Saturday, December 29, 2018

Section 80 deductions can save tax more than you think



Most of us think that deductions mean deduction under section 80C which further means just related to Fixed deposits, Insurance and now National pension scheme. But, there are lot more tools which allow deductions under section 80. Just read it thoroughly.

All deductions are  allowed from the gross total income in order to arrive at taxable income. For the purpose of deduction, all amounts are allowed only on paid basis during the previous year. If the investment is not made between the period of income liable for tax then deduction is not allowed. All deductions are subject to maximum limit i.e. Rs.1,50,000 subject to any specific limit on some contributions/investment limiting deduction to Rs.100,000 only.

Please note that some of the deductions may not be available if return of income is not filed on or before due dates u/s 139(1).

1.       Deduction for Home loan u/s 80C –

If you have taken a loan to finance your home then you will not only get deduction for interest and loss on property under the Head of income ‘House Property’ but also get deduction u/s 80C up to limit of Rs. 1,50,000.

All you need is to refer your repayment schedule and insert principal amount in the 80C section.
What’s more, you are eligible for deduction of Rs.50,000 more u/s 80EE basis following condition:

·         You are a first time home buyer in FY 2016-17 i.e. assessee did not own a house         
        property on the loan sanction date.
·         The loan was sanctioned in between 1 April 2016 and 31 March 2017.
·         The loan sanction amount doesn’t exceed ₹ 35,00,000.
·         The value of house property doesn’t exceed ₹ 50,00,000.

2.       Various contributions u/s 80C :

Ø  Tuition fee is allowed to all parents having up to 2 children. This deduction does not cover private tutor fee. One  more thing, this deduction is very specific to ‘Tuition fee’ only, so any amount mentioned on fee slip as Library fee, music fee, sports fee, transport fee etc is not deductible.
This deduction is neither available for distant learning nor studies in abroad.
Ø  Life insurance cover provides cushion for your family in case of death or permanent disability of the insurer. This also provides you deduction under section 80C. Conditions to deduction:
·   Investment in the name of Self / Spouse & Children allowed
Ø  Other items to invest are Deferred annuity, provident fund, public provident fund, National Savings Certificate, Unit linked Insurance plan, Notified Mutual fund or UTI, Fixed deposit for more than 5 years, Five year Deposit Scheme of Post office, Deposit under Senior Citizen Saving Scheme, pension fund (80CCC), National Pension Scheme (80 CCD) etc.
Some plans have minimum period of holding applicable:
ULIP – 5 years
Life Insurance – 2 years
Deposit under Senior Citizen Saving Scheme – 5 years
Fixed Deposits with bank or post office – 5 years


3.       Mediclaim policy u/s 80D: The deduction is available if the following conditions are satisfied-
S. No
Self, spouse, dependent children
Maximum Eligible in ₹
Parents
Maximum Eligible in ₹
Maximum Eligible Deduction (inclusive of preventive check-up)
1
Senior Citizen
50,000.00
Senior Citizen
50,000.00
100,000.00
2
Other than Senior citizen
25,000.00
Senior Citizen
50,000.00
75,000.00
3
Other than Senior citizen
25,000.00
Other than Senior citizen
25,000.00
50,000.00


4.       Disability deductions under section 80DD/80U - Conditions for claiming deduction:
Particulars
80DD
80U
Eligible Person
Resident Individual or HUF
Resident Individual
Allowable for
Spouse, children, parents, brothers/sisters of employee or any of them dependent on him
Self
Disability
Rs, 75000
Rs. 75000
Severe disability
Rs. 125000
Rs. 125000
Requirement
Incurred any expenditure or paid /deposited any amount as specified
Certificate from the medical authority
It may be noted that employer should ensure that employee has submitted Form No. 10-IA for claiming deduction u/s 80DD or 80U.

5.       Deduction for medical treatment u/s 80DDB :
Deduction is available if following conditions are satisfied :

1.       Claim is made by individual and HUF resident in India.
2.       Claim is made for self or first family member.
3.       Claim is made for specified illness below:
Neurological diseases, Malignant cancers, AIDS, Chronic Renal Failure and Hematological disorders.
Limit for deduction
Rs. 40000 for non senior citizen
Rs. 1,00,000 for senior citizen for Assessment year 2019-20.
6.       Deduction for Interest on loan u/s 80E:
All interest on loan for education for Self/Spouse/Children is allowed for deduction. The loan should be taken from Financial institution. The loan must be taken for pursuing higher education.

7.       Deduction u/s 80EE: If loan is taken by individual from financial institution and loan is sanction during 1 April 2016 and 31 March 2017 for amount Rs.35 lakhs and value of property does not exceeds Rs.50 lakhs then deduction of Rs. 50,000 is allowed given assesse does not own any other house property.
8.    Deduction u/s 80G : This deduction is available to any tax payer for making any contribution to charitable institutions etc.
Deduction is available upto 100% and minimum 50% as prescribed of the amount contributed.

