Saving Tax Trauma

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p>Direct Taxes Code (DTC), which seeks to modernise tax laws in the country, is expected to come into force from April 1, 2012. The proposed Direct Taxes Code brings together the policy initiatives on direct taxes. In a bid to modernise the tax system, the government has proposed to replace the Income Tax Act, 1961, with a new legislation and is expected to raise the exemption limit. But till then and certainly this year, old rates apply. Kalpesh Ashar, Certified Financial Planner - CFPCM, and associate partner with VCare Investment Services Pvt Ltd simplifies income tax to <strong>Tanushree Pillai. </strong><br><br><strong>What are the kind of instruments that individuals can use to save tax on their income? </strong><br>There are various instruments available for individuals when it comes to saving tax on their income. Salaried and Self Employed / Professionals utilise these financial instruments as per the respective features and their requirements. <br><br>Certain expenses, incomes and investments are eligible for deductions from an Individual's gross total income and thus induce tax savings. <br><br><strong>How do these differ from each other?</strong><br>The threshold limit of Rs 1,00,000 - is applicable for deduction under Sec. 80C for Individuals and HUF ( Hindu Undivided family )under which the following are included ( most commonly used ) : <br>a. Life Insurance Premiums (for self / spouse / children). <br>b. Recognised Provident Fund / EPF <br>c. Public Provident Fund <br>d. ELSS Fund – Equity linked Saving Schemes of Mutual Funds. <br>e. Tuition Fees paid – To any university, college, school or other educational institution situated within India for full-time education of any 2 children of the individual. <br>f. Payment for purchase or construction of a residential house the income from which is chargeable under Income from House Property, in respect of-<br>i) Instalment or part payment towards cost of House Property allotted to him <br>ii) Repayment of Loans <br>g. Term deposit of tenure of 5 years or more issued by a scheduled bank. <br>h. Senior Citizen Savings Scheme ( Post Office ). <br>i. 5 year Time Deposit ( Post Office ) <br>j. National Savings Certificate – VIII <br>k. NPS ( New Pension Scheme ) <br><br><strong>•Deduction under Sec.80D :-</strong><br><strong>Mediclaim </strong>:- Deduction up to Rs 15,000 paid as premiums paid towards health of an individual, his spouse and dependent children is allowed. <br><br>If the individual or the spouse is a senior citizen, the limit is higher at Rs 20,000. An additional deduction of up to Rs 15,000 is available to an individual on premiums paid for his parents, dependant or otherwise. If the parent is a senior citizen, then the limit is enhanced to Rs 20,000. <br><br><strong>•Deduction under Sec.80CCF: </strong><br><strong>Long Term Infrastructure Bonds: </strong>An amount of up to Rs 20,000 - is allowed as deduction under this newly introduced section. This will be <br>over and above the overall limit of Rs 1,00,000 - eligible u/s 80C. <br><br><strong>•Deduction under Sec.80DD :</strong><br><strong>Handicapped Dependant: </strong>An individual having a dependant suffering from a permanent physical disability or mental retardation is entitled to a deduction for medical treatment of the dependent. An amount of Rs 50,000 is allowed for non-severe disability and Rs 1,00,000 is for severe disability. <br><br><strong>•Deduction under Sec.80G: Donations </strong><br>An Individual is entitled to a deduction of 50 per cent and in some cases 100 per cent of donations made to approved charitable purposes. <br><br><strong>What the biggest misconceptions about taxation? </strong><br>There are a couple of misconceptions about taxation that individuals have: <br><br>1)The general misconception or shall I say perception of taxation is that by investing or contributing in certain Financial products in last leg of the <br><br>Financial year, your tax savings are taken care of. This last moment panic invariably results in the wrong selection of financial products for the <br>individual. In reality these tax saving instruments whether they are expense oriented or investments can be channelized and planned for definite <br>financial purposes and goals through the year peacefully with the help of a Financial Planner or advisor. <br><br>2) Taxation is "complicated and taxing " -The general notion is that minimal tax has to be paid and it is the domain known only by CA's. Though a Chartered Accountant would obviously understand the taxation laws and features, the actual simplification and implementation of an Individual's personal taxation has to be done by the individual himself or with the assistance of a financial advisor or planner who will guide the investor on his taxation after analysing and understanding his financial profile first. <br><br><strong>Do women tax payers enjoy any special benefits? What are they? </strong><br>Apart from the minimum tax slab for women which begins at Rs 1,90,000 — in comparison to the male tax payers who have a minimum tax slab which is Rs 1,80,000, — all the other Tax provisions for women tax payers are more or less the same as for individuals. <br><br><strong>What kind of loans that an individual has taken can be used to save taxes? </strong><br>Home Loans and Loans on Higher Education are the only loans that can be used to save taxes. Under home loans, the principal amount and the interest on loan repayment during the year are eligible for tax deduction. <br><br>In Loan for Higher Education, the Interest paid on loan taken by an individual from a bank, a notified financial institution, or any approved charitable institution for higher education is deductible for 8 successive years starting from the financial year in which the individual starts repaying the interest. <br><br><strong>Throw a little light on filing of taxes in brief. </strong><br>Taxes are now mainly filed online as it is faster and the response time from the IT authorities is quicker too if the mode is online. Individuals still have the option of also filing taxes and returns physically if their businesses do not come under tax audit. Employers do manage the TDS (Form 16) disclosures of their employees, but the onus of filing of taxes lies with the individual to do it individually or through his Chartered Accountant. <br>&nbsp;<br></p>