How to Save tax for FY 2016-17?

Incorporates changes made in Income Tax laws in Budget

presented on February 29, 2016

CA Gopal R Rathi Mob. 9762227144

Income Tax Calculator for FY 2016-17 (AY 2017-18)

- Education cess of 3%

- Surcharge of 15% on Rs 1 crore plus income earners

- Tax credit of Rs 5,000 for income up to Rs 5 lakhs u/s 87A

- There are no separate slab for male and female

Below is the list of all Tax Saving Sections available for Individuals in India

How Much Tax you need to Pay?

Tax Saving Sections

The first step for tax planning is to know how much Tax you need to pay!

Up to Rs. 2.5 Lakhs

Rs. 2.5 – 5 Lakhs

Rs. 5 – 10 Lakhs

Above Rs. 10 Lakhs

Up to Rs. 3 Lakhs

Rs. 3 – 5 Lakhs

Rs. 5 – 10 Lakhs

Above Rs. 10 Lakhs

Up to Rs. 5 Lakhs

Rs. 5 – 10 Lakhs

Above Rs. 10 Lakhs

Nil

10%

20%

30%

Nil

10%

20%

30%

Nil

20%

30%

General Public

(Below 60 Years of Age)

Senior Citizens

(60 to 80 Years of Age)

Very Senior Citizens

(More than 80 Years of Age)

Income Tax Slab Tax Income Tax Slab Tax Income Tax Slab Tax

Maximum Rs 1.5 Lakh Deduction for Income Tax combining these 3 Sections

Section 80C

Lots of Options

like PPF ELSS,

FD, etc

Section 80CCC

Pension Products

Section 80CCD

Central Government

Employee Pension

Scheme

Investments &

Expenditure

NPS

Section 80CCD(1B)

Budget 2015 has allowed additional

exemption of Rs 50,000 for

investment in NPS

CA Gopal R Rathi Mob. 9762227144

Tax Saving Sections

Health and Well Being

Loans

Donations

Others

Section 80D

Section 80E

Section 80G

Section 80GG

Section 80EE

Section 80GGC

Section 80TTA

Section 24

Section GGA

Section 80CCG

Section 80DD Section 80DDB Section 80U

Medical Insurance

for Family and

Parents

Deduction Up to

Rs 60,000

Maintenance &

medical treatment of

disabled dependent

Deduction Up to

Rs 1.25 Lakh

Treatment of

certain Disease /

Ailment

Deduction Up to

Rs 80,000

Physically Disabled

Assesse

Deduction Up to

Rs 1.25 Lakh

Deduction Up to Rs 2 Lakh

for Home Loan and

Rs. 30,000 for Home

Improvement Loan

Deduction Up to

Rs 1 Lakh

Interest payable on

Education Loan

Donation to certain

charitable funds, charitable

institutions, etc.

For Paying Rent in

case of no HRA

No Limit for Deduction

Deduction Up to

Rs 40,000

Interest payable on

Housing Loan & Home

Improvement Loan

Donations for scientific

research or rural

development

Additional deduction up to

Rs 50,000 for Interest

Payable on Home Loan

Donation to

political parties

For First time home

buyers

Deduction Up to

Rs 60,000

Deduction Up to

Rs 24,000

Rajiv Gandhi Equity

Savings Scheme

(RGESS)

Deduction Up to

Rs 25,000

(50% of amount invested)

Interest received in

Saving Bank Account

Deduction Up to

Rs 10,000

CA Gopal R Rathi Mob. 9762227144

Tax Saving Sections

EPF/VPF (Employee Provident Fund)

Following options are available for deduction under sec 80C/80CCC/80CCD

The maximum deduction combining all these investments / expenditures is

Rs 1.5 lakh

Investment

Options (Debt)

Investment

Options (Others)

Provident

Fund

(EPF/

VPF)

Public

Provident

Fund

(PPF)

Sukanya

Samriddhi

Account

National

Saving

Certificate

(NSC)

Senior

Citizen’s

Saving

Scheme

(SCSS)

Tax Saving

Fixed

Deposits

(for 5 Years)

Life

Insurance

Premium

Pension

Plans from

Mutual

Funds

Pension

Plans from

Insurance

Companies

New

Pension

Scheme

(NPS)

Tax Saving

Mutual

Funds

(ELSS)

Central Govt.

