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Tax Planning

A Complete Presentation on Tax Planning

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Tax Planning

  1. 1. Plan ITSmartly…. Pay ITHonestly……
  2. 2. Some Facts…. You will be surprised to know that only 2% population of India file their Income Tax Return. Either people are scared to disclose their income to Department or they think it is a bit stressful job. We work 3 to 4 months to pay the Income Tax in a year. YOU PAYMORE TAX BECAUSE YOUR NEIGHBOR DON’T PAY TAX… Let’s encourage people to file their Income Tax Return.
  3. 3. Q 1. When we pay Tax ? Ans. When there is Income. Q 2. What are the various sources of income ?
  4. 4. Sources of Income  Income From Salary Income From House Property Income From Business and Profession Income from Capital Gain Income From Other Sources
  5. 5. What are Tax Rates ?
  6. 6. IncomeRange Male & Female (Below60 years) SeniorCitizens (Male & Female above 60 years of age), but below 80years Very Senior Citizens (Male & Female above 80 years of age) Up to Rs. 2,50,000 Nil Nil Nil Rs. 2,50,001 to 3,00,000 10% Nil Nil Rs. 3,00,001 to 5,00,000 10% 10% Nil Rs. 5,00,001 to 10,00,000 20% 20% 20% Above Rs.10,00,000 30% 30% 30% Note- Tax Credit of Rs 2,000/- is allowed as a credit whose Income is less than Rs 5,00,000/-
  7. 7. Tax Rates for Capital Gains LTCG STCG Sale of units of Equity Oriented FundsThrough recognized stock exchanges Exempt u/s 10(38) 15% tax u/s 111A Any othercase 20% Tax 30% for companies (If individuals as per slab rates)
  8. 8. Tax Planning • Tax Planning, NOT Tax Evasion. • Taking maximum benefits of Deductions &Exclusions. • Optimizing the Investment through after tax returns. Financial Hospital "A complete wealthplanner"
  9. 9.  By Tax Evasion - Hiding of Income By Tax Planning – Systematic Planning with proper compliances of tax laws.
  10. 10. Tools of Tax Planning Section 10 – Benefit of Various Allowances Deduction Chapter VI A  Housing Loan and Tax Benefit Capital Gain from sale of House Property or any other assets Gift and Tax Implication  Tax Planning through Spouse, Mom andDad Points you should keep in mind. Document Checklist for Declaration.
  11. 11. Section 10 - Benefit 1.What is Section 10 benefit ? Ans. Tax Friendly Allocation of CTC. 2.Is it Important for Tax Planning ? Ans. Yes, for maximizing your tax savings. Q3. Is it affects the Gross CTC? Ans. No.
  12. 12. Salary Component Expenses incurred for- Exempt (Amount) P.A. Transportation Allowances NO NEED FOR BILLS Rs. 19,200/- ( Rs. 1,600/- p.m.) HRA Paying rent for residence As per calculation LTA Vacations As per calculation Reimbursement of Expenses Office purpose only As per Actual expenses incurred Benefit of various allowances u/s 10.
  13. 13. Salary Component Expenses incurred for- Exempt (Amount) P.A. Uniform Allowance Purchase or maintenance of uniform As per Actual expenses incurred Medical Expenses Medical Treatment Rs. 15,000/- Daily Meal Allowance Refreshment Rs. 15,600/- ( Rs. 50/- per day) Children Allowance NO NEED FOR BILLS Rs. 2,400/- Children Hostel Allowance NO NEED FOR BILLS Rs. 7,200/- Benefit of various allowances u/s 10.
  14. 14. Section 10 - Benefit Leave Travel Allowance (LTA)  Amount of exemption is-  Where journey is performed by Air- Economy class of Air  Where journey is performed by Rail – First class rail fare  Family means- Himself, spouse, two children and dependent brother, sister, parents;  Exemption available for 2 Journey in a block of 4 calendar years;  Current block is 2014-2017 (January 1,2014 to Dec 31,2017). Go on HOLIDAY to save your TAX
  15. 15. Amount of Exemption (HRA) -  Least of Following- 50% or 40% of Salary Rent paid excess of 10% of Salary HRA component in your PAY SLIP  HRA exemption is NOT AVAILABLE if employee- 1. Resides in his/her own house. 2. Does not incur any expenditure on rent. House Rent Allowance (HRA)
  16. 16. YES…..There is no legal requirement but in such case rent has to be paid through bank transfer entry ( Cheque or NEFT).
  17. 17. YES…..There is no legal requirement but in such case rent has to be paid through bank transfer entry (Cheque or NEFT). Can claim exemption even if he owns a house (in same city or in a different city)
  18. 18. YES…..If you actually pay rent (through Bank transfer) to reside in rented property and pay housing loan EMI as well.
