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Tax Saving Guide for FY 2015-16 (AY 2016-17)

The document provides a comprehensive guide for individual taxpayers in India on tax-saving strategies for the fiscal year 2015-16, incorporating recent changes in tax laws. It outlines various tax-saving sections (like 80C, 80D, etc.) and options such as PPF, ELSS, and NPS that can help individuals maximize deductions and reduce tax liabilities. Additionally, it includes tax slabs and credits, essential for informed financial planning.

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How to Save tax for FY 2015-16? By Amit Founder - Apnaplan.com Version 1.2 Incorporates changes made in Income Tax laws in Budget presented on February 28, 2015
Everyone is talking about 80C, 80CCC, 80D, 80E, 80!@### - what’s the mystery of 80’s in tax planning? How much tax I need to pay this year! Can I use both HRA and Home Loan to save taxes? PPF, FD or Insurance for saving tax? How I am paying more tax than my boss with higher income? How much benefit I can get for my home and education loan? What is the max I can save on taxes? How do I learn about my investment and taxes? If the above thoughts haunt you, this presentation is for you! Why did I buy that Insurance thing I never required? 2
How to Use This Deck?  I hope this helps you to understand the tax saving avenues available to Individual tax payers in India and help you save tax and your hard earned money  This deck would be continuously updated based on your feedback  This deck has been updated based on changes proposed in Budget presented on February 2015 This presentation (deck) is quick and simple "know how" of all tax saving instruments available in India for Individual tax payers The focus is to help even the layman to understand tax saving instruments and plan accordingly If you seek more details on the topic you can click the boxes next to .This would redirect you to relevant articles on In case you find have any doubts or feedback, write me back at apnaplan.com@gmail.com 3
How Much Tax you need to Pay? The first step for tax planning is to know how much Tax you need to pay! IncomeTax Calculator for FY 2015-16 (AY 2016-17) Click on the excel logo to download the IncomeTax Calculator You should be connected to internet to download this Fill up the relevant details to know your tax liability for FY 2015-16 IncomeTax Slabs for FY 2015–16 (AY 2016-17) • Education cess of 3% • Surcharge of 12% on Rs 1 crore plus income earners • Tax credit of Rs 2,000 for income up to Rs 5 lakhs u/s 87A • There are no separate slab for male and female IncomeTax Slab Tax Up to Rs. 2.5 Lakhs Nil Rs. 2.5 – 5 Lakhs 10% Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% IncomeTax Slab Tax Up to Rs. 3 Lakhs Nil Rs. 3 – 5 Lakhs 10% Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% IncomeTax Slab Tax Up to Rs. 5 Lakhs Nil Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% General Public (Below 60Years of Age) Senior Citizens (60 to 80Years of Age) Very Senior Citizens (More than 80Years of Age) 9 Changes in Income Tax Exemptions and Rules in Budget 2015 4
Tax Saving Sections Investments& Expenditure Below is the list of all Tax Saving Sections available for Individuals in India History of Income Tax Slabs in India Section 80C Lots of Options like PPF, ELSS, FD, etc. Section 80CCC Pension Products Section 80CCD Central Government Employee Pension Scheme Maximum Rs 1.5 Lakh Deduction for IncomeTax combining these 3 Sections NPS Section 80CCD(1B) Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS 5
Tax Saving Sections (Contd…) Section 80E Interest payable on Education Loan No Limit for Deduction Section 24 Interest payable on Housing Loan & Home Improvement Loan Deduction Up to Rs 2 Lakh for Home Loan and Rs 30,000 for Home Improvement Loan Section 80 D Medical Insurance for Family and Parents Deduction Up to Rs 60,000 Section 80DD Maintenance & medical treatment of disabled dependent Deduction Up to Rs 1.25 Lakh Section 80DDB Treatment of certain Disease/ Ailment Deduction Up to Rs 80,000 Section 80U Physically Disabled Assesse Deduction Up to Rs 1.25 Lakh HealthandWellBeingLoans Are you eligible for Rs 2,000 Tax Credit u/s 87A 6
Tax Saving Sections (Contd…) Section 80G Donation to certain charitable funds, charitable institutions, etc. Deduction Up to Rs 40,000 Section 80GGA Donations for scientific research or rural development Deduction Up to Rs 1 Lakh Section 80GGC Donation to political parties Deduction Up to Rs 60,000 Section 80GG For Paying Rent in case of no HRA Deduction Up to Rs 24,000 Section 80CCG Rajiv Gandhi Equity Savings Scheme (RGESS) Deduction Up to Rs 25,000 (50% of amount invested) Section 80TTA Interest received in Saving Bank Account Deduction Up to Rs 10,000 OthersDonations 19 Ways Budget 2015 Impacts our Spending, Saving, Investment and Taxation 7
Section 80C/ 80CCC/ 80CCD Provident Fund (EPF/VPF) Public Provident Fund (PPF) Sukanya Samriddhi Account National Saving Certificate (NSC) Senior Citizen’s Saving Scheme (SCSS) Tax Saving Fixed Deposits (for 5Years) Life Insurance Premium Pension Plans from Mutual Funds Pension Plans from Insurance Companies New Pension Scheme (NPS) Tax Saving Mutual Funds (ELSS) Central Govt. Employees Pension Scheme Principal Payment on Home Loan Stamp duty and registration cost of the House Tuition Fee for 2 Children Investment Options (Debt) Investment Options (Others) Expenditures  Following options are available for deduction under sec 80C/80CCC/80CCD  The maximum deduction combining all these investments/ expenditures is Rs 1.5 lakh All these options have been explained in details in subsequent slides. Whose name can Tax Saving investment be done? 8
EPF/VPF (Employee Provident Fund) The Good • The interest earned on EPF/VPF isTax Free • Can take loan against EPF and also do partial withdrawal under certain conditions • Convenient to invest as the amount is directly deducted from salary The Bad • Money is locked till your retirement • The EPF interest rates are market linked and set by EPFO every year • This option is only for salaried employees • The withdrawal of EPF takes time  EPF is mandatory for salaried employees working for companies with more than 20 employees  Under EPF rules, you need to contribute 12% of your Basic pay + DA to EPF  The employer matches this EPF contribution  You have option to put up to 100% of Basic pay + DA to EPF. This is known asVoluntary Provident Fund (VPF)  The employer generally does not match yourVPF contribution • You can opt forVPF by giving a request to your company at the start of every financial year • Only your contribution in EPF andVPF is considered forTax Deduction • If you withdraw your EPF before 5 years the amount is taxable and also the earlier tax deduction claimed is nulled • In case you change your job, you can transfer the previous EPF to your current employer Check EPF Balance Online VPF – A good retirement option 9
PPF (Public Provident Fund) The Good • The interest earned on PPF isTax Free • After opening the PPF account, investment can be done online everyYear (for some banks) • Can take loan against PPF and also do partial withdrawal • It cannot be attached by court orders • Highest Safety – backed by Govt. of India The Bad • Longer Locking period • The PPF interest rates are market linked and hence would change every year • HUFs and NRIs cannot open PPF Account  PPF can be opened at Post Offices, 24 Nationalized Banks and ICICI Bank  Has mandatory locking of 15Years and can be extended further 5 years at a time  Maximum Investment Allowed: Rs 1.5 Lakh perYear (Budget 2014 increased this limit )  Minimum Investment of Rs 500 required every year to keep the account active  Interest Rates paid on PPF are market linked onward hence would vary every year. The interest rate is 8.7% since April 1, 2013. (Has not changed for FY 2015-16) • Investment done till 5th of the month earns interest for the month. So deposit your money before 5th of month • PPF can be opened on minors name with either parents as guardian • The total investment in your PPF and the minor child PPF account (for whom you are guardian) should not exceed Rs1.5 lakh in a financial year List of Banks for opening PPF PPF – A must have in every Portfolio! Download PPF Calculator 10
Sukanya Samriddhi Account (SSA) The Good • The interest earned on SSA isTax Free • 50% withdrawal allowed when girl turns 18 for marriage/higher education • Highest Safety – backed by Govt. of India The Bad • Longer Locking period • New Scheme – Banks not well aware of formalities • The SSA interest rates are market linked and hence would change every year • HUFs and NRIs cannot open SSA Account  Sukanya Samriddhi Account is a new scheme by Government to promote all round development of Girl Child  Can only be opened for Girl child below 10 years of age (max for 2 girl child by a parent)  Deposit to the account to be made for 14 years and account matures at 21 years from date of opening  Maximum Investment Allowed: Rs 1.5 Lakh perYear per account  Minimum Investment of Rs 1,000 required every year to keep the account active  Interest Rates paid are market linked, hence would vary every year. The present interest rate is 9.2% • Documents Needed – Date of Birth proof for Girl Child,Your Identity and Address Proof • Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied • Account can be closed before 21 years in case of marriage All abount Sukanya Samriddhi Account 11
