Tax Savings with enhanced limit various Sections for the Financial Year 2016-17

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 31^st 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 mean 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 relief’s offered by budget 2016.

Click here to download Automatic Master of Form 16 Part A & B for F.Y.2016-17 [ Prepare at a time 100 employees Form 16 Part A &B]

 

Click here to download Automatic Master of Form 16 Part A & B for F.Y.2016-17 [ Prepare at a time 50 employees Form 16 Part A &B]

Maximum 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 a person falling in the tax bracket of 20% and Rs.5,150 to the person falling in the lowest tax bracket of 10%.

Home Loan Benefit U/s 24B & 80C & 80EE

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 the maximum of Rs.2 lakhs deduction on the accrued interest on Home Loan per annum.

Remember section 24 is applicable for the 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 the 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 the same rate of interest and same tax treatment. The only things that make NSC more lucrative than tax savings bank FD are the method of interest calculation. The interest is compounded annually in the case of tax savings bank FD while the interest is compounded half-yearly in the case of NSC.

Equity Linked Savings Scheme

ELSS 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

Tax Rebate 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 an 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.

On June 16, 2017 by www.taxexcel.net

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Here is a list of 6 components in your salary that is tax-free. In case you have it in your pay slip, great – but in case you don’t have it – you can always discuss with your company and HR.

Download Automatic Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to 2016-17

1. House Rent Allowance (HRA):

The HRA that can be claimed for tax exemption is minimum of

§                    Actual HRA Received or

§                    40% (50% for metros) of (Basic + Dearness Allowance) or

§                    Rent paid (-) 10% of (Basic + Dearness Allowance)

If you pay rent of more than Rs 1 Lakh, you need to give PAN Card number of the landlord to your employer. In case your landlord does not have a PAN Card, you will need to get a declaration signed by him for the same.

Tip: HRA at 50% of (Basic + Dearness Allowance) is the most optimum break up in a salary. Download Automatic H.R.A. Exemption Calculator

2. Medical Reimbursement:

You can claim up to Rs 25,000/- per year against medical expenses by submitting medical bills. Even cost for eye testing and spectacles frame and lens costs are covered.& Rs. 30000/- for a Sr.Citizen person.

3. Transport Allowance:

Transport Allowance up to Rs 1600/- per month is tax-free while this limit is Rs 3200/- per month for orthopedic person. from the F.Y.2016-17

4. Leave Travel Allowance (LTA):

LTA is tax-free only when you get your traveling expenses reimbursed from the company on submission of the bills. You can claim LTA twice for two domestic trips with family in the block of four years. The present block is 2014 – 2017. There is no maximum limit of LTA and is decided by the employer.

The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. Only expenses incurred in traveling is covered.  You cannot claim hotel stay and food bills.

Assuming Rs 1,500 per ticket for the one-way train journey in 3AC, it costs Rs 12,000 for the return journey for a family of four. For journey by flight, this expense can easily go to Rs 30,000 per trip. Since this can be claimed once in two years LTA of at least Rs 12,000 per year seems sensible.

5. Uniform Allowance:

Amount up to Rs 24,000 per annum is tax-free, but this cannot be given for normal clothes. This is more common in manufacturing units where they have the dress code; it would be difficult to implement the same in IT/ITES sector.

6. Children Education Allowance:

Rs.100 per month per Child and Rs.300 for Hostel Expenditure for the maximum of two children is tax exempted.

On January 27, 2017 by www.taxexcel.net

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The Income Tax Act and the Profession Tax Act provides various income tax deductions under Section 80DD, 80DDB and 80U for differently-abled (disabled and handicapped) people.

Most states in India allow a professional tax exemption for any person suffering from a permanent disability.

Download All in One Income Tax Preparation Excel Based Software for Govt & Non-Govt Employees for F.Y.2016-17 & A.Y.2017-18. [This Excel Utility can prepare at a time Tax Compute Sheet + Individual Salary Structure + Individual Salary Sheet + Automatic H.R.A.Exemption Calculation + Automated Arrears Relief Calculation with Form 10E + Automated Form 16 Part A&B and Form 16 Part B ] 

Section 80U

Under Section 80U a mentally or physically challenged person can claim an income tax deduction of up to Rs 75000 provided he/she suffers from over 40% of the identified disabilities notified as per the Income Tax Act. In the case of severe disability of over 80%, the disabled person can claim an income tax exemption up to Rs.125,000.

Disabilities included under Section 80U include blindness, low vision, leprosy-cured, hearing impairment, mental retardation, mental illness, locomotor disability. Documents related to the expenses don’t have to be produced if you are claiming for self.

However, you are required to submit a medical certificate authenticating the disability of the dependent from a certified medical professional to claim an income tax deduction. This certificate is not required at the time of filing taxes but may have to submit to an assessing officer, if demanded.

Section 80DD

Under Section 80DD the expenses on maintenance/ medical treatment of disabled dependents can be claimed as an income tax deduction. Dependents include spouse, children, parents, brothers and sisters and the income tax deduction is valid only if they have not already claimed a benefit under Section 80U. Income-tax Deduction for expenses for partially disabled dependants (severity 40-80%) is allowed up to Rs.75,000 while it goes up to Rs 1.25 lakh if the dependant is over 80% disabled. The plus side is that even if your actual expenses are lesser than Rs 75000 you can claim a full deduction.

Section 80DDB

Section 80DDB allows an income tax deduction on expenses incurred on medical treatment of various ailments. This included Neurological Diseases where the disability level has been certified to be of 40% and above (including Dementia, Dystonia Musculorum Deformans, Motor Neuron Disease, Ataxia, Chorea, Hemiballismus, Aphasia, Parkinson’s Disease), Malignant Cancers, Full Blown Acquired Immuno-Deficiency Syndrome (AIDS), Chronic Renal failure, Hematological disorders including Hemophilia and Thalassaemia.

Income tax deduction for any of the above diseases ranges between Rs 40000 to Rs 80000 depending on your age and income tax slab.

On September 12, 2016 by www.taxexcel.net

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