Employees

Pension

Scheme

Expenditures

Principal Payment

on Home Loan

Stamp duty and

registration

cost of the House

Tuition Fee for

2 Children

EPF is mandatory for salaried employees working for companies with more

than 20 employees

Under EPF rules, you need to contribute 12% of your Basic pay + DA to EPF

The employer matches this EPF contribution

You have option to put up to 100% of Basic pay + DA to EPF. This is known as

Voluntary Provident Fund (VPF)

The employer generally does not match your VPF contribution

Helpfull Tips

The Good

• The interest earned on EPF/VPF is Tax Free

• Can take loan against EPF and also do

partial withdrawal under certain conditions

• Convenient to invest as the amount is

directly deducted from salary

The Bad

• Money is locked till your retirement

• The EPF interest rates are market linked

and set by EPFO every year

• This option is only for salaried employees

• The withdrawal of EPF takes time

- You can opt for VPF by giving a request to your company at the start of every financial year

- Only your contribution in EPF and VPF is considered for Tax Deduction

- If you withdraw your EPF before 5 years the amount is taxable and also the earlier tax

deduction claimed is nulled

- In case you change your job, you can transfer the previous EPF to your current employer

SEC 80C

CA Gopal R Rathi Mob. 9762227144

PPF (Public Provident Fund)

Sukanya Samriddhi Account (SSA)

- Has mandatory locking of 15 Years and can be extended further 5 years at a time

- Maximum Investment Allowed: Rs 1.5 Lakh per Year (Budget 2014 increased this limit)

- Minimum Investment of Rs 500 required every year to keep the account active

- Interest Rates paid on PPF are market linked onward hence would vary every quarter

The interest rate is 8.1% for Q1 (FY 2016-17)

PPF can be opened at Post Offices, 24 Nationalized Banks and ICICI Bank

development of Girl Child

- Can only be opened for Girl child below 10 years of age (max for 2 girl child by a parent)

- Deposit to the account to be made for 14 years and account matures at 21 years from

date of opening

- Maximum Investment Allowed: Rs 1.5 Lakh per Year per account

- Minimum Investment of Rs 1,000 required every year to keep the account active

- Interest Rates paid are market linked & is reset every quarter. The present interest rate

is 8.6% (Q1 – FY 17)

Sukanya Samriddhi Account is a new scheme by Government to promote all round

Helpfull Tips

The Good

• The interest earned on EPF/VPF is Tax Free

• Can take loan against EPF and also do

partial withdrawal under certain conditions

• Convenient to invest as the amount is

directly deducted from salary

The Good

• The interest earned on SSA is Tax Free

• 50% withdrawal allowed when girl turns

18 for marriage/higher education

• Highest Safety - backed by Govt. of India

• Investment can be done online

The Bad

• Money is locked till your retirement

• The EPF interest rates are market linked

and set by EPFO every year

• This option is only for salaried employees

• The withdrawal of EPF takes time

The Bad

• Longer Locking period

• The SSA interest rates are market linked

and hence would change every quarter

• HUFs and NRIs cannot open SSA Account

- Investment done till 5th of the month earns interest for the month. So deposit your

money before 5th of month

- PPF can be opened on minors name with either parents as guardian

- The total investment in your PPF and the minor child PPF account (for whom you

are guardian) should not exceed Rs1.5 lakh in a financial year

- Documents Needed – Date of Birth proof for Girl Child, Your Identity and Address Proof

- Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied

- Account can be closed before 21 years in case of marriage

- Only resident Indians are eligible to open SSA account

SEC 80C

CA Gopal R Rathi Mob. 9762227144

NSC (National Saving Certificate)

Tax Saving FD from Banks / Post Offices

- It is available for 5 years (NSC VIII) ¡V 10 Year NSC has been discontinued from 2016

- The interest is market linked and changes every quarter. Its 8.1% for 5 Year for Q1 FY

