Tax Saving Plans

How to save taxes as a salaried individual?

Salaried individuals are one class of people that have to pay maximum taxes in our country. This often leads to disappointment among salaried individuals. Of course, who would be happy knowing that half of the hard earned income has been deducted in the form of taxes? But with the right tax planning strategies, it is possible to save your income from tax liabilities. Here are few ways that will help you save taxes as a salaried individual.

Restructure your salary: We often spend money from our own account on expenses which are actually company’s or employer’s requirement. For example, if you wear a uniform for your job’s sake or talk to a client with your own mobile phone. Such expenses should be certainly covered by your employer. Ask for the restructuring of your salary, if you are the one who is paying for the following expenses.

Some allowances which save tax

Conveyance

Newspaper, Books and Magazine

Medical Treatment

Uniform

Telephone and Mobile

Office Entertainment

Make use of section 80C: Under section 80C, you can avail a maximum tax deduction of Rs 1 lakh by investing in any of the following options

ELSS(Equity linked saving scheme)

Public provident fund

Life insurance policy

Fixed deposits

National saving certificates.

Save tax on rent payment: You may be working outside your city and do not have a company accommodation. Expenses on rent payment should be deductible from your taxable income. House rent allowances include 25 % of the total income. However, the deduction will not be allowed if you own a residential house in that location.

Reimburse travel and medical expenses: Personal expenses such as travel and medical are also tax deductible. Although you will be required to provide proper receipts and bills in order to claim the deduction. Deduction, under this category, is limited up to Rs 15,000.

Tax saving from home loans: As a salaried individual, you will always consider a home loan option before buying a house. In such case, do not forget to take into account tax deductions which are applicable to both principal payments as well as interest payment. Section 80C offers deduction up to Rs 1 Lakh on principal component of your home loan.

Apart from considering all the above Tax Saving Plans options, consult a professional tax planner to avoid any last minute hassle. It is important to start your tax planning well before 31st March and to file your returns before the 31st of July each year.

Source: http://tax-saving-plans.tumblr.com/post/143984905105/how-to-save-taxes-as-a-salaried-individual

Best Tax Saving Plan

All About Deduction Under Section 80C And Tax Planning

Background for Section 80C of the Income Tax Act (India) / what are eligible investments for Section 80C:

Section 80C replaced the existing Section 88 with more or less the same investment mix available in Section 88.  The new section 80C has become effective w.e.f. 1st April, 2006.  Even the section 80CCC on pension scheme contributions was merged with the above Section 80C.  However, this new section has allowed a major change in the method of providing the tax benefit.  Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt.  One must plan investments well and spread it out across the various instruments specified under this section to avail maximum tax benefit. Unlike Section 88, there are no sub-limits and is irrespective of how much you earn and under which tax bracket you fall.

The total limit under this section is Rs 1.50 lakh from financial year 2014-15 / Assessment Year 2015-16. Before FY 2014-15 the limit was Rs. 1 Lakh. Under this heading many small savings schemes like NSC, PPF and other pension plans. Payment of life insurance premiums and investment in specified government infrastructure bonds are also eligible for deduction under Section 80C

Most of the Income Tax payees try to save tax by saving under Section 80C of the Income Tax Act.  However, it is important to know the Section in to so that one can make best use of the options available for exemption under income tax Act.   One important point to note here is that one can not only save tax by undertaking the specified investments, but some expenditure which you normally incur can also give you the tax exemptions.

Besides these investments, the payments towards the principal amount of your home loan are also eligible for an income deduction. Education expense of children is increasing by the day. Under this section, there is provision that makes payments towards the education fees for children eligible for an income deduction

Sec 80C of the Income Tax Act is the section that deals with these tax breaks. It states that qualifying investments, up to a maximum of Rs. 1.50 Lakh , are deductible from your income. This means that your income gets reduced by this investment amount (up to Rs. 1.50 Lakh), and you end up paying no tax on it at all!

This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the highest tax bracket of 30%, and you invest the full Rs. 1.50 Lakh, you save tax of Rs. 45,000. Isn’t this great? So, let’s understand the qualifying investments first.

Qualifying Investments

Provident Fund (PF) & Voluntary Provident Fund (VPF): PF is automatically deducted from your salary. 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.

