How to Save Tax for FY 2013-14 (AY 2014-15)


Presentation Description

A quick and simple deck covering all Income tax saving investments available for individuals in India for FY 2013-14 (AY 2014-15)


Presentation Transcript

How to Save tax for FY 2013-14?:

How to Save tax for FY 2013-14? By Amit Founder - Version 1.0

PowerPoint Presentation:

Everyone is talking about 80C, 80CCC, 80D, 80E, 80!@### - what’s the mystery of 80’s in tax planning? How much tax I need to pay this year! Can I use both HRA and Home Loan to save taxes? PPF, FD or Insurance for saving tax? How I am paying more tax than my boss with higher income? How much benefit I can get for my home and education loan? What is the max I can save on taxes? How do I learn about my investment and taxes? If the above thoughts haunt you, this presentation is for you! Why did I buy that Insurance thing I never required? 2

How to Use This Deck?:

How to Use This Deck? I hope this helps you to understand the tax saving avenues available to Individual tax payers in India and help you save tax and your hard earned money This deck would be continuously updated based on your feedback 3

How Much Tax you need to Pay?:

How Much Tax you need to Pay? The first step for tax planning is to know how much Tax you need to pay! Income Tax Calculator for FY 2013-14 (AY 2014-15) Click on the excel logo to download the Income Tax Calculator You should be connected to internet to download this Fill up the relevant details to know your tax liability for FY 2013-14 Income Tax Slabs for FY 2013 – 14 Education cess of 3% Surcharge of 10% on Rs 1 crore plus income earners Tax credit of Rs 2,000 for income up to Rs 5 lakhs u/s 87A There are no separate slab for male and female Income Tax Slab Tax Up to Rs. 2 Lakhs Nil Rs. 2 – 5 Lakhs 10% Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% Income Tax Slab Tax Up to Rs. 2.5 Lakhs Nil Rs. 2.5 – 5 Lakhs 10% Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% Income Tax Slab Tax Up to Rs. 5 Lakhs Nil Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% General Public Senior Citizens Very Senior Citizens 4 Are you eligible for Rs 2,000 Tax Credit u/s 87A

Tax Saving Sections:

Tax Saving Sections Health and Well Being Investments & Expenditure Below is the list of all Tax Saving Sections available for Individuals in India Continued on next page 5 16 Personal Finance Changes in Budget 2013

Tax Saving Sections (Contd…):

Tax Saving Sections ( Contd …) Donations Loans Others All these Sections have been explained in details in subsequent slides. 6

Section 80C/ 80CCC/ 80CCD:

Section 80C/ 80CCC/ 80CCD Investment Options (Debt) Investment Options (Others) Expenditures Following options are available for deduction under sec 80C/80CCC/80CCD The maximum deduction combining all these investments/ expenditures is Rs 1 lakh All these options have been explained in details in subsequent slides. 7 Whose name can Tax Saving investment be done?

EPF/VPF (Employee Provident Fund):

EPF/VPF (Employee Provident Fund) EPF is mandatory for salaried employees working for companies with more than 20 employees Under EPF rules, you need to contribute 12% of your Basic pay + DA to EPF The employer matches this EPF contribution You have option to put up to 100% of Basic pay + DA to EPF. This is known as Voluntary Provident Fund (VPF) The employer generally does not match your VPF contribution Sec 80C EPF Interest Rates since 1952 Check EPF Balance Online 8

PPF (Public Provident Fund):

PPF (Public Provident Fund) PPF can be opened at Post Offices, 24 Nationalized Banks and ICICI Bank Has mandatory locking of 15 Years and can be extended further 5 years at a time Maximum Investment Allowed: Rs 1 Lakh per Year Minimum Investment of Rs 500 required every year to keep the account active Interest Rates paid on PPF are market linked onward hence would vary every year. The interest rate is 8.7% since April 1, 2013 Sec 80C List of Banks for opening PPF 9

NSC (National Saving Certificate):

NSC (National Saving Certificate) NSC is Tax saving Fixed Deposit Scheme from India Post It is available for 5 years (NSC VIII) and 10 Years Tenure (NSC IX) The interest is market linked and changes every year. Its 8.5% for 5 Year and 8.8% for 10 Years since April 1, 2013 There is no maximum limit for investment in NSC but the deduction is only till maximum of Rs 1 Lakh u/s 80C You can buy NSC in denominations of Rs 100, 500, 1000, 5000 and 10000 Sec 80C 10

Tax Saving FD from Banks/ Post Offices:

