,00,000 Nil
3,00,001 to 5,00,000 10%

Very senior citizens (Aged 80 and above)

Income Tax Slab (In Rs) Tax
0 to 5,00,000 Nil

1. Under section 80 C – 1 / 2

  1. Provident Fund
  2. Public Provident Fund
  3. Life Insurance
  4. Pension Funds
  5. Infrastructure Bonds
  6. National Savings Certificate
  7. Equity Linked Savings Scheme
  8. Bank FDs ( 5 Yrs and above)
Overall limit of Rs. 150,000

2. Options beyond 80 C

If you have exhausted your limit of rs. 1,50,000 under section 80C, here are a few more options:

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    Sec 80CCG: RGESS is a tax saving scheme basically for 1st time investors (annual income not exceeding Rs. 10 lakhs). Lock in period is of three years and for tax exemption purpose only Rs. 50,000 is eligible. Tax deduction is 50% of invested amount.

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    Sec 80D: Deduction of Rs. 25,000 for medical insurance of self, spouse and dependent children and Rs. 30000 for medical insurance of parents above 65 years.

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    Sec 80E: Deduction in respect of interest on loan taken for higher education

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    Sec 24:Interest paid on the home loan: a deduction up to Rs. 2,00,000 towards the total interest payable on the home loan.

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    Sec 80G: Donations to specified funds or charitable institutions.

3. HRA

Are you paying rent, yet not receiving any HRA from your company? The least of the following could be claimed under Section 80GG:

  1. 25 percent of the total income or
  2. Rs. 2,000 per month or
  3. Excess of rent paid over 10 percent of total income
  4. This deduction will however not be allowed, if you, your spouse or minor child owns a residential accommodation in the location where you reside or perform offices duties.
  5. If HRA form part of ypur salary, then the minimum of the following three is available as exemption:
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      The actual HRA received from your company

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      The actual rent paid by you for the house, minus 10 percent of your salary (this includes basic dearness allowance, if any)

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      50 percent of your basic salary (for a metro) or 40 percent of your basic salary (for non-metro)

4. Tax Savings under Home Loans

  1. Use your home loan efficiently to save more tax. The principal component of your loan, is included under Section 80C, offering a deduction up to Rs. 1,50,000. The interest portion offers a deduction up to Rs. 2,00,000 separately under Section 24.
  2. The Govt. has been encouraging individuals to invest more on House Property.
  3. Greater benefits on Housing Loan by exempting payment of interest as well as principal part of the loan. Budget 2013 introduced a new section 80EE giving additional benefits of Rs. 1 Lakh on interest payment to Individuals who were taking housing loan for the first time.

Why need Tax Planning

  1. Increasing Net Income
  2. Adhering to statutory requirements
  3. Enhancing credit worthiness
  4. Improving post tax investment yields
  5. Managing your personal finance and cash flow better
  6. Balancing your short-term and long-term financial goals

Tax Saving Tips

The Department of Income Tax provides numerous provisions whereby an individual may save tax, in a perfectly legal manner. When employed, these techniques would lead to a lower tax payment, that means a higher net income. In this section we however look at income tax for an individual. Here are a few tips:

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    Ask your employer to create a tax friendly package. LTA, conveyance, Medical allowance help to cut down on income tax.

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    Ask your employers to replace part of your salary with food vouchers such as Sodexho

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    Save as much tax under section 80(c) as possible by selecting the instruments best suited to your risk appetite.

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    If you are salaried and living in a rented house, declare the same to your employer since it can help bring down your taxable income.

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    REMEMBER – HRA is exempt over and above the limit set by section 80C

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    Look out for investment plans that provide a tax exemption on returns which would mean that all growth/returns can be fully enjoyed by the you.

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    A mediclaim provides rebate over and above the 1Lac limit of Section 80C. Incase you do not have medical insurance buying a plan for yourself and your family can also provide you further tax relief.

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    Homeloans not only contribute to exemption under section 80(c), but can also reduce your taxable income through interest repayment under section 24.

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    Incase, interest outflow is high, it may be advisable to take a joint home loan so that the interest exemption can be shared between both the applicant and the co-applicant.

These tips are meant to help you reduce your tax outflow. However for the best individual advice please consult our team of experts.