Indian Income Tax Slabs, Capital Gains Taxation System in India Total Income and Types of Assessee Taxable Income Slab for FY 2011 - 12 Capital Gains Taxation Intra-day Trading Taxation on Derivatives Dividend Distribution Tax (DDT) Securities Transaction Tax (STT) Tax Deducted at Source (TDS) Surcharge and Education Cess Mutual Fund Taxation Direct Equity Trading Taxation Debentures Taxation PMS Taxation Private Equity Taxation Gold Taxation Real Estate Taxation Insurance Taxation Section 80 C Investments Other Small Savings Taxation Wealth tax Sec 80 D - Health Insurance Premium DTC - Proposed Changes

1. 18-02-2012
All about taxation on Indian Financial Products for FY 2011 - 12
ÉTICA WEALTH MANAGEMENT PVT LTD
April 2011
INDEX
Taxation System in India Debentures Taxation
Total Income and Types of Assessee PMS Taxation
Taxable Income Slab for FY 2011 - 12 Private Equity Taxation
Capital Gains Taxation Gold Taxation
Intra-day Trading Real Estate Taxation
Taxation on Derivatives Insurance Taxation
Dividend Distribution Tax (DDT) Section 80 C Investments
Securities Transaction Tax (STT) Other Small Savings Taxation
Tax Deducted at Source (TDS) Wealth tax
Surcharge and Education Cess Sec 80 D - Health Insurance
Mutual Fund Taxation Premium
Direct Equity Trading Taxation DTC - Proposed Changes
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2. 18-02-2012
TAXATION SYSTEM IN INDIA
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies.
Direct Taxes
Capital Gains Tax
Tax on Corporate Income
Personal Income Tax
Tax Incentives
Double Taxation Avoidance Treaty
Wealth Tax
Taxes Indirect Taxes
Levied
Excise Duty
Service Tax
Custom Duty
Securities Transaction Tax
Taxes Levied by State Governments and Local Bodies
Sales Tax / VAT
Other Taxes
TOTAL INCOME AND TYPES OF ASSESSEE
GROSS TOTAL INCOME:
As per the Income Tax Act Income is Chargeable to tax under five heads, those being:
1) Salaries
2) Income from House Property
3) Profits and Gains from Business or Profession
4) Capital Gains.
5) Income from Other Sources
PERSON / TYPES OF ASSESSEE:
1) An Individual. e.g. Mr. A or Mr. B.
2) A Hindu Undivided Family. e.g. Mr. A (HUF)
3) A Company. e.g. XYZ Pvt. Ltd. Or ABC Ltd.
4) A Partnership firm. e.g. M/s ABC or M/s XYZ and Co.
5) An Association of Persons or a Body of Individuals, whether incorporated or not. e.g. ABC
Sangh or XYZ Dal.
6) A Local Authority. e.g. Pune Municipal Corporation or PCMC Municipal Corporation.
7) Every Artificial Juridical persons not falling within any of the above categories. (Residual Category).
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3. 18-02-2012
TAXABLE INCOME SLAB FOR INDIVIDUALS FOR FY 11-12
Assessee Total Income Tax rate
Women Rs. 0 - 1,90,000 Nil
Rs. 1,90,001 - 5,00,000 10%
Rs. 5,00,001 - 8,00,000 20%
Rs. 8,00,001 or more 30%
Senior Citizen Rs. 0 - 2,50,000 Nil
(60 years and above) Rs. 2,50,001- 5,00,000 10%
Rs. 5,00,001 - 8,00,000 20%
Rs. 8,00,000 or more 30%
Others (Men / HUF etc) Rs. 0 - 1,80,000 Nil
Rs. 1,80,001 - 5,00,000 10%
Rs. 5,00,001 - 8,00,000 20%
Rs. 8,00,000 or more 30%
Very Senior Citizen Rs. 0 - 5,00,000 Nil
(80 years and above) Rs. 5,00,001 - 8,00,000 20%
Rs. 8,00,000 or more 30%
Surcharge is not applicable
Education cess is applicable @ 3 percent on income-tax
CAPITAL GAINS
A Capital Gain can be defined as an any income generated by selling a capital investment . The 'gain' here is the difference
between the price originally paid for the investment and money received upon selling it, and is taxable.
