Tax
Savings with enhanced limit various Sections
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.
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.
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.
Download and prepare at a time 100 employees Form 16 Part A&B for FY 2014-15
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 benefited this year
also.
Similarly, RGESS (Rajiv Gandhi
Equity Savings Scheme) is also present this year which gives tax benefit on the
direct investment into the stock market.