NSC (National Saving Certificate) The Good • Certificates can be kept as collateral security to get loan from banks • NoTax deduction at source • The interest accrued for NSC qualifies for Sec 80C deduction in subsequent years • Highest Safety – backed by Govt. of India The Bad • The interest earned is taxable • You need to go to post office to invest and redeem. There is no online investment/ redemption facility • Trust and HUF cannot invest  NSC is Tax saving Fixed Deposit Scheme from India Post  It is available for 5 years (NSCVIII)  The interest is market linked and changes every year. Its 8.5% for 5Year since April 1, 2014  There is no maximum limit for investment in NSC but the deduction is only till maximum of Rs 1.5 Lakh u/s 80C  You can buy NSC in denominations of Rs 100, 500, 1000, 5000 and 10000 • Maturity value of a certificate of Rs100 purchased on or after April 1, 2012 shall be Rs 152.35 after 5 years. • NSC is better tax saving option than banksTax Saving FD (offering similar interest) as interest accrued for NSC qualifies for Sec 80C deduction in subsequent years Interest Rates on Small Saving Schemes for FY 2015-16 12
Tax Saving FD from Banks/ Post Offices The Good • Convenient to invest. Many banks offers online facility forTax Saving FD • Redemption on maturity comes directly to your bank account • High Safety - FD up to Rs1 Lakh is insured by RBI The Bad • The interest earned is taxable • Cannot be withdrawn prematurely • Cannot be pledged to secure loan or as security  These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while making the deposit  Has minimum tenure of 5Years. Some banks offer special schemes for longer tenures with higher interest rates  Some banks offer 0.25% to 0.75% additional interest for Senior Citizens and their employees  As of today banks are offering 8% -8.5% for general public and 8.5% - 9% for Senior Citizens • The Post Office Time Deposit Account (which is FD offered by Post Office) of 5Years maturity also qualifies for 80C deduction.Its offering 8.5% since April 1, 2014 • Don’t be mislead by banks advertisements about their yield onTax Saving FDs.Those are manipulative calculations • Be cautious of small co-operative banks as they have higher risk than bigger private and public sector banks Best Tax Saving FD Rates How you Loose Money in FD 13
Senior Citizens Savings Scheme (SCSS) The Good • The interest is paid quarterly to the saving account, hence can serve as regular income for retired • Redemption on maturity comes directly to your bank account or through post dated cheques • The SCSS carries a sovereign guarantee for principal and interest payments. So it’s the safest investment The Bad • The interest from SCSS is taxable • Bank would deductTDS if the total interest in a year is over Rs 10,000 • NRIs and HUF are not eligible to open an account  As the name suggests, SCSS is for senior citizens who are 60 years or above on the date of opening of the account.Also people with 55 years of age who have retired byVRS can open SCSS after 3 months of retirement  Minimum Investment: Rs 1,000 while Maximum Investment: Rs 15 Lakhs  The joint account can be opened only with your spouse..There is no age limit applicable for the joint account holder.  The interest is paid out quarterly.The interest is 9.3% w.e.f April 1, 2015  No partial withdrawal is permitted before 5 years.The account may be extended for a further period of 3Years • You can open SCSS with Post offices, 24 nationalized bank or ICICI bank • SCSS account can be closed after 1Year (with penalty) but in case you have availed Sec 80C benefit,it would be reversed • If your income is not taxable, you can provide form 15H or 15G so that banks don't cutTDS • Any retired Defense Services personnel is eligible for SCSS irrespective of his age All about Senior Citizens’ Savings Scheme 14
Life Insurance  The only product you should consider from Life Insurance companies is – Term Plan  The sum assured on death should be at least 10 times the annual premium  This limit is altered only in special cases of disability (the premium should be 15% or less of sum assured)  Buy insurance only if you have dependents.! Do not buy insurance to save tax!There are plenty of better ways to save taxes • OnlineTerm Plans are cheaper than products sold by agents. So if you are comfortable with online purchasing go for it • Never hide anything from insurance companies.A wrongly stated fact might deny insurance to your dependents when they need it most • PPF along with Term Plans are better products than Endowment Plans. Similarly Mutual Funds withTerm plans turn out better option than ULIPs • The maturity proceeds of life insurance is tax free u/s 10(10)D,subject to certain conditions How much Insurance? • Your life insurance should be adequate to replace your income • This roughly turns out to be 7 to 10 times your present annual income • This might vary widely based on your assets, liabilities and situation Latest Death Claim Settlement Ratio Tax Benefit on Life Insurance? 15
National Pension Scheme (NPS) The Good • This is lowest cost Pension plan in the country • You can choose your investment profile based on your risk. NPS can invest maximum of 50% in selected stocks. • On death the entire amount is paid to the nominee The Bad • NPS is taxable at withdrawal • The locking is till you are 60 years of age • You can withdraw max of 60% at maturity and have to compulsorily buy annuity for min 40% corpus  NPS was introduced in April 2009 and has two types of Accounts –Tier 1 andTier 2  Tier 2 account is optional and only contribution toTier 1 account is eligible forTax Deduction u/s 80CCD  Tier- 1 account requires a minimum investment of Rs 6,000 annually and Rs 500 per transaction  Salaried employees can claim deduction up to 10% of your salary, which comprises basic + DA, while for self employed its capped capped at 10% of gross total income • You should opt for 50% equity investment when young and slowly move to debt as you approach your retirement • Budget 2015 has announced additional tax exemption of Rs 50,000 for investment in NPS u/s 80CCD(1B) Should you Invest Rs 50,000 in NPS to Save Tax u/s 80CCD (1B)? 16
Do You know how Your Family can Help You Save Taxes? Click to Know HowYour Spouse can Help you save taxes! Click to Know HowYour Parents can Help you save taxes! Click to Know HowYour Children can Help you save taxes! 17
Equity Linked Saving Scheme (ELSS) The Good • The gains on ELSS Fund is Tax Free • Only investment option which can beat inflation • Has the shortest locking period of 3 years • ELSS can be bought and redeemed online The Bad • The returns are dependent on stock market. So its high risk investment.You might loose money at the end of 3 years  ELSS is popularly known as Tax Saving Mutual Fund  The minimum investment is Rs 500  There is no limit for maximum investment but the maximum deduction you get 1.5 Lakhs every year • Doing SIP (Systematic Investment Plan) in one or two ELSS Fund is the best way to invest • Dividend Reinvestment option in ELSS has been discontinued from February 2015 • You should choose maximum of two funds for investing • Research well before you invest in ELSS Fund • You should try to invest directly to fund as this would give you 0.5% to 1% higher returns as compared to when you invest through broker Best ELSS Funds for FY 2015-16 Dividend or Growth Option? 18
Pension Plans from Insurance Companies  Pension Plans from Insurance Companies Qualify for deduction under Sec 80CCC  There were few launches in Pension Plan space this year from life insurance companies  These are very inefficient products , so you should stay away from these plans  They generally have assured return in the range of 1-2% per annum, which is very low return. Savings accounts pay at least 4% • Don’t invest in pension plans just by seeing their emotional advertisements.They are high cost products and would ruin our retirement planning • PPF/ EPF &VPF turns out to be a better plan for retirement even for most risk averse investor • NPS is also good alternative to these Pension plans Why you should never buy these Pension Plans? • Low Returns: They don’t invest in equities, which is must for long term wealth creation • If you want to surrender these, you loose a lot in terms of returns • On surrendering,the tax benefit you claimed earlier, would be reversed and you would need to pay these taxes back • On maturity, you cannot withdraw the entire corpus and have to compulsorily buy Annuity Budget 2015: TDS on Fixed Deposit, Recurring Deposit and EPF 19
Tuition Fee  The expenses on tuition fees for maximum of two children is eligible for deduction u/s 80C  The maximum deduction available is Rs 1.5 Lakh  The deduction is available for full time courses only  The deduction is not available for tuition fee to coaching classes or private tuitions  The educational institute should be located in India, though it may be affiliated to any foreign university • The following expenses are not considered as tuition fees – Development Fee,Transport charges, hostel charges, Mess charges, library fees, Late fines, etc • This deduction is not available for tuition fees for self or spouse Where to Park Money for Very Short Term [less than 6 Months]? 20
Stamp Duty & Registration Charges  Stamp duty and registration charges up to Rs 1.5 Lakh can be claimed for deduction u/s 80C  The payment should have been made in the same financial year for which the tax is being paid. i.e. the deduction cannot be carried forward to next year  The house should be in the name of assessee claiming deduction  The payment for stamp duty should have been made from his own funds  This benefit is available on purchase on new residential unit only Example of Newspapers Publishing Wrong Math to Fool Investors! 21
Recommended Books  I have often been asked books I would recommend for Personal Finance. Below are some of recommendations As the name suggests, it’s a book on retirement planning written by PV Subramanyam a CA and regular blogger Blogs at Subramoney.com Clicking on Books Image would take you to Amazon.in where you can buy these books online. Both the books have been authored by Manish who an avid blogger and features on PLAN F program of CNBC. Blogs at Jagoinvestor.com Authored by Lakhotia, a very renowned tax consultant and is regular on CNBC Awaaz “Tax Guru” Program. Good book to understand your taxes!