2016-17

- There is no maximum limit for investment in NSC but the deduction is only till

maximum of Rs 1.5 Lakh u/s 80C

- You can buy NSC in denominations of Rs 100, 500, 1000, 5000 and 10000

NSC is Tax saving Fixed Deposit Scheme from India Post

making the deposit

- Has minimum tenure of 5 Years. Some banks offer special schemes for longer tenures

with higher interest rates

- Some banks offer 0.25% to 0.75% additional interest for Senior Citizens and their

employees

- As of today banks are offering 7% -7.5% for general public and 7.5% - 8% for Senior

Citizens

These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while

Helpfull TipsHelpfull Tips

The Good

• Certificates can be kept as collateral security

to get loan from banks

• No Tax deduction at source

• The interest accrued for NSC qualifies for Sec

80C deduction in subsequent years

• Highest Safety - backed by Govt. of India

The Bad

• The interest earned is taxable

• You need to go to post office to invest and

redeem. There is no online investment/

redemption facility

• Trust and HUF cannot invest

The Good

• Convenient to invest. Many banks offers online

facility for Tax Saving FD

• Redemption on maturity comes directly to

your bank account

• High Safety - FD up to Rs1 Lakh is insured by RBI

The Bad

• The interest earned is taxable

• Cannot be withdrawn prematurely

• Cannot be pledged to secure loan or as security

- Maturity value of a certificate of Rs100 purchased on or after April 1, 2016 shall be

Rs 147.61 after 5 years.

- NSC is better tax saving option than banks Tax Saving FD (offering similar interest)

as interest accrued for NSC qualifies for Sec 80C deduction in subsequent years

- The Post Office Time Deposit Account (which is FD offered by Post Office) of 5 Years maturity

also qualifies for 80C deduction. Its offering 7.9% since April 1, 2016

- Don’t be mislead by banks advertisements about their yield on Tax Saving FDs. Those are

manipulative calculations

- Be cautious of small co-operative banks as they have higher risk than bigger private and public

sector banks

SEC 80C

CA Gopal R Rathi Mob. 9762227144

Senior Citizens Savings Scheme (SCSS)

Life Insurance

opening of the account. Also people with 55 years of age who have retired by VRS can open

SCSS after 3 months of retirement

- Minimum Investment: Rs 1,000 while Maximum Investment: Rs 15 Lakhs

- The joint account can be opened only with your spouse.. There is no age limit applicable for

the joint account holder.

- The interest is paid out quarterly. The interest is 8.6% w.e.f April 1, 2016

- No partial withdrawal is permitted before 5 years. The account may be extended for a further

period of 3 Years

As the name suggests, SCSS is for senior citizens who are 60 years or above on the date of

Helpfull Tips

How much

Insurance?

The Good

The interest is paid quarterly to the saving

account, hence can serve as regular income

for retired

Redemption on maturity comes directly to

your bank account or through post dated

cheques

The SCSS carries a sovereign guarantee for

principal and interest payments. So it¡¦s the

safest investment

•

The Bad

• The interest earned is taxable

• You need to go to post office to invest and

redeem. There is no online investment/

redemption facility

• Trust and HUF cannot invest

Helpfull Tips

- You can open SCSS with Post offices, 24 nationalized bank or ICICI bank

- SCSS account can be closed after 1 Year (with penalty) but in case you have availed Sec 80C

benefit, it would be reversed

- If your income is not taxable, you can provide form 15H or 15G so that banks don't cut TDS

Any retired Defense Services personnel is eligible for SCSS irrespective of his age

- Online Term Plans are cheaper than products sold by agents. So if you are comfortable

with online purchasing go for it

- Never hide anything from insurance companies. A wrongly stated fact might deny

insurance to your dependents when they need it mos

- PPF along with Term Plans are better products than Endowment Plans. Similarly Mutual

Funds with Term plans turn out better option than ULIPs

- The maturity proceeds of life insurance is tax free u/s 10(10)D, subject to certain conditions

- The only product you should consider from Life Insurance companies is ¡V Term Plan

The sum assured on death should be at least 10 times the annual premium

- This limit is altered only in special cases of disability (the premium should be 15% or

less of sum assured)

- Buy insurance only if you have dependents.! Do not buy insurance to save tax!

