Income Tax :- Planning /How to Save Tax
Tax planning is a big issue for an employee. Now-a-days every employee is busy in calculation of Income Tax for the Financial
Year 2012-13 or Assessment Year 2013-14. Each employer wants to deduct proportionate Income Tax (TDS) on salaries of their employees. There is no end of planning to save Income Tax, but some examples of tax planning for the Financial Year
2012-13 and Assessment Year 2013-14 is given as under :-
Tax Slabs
1) In Case of General Assesses (Both Male & Female):
Income Bracket Rate
0 to Rs. 2,00,000 0 %
Rs. 2,00,001 to Rs. 5,00,000 10 %
Rs. 5,00,001 to Rs. 10,00,000 20 %
Above Rs. 10,00,000 30 %
2) In Case of Senior Citizens (Age above 60 years but below 80 years):
Income Bracket Rate
0 to Rs. 2,50,000 0 %
Rs. 2,50,001 to Rs. 5,00,000 10 %
Rs. 5,00,001 to Rs. 10,00,000 20 %
Above Rs. 10,00,000 30 %
3) In Case of Very Senior Citizens (Age 80 years and above):
Income Bracket Rate
0 to Rs. 5,00,000 0 %
Rs. 5,00,001 to Rs. 10,00,000 20 %
Above Rs. 10,00,000 30 %
* On final tax amount, a surcharge of 3 %
**No surcharge above 10 lacs.Tax
Exemptions:
1) Section 80 C Limit Unchanged (Rs. 1,00,000)
Deduction on life insurance policy, taken after 1 April 2012, will be allowed only if yearly premium is less than 10% of sum assured. This is a new change from c.y. earlier it was 20%. If its more than 10% then not eligible for
deduction u/sec. 80C
• ELSS
• PPF
• EPF
• FD for 5 years
• Pension Plans
• NSC
• Post Office SB
• Infrastructure Bonds
• Expenditure on Children Education (Upto Rs. 200 per month for upto 2 children)
• Tuition fees (Only Tuition fees excluding Development Fees, Donations, etc. Maximum allowed:
Rs. 24,000/-)
• Housing loan principal
• Deferred Annuity
• Approved Super Annuation Fund
2) Section 80 CCF – Additional Rs. 20,000 on investments towards approved Infrastructure bonds
(withdrawn)
3) Section 80CCD:
Deduction under this section can be claimed only if the contribution to your NPS account is made by your employer and the deduction is limited to a maximum of 10% of your basic salary. Returns on NPS are tax free, but withdrawal is still taxable. The deduction under sec 80CCD is over and above the deduction available under sec 80C.
4) Section 80 D
Deduction under section 80D
Deduction of Rs. 15000/- is allowed if the same is paid as premium for Medical Insurance taken for self / dependents or towards preventive health check-up (max Rs. 5000). In case any of self / dependents is a senior citizen, the deduction allowed is Rs. 20000/-
Additional Rs. 15000/-is allowed as deduction if the same is paid as premium for Medical Insurance taken for parents. In case the parent is a senior citizen, the deductionallowed is Rs. 20000/-
5) Section 80DD
Deduction under section 80DD
Exemption given for Expenditure made for a disabled dependant towards Medical Treatment/Training/Rehabilitation. It also includes the LIC/Insurance premium paid towards maintenance of such dependant.
Maximum deduction allowed is Rs. 50,000/- in case of normal disability and Rs. 1 Lakh in case of severe disability.
6) Section 80DDB
Deduction under section 80DDB
Exemption given for expenditure incurred on specified disease or ailments such as cancer/aids.
Maximum deduction allowed is Rs. 40,000/-. In case of Senior Citizens, maximum deduction allowed is Rs.60,000/-
7) Section 80E
Deduction under section 80E
Deduction is allowed for repayment of interest component of Higher Education loan. All education after Class 12 is allowed, either vocational or Fulltime. But should be from a school/institute/university recognized by the government.
8 ) Section 80G
Contribution to exempt charities –25/50/75/100% depending on the charity and as per approval
100% exemption on donation to political parties
9) Section 80U
Deduction under section 80U
Deduction upto Rs. 50,000/- is allowed in case of Permanent Disability.
In case of Permanent Disability exceeding 80%, maximum deduction allowed is Rs. 1,00,000/-
10) Section 24(1)(vi)
Housing loan interest.Maximum Investment Limit– Rs. 1,50,000 (for loans taken after 1 April 1999, for
loans before that Maximum Investment Limit 30,000).
11) Superannuation – Any contribution made by a company to superannuation fund upto Rs. 1,00,000 tax free
in the hands of the employee.
12) Conveyance/Transport Allowance – Any Conveyance / Transport Allowance given to an employee is tax free upto Rs. 9,600 /- (No Supporting Bills required).
13) Medical Allowance – Any Medical Allowance given to an employee is tax free upto Rs. 15,000 /- (Supporting
Bills required).
14) HRA – Any House Rent Allowance given to an employee is tax free upto the minimum value of the following conditions (subject to – when an employee can produce rent paid receipts from landlord for the period and if the employee has not availed of tax exemptions for home loan interest / principal repayment):
a) 50% of Annual Basic (40% of Annual Basic in case of non-metros)
b) Actual HRA received
c) Rent Paid – (10% of Annual Basic)
15) Professional Tax – Any Professional Tax deducted from an employee’s salary can be reduced from the annual salary income to arrive at taxable salary.
16) Provident Fund – Provident Fund contributions (under section 80 C and subject to an overall investment limit of Rs. 1,00,000 ) deducted from an employee’s salary are tax exempt.
17) 80CCG – Direct Equity Investment – Under ‘Rajiv Gandhi Equity Savings Scheme‘ – a new equity investor will be able to claim 50% of his investment in direct equity as deduction subject to maximum investment of Rs. 50,000 and provided his taxable income is below Rs. 10 lacs. The investment will be subject to 3 years lock-in. Update 23 Sep 2012: Government has notified this scheme (RGESS). Mutual funds and ETFs that invest in BSE100 or CNX 100 stocks or PSUs which are Navratna, Maharatna and Miniratna will qualify under this scheme. These investments can be traded over stock exchange after 1 year of investment. New equity investor has been defined as someone who has opened a Demat account but has not bought any securities till date of notification of this scheme (22 Sep 2012). More information here.
18) Section 80TTA – Savings Bank Interest - No tax will be charged on interest earned on balance in savings bank account subject to a maximum of Rs. 10,000 per year.
