Complete Information about Income Tax for AY 2010-11
A.
You can reduce your tax liability by taking advantage of the various tax deductions.Under Section 80C of the Income tax Act, 1961 you can reduce your total taxable income by up to Rupees One lakh by making specified investments. There are other sections of the Act as well like 80 D, 80 E, and Section 24 under which you can reduce your total taxable income
Q2. What are the income tax slabs for the current financial year 2009-10 (assessment year 2010-2011)
A.
Tax rate for Individual are revised as under:
| | Individual | Woman | Senior Citizen |
| Upto Rs. 160,000 | Nil | Nil | Nil |
| Rs. 160,001 to Rs. 190,000 | 10% | Nil | Nil |
| Rs. 190,001 to Rs. 240,000 | 10% | 10% | Nil |
| Rs. 240,001 to Rs.300,000 | 10% | 10% | 10% |
| Rs. 300,001 to Rs. 500,000 | 20% | 20% | 20% |
| Above Rs. 500,000 | 30% | 30% | 30% |
Previously existing surcharge of 10% on individuals has been abolished. Education Cess @ 3% remains unchanged.
What are the various categories of deduction?
A.
Currently Income tax Act, 1961 provides for following deductions to reduce the tax liability
- Deduction under Section 80C - Various Investments options like Insurance ,PPF , ELSS etc.
- Deductions under Section 80D – Medical insurance premium
- Deductions under Section 80E – Interest on Education loan
- Deductions under Section 80 G - Donation
- Deductions under Section 24 - Interest on loan for purchase of house property
How do I calculate my tax liability
A.
You can calculate your Net taxable income by reducing the various deductions available under sections 80C to 80U and Section 24 (few examples were given in Question No-3) from your gross total income. (Gross total income is calculated by adding income under five heads –income from salary, house property, capital gains, business and profession & other sources.).You can then use the tax slabs applicable in your case to calculate tax liability for the year
What facts should I consider while making my tax saving decision?
A. The decision to invest should be made keeping in view security, long term goals, liquidity and returns (After-tax) like any other investments.
Tax related sections that you should know
- Section 80C: According to Section80 C, the investment (up to a particular limit) that you make in certain instruments like life insurance, Public provident fund etc. or an expense like payment of tuition fees that you incur, reduces your Gross total income by that amount. The maximum amount that you can claim under this section is Rs 1 Lac.
- Section 80CCC: The premium that you pay towards pension plans qualifies for tax benefits under Section 80CCC. The maximum amount that you can invest under this section is Rs 1 Lac. Note that the combined investment u/s 80C and 80CCC cannot exceed Rs 1 Lac.
- Section 80D: The premium that you pay towards health insurance for yourself and family (Spouse & dependent children) qualifies for tax benefit under Section 80D. The amount that you can claim under this section is 15,000. Additionally you can claim Rs. 15,000 for premium paid for parents health insurance. In case of senior citizen the limit is enhanced to Rs. 20,000. Hence the maximum amount that you can claim is Rs. 35,000.
- Section 24: Repayment of Interest in home loan up to Rs. 1.5 lacs is tax deductible if the property is self occupied. If the property is rented out, there is no cap on the interest portion that you can claim for deduction i.e. the entire interest portion can be reduced from your taxable income
- Section 80E: Section 80 E The interest on loans taken for higher education (any course after passing SSC) qualifies for tax benefits. The loan taken for spouse or children̢۪s education also qualifies for the same. Do remember that there is no ceiling to the interest portion for the loan but unlike home-loan, principal repayment gets no tax advantage. Up to FY 2008-09 scopes of higher educations was restricted to full times studies for graduation or post graduation course in select fields.
- Section 80DD: A fixed total of Rs. 50,000 qualifies as deduction irrespective of amount incurred towards expenditure / investment for the medical treatment of handicapped dependant, certified by medical authority. In case the disability is severe deduction is Rs 75,000. In this years budget the limit for severe disability is proposed to be increased to Rs.1, 00,000 from the current Rs.75,000.
