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INCOME TAX REBATE ​FOR FY 2018-19

& POPULAR TAX SAVING SCHEMES

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BUDGET PROPOSALS FOR FY 2018-19  AFFECTING PERSONAL FINANCE , CLICK HERE

The Article on  " TAX PLANNING FOR FY 2018-19  CONTAINS   5 PARTS 
​
PART I: MAJOR CHANGES IN TAX RULES FOR FY 2018-19 CLICK HERE 

PART 2: TAX RATES  / SLABS FOR FY 2018-19 CLICK HERE    

PART 3: INCOME TAX REBATES  AND POPULAR TAX SAVING SCHEMES    
​                                               READ THIS PART BELOW ​         
PART 4 : ESTIMATE YOUR INCOME TAX /ADVANCE TAX FOR FY 2018-19  CLICK HERE 
                      :                                                                  

​PART 5: TAX ON RETIREMENT BENEFITS  CLICK HERE    

FOR INCOME TAX NEWS CLICK HERE

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INCOME TAX REBATE FOR FY 2018-19

Standard Deduction of Rs 40,000 allowed for salaried persons/pensioners   .

However transport allowance of Rs 19,200  and medical reimbursement of Rs 15,000 will not be available for FY 2018-19.Hence net difference is only Rs 5,800 for those who are already availing transport allowance and medical reimbursement .  

Cumulative deduction allowed under Section 80C, 80CCC, and Section 80 CCD for savings/investments, premium for annuity / pension fund   is Rs. 1.5 lakh . Now under Section 80CCD, a deduction of upto Rs. 50,000  is allowed over and above the limit of Rs. 1.50 lakh under Section 80C  in respect of contributions made to NPS 

Deduction under 80 CCG  for  of 50 % of investment under the scheme  with  a maximum deduction of Rs 25,000  allowed .

Deduction allowed  on Health insurance Policies under 80 D is Rs. 50,000/- for senior citizens and up to Rs. 25,000/-  for   others .For senior citizens, if no insurance amount is paid , hospital expenditure up to Rs 50,000 is allowed .An assessee can claim additional Rs 50,000 for his / her parents if they are senior citizens and Rs 25,000 in other cases . Overall claim cannot exceed Rs 1,00,000 . All payments should have been made in any mode other than cash . Cost of preventive health check up up to Rs 5,000  can be claimed within the overall limit and it could have been made in cash also . 

Deductions allowed Rs 2.00 lakhs under  Section  24 for the Interest on Housing loans 

Deduction allowed under 80E  for interest on education loan taken . 

Interest on savings bank accounts are exempted by tax up to an amount of Rs 10,000 
under Section 80TTA  and for senior citizens only if they have not claimed  under section 80TTB

Interest  received by a senior citizen on deposits with banks / co-operative societies / post office is exempted up to Rs 50,000  under section 80 TTB   . 

Income Tax exemption on Interest paid on housing loan under Section 24 of the Income Tax Act is  Rs. 2 lakh

 
If you need  any clarifications  or you want  to know various rebates available under various sections of IT Act , CLICK HERE 

INSTRUMENTS QUALIFYING UNDER SECTION 80C 

Premium paid on a Life Insurance   
policy for self or spouse or child      ( Tax benefits come with riders . To see the riders  , go to   section 

Contribution made under Employee’s Provident Fund Scheme Amount paid towards PPF for self/spouse, any child  .  

Contribution to a recognised Provident Fund

Sum deposited in Post Office Savings Bank Account(10 year/15 years)

Subscription to any notified securities/notified deposits schemes like ELSS  ( For  details ,  go to the end of the page   )

Amount invested in any notified savings certificate, Unit Linked Savings certificates.

Investments in Unit Linked Insurance Plan of LIC Mutual Fund

Payments made in installments or part payment for purchasing or constructing a house property.(conditions Apply )  

Tuition fees paid to any Indian school,college, university or other educational institutions ( Conditions Apply )

Contribution made to  Sukanya  samriddhi account 

Tax saver Fixed Deposits issued by Commercial Banks 

UTILISE TUITION FEE FOR REBATE UNDER 80C

Total tuition fee paid by a parent for maximum of two childern is eligible for tax exemption under 80C .
 " Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children "  is eligible  to be deducted under 80C .

Tuition fees paid for self or spouse is NOT eligible under 80C .  
Fees paid to  educational institutions  situated outside India are not eligible .  Only 
University, college, school or other educational institution must be situated in India though it can be affiliated to any foreign institutes.

Tuition fee Paid for children for full time courses  only is eligible . Obviously fees paid for coaching classes will not be eligible . 
-Pre-nursery, play school and nursery class fees is also covered under section 80C (circular 9/2008 & 8/2007).

If both husband and wife are tax payers , both can utilise  the  deduction separately for the individual payments made by them . 


Not allowable Expenses:- 
1. Development fees or donation not eligible. 
2. Transport charges, hostel charges, Mess charges, library fees, scooter/cycle/car stand charges incurred for education are not allowed. 
3. Late fees is not eligible for deduction. 
4. Term Fees is not eligible for deduction.