Do You know how Your Investments are Taxed? How is your Investment in Mutual Funds Taxed? KnowTaxation of Equity, Debt,Arbitrage, International Mutual Funds Is your Life Insurance Policy eligible forTax Benefit? Not all Policies are eligible forTax Benefit at Investment and on Maturity TDS andTax on NCDs (Non Convertible Debentures) 23
Home Loan: Interest & Principal • The deduction is only available from the year of possession/ completion of the house • All the benefit of tax u/s 80C will reversed if house property is sold with 5 year from purchase of house property How much Home Loan you are eligible for?  Buying a house is one of the top most priority for most  The good news is you get tax deduction on both principal and interest payment on your Housing Loan Deduction on Principal Payment on Home Loan  Deduction up to Rs 1.5 Lakh is allowed on the principal repayment of the housing loan if the house is self occupied or vacant  The house should be registered in the name of assessee. (He should be one of the owners, in case of joint ownership)  The loan should be taken from Banks, NBFCs or respective employers. Loans taken from friends/ relatives does not qualify for this deduction  This deduction is available also to people with multiple properties Home Loan Principal Deduction u/s 80C up to Rs 1.5 Lakh Interest Deduction u/s 24 up to Rs 2 Lakhs 24
Home Loan: Interest & Principal • The deduction is only available from the year of possession/ completion of the house • The Pre-EMI interest you pay before the completion of the house can be claimed as deduction in 5 equal installments starting from year the construction of the house completes • All the benefit of tax u/s 80C will reversed if house property is sold with 5 year from purchase of house property • You can claim benefit of both HRA and Home Loan together • In case the Home Loan is taken before April 1, 1999 the deduction on interest is only Rs 30,000 Deduction on Interest Payment on Home Loan  Deduction up to Rs 2 Lakh is allowed on the principal repayment of the housing loan in case of single non- rented house  In case of rented or multiple houses, there is no limit of deduction  Section 24 covers “Loss/Gain from Housing Property”  For Sec 24, all the rent you receive from houses is your income while  The interest paid on housing loan is considered as expense  So broadly speaking the (income – expense) subject to certain conditions is added to your income.  In case the interest paid is more than your rental income, the above calculation is negative and hence a deduction to your total income How much you gain by Switching Home Loan 25
Home Improvement Loan: Interest • If the loan for acquisition/construction was taken before April 1, 1999 - then the combined (interest paid on the loan taken for acquisition/construction and the loan taken for repair/renewal) limit for interest deduction stays at Rs.30,000 • You can take loan of up to 80% of the cost of valuation of the home improvement work • The maximum tenure of home improvement loan can go up to 10- 20 years depending on lending institution • The interest rate for home improvement loan is 0 – 2.5% higher than home loan from the same institution  Deduction up to Rs 30,000 is allowed on the interest payment for loan taken for Home Improvement  Home improvement Loan can be taken for furnishing of new home or repairing, painting or refurnishing existing home  The above limit is for self-occupied homes only  There is no limit of deduction for rented or vacant homes  This exemption is over and above the Rs 2 Lakh limit that you can claim for Home Loan interest  No deduction is available for the principal portion of the repayment on home improvement loans How RBI Rate Cut Impacts your Investments and Loans? 26
Section 80D: Medical Insurance  Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children and Parents qualify for deduction u/s 80D  You can claim maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 30,000 above 60 years of age.  An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 30,000 in case of either parents being senior citizens)  This deduction can be claimed irrespective of parents being dependent on you or not  This is not available for buying health insurance for in-laws.  HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF • To avail deduction the premium should be paid in any mode other than cash • Budget 2013 introduced deduction of Rs 5,000 is also allowed for preventive health checkup for Self, Spouse, dependent Children and Parents. Its continued to this FY too. • This Rs 5,000 is within Rs 25,000 limit for Health Insurance Making Sense of Tax Benefit on Health Insurance u/s 80D 27
Section 80DD: Handicapped Dependents  In case you have dependent who is differently abled, you can claim deduction for expenses on his maintenance and medical treatment  You can claim up to Rs 75,000 or actual expenditure incurred, which ever is lesser. (The limit is Rs 1.25 Lakh for severe conditions)  Dependent can be parents, spouse, children or siblings.Also the dependent should not have claimed any deduction for self • A severe disability condition is 80% or more of the disabilities • Individuals would need disability certificate issued by state or central government medical board to claim deduction • The life insurance policy should be on the tax payer name, with the disabled person as the beneficiary. • In case the disabled dependent expires before you, the policy amount is returned back and treated as income for the year and is fully taxable. Blindness and Vision problems Leprosy- cured Hearing impairment Locomotor disability Mental retardation or illness 40% or more of following Disability is considered for purpose of tax exemption Costs incurred for medical treatment, training or rehabilitation of a disabled dependent, including amount spent for nursing Amount paid towards an insurance scheme for the maintenance of your disabled dependent in case of your untimely death Deductions are permissible in either of the following cases Which is the Best Day for SIP in Mutual Funds 28
Section 80DDB: Treatment of Certain Diseases  Cost incurred for treatment of certain disease for self and dependents gets deduction for Income tax.  For very senior citizens the deduction amount is up to Rs 80,000; while for senior citizens it Rs 60,000 and for all others its Rs 40,000  Dependent can be parents, spouse, children or siblings.They should be wholly dependent on you. • A certificate from specialist from Government Hospital would be required as proof for the ailment and the treatment • In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed. • In case of partial reimbursement, the balance amount can be claimed as deduction Diseases Covered Neurological Diseases Parkinson’s Disease Malignant Cancers AIDS Chronic Renal failure Hemophilia Thalassaemia How to invest “DIRECT” in Mutual Funds? 29
Section 80U: Physically Disabled Assesse  Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases.  The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability) • A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government Hospital would be required as proof for the ailment. Disabilities Covered Blindness and Vision problems Leprosy- cured Hearing impairment Locomotor disability Mental retardation or illness Autism Cerebral Palsy How safe is you Money/FD in bank? 30
Section 80E: Education Loan  The entire interest paid on education loan in a financial year is eligible for deduction u/s 80E  There is no deduction on principal paid for the Education Loan  The loan should be for education of self, spouse or children only  The loan should be taken for pursuing full time courses only  The loan has to be taken necessarily from approved charitable trust or a financial institution only • The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. • So in all you can claim education loan deduction for maximum eight years. Details on Tax Benefit on Education Loan 31
Recommended Books - 2  I have often been asked books I would recommend for Personal Finance. Below are some of recommendations One of the world’s Best Sellers in Personal Finance and one of the earliest books I read. Good book but not everything relevant for Indian Audience Clicking on Books Image would take you to Amazon.in where you can buy these books online. Authored by Hemant, who is Certified Financial Planner and regular blogger Blogs at Tflguide.com Authored by Manoj Arora, an engineer by profession, is a gold medalist from Aligarh Muslim University
Rajiv Gandhi Equity Savings Scheme (RGESS)  RGESS is a newTax Saving Scheme which was announced in Budget 2012 to encourage first time investors in stock market  Under RGESS, you are eligible for a tax deduction on 50% of the amount invested  The maximum amount eligible for investment in a year for RGESS is Rs 50,000.So maximum deduction is 50% of 50,000 = Rs 25,000  You can take advantage of RGESS for three consecutive years  RGESS allows you to invest directly in stocks which are part of CNX-100 index or BSE-100 index  Some Mutual Funds and ETFs which invest only in the above companies are also eligible for RGESS All about RGESS Best Demat Account Who can invest in RGESS? • This scheme is to encourage New Investors in Stock market. So as per RGESS,you are new investor if • did not have a Demat A/C before November 23, 2012 OR • have not transacted in the equity or derivate segment till November 23, 2012 OR • had a demat account but as second joint holder • Additionally your gross income should be less than Rs 12 Lakhs Continued in Next Slide … 33
Rajiv Gandhi Equity Savings Scheme (RGESS) The Good • The gains on RGESS Fund is Tax Free • The returns generated can beat inflation • Has short locking period • Everything needs to be done through your demat account. So its convenient The Bad • The returns are dependent on stock market. So its high risk investment.You might loose money. • Its complicated for a normal investor • As first time investors, it makes sense to either invest in eligible mutual fund schemes or ETFs • Investing directly in stocks is very risky and you can loose money if you select the wrong one • There is concept of flexible and fixed lock-in, which makes the scheme complex. For simplicity you should assume that your investment in RGESS is locked in for 3 years • I recommend investing in the scheme through ETFs, as the tax break gives you a cushion to your prospective losses, if any. Moreover, its those few schemes which have possibility to generate positive inflation adjusted returns. Steps to invest in RGESS? Open a Demat Account Designate the A/C as RGESSAccount by filling up relevant form Buy Eligible Stocks or ETFs Submit Demat Statement as Proof to claim tax benefit 4 Steps to ClaimTax Benefit in RGESS 34