Nature of Asset (Capital Investment) Short term capital assets Long term capital assets
Listed & Unlisted Shares, Securities (like Held less than 12months Held more than 12months
Debentures, Govt. securities) listed on a
recognized stock exchange in India, Mutual Funds
and Gold ETF
Assets other than mentioned above i.e. sale of Held less than 36 months Held more than 36 months
property / Unlisted Debentures
Type of Gain Tax rate in case of transfer of Tax rate in case of transfer of
assets subject to payment of other assets
STT
Long-term capital gains
Long- NIL 22.145 % with indexation
Short-term capital gains
Short- 16.995 % Progressive slab Rates
applicable to individuals
Losses under the head “Capital Gains” cannot be set off against income under other heads of income whether salary, Business &
profession, House Property or Income from other source.
Short-term capital loss can be set off against Short-term capital gain & long term capital gains. Long-term capital loss can be set off only
against Long-term capital gain. If Long-term and short-term capital losses cannot be set off against the capital gain of that particular year
then it can be carried forward for the next 8 consecutive years.
Loss from speculative business can be set off only against income from speculative business. In these cases, the net loss can be carried
forward for setoff against the profits and gains only from the respective business and the carry forward is allowed for only 4 years and not
8 years.
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4. 18-02-2012
INTRADAY TRADING
Profit from intraday trading
Business
Income STCG
Tax Rate: 15%
Speculative Non – Speculative
Business Income i.e. Derivatives (F&O)
i.e. Intraday Trading Tax Rate: As per Tax Slab
Tax Rate: As per Tax Slab
Profit/Loss from Dealing in Shares (Intraday, contract settled without actual delivery of shares) is Speculation Profit/Loss
Profit or loss from dealing in shares where contract settled otherwise than the actual delivery (Intraday) is speculation profit/loss. However if it is for
hedging the existing position then it is not the speculation.
Profit/loss from Intra day day trading can be taxed either
• Short term capital gain tax or
• Speculative business income
Treatment of these type of transaction is depended on intention of the assesses ,quantum of transaction , frequency of transaction etc
Short term capital gain.
Suppose if any individual’s intraday transaction is1-2 times in a week/month and that is also within his net worth value he can treat that income loss as
short term capital gain.
Speculative Business Income
Incase if he purchases in lots heavier than his net worth / volume of transaction is heavy then it can also be treated as speculative short selling
TAXATION ON DERIVATIVES
Stocks & Index Futures
Profit or Loss from Trading in Derivatives (Stocks & Index) is treated as business profit or loss, not speculation even though there is no
delivery.
actual delivery.
As per proviso (d) of section 43(5) profit or loss from a derivative transaction is treated as business profit or loss if following conditions are
satisfied:
a) It is carried out in a recognized stock exchange (as per section 2(f) of securities contract regulation Act 1956) and;
b) It is carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary;
c) It is supported by the time stamped contract note issued by a broker, sub-broker or other intermediary
d) It is carried out in a notified stock exchange by the central government for this purpose (NSE & BSE is notified exchange)
Currency Futures
Profit or loss from trading in currency future is business income/loss
Profit or loss from trading in currency future is treated as business profit or loss if it satisfies the conditions (a) to (d) as discussed above.
For the currency future NSE, BSE & MCX stock exchange ltd is the notified stock exchange.
Commodity Futures
Profit or loss from Commodity future is speculation profit/loss
Profit or loss from trading in commodity future is treated as speculation profit or loss because it is not covered in the exceptions of the
section 43(5). Exceptions of section 43(5) covers only derivatives referred to in clause [(ac)] of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956) while commodity future is regulated by Forward Market Commission (FMC) under Forward Contracts
(Regulation) Act, 1952.
However if commodity future is booked by a person, to guard against loss through future price fluctuations in respect of his contracts for
actual delivery of goods manufactured by him or merchandise sold by him, then it will not treated as speculation.
