Tax planning
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Tax Planning for an individual with the help of deductions in Income Tax Act. I have provided the basic deductions which will be applicable to a common individual.
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Tax planning
- 1. TAX PLANNING FOR LEGAL TAX SAVINGS
- 2. Objectives Every person will like to increase their income for improving their life style, but whenever we were thinking about the income the other thing which will come to our mind will be tax on such income. Many people will not have basic knowledge about the deductions which will be eligible for them to save their tax amount. It will very simple to save tax if once we know the ways how to reduce but many people will not concentrate on the same. In my experience I have met various professionals and some other employees who were in very good position in different companies but they will not use the tax saving options which will available to them and as a effect they will pay tax in huge amounts due to the lack of basic knowledge about the tax deductions available as per income tax Act. So we will try to obtain some basic knowledge about the tax deductions from the individual perspective – The One & Only objective of the presentation.
- 3. My words Once we go through the income tax act , the deductions are nothing but the benefits provided by the CBDT for the tax savings purpose of common people. So everybody should utilize the same so that many people will not covered within the tax base. Whenever we filed our returns we will think that we should save some tax for the next assessment year but we will just think but we will not do the same for the tax savings benefit due to many reasons, one of the most common reason is WE DON’T WHAT TAX SAVINGS DEDUCTIONS WE CAN PLAN. For filling return for the next year we should do the tax planning in the present year Right! Now just few days before we have filled our returns for the last year, and next year we want to save some tax for the present year. Usually business concerns will have chance to claim their expenses from their income but individuals cannot claim their expenses as deductions from their income for reducing their tax liability so we will use the some other ways to reduce our tax liability.
- 4. My words So Please try to spend some time on your tax planning so that we will try to reduce the tax on your income. I have one doubt Why should we file the Income Tax Returns ????????????? So let me explain you the benefits of filling income tax returns to the Income tax department 1. It is the responsibility of every individual or corporate to file the return of income in order to avoid the potential legal consequences. 2. To obtain the loans from the banks – the primary requirement will be income tax returns for the last 3 or 5 years. 3. Now a days, Penalized sections in the income tax act have been made stringent, hence needs to be avoid the same. 4. It will be counted when the employees are moving towards the strategic level positions in the company ( like Clause 49 of listing agreement & Corporate Governance), if not filled it will be effected the legal background of the individuals. 5. For the sole proprietary business, it will helpful to expand the business easily without too much litigations.
- 6. Section Nature Explanation Max Deduction 80C Individual Prescribed Investments 1,50,000 80CCD Individual LIC or Other Insurance pension Plan 80CCD Individual Approved Pension Fund Contribution 80CCD(1B) Additional Benefit Employee Contribution to NPS 50,000 80CCG Resident Individual Listed units of Equity oriented Funds 50% of investment or 25K
- 7. Section Nature Explanation Max Deduction 80D Individual Mediclaim Policy Max - 30K General 15,000 Senior Citizen 20,000 Very Senior Citizen 30,000 Preventive Health Check up 5,000 80DD Resident Individual Exp on Handicap Dependents Disable 75000 Severe Disable 125000
- 8. Section Nature Explanation Max Deduction 80DDB Resident Individual Specified Diseases Persons other than (b) & C 40,000 Senior Citizen 60,000 Very senior citizen 80,000 80E Individual Interest on Education Loan for self or relative No Limit 80G Individual Donation 100% or 50% Max - 10% of Adj Total Inc
- 9. Section Nature Explanation Max Deduction 80GG Individual Rent Payment (HRA not received) Max - 24000 80GGC Resident Individual Political Donation Actual Amount 80U Handicapped Resident Individual Disability / Severe Disability 75,000/ 1,25,000 80QQB Resident Individual Royalty from Books 3,00,000 80RRB Resident Individual Patent Registered 3,00,000 80TTA Individual Interest on Deposits in savings Account 10,000
- 10. IDEAL TAX SAVUNGS OPTIONS FOR SALARIED EMPLOYEES CASE – 1 SALARY OF Rs 12,00,000 CASE – 2 SALARY OF Rs 9,00,000
- 11. CASE -1 - NO DEDUCTIONS Vs IDEAL DEDUCTIONS Particulars Amount Rs Amount Rs Gross Total Income 1200000 1200000 Deductions 0 299000 Adjusted Total Income 1200000 901000 Tax 185000 105200 Rebate 0 0 Tax Payable 185000 105200 Tax Savings – Rs 79,800 Tax Savings Rate – 43.14%
- 12. CASE -1 – ONLY 80C DEDUCTIONS Vs IDEAL DEDUCTIONS Particulars Amount Rs Amount Rs Gross Total Income 1200000 1200000 Deductions 150000 299000 Adjusted Total Income 1200000 901000 Tax 140000 105200 Rebate 0 0 Tax Payable 140000 105200 Tax Savings – Rs 34,800 Tax Savings Rate – 24.86%
- 13. CASE -1 - IDEAL DEDUCTIONS BREAK UP Sections Amount Rs Explanation 80C 150000 Prescribed Investments 80 CCD (1B) 50000 NPS 80 CCG 25000 Listed Shares 80D 15000 Mediclaim - gen 80D 20000 Mediclaim - Senior 80DD 0 Handicap Dependents 80DDB 0 Specified Diseases 80E 0 Education Loan interest 80G 5000 Donation 80GG 24000 Rent payment 80TTA 10000 interest 80U 0 Handicap Total 299000
- 14. CASE -2 - NO DEDUCTIONS Vs IDEAL DEDUCTIONS Particulars Amount Rs Amount Rs Gross Total Income 900000 900000 Deductions 0 207500 Adjusted Total Income 900000 692500 Tax 105000 63500 Rebate 0 0 Tax Payable 105000 63500 Tax Savings – Rs 41,500 Tax Savings Rate – 39.52%
- 15. CASE -2 - NO DEDUCTIONS Vs IDEAL DEDUCTIONS Particulars Amount Rs Amount Rs Gross Total Income 900000 900000 Deductions 150000 207500 Adjusted Total Income 750000 692500 Tax 75000 63500 Rebate 0 0 Tax Payable 75000 63500 Tax Savings – Rs 11,500 Tax Savings Rate – 15.33%
- 16. CASE -2 - IDEAL DEDUCTIONS BREAK UP Sections Amount Rs Explanation 80C 150000 Prescribed Investments 80 CCD (1B) 0 NPS 80 CCG 5000 Listed Shares 80D 10000 Mediclaim - gen 80D 12000 Mediclaim - Senior 80DD 0 Handicap Dependents 80DDB 0 Specified Diseases 80E 0 Education Loan interest 80G 1500 Donation 80GG 24000 Rent payment 80TTA 5000 interest 80U 0 Handicap Total 207500
- 17. Please Try the other options which are suitable to your requirements NOTE : Some of the deductions are subjected to the conditions in the income tax act , Please go through the same before opting the deduction options.