Tuesday , October 24 2017

Tax Planning

One of the most common ignored sectors is tax planning which most of us don’t do. It is either due to ignorance of the instruments available in the market for tax planning or due to lack of understanding and willingness.

Tax planning not only saves money but it also helps in achieving the future financial goal.

Thus, it can be concluded that financial planning is incomplete without tax planning. Therefore, one must do the following:

  • One must look for all possible deductions available to individual according to his age and needs.
  • Individual should also be aware about tax slab in which they fall so as to plan for tax saving accordingly
  • Multiple options are available in the market through which not only individual can save money and earn interest/rewards but also save tax

DEDUCTIONS THAT HELP IN TAX SAVING

Based on different types of investments there are different sections available in law by which one can save tax to the maximum. Deductions are as follows:

  • Deduction under Section 80C&Section 80CCC

This section provides deduction to the individuals up to INR 1,50,000 for saving in any of the below mentioned instruments:

  • Post office schemes (along with sub heads)
  • Post Office Savings Account
  • 5-Year Post Office Recurring Deposit Account (RD)
  • Post Office Time Deposit Account (TD)
  • Post Office Monthly Income Scheme Account (MIS)
  • Senior Citizen Savings Scheme (SCSS)
  • 15 year Public Provident Fund Account (PPF)
  • National Savings Certificates (NSC)
  • KisanVikasPatra (KVP)
  • SukanyaSamriddhi Accounts
  • Life insurance policies
  • Tax saving Mutual funds
  • Tuition fees of children
  • Repayment of principle of housing loan
  • Tax saving fixed deposits (which is for 5 years or more)
  • Pension Plans (Comes under Section 80CCC)

 

  • Deduction under Section 80CCD
  • This section provides deduction to the individuals of if they make investment in Pension Scheme i.e. National Pension scheme (NPS) during a particular financial year
  • Maximum amount that can be deducted is INR 50,000
  • Option available only for Individual Investors not HUF
  • This Section provides additional deduction apart from Section 80C & 80CCC

 




  • Deduction under Section 80(D)

This section provides deduction to the individuals on premiums paid onmedical insurancefor himself, spouse or dependent children. And, in case of HUF it could be any family member. The maximum deduction is limited to the total premium paid by the individual.

  • Maximum deduction of INR 25000 for individual, spouse or dependent children
  • And, Maximum deduction of INR 30000 for senior citizen
  • Person can claim deduction of INR 5000 against the preventive health care medical check-up the for entire family in 1 financial year. This deduction is not over and above INR 25000
  • Also, if the parents are above 80 years of age and are not covered by any medical insurance than the amount spent on medical well-being of parents can also be used under same deduction up to INR 30,000

 

  • Deduction under Section 80DD

This section provides deduction to the individuals who incur expenses on medical disability of dependent family member.Also, money paid towards Life Insurance Premium can be deducted. Dependent family member could be any of following:

  • Parents
  • Brother or Sister
  • Spouse
  • In case of HUF any member of HUF
            DISABILITY PERCENTAGE FLAT DEDUCTION ALLOWED IRRESPECTIVE OF EXPENDITURE OCCURRED
Person having 40% Disability or more of one disability INR 75,000 for financial year 2015-2016
Person having 80% or more of one disability INR 1,25,000 for financial year 2015-2016
  • Deduction under Section 80DDB

This section provides deduction to the resident individual or HUF, for incurring expenses for medical treatment of AIDS, Cancer or Neurological diseases; for himself or dependent family member. Maximum deduction allowed on gross total income is as follows:

A.Y. 2016-17 A.Y. 2015-16
For HUF or Individual who are below 60 years of Age 40,000 40,000
Any resident individual whose age is above 60 years but below 80 years 60,000 60,000
Resident individual whose age is above 80 year 80,000 60,000

Note: To avail max benefit one must not have taken reimbursement from any insurance company for the same or by an employer.

  • Deduction under Section 80E
  • If the individual has taken any educational loan (for self, spouse, dependent children or for a student for whom the individual is a legal guardian) and is repaying interest for the same then the amount spent as interest can be a deduction.
  • Claim can be made for max period of 8 years or until the time when interest is paid (whichever is earlier)
  • There is no maximum limit for claiming deduction under this section.
  • Claim can be made for educational loan for higher studies/Vocational course within or outside India
  • Claim can only be made for interest paid for repayment of education loan. It cannot for the principal loan amount as it

 

  • Deduction under Section 80G
  • This section provides deduction to the individual who make donation for social and charitable reasons or make contribution towards national relief fund
  • In some cases 100% of the amount donated is deduction and in some cases 50% of the amount donated is deduction

 




  • Deduction under Section 80CCG
  • It is also known as Rajiv Gandhi Equity Saving Scheme
  • The eligibility to avail tax benefit under this section is:
    • Investor’s earning should be less than INR 12Lac per annum
    • Investor should be first time investors in listed equity shares
  • Maximum upto INR 50000 can be invested in the financial year
  • Deductionis of 50% of the amount saved or INR 25,000 whichever is less

 

  • Deduction under Section 80U

This section provides deductionto the individual for own disability. The deduction under this section is as follows:

 

DISABILITY PERCENTAGE FLAT DEDUCTION ALLOWED IRRESPECTIVE OF EXPENDITURE OCCURRED
Person having 40% Disability or more of one disability INR 75,000 for financial year 2015-2016
Person having 80% or more of one disability INR 1,25,000 for financial year 2015-2016

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