We are releasing the eBook on Tax Planning for FY 2016-17. This is a short 45 slide power point presentation which gives the details of tax saving sections and investments available to individual tax payers.
But first lets look at the changes in the Income Tax rules in Budget 2016.
- 1 Changes in Income Tax Rules:
- 2 1. Section 80C/80CCC/80CCD
- 3 2. Section 80CCD(1B) – Investment in NPS
- 4 3. Payment of interest on Home Loan (Section 24/80EE)
- 5 4. Payment of Interest on Education Loan (Section 80E)
- 6 5. Investment in RGESS (Section 80CCG)
- 7 6. Medical insurance for Self and Parents (Section 80D)
- 8 7. Treatment of Serious disease (Section 80DDB)
- 9 8. Physically Disabled Tax payer (Section 80U)
- 10 9. Physically Disabled Dependent (Section 80DD)
- 11 10. Donations to Charitable Institutions (Section 80G)
- 12 11. Donations to Charitable Institutions (Section 80GGA)
- 13 12. Donations to Charitable Institutions (Section 80GGC)
Changes in Income Tax Rules:
1. There has been no change in the income tax slabs.
2. For people with net taxable income below Rs 5 lakh, the tax rebate has been increased from Rs 2,000 to Rs 5,000 u/s 87A. This would benefit people who have net taxable income between Rs 2.7 Lakhs to Rs 5 Lakhs.
3. Additional exemption for first time home buyer up to Rs. 50,000 on interest paid on housing loans. This would be applicable where the property cost is below Rs 50 Lakhs and the home loan is below Rs 35 lakhs. The loan should be sanctioned on or after April 1, 2016.
4. Tax Exemption u/s 80GG (for rent expenses who do have HRA component in salary) has been increased from Rs 24,000 to Rs 60,000 per annum. This is a good move to align the exemption amount with today’s rent and keep the section relevant.
5. For people with net taxable income above Rs 1 crore, the surcharge has been increased from 12% to 15%
6. Dividend Income in excess of Rs. 10 lakh per annum to be taxed at 10%
8. Presumptive taxation scheme introduced for professionals with receipts up to Rs. 50 lakhs. The presumptive income would be 50% of the revenues.
The eBook covers the following income tax sections available for individual tax payers:
1. Section 80C/80CCC/80CCD
These 3 are the most popular sections for tax saving and have lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.
You can choose from the following for tax saving investments:
- Employee/ Voluntary Provident Fund (EPF/VPF)
- PPF (Public Provident fund)
- Sukanya Samriddhi Account
- National Saving Certificate (NSC)
- Senior Citizen’s Saving Scheme (SCSS)
- 5 years Tax Saving Fixed Deposit in banks/post offices
- Life Insurance Premium
- Pension Plans from Life Insurance or Mutual Funds
- NPS (New Pension Scheme)
- Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)
- Central Government Employee Pension Scheme
- Principal Payment on Home Loan
- Stamp Duty and registration of the House
- Tuition Fee for 2 children
2. Section 80CCD(1B) – Investment in NPS
Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS. We have done a complete analysis and concluded that it would be beneficial for you to discard this benefit and invest after tax money in a good equity mutual fund.
3. Payment of interest on Home Loan (Section 24/80EE)
The interest paid up to Rs 2 lakhs on home loan for self-occupied home is exempted u/s 24. There is no limit for home given on rent.
Budget 2016 has provided additional exemption up to Rs 50,000 for payment of home loan interest for first time home buyers. To avail this benefit the value of home should not exceed Rs 50 lakhs and loan should not be more than Rs 35 lakhs.
4. Payment of Interest on Education Loan (Section 80E)
The total interest paid on education loan can be claimed as tax exemption. There is no upper limit for the same.
5. Investment in RGESS (Section 80CCG)
Deduction Up to Rs 25,000 (50% of amount invested) is allowed if you make investment in preapproved stocks and mutual funds in Rajiv Gandhi Equity Savings Scheme (RGESS). This is available to first time equity investors subject to certain conditions.
6. Medical insurance for Self and Parents (Section 80D)
You can get tax deduction up to Rs 60,000 by paying medical insurance premium for self, your dependents and your parents. There is also sub limit of Rs 5,000 for preventive medical checkup.
7. Treatment of Serious disease (Section 80DDB)
You can claim deduction up to Rs 80,000 for treatment of certain diseases like AIDS, renal failure, etc for self or dependents
8. Physically Disabled Tax payer (Section 80U)
Physically Disabled Tax payer can get tax exemption up to Rs 1.25 lakhs u/s 80U
9. Physically Disabled Dependent (Section 80DD)
You can claim deduction up to Rs 1.25 lakhs for maintenance and medical treatment of Physically Disabled dependent
10. Donations to Charitable Institutions (Section 80G)
Deduction up to Rs 40,000 is allowed for Donation to certain charitable funds, charitable institutions, etc.
11. Donations to Charitable Institutions (Section 80GGA)
Deduction up to Rs 1 lakh is allowed for donations for scientific research or rural development
12. Donations to Charitable Institutions (Section 80GGC)
Deduction up to Rs 60,000 is allowed for donations to political parties
Along with the tax saving options, it also has details about all the common salary components and their tax treatment. This section can help you to plan your salary components in case your company offers such facility.
We hope that this eBook would help you in understanding, planning and saving taxes.
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