There are plenty of better ways to save taxes

Your life insurance should be adequate to replace your income

This roughly turns out to be 7 to 10 times your present annual income

This might vary widely based on your assets, liabilities and situation

SEC 80C

CA Gopal R Rathi Mob. 9762227144

National Pension Scheme (NPS)

Equity Linked Saving Scheme (ELSS)

- Tier 2 account is optional and only contribution to Tier 1 account is eligible for Tax

Deduction u/s 80CCD

- Tier- 1 account requires a minimum investment of Rs 6,000 annually and Rs 500 per

transaction

- Salaried employees can claim deduction up to 10% of your salary, which comprises

basic + DA, while for self employed its capped capped at 10% of gross total income

NPS was introduced in April 2009 and has two types of Accounts ¡V Tier 1 and Tier 2

- The minimum investment is Rs 500

- There is no limit for maximum investment but the maximum deduction you get 1.5

Lakhs every year

ELSS is popularly known as Tax Saving Mutual Fund

The GoodThe Good

• This is lowest cost Pension plan in the

country

• You can choose your investment profile

based on your risk. NPS can invest

maximum of 50% in selected stocks.

• On death the entire amount is paid to

the nominee

The gains on ELSS Fund is Tax Free

Only investment option which can beat

inflation

Has the shortest locking period of 3 years

ELSS can be bought and redeemed

online

•

The BadThe Bad

• NPS is partially taxable at withdrawal

• The locking is till you are 60 years of age

• You can withdraw max of 60% at maturity

and have to compulsorily buy annuity for

min 40% corpus

• The returns are dependent on stock

market. So its high risk investment. You

might loose money at the end of 3 years

Helpfull TipsHelpfull Tips

- You should opt for 50% equity investment when young and slowly move to debt as

you approach your retirement

- Budget 2015 has announced additional tax exemption of Rs 50,000 for investment in

NPS u/s 80CCD(1B)

- Doing SIP (Systematic Investment Plan) in one or two ELSS Fund is the best way to invest

- Dividend Reinvestment option in ELSS has been discontinued from February 2015

- You should choose maximum of two funds for investing

- Research well before you invest in ELSS Fund

- You should try to invest directly to fund as this would give you 0.5% to 1% higher returns as

compared to when you invest through broker

SEC 80CCC

SEC 80C

CA Gopal R Rathi Mob. 9762227144

Pension Plans from Insurance Companies

Tuition Fee

Pension Plans from Insurance Companies Qualify for deduction under Sec 80CCC

There were few launches in Pension Plan space this year from life insurance

companies

These are very inefficient products , so you should stay away from these plans

They generally have assured return in the range of 1-2% per annum, which is very low

return. Savings accounts pay at least 4%

The expenses on tuition fees for maximum of two children is eligible for

deduction u/s 80C

The maximum deduction available is Rs 1.5 Lakh

The deduction is available for full time courses only

The deduction is not available for tuition fee to coaching classes or private

tuitions

The educational institute should be located in India, though it may be affiliated

to any foreign university

Helpfull TipsHelpfull Tips

Don’t invest in pension plans just by seeing their emotional advertisements. They are

high cost products and would ruin our retirement planning

PPF/ EPF & VPF turns out to be a better plan for retirement even for most risk averse

investor

NPS is also good alternative to these Pension plans

The following expenses are not considered as tuition fees – Development Fee,

Transport charges, hostel charges, Mess charges, library fees, Late fines, etc

This deduction is not available for tuition fees for self or spouse

Ÿ Low Returns: They don’t invest in equities, which is must for long term wealth creation

Ÿ If you want to surrender these, you loose a lot in terms of returns

Ÿ On surrendering, the tax benefit you claimed earlier, would be reversed and you would need

to pay these taxes back

Ÿ On maturity, you cannot withdraw the entire corpus and have to compulsorily buy Annuity

Why you should never buy these Pension Plans?

SEC 80CCC

SEC 80C

CA Gopal R Rathi Mob. 9762227144

Recommended Books

Do You know how Your Investments are Taxed?

