Tax PlanningFY 2018-19

Expenses that you must know before Tax Planning for FY 18-19

Newz On Tips
Tue Dec 11 2018 / By: Nupur Sharma

Have you been tax planning lately? Keep these critical expenses in mind first.


It goes without saying how important tax planning is. It is only wise to find out good tax saving options for yourself as no one likes hurting their own pockets. We are here to tell you that tax planning isn’t that tough. In order to save better you need to find the right places where you can invest. This means that you need to look for the right investment schemes for yourself.

To reduce tax benefit, the govt has introduced some ways to do that. There are anomer of rebates, deductions and exemptions that they have provided under Income Tax Act. It is important for you to know about these to help you plan efficiently and lessen the load of tax. Two ways in which you can save tax are:


  1. Through investment
  2. Disclosing your expenses


Before the process to tax planning starts, you must get aware of certain expenses that are exempted from tax. Identifying these expenses helps you to know how much you should invest. Here is a list that will help you:


Housing Loan (Principal and Interest Payment): Section 24, 80C and 80EE:

Under section 24 and 80 C of Income Tax, there is tax deduction on the interest (Rs. 2 lakhs) and principal (Rs. 1.5 lakhs) of a home loan. If the tax payer sells his house, the tax benefit is reversed. (Section 80C)


Medical Insurance: Section 80D:Under section 80D of the Income Tax Act, a premium payment on Health Insurance policy (uptoRs. 15,000 for individual, age less than 60 years) is exempted from tax. Paying for parents also in health insurance will save another Rs. 15,000. (in cases where age of parents is more than 65, the deduction will be Rs. 20,000 instead.) A preventive health check-up (forself, spouse, children and parents) can have deductions around Rs. 5,000.

 

Education Loan: Section 80E

If you’re planning to take an Education loan, you tax exemption for the whole interest. (Section 80 E). The only thing to remember is that this exemption


Treatment of Disabilities: Section 80DD and 80DDB

Spending on medical care expenses will give you an exemption ( for treatment of specific disabilities, According to Section 80 DD). Rs. 50,000 has been fixed as the limit for deduction + 1 Lakh for severe disability.


Donations: Section 80G

Under 80G of Income Tax Act- donations made out to approved charitable institutions/organisations/trusts are eligible for deduction. Most donations are completely exempted from tax while others are 50%. The max limit is usually fixed at 10% of gross annual income.


Children Tuition Fees: Section 80C

On the off chance that you are paying any educational cost expenses for your youngster's instruction in any school, college, school or some other instructive foundation inside India, you can get an assessment exclusion under Section 80C. This can be up to Rs. 1 lakh in a year. A couple has a different limit of two kids. So each parent can guarantee for two kids each. This is eligible for full-time courses and not for private educational costs or training classes. The exception is Rs. 100 every month for each kid as instruction stipend and Rs. 300 every month for each youngster for lodging use costs.


Life Insurance Premium: Section 80C: This is a good option if you want to take care of your family incise you are not there plus it also saves tax. Exemption uptoRs. 1,50,000 under Section 80 C of Income Tax Act.



If you have covered all these expenses, then your tax planning job is almost done!

Newz On Tips

Related Blogs

Tax

employee tax exemption limit for allowancesemployee reimbursementtax exemptionincome tax

What are the tax exemption limits for allowances, reimbursements paid to employees? Find out

Wed Jul 15 2020 / By: Rashmi

The largest part of India's taxpayer group is of salaried persons. They pay the highest amount of taxes that ultimately help in basic infrastructure like roads and provide good health services and education systems. But this transaction is not only one way. The government also says Thanks by giving them monetary relief.


They are exempted from a portion of the tax for different kinds which are called allowances. If a salaried person takes reimbursements from the employers, a large chunk of money will be saved by the end of the year.


An employer's salary is made up of many components. The total salary package of employers is called Cost to Company (CTC). While the money that gets credited into account is called in-hand salary, which is lower than this CTC. It happens because employers deduct various kinds of taxes imposed by the governed. While some of these taxes are fixed, a few can be reimbursed if employers’ claim for allowances.


Here's a list of major deductions and allowances given by the government:


1.    House rent allowance (HRA)

2.    Telephone reimbursement

3.    Books and periodicals allowance

4.    Meal coupons

5.    Interest on higher studies loan


How to Reimburse Them:


The name of these allowances is pretty explanatory. If an employee is living in a rental house, then he/she is eligible for HRA. The same logic applies to other allowances. What these allowances basically mean is that salaried people should get some relief on their basic needs of working like housing, traveling, reading, and eating.


The process of asking reimbursements of these allowances is very simple. Salaried people have to give bills for using these basic services and commodities.


For HRA, one needs to submit rent receipts including the PAN of the employer (PAN is compulsory if the rental payment is above INR 1 lakh annually). For books and periodicals allowance, one has to submit newspaper bills, bills of books, and magazines. The same rule applies to telephone reimbursement, meal coupons, and Interest on higher studies loans.


However, one allowance that deviates from the same logic is Standard Deduction. In the last budget, it was decided that a standard amount of Rs 50,000 would be deduced from IT for salaried employees. It actually replaced transport allowance and medical reimbursement.


These tax allowances may sound small to a middle-middle-class or a higher- middle-class person. But when all of these allowances are accrued, the sum money almost looks like a monthly saving that has accumulated after a year. Basically, if you get reimbursement for all these allowances, you'll start getting more money than your present in-hand salary.


For more details about the changes in Income Tax exemption, click here.



Want to save more of your hard-earned money? Keep reading BankingOnTips Blog.