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 8.70% tax-free (Compounded Yearly) and the normal maturity period is 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1, 50,000. A point worth noting is that interest rate is assured but not fixed.

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

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.

Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house.

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: This section – Sec 80CCC – stipulates that 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. 1.50 Lakh. This also means that your investment in pension funds up to Rs. 1.50 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC cannot exceed Rs. 1.50 Lakh.

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 9.20% 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 Best Tax Saving Plan . The account may be opened by an individual,

Who has attained age of 60 years or above on the date of opening of the account?

Who has attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement.

No age limit for the retired personnel of Defense services provided they fulfill other specified conditions.

Source: http://bestsavingsplan.tumblr.com/post/143625123529/all-about-deduction-under-section-80c-and-tax

SIX TASKS TO DO IN THE NEW FINANCIAL YEAR

Tax Saving Plans

Tax Saving Plans

Quick tips to save tax through insurance

Come March and all of us will be busy in calculating our tax liabilities. In fact, most organisations start asking for proofs of investment under tax exempted instruments by January itself.

Thus, this is the time when one can review his or her tax liabilities and take necessary actions. As you may already be aware that this year the income tax exemption limit towards life insurance has increased from Rs 1 lakh to Rs 1.50 lakh. It is a significant jump of flat 50 per cent. This exemption can be claimed under section 80C of the Income Tax Act.

But, are you going to take advantage of this move? Of course, you should. Unfortunately, there are millions of people who had been investing in insurance as per the previous limit of Rs 1 lakh. But it is still not late and you can take a corrective action.

What about pension funds?

If you are thinking of investing in a long-term pension fund, then you can claim tax benefit under section 80CCD of the Income Tax Act. The deduction under this section can be availed up to Rs 1 lakh.

Although, the pension which you receive after the policy tenure is applicable to income tax. The percentage of tax depends upon the amount of your gross taxable income.

Section 80 CCE of the Act specifies that the total limit of deduction under the abovementioned sections – 80C and 80CCD comes to Rs 1.50 lakh.

Deduction under health insurance

After life insurance, you can further claim income tax deduction with respect to premium paid towards health insurance. There is a provision of deduction up to Rs 15,000 towards health insurance.

This is further added up by Rs 20,000 towards health insurance premium paid for parents above 60 years of age. If parents are below 60 years, then the tax deduction would be Rs 15,000. Tax payers, who fall in the category of senior citizens, can also claim the deduction of Rs 20,000.

Are you worried about low returns?

A large number of people appreciate life insurance plans because of their dual benefit of risk coverage and tax exemption. But there is always a concern on the low rate of returns offered by these plans. It is observed that most plans offer annual returns in the range of 5-8 per cent.

This rate of return is even lower than average rate of inflation. Thus, investing in insurance is not preferred by people who wish high return on investment. They may invest some amount to cover risk and get some exemption but they always aspire to invest in other instruments such as equities and real estate. Is there a solution?

Well, we cannot say anything about real estate, but yes, you can always invest in equities and insurance altogether. Unit Linked Insurance Plan (ULIP) are the potential solution.

These plans are also recognised for Tax Saving Plans exemption under section 80C and there is an added benefit of investing in equity markets. You can always the allocation of your premium in traditional debt instruments and equities to balance risks. For instance, you can specify that 40 per cent of your premium should be invested in equities and the rest in government securities. This helps is enhancing the average rate of returns on you investment.

For instance, you invest Rs 1 lakh in ULIPs, specifying that Rs 60,000 should be invested in government securities and the rest in equity markets. Now, in a year if your plan generate 9 per cent on government securities and 15 per cent from equity markets, your total return will be as: Rs 5,400 from securities and Rs 6,000 from equities. This will bring you a return of Rs 11,400 in total – 11.4 per cent returns per annum.

In the long run, you are able to enjoy the power of compounding. ULIPs have a lock-in period of 3-5 years, and you are somehow bound to think long term. If you tend to withdraw the premium before this period, the deductions are as high as 30 per cent.

From these perspectives, all the insurance plans have such conditions in place. That means, if you withdraw premium amount before a certain period, which is generally 3-5 years, then the penalties fall in the range of 30 per cent. Thus, it is better to invest in insurance from a long term perspectives, and it really works, providing you a sizeable corpus.