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5. 18-02-2012
DIVIDEND DISTRIBUTION TAX (DDT)
Dividends on shares or mutual fund received will not be taxable on the hands of the
assessee. It is not a direct tax paid by the investor therefore, he cannot file for
exemption from distribution tax. The dividend distribution tax will be payable by
company / mutual fund.
Categories Equity Share Equity Other Debt Funds Money Market /
Funds Liquid Funds
Individuals & HUF 16.223% Nil 13.52% * (12.5% + SC + Cess) 27.04% * (25% + SC + Cess)
Others / Corporates 16.223% Nil 32.45% * (30% + SC + Cess) 32.45% * (30% + SC + Cess)
NRIs 16.223% Nil 13.52% * (12.5% + SC + Cess) 27.04% * (25% + SC + Cess)
* including a Surcharge of 5% and an additional education cess of 3% on the amount of tax
SECURITY TRANSACTION TAX (STT)
STT is a tax being levied on all transactions done on the recognized stock exchanges. STT is applicable
on purchase or sale of equity shares, derivatives, and equity oriented funds
Switch and redemption of equity oriented mutual funds.
It is not applicable in case of government securities, bonds, debentures and units of mutual fund other
than equity oriented mutual fund.
Transaction in recognized stock exchange STT - Rate Paid by
Sale of unit of an equity oriented fund to a Mutual Fund 0.25% Seller
Delivery based transactions in equity shares or purchase and sell of units of an 0.125% Purchaser / Seller
equity-
equity-oriented fund
Non - delivery based transactions in equity shares 0.025% Seller
Sale of Derivatives (on the Premium Amount) 0.017% Seller
Sale of an Option in Securities 0.017% Seller
Sale of derivatives (where the option is exercised) 0.125% Purchaser
Gold ETF / Gold Bar / Gold Futures Nil NA
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6. 18-02-2012
TAX DEDUCTED AT SOURCE (TDS)
The tax deducted at the time of payment or redemption by the issuer of the security and deposited with the
Government. This tax is deducted by the issuer from income payable to the investor and the investor gets
credit of the same while filing his annual return of tax.
In cases where the Individual / HUF / AOP / BOI is not liable to pay tax on interest earned on FDs, he may
claim an exemption from TDS by filing a Form 15H and 15AA for any other person with the issuing body of
the security (whoever deducts TDS).
A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax
deducted. The TDS certificate is commonly issued in Form16 A.
Categories of Investors MF Equity & Stocks Listed on MF Debt and Unlisted stock Interest on FDs
recognized stock exchange
Individuals & HUF Nil Nil 10%*
Domestic Companies Nil Nil 20%*
NRIs STCG - 15%* STCG - 30%* 30%*
LTCG - Nil LTCG - 20%*
(After providing for indexation)
*Additional education cess of 3% on the amount of tax
SURCHARGE AND EDUCATION TAX
Surcharge
It is a charge in addition to a charge, or a tax added to the original tax.
Surcharge has been completely removed/abolished in case of individual and partnership firms.
Surcharge @ 5% is applicable only incase of Domestic Company (Any company registered in India –
Private & Public ) if total income exceeds Rs. 1 Cr
Education Cess
To give a boost to primary education in the country and in conformity with the Common Minimum
Programme of the UPA government, a Education cess is levied on income tax, corporation tax, excise and
customs duties and service tax. The education cess is to be paid on the tax payable (inclusive of
surcharge, if any)
