Tax Planning Guide for FY 2016-17

How to Save Income Tax for Fy 2016-17

How to Save Income Tax for Fy 2016-17?

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.

The New Tax Saving Guide for FY 2017-18 is now available for Download – Click here!

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%

7. 40% of lump sum withdrawal on NPS at maturity would be exempted from Tax. This rule now also applies to EPF. So now in case of EPF income tax would be applicable on 60% of the corpus on maturity.

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:

Download Tax Planning eBook for FY 2016-17 [AY 2017-18] (2.46 MB)

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:

  1. Employee/ Voluntary Provident Fund (EPF/VPF)
  2. PPF (Public Provident fund)
  3. Sukanya Samriddhi Account
  4. National Saving Certificate (NSC)
  5. Senior Citizen’s Saving Scheme (SCSS)
  6. 5 years Tax Saving Fixed Deposit in banks/post offices
  7. Life Insurance Premium
  8. Pension Plans from Life Insurance or Mutual Funds
  9. NPS (New Pension Scheme)
  10. Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)
  11. Central Government Employee Pension Scheme
  12. Principal Payment on Home Loan
  13. Stamp Duty and registration of the House
  14. 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.

Download Tax Planning eBook for FY 2016-17 [AY 2017-18] (2.46 MB)

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

Download Tax Planning eBook for FY 2016-17 [AY 2017-18] (2.46 MB)

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.

Please give us your feedback and help us improve!

68 thoughts on “Tax Planning Guide for FY 2016-17

  1. Total Package 8.4 PA + 1 Month bonus + 5% incentive on profit margin… TDS 4800 Dudecued every month… taking home loan 18 lacs i want to save my tds please guide me…. current investment LIC 37372 PA

  2. i am a doctor and have a home loan jointly in the name of me and my husband of 40 lakhs and quoted price of the property is 57 can i still avail of tax benefit ?

  3. I have to pay 9000 rs tax for FY 2016-2017 . If i take LIC Term plan for 7500000, premium is 14000 per year . Will it reduce tax amount?

    • The total exemption under sec 80C is Rs 1.5 lakhs (which includes lot of options like insurance, ELSS, FD, NPS, etc). In case you have made other investments which is up to or more than 1.5 lakhs in the financial year no further tax benefit would be possible. However if you still have window of 80C open – LIC term plan would give you desired tax break.

  4. kannaboopathy says:

    Excellent . Very useful
    Much appreciated.

  5. Dear Amit Ji, thanks for another informative article. I want to start SIP in mutual funds 10000/- per month for 15 years for wealth creation. I can take high risk. for better return. I’ve shortlisted 5 funds, one from each category.
    Do you recommend any change to this portfolio? Or should I go with it?

    a) BSL Frontline Equity Fund 2000/-
    b) ICICI Prudential Value Discovery Fund 2000/-
    c) Franklin India Smaller Companies Fund 2000/-
    d) DSP-BR Micro Cap Fund 2000/-
    e) BSL Tax Relief ’96 Fund 2000/-
    If I increase the SIP amount to 15000/- any portfolio change is required?

  6. CA Swapnil Rege says:

    Hi amit , I went through the NPS contribution tax treatment article that u have written . Its nicely explained !! I have one query that for salaried employee if the employer contributes 10% of ( Basic + DA ) u/s 80CCD(2) in to the NPS scheme and say the amount is Rs.90000 /- per annum then will this be held over and above my 80C Rs.1.5 lacs capping limit ?? If this is true then my aggregate tax benefit ( assuming my 80C Rs.1.50 lacs is fully utilized ) comes to Rs.1.5 Lacs + 0.50 lacs u/s 80CCD(1B) + Rs.0.90 L = 2.90 lacs !! Kindly help verify my understanding .
    CA Swapnil Rege

    • The employer contribution is not added to your income and hence you cannot actually take that in account while computing your taxes. And if you take employer contribution as exemption you would also need to add that to your income. So net-net there is no gain!

  7. Received your tax planning guide from a friend. Very helpful. Thanks…and keep us all educated!



  9. Sandesh Nayak says:

    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.” What does the last sentence mean?

    • When the flat is given on rent the loss on home is computed as (Interest paid – Rental income after all deductions). There is no cap on this deduction. For self occupied home the same equation is applicable but the rental income is 0. And so its capped at Rs 2 lakh.

  10. thanks to sharing

  11. good post thanks

  12. Hi amit.
    In this post, you have mentioned that in section 80U and 80DD both tax exemption limit is 1.25 lakh, but up to my knowledge in 80u(physically disabled tax payer) , it’s 1.25..
    n in 80DD it’s 75k

    • Its Rs 75000 for 40% or more disabled and Rs 125000 for severely disabled (80% or more) under both sections 80D & 80U. Both the limits were increased in Budget 2014 and applicable for FY 2015-16.

  13. Hello Amit,
    My business firm is paying Rent of Rs.30,000 monthly to the Landlord. As per rule I deduct TDS and pay TDS on monthly basis. My question is – Can the Landlord give some form or declaration stating that I need not deduct TDS while paying monthly rent, just like 15g, & that Landlord would pay taxes as applicable?

  14. Pranav Marathe says:

    My company has asked to submit Rental Agreeement along with rent receipts (have already submitted Landlord’s PAN number). Is it mandatory to submit? We don’t renew agreement every year.

    • Its employer responsibility to verify your rent for HRA. They may ask for rent receipt and/or lease agreement. Some are good with rent receipt only but others do ask for lease agreement too.

  15. Thank you for such a detailed great guide !

  16. Thank you for this e-book !

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