Tintu Thomas Income Tax- Personal Taxation…2017-2018 A Guide to…
Tintu Thomas
Income Tax- Personal Taxation…2017-2018
A Guide to…
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What is….Income Tax?
• Constitution of India → Schedule VII → Union List → Entry 82 has given power to the Central Government to levy a tax on any income other than agricultural income which is defined in Section 10(1) of the Income Tax Act, 1961.
• Income tax is that percentage of your income that you pay to the government to fund infrastructural development, pay the salaries of those employed by the state or central governments, etc.
• All taxes are levied based on the passing of a law, and the law that governs the provisions for our income tax is the Income Tax Act, 1961.
• The Income Tax Department is the biggest revenue mobilizer for the Government.
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Benefits of proper tax remittance…
No audit risk Peace of Mind Good Credit Rating Social Responsibility and Contribution to the Country Enhanced sense of security Tax saving plans leads to monetary gains(Via Investments)
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Tax Slabs…
Current year(2016-17)
Proposed for Next year(2017-18)
* 2+1=3% Cess will be on total the tax payable
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Tax Rebate under Sec 87 A…Explained
AY 2017-2018
Category Rebate
2,50,000 to 5,00,000 5,000
5,00,001 to 10,00,000 Nil
Above 10,00,000 Nil
AY 2018-2019 (Proposed)
Category Rebate
2,50,000 to 3,50,000 2,500
3,50,001 to 5,00,000 Nil
5,00,001 to 10,00,000 Nil
Above 10,00,000 Nil
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Tax saving sections…
Section 80C
Wide range of options
PPF,ELSS,SSA,FD etc
Section 80CCC
Pension Products
Section 80CCD
Central Government Employee Pension
Scheme
Section 80CCD(1B)
Additional exemption of Rs: 50,000 for investment in NPS
NP
SIn
vest
men
ts &
E
xpen
ditu
re
Maximum of Rs: 1.5 Lakh Deduction for Income Tax combining these 3 sections
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Tax saving sections…contd
Section 80D
Medical Insurance for
family and parents
Hea
lth &
wel
l be
ing
Deduction up to Rs: 50,000
Section 80DD
Medical treatment of
disabled dependent
Deduction up to Rs: 1.25
Lakh
Section 80DDB
Treatment of certain
Disease/AilmentDeduction up
to Rs: 40,000
Section 80U
Physically disabled AssesseDeduction up
to Rs: 1.25 Lakh
Section 80E
Interest payable on educational
loanLoan
s
Full exemption
Section 24
Interest payable for housing loan & Home
improvement loanDeduction up to Rs: 2 Lakh for home loan & Rs: 30,000 for home Improvement loan
Section 80EE
Additional deduction of
Rs: 50,000 for interest on
housing loanFor first home buyers
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Tax saving sections…contd
Section 80GG
For paying rent in case of no
HRAOth
ers
Deduction up to Rs: 24,000
Section 80CCG
Rajiv Gandhi Equity Savings Scheme
(RGESS)Deduction up to Rs:
25,000(50% of amount
invested)
Section 80TTA
Interest received from Savings Bank
AccountDeduction up to
Rs: 10,000
Section 80G
Donation to certain
charitable funds/institution
s
Don
atio
ns
Max of 10% of annual Income
Section 80GGA
Donations for scientific research or
rural development
Full exemption
Section 80GGC
Donation to political parties
Max of 10% of annual Income
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Tax saving sections…80C/80CCC/80CCD combined maximum amount that can be claimed Rs: 1.5 Lakh
Inve
stm
ent
Opt
ions
(Deb
t) Provident
Fund (EPF/V
PF)
Public Provid
ent Fund (PPF)
Sukanya
Samridhi
Account
National
Savings
Certificate
(NSC)
Senior Citizen
s Saving
s Schem
e (SCSS)
Tax Saving Fixed
Deposits
(For 5 Yrs)
Inve
stm
ent
Opt
ions
(O
ther
s)
Life Insura
nce Premiu
m
Pension plans
from Mutual Funds
Pension plans
from Insura
nce Compa
nies
National
Pension
Scheme
(NPS)
Tax saving Mutual Funds (ELSS)
Central Govt.
