When Taxman comes knocking....(Ways to save taxes for salaried individuals)

When taxman knocks you should be prepared!! It is essential to acquaint yourself with few details relating to tax and taxable income.

Various Heads of Income

•         Income from Salaries

•         Income from House Property

•         Profits and Gains from Business or Profession

•         Capital Gains

•         Income from Other Sources

Exempted Income

The following incomes are exempted from tax.

•         10(1)Agricultural Income

      •         10(10A) Commutation of Pension – Subject to

–        1. Age > 45 years

–        2. Commuted Amount not more than 1/3rd of the total amount

      •         10(10D) Amount Claimed from Insurance Companies on Maturity and                    Death subject to Life Cover being > 5 times Annual Premium.

      •         10(13A) House Rent Allowance:

–        Lower of HRA Paid

–        40% of Basic or 50% of Basic in Metros

–        Rent Paid minus 10% of Basic Salary

      •         10(14) Conveyance Allowance – Rs.1600/- per month

•         10(34)Dividend where dividend distribution tax has been paid

      •         10(38)   Long Term Capital Gains Tax on Units of Equity Oriented Mutual Fund

Deductions

You can claim the following deductions.

•         80C Maximum Rs.100,000/-

                  –        EPF (Employee Provident Fund)

–        PPF (Public Provident Fund)

–        Insurance Premiums

–        Pension Plans

–        Education Fees

–        Principal of Housing Loan

–        ELSS (Equity Linked Saving Scheme – Tax Saving Mutual Funds)  

–        NSC (National Savings Certificate)

–        Infrastructure Bonds

–        Bank Deposits of 5 years with lock in.

      •         24 - Interest on Housing Loan up to Rs.150,000/-

      •         80E -  Interest paid on higher education loan

•         80G - Donation to Charitable Funds

–        100% for Prime Minister’s Relief Fund

–        50% for all other eligible funds

      •         80GG - Deduction for rent paid where HRA is not paid. Least of

•         25% of Total Income

•         Rent Paid minus 10% total income

•         80U - Persons with specified disabilities Rs.50,000/-. For Severe Disability Rs.75,000/-

   and 80D -  Medical Insurance up to Rs.15,000/- (Rs.15,000/- for Senior Citizens > 65 years old)

Deductions on Reimbursement 

You can claim certain deductions by reimbursement only by submitting original bills

•         Medical Reimbursement – up to Rs.15,000/-

      •         Leave Travel Allowance – Twice in Four Years subject to limitation on travel.

      •         Food Coupons and Vouchers (Sodexho)

      •         Business related travel and entertainment

      •         Actual Expenses for Higher Education

Reference: http://law.incometaxindia.gov.in/TaxmannDit/DisplayPage/dpage1.aspx

(Disclaimer: This document is created by Booombaastic. Reproduction of any part of this document by any medium is strictly prohibited and suitable actions will be taken against the errant)