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INSTRUMENTS QUALIFYING UNDER  80CCC,  80CCG AND  80D 

Instruments qualifying under 80CCC

Payment of premium for annuity plan of LIC or any other insurer.

Instruments qualifying under 80 CCG

Listed Equity shares or listed units of a fund in accordance with Rajiv Gandhi Equity Savings Scheme  Subject to following conditions :
Resident Individual  being a new retail investor  with not more than 10.00 lakhs income and  investing with a lock in period of 3 years  
Instruments qualifying under 80 D

​Health Insurance policies

POPULAR  TAX SAVING SCHEMES 

 For   the current interest rate on various SMALL SAVINGS Instruments ,   visit our page  "  NEWS ON INTEREST RATES  "

Array of products   from   
1.Guaranteed return schemes like PPF  AND NSC 
2.Insurance schemes   which cover life   risks  with units linked to market  or otherwise
3.Equity linked  mutual funds  which have high risk  and return probabilities like ELSS   
are available for the investors to utilize the rebates  on income tax  offered by the government . 

PPF is  a fixed income long term investment  while NSC is fixed return medium term  investment .Insurance policies which cover life risk are available in unit linked market related schemes  and otherwise also .On the other hand ELSS is totally market related mutual fund which carry all the risks of an equity market and  have given good returns 
Details of Each scheme is given below : 

PUBLIC  PROVIDENT FUNDS 

SALIENT FATURES :

• Ideal investment option for both salaried as well as self employed classes.
• Non-Resident Indians (NRIs) are not eligible.
• Investment up to INR. 1,50,000 per annum qualifies for IT Rebate under section 80 C of IT Act.
• The rate of interest varies quarter to quarter  as per announcements made by Government .
  
• Loan facility available from 3rd financial year upto 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011.
  
• Withdrawal permitted from 6th financial year.
• Free from court attachment.
• An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons.
• Public Provident Fund(Individual account on his behalf or on behalf of minor of whom he is the guardian)INR. 500/- in a financial yearINR. 1,50,000/- in a financial year
• The public provident fund is established by the central government.
•  One can voluntarily open an account with any nationalized bank,selected authorized private bank or post office. 
• SAFE , SECURE , TAX EFFICIENT   AND  LIMITED LIQUIDITY AVAILABLE  FROM 3RD YEAR  BY WAY OF LOAN FACILITY

NATIONAL SAVINGS CERTIFICATES
SOURCE OF INFORMATION  INDIA POST 
NSC VIII Issue

• Scheme specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses.
• No maximum limit for investment.
• No Tax deduction at source.
• Certificates can be kept as collateral security to get loan from banks.
• Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act.
• Trust and HUF cannot invest.

NSC IX Issue

• No maximum limit for investment.
• Minimum INR. 100/- No maximum limit available in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-.
• A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor.
• Buy National Savings Certificates (NSCs) every month for Five years – Re-invest on maturity and relax - On retirement it will fetch you monthly pension as the NSC matures.

NSCS ARE AVAILABLE ONLY IN POST OFFICES  ALL OVER INDIA 

LIFE INSURANCE POLICIES
Life insurance policies   are    the financial instruments which cover Life Risks of the insured along with Tax relief .  Various  types of life insurance policies are available   with wide ranging terms  . Some are unit linked policies whose Net Asset value depends up on the  equity market and hence carry market risks .   For full details on Life Insurance   and tips for purchasing such policies , please go the page LIFE INSURANCE   

​Under 80 C  of Income tax  Act , life insurance premium paid  on life insurance policies  is  one of the eligible instruments for total tax exemption up to Rs 1,50,000 only  .    However  be cautious and confirm with policy issuers whether the contribution made to the particular policy is eligible for such exemption . The reason is there are riders for contributions made to be eligible for exemption . 

As per Income tax law , 
quote ;  " 
  Life Insurance premium is part of gross qualifying amount for the purpose of deduction under section  80 C . Payment of premium which is in excess of 10 percent  ( if policy is issued on or after 1-4-2013 , 15 % in case of insurance on life of person with disability referred to in section 80U  or suffering from disease or ailment specified in section 80 DDB/ rule 11DD )  of actual capital sum assured shall not be included in gross qualifying amount . The value of any premiums agreed to be returned or of any benefit by way of bonus or otherwise , over the sum actually assured , which is to be or may be received under the policy by any person , shall not be taken in to account for the purpose of calculating the actual capital sum assured .The limit of 10 per cent will be applicable only in the case of policies issued on or after 1-4-2012. In respect of policies issued prior to 1-4-2012, the old limit of 20 per cent of actual sum assured will be applicable.
With effect from 1-4-2013, 'actual capital sum assured' in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account--
 (i)  the value of any premium agreed to be returned; or
(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.   "   unquote   

 For full page  of Income tax website   relevant to  the above rule  , CLICK HERE   

Hence premia paid   one time premium policies may not be eligible to qualify for exemption  as  the insured amount may not be ten times the premium .   Further amount received under those policies may be treated as  Taxable Income and tax calculated .  Hence double check  with insurance companies before purchasing   as selling agents may not reveal you correctly . 