employees
pension
Scheme
Exp
endi
ture
s
Principal repayment of housing loan
Stamp Duty and
registration cost of the
house
Tuition fee for 2
children
80C
80C 80CCC80C 80CCD
80C
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Tax Saving Sections…Explained
1. EPF/VPF (Employee Provident Fund)
• EPF –Mandatory fund• Employee contribution 12% which matches the employer• Only employees contribution is tax exempted• Interest earned from EPF/VPF is tax exempted• Can be withdrawn/transferred
SEC 80C
2. PPF (Public Provident Fund)
• PPF can be opened at post office, 24 nationalized bank and ICICI bank• Mandatory locking period of 15 years + 5 years extension (Optional)• Maximum investment Rs: 1.5 Lakh/Year, min Rs: 500/Year• Interest is market linked, ~ 8.1%• Can be opened in the name of minors also
SEC 80C
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Tax Saving Sections…Explained
3. Sukanya Samriddi Account (SSA)
• Can be opened for girl child aged <10 (Max 2 child)• Deposit to be made for 14 years, account matures at 21 years• Max investment of 1.5 lakh/Year, Min Rs: 1000/Year• 50% of amount can be withdrawn at the time of marriage(18 Yrs)• Interest rate is market liked ~8.6%, and is tax free
4. National Savings Certificate (NSC)
• Tax saving FD scheme of India Post• No max limit, but max can be claimed under 80C is 1.5 Lakh• Can buy NSC from Rs: 100,500,100,5000,10000• Better than FD at bank• Certificate can be kept as collateral security for getting bank loan• Interest rate is market liked ~8.1%, and is taxable
SEC 80C
SEC 80C
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Tax Saving Sections…Explained
5. Tax saving FD from Banks/Post Office
• Minimum tenure should be 5 yrs.• Interest rate ~ 7%-7.5%• Post office time deposit FD account gives more interest @ 7.9%• Interest earned is taxable
6. Senior Citizens Savings Scheme (SCSS)
• For senior citizens(Aged above 60)• Max investment Rs: 15 lakh, min Rs:1000• Interest paid is @ 8.6%• No partial withdrawal for 5 years• Can be opened at post office, 24 nationalized bank and ICICI bank• Interest earned is taxable
SEC 80C
SEC 80C
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Tax Saving Sections…Explained
7. Life insurance
• Best insurance can that can buy are term plan.• Life insurance should be adequate to replace your income• Maturity proceeds are tax free
8. National Pension Scheme (NPS)
• Lowest cost pension plan • Min investment 6000/Year• Locking period is for 60 years• During the time of death entire amount goes to the nominee.
Budget 2015 announced additional deduction of Rs: 50,000 on NPS u/s 80CCD(1B) that can be claimed apart from 80C,80CCC Etc
SEC 80C
SEC 80CCC
SEC 80CCD(1b)
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Tax Saving Sections…Explained
9. Equity linked savings Scheme (ELSS)
• AKA tax saving mutual fund• Min investment Rs: 500, no max investment but max that can be claimed u/s 80C is
1..5 lakh• Can invest max 2 funds• Gains from ELSS is tax free• Shortest locking period-3 years
10. Pension plans from insurance companies
• Pension plans from insurance companies qualify for deduction under section 80CCC
• Assured returns ~1-2%/Annum• Low returns, on maturity can’t withdraw the entire corpus have to buy Annuity• PPF/EPF, NPS is better pension plans which have more flexibility & returns
SEC 80C
SEC 80CCC
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Tax Saving Sections…Explained
11. Tuition Fee
• Expenses on tuition fee for maximum of two children is exempted• Deduction is for full time course only, the institute should be located in India• This deduction can’t be claimed for the tuition fees of self & spouse• Development fees, transport charges, mess charges, library fees, late fees etc are
not considered for deduction
12. Stamp Duty and registration charges
• For the purchase of new residential unit only• House should be on the name of the assesse, payment should be done from his
funds• Payment should have been made on current financial year can’t be carry
forwarded.