  19. 19. Housing Loan & Tax Benefit  Most Popular tool for Saving Tax.  Repayment of Housing loan - a)Principal – Chapter VI A (already covered) b)Interest on Housing Loan  Payment of Interest on Housing Loan will be covered for Deduction up to Maximum Rs. 2,00,000/- (In case of Self Occupied)  It is advisable to take loan on Joint name to take benefit of Rs. 2,00,000/- each. It means we can claim a deduction of up to Rs 400,000/-.
  20. 20. Housing Loan & Tax Benefit Two or more House Property and Loan Interest Paid on Housing Loan Self Occupied Property (SOP) Max Benefit Rs 2,00,000/- Let out Property (LOP) / Deemed Let out Property (/DLOP) Unlimited Amount
  21. 21. Housing Loan & Tax Benefit Having Two or more House Property and Loan- Hint for Tax Planning - If both of house used for resident purpose than its upto you to declare one house property as SOP and one as DLOP. If both of property is actually let out and staying on rent than we can claim-  Entire interest on loan of both of property  HRA exemption
  22. 22. Housing Loan & Tax Benefit Planning to Buy Second Home  Go for housing loan if you are in higher tax bracket because we can claim entire amount of interest as a deduction.  Don’t vacant it, Let out your property because-  It will generate cash revenue  Entire amount of interest will allowed as a deduction
  23. 23. Sale of House Property/ Any other Asset- Save Capital Gain Holding for more than 36 months Long Term Capital Gain Tax arises
  24. 24. Sale of House Property/ Any other Asset- Save Capital Gain Invest into another house property- Before one year or after two year from the date of original transfer or Construction with in three years Invest in specified bond i.e. NHAI and REC within a 6 month from date of sale up to Maximum Rs 50 Lacs.
  25. 25. Chapter VIA Deduction Investment in 80C (Max Rs 1,50,000/-)  Premium of Life Insurance/TermPlan/ULIP  Contribution toPF/PPF or National Saving Certificate(NSC)  Housing Loan PrincipalRe-Payment  FDR with 5 year lock in  Tuition Fee - paid for children (own, adopted, step) for full time education;  Self Contribution to Pensionscheme  Stamp duty & registration charges on house propertypurchased  ELSS-Mutual Fund ( Lock in period 3 years).  NPS (Addition Rs. 50,0000/-)
  26. 26. Chapter VIA Deduction Benefits above Rs 150,000/- MEDICLAIM (Sec. 80D)  Max. Benefit : 55,000/-  Mediclaim for self 25,000/-  A deduction of Rs 5,000/- for preventive health check-up is available.  Mediclaim for parents 25,000/- or 30,000/- (in case of senior citizen)  Even if your parents are not dependent, you can pay for medical insurance and claim deduction. “Health bhi aur Wealthbhi”
  27. 27. Beauty of Education Loan  Interest is eligible for deduction with UNLIMITED amount.  Deduction available for seven year.  For full time studies or any vocational studies after passing SSE.  Taken a loan from anyFIIs.  Deduction eligible for repayment of education loans made for spouse or children also. Chapter VIA Deductions Benefits above Rs 150,000/-
  28. 28. Rajiv Gandhi Equity SavingsScheme (RGESS) u/s 80CCG  One can invest a maximum of Rs. 50,000/-;  Available for FY 13-14, 14-15 and 15-16 only;  Tax rebate of 50%;  Only for individuals whose annual income is less than 12 lacs  Investing in stocks for the firsttime  Lock in of 3 year but can trade after 1 year. Chapter VIA Deduction Benefits above Rs. 150,000/-
  29. 29. Chapter VIA Deduction Benefits above Rs 150,000/- Expenses incurred in Medical treatment (Sec. 80DDB )  Specified disease for himself, spouse, children, parents, brother &sisters.  Maximum deduction Rs. 50,000/- (Senior Citizen Rs.1,00,000/-) Less amount of claim received from insurancecompanies.  Required actual bills and Certificate from specialist who is working in GovtHospital.
  30. 30. Expenses incurred on maintenance of Handicapped (Sec. 80DD / 80 U)  Himself, spouse,children, parents, brother & sisters.  Amount of Deduction Rs. 50,000/-, In case of permanent disability Rs. 1,00,000/- (Actual Expenses Irrelevant) Required Certificate from medical authority. Chapter VIA Deduction Benefits above Rs 150,000/-
  31. 31. Chapter VIA Deduction Benefits above Rs 150,000/- Donation or charity made to any NGO/Trust/Political Parties Maximum 10% of Gross Total income (For 50% deduction).