Stamp Duty & Registration Charges

deduction u/s 80C

- The payment should have been made in the same financial year for which the tax

is being paid. i.e. the deduction cannot be carried forward to next year

- The house should be in the name of assessee claiming deduction

- The payment for stamp duty should have been made from his own funds

- This benefit is available on purchase on new residential unit only

Stamp duty and registration charges up to Rs 1.5 Lakh can be claimed for

I have often been asked books I would recommend for Personal Finance.

Below are some of recommendations

As the name suggests,

it’s a book on retirement

planning written by

P V Subramanyam a

CA and regular blogger

Blogs at Subramoney.com

Both the books have been

authored by Manish who an

avid blogger and features on

PLAN F program of CNBC.

Blogs at Jagoinvestor.com

Authored by Lakhotia, a

very renowned tax

consultant and is regular on

CNBC Awaaz “Tax Guru¡’’

Program. Good book to

understand your taxes!

How is your Investment in

Mutual Funds Taxed?

Know Taxation of Equity,

Debt, Arbitrage,

International Mutual Funds

Is your Life Insurance Policy

eligible for Tax Benefit?

Not all Policies are eligible

for Tax Benefit at Investment

and on Maturity

TDS and Tax on NCDs

(Non Convertible

Debentures)

SEC 80C

CA Gopal R Rathi Mob. 9762227144

Home Loan: Interest & Principal

- The good news is you get tax deduction on both principal and interest payment on

your Housing Loan Deduction on Principal Payment on Home Loan

Buying a house is one of the top most priority for most

Helpfull Tips

- The deduction is only available from the year of possession/ completion of the house

- All the benefit of tax u/s 80C will reversed if house property is sold with 5 year from

purchase of house property

Ÿ Deduction up to Rs 2 Lakh is allowed on the principal repayment of the housing loan in

case of single nonrented house

Ÿ Budget 2016 has given additional Rs 50,000 deduction for first time home buyers

(details on next slide)

Ÿ Section 24 covers “Loss/Gain from Housing Property”

Ÿ For Sec 24, all the rent you receive from houses is your income while

Ÿ The interest paid on housing loan is considered as expense

Ÿ So broadly speaking the (income – expense) subject to certain conditions is added to

your income.

Ÿ In case the interest paid is more than your rental income, the above calculation is

negative and hence a deduction to your total income

Ÿ Deduction up to Rs 1.5 Lakh is allowed on the principal repayment of the housing loan

if the house is self occupied or vacant

Ÿ The house should be registered in the name of assessee. (He should be one of the

owners, in case of joint ownership)

Ÿ The loan should be taken from Banks, NBFCs or respective employers. Loans taken

from friends/ relatives does not qualify for this deduction

Ÿ This deduction is available also to people with multiple properties

Deduction on Principal Payment on Home Loan

Deduction on Interest Payment on Home Loan

SEC 24 SEC 80C SEC80EE

Additional Deduction u/s 80EE up to Rs 50,000

(Budget 2016)

Deduction u/s 24 up to Rs 2 Lakhs

Deduction u/s 80C up to Rs 1.5 Lakh

Principal

Interest

Home Loan

CA Gopal R Rathi Mob. 9762227144

Helpfull Tips

house

- The Pre-EMI interest you pay before the completion of the house can be claimed as

deduction in 5 equal installments starting from year the construction of the house

completes

- You can claim benefit of both HRA and Home Loan together

- In case the Home Loan is taken before April 1, 1999 the deduction on interest is only

Rs30,000

- In case the house is not completed within 5 years (enhanced from 3 yeas in Budget

2016) of start of loan, the interest exemption for self-occupied home is capped at

Rs 30,000 only

The deduction is only available from the year of possession/ completion of the

Home Loan: Interest & Principal

Ÿ Budget 2016 had added a new section 80EE, which gives additional exemption of Rs

50,000 on payment of interest on Home Loan subject to following conditions:

Ÿ The loan needs to be taken in the financial year 2016-17 (i.e. between April 1,

2016 to March 31, 2017)

