Income Tax Saving Discussion Thread

[Zangetsu]

Hi Guys,

Most of us work & earn income.
so I opened the thread for discussion on Saving Income Tax.
I hope all the questions & doubts will be cleared here....


Q:How much amount one can save from Tax (from annual income)?

[Faun]

Just what I needed Thanks for starting.

[Liverpool_fan]

Take a House Loan.

[ssk_the_gr8]

there are some special tax saving funds.. you can invest in them

[Nemes!s]

Income Tax Rates/Slabs Rate (%)
for men:
→ Up to 1,80,000 = NIL ,
→ 1,80,001 – 5,00,000 = 10%,
→ 5,00,001 – 8,00,000 = 20%,
→ 8,00,001 upwards = 30%,
Up to 1,90,000 (for resident women)= NIL,
Up to 2,50,000 (for resident individual of 60 years or above)= 0,
Up to 5,00,000 (for very senior citizen of 80 years or above)= 0.

So there will be no tax upto 1.8 lacs and moreover you can save tax on another 1,00,000 if you invest in tax saving instruments like (tax saving mutual funds, PPF,home loan, national saving certificates etc)

so this way u can save tax on max 2,80,000 after that all income is taxable subject to the tax percent brackets.

anyways IT is much bigger topic to discuss but I hope this help...

[Zangetsu]

^^2,80000 can be saved from tax u say cud justify it with an example.

e.g: Section 80C (Rs 1Lacs) -- Employees Provident Fund, Public Provident Fund, life insurance, five-year bank fixed deposits, equity-linked saving schemes.

Section 80CCF - Rs 20,000 in infrastructure bonds

Section 80D - (Rs 15,000 towards health insurance for self and Rs 20,000 for parents).

Total: 1Lacs + 20k + 35k = 1.55lacs (if i m no wrong)

[Nemes!s]

Originally Posted by Zangetsu

^^2,80000 can be saved from tax u say cud justify it with an example.

e.g: Section 80C (Rs 1Lacs) -- Employees Provident Fund, Public Provident Fund, life insurance, five-year bank fixed deposits, equity-linked saving schemes.

Section 80CCF - Rs 20,000 in infrastructure bonds

Section 80D - (Rs 15,000 towards health insurance for self and Rs 20,000 for parents).

Total: 1Lacs + 20k + 35k = 1.55lacs (if i m no wrong)

yes.. I agree there are other sections too in which u can avail tax benefits. I was highlighting the main brackets. chill mate

[Zangetsu]

I've heard that sec 80C limit amount is increased to 2lacs from 1lacs is it true?

[Nemes!s]

Originally Posted by Zangetsu

I've heard that sec 80C limit amount is increased to 2lacs from 1lacs is it true?

Nope thats not true.. well but there are few other things if your emplouer provides like Medical expenses(15000-18000),Telephone & Internet expenses(15000-18000),LTA(20000-40000) under which if you submit valid bills these amounts are exempted from taxes.

Disclaimer- mentioned amount varies from employer to employers.

[Zangetsu]

which is best to invest
Mutual funds
Bonds
Share Market (Equity)
Fixed Deposits
NSC

[abhinav_sinha]

I say never go for Fixed Deposit and don't know about share market (Equity) but I would advice to go for NSC for two basic reasons.
1. You get saving which you intended with interest. (The rate of interest might not be very high.)
2. The money taken is invested by the government for welfare and development. (Now don't go after my blood crying corruption.)

[R2K]

^^
whats wrong with investing in fixed deposits?

[abhinav_sinha]

Originally Posted by R2K

whats wrong with investing in fixed deposits?

Well its a matter of opinion.
Lets see: Suppose I invest 100K in FD and get an interest rate a max of 9.25%p.a if invested for at least 4-5yrs. After 4-5 yrs I get about 145K whose value is same after 4-5 yrs which was of 100K in the present. So in reality you don't gain any rupee but the banks have gained many (see the interest rate of loan).
So I consider investing in NSC better than FD as even considering corruption I don't loose money but if I invested 100K in NSC then at least 1K must reach the ones which are in need.

[abhidev]

got this mail recently....don't know how much its true or is it totally fake...



No need to file tax return for income up to Rs 5 lakh
Agencies

Posted On Tuesday, June 07, 2011 at 12:12:45 PM

NEW DELHI: As many as 85 lakh salaried taxpayers whose taxable income, including salary and interest income, is up to Rs 5 lakh, will not be required to file income-tax return from now.