  32. 32. How to Save TAX by Investingin Spouse’sName  If you have some surplus to Invest somewhere – Yes INCOME will arise Tax Planning needed  Where you can Invest - In House Property - Rental Income - PPF, LTCG on MF & Equity -Tax Free Income  To invest a house in wife’s name , loan her the money and in exchange, she can give you her jewellery.  If a couple is engaged, and the girl does not have any taxable income or pays tax at a lower rate, her fiancé can transfer money to her. The income from that won’t be included in his income because the transaction took place before they got married.
  33. 33.  If you have some surplus to Invest somewhere – Yes INCOME will arise Tax Planning needed  Where they can invest- Anywhere  If your parents do not have a high income, you can invest in their name.  There is NO TAX on such gifts  No clubbing provisions come into play when money is transferred to a parent.  No limit on the amount you can give to your parents. How to Save TAX by Investing in MOM & DAD’s Name
  34. 34. BE CAREFUL, Income Tax iswatching, ifyou Cash deposits (10 lakh and above)  Credit card bills (2 lakh and above)  Mutual Fund purchase (2 lakh and above)  Purchase of bonds/debentures (5 lakh and above) Purchase of shares of a company (1 lakh and above) Purchase of immovable property (30 lakh and above) Sale of immovable property (30 lakh and above) Purchase of RBI bonds (5 lakh and above) Other points you should keep in mind
  35. 35. Most ImportantAlways advisable-  If you switch the job in middle of the financial year then inform the new company about the income from the old company, so that new company will deduct the actual TDS on that.  If You have FD Interest more than Rs 10,000/- then inform your company and submit the income details so that the company will deduct the actual TDS on that. Benefit- It can save the Interest on Tax that can be huge.
  37. 37. Personal Taxation Tax Rates • No change in income slabs or tax rates • Increase in surcharge from 12% to 15% on individuals, HUFs having income exceeding Rs. 1 crore. • Rebate of income tax for resident individuals with total income not exceeding Rs. 5 lakh enhanced from Rs. 2,000 to Rs.5,000.
  38. 38. House Property • An additional deduction of Rs. 50,000 in respect of interest payable on home loan taken by an individual during the financial year 2016-17. This deduction is available to a person not owning a house property and where the cost of house does not exceed Rs. 50 lakhs and the loan does not exceed Rs. 35 lakhs. • Maximum deduction for house rent paid by individuals not receiving House Rent Allowance increased from Rs. 2,000 per month to Rs. 5,000 per month. • The period within which the construction or acquisition of a self occupied house property is to be completed, to claim a deduction of interest on housing loan, increased from 3 years to 5 years reckoned from the year in which the loan is borrowed. • The permissible deduction limit continues to be Rs. 200,000.
  39. 39. Personal Taxation Capital Gains • Deposit certificates issued under ‘Gold Monetization Scheme 2015’ will not be considered as capital assets. The interest thereon would also be exempt from tax. • Gains from redemption of gold bonds issued by the Reserve Bank of India under ‘Sovereign Gold Bonds Scheme 2015’ shall not be subject to capital gains tax in the hands of the individual.
  40. 40. • Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of Rs. 10 lakh per annum. • Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of ` ten lakh and purchase of goods and services in cash exceeding ` two lakh. • Securities Transaction tax in case of ‘Options’ is proposed to be increased from .017% to .05%. • Equalization levy of 6% of gross amount for payment made to nonresidents exceeding Rs. 1 lakh a year in case of B2B transactions. • Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016. Proceeds would be exclusively used for financing initiatives for improvement of agriculture and welfare of farmers. Input tax credit of this cess will be available for payment of this cess. Other Imp Points
  41. 41. PM’s 3 New Schemes PRADHAN MANTRI SURAKSHA BIMA YOJANA  Renewable one year accidental death cum disability Cover  Age group between 18 to 70.  Rs. 12 per year for 2 lacs PRADHAN MANTRI JEEVAN JYOTI BIMA YOJANA  Renewable one year Life Cover  Age group between 18 to 50  Rs. 330 p.a. for 2 lacs THE ATALPENSION YOJANA  Guaranteed Pension  At the age of 60  Rs. 1000,2000, 3000, 4000 and 5000 depending on the corpus.
  42. 42. Donate and Educate..
  43. 43. Documents Check List For Declaration  In case you live in a rented apartment: 12 months rental receipt from owner  In case you have home loan: Statement of housing loan with details of principal and Interest components  Medical bills for the year if any  Tuition fee receipt paid for your children if any  Flight & train tickets for LTA claims  Insurance premium receipts paid for the year  NSC purchased in the year  Mutual fund (ELSS) statement  Mediclaim premium receipt  Parents’ mediclaim premium receipt  Education loan statement (mentioning the interest component)  Bank Fixed deposit receipts (the 5 year lock-in thing)
  44. 44. Manish P. “it’s make you more beautiful…”