SEC 80C
SEC 80C
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Tax Saving Sections…Explained
13. Home Loan: Interest & Principal SEC 24 SEC 80C SEC 80EE
Home Loan
Principal
Interest
Deduction u/s 80C(Max 1.5 Lakhs)
Deduction u/s 24 up to 2 lakhs
Additional Deduction of Rs: 50,000 u/s 80EE (First home buyer)
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Tax Saving Sections…Explained
ii. Deduction on Interest payment of house loan
• Deduction up to 2 Lakh towards the interest paid towards housing loan.• We can claim Interest and HRA together• Deduction is available from the year of possession/Completion• Section 24 covers Loss/Gain from housing property• Rent received= Income, Rent Paid= Expense (in case of rented out property)• ie (income – expense)= amount for deduction*
SEC 80C i. Deduction on principal repayment of house loan
• House should be on the name of the assesse• Deduction can be claimed for multiple properties• Loan should be recognized financial institution.• Deduction is available from the year of possession/Completion• All benefits are reversed if the property is sold within 5 years.
SEC 24
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Tax Saving Sections…Explained
14. Home Improvement Loan
• Deduction up to Rs: 30,000 towards the interest paid towards housing loan taken for home improvement- Self occupied home
• It can be taken for furnishing, repairing, painting of new or existing home• This deduction is over and above the Rs: 2 Lakh for the interest payment of
housing loan.• Can take 80% of the amount estimated for home improvement
SEC 80EE iii. Additional Deduction on interest payment of house loan
• Additional Deduction of Rs: 50,000 towards the interest payment of housing loan-first home buyers.
• Loan should be taken from 01/04/2016 onwards• Loan should only be taken from banks/ Housing finance companies• Loan should not exceed Rs: 35 Lakhs, house shouldn’t cost > Rs: 50 Lakhs
SEC 24
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Tax Saving Sections…Explained
15. Medical Insurance
• Can claim Rs: 25,000 for medical insurance taken for Self and family, Rs: 30,000 in case if you are senior citizen
• Additional Rs: 30,000 can be claimed for insurance taken for parents who are >60yrs
• This deduction can’t be claimed irrespective your parents are depended or not• Deduction can’t be claimed for In-laws
Budget 2013 introduced deduction of Rs: 5,000 towards the preventive health check-up for self, spouse, children and parents. This is within the Rs: 25,000 limit of your health insurance
16. Handicapped Dependents
• Can claim for expenses for the treatment and maintenance of dependent who is differently abled.
• Max claim is up to Rs: 75,000 or actual expenditure which ever is less• Dependent can be Parents, spouse, children or siblings• 40% or more for blindness and vision problems, Leprosy, Hearing Impairment, Loco
motor disability, mental retardation/ illness• Disability certificate is required for deduction.