Donation to Approved Charitable Organizations  The government encourages us to donate to Charitable Organizations by providing tax deduction for the same u/s 80G  Some donations are exempted for 100% of the amount donated while for others its 50% of the donated amount  Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income • Only donations made to approved organizations and institutions qualify for deduction • Only donations made in cash or cheque are eligible for deduction.Donations in kind like giving clothes, food, etc is not covered for tax exemption List of Approved Organizations How to Claim Sec 80G Deduction? • A signed & stamped receipt issued by the Charitable Institution for your donation is must • The receipt should have the registration number issued by IncomeTax Dept printed on it • Your name on the receipt should match with that on PAN Number • Also the amount donated should be mentioned both in number and words 35
Donation to Political Parties/ Scientific Research Section 80GGA – Donation for Scientific Research  100% tax deduction is allowed for donation to the following for scientific research u/s 80GGC  To a scientific research association or University, college or other institution for undertaking of scientific research  To a University, college or other institution to be used for research in social science or statistical research  To an association or institution,undertaking of any programme of rural development  To a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme  To the National Urban Poverty Eradication Fund set up How to Stop SIP in Mutual Fund? Section 80GGC – Donation to Political Parties  100% tax deduction is allowed for donation to a political party registered under section 29A of the Representation of the People Act, 1951 u/s 80GGC  The maximum exemption you can claim is limited to 10% of your gross annual income 36
Interest on Saving Account  Budget 2012 introduced a new Section 80TTA, which allows deduction of Rs 10,000 on interest earned on saving bank account  This benefit is continued for FY 2015-16 Highest Interest Rate on Savings Account 22 Hidden Charges in Savings Account 37
House Rent in case HRA is not part of Salary  In case, you do not receive HRA (House Rent Allowance) as a salary component,you can still claim house rent deduction u/s 80GG  You cannot claim this deduction if you or your spouse or your children own any home in India or abroad. • The House Rent deduction is lower of the 3 numbers: • Rs. 2,000 per month • 25% of annual income • (Rent Paid - 10% of Annual Income) 8 Questions on HRA Landlord Declaration if no PAN Card 38
Tax on Salary Components  Your salary has multiple components  Some of them are fully taxable while others are partially taxable or tax free FullyTaxable • Basic Salary • Dearness Allowance (DA) • SpecialAllowance • Band Pay • Bonus • Over time • Arrears • Personal Pay • Food Allowance • FurnitureAllowance • Shift Allowance PartiallyTaxable/Tax Free • Medical Reimbursement up to Rs 15,000 per year • Transport Allowance up to Rs 1600 per month • LeaveTravel Allowance (LTA) • Vehicle Maintenance • House Rent Allowance (HRA) • UniformAllowance – Amount up to Rs 24,000 per annum is tax free • Children EducationAllowance (Rs.100/ month per Child (Rs.300 for Hostel Expenditure) Max for 2 Children) • Newspaper/JournalAllowance – Amount up to Rs 12,000 per annum is tax free • TelephoneAllowance • Meal Coupons  Some of the components have been explored in next few slides 11 Tax Free Components You Must have in Salary 39
Partially Taxable Salary Components House Rent Allowance • 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 the annual rent paid is more than Rs 1 Lakh, you need to give PAN Card number of landlord to your employer • In case the landlord does not have PAN Card, he needs to give a declaration for the same • You can claim benefit of both HRA and Home Loan together Company Car/ Car Maintenance Allowance • If the company provides you a car for personal and official purposes and reimburses the fuel, insurance, maintenance and driver’s salary the taxable value shall be: • in case the car is less than equal to 1600 CC – Rs 1,800 per month • in case the car is greater than 1600 CC – Rs 2,400 per month • Also Rs 900 per month in case company provides driver • In case the car is owned by you, the reimbursement of running and maintenance cost up to • Rs 1,800 per month (for car less than 1600CC) and • Rs 2,400 per month (for car greater than 1600CC) • along with Rs 900 for driver salary is tax free Why most Mutual Fund NFOs are bad investment? 40
Partially Taxable Salary Components Mobile Phone and Internet Bill Reimbursement • The reimbursement of mobile and internet bills used for company purpose is tax free • There is no limit on the amount of reimbursement and is fixed by company depending on work profile Leave Travel Allowance (LTA) • You can claim LTA twice for two domestic trips with family in block of four years.The present block is 2014 - 2017 • 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 • There is no maximum limit of LTA and is decided by employer • Only expenses incurred in travelling is covered. You cannot claim hotel stay and food bills Meal Coupons • Meal Coupons like Sodexo orTicket are tax free subject to Rs 50 per meal • So assuming 22 days working month and 2 meals a day, meal coupon up to Rs 2,200 per month are tax free • Annually this amount comes to Rs 26,400 How builders use super built-up area to deceive home buyers? 41
Banks for Opening SCSS & PPF  At present, Post Offices, 24 Nationalized banks and one private sector bank are authorized to handle the SCSS and PPF Allahabad Bank IDBI Bank State Bank of Travancore Andhra bank Indian Bank Syndicate Bank Bank of Baroda Indian Overseas Bank UCO Bank Bank of India Punjab National Bank Union Bank of India Bank of Maharashtra State Bank of Bikaner and Jaipur United Bank of India Canara Bank State Bank of Hyderabad Vijaya Bank Central Bank of India State Bank of India ICICI Bank Ltd. Corporation Bank State Bank of Mysore Dena Bank State Bank of Patiala Advanced Tax Payment by Salaried Employees - Rules 42
Sec 80G: List of eligible Organizations 1. National Defense Fund 2. Prime Minister's National Relief Fund 3. Prime Minister's Armenia Earthquake Relief Fund 4. Africa (Public Contributions-India) Fund 5. National Foundation for Communal Harmony 6. Approved university/educational institution 7. Chief Minister's Earthquake Relief Fund 8. Zila Saksharta Samiti 9. National Blood Transfusion Council 10. Medical Relief Funds of state govt 11. Army Central Welfare Fund, Indian Naval Ben. Fund,Air Force CentralWelfare Fund. 12. National Illness Assistance Fund 13. Chief Minister's or Lt. Governor's Relief Fund 14. National Sports Fund 15. National Cultural Fund 16. Govt./ local authority/ institution/ association towards promoting family planning 17. Central Govt.'s Fund for Technology Development & Application 18. NationalTrust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities 19. Indian Olympic Association/ other such notified association 20. Andhra Pradesh Chief Minister's Cyclone Relied Fund 21. National Fund for Control of Drug Abuse (NFCDA) 22. Swachh Bharat Kosh 23. Clean Ganga Fund 1. Jawaharlal Nehru Memorial Fund 2. Prime Minister's Drought Relief Fund 3. National Children's Fund 4. Indira Gandhi Memorial Trust 5. Rajiv Gandhi Foundation 6. Donations to govt./ local authority for charitable purposes (excluding family planning) 7. Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB) 8. Donations for repair/ renovation of notified places of worship 9. WorldVision India 10. Udavum Karangal 100% Exemption 50% Exemption Renting Bank Lockers: Charges, Guidelines and Alternatives 43
About the Author • This deck has been authored by Amit Kumar, the brain behind Apnaplan.com,a leading personal finance blog in India • Amit is MBA from NITIE, Mumbai and BIT from Delhi University • Apnaplan.com is leading personal finance blog in India • The blog has more than 500 articles related to • Investments like Mutual Funds, Fixed Deposits,Stocks, Bonds, Real Estate etc • Taxation – Calculators,FAQs ofTax Saving Options, etc • Loans – Home, Personal, Gold, Education,etc • Retirement Planning,Money Saving and Smart ShoppingTips • Few Numbers: • More than 2.5 Lakhs PageViews with 1.5 Lakh unique visitors monthly • Alexa Rank of 82,000 worldwide and 7,000 in India [as of January 20, 2016] 44
Thank You! Thank you for reading through the presentation • We sincerely hope you like it and would help you in your tax planning for FY 2015-16 • In case you liked our work, please share it with others • You can recommend/email and share this with your friends and family • Share it on online forums, your group emails • Like us on Facebook • Give us +1 on Google • Leave us a note of appreciation on Apnaplan.com • Your appreciation encourages us and motivates us to come out with more such decks Help us to Make this deck Better! • We look forward to your feedback - Let us know how we can make this deck better and more useful for you! • You can email us on apnaplan.com@gmail.com 45
Disclaimer • This deck is for information purpose only and all the information presented is on best effort basis • You are advised to consult your financial planner or tax expert before taking any investment decision • The author has full copyright of this deck and this should not be modified or copied without written permission from the author • However this deck might be shared or presented with due credit to the author and Apnaplan.com 46

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Tax Saving Guide for FY 2015-16 (AY 2016-17)

  • 1.