EQUITY LINKED SAVING SCHEME   (  ELSS  )  

Is another popular scheme under which investors can  invest in stock market mutual fund while enjoying tax benefits under 80C of Income Tax act . 

TAX SAVING FIXED DEPOSITS ISSUED BY COMMERCIAL BANKS  :

Key highlights of Tax Saver FDs:

• Deposits are opened for   a period  of 5 years.
• Maximum  tax deduction up to Rs.1, 50,000.
• Deduction is available to individuals, members of Hindu undivided family (HUF), senior citizens and NRIs.
• The interest earned from tax saver fixed deposits is taxable. Tax will deducted at source.
• Premature withdrawal is not allowed .
•  No  loan against tax saver fixed deposits.
• Tax saver deposits can be opened both singly and jointly. In case of a joint account, tax benefit will be availed by first holder of the deposit as per the section 80C of the Income Tax Act, 1961.

WHAT IS AN ELSS SCHEME  ?

Subscription to certain  notified securities/notified deposits schemes are eligible instruments under  section  80C for claiming deductions from  taxable income . One such popular investment is  tax saving mutual funds or Equity Linked Savings Scheme (ELSS). In this  equity diversified fund , investors enjoy the benefits of capital appreciation as well as tax benefits. With  recent positive movements in equity market , more interest is being generated in the public on the scheme . 


ELSS is basically an equity based diversified Mutual Fund with a lock in period of 3 years .  It has got same risk and reward function of any other equity based mutual fund  .While under national saving certificate , funds are locked in a period of 6 years ,  ELSS has lock in period of 3 years only .One who is willing to take market risk , ELSS is a good option as  investment  is tax free under 80C  as also all the returns .Some ELSS funds have been reported giving good tax free returns over  a long period of time . One has to carefully study the past performance  of the fund  as well as fund manager's performance before investing . As returns or principal is not  guaranteed and  classified as high risk investment ,Risk averse  persons may avoid such investment .  
Persons interested in investing in ELSS  may understand Mutual Funds and go to the websites of  Mutual fund Issuers 

 For Tax on Retirement  Benefits CLICK HERE 

The Article on  " TAX PLANNING FOR FY 2018-19  CONTAINS   5 PARTS 

PART I : MAJOR CHANGES IN TAX RULES FOR FY 2018-19 CLICK HERE 

PART 2: TAX RATES  / SLABS FOR FY 2018-19 CLICK HERE 

PART 3: TAX REBATES    FOR FY 2018-19 READ THE ABOVE  PART  ​         

PART 4: ESTIMATE YOUR INCOME TAX / ADVANCE TAX FOR FY 2018-189 CLICK HERE 
                      :                                                                  
PART 5: TAX ON RETIREMENT BENEFITS CLICK HERE   

FOR DETAILS ON AAYKAR SETHU ,
NEW MOBILE APPLICATION FROM INCOME TAX DEPT , CLICK HERE  

​                                                      NEW  ARTICLES ON
    
SMALL FINANCE BANKS                                                                  PAYMENT  BANKS      
                                                                         
UNIFIED  PAYMENT INTERFACE                                                    BHARAT BILL PAYMENT SYSTEM   

BHIM APP                                                                                             AADHAR    

e-INSURANCE   Account ( eIA  )

FOR INTEREST RATE NEWS , CLICK HERE                                FOR INCOME TAX NEWS ,   CLICK HERE

TO READ OUR   POPULAR ARTICLE ON FINANCIAL PLANNING FOR YOUNG  ,CLICK HERE                                                                                                                            PLAN YOUR INVESTMENTS       
                                                        SYSTEMATIC INVESTMENT PLANS   ( SIP )               TOOL  TO AVOID  MARKET HICCUPS             
                                                                                                    CLICK HERE TO KNOW  ​

FOR AUTHENTIC INFORMATION  AND  TIPS ON INCOME TAX  MATTERS

Income tax dept of Govt of India has  a very useful portal  which churns out valuable guidance for tax payers . One can go through and understand the basics  .
Link to the portal is  http://india.gov.in/spotlight/filing-income-tax-returns#itr2

Further there are practical tips for computing tax  which can be read and used . For example  , the link how to compute other income. One can make use of  the portal in understanding law, making payment and also to file returns .  

THIS ARTICLE CARRIES INFORMATION ON VARIOUS TAX  PROVISIONS  WHICH ARE GENERALLY  USEFUL .  YET IT DOES NOT CARRY ALL THE PROVISIONS  AND HENCE YOU ARE  ADVISED TO GO THROUGH INCOME TAX DEPARTMENT WEBSITES  FOR AUTHENTIC COMPLETE INFORMATION , ESPECIALLY FOR THOSE WHO HAVE GOT MULTIPLE STREAMS OF INCOME  OR COMPLEX INVESTMENTS . YOU MAY ALSO CONSULT A QUALIFIED TAX CONSULTANT / CHARTERED  
ACCOUNTANT  FOR ANY  CLARIFICATION.  READERS ARE ALSO WELCOME TO SEND FEEDBACK , FORM AVAILABLE BELOW . WE  ARE OPEN FOR CORRECTION  IF  NEEDED