- Section 80DDB: Deduction upto Rs. 40,000 (for Senior citizen Rs. 60,000) is allowed for medical treatment of specified diseases certified by Government hospital
- Section 80G: A part (50%) or entire donation made to specific Trusts / charities / funds is eligible for deduction under this section. The maximum amount that can be claimed under this section is 10 % of (gross total income (claim under various other sections)).
- Section80CCD: The deduction for contributions to a pension scheme of the Central Government is available only to those individual who have been employed by the central government on or after 1st January 2004, and will be allowed for any amount deposited in such a pension scheme. But, in this case, deduction of more than 10 per cent of the employee's salary shall not be allowed. This deduction was hitherto available for only employees of Government and Other non government organizations. Now self employed assesses can also claim this deduction. If the assessee uses the amount received from the Trust to purchase an annuity during the same previous year, then such receipt would not be taxable in the hands of the assessee.
- Section80U: It is deduction in the case of a person with a disability. An individual who is suffering from a permanent disability or mental retardation as specified in the persons with disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability it is Rs. 75,000.
Insurance has traditionally been one of the preferred investment options for investors seeking to reduce their tax burden but there are many benefits of insurance that people are not aware of.
- Health insurance joins the party Sec 80C has always been the more popular and glamorous tax savings section. People know how much they can save and what kind of investments come under the ambit of Sec 80C. But, last years budgetary provisions brought the limelight on a so-far lesser known tax provision which is Sec 80D. Sec 80D covers premium paid towards health insurance plans. This years budget increased the cap of investments under Sec 80D by Rs 15,000. This covers premium paid towards medical insurance taken on the health of self, spouse and dependent children (max Rs 15,000) and on the health of parents (max Rs 20,000 in the case of parents being senior citizens or Rs15, 000 otherwise).
So, now when you combine Sec 80C and 80D, you find that you can invest up to Rs 1.35 Lacs which for someone in the highest tax slab converts to an additional savings of almost Rs.5, 099 . - Tax treatment Tax treatment at the time of maturity Tax treatment at the time of maturity when people are taking a decision related to their tax savings investments, they look for tax savings only at the time of investment. But in doing so, they only see the incomplete picture as they do not look at the tax treatment at the time of the maturity of their investments.
So, in the worst case they end up investing in a plan which does give them tax savings at the time of investment but at the time of maturity, the maturity proceeds get taxed.
For e.g. - if a person invests Rs. 100 in a plan in which the maturity amount gets taxed, he saves Rs. 33 u/s 80C. Let us assume that after a year, this investment matures and the investment value is Rs. 300 (Growth Rs. 200). If this growth were to be taxed on maturity, he will end up paying Rs 66 as tax. So, the net gain for the investor is much lower.
Regular premium life Insurance is one of the few tax savings investment options which give you the benefit of tax-free maturity. So, not only do you save tax on your premium payments but you also enjoy tax free maturity benefits.
Now, that is having the cake and eating it too
Some FAQ's
Q 1. I have withdrawn the Provident Fund & got the amount credited to my bank account, Whether is their any need of showing as income from other sources & make the Tax payment
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No, amount withdrawn from PPF a/c is exempt from tax
Q 2. For the year April 2008 to march 2009 what is that last date for filing returns for an individual 2.As seen in the quiz if it is
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The last date for filing a tax return for 2008-09 would be
Q 3. I was working on Rs.40, 000 per month now I have joined a teaching course so I am getting Rs. 11,000 per month so kindly guide me for tax filing.
A.
The income that you receive from the teaching course would be taxable. If you continue the job and this is merely part time then it may be treated as income from other sources. If this is now your only vocation then it will be taxed as business income. In either case any expenses which re specifically incurred to earn this income can be claimed as a deduction including books, conveyance and whatever else. If your total taxable income for the year is more than Rs. 150,000 you would be obliged to file a tax return as well.
Q 4. If I am a proprietor and I donate some amount to a charitable institution, what should be the procedure to get deduction and how should I pay, whether in cash, cheque or kind.