    How to Savetax for FY 2015-16? By Amit Founder - Apnaplan.com Version 1.2 Incorporates changes made in Income Tax laws in Budget presented on February 28, 2015
  • 2.
    Everyone is talking about80C, 80CCC, 80D, 80E, 80!@### - what’s the mystery of 80’s in tax planning? How much tax I need to pay this year! Can I use both HRA and Home Loan to save taxes? PPF, FD or Insurance for saving tax? How I am paying more tax than my boss with higher income? How much benefit I can get for my home and education loan? What is the max I can save on taxes? How do I learn about my investment and taxes? If the above thoughts haunt you, this presentation is for you! Why did I buy that Insurance thing I never required? 2
  • 3.
    How to UseThis Deck?  I hope this helps you to understand the tax saving avenues available to Individual tax payers in India and help you save tax and your hard earned money  This deck would be continuously updated based on your feedback  This deck has been updated based on changes proposed in Budget presented on February 2015 This presentation (deck) is quick and simple "know how" of all tax saving instruments available in India for Individual tax payers The focus is to help even the layman to understand tax saving instruments and plan accordingly If you seek more details on the topic you can click the boxes next to .This would redirect you to relevant articles on In case you find have any doubts or feedback, write me back at [email protected] 3
  • 4.
    How Much Taxyou need to Pay? The first step for tax planning is to know how much Tax you need to pay! IncomeTax Calculator for FY 2015-16 (AY 2016-17) Click on the excel logo to download the IncomeTax Calculator You should be connected to internet to download this Fill up the relevant details to know your tax liability for FY 2015-16 IncomeTax Slabs for FY 2015–16 (AY 2016-17) • Education cess of 3% • Surcharge of 12% on Rs 1 crore plus income earners • Tax credit of Rs 2,000 for income up to Rs 5 lakhs u/s 87A • There are no separate slab for male and female IncomeTax Slab Tax Up to Rs. 2.5 Lakhs Nil Rs. 2.5 – 5 Lakhs 10% Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% IncomeTax Slab Tax Up to Rs. 3 Lakhs Nil Rs. 3 – 5 Lakhs 10% Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% IncomeTax Slab Tax Up to Rs. 5 Lakhs Nil Rs. 5 – 10 Lakhs 20% Above Rs. 10 Lakhs 30% General Public (Below 60Years of Age) Senior Citizens (60 to 80Years of Age) Very Senior Citizens (More than 80Years of Age) 9 Changes in Income Tax Exemptions and Rules in Budget 2015 4
  • 5.
    Tax Saving Sections Investments& Expenditure Belowis the list of all Tax Saving Sections available for Individuals in India History of Income Tax Slabs in India Section 80C Lots of Options like PPF, ELSS, FD, etc. Section 80CCC Pension Products Section 80CCD Central Government Employee Pension Scheme Maximum Rs 1.5 Lakh Deduction for IncomeTax combining these 3 Sections NPS Section 80CCD(1B) Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS 5
  • 6.
    Tax Saving Sections(Contd…) Section 80E Interest payable on Education Loan No Limit for Deduction Section 24 Interest payable on Housing Loan & Home Improvement Loan Deduction Up to Rs 2 Lakh for Home Loan and Rs 30,000 for Home Improvement Loan Section 80 D Medical Insurance for Family and Parents Deduction Up to Rs 60,000 Section 80DD Maintenance & medical treatment of disabled dependent Deduction Up to Rs 1.25 Lakh Section 80DDB Treatment of certain Disease/ Ailment Deduction Up to Rs 80,000 Section 80U Physically Disabled Assesse Deduction Up to Rs 1.25 Lakh HealthandWellBeingLoans Are you eligible for Rs 2,000 Tax Credit u/s 87A 6
  • 7.
    Tax Saving Sections(Contd…) Section 80G Donation to certain charitable funds, charitable institutions, etc. Deduction Up to Rs 40,000 Section 80GGA Donations for scientific research or rural development Deduction Up to Rs 1 Lakh Section 80GGC Donation to political parties Deduction Up to Rs 60,000 Section 80GG For Paying Rent in case of no HRA Deduction Up to Rs 24,000 Section 80CCG Rajiv Gandhi Equity Savings Scheme (RGESS) Deduction Up to Rs 25,000 (50% of amount invested) Section 80TTA Interest received in Saving Bank Account Deduction Up to Rs 10,000 OthersDonations 19 Ways Budget 2015 Impacts our Spending, Saving, Investment and Taxation 7
  • 8.
    Section 80C/ 80CCC/80CCD Provident Fund (EPF/VPF) Public Provident Fund (PPF) Sukanya Samriddhi Account National Saving Certificate (NSC) Senior Citizen’s Saving Scheme (SCSS) Tax Saving Fixed Deposits (for 5Years) Life Insurance Premium Pension Plans from Mutual Funds Pension Plans from Insurance Companies New Pension Scheme (NPS) Tax Saving Mutual Funds (ELSS) Central Govt. Employees Pension Scheme Principal Payment on Home Loan Stamp duty and registration cost of the House Tuition Fee for 2 Children Investment Options (Debt) Investment Options (Others) Expenditures  Following options are available for deduction under sec 80C/80CCC/80CCD  The maximum deduction combining all these investments/ expenditures is Rs 1.5 lakh All these options have been explained in details in subsequent slides. Whose name can Tax Saving investment be done? 8
  • 9.
    EPF/VPF (Employee ProvidentFund) The Good • The interest earned on EPF/VPF isTax Free • Can take loan against EPF and also do partial withdrawal under certain conditions • Convenient to invest as the amount is directly deducted from salary The Bad • Money is locked till your retirement • The EPF interest rates are market linked and set by EPFO every year • This option is only for salaried employees • The withdrawal of EPF takes time  EPF is mandatory for salaried employees working for companies with more than 20 employees  Under EPF rules, you need to contribute 12% of your Basic pay + DA to EPF  The employer matches this EPF contribution  You have option to put up to 100% of Basic pay + DA to EPF. This is known asVoluntary Provident Fund (VPF)  The employer generally does not match yourVPF contribution • You can opt forVPF by giving a request to your company at the start of every financial year • Only your contribution in EPF andVPF is considered forTax Deduction • If you withdraw your EPF before 5 years the amount is taxable and also the earlier tax deduction claimed is nulled • In case you change your job, you can transfer the previous EPF to your current employer Check EPF Balance Online VPF – A good retirement option 9
  • 10.
    PPF (Public ProvidentFund) The Good • The interest earned on PPF isTax Free • After opening the PPF account, investment can be done online everyYear (for some banks) • Can take loan against PPF and also do partial withdrawal • It cannot be attached by court orders • Highest Safety – backed by Govt. of India The Bad • Longer Locking period • The PPF interest rates are market linked and hence would change every year • HUFs and NRIs cannot open PPF Account  PPF can be opened at Post Offices, 24 Nationalized Banks and ICICI Bank  Has mandatory locking of 15Years and can be extended further 5 years at a time  Maximum Investment Allowed: Rs 1.5 Lakh perYear (Budget 2014 increased this limit )  Minimum Investment of Rs 500 required every year to keep the account active  Interest Rates paid on PPF are market linked onward hence would vary every year. The interest rate is 8.7% since April 1, 2013. (Has not changed for FY 2015-16) • Investment done till 5th of the month earns interest for the month. So deposit your money before 5th of month • PPF can be opened on minors name with either parents as guardian • The total investment in your PPF and the minor child PPF account (for whom you are guardian) should not exceed Rs1.5 lakh in a financial year List of Banks for opening PPF PPF – A must have in every Portfolio! Download PPF Calculator 10
  • 11.
    Sukanya Samriddhi Account(SSA) The Good • The interest earned on SSA isTax Free • 50% withdrawal allowed when girl turns 18 for marriage/higher education • Highest Safety – backed by Govt. of India The Bad • Longer Locking period • New Scheme – Banks not well aware of formalities • The SSA interest rates are market linked and hence would change every year • HUFs and NRIs cannot open SSA Account  Sukanya Samriddhi Account is a new scheme by Government to promote all round development of Girl Child  Can only be opened for Girl child below 10 years of age (max for 2 girl child by a parent)  Deposit to the account to be made for 14 years and account matures at 21 years from date of opening  Maximum Investment Allowed: Rs 1.5 Lakh perYear per account  Minimum Investment of Rs 1,000 required every year to keep the account active  Interest Rates paid are market linked, hence would vary every year. The present interest rate is 9.2% • Documents Needed – Date of Birth proof for Girl Child,Your Identity and Address Proof • Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied • Account can be closed before 21 years in case of marriage All abount Sukanya Samriddhi Account 11
  • 12.