Ÿ If you were not able to exhaust the complete Rs 50,000 limit in FY 2016-17, this

could be carry forward to FY 2017-18 Rs 50,000 is the maximum allowed

deduction combining both financial years above

Ÿ The loan can only be taken from Banks or Housing Finance companies

Ÿ The loan should not exceed Rs. 35 lakh

Ÿ The house should not cost more than Rs. 50 lakh

Ÿ The borrower should not own any other property at the time of loan sanction

Additional Deduction on Interest Payment on Home Loan u/s 80EE

SEC 24 SEC 80C SEC80EE

CA Gopal R Rathi Mob. 9762227144

Home Improvement Loan: Interest

Section 80D: Medical Insurance

SEC 24

SEC 80D

Deduction up to Rs 30,000 is allowed on the interest payment for loan taken for Home

Improvement

Home improvement Loan can be taken for furnishing of new home or repairing,

painting or refurnishing existing home

The above limit is for self-occupied homes only

There is no limit of deduction for rented or vacant homes

This exemption is over and above the Rs 2 Lakh limit that you can claim for Home Loan

interest

No deduction is available for the principal portion of the repayment on home

improvement loans

qualify for deduction u/s 80D

- You can claim maximum deduction of Rs 25,000 in case you are below 60 years of age

and Rs 30,000 above 60 years of age.

- An additional deduction of Rs 25,000 can be claimed for buying health insurance for

your parents (Rs 30,000 in case of either parents being senior citizens)

- This deduction can be claimed irrespective of parents being dependent on you or

not

- This is not available for buying health insurance for in-laws.

- HUFs can also claim this deduction for premium paid for insuring the health of any

member of the HUF

Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children and Parents

Helpfull Tips

If the loan for acquisition/construction was taken before April 1, 1999 - then the combined

(interest paid on the loan taken for acquisition/construction and the loan taken for

re air/renewal) limit for interest deduction stays at Rs.30,000

You can take loan of up to 80% of the cost of valuation of the home improvement work

The maximum tenure of home improvement loan can go up to 10- 20 years depending on

lending institution

The interest rate for home improvement loan is 0 – 2

.5% higher than home loan from the

same institution

- To avail deduction the premium should be paid in any mode other than cash

- Budget 2013 introduced deduction of Rs 5,000 is also allowed for preventive health

checkup for Self, Spouse, dependent Children and Parents. Its continued to this FY

too.

- This Rs 5,000 is within Rs 25,000 limit for Health Insurance

CA Gopal R Rathi Mob. 9762227144

Section 80DD: Handicapped Dependents

Section 80DDB: Treatment of Certain Diseases

SEC 80DD

SEC 80DDB

expenses on his maintenance and medical treatment

- You can claim up to Rs 75,000 or actual expenditure incurred, which ever is lesser. (The

limit is Rs 1.25 Lakh for severe conditions)

- Dependent can be parents, spouse, children or siblings. Also the dependent should not

have claimed any deduction for self

In case you have dependent who is differently abled, you can claim deduction for

Cost incurred for treatment of certain disease for self and dependents gets deduction

for Income tax.

For very senior citizens the deduction amount is up to Rs 80,000; while for senior

citizens it Rs 60,000 and for all others its Rs 40,000

Dependent can be parents, spouse, children or siblings. They should be wholly

dependent on you.

Helpfull Tips

- A severe disability condition is 80% or more of the disabilities

- Individuals would need disability certificate issued by state or central government medical

board to claim deduction

- The life insura should be on the tax payer name, with the disabled person as the beneficiary.

- In case the disabled dependent expires before you, the policy amount is returned back and

treated as income for the year and is fully taxable.

Helpfull Tips

A certificate from specialist from Government Hospital would be required as proof for the

ailment and the treatment

In case the expenses have been reimbursed by the insurance companies or your employer,

this deduction cannot be claimed.

In case of partial reimbursement, the balance amount can be claimed as deduction

Blindness

and Vision

problems

Leprosy

cured

Hearing

impairment

Locomotor

disability

Mental

retardation

or illness

40% or more of following

Disability is considered for

purpose of tax exemption

Costs incurred for medical

treatment, training or

rehabilitation of a disabled

dependent, including amount

spent for nursing

Amount paid towards an

insurance scheme for the

maintenance of your disabled

dependent in case of

your untimely death

Deductions are

permissible in

either of the

following cases

Diseases Covered

Thalassaemia

Hemophilia

Chronic Renal failure

AIDS

Malignant Cancers

Parkinson’s Disease

Neurological Diseases

CA Gopal R Rathi Mob. 9762227144

The Good

Ÿ The gains on RGESS Fund is Tax Free

Ÿ The returns generated can beat inflation

Ÿ Has short locking period

Ÿ Everything needs to be done through

your demat account. So its convenient

The Bad

• The returns are dependent on stock

market. So its high risk investment. You

might loose money.