SEC 80D
SEC 80DD
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Tax Saving Sections…Explained
17. Treatment of certain Diseases
• Max Deduction is Rs: 40,000, for senior citizen Rs: 60,000• Can be claimed for Self, Spouse, Children, parents & siblings if they are
dependents.• Diseases covered- Hemophilia, Malignant Cancers, AIDS, Thalassemia,
Parkinson’s disease, Chronic Renal failure, Neurological Diseases.• Ailment/Treatment certificate from a specialist from Government Hospital is
required
18. Physical Disabled Assesse
• Tax payer can claim deduction u/s 80U in case he suffers from certain Disabilities/Diseases
• Deduction can be claimed fro Rs: 75,000 to 1,25.000 based on the disability• Diseases covered are Loco motor disability, leprosy cured, Autism, Cerebral palsy,
Blindness and vision problems, Hearing impairment, Mental retardation/ illness• A certificate of ailment from a neurologist/Civil Surgeon/Medical officer of
Government hospital is required
SEC 80DDB
SEC 80U
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Tax Saving Sections…Explained
19. Education Loan
• Entire interest paid towards the educational loan in the financial year is liable for Deduction
• Loan should be for Self/Spouse/Children• Loan should be for full time course only• Educational loan deduction can be claimed for maximum of 8 Years• No principal amount toward the loan is liable for deduction
SEC 80E
20. Donation to approved charitable organizations
• Max exemption you can claim is 10% of your income after 80C to 80U• Donations vary in deduction from 50% to 100%• Deduction made the approved list of institution/organization is available for
deduction• Receipt should have registration number from IT, should be signed, stamped from
the institution/organization• Receipt name should match your PAN name
SEC 80G
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Tax Saving Sections…Explained
21. Donation for Scientific Research
• 100% deduction for payments towards scientific research association/university/college who undertake scientific research
• Any institution/organization undertaking any program on rural development• To a University/college/institution that researches on social science or statistics
SEC 80GGA
22. Donation to political Parties
• 100% deduction towards the donation towards registered political parties.• Max claim is limited to 10% of your gross annual income
SEC 80GGC
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Tax Saving Sections…Explained
SEC 80GG 23. House Rent in case HRA is not part of salary
• Can claim deduction in case HRA is not there as a salary component• Cannot claim the amount if your spouse / children owns a property• HRA deduction will be the lowest of the following”
o 5000/Montho 25% of your annual incomeo Rent paid excess of 10% of annual income
24. Rajiv Gandhi Equity Savings Scheme (RGESS)
• Max deduction is 50% of amount invested, maximum amount is Rs: 25,000( ie.Min 50,000 should be invested)
• Can make use of RGSS for 3 consecutive years• RGSS is for promoting new investors in stock market• If your annual income is >Rs: 12 Lakhs you cant claim RGSS
SEC 80CCG
25. Interest on Savings Account
• Rs: 10,000 deduction towards the interest received from savings bank account.
SEC 80TTA
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Tax on salary components…
Fully Taxable
Basic Salary
DA
Special Allowance
Band Pay
Bonus
Over Time
Arrears
Personal Pay
Food Allowance
Furniture Allowance
Shift Allowance
Partially Taxable/Tax Free
Medical Reimbursement up to Rs: 15,000/Year
Transport allowance up to Rs: 19,200/Year
Leave travel Allowance (LTA)
Vehicle Maintenance
House Rent Allowance (HRA)
Uniform Allowance up to Rs: 24,000/year
Children Education Allowance Rs: 1200/Year, Hostel expenditure Rs: 3600/Year - for max 2 children
News Paper/Journal Allowance up to Rs: 12,000/ Year
Telephone Allowance
Meal Coupons
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Partially Taxable salary components…
1. House Rent Allowance
HRA claimed is the lowest of the following,
40% of Basic + DA (50% for Metros) HRA Received House Rent Paid – (10% of Basic + DA)
If the rent is >1 lakh, PAN of the house owner is required
2. Company Car/ Car maintenance allowance
If the car and maintenance reimbursement is provided by company
<=1600cc, Rs: 21,600/Year is taxable >1600cc, Rs: 28,800/Year is taxable Rs: 10,800/Year as driver salary is taxable
If the car and maintenance is done by yourself
<=1600cc, Rs: 21,600/Year is tax free >1600cc, Rs: 28,800/Year is tax free Rs: 10,800/Year as driver salary is tax free
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Partially Taxable salary components…
5. Leave Travel Allowance (LTA)
• LTA can be claimed twice in a block of 4 years(ie. Once in 2 years)• Claimed for domestic trips for self and dependents• Only travel expenses are covered• Max limit is decided by employer• Current Block is 2014-2017
4. Mobile Phone bills & Internet Bills Reimbursement
• Official Mobile Phone bills & Internet Bills Reimbursement are tax free
3. Meal coupons
• Rs: 26,400/Year is tax free(Assuming 22 working days a month)- 50/Meal(2 Meals a day)
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Thank You…