    NSC (National SavingCertificate) The Good • Certificates can be kept as collateral security to get loan from banks • NoTax deduction at source • The interest accrued for NSC qualifies for Sec 80C deduction in subsequent years • Highest Safety – backed by Govt. of India The Bad • The interest earned is taxable • You need to go to post office to invest and redeem. There is no online investment/ redemption facility • Trust and HUF cannot invest  NSC is Tax saving Fixed Deposit Scheme from India Post  It is available for 5 years (NSCVIII)  The interest is market linked and changes every year. Its 8.5% for 5Year since April 1, 2014  There is no maximum limit for investment in NSC but the deduction is only till maximum of Rs 1.5 Lakh u/s 80C  You can buy NSC in denominations of Rs 100, 500, 1000, 5000 and 10000 • Maturity value of a certificate of Rs100 purchased on or after April 1, 2012 shall be Rs 152.35 after 5 years. • NSC is better tax saving option than banksTax Saving FD (offering similar interest) as interest accrued for NSC qualifies for Sec 80C deduction in subsequent years Interest Rates on Small Saving Schemes for FY 2015-16 12
  • 13.
    Tax Saving FDfrom Banks/ Post Offices The Good • Convenient to invest. Many banks offers online facility forTax Saving FD • Redemption on maturity comes directly to your bank account • High Safety - FD up to Rs1 Lakh is insured by RBI The Bad • The interest earned is taxable • Cannot be withdrawn prematurely • Cannot be pledged to secure loan or as security  These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while making the deposit  Has minimum tenure of 5Years. Some banks offer special schemes for longer tenures with higher interest rates  Some banks offer 0.25% to 0.75% additional interest for Senior Citizens and their employees  As of today banks are offering 8% -8.5% for general public and 8.5% - 9% for Senior Citizens • The Post Office Time Deposit Account (which is FD offered by Post Office) of 5Years maturity also qualifies for 80C deduction.Its offering 8.5% since April 1, 2014 • Don’t be mislead by banks advertisements about their yield onTax Saving FDs.Those are manipulative calculations • Be cautious of small co-operative banks as they have higher risk than bigger private and public sector banks Best Tax Saving FD Rates How you Loose Money in FD 13
  • 14.
    Senior Citizens SavingsScheme (SCSS) The Good • The interest is paid quarterly to the saving account, hence can serve as regular income for retired • Redemption on maturity comes directly to your bank account or through post dated cheques • The SCSS carries a sovereign guarantee for principal and interest payments. So it’s the safest investment The Bad • The interest from SCSS is taxable • Bank would deductTDS if the total interest in a year is over Rs 10,000 • NRIs and HUF are not eligible to open an account  As the name suggests, SCSS is for senior citizens who are 60 years or above on the date of opening of the account.Also people with 55 years of age who have retired byVRS can open SCSS after 3 months of retirement  Minimum Investment: Rs 1,000 while Maximum Investment: Rs 15 Lakhs  The joint account can be opened only with your spouse..There is no age limit applicable for the joint account holder.  The interest is paid out quarterly.The interest is 9.3% w.e.f April 1, 2015  No partial withdrawal is permitted before 5 years.The account may be extended for a further period of 3Years • You can open SCSS with Post offices, 24 nationalized bank or ICICI bank • SCSS account can be closed after 1Year (with penalty) but in case you have availed Sec 80C benefit,it would be reversed • If your income is not taxable, you can provide form 15H or 15G so that banks don't cutTDS • Any retired Defense Services personnel is eligible for SCSS irrespective of his age All about Senior Citizens’ Savings Scheme 14
  • 15.
    Life Insurance  Theonly product you should consider from Life Insurance companies is – Term Plan  The sum assured on death should be at least 10 times the annual premium  This limit is altered only in special cases of disability (the premium should be 15% or less of sum assured)  Buy insurance only if you have dependents.! Do not buy insurance to save tax!There are plenty of better ways to save taxes • OnlineTerm Plans are cheaper than products sold by agents. So if you are comfortable with online purchasing go for it • Never hide anything from insurance companies.A wrongly stated fact might deny insurance to your dependents when they need it most • PPF along with Term Plans are better products than Endowment Plans. Similarly Mutual Funds withTerm plans turn out better option than ULIPs • The maturity proceeds of life insurance is tax free u/s 10(10)D,subject to certain conditions How much Insurance? • Your life insurance should be adequate to replace your income • This roughly turns out to be 7 to 10 times your present annual income • This might vary widely based on your assets, liabilities and situation Latest Death Claim Settlement Ratio Tax Benefit on Life Insurance? 15
  • 16.
    National Pension Scheme(NPS) The Good • This is lowest cost Pension plan in the country • You can choose your investment profile based on your risk. NPS can invest maximum of 50% in selected stocks. • On death the entire amount is paid to the nominee The Bad • NPS is taxable at withdrawal • The locking is till you are 60 years of age • You can withdraw max of 60% at maturity and have to compulsorily buy annuity for min 40% corpus  NPS was introduced in April 2009 and has two types of Accounts –Tier 1 andTier 2  Tier 2 account is optional and only contribution toTier 1 account is eligible forTax Deduction u/s 80CCD  Tier- 1 account requires a minimum investment of Rs 6,000 annually and Rs 500 per transaction  Salaried employees can claim deduction up to 10% of your salary, which comprises basic + DA, while for self employed its capped capped at 10% of gross total income • You should opt for 50% equity investment when young and slowly move to debt as you approach your retirement • Budget 2015 has announced additional tax exemption of Rs 50,000 for investment in NPS u/s 80CCD(1B) Should you Invest Rs 50,000 in NPS to Save Tax u/s 80CCD (1B)? 16
  • 17.
    Do You knowhow Your Family can Help You Save Taxes? Click to Know HowYour Spouse can Help you save taxes! Click to Know HowYour Parents can Help you save taxes! Click to Know HowYour Children can Help you save taxes! 17
  • 18.
    Equity Linked SavingScheme (ELSS) The Good • The gains on ELSS Fund is Tax Free • Only investment option which can beat inflation • Has the shortest locking period of 3 years • ELSS can be bought and redeemed online The Bad • The returns are dependent on stock market. So its high risk investment.You might loose money at the end of 3 years  ELSS is popularly known as Tax Saving Mutual Fund  The minimum investment is Rs 500  There is no limit for maximum investment but the maximum deduction you get 1.5 Lakhs every year • Doing SIP (Systematic Investment Plan) in one or two ELSS Fund is the best way to invest • Dividend Reinvestment option in ELSS has been discontinued from February 2015 • You should choose maximum of two funds for investing • Research well before you invest in ELSS Fund • You should try to invest directly to fund as this would give you 0.5% to 1% higher returns as compared to when you invest through broker Best ELSS Funds for FY 2015-16 Dividend or Growth Option? 18
  • 19.
    Pension Plans fromInsurance Companies  Pension Plans from Insurance Companies Qualify for deduction under Sec 80CCC  There were few launches in Pension Plan space this year from life insurance companies  These are very inefficient products , so you should stay away from these plans  They generally have assured return in the range of 1-2% per annum, which is very low return. Savings accounts pay at least 4% • Don’t invest in pension plans just by seeing their emotional advertisements.They are high cost products and would ruin our retirement planning • PPF/ EPF &VPF turns out to be a better plan for retirement even for most risk averse investor • NPS is also good alternative to these Pension plans Why you should never buy these Pension Plans? • Low Returns: They don’t invest in equities, which is must for long term wealth creation • If you want to surrender these, you loose a lot in terms of returns • On surrendering,the tax benefit you claimed earlier, would be reversed and you would need to pay these taxes back • On maturity, you cannot withdraw the entire corpus and have to compulsorily buy Annuity Budget 2015: TDS on Fixed Deposit, Recurring Deposit and EPF 19
  • 20.
    Tuition Fee  Theexpenses on tuition fees for maximum of two children is eligible for deduction u/s 80C  The maximum deduction available is Rs 1.5 Lakh  The deduction is available for full time courses only  The deduction is not available for tuition fee to coaching classes or private tuitions  The educational institute should be located in India, though it may be affiliated to any foreign university • The following expenses are not considered as tuition fees – Development Fee,Transport charges, hostel charges, Mess charges, library fees, Late fines, etc • This deduction is not available for tuition fees for self or spouse Where to Park Money for Very Short Term [less than 6 Months]? 20
  • 21.
    Stamp Duty &Registration Charges  Stamp duty and registration charges up to Rs 1.5 Lakh can be claimed for deduction u/s 80C  The payment should have been made in the same financial year for which the tax is being paid. i.e. the deduction cannot be carried forward to next year  The house should be in the name of assessee claiming deduction  The payment for stamp duty should have been made from his own funds  This benefit is available on purchase on new residential unit only Example of Newspapers Publishing Wrong Math to Fool Investors! 21
  • 22.