"No income tax returns is required for salaried persons whose annual annual taxable income including salary and interest is up to Rs 5 lakh. We would shortly notify this," a Central Board of Direct Taxes official said.

However, he said this would not cover income from other sources like house property , capital gains and gains from profession and business.

The scheme would be applicable from assessment year 2011-12 onwards. This means that salaried persons eligible under the scheme would not have to file returns for the financial year 2010-11 in 2011-12 (assessment year).

Under the scheme, those salaried persons who want to claim tax refund, would have to file income tax return.

As per the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.

Under the scheme, the salaried person wants exemption from filing IT return, has to disclose about the incomes like dividend and interest to his employer for tax deduction. In the scenario, the Form 16 issued to salaried employees will be treated as income tax return. At present, it is obligatory for all salaried persons to file income tax return under the Income Tax Act, 1961.

The idea behind the move is that in cases where there are no other sources of income, filing of a return is a duplication of existing information.

[Zangetsu]

^^thats true

[abhinav_sinha]

^^Yes. Its the latest news regarding it.

[Faun]

What is TDS (Tax Deduction at Source). I deposited some amount in recurring deposit for 12 months and there the terms outlined that there is not TDS on the amount. Can someone explain what it is ?

[rhitwick]

TDS is what your company cuts from your salary when paying you.

The approach in simple language is: considering your package at the very beginning of a financial year your income tax is calculated. Suppose on your current package you owe 24000/- as income tax.
Now the amount would be devided by 12 i.e each month 2000/- would be deducted from your salary as income tax.
So, at end of year when you get FORM16, your tax payable would be "0" (in recent rule if your income is under 5lac, and your form16 shows 0 tax payable, you do not need to file return).
Now, if you invest in between and provided the relevant docs in company, your TDS would be re-calculated.
i.e after submitting investment docs it was calculated that you annual tax is 8000/- instead of 24000/-.
Now, if you have already paid tax for 3 months in old calculation, you have paid (2000*3=6000/-) that amount is deducted from present tax payable.
i.e 8000-6000=2000/-
Now this is devided by rest of the month i.e. 2000/9=222.23/-
This would be your new tax payable.

For RD, the clearly mentioning that they won't be deducting any tax from the amount you get when the RD matures. You needto show the amount you received as interest as income when filling tax return.

(if TDS were implemented at the bank and the tax were 500/- you would have got 23500/- as your matured amount instead of 24000/- at the end of RD tenure)

(the above information is true to my knowledge )

[abhinavmail1]

Nice thread man . .

[red dragon]

Originally Posted by Zangetsu

which is best to invest
Mutual funds
Bonds
Share Market (Equity)
Fixed Deposits
NSC

Few important questions,
1.Do you have a PPF a/c?
2.How much money will you like to invest?
3.What kind of investment you are looking for?(long term,short term etc.)
4.Do you want any tax benefits?

[asingh]

I doubt 80C will move to 2L.

No matter what, never invest in the darn ULIP.

[Zangetsu]

Originally Posted by red dragon

Few important questions,
1.Do you have a PPF a/c?

no..but is it a must?

Originally Posted by red dragon

2.How much money will you like to invest?

as much as possible.

Originally Posted by red dragon

3.What kind of investment you are looking for?(long term,short term etc.)

both LT & ST

Originally Posted by red dragon

4.Do you want any tax benefits?

yes..absolutely

[Zangetsu]

Q: On Bank Savings account tax is deducted from the interest we get,So does the Tax is deducted annually & also what is the % basis of tax deduction?

[red dragon]

1.PPF is not must,but does not hurt to have one.
You can deposit anything between Rs.500-70k,(the upper limit will probably increase soon)and the return after maturity is entirely tax free.

2.I think I have read somewhere,that a person should save about 40%of his income.

3.These are the common options you have,
http://business.mapsofindia.com/inve...t-options.html

4.For tax benefit options,
Top 10 Tax-saving Instruments for Investors!

Regarding newer tax savings options,my knowledge is very much limited as I do not have to pay tax on my income(but I will have to pay tax on the interests from investments)

[Zangetsu]

Do we have to submit separate Form 16 for Tax Declaration?

e.g: A Form 16 from Employer & another Form 16 from some small business...

[PraKs]

small business may not have Form 16 unless you work for them. if you have ur own small business then It will come under diff catogery.

Hold on your horses, Direct tax code is comng, Lots will change from April 2012.