Download Automated Master of Form 16 for the Financial Year 2014-15 [ This Excel Utility can prepare at a time 100 employees Form 16 for the FY 2014-15]
How to Save Tax on Salary Income? This
question is popping up in the mind of every salaried employee. Since March is
fast approaching, HR department has started buzzing employees about the tax
savings investment he has made.
Tax
Savings investments have to be made before 31st March to claim the tax benefit and
maximize savings. But before rushing to invest, one needs to and plan out his
investment keeping in mind the changes made in the Budget 2014 to maximize his
tax savings.
Tax Savings does not necessarily means
acknowledging various sections of Income Tax Act, few sections along with your
salary slip can very well accomplish the peculiar task of tax planning for you.
In this article we will discuss the additional tax benefit and marginal reliefs
offered by budget 2014.
The Tax Slab has already Raised up to Rs. 2.5 Lakh by the Budget 2014 and the deduction limit of U/s 80C has also raised up to Rs.1.5 Lakh.
Enhanced limit of Section 80C
Budget 2014 has augmented the limit of
section 80C from Rs.1 lakh to Rs.1.5 lakhs. This enhanced limit gives
additional tax relief of Rs.15,450 for the person falling in the tax slab of
30%, similarly Rs.10,300 to person falling in the tax bracket of 20% and
Rs.5,150 to the person falling in the lowest tax bracket of 10%.
Maximize tax savings from increased limit of
section 80C:
Home Loan Benefit
Budget 2014 has also enhanced the limit
of deduction for Home Loan Principal u/s 80C and Home Loan Interest u/s 24.
Tax Benefits on Home
Loan – Principal Repayment
Principal Repayment of the Home Loan
taken from Financial Institutions is eligible for deductions u/s 80C but
restricted to the maximum of Rs.1.5 lakhs per annum. Remember this limit of
Rs.1.5 lakhs includes all deduction u/s 80C i.e. PPF, Tax Savings Bank FD, NSC,
EPF, LIC etc.
Reintroduce Kissan Vikas Patra (
K.V.P.) :-
Amount invested in Kissan Vikas Patra (KVP)
doubles in 100 months at the present rates. The certificates can be purchased
by an adult for himself or on behalf of a minor or to a minor. It can also be
purchased jointly by two adults.
A certificate may be transferred from one person to another with consent in writing to an officer of the Post Office or Bank. Under the scheme the transferee has to be eligible to purchase the certificate. The certificate may be prematurely encashed any time after two years and a half from the date of purchase, in the event of death of holder or any holder in case of joint holder, on order of court of Law and forfeiture by a pledge.
The Government has no proposal to separately tax benefit on KVP. However, income on KVP would be taxable as per existing provisions. Investor will have to undergo Know Your Customer (KYC) modalities at the time of application. In the case of transfer of KVP from one customer to another, a request has to be made in writing to an officer of the Post Office or Bank and the transferee has to be eligible to purchase KVP certification in the first instance.
Kissan Vikas Patra (KYP) has been reintroduced and is available in Post Offices. In future, KVP will be available in banks which are/will be authorized for handling small savings schemes.
A certificate may be transferred from one person to another with consent in writing to an officer of the Post Office or Bank. Under the scheme the transferee has to be eligible to purchase the certificate. The certificate may be prematurely encashed any time after two years and a half from the date of purchase, in the event of death of holder or any holder in case of joint holder, on order of court of Law and forfeiture by a pledge.
The Government has no proposal to separately tax benefit on KVP. However, income on KVP would be taxable as per existing provisions. Investor will have to undergo Know Your Customer (KYC) modalities at the time of application. In the case of transfer of KVP from one customer to another, a request has to be made in writing to an officer of the Post Office or Bank and the transferee has to be eligible to purchase KVP certification in the first instance.
Kissan Vikas Patra (KYP) has been reintroduced and is available in Post Offices. In future, KVP will be available in banks which are/will be authorized for handling small savings schemes.
Download Automated Form 16 Part B for the Financial Year 2014-15 [ This Excel Utility can prepare at a time 100 employees Form 16 Part B]
Tax Benefits on Home
Loan – Interest Component
Threshold limit of deduction of
Interest on the home loan u/s 24 is also increased in budget 2014 by Rs.50,000.
Now you can get maximum of Rs.2 lakhs deduction on the accrued interest on Home
Loan per annum.
Remember section 24 is applicable for
self-occupied house only i.e. capping limit of Rs.2 lakh applies when you hold
a self-occupied house. In case the house is not self-occupied than you can
claim the actual amount of interest paid which can even exceed Rs.2 lakhs.
Contribution towards Provident Funds
Section 80C comprises for various
instruments but contributions towards Provident Fund i.e. Employees Provident
Fund or Public Provident Fund are best amongst them. Being EEE scheme (Exempt,
Exempt, Exempt) these provide best solution for accumulating corpus for
retirement. Point to note is that provident fund is a long term investment
scheme, so opt this scheme considering it for post-retirement life.
National Savings Certificate (NSC) and Tax
Savings Bank FD
Both National Savings Certificate (NSC)
and Tax Savings Bank FD offers same rate of interest and same tax treatment.
The only things that makes NSC more lucrative than tax savings bank FD is the
method of interest calculation. The interest is compounded annually in case of
tax savings bank FD while the interest is compounded half-yearly in case of
NSC.
Equity Linked Savings Scheme
ELSS is also enjoys EEE tax treatment
as EPF and PPF but it comes with a high degree of risk. Since ELSS is exposed
to market the risk involved is similar to any other mutual fund but the quantum
is increased due to lock-in period of 3 years.
You can choose any of the four for
maximize your tax savings. No need to see any other investment scheme u/s 80C.
Continuation of Section 87A
Last year budget has introduced tax
credit system under which person having gross salary up to Rs.5,00,000 can get
additional tax rebate of Rs.2,000 from the income tax payable. This year budget
did not drop this section and thus letting taxpayer to get benefitted this year
also.