Tax Saving FD from Banks/ Post Offices These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while making the deposit Has minimum tenure of 5 Years. Some banks offer special schemes for longer tenures with higher interest rates Some banks offer 0.25% to 0.75% additional interest for Senior Citizens and their employees As of today banks are offering 8.5% -9.5% for general public and 8.75% - 9.75% for Senior Citizens Sec 80C Best Tax Saving FD Rates How you Loose Money in FD 11

Senior Citizens Savings Scheme (SCSS):

Senior Citizens Savings Scheme (SCSS) As the name suggests, SCSS is for senior citizens who are 60 years or above on the date of opening of the account. Also people with 55 years of age who have retired by VRS can open SCSS after 3 months of retirement Minimum Investment: Rs 1,000 while Maximum Investment: Rs 15 Lakhs The joint account can be opened only with your spouse.. There is no age limit applicable for the joint account holder. The interest is paid out quarterly. The interest is 9.2% w.e.f April 1, 2013 No partial withdrawal is permitted before 5 years. The account may be extended for a further period of 3 Years Sec 80C List of Banks for opening SCSS 12

Life Insurance:

Life Insurance The only product you should consider from Life Insurance companies is – Term Plan The sum assured on death should be at least 10 times the annual premium This limit is altered only in special cases of disability (the premium should be 15% or less of sum assured) Buy insurance only if you have dependents.! Do not buy insurance to save tax! There are plenty of better ways to save taxes Sec 80C Latest Death Claim Settlement Ratio Money Back or Term Plan? 13

National Pension Scheme (NPS):

National Pension Scheme (NPS) NPS was introduced in April 2009 and has two types of Accounts – Tier 1 and Tier 2 Tier 2 account is optional and only contribution to Tier 1 account is eligible for Tax Deduction u/s 80CCD Tier- 1 account requires a minimum investment of Rs 6000 annually and Rs 500 per transaction Salaried employees can claim deduction up to 10% of your salary, which comprises basic + DA, while for self employed its capped capped at 10% of gross total income Sec 80CCC 14 VPF – A good retirement option

Equity Linked Saving Scheme (ELSS):

Equity Linked Saving Scheme (ELSS) ELSS is popularly known as Tax Saving Mutual Fund The minimum investment is Rs 500 There is no limit for maximum investment but the maximum deduction you get 1 Lakh every year Sec 80C Best ELSS Funds for 2013c Dividend or Growth Option? 15

Pension Plans from Insurance Companies:

Pension Plans from Insurance Companies Pension Plans from Insurance Companies Qualify for deduction under Sec 80CCC There were few launches in Pension Plan space this year from life insurance companies These are very inefficient products , so you should stay away from these plans They generally have assured return in the range of 1-2% per annum, which is very low return. Savings accounts pay at least 4% Sec 80CCC LIC Jeevan Nidhi Review 16

Tuition Fee:

Tuition Fee The expenses on tuition fees for maximum of two children is eligible for deduction u/s 80C The maximum deduction available is Rs 1 Lakh The deduction is available for full time courses only The deduction is not available for tuition fee to coaching classes or private tuitions The educational institute should be located in India, though it may be affiliated to any foreign university Sec 80C 17

Stamp Duty & Registration Charges:

Stamp Duty & Registration Charges Stamp duty and registration charges up to Rs 1 Lakh can be claimed for deduction u/s 80C The payment should have been made in the same financial year for which the tax is being paid. i.e. the deduction cannot be carried forward to next year The house should be in the name of assessee claiming deduction The payment for stamp duty should have been made from his own funds This benefit is available on purchase on new residential unit only Sec 80C 18

Home Loan: Interest & Principal:

Home Loan: Interest & Principal Sec 24 How much Home Loan you are eligible for? Sec 80C Buying a house is one of the top most priority for most The good news is you get tax deduction on both principal and interest payment on your Housing Loan Deduction on Principal Payment on Home Loan Deduction up to Rs 1 Lakh is allowed on the principal repayment of the housing loan if the house is self occupied or vacant The house should be registered in the name of assessee . (He should be one of the owners, in case of joint ownership) The loan should be taken from Banks, NBFCs or respective employers. Loans taken from friends/ relatives does not qualify for this deduction This deduction is available also to people with multiple properties Deduction u/s 80C up to Rs 1 Lakh Deduction u/s 24 up to Rs 1.5 Lakh Additional Deduction u/s 80EE up to Rs 1 Lakh Sec 80EE 19

Home Loan: Interest & Principal:

Home Loan: Interest & Principal Sec 24 Sec 80C Deduction on Interest Payment on Home Loan Deduction up to Rs 1.5 Lakh is allowed on the principal repayment of the housing loan in case of single non-rented house In case of rented or multiple houses, there is no limit of deduction Section 24 covers “Loss/Gain from Housing Property” For Sec 24, all the rent you receive from houses is your income while The interest paid on housing loan is considered as expense So broadly speaking the (income – expense) subject to certain conditions is added to your income. In case the interest paid is more than your rental income, the above calculation is negative and hence a deduction to your total income Sec 80EE 20 How much you gain by Switching Home Loan

Home Loan: Interest & Principal:

Home Loan: Interest & Principal Sec 24 16 Personal Finance Changes in Budget 2013 Sec 80C Additional Deduction on Interest Payment on Home Loan Budget 2013 has added a new section 80EE, which gives additional exemption of Rs 1 Lakh on payment of interest on Home Loan subject to following conditions: The loan needs to be taken in the financial year 2013-14 (i.e. between April 1, 2013 to March 31, 2014) The loan can only be taken from Banks or Housing Finance companies The loan should not exceed Rs. 25 lakh The house should not cost more than Rs. 40 lakh The borrower should not own any other property at the time of loan sanction The additional deduction on interest payment of home loans can be claimed in FY 2013-14. In case you are not able to exhaust the limit in FY 2013-14, the balance can be claimed in FY 2014-15 Sec 80EE 21

Home Improvement Loan: Interest:

Home Improvement Loan: Interest Sec 24 Deduction up to Rs 30,000 is allowed on the interest payment for loan taken for Home Improvement Home improvement Loan can be taken for furnishing of new home or repairing, painting or refurnishing existing home The above limit is for self-occupied homes only There is no limit of deduction for rented or vacant homes This exemption is over and above the Rs 1.5 Lakh limit that you can claim for Home Loan interest No deduction is available for the principal portion of the repayment on home improvement loans 22

Section 80D: Medical Insurance:

Section 80D: Medical Insurance Premium paid for Mediclaim / Health Insurance for Self, Spouse, Children and Parents qualify for deduction u/s 80D You can claim maximum deduction of Rs 15,000 in case you are below 60 years of age and Rs 20,000 above 60 years of age. An additional deduction of Rs 15,000 can be claimed for buying health insurance for your parents (Rs 20,000 in case of either parents being senior citizens) This deduction can be claimed irrespective of parents being dependent on you or not This is not available for buying health insurance for in-laws. HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF Sec 80D 23

Section 80DD: Handicapped Dependents:

Section 80DD: Handicapped Dependents In case you have dependent who is differently abled , you can claim deduction for expenses on his maintenance and medical treatment You can claim up to Rs 50,000 or actual expenditure incurred, which ever is lesser. (The limit is Rs 1 Lakh for severe conditions) Dependent can be parents, spouse, children or siblings. Also the dependent should not have claimed any deduction for self 40% or more of following Disability is considered for purpose of tax exemption Deductions are permissible in either of the following cases Sec 80DD 24

Section 80DDB: Treatment of Certain Diseases:

Section 80DDB: Treatment of Certain Diseases Cost incurred for treatment of certain disease for self and dependents gets deduction for Income tax. For senior citizens the deduction amount is up to Rs 60,000 while for others its Rs 40,000 Dependent can be parents, spouse, children or siblings. They should be wholly dependent on you. Sec 80DDB 25

Section 80U: Physically Disabled Assesse :

Section 80U: Physically Disabled Assesse Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases. The deduction is Rs 50,000 in case of normal disability (40% or more disability) and Rs 1 Lakh for severe disability (80% or more disability) Sec 80U 26

Section 80E: Education Loan:

Section 80E: Education Loan The entire interest paid on education loan in a financial year is eligible for deduction u/s 80E There is no deduction on principal paid for the Education Loan The loan should be for education of self, spouse or children only The loan should be taken for pursuing full time courses only The loan has to be taken necessarily from approved charitable trust or a financial institution only Sec 80E Details on Tax Benefit on Education Loan 27

Rajiv Gandhi Equity Savings Scheme (RGESS):

Rajiv Gandhi Equity Savings Scheme (RGESS) RGESS is a new Tax Saving Scheme which was announced in Budget 2012 to encourage first time investors in stock market Under RGESS, you are eligible for a tax deduction on 50% of the amount invested The maximum amount eligible for investment in a year for RGESS is Rs 50,000. So maximum deduction is 50% of 50,000 = Rs 25,000 You can take advantage of RGESS for three consecutive years RGESS allows you to invest directly in stocks which are part of CNX-100 index or BSE-100 index Some Mutual Funds and ETFs which invest only in the above companies are also eligible for RGESS Sec 80CCG RGESS Details Best Demat Account Continued in Next Slide … 28