Investment Category Surcharge rate Education Cess
Individual/HUF/AOP/BOI Nil 3%
Domestic Company if total income is < 1 crore Nil 3%
Domestic Company if total income is > 1 crore 5% 3%
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7. 18-02-2012
EQUITY MF ORIENTED SCHEME
Investor Category Short Term Capital Long Term Capital Dividend Income Dividend TDS
Gain Tax Gain Tax Distribution Tax
(holding period (holding period >
< 12 months) 12months)
Residential 15%* Nil Tax Free Nil Nil
Individual/ HUF
Partnership 15%* Nil Tax Free Nil Nil
Firms/AOP/BOI
Domestic Companies 15% *$ Nil Tax Free Nil Nil
NRIs 15%* Nil Tax Free Nil STCG- 15%*
LTCG – Nil
TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual
*Additional education cess of 3% on the amount of tax
$ Additional surcharge of 5% and an education cess of 3% on the amount of tax
DEBT MF ORIENTED SCHEME
Investor Category Short Term Long Term Dividend Dividend Dividend TDS
Capital Gain Capital Gain Income Distribution Tax – Distribution
Tax Tax Other than Liquid Tax - Liquid &
(holding period (holding period & Money Market Money Market
<12months) >12 months) Schemes Schemes
Residential As Per Tax Slab 10%(20% with Tax Free 13.519% # 27.038 #
27.038% Nil
Individual/ HUF indexation)*
Partnership 30%* 10%(20% with Tax Free 32.445% # 32.445% # Nil
Firms/AOP/BOI indexation)*
Domestic 30%*$ 10%(20% with Tax Free 32.445% # 32.445% # Nil
Companies indexation)$^
NRIs As Per Tax Slab 10%(20% with Tax Free 13.519% # 27.038 #
27.038% STCG- 30%*
indexation)* LTCG- 20%*
(After providing
for indexation)
TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual
*Additional education cess of 3% on the amount of tax
$ Additional surcharge of 5% and an education cess of 3% on the amount of tax
#DDT includes 5% surcharge and 3% education cess
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8. 18-02-2012
DIRECT EQUITY TRADING TAXATION
If considered as If considered as
non – business Income business Income
Long Term Dividend
Investor Short Term Short Term Long Term
Capital Gain Distribution
Category Capital Gain Capital Gain Capital Gain Dividend
Tax Tax TDS
Tax Tax Tax Income
(> 12 (Paid by the
(< 12 mnths) (< 12 mnths) (> 12 mnths)
mnths) companies)
Residential
As per tax NIL
Individual/ 15 %* NIL Tax Free 16.609%# NA
slab
HUF
Partnership
15 %* As per tax
Firms/AOP/ NIL NIL Tax Free 16.609%# NA
slab
BOI
Domestic As per tax
15 %*$ NIL NIL Tax Free 16.609%# NA
Companies slab
As per tax STCG – 15%*
NRIs 15 %* NIL NIL Tax Free 16.609%# LTCG - Nil
slab
TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP - Association of Persons BOI - Body of Individual
* Additional education cess of 3% on the amount of tax
$ Additional surcharge of 5%
# DDT includes 5% surcharge and 3% education cess
TAXATION ON DEBENTURES
Listed Debentures Unlisted Debentures
Investor Long Term
Short Term Capital Long Term Capital Short Term
Category Capital Gain Interest
Gain Tax Gain Tax Capital Gain Tax TDS
Tax Income
(< 12 mnths) (> 12 mnths) (< 36 mnths)
(> 36 mnths)
Residential
As per tax slab 11.33% As per tax slab 22.145% 33.21% NA
Individual/ HUF
Partnership
As per tax slab 11.33% As per tax slab 33.21% NA
Firms/AOP/ BOI 22.145%
Domestic
As per tax slab 11.33% As per tax slab 22.145% 33.21% NA
Companies
STCG – 15%*
NRIs As per tax slab 11.33% As per tax slab 22.145% 33.21% LTCG - Nil
TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual
Premium receivable on redemption of debentures could be considered as interest income.
