TAX PLANNING    FOR FY 2015-16
                                                                
           

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HIGHLIGHTS OF  CHANGES IN INCOME TAX RULES FROM FY 2014-15 TO  FY 2015-16 

   1. Tax exemption on Health insurance premia paid under  Section 80D  - 
 Limit raised   from   Rs 15,000 to Rs 25,000 
 
2.  Higher Income Tax Deductions for the differently abled – In order to provide tax benefit to those who are differently abled or those caring for dependents who may be differently abled,  deduction   is increased – Under Section 80DD and Under Section 80U – where disability is 40% or more but less than 80% the fixed deduction. The deduction earlier allowed was Rs 50,000 which is now raised to Rs 75,000. And in case of more than 80% disability deduction allowed was Rs 1,00,000 which is now raised to Rs 1,25,000.

  3. Transport Allowance allowed now is Rs 1600 pm , up from Rs 800 pm 

4.  100% deduction under Section 80G for contributions to Swach Bharat Abhiyaan and Clean Ganga Fund

5. Interest earned on Sukanya Samridhi Account to be fully tax free –

  6. Additional deduction  of Rs 50,000 towards contributions to Pension Funds under 80 CCD  –


For Senior Citizens

   1.    Tax exemption on Health insurance premia paid under  Section 80D  - 
 Limit raised   from   Rs 20,000 to Rs 30,000 

   2. Deduction towards medical treatment for specified diseases  raised from Rs 60,000 to Rs 80, 000   under Section 80DDB 

  3.  Deduction for Medical Expenses for Super Senior Citizens  (  aged above 80 years  ) is allowed  up to Rs 30,000:   Can be deducted from the total income .  


4. Service Tax Exemption on premium paid by Senior Citizens for Varishtha Bima Yojana 

 FOR ARTICLE OF TAX PLANNING FOR FY 2014-15  , CLICK HERE 

Tax Planning for FY 2015-16

PLAN N PROGRESS

    






ESTIMATE YOUR INCOME     AND TAX LIABILITY 
     
     1.  Estimate your expected   total income including salary , interest or any other income for the current year  April 2015 to March 2016  . Please note that interest on Fixed Deposits   is to be included . 
​The budget 2015-2016 has put RDs at par with FDs for TDS purpose. Banks will deduct Tax Deducted at Source (TDS) on Recurring Deposits too, from 1st June, 2015. Remember, TDS doesn’t end your Tax Liability.  Interest on RDs & FDs is fully taxable as income at the rate applicable to you. So even if TDS has been cut, you might have to pay more tax. However interest on Savings Bank account is exempted up to  Rs 10,000 /- only under section 80 TTA
     2.  Take stock of  payments like Provident Fund paid  payable  by your employer ,       Insurance Premium  you have paid or any other instrument you have purchased  or to be purchased which is  eligible for  Tax concession . 
      3. Collect the details of Housing loan and education loan instalments  to be  paid during the year and interest paid / payable  for them for the year . 
      3. Go to Income Tax Department , Govt of India website  
http://www.incometaxindia.gov.in/Pages/tools/income-tax-calculator-234ABC.aspx
and calculate the estimated  income tax liability for the current year . 

      4.   We have given below  tax  rates and  various concessions available under    various sections of Income Tax act . Verify whether you can utilise  any of the concessions   and the amount you can invest to avail maximum concession under the each section .  For full list of all concessions , you can go to following website of Income tax Department 
 http://www.incometaxindia.gov.in/pages/tax-information-services.asp
    
      5. While  purchasing  insurance policy or any other financial instrument like pension plan , mutual fund etc ., discuss with the financial advisors /  consultants /  agents etc who  are selling the product regarding the tax concessions available specifically for the instrument in question  and reconfirm by going to the website of the issuer  . Some   advisors / consultants who have  their interest in selling these products may mis-inform you about the concessions available . 

 6. Verify such concessions are useful to your tax plan  and you can make use of such concession  for the  present year . 

7. Beware of the instruments  like unit linked  policies , ELSS etc which are linked to market performance . Such instruments will  perform only when stock  markets. perform .  Some times long terms returns    are shown   with  illustrative rates which may look lucrative . Please remember that those rates are only illustrative and the  such returns may become illusive if   Net Asset Value ( NAV ) does not grow and if sellers do not guarantee the return . Know the risks of investing in such high risk products . 


8. If instruments warrant repetitive  payments say monthly or annually , please  check your financial position  with regard to affordability of the product for you for long term . 
 9. After making all the payments  and investments  and after    getting the    total income correctly calculated , you can go again  to income tax Dept  site  and  arrive final tax liability . 
         