There are many more deductions that are available under section 80 but all of those are generally not available to individuals or not normally famous method of investment for the individual.
Income tax site can be referred for complete list or you can get in touch with me for any help.


Tuesday, December 25, 2018

All You Need to Know for your Salary Investment Proof Submission


Time to submit investment proof – Remember these deductions for salaries


You are at the part of the year when your HR department is asking you for Investment proofs. You started to assess your investments, and what, you have not done your investment fully. I am explaining you below what all types of investment you can do to save tax on salaries.
Please note that all deduction are available on paid basis.

House Rent Allowance:

HRA is allowed to employees who are leaving in the rented accommodation as they are away from their home or could not live in their owned house due to some unavoidable reasons:

HRA limits varies with city you live in:

The least of the following will be exempt:

Mumbai/Kolkata/Delhi/Chennai
Other Cities (Gurgaon, Noida etc.)
Allowance actually received
Allowance actually received
Rent paid less 10% of basic salary
Rent paid less 10% of basic salary
50 per cent of basic salary
40 per cent of basic salary

PAN Card number along with name and address of the landlord is mandatory and needs to be
declared if the rent paid is more than ₹ 1 lakh annually.

Can I claim HRA and home Loan together?

There are no restriction
as per Income Tax Act and hence,
Home Loan deduction and HRA can
be claimed together.
However, organizations have differing views on the subject of an individual having an owned
property in the same city as that in which he is staying in a rented accommodation. Some
organizations feel, this combination can be claimed only if the individual has a sufficient reason
for having a property in the same city but is staying in a rented accommodation.
There is no problem when both the owned property and rental accommodation is in different
cities.

House property:

If you have purchased a property on loan, then principal, interest and loss on house property is available for deductions, given you have received the possession of the house property.
Maximum deduction allowed on account of interest paid on loan for a self-occupied property:

Purpose of borrowing capital
Date of borrowing capital
Maximum Deduction allowable
1 Repair or renewal or reconstruction of the house
Any time
₹ 30,000
2 Acquisition or construction of the house
Before 01.04.1999
₹ 30,000
3 Acquisition or construction of the house
On or after 01.04.1999
₹ 2,00,000

Conditions for availing maximum deduction of ₹ 2,00,000:
1.     The house so acquired or constructed should be completed within 5 years from the end of the FY in which the capital was borrowed.
2.     The completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
3.     Certificate specifying the amount of interest payable.
Note: In case of Joint Property, the co-owner’s declaration needs to be submitted.
A maximum of 1/5th of the pre-construction period Interest will be allowed as deduction. Pre-construction period Interest will be allowed as deduction subject to maximum ceiling of ₹30,000 or ₹2,00,000 as the case may be.
Any principal amount paid during the pre-construction period cannot be claimed.

Deduction of principal is covered in section 80C.
Loss from house property is limited to maximum of Rs. 2,00,000.

Investment under section 80C:

You can invest in one or more of the following options and get a deduction u/s80C:
Life Insurance, Unit Linked Insurance Plan (ULIP), Pension plans, Equity Linked Savings Scheme(ELSS) or Mutual fund, Infrastructure bond, Public Provident Fund, National Saving Certificate, Deposits more than 5 years, Sukanya Smiridhi Yojna.
You will also get deduction for Home loan and Tuition fee (upto 2 children)
Limit for deduction for above items cannot be more than Rs. 1,50,000.
Note : NPS is available for deduction more than limit of Rs.1,50,000 basis satisfying some conditions.


Mediclaim:

Limits are:

S. No
Self, spouse, dependent children
Maximum Eligible in ₹
Parents
Maximum Eligible in ₹
Maximum Eligible Deduction (inclusive of preventive check-up)
1
Senior Citizen
50,000.00
Senior Citizen
50,000.00
100,000.00
2
Other than Senior citizen
25,000.00
Senior Citizen
50,000.00
75,000.00
3
Other than Senior citizen
25,000.00
Other than Senior citizen
25,000.00
50,000.00

Disability
Conditions for claiming deduction under section 80DD/80U:
Particulars
80DD
80U
Eligible Person
Resident Individual or HUF
Resident Individual
Allowable for
Spouse, children, parents, brothers/sisters of employee or any of them dependent on him
Self



Disability
Rs, 75000
Rs. 75000
Severe disability
Rs. 125000
Rs. 125000
Requirement
Incurred any expenditure or paid /deposited any amount as specified
Certificate from the medical authority
It may be noted that employer should ensure that employee has submitted Form No. 10-IA for claiming deduction u/s 80DD or 80U.


Education loan
All interest on loan for education for Self/Spouse/Children is allowed for deduction.

Please note that:
Investment proofs are submitted with Employers for deductions, however, ultimate responsibility resides with employee to produce documents as and when required by the authorities, so keep them handy.
Always check with your HR department for documents required by them for deductions. This guide can help you to be prepared.

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