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9. 18-02-2012
PMS TAXATION
Short Term Long Term
DDT
Capital Gain Tax Capital Gain Tax Dividend
Investor Category (Paid by the TDS
(holding period < (holding period > Income
companies)
12 mnths) 12 mnths)
Residential
15 %* NIL Tax Free 16.223%# Nil
Individual/ HUF
Partnership
15 %* NIL Tax Free 16.223%# Nil
Firms/AOP/ BOI
Domestic
15 %*$ NIL Tax Free 16.223%# Nil
Companies
STCG – 15%*
NRIs 15 %* NIL Tax Free 16.223%# LTCG – Nil
TDS – Tax deducted at Source HUF – Hindu Undivided Family AOP- Association of Persons BOI- Body of Individual
Portfolio Manager is just an agent
Purchases & Sales is in name of client and therefore the tax liability is on the client
Detailed summary /account statement is furnished to the client by the PMS for his taxation purpose
each financial year
Incase the PMS has generated STCG and the income has not been distributed to the investor in
that financial year, he is still liable to pay tax for that particular financial year
*Additional education cess of 3% on the amount of tax
$ Additional surcharge of 5% and an education cess of 3% on the amount of tax
#DDT includes 5% surcharge and 3% education cess
PRIVATE EQUITY TAXATION
Unlisted Listed on recognized stock
exchange
Short Term Long Term Long Term Dividend
Short Term Interest
Capital Gain Capital Gain Capital Distribution
Type of Capital Gain Dividend Income
Tax Tax Gain Tax Tax
Instrument Tax Income (paid by
(< 12 (> 12 (> 12 (Paid by the
(< 12 mnths) Investor)
mnths) mnths) mnths) companies)
Equity As per tax 20%* with
15%* NIL Tax Free 16.223%# NA
Shares slab indexation
Benefit of indexation is available for LTCG in case of Equity shares but not in debentures
STCG and LTCG is paid by the investor
Purchases & Sales is in name of the client and therefore the tax liability is on the client
Detailed summary /account statement is furnished to the client by the PE vehicle for his taxation purpose
each financial year
Income earned by a domestic SEBI registered VCF (whether a trust or a company) from an investment in a venture capital
undertaking is exempt from tax. Such VCFs have been accorded a “pass through” status, i.e., the investors in the VCF are
directly taxed on any income distributed by the VCFs as though the investors have made direct investments in the portfolio
companies. However, to avail this “pass through” status, the VCF’s investments must be made in domestic companies in
the nine specified sectors only
*Additional education cess of 3% on the amount of tax
# DDT includes 5% surcharge and 3% education cess
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10. 18-02-2012
GOLD TAXATION
Investment mode STCG (holding period < LTCG (holding period >12months)
12months)
Gold ETFs As per Tax slab 10% (20% with indexation)
STCG (holding period < LTCG (holding period >36months)
36months)
Gold Bar / Jewellery As per Tax slab 20% with indexation
STCG (holding period < 36months)
Gold - Futures As per Tax slab
While gains are taxed, a loss in gold ETF will be available as a set-off too. The only restriction is that a long-term capital loss
will be available for a set-off against a long-term capital gain only, while a short-term capital loss can be set off either
against a long-term capital gain or a short-term capital gain . Short-term capital gains can be adjusted against short-term
capital losses.
Tax liability arising from long-term capital gains, on the sale of gold or other jewelery can be optimised by investing in a
residential house under Section 54F or any other specified assets like capital gains bonds under Section 54EC.
REAL ESTATE TAXATION
STCG LTCG
( holding period (holding period
< 36 months) > 36 months)
Real Estate As per Tax slab 20% with indexation
Tax on long term capital gain can be avoided if the sale relates to a property other than one residential
accommodation and reinvested in any residential property within a period of 1 year before or 2 years after the
date of transfer (Section 54 F)
Long term capital gain is exempt if the capital gains are invested within 6 months in 3 year bonds issued by
REC or NHAI and that investment is retained for three years.
Investment cannot exceed Rs 50 lakhs - section 54EC of Income Tax Act.
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11. 18-02-2012
INSURANCE TAXATION
At the time of Interest & On Maturity On Death
Withdrawal & Surrender Dividend
Traditional Plans Tax free - After 2 NA Tax Free Tax Free
E.g.-Money Back Plan, completed policy years
Endowment Plan
ULIPs Tax free - After 2 NA Tax Free Tax Free
completed policy years
Pensions Plans As per tax Slab NA One third of the Tax Free
commuted Fund
Value is tax free,
2/3rd is taxable as
per tax slab.
However any sum (not including the premium paid by the assessee) received
under an insurance policy issued on or after the 1st day of April, 2003 in respect
of which the premium payable for any of the years during the term of the policy
exceeds 20% of the actual capital sum assured will no longer be exempted
ALL ABOUT SECTION 80 C
Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt. The
total limit under this section is Rs. 100,000 (Rupees One lakh) this is irrespective of how much you are
earn and under which tax bracket you fall. Investments that fall under Section 80C are listed as below.