Rajiv Gandhi Equity Savings Scheme (RGESS):

Rajiv Gandhi Equity Savings Scheme (RGESS) Sec 80CCG Steps to invest in RGESS? RGESS eligible Mutual Funds List 4 Steps to Claim Tax Benefit in RGESS 29

Donation to Approved Charitable Organizations:

Donation to Approved Charitable Organizations The government encourages us to donate to Charitable Organizations by providing tax deduction for the same u/s 80G Some donations are exempted for 100% of the amount donated while for others its 50% of the donated amount Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income Sec 80G List of Approved Organizations 30

Donation to Political Parties/ Scientific Research:

Donation to Political Parties/ Scientific Research Section 80GGA – Donation for Scientific Research 100% tax deduction is allowed for donation to the following for scientific research u/s 80GGC To a scientific research association or University, college or other institution for undertaking of scientific research To a University, college or other institution to be used for research in social science or statistical research To an association or institution, undertaking of any programme of rural development To a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme To the National Urban Poverty Eradication Fund set up Sec 80GGA List of Approved Organizations Sec 80GGC Section 80GGC – Donation to Political Parties 100% tax deduction is allowed for donation to a political party registered under section 29A of the Representation of the People Act, 1951 u/s 80GGC The maximum exemption you can claim is limited to 10% of your gross annual income 31

Interest on Saving Account:

Interest on Saving Account Sec 80TTA Budget 2012 introduced a new Section 80TTA, which allows deduction of Rs 10,000 on interest earned on saving bank account 32 Best Saving Bank A/C interest Rates

House Rent in case HRA is not part of Salary:

House Rent in case HRA is not part of Salary In case, you do not receive HRA (House Rent Allowance) as a salary component, you can still claim house rent deduction u/s 80GG You cannot claim this deduction if you or your spouse or your children own any home in India or abroad. Sec 80GG 33

Tax on Salary Components:

Tax on Salary Components Your salary has multiple components Some of them are fully taxable while others are partially taxable or tax free Some of the components have been explored in next few slides 34 How your wife can help you save taxes?

Partially Taxable Salary Components:

Partially Taxable Salary Components 8 Questions on HRA 35 Landlord Declaration if no PAN Card

Partially Taxable Salary Components:

Partially Taxable Salary Components 36 What can you do if your landlord does not give his PAN number?

Banks for Opening SCSS & PPF:

Banks for Opening SCSS & PPF At present, Post Offices, 24 Nationalized banks and one private sector bank are authorized to handle the SCSS and PPF Allahabad Bank IDBI Bank State Bank of Travancore Andhra bank Indian Bank Syndicate Bank Bank of Baroda Indian Overseas Bank UCO Bank Bank of India Punjab National Bank Union Bank of India Bank of Maharashtra State Bank of Bikaner and Jaipur United Bank of India Canara Bank State Bank of Hyderabad Vijaya Bank Central Bank of India State Bank of India ICICI Bank Ltd. Corporation Bank State Bank of Mysore Dena Bank State Bank of Patiala Sec 80C 37

Sec 80G: List of eligible Organizations:

Sec 80G: List of eligible Organizations National Defense Fund Prime Minister's National Relief Fund Prime Minister's Armenia Earthquake Relief Fund Africa (Public Contributions-India) Fund National Foundation for Communal Harmony Approved university/educational institution Chief Minister's Earthquake Relief Fund Zila Saksharta Samiti National Blood Transfusion Council Medical Relief Funds of state govt Army Central Welfare Fund, Indian Naval Ben. Fund, Air Force Central Welfare Fund. National Illness Assistance Fund Chief Minister's or Lt. Governor's Relief Fund National Sports Fund National Cultural Fund Govt./ local authority/ institution/ association towards promoting family planning Central Govt.'s Fund for Technology Development & Application National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Indian Olympic Association/ other such notified association Andhra Pradesh Chief Minister's Cyclone Relied Fund Jawaharlal Nehru Memorial Fund Prime Minister's Drought Relief Fund National Children's Fund Indira Gandhi Memorial Trust Rajiv Gandhi Foundation Donations to govt./ local authority for charitable purposes (excluding family planning) Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB) Donations for repair/ renovation of notified places of worship World Vision India Udavum Karangal 100% Exemption 50% Exemption 38

About the Author:

About the Author Income Tax Calculator for FY 2013-14 Recurring Deposits – Start now to gain from high interest rates 40 Years History of Gold Prices in India Life Insurance Claim Settlement Ratio for 2011-12 Design your own Capital Protection Fund Best Day for SIP in Mutual Fund? 39

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