Ÿ Its complicated for a normal investor

Helpfull Tips

As first time investors, it makes sense to either invest in eligible mutual fund schemes or

ETFs

Investing directly in stocks is very risky and you can loose money if you select the wrong one

There is concept of flexible and fixed lock-in, which makes the scheme complex. For

simplicity you should assume that your investment in RGESS is locked in for 3 years

I recommend investing in the scheme through ETFs, as the tax break gives you a cushion to

your prospective losses, if any. Moreover, its those few schemes which have possibility to

generate positive inflation adjusted returns.

Rajiv Gandhi Equity Savings Scheme (RGESS)

RGESS is a new Tax Saving Scheme which was announced in Budget 2012 to encourage first

time investors in stock market

Under RGESS, you are eligible for a tax deduction on 50% of the amount invested

The maximum amount eligible for investment in a year for RGESS is Rs 50,000. So maximum

deduction is 50% of 50,000 = Rs 25,000

You can take advantage of RGESS for three consecutive years

RGESS allows you to invest directly in stocks which are part of CNX-100 index or BSE-100

index

Some Mutual Funds and ETFs which invest only in the above companies are also eligible for

RGESS

Helpfull Tips

This scheme is to encourage New Investors in Stock market. So as per RGESS, you are

new investor if

did not have a Demat A/C before November 23, 2012 OR

have not transacted in the equity or derivate segment till November 23, 2012 OR

had a demat account but as second joint holder

Additionally your gross income should be less than Rs 12 Lakhs

SEC 80CCG

Who can invest in RGESS?

4 Steps to Claim Tax Benefit in RGESS

Open a

Demat

Account

Designate the

A/C as RGESS

Account by

filling up

relevant form

Buy Eligible

Stocks or

ETFs

Submit Demat

Statement as

Proof to claim

tax benefit

CA Gopal R Rathi Mob. 9762227144

Section 80U: Physically Disabled Assesse

Section 80E: Education Loan

SEC 80U

SEC 80E

Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or

diseases.

The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs

1.25 Lakh for severe disability (80% or more disability)

The entire interest paid on education loan in a financial year is eligible for deduction

u/s 80E

There is no deduction on principal paid for the Education Loan

The loan should be for education of self, spouse or children only

The loan should be taken for pursuing full time courses only

The loan has to be taken necessarily from approved charitable trust or a financial

institution only

Helpfull Tips

- A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government

Hospital would be required as proof for the ailment.

Helpfull Tips

The deduction is applicable for the year you start paying your interest and seven more years

immediately after the initial year.

So in all you can claim education loan deduction for maximum eight years.

Diseases Covered

Cerebral Palsy

Locomotor

disability

Hearing impairment

Autism

Leprosycured

Blindness and

Vision problems

Mental retardation

or illness

Section 80U: Physically Disabled Assesse

Section 80E: Education Loan

SEC 80U

SEC 80E

Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or

diseases.

The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs

1.25 Lakh for severe disability (80% or more disability)

The entire interest paid on education loan in a financial year is eligible for deduction

u/s 80E

There is no deduction on principal paid for the Education Loan

The loan should be for education of self, spouse or children only

The loan should be taken for pursuing full time courses only

The loan has to be taken necessarily from approved charitable trust or a financial

institution only

Helpfull Tips

- A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government

Hospital would be required as proof for the ailment.

Helpfull Tips

The deduction is applicable for the year you start paying your interest and seven more years

immediately after the initial year.

So in all you can claim education loan deduction for maximum eight years.

