Understanding Tax!

Tax 2008-2009 – The slabs! Assessee (others) (Male < 65, HUF) – Rs: 1,50,000 Women Assessee ( < 65) – Rs: 1,80,000 Senior Citizen (65 or 65+) – Rs: 2,25,000 0 – 1,50,000 - Nil 1,50,001 – 3,00,000 - 10% (15,000) + 3% E.C 3,00,001 – 5,00,000 - 20% (60,000) + 3% E.C 5,00,001 – above - 30% + 3% E.C 10% Surcharge - above 10,00,000

Assessee (others) (Male < 65, HUF) – Rs: 1,50,000

Women Assessee ( < 65) – Rs: 1,80,000

Senior Citizen (65 or 65+) – Rs: 2,25,000

0 – 1,50,000 - Nil

1,50,001 – 3,00,000 - 10% (15,000) + 3% E.C

3,00,001 – 5,00,000 - 20% (60,000) + 3% E.C

5,00,001 – above - 30% + 3% E.C

10% Surcharge - above 10,00,000

Rates – Ready Reckoner! Rate Others Women < 65 Senior Citizens Up to 1,50,000 - - - 1,50,001 to 1,80,000 10% - - 1,80,001 to 2,25,000 10% 10% - 2,25,001 to 3,00,000 10% 10% 10% 3,00,001 to 5,00,000 20% 20% 20% 5,00,001 & above 30% 30% 30% 10,00,001 & above 10% Surcharge on Tax Education Cess 2% Education Cess on( Tax + SC)

Tax, Tax and more tax!! 20% 30% 10% 0 0 1,50,000 15,000 3,00,000 55,000 5,00,000 2,05,000 10,00,000 Tax Liability Income

Tax & Planning

Relief(s) Available! Section 80 C Section 80 CCC Section 80 CCD Section 80 D Section 80 E

Section 80 C

Section 80 CCC

Section 80 CCD

Section 80 D

Section 80 E

80C - Conditions Apply! Cannot exceed Rs.1,00,000 Sum may be paid or deposited at any time during the year No limits for various items specified u/s. 80C. Therefore, an assessee may opt to invest even in only one item say insurance premium Premium or other payment made on insurance policy not in excess of 20% of actual capital sum assured Tuition Fee for any two children of the assessee Principal repayment on loan borrowed for acquiring commercial property is not eligible Residential property under construction for which principal has been repaid does not qualify for deduction

Cannot exceed Rs.1,00,000

Sum may be paid or deposited at any time during the year

No limits for various items specified u/s. 80C. Therefore, an assessee may opt to invest even in only one item say insurance premium

Premium or other payment made on insurance policy not in excess of 20% of actual capital sum assured

Tuition Fee for any two children of the assessee

Principal repayment on loan borrowed for acquiring commercial property is not eligible

Residential property under construction for which principal has been repaid does not qualify for deduction

80C– More Conditions Apply! Repayment of principal on loan borrowed for residential house (whether let-out or self occupied) only is entitled for deduction. Where the loan is availed for any addition, alteration, repair or renovation no deduction can be claimed for principal repayment Repayment of loan borrowed for housing from relatives, friends, non-specified employer / institution are not eligible for deduction. However, any interest paid on such loan borrowed is deductible under section 24, while computing income under the head “House Property” Fixed Deposit in Banks must be for 5 years

Repayment of principal on loan borrowed for residential house (whether let-out or self occupied) only is entitled for deduction.

Where the loan is availed for any addition, alteration, repair or renovation no deduction can be claimed for principal repayment

Repayment of loan borrowed for housing from relatives, friends, non-specified employer / institution are not eligible for deduction.

However, any interest paid on such loan borrowed is deductible under section 24, while computing income under the head “House Property”

Fixed Deposit in Banks must be for 5 years

80C– Additional Options! Five year time deposit in an account under Post Office Time Deposit Rules, 1981. Deposit in an account under the Senior Citizens Savings Scheme Rules, 2004

Five year time deposit in an account under Post Office Time Deposit Rules, 1981.

Deposit in an account under the Senior Citizens Savings Scheme Rules, 2004

80C - Popular Choices! Mutual Funds Insurance ULIP Principal repayment of Housing Loan Tuition fee – paid for children (own, adopted, step) for full time education in India. [ Note: Tuition fee paid for grandchildren is eligible for deduction for the HUF ] Fixed Deposits in Banks (5 years) NSC – National Savings Certificate PF – Provident Fund [SPF, PPF, RPF] 10 year Post Office Savings Bank (CTD) Stamp Duty and Registration Charges

Mutual Funds

Insurance

ULIP

Principal repayment of Housing Loan

Tuition fee – paid for children (own, adopted, step) for full time education in India. [ Note: Tuition fee paid for grandchildren is eligible for deduction for the HUF ]

Fixed Deposits in Banks (5 years)

NSC – National Savings Certificate

PF – Provident Fund [SPF, PPF, RPF]

10 year Post Office Savings Bank (CTD)

Stamp Duty and Registration Charges

80CCC & 80CCD –Pension-No Tension ! 80CCC-Contribution to pension scheme Rs.1,00,000 (outer limit) Disallowance on cancellation or lapse All withdrawals are taxable on surrender / maturity 80CCD-Contribution to CG pension scheme 10% of Salary (Basic + DA) All withdrawals are taxable on surrender / maturity

80CCC-Contribution to pension scheme

Rs.1,00,000 (outer limit)

Disallowance on cancellation or lapse

All withdrawals are taxable on surrender / maturity

80CCD-Contribution to CG pension scheme

10% of Salary (Basic + DA)

All withdrawals are taxable on surrender / maturity

80D – Health is wealth (literally)! 80 D – Contribution to Medical Insurance Schemes Rs: 15,000 Self + Spouse + Dependent Children + Dependent Parents Rs: 20,000 for senior citizens Now, an additional deduction of Rs: 15,000 (Rs: 20,000 if parents are senior citizens) is available to an individual for payment of medical insurance premium for parents.

80 D – Contribution to Medical Insurance Schemes

Rs: 15,000

Self + Spouse + Dependent Children + Dependent Parents

Rs: 20,000 for senior citizens

Now, an additional deduction of Rs: 15,000 (Rs: 20,000 if parents are senior citizens) is available to an individual for payment of medical insurance premium for parents.

80E – It’s good to study!  80 E – Repayment of Education Loans Only Interest is eligible for deduction No Limit Deduction eligible for initial year and immediately succeeding seven years Deduction eligible for repayment of education loans made for spouse or children

80 E – Repayment of Education Loans

Only Interest is eligible for deduction

No Limit

Deduction eligible for initial year and immediately succeeding seven years

Deduction eligible for repayment of education loans made for spouse or children

What is the Tax liability if Total Income is Rs.300,000 (for Male assessee < 65) Test Yourself! i Rs.15,000 ii Rs.13,330 iii Rs.13,707 iv Rs.15,450

Fixed Deposit in Banks must be for ___ years to be eligible for Section 80C? Test Yourself! i 3 ii 5 iii 2 iv No specifications

What is the Tax liability if Total Income is Rs.180,000 (for Female assessee < 65) Test Yourself! i Rs.15,000 ii Rs.1,030 iii NIL iv Rs.15,450

What is the maximum limit under Section 80E? Test Yourself! i Rs.15,000 ii Rs.5,000 iii Rs.20,000 iv None

What is the Tax liability if Total Income is Rs.500,000 (for Male Assessee < 65) Test Yourself! i Rs.56,650 ii Rs.77,250 iii Rs.75,000 iv Rs.50,600

Plan Ahead! Have A Non ‘Tax’ing Year!!