    Recommended Books  Ihave often been asked books I would recommend for Personal Finance. Below are some of recommendations As the name suggests, it’s a book on retirement planning written by PV Subramanyam a CA and regular blogger Blogs at Subramoney.com Clicking on Books Image would take you to Amazon.in where you can buy these books online. Both the books have been authored by Manish who an avid blogger and features on PLAN F program of CNBC. Blogs at Jagoinvestor.com Authored by Lakhotia, a very renowned tax consultant and is regular on CNBC Awaaz “Tax Guru” Program. Good book to understand your taxes!
  • 23.
    Do You knowhow Your Investments are Taxed? How is your Investment in Mutual Funds Taxed? KnowTaxation of Equity, Debt,Arbitrage, International Mutual Funds Is your Life Insurance Policy eligible forTax Benefit? Not all Policies are eligible forTax Benefit at Investment and on Maturity TDS andTax on NCDs (Non Convertible Debentures) 23
  • 24.
    Home Loan: Interest& Principal • The deduction is only available from the year of possession/ completion of the house • All the benefit of tax u/s 80C will reversed if house property is sold with 5 year from purchase of house property How much Home Loan you are eligible for?  Buying a house is one of the top most priority for most  The good news is you get tax deduction on both principal and interest payment on your Housing Loan Deduction on Principal Payment on Home Loan  Deduction up to Rs 1.5 Lakh is allowed on the principal repayment of the housing loan if the house is self occupied or vacant  The house should be registered in the name of assessee. (He should be one of the owners, in case of joint ownership)  The loan should be taken from Banks, NBFCs or respective employers. Loans taken from friends/ relatives does not qualify for this deduction  This deduction is available also to people with multiple properties Home Loan Principal Deduction u/s 80C up to Rs 1.5 Lakh Interest Deduction u/s 24 up to Rs 2 Lakhs 24
  • 25.
    Home Loan: Interest& Principal • The deduction is only available from the year of possession/ completion of the house • The Pre-EMI interest you pay before the completion of the house can be claimed as deduction in 5 equal installments starting from year the construction of the house completes • All the benefit of tax u/s 80C will reversed if house property is sold with 5 year from purchase of house property • You can claim benefit of both HRA and Home Loan together • In case the Home Loan is taken before April 1, 1999 the deduction on interest is only Rs 30,000 Deduction on Interest Payment on Home Loan  Deduction up to Rs 2 Lakh is allowed on the principal repayment of the housing loan in case of single non- rented house  In case of rented or multiple houses, there is no limit of deduction  Section 24 covers “Loss/Gain from Housing Property”  For Sec 24, all the rent you receive from houses is your income while  The interest paid on housing loan is considered as expense  So broadly speaking the (income – expense) subject to certain conditions is added to your income.  In case the interest paid is more than your rental income, the above calculation is negative and hence a deduction to your total income How much you gain by Switching Home Loan 25
  • 26.
    Home Improvement Loan:Interest • If the loan for acquisition/construction was taken before April 1, 1999 - then the combined (interest paid on the loan taken for acquisition/construction and the loan taken for repair/renewal) limit for interest deduction stays at Rs.30,000 • You can take loan of up to 80% of the cost of valuation of the home improvement work • The maximum tenure of home improvement loan can go up to 10- 20 years depending on lending institution • The interest rate for home improvement loan is 0 – 2.5% higher than home loan from the same institution  Deduction up to Rs 30,000 is allowed on the interest payment for loan taken for Home Improvement  Home improvement Loan can be taken for furnishing of new home or repairing, painting or refurnishing existing home  The above limit is for self-occupied homes only  There is no limit of deduction for rented or vacant homes  This exemption is over and above the Rs 2 Lakh limit that you can claim for Home Loan interest  No deduction is available for the principal portion of the repayment on home improvement loans How RBI Rate Cut Impacts your Investments and Loans? 26
  • 27.
    Section 80D: MedicalInsurance  Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children and Parents qualify for deduction u/s 80D  You can claim maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 30,000 above 60 years of age.  An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 30,000 in case of either parents being senior citizens)  This deduction can be claimed irrespective of parents being dependent on you or not  This is not available for buying health insurance for in-laws.  HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF • To avail deduction the premium should be paid in any mode other than cash • Budget 2013 introduced deduction of Rs 5,000 is also allowed for preventive health checkup for Self, Spouse, dependent Children and Parents. Its continued to this FY too. • This Rs 5,000 is within Rs 25,000 limit for Health Insurance Making Sense of Tax Benefit on Health Insurance u/s 80D 27
  • 28.
    Section 80DD: HandicappedDependents  In case you have dependent who is differently abled, you can claim deduction for expenses on his maintenance and medical treatment  You can claim up to Rs 75,000 or actual expenditure incurred, which ever is lesser. (The limit is Rs 1.25 Lakh for severe conditions)  Dependent can be parents, spouse, children or siblings.Also the dependent should not have claimed any deduction for self • A severe disability condition is 80% or more of the disabilities • Individuals would need disability certificate issued by state or central government medical board to claim deduction • The life insurance policy should be on the tax payer name, with the disabled person as the beneficiary. • In case the disabled dependent expires before you, the policy amount is returned back and treated as income for the year and is fully taxable. Blindness and Vision problems Leprosy- cured Hearing impairment Locomotor disability Mental retardation or illness 40% or more of following Disability is considered for purpose of tax exemption Costs incurred for medical treatment, training or rehabilitation of a disabled dependent, including amount spent for nursing Amount paid towards an insurance scheme for the maintenance of your disabled dependent in case of your untimely death Deductions are permissible in either of the following cases Which is the Best Day for SIP in Mutual Funds 28
  • 29.
    Section 80DDB: Treatmentof Certain Diseases  Cost incurred for treatment of certain disease for self and dependents gets deduction for Income tax.  For very senior citizens the deduction amount is up to Rs 80,000; while for senior citizens it Rs 60,000 and for all others its Rs 40,000  Dependent can be parents, spouse, children or siblings.They should be wholly dependent on you. • A certificate from specialist from Government Hospital would be required as proof for the ailment and the treatment • In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed. • In case of partial reimbursement, the balance amount can be claimed as deduction Diseases Covered Neurological Diseases Parkinson’s Disease Malignant Cancers AIDS Chronic Renal failure Hemophilia Thalassaemia How to invest “DIRECT” in Mutual Funds? 29
  • 30.
    Section 80U: PhysicallyDisabled Assesse  Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases.  The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability) • A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government Hospital would be required as proof for the ailment. Disabilities Covered Blindness and Vision problems Leprosy- cured Hearing impairment Locomotor disability Mental retardation or illness Autism Cerebral Palsy How safe is you Money/FD in bank? 30
  • 31.
    Section 80E: EducationLoan  The entire interest paid on education loan in a financial year is eligible for deduction u/s 80E  There is no deduction on principal paid for the Education Loan  The loan should be for education of self, spouse or children only  The loan should be taken for pursuing full time courses only  The loan has to be taken necessarily from approved charitable trust or a financial institution only • The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. • So in all you can claim education loan deduction for maximum eight years. Details on Tax Benefit on Education Loan 31
  • 32.
    Recommended Books -2  I have often been asked books I would recommend for Personal Finance. Below are some of recommendations One of the world’s Best Sellers in Personal Finance and one of the earliest books I read. Good book but not everything relevant for Indian Audience Clicking on Books Image would take you to Amazon.in where you can buy these books online. Authored by Hemant, who is Certified Financial Planner and regular blogger Blogs at Tflguide.com Authored by Manoj Arora, an engineer by profession, is a gold medalist from Aligarh Muslim University
  • 33.
    Rajiv Gandhi EquitySavings Scheme (RGESS)  RGESS is a newTax Saving Scheme which was announced in Budget 2012 to encourage first time investors in stock market  Under RGESS, you are eligible for a tax deduction on 50% of the amount invested  The maximum amount eligible for investment in a year for RGESS is Rs 50,000.So maximum deduction is 50% of 50,000 = Rs 25,000  You can take advantage of RGESS for three consecutive years  RGESS allows you to invest directly in stocks which are part of CNX-100 index or BSE-100 index  Some Mutual Funds and ETFs which invest only in the above companies are also eligible for RGESS All about RGESS Best Demat Account Who can invest in RGESS? • This scheme is to encourage New Investors in Stock market. So as per RGESS,you are new investor if • did not have a Demat A/C before November 23, 2012 OR • have not transacted in the equity or derivate segment till November 23, 2012 OR • had a demat account but as second joint holder • Additionally your gross income should be less than Rs 12 Lakhs Continued in Next Slide … 33
  • 34.
