Understanding Tax!

Tax 2008-2009 – The slabs!

Assessee (others) (Male < 65, HUF) – Rs: 1,50,000

Women Assessee ( < 65) – Rs: 1,80,000 Senior Citizen (65 or 65+) – Rs: 2,25,000

0 – 1,50,0000 – 1,50,000 -- NilNil

1,50,001 – 3,00,0001,50,001 – 3,00,000 -- 10% (15,000) + 3% E.C10% (15,000) + 3% E.C

3,00,001 – 5,00,0003,00,001 – 5,00,000 -- 20% (60,000) + 3% E.C20% (60,000) + 3% E.C

5,00,001 – above 5,00,001 – above -- 30% + 3% E.C30% + 3% E.C

10% Surcharge10% Surcharge -- above 10,00,000above 10,00,000

Rates – Ready Reckoner!

Rate Others Women < 65

Senior Citizens

Up to 1,50,000 - - -1,50,001 to 1,80,000 10% - -1,80,001 to 2,25,000 10% 10% -2,25,001 to 3,00,000 10% 10% 10%3,00,001 to 5,00,000 20% 20% 20%

5,00,001 & above 30% 30% 30%10,00,001 & above 10% Surcharge on Tax

Education Cess 2% Education Cess on( Tax + SC)

Income Tax Liability

10,00,000 2,05,000

5,00,000 55,000

3,00,000 15,000

1,50,000 0

0

Tax, Tax and more tax!!

20%

30%

10%

Tax

&

Planning

Relief(s) Available!

Section 80 C Section 80 CCC Section 80 CCD Section 80 D Section 80 E

80C - Conditions Apply!

Cannot exceed Rs.1,00,000

Sum may be paid or deposited at any time during the year

No limits for various items specified u/s. 80C. Therefore, an assessee may opt to invest even in only one item say insurance premium

Premium or other payment made on insurance policy not in excess of 20% of actual capital sum assured

Tuition Fee for any two children of the assessee

Principal repayment on loan borrowed for acquiring commercial property is not eligible

Residential property under construction for which principal has been repaid does not qualify for deduction

80C– More Conditions Apply!

Repayment of principal on loan borrowed for residential house (whether let-out or self occupied) only is entitled for deduction.

Where the loan is availed for any addition, alteration, repair or renovation no deduction can be claimed for principal repayment

Repayment of loan borrowed for housing from relatives, friends, non-specified employer / institution are not eligible for deduction.

However, any interest paid on such loan borrowed is deductible under section 24, while computing income under the head “House Property”

Fixed Deposit in Banks must be for 5 years

80C– Additional Options!

Five year time deposit in an account under Post Office Time Deposit Rules, 1981.

Deposit in an account under the Senior Citizens Savings Scheme Rules, 2004

80C - Popular Choices!

Mutual Funds

Insurance

ULIP

Principal repayment of Housing Loan

Tuition fee – paid for children (own, adopted, step) for full time education in India. [Note: Tuition fee paid for grandchildren is eligible for deduction for the HUF]

Fixed Deposits in Banks (5 years)

NSC – National Savings Certificate

PF – Provident Fund [SPF, PPF, RPF]

10 year Post Office Savings Bank (CTD)

Stamp Duty and Registration Charges

80CCC & 80CCD –Pension-No Tension!

80CCC-Contribution to pension scheme

Rs.1,00,000 (outer limit)

Disallowance on cancellation or lapse

All withdrawals are taxable on surrender / maturity

80CCD-Contribution to CG pension scheme

10% of Salary (Basic + DA)

All withdrawals are taxable on surrender / maturity

80D – Health is wealth (literally)!

80 D – Contribution to Medical Insurance Schemes

o Rs: 15,000

o Self + Spouse + Dependent Children + Dependent Parents

o Rs: 20,000 for senior citizens

o Now, an additional deduction of Rs: 15,000 (Rs: 20,000 if parents are senior citizens) is available to an individual for payment of

medical insurance premium for parents.

80E – It’s good to study!

80 E – Repayment of Education Loans

Only Interest is eligible for deduction

No Limit

Deduction eligible for initial year and immediately succeeding seven years

Deduction eligible for repayment of education loans made for spouse or children

What is the Tax liability if Total Income is Rs.300,000 (for Male assessee < 65)

i Rs.15,000

ii Rs.13,330

iii Rs.13,707

iv Rs.15,450

Test Yourself!

Fixed Deposit in Banks must be for ___ years to be eligible for Section 80C?

i 3

ii 5

iii 2

iv No specifications

Test Yourself!

What is the Tax liability if Total Income is Rs.180,000 (for Female assessee < 65)

i Rs.15,000

ii Rs.1,030

iii NIL

iv Rs.15,450

Test Yourself!

What is the maximum limit under Section 80E?

i Rs.15,000

ii Rs.5,000

iii Rs.20,000

iv None

Test Yourself!

What is the Tax liability if Total Income is Rs.500,000 (for Male Assessee < 65)

i Rs.56,650

ii Rs.77,250

iii Rs.75,000

iv Rs.50,600

Test Yourself!

Plan Ahead!Have A Non ‘Tax’ing Year!!