A.
To get a deduction, the trust or association to which you donate should be certified under section 80G - you must receive the receipt and an 80G certificate valid for the year in which the donation is given. Donation can be given by cheque r by cash withdrawn from your regular bank account. There are no tax benefits for donations in kind.
Q 5. I want to make a pan card but I don't have my high school mark sheet. sir I am 17 years old so I can make a pan card after that I will not face any problem
A.
As your income is below taxable limits, it is not compulsory to file a tax return even if you have a PAN Card. However if excess tax ahs been deducted at source and you wish to claim such tax as a refund, you need to file the same. You can, nonetheless, file the tax
Q 6. I am a retired employee and my income (Pension) was below taxable limit. I did not submit income tax return since last 4 years. This year I have got arrear pension payment due to revision of pension. My income this year is above exemption limit and I will have to pay income tax. I am told that Income Tax office does not accept return if return is not filed in the previous year. How can I submit Return this year?
A.
You can file your return even if you have not filed your return for 4 previous years. You may however have to make a declaration to the Tax Office that the reason for not filing a return earlier was that there was no taxable Income
Q 7. I plan to invest money in bank term deposits. It is usually mentioned that for interest amount earned upto INR 10'000/- there is no TDS. My question is that whether this limit is valid for just one branch of a bank (as advertised at many places) or one has to consider the total interest earned in all the banks/branches where term deposits are held by an individual. In other words if one sees the interest limit surpassing in one branch then s/he should open a term deposit in another branch to avoid TDS. Also, if the latter is true then while filing the Form 15G or H to any branch, whether one should certify the deposit details pertaining to that branch only or all the holdings in various branches. Regards.
A.
As per the law, the TDS limit of Rs. 10,000 is applicable per branch. From a 15G/ 15H perspective however it is the total income which matters and not just income earned from FDs with a particular
HRA tax treatment:
Q 1. Please give me some guide line, how to get exemption from IT. I have a house loan from ICICI bank in
A.
The house in
Q 2. I possess a Ground Floor Tenement in a society. Now I have constructed first floor on the same tenement. I have taken a housing loan from a bank. I want to know whether I will get tax benefit on principal and interest both or only one - as purchase of land is not involved and extension is on the existing tenement.
A.
Yes, you can avail of the tax benefits available both for Interest and the principal amount of housing loan repaid
Q 3. I know that Rs 1, 50,000 can be shown as house loan interest per year. In my case I paid Rs 1, 50,000 as interest for my house loan and also around Rs 2, 50,000 as pre-EMI interest during the last 18 months. My query is can I show the house loan interest as Rs 4, 00,000 (i.e., 150000+250000)?
A.
You can claim maximum interest amount of Rs. 150000. In case any interest pertains to the period prior to the acquisition of the property, such interest can be claimed in 5 equal installments starting with the year when the property is acquired but subject to the overall limit of 150,000 mentioned above.
Q 4. I am staying in government accommodation. Whether license fee should be exempted from income tax
A.
Where accommodation is provided by Central Govt. or State Govt. License fee determined by them in respect of accommodation in accordance with the rules framed by such Govt. (less the rent actually paid by you) will taxable as a perquisite in your hands.
Q 5. Can a person can avail the income tax benefit on the second house. if the tax benefit is more on the 2nd property
A.
Yes, you can consider any one of your property as self occupied and claim exemption for the same. In respect of the other property the ratable value of property will be deemed to be your income, if it ahs not actually been rented.
Q 6. If a person has two housing loans, one house is let out and tax filed accordingly, then, what is the total interest exemption eligible for tax rebate
A.
You can claim upto Rs.150, 000 in respect of your Self occupied property and the total amount of interest paid without any limit on the house which has been let out
Q 7. Me and my wife have taken joint home loan .For agreement we have given stamp duty and registration fees. I want to ask whether we both can claim stamp duty and registration fees by dividing the amount instead of taking benefit singly. Please solve
A.