Tax

itr filing 2020new 26as formincome tax form 26aslatest update on 26as

ITR filing for AY 2020-21: What is new in the New 26AS Form? Here is all you need to know

Thu Jun 11 2020 / By: Rashmi

During Budget 2020, Finance Minister Nirmala Sitharaman had announced that a new Form 26AS will replace the older one. Now, a new Form 26AS has been released by the Income Tax Department, and it will contain more information than ever. The information embedded in the Form 26AS is very vital, but unfortunately, only a few know about it.


Here is all you need to know about the new form:


What's New?

In the older version of Form 26AS, only a few personal details were provided. like PAN number, full name, and address. While now, additional information like Phone Number and email address. The Income Tax Department now sends all the new information and notifications through emails and texts on the phone number. Till now, you may have ignored updating your phone number when changing the sim card but not anymore.


Apart from email address and phone number, the new Form 26AS now also includes your birthdate for unknown reasons.


Taxes And Proceedings

The new Form 26AS will have all the details of taxes that deducted by your company and collected by your bank. In addition to that, the details of advance tax or self-assessment tax will also be included in it.


If some tax filing is missing from your new Form 26AS, you can call your employer and bank in the court. This also works the other way around.


The outstanding demands will also be enlisted on the new Form 26AS. This will help you in knowing if the demand is really outstanding or should you raise a dispute on it.


Details About Taxes And Proceedings


In addition to that, your pending income tax proceedings will also be mentioned in the new Form 26AS. Both the taxpayer and the Income Tax Departement will have to go to just one single place to look up for all pending cases and their details. It's a win-win situation for both parties.


Until now, Form 26AS only had a few info included in it about your financial transactions. But from now on, various details like banks, listed companies, mutual funds, registrar, stock exchanges, etc. will also be included in the Form 26AS, as they were already available to the department.


If your transactions for credit cards, foreign exchange, shares, and bond purchases exceed a certain threshold, the details of all these transactions will also be written on Form 26AS.


To understand it in simple words, the Income Tax Department has made sure that Form 26AS become the one-stop-shop for taxpayers.


For More Such Updates And News, Keep Reading BankingOnTips.

Tax

income taxITR Financial Year 2019-20

Taxpayers Alert: Income Tax Department To Notify New ITR Forms By April's End

Mon Apr 20 2020 / By: Rashmi

Amid the COVID-19 crisis, the Income Tax department has decided to revise its Income Tax Return (ITR) forms. The forms will be changed so that taxpayer citizens can get the benefits that the government has given as relief measures. 


The central finance ministry released an official note on Monday regarding the ITR form changes. It says that the government has given various timeline extensions to the citizens as a relief measure. But to fully avail it for the common people, the income tax department will revise the return forms for the financial year 2019-20 and the assessment year of 2020-21. The changes made will be notified to taxpayers by this month's end. 


The benefits given to taxpayers are for financial transactions made between April 1, 2020, to June 30, 2020. Financial world pundits are also speculating that the department will most likely extend the ITR filing deadline of July 31. 


Once the forms are changed, and the taxpayers notified, the department will also amend the software and return filing utility. All this procedure shall be completed before May 31. 


Talking to the media about this recent announcement, the director of Nangia Andersen Consulting, Mr. Shailesh Kumar, said that there is a small discrepancy in the time-period. While the taxpayers would have to make tax-saving investments by the end of June, the new ITR forms and utilities would be notified to taxpayers by the end of May. Hence there is lesser time for taxpayers to file the Income-tax return by July's end. To make sure every eligible person pays tax, the government will probably extend the ITR filing date. 


Almost every finance-related timelines and deadlines have been extended by the Finance Ministry, including the utilities of the Income Tax department and Reserve Bank of India. 


After announcing the Pan-India lockdown on March 25, the government ruled that the claims for payments that come under Section 80 C, 80D, and 80G (which includes Donations, Mediclaim and LIC, PPF, NSC, and mutual funds, etc.) are extended till the end of June. 


Usually, the ITR forms are notified to taxpayers once the financial year ends, i.e., March 30 or 31. Then the taxpayers have four months to file their Income Tax Returns before the end of July. However, this government broke the norms when it released the new forms called ITR-1 (Sahaj) and ITR-4 (Sugam) in January instead of March. Now, after Coronavirus spread and nationwide lockdown, every rule and norm is being changed as per necessity. 


For more such updates, keep reading BankingOnTips.

Tax

Budget 2020Tax

Do NRIs have to pay taxes after the 2020 budget or not

Mon Feb 17 2020 / By: Rashmi

The money that is earned legally and ethically is called white money, while the money that is earned by illegitimate methods is called black money. But, what if you don't know if the ways by which you are earning money is legitimate or not? What if the laws themselves are not showing your money's true colour; black or white? 


The 2020 budget has left grey areas over a number of monetary spaces. One of them is taxation for NRIs. 


In her budget speech, the union Finance Minister, Nirmala Sitharaman, said that the government is planning to crack down on people who are trying to create a loophole in the taxation system in the name of their residence status. But, after the speech caused great furore among NRIs, the government took a U-turn. 


In an official statement, the finance ministry said, "The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct."


So, who does exactly have to pay the 'NRI tax'?


Those persons who live in India for more than 120 days will now be deemed as Indian residents. Hence, if they have businesses in India, then the money earned by those businesses will come under the scrutiny of the Indian tax system. 


One thing to be noted here is that one has to pay taxes only for the local earnings and not the earnings made in any foreign country. The finance ministry clearly said so in the statement issued on February 02, "It is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession."


Another loophole left:


It is not the case that 'NRIs' now can not exempt themselves from paying taxes to the Indian government. They can; if they care enough to read the budget thoroughly. According to the Indian 2020 budget, if an NRI lives abroad for more than 35 weeks or 145 days, one can not be taxed even for earnings made through Indian businesses. In other words, NRIs still don't have to pay taxes, it is just that the definition of an NRI has changed after the 2020 budget.