10.  If you  are eligible to submit  form 15H or  15G  to the banks , do it   well in time   , preferably at the beginning of the financial year or immediately now , for avoiding TDS on interest  paid by the bank .


11. For  authentic details of all the matters relating to Income tax , go to the website of  Income Tax Department , Government of India  :http://www.incometaxindia.gov.in/

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ALL ABOUT  TDS AND FORMS 15G AND 15H 

When Banks will deduct TDS for interest paid   ?

            The bank will deduct tax at source once the amount of interest to be credited in respect of all the fixed deposits taken together exceeds Rs. 10,000 in a financial year.

Who is eligible to submit  Form 15G


A  resident person or HUF ,  whose tax on the estimated income for the year is nil and      the amount of interest income from all the sources does not exceed the minimum exemption limit  ( presently Rs 2,50,000/-  ), can submit the Form.15G . Please note that  both conditions are to be fulfilled to become eligible to submit  the form 15G. 

Who can submit form No. 15H?


A resident senior citizen l who is above sixty years of age or completes sixty years during the financial year can submit form No. 15H provided his  estimated tax liability is nil for the financial year though the total amount of interest from all sources may exceed Rs. 2.50 lacs, the minimum amount liable for tax.  

Caution : Any wrong or false / wrong  declaration attracts  penalty  under section 277 .   A  person can be prosecuted and can be liable for 3 months to 7 years   of imprisonment  for such false declarations .  Hence please check your eligibility before submitting  the forms . 


DOWNLOAD  FORM15H                                                              DOWNLOAD  FORM 15G

Employers  will issue   Form 16 ,( Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source from income chargeable under the head “Salaries” ) 
for all the tax deducted at  source   while disbursing  salaries .  The certificate can be used for   computing actual income and tax deducted at source . Format of   Form 16  can be downloaded here   DOWNLOAD  FORM 16

INCOME TAX RATES / SLABS FOR FY 2015-2016
​

INCOME TAX REBATES 

Cumulative deduction allowed under Section 80C, 80CCC, and Section 80 CCD(1) 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. 30,000/- for senior citizens and upto Rs. 25,000/ for   others 

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

Deduction allowed under 80 E  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 80 TTA

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

 

INSTRUMENTS QUALIFYING UNDER   SECTION 80C 

Premium paid on a Life Insurance   
policy for self or spouse or child 

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.
 

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 

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 on the subscriptions made to the fund on or after 01.12.2011 and balances at credit of the subscriber in the existing PPF account shall bear interest at the rate of eight point seven per cent (8.70%) per annum.
  
  
• 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.
• Rate of interest 8.50%.
• Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 151.62 after 5 years.

NSC IX Issue

• No maximum limit for investment.
• INR. 100/- grows to INR 234.35 after 10 years.
• 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.
• Rate of interest 8.80%.
• Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 236.60 after 10 years.

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 

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 

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 

ADVANCE PAYMENT OF TAX 

Under Section 208 of Income-tax Act, every assessee is required to pay advance tax if the tax liability for the previous year exceeds ten thousand rupees.  The  Tax payable during the financial year itself is called Advance Tax .  For individuals  with   salary as  sole source of income ,  TDS  is to deducted by the employer   during disbursal of salary  and hence  question of paying advance tax separately may not arise. For other individuals  , 30 % of  total advance tax liability is to be paid before 15th Sept of the year  .  60 %  of advance tax liability is to be paid before    15th december . 100 % of Advance Tax liability is to be paid  before 15th march of the  financial year .

However  a Resident senior Citizen is exempted  for   paying advance tax  , if he has  no income from business or profession .  .  He can discharge his tax liability  by paying self assessment tax . 

VERIFY YOUR TAX CREDIT 

Your employer or your banker would have deducted income tax from your salary / interest etc   and remitted to Income Tax Department . You could have also paid tax directly . Whether such amounts have gone to your account only ?    Whether  there was any error  from TDS payers while remitting ? You can verify yourself   on line whether all the amounts deducted have gone to your account only .  There are two methods . One method is to register at   TRACES  (  TDS Analysis and Correction Enabling System )   and you can view your tax credit form 26AS since assessment year 2009-10 .    The other method is to get by your Income Tax  e- filing website https://incometaxindiaefiling.gov.in  . if you have not registered  there , you can register and view your tax credits . .

If you find any discrepancies  in your tax credits , you can contact the   TDS  Deductors , find the reasons and   get it rectified .  This step will save  you in future   in  avoiding unnecessary tax demands from the department . 

FILING OF INCOME TAX RETURNS 

Income  Tax returns can be filed on line . For   further details visit  IT RETURNS  Page 

 For Tax on Retirement  Benefits                                  CLICK HERE 

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 .