Yes, Stamp duty and registration fees paid at the time of purchase can be equally divided & included in the cost of the property
Q 8. What tax benefit we get from home loan (principal and interest), under what section, is it included in 80c?
A.
Repayment of principal amount of home loan is allowable as a deduction under 80C upto limit of Rs.100, 000 along with various other investments. In case where a loan is taken for acquisition of a property which is self occupied and not rented, Interest can be claimed upto Rs.150000 under sec.24 provided loan is taken after 31.3.99
Q 9. If the house is rented one, then what all benefits do we get, in respect of rented income, principal repayment and interest repayment and under what section?
A.
If a house is rented , then entire amount paid towards interest on loan taken to acquire that house will be allowed as deduction from rental income. The Principal amount repaid Will be allowed as a deduction under 80 C upto limit of Rs.100, 000.
Q 10. I am staying in a house owned by my wife and son. Can I take a receipt from them for house rent and claim the exemption
A.
If you actually pay rent to your wife and major son ( and not just take receipts), you may be able to claim some portion of the House Rent Allowance received by you as exempt. The rent received by your wife and major son will be taxable in their hands, though they will get a deduction of 30% against the rent so received. It is being assumed that your wife and son is owner of the house. In case your son is a minor, his property income from such rental will be clubbed with your income.
various tax saving instruments:
Q 1. My wife is 62 years old. I wonder whether investment can be made under ULIP in her name and claim 80C benefit from her total income. I guess the advantage is: 1. Reduced lock-in period of 3 years, against 5 years in back tax saver deposit. 2. Do the dividends after 3 years become eligible for tax free income? 3. She is contributing Rs.70, 000/- regularly in her PPF. Is there any limit of investment in ULIP scheme? Of course I understand that the maximum limit that can be claimed is limited to Rs.1 Lac.
A.
Dividends will be tax free. The maximum deduction under 80C including PPF as well as ULIP would be 100000. So, if she so already contributing Rs.70, 000 to PPF, the additional tax benefit she can get under 80C from an investment in ULIP is only on Rs. 30,000. Subject to that, there is no limit on the amount that can be invested in a ULIP. Please note that with most investments there may be no limit on the amount you can invest although the tax exemption that you can avail of may be on only a part of the investment so made
Q 2. I have a ULIP for which I have not paid the last two annual premiums. The policy can be reactivated by paying the outstanding premium. I would like to know if the total premium paid to re-activate the policy can be used to claim tax deductions for this current fiscal.
A.
Yes, any amount paid as premium for ULIP can be claimed as deduction but amount paid towards the reactivation charges or interest for late payment or any other penalty can not be claimed
Q 3. What is the amount that is exempted u/s 80c in case of life insurance premium? As per the act maximum limit is 20% of sum assured. Every one is telling that total amount is exempted irrespective of sum assured. Kindly clarify the position.
A.
The maximum amount which can be claimed for insurance premium under 80C is 20% of the actual capital sum assured. This is specifically provided in section 80C
Q4. Are the partial withdrawals or the surrender amount of a ULIP policy taxable?
A.
Partial withdrawals or the surrender amount of a ULIP policy are exempt u/s 10 provided contribution to ULIP is paid for 5 years. If however the policy is being discontinued before paying premium for 5 years then the amount claimed as a deduction under 80C in the past will be taxed in the year in which the policy is cancelled or surrendered
Q 5. Child insurance
A.
You can claim an 80C deduction for the amount paid for the insurance of your children.
Q 6. My PPF a/c matured and I got Rs.8 lakhs. I invested the same as Term Deposits in a scheduled bank as Rs.4 and 3 lakhs each for 2 years with my wife as the first depositor and me as the second. My wife is a housewife and has no income or PAN card. Both of us are senior citizens. Pleas advise the would be tax liability on this.646420
A.