Employees Provident Fund
Public Provident Fund
Life Insurance premium
Pension plans
Equity Linked Saving Schemes (ELSS) of mutual funds
Bank Fixed Deposits
National Savings Certificate
Senior Citizens Savings Scheme (SCSS)
New Pension Scheme (NPS)
Additional Rs 20,000 can be invested in Infrastructure Bonds – Sec 80CCF
Besides these investments, the payments towards the principal amount of your home loan are also
eligible for an income deduction.
All the above must be made from the current year's earnings and not past earnings. So if you are paying
tax for the financial year 2010-11, then your investments must be made from earnings during this period.
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12. 18-02-2012
TAXATION FOR SEC 80 C INVESTMENTS
Instrument Tax Treatment
Employees Provident Fund Contribution, Return and Maturity Proceeds are all tax exempt (EEE)
Mutual Funds – ELSS Contribution, Return, Dividends and Redemption Proceeds are all tax
exempt (EEE)
Senior Citizen Savings Scheme Interest taxable
Fixed Deposit > 5 years Interest taxable
5 year Post Office Time Deposits Interest taxable
Infrastructure Bonds Interest taxable
INABARD Rural Bonds Interest taxable
National Savings Certificate Interest taxable
New Pension Scheme (NPS) Maturity Proceeds taxable
TAXATION FOR OTHER SMALL SAVINGS SCHEMES
Instrument Tax Treatment
Post Office Monthly Income Scheme Interest income is fully taxable
Kisan Vikas Patra Interest income is fully taxable
Post Office Recurring Deposit Interest taxable
8% GOI Taxable Bonds Interest income is fully taxable
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13. 18-02-2012
WEALTH TAX
Wealth tax is leviable on specified assets at 1 percent on the value of the net assets
plus surcharge and cess as held by the assessee (net of debts incurred in respect
of such assets) in excess of the basic exemption of INR 30,00,000.00
SECTION 80D – MEDICAL INSURANCE PREMIUM
Self, Spouse and Parents (below Parents (above
Children 56 years) 56 years)
Assessee Rs 15,000 Rs 15,000 Rs 20,000
If the Assessee is a Senior Citizen then tax exemption on Premium is extended to Rs 20,000
Section 80-DD provides deduction in respect of expenditure incurred on the maintenance
and medical treatment, of a dependent who is a person with severe disability. The deduction
amount under this Section has been increased from Rs 75,000 to Rs 100,000
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14. 18-02-2012
DIRECT TAX CODE – PROPOSED CHANGES
Proposed Income Tax slabs
Assessee Total Income Tax rate
Men & Women Rs. 0 – 2,00,000 Nil
Rs. 2,00,001 – 5,00,000 10%
Rs. 5,00,001 – 10,00,000 20%
Rs. 10,00,001 or more 30%
HRA, LTA and Medical Allowance to be fully taxable
No Only half of Short-term capital gains will be taxed
EET system to be introduced for all investments
All gains to be added to the total income and taxed as per the income slab of the investor.
Indexation benefit to be allowed
Tax Savings instruments limit to remain at Rs 1,00,000 ; Additional Rs 50,000 for pure life insurance
Investments in ELSS, ULIPs, Senior Citizen Savings Scheme, Bank Fixed Deposits, NSC will not be considered
for the purpose of tax saving exemption
EEE to be allowed for provident funds (GPF, EPF and PPF), NPS, Retirement benefits (gratuity, leave
encashment, etc), pure life insurance products & annuity schemes.
Surcharge and education cess are abolished.
Max limit for medical reimbursements has been increased to 50,000 per year from current 15,000 limit.
THANK YOU
For any further information, please contact:
Mr. Virendra Kothari, CAIA, CFP
M:+91 98677 42732
E: virendra.kothari @eticawealth.com
Ética Wealth Management Private Limited
501, T-39 Sunshine Building,
Shastri Nagar,
Lokhandwala Complex Road,
Andheri West,
Mumbai – 400 053
Landmark: Suburban Diagnostics, Near Lokhandwala Circle
T: +91 22 2632 9644
+91 22 4264 8740
E: info@eticawealth.com
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