    Rajiv Gandhi EquitySavings Scheme (RGESS) The Good • The gains on RGESS Fund is Tax Free • The returns generated can beat inflation • Has short locking period • Everything needs to be done through your demat account. So its convenient The Bad • The returns are dependent on stock market. So its high risk investment.You might loose money. • Its complicated for a normal investor • As first time investors, it makes sense to either invest in eligible mutual fund schemes or ETFs • Investing directly in stocks is very risky and you can loose money if you select the wrong one • There is concept of flexible and fixed lock-in, which makes the scheme complex. For simplicity you should assume that your investment in RGESS is locked in for 3 years • I recommend investing in the scheme through ETFs, as the tax break gives you a cushion to your prospective losses, if any. Moreover, its those few schemes which have possibility to generate positive inflation adjusted returns. Steps to invest in RGESS? Open a Demat Account Designate the A/C as RGESSAccount by filling up relevant form Buy Eligible Stocks or ETFs Submit Demat Statement as Proof to claim tax benefit 4 Steps to ClaimTax Benefit in RGESS 34
  • 35.
    Donation to ApprovedCharitable Organizations  The government encourages us to donate to Charitable Organizations by providing tax deduction for the same u/s 80G  Some donations are exempted for 100% of the amount donated while for others its 50% of the donated amount  Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income • Only donations made to approved organizations and institutions qualify for deduction • Only donations made in cash or cheque are eligible for deduction.Donations in kind like giving clothes, food, etc is not covered for tax exemption List of Approved Organizations How to Claim Sec 80G Deduction? • A signed & stamped receipt issued by the Charitable Institution for your donation is must • The receipt should have the registration number issued by IncomeTax Dept printed on it • Your name on the receipt should match with that on PAN Number • Also the amount donated should be mentioned both in number and words 35
  • 36.
    Donation to PoliticalParties/ Scientific Research Section 80GGA – Donation for Scientific Research  100% tax deduction is allowed for donation to the following for scientific research u/s 80GGC  To a scientific research association or University, college or other institution for undertaking of scientific research  To a University, college or other institution to be used for research in social science or statistical research  To an association or institution,undertaking of any programme of rural development  To a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme  To the National Urban Poverty Eradication Fund set up How to Stop SIP in Mutual Fund? Section 80GGC – Donation to Political Parties  100% tax deduction is allowed for donation to a political party registered under section 29A of the Representation of the People Act, 1951 u/s 80GGC  The maximum exemption you can claim is limited to 10% of your gross annual income 36
  • 37.
    Interest on SavingAccount  Budget 2012 introduced a new Section 80TTA, which allows deduction of Rs 10,000 on interest earned on saving bank account  This benefit is continued for FY 2015-16 Highest Interest Rate on Savings Account 22 Hidden Charges in Savings Account 37
  • 38.
    House Rent incase HRA is not part of Salary  In case, you do not receive HRA (House Rent Allowance) as a salary component,you can still claim house rent deduction u/s 80GG  You cannot claim this deduction if you or your spouse or your children own any home in India or abroad. • The House Rent deduction is lower of the 3 numbers: • Rs. 2,000 per month • 25% of annual income • (Rent Paid - 10% of Annual Income) 8 Questions on HRA Landlord Declaration if no PAN Card 38
  • 39.
    Tax on SalaryComponents  Your salary has multiple components  Some of them are fully taxable while others are partially taxable or tax free FullyTaxable • Basic Salary • Dearness Allowance (DA) • SpecialAllowance • Band Pay • Bonus • Over time • Arrears • Personal Pay • Food Allowance • FurnitureAllowance • Shift Allowance PartiallyTaxable/Tax Free • Medical Reimbursement up to Rs 15,000 per year • Transport Allowance up to Rs 1600 per month • LeaveTravel Allowance (LTA) • Vehicle Maintenance • House Rent Allowance (HRA) • UniformAllowance – Amount up to Rs 24,000 per annum is tax free • Children EducationAllowance (Rs.100/ month per Child (Rs.300 for Hostel Expenditure) Max for 2 Children) • Newspaper/JournalAllowance – Amount up to Rs 12,000 per annum is tax free • TelephoneAllowance • Meal Coupons  Some of the components have been explored in next few slides 11 Tax Free Components You Must have in Salary 39
  • 40.
    Partially Taxable SalaryComponents House Rent Allowance • 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 the annual rent paid is more than Rs 1 Lakh, you need to give PAN Card number of landlord to your employer • In case the landlord does not have PAN Card, he needs to give a declaration for the same • You can claim benefit of both HRA and Home Loan together Company Car/ Car Maintenance Allowance • If the company provides you a car for personal and official purposes and reimburses the fuel, insurance, maintenance and driver’s salary the taxable value shall be: • in case the car is less than equal to 1600 CC – Rs 1,800 per month • in case the car is greater than 1600 CC – Rs 2,400 per month • Also Rs 900 per month in case company provides driver • In case the car is owned by you, the reimbursement of running and maintenance cost up to • Rs 1,800 per month (for car less than 1600CC) and • Rs 2,400 per month (for car greater than 1600CC) • along with Rs 900 for driver salary is tax free Why most Mutual Fund NFOs are bad investment? 40
  • 41.
    Partially Taxable SalaryComponents Mobile Phone and Internet Bill Reimbursement • The reimbursement of mobile and internet bills used for company purpose is tax free • There is no limit on the amount of reimbursement and is fixed by company depending on work profile Leave Travel Allowance (LTA) • You can claim LTA twice for two domestic trips with family in block of four years.The present block is 2014 - 2017 • 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 • There is no maximum limit of LTA and is decided by employer • Only expenses incurred in travelling is covered. You cannot claim hotel stay and food bills Meal Coupons • Meal Coupons like Sodexo orTicket are tax free subject to Rs 50 per meal • So assuming 22 days working month and 2 meals a day, meal coupon up to Rs 2,200 per month are tax free • Annually this amount comes to Rs 26,400 How builders use super built-up area to deceive home buyers? 41
  • 42.
    Banks for OpeningSCSS & PPF  At present, Post Offices, 24 Nationalized banks and one private sector bank are authorized to handle the SCSS and PPF Allahabad Bank IDBI Bank State Bank of Travancore Andhra bank Indian Bank Syndicate Bank Bank of Baroda Indian Overseas Bank UCO Bank Bank of India Punjab National Bank Union Bank of India Bank of Maharashtra State Bank of Bikaner and Jaipur United Bank of India Canara Bank State Bank of Hyderabad Vijaya Bank Central Bank of India State Bank of India ICICI Bank Ltd. Corporation Bank State Bank of Mysore Dena Bank State Bank of Patiala Advanced Tax Payment by Salaried Employees - Rules 42
  • 43.
    Sec 80G: Listof eligible Organizations 1. National Defense Fund 2. Prime Minister's National Relief Fund 3. Prime Minister's Armenia Earthquake Relief Fund 4. Africa (Public Contributions-India) Fund 5. National Foundation for Communal Harmony 6. Approved university/educational institution 7. Chief Minister's Earthquake Relief Fund 8. Zila Saksharta Samiti 9. National Blood Transfusion Council 10. Medical Relief Funds of state govt 11. Army Central Welfare Fund, Indian Naval Ben. Fund,Air Force CentralWelfare Fund. 12. National Illness Assistance Fund 13. Chief Minister's or Lt. Governor's Relief Fund 14. National Sports Fund 15. National Cultural Fund 16. Govt./ local authority/ institution/ association towards promoting family planning 17. Central Govt.'s Fund for Technology Development & Application 18. NationalTrust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities 19. Indian Olympic Association/ other such notified association 20. Andhra Pradesh Chief Minister's Cyclone Relied Fund 21. National Fund for Control of Drug Abuse (NFCDA) 22. Swachh Bharat Kosh 23. Clean Ganga Fund 1. Jawaharlal Nehru Memorial Fund 2. Prime Minister's Drought Relief Fund 3. National Children's Fund 4. Indira Gandhi Memorial Trust 5. Rajiv Gandhi Foundation 6. Donations to govt./ local authority for charitable purposes (excluding family planning) 7. Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB) 8. Donations for repair/ renovation of notified places of worship 9. WorldVision India 10. Udavum Karangal 100% Exemption 50% Exemption Renting Bank Lockers: Charges, Guidelines and Alternatives 43
  • 44.
    About the Author •This deck has been authored by Amit Kumar, the brain behind Apnaplan.com,a leading personal finance blog in India • Amit is MBA from NITIE, Mumbai and BIT from Delhi University • Apnaplan.com is leading personal finance blog in India • The blog has more than 500 articles related to • Investments like Mutual Funds, Fixed Deposits,Stocks, Bonds, Real Estate etc • Taxation – Calculators,FAQs ofTax Saving Options, etc • Loans – Home, Personal, Gold, Education,etc • Retirement Planning,Money Saving and Smart ShoppingTips • Few Numbers: • More than 2.5 Lakhs PageViews with 1.5 Lakh unique visitors monthly • Alexa Rank of 82,000 worldwide and 7,000 in India [as of January 20, 2016] 44
  • 45.
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  • 46.
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