Interest accrued on FD will be taxable in your hands even if the FD is in your wife's name as money has been transferred from your account. This happens due to what is known as 'clubbing' provisions where if assets are transferred to a spouse without consideration, the assets belong to the spouse but income thereon is included in the donor's tax account. As you are senior citizen your total taxable income upto Rs.225, 000 will be exempt from tax
Q 7. I have a sum of Rs 20 lacs which I have put in fixed deposit in 2 different FDs of 10 lacs each. The second FDs which is jointly in the name of my wife as No 1, I and my son. I want to gift this FD to my son as it is. What will be liability of the interest accrued? The FD is for 3 years
A.
You can gift any amount to your son. If you are gifting the FD then it should be transferred in the name of your son and this may or may not be possible without breaking of the FD. The Interest accrued on the FD will be considered as your income till the date of gift and as his income thereafter. If your son is a minor his income will be clubbed into your income, though you will get a tax exemption of upto Rs. 1,500 against his income so clubbed
Q 8. If I have a savings in post office made in 2004 and close the account and transfer the amount in bank is the total amount received from post office be considered as income for current financial year?2) I have 25000/- deposited in ICICI Pru ,how much tax benefit I will get?3) if I sell a 10years old share will I have to pay tax on the sale value I have received
A.
Only the interest received from Post office saving a/c will be taxable in the current year provided the same has not already been taxed in previous years on an accrual basis. 2) You will be able claim the Rs.25, 000 as deduction from your income under 80C. 3) If the shares are sold through the Stock Exchange and a Securities Transaction Tax (STT) is levied by the Stock Exchange thereon, the entire Gain will be exempt from tax
Q 9. I plan to invest money in bank term deposits. It is usually mentioned that for interest amount earned upto INR 10'000/- there is no TDS. My question is that whether this limit is valid for just one branch of a bank (as advertised at many places) or one has to consider the total interest earned in all the banks/branches where term deposits are held by an individual. In other words if one sees the interest limit surpassing in one branch then s/he should open a term deposit in another branch to avoid TDS. Also, if the latter is true then while filing the Form 15G or H to any branch, whether one should certify the deposit details pertaining to that branch only or all the holdings in various branches.
A.
As per the law, the TDS limit of Rs. 10,000 is applicable per branch. From a 15G/ 15H perspective however it is the total income which matters and not just income earned from FDs with a particular
Q 10. Tax implication on surrender of policy
A.
Surrender value of the policy is exempt from tax - unless it is a policy issued after 1.4.2003 and the premium paid in any year exceeds 20% of the total sum assured
Q 11. My wife is a housewife and I have taken her insurance policy, can I take benefit under section 80c
A.
Yes, Insurance premium paid on life of spouse can be claimed under 80C.
Q 12. I have not withdrawn the amount from PPF, but only from the PF account(I am a salaried Class, working in pvt. Sector).I have left the job after two years of joining & now withdrawn. The PF amount from my PF account of Company. Now tell me the tax treatment for the same. Whether It will be liable to be included under income from other sources, or not
A.
As you have withdrawn amount from your company's PF a/c within 5 years, Same will be taxable as income.
Q 13. I pay a premium of 85000/- to ICICI Pru and Rs. 15000/- (once in 2 years) to ICICI
A.
No. The maximum deduction that you can claim for A Y 09-10 under 80C will be Rs. 100,000 and not 115,000. A further deduction for any mediclaim paid will be available under 80D
Q 13. I pay a premium of 85000/- to ICICI Pru and Rs. 15000/- (once in 2 years) to ICICI
A.
No. The maximum deduction that you can claim for A Y 09-10 under 80C will be Rs. 100,000 and not 115,000. A further deduction for any mediclaim paid will be available under 80D
Q 14. I have invested in Three Mutual Funds through SIP. These funds are ELSS. Now my Question is can I claim all invested amount under 80 deductions in my IT Return? Please guide me
A.
Yes, you can claim the same under 80C
Q 15. I have withdrawn Provident Fund Amount from my account. (I was serving with the Pvt. Co for 2 years, now I left & changed the Company. I have received a PF amount in my bank account. As per my knowledge it is liable for Income tax, Pl. suggest better.
A.
As you have withdrawn amount from your company's PF a/c within 5 years, same will be taxable as income
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