Diseases Covered

Cerebral Palsy

Locomotor

disability

Hearing impairment

Autism

Leprosycured

Blindness and

Vision problems

Mental retardation

or illness

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Donation to Approved Charitable Organizations

Donation to Political Parties/ Scientific Research

deduction for the same u/s 80G

- Some donations are exempted for 100% of the amount donated while for others its 50% of

the donated amount

- Also for most donations, the maximum exemption you can claim is limited to 10% of your

gross annual income

The government encourages us to donate to Charitable Organizations by providing tax

80GGC

- To a scientific research association or University, college or other institution for

undertaking of scientific research

- To a University, college or other institution to be used for research in social science or

statistical research

- To an association or institution, undertaking of any programme of rural

development

- To a public sector company or a local authority or to an association or institution

approved by the National Committee, for carrying out any eligible project or scheme

- To the National Urban Poverty Eradication Fund set up

100% tax deduction is allowed for donation to the following for scientific research u/s

Helpfull Tips

- Only donations made to approved organizations and institutions qualify for

deduction

- Only donations made in cash or cheque are eligible for deduction. Donations in kind

like giving clothes, food, etc is not covered for tax exemption

• A signed & stamped receipt issued by the Charitable Institution for your donation is must

• The receipt should have the registration number issued by Income Tax Dept printed on it

• Your name on the receipt should match with that on PAN Number

• Also the amount donated should be mentioned both in number and words

How to Claim Sec 80G Deduction?

29A of the Representation of the People Act, 1951 u/s 80GGC

- The maximum exemption you can claim is limited to 10% of your gross annual income

100% tax deduction is allowed for donation to a political party registered under section

Section 80GGC – Donation to Political Parties

Section 80GGA – Donation for Scientific Research

SEC 80G

SEC 80GGA

SEC 80GGC

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Interest on Saving Account

House Rent in case HRA is not part of Salary

Tax on Salary Components

- In case, you do not receive HRA (House Rent Allowance) as a salary component, you

can still claim house rent deduction u/s 80GG

Tax Payer may be either salaried or a self-employed

You cannot claim this deduction if you or your spouse or your children own any home

in India or abroad.

Helpfull Tips

- Budget 2012 introduced a new Section 80TTA, which allows deduction of Rs 10,000

on interest earned on saving bank account

This benefit is continued for FY 2016-17-

- The House Rent deduction is lower of the 3 numbers:

Rs. 5,000 per month [changed from Rs 2,000 to Rs 5,000 in Budget 2016]

25% of annual income

(Rent Paid - 10% of Annual Income)

SEC 80C

SEC 80GG

- Your salary has multiple components

- Some of them are fully taxable while others are partially taxable or tax free

- Basic Salary

- Dearness Allowance (DA)

- Special Allowance

- Band Pay

- Bonus

- Over time

- Arrears

- Personal Pay

- Food Allowance

- Furniture Allowance

- Shift Allowance

Medical Reimbursement up to Rs 15,000 per year

- Transport Allowance up to Rs 1600 per month

- Leave Travel Allowance (LTA)

- Vehicle Maintenance

- House Rent Allowance (HRA)

- Uniform Allowance – Amount up to Rs 24,000 per

annum is tax free

- Children Education Allowance (Rs.100/ month per Child

(Rs.300 for Hostel Expenditure) Max for 2 Children)

- Newspaper/Journal Allowance – Amount up to Rs

12,000 per annum is tax free

- Telephone Allowance

- Meal Coupons

Fully Taxable

Partially Taxable/ Tax Free

11 Tax Free Components

You Must have in Salary

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Partially Taxable Salary Components

House Rent Allowance

Meal Coupons

Mobile Phone and Internet Bill Reimbursement

Company Car/ Car Maintenance Allowance

- The HRA that can be claimed for tax exemption is minimum of

Actual HRA Received or

40% (50% for metros) of Basic + Dearness Allowance or

Rent paid (-) 10% of (Basic + Dearness Allowance)

If the annual rent paid is more than Rs 1 Lakh, you need to give PAN Card number of

landlord to your employer

In case the landlord does not have PAN Card, he needs to give a declaration for the same

You can claim benefit of both HRA and Home Loan together

- If the company provides you a car for personal and official purposes and reimburses

the fuel, insurance, maintenance and driver’s salary the taxable value shall be:

- in case the car is less than equal to 1600 CC – Rs 1,800 per month

- in case the car is greater than 1600 CC – Rs 2,400 per month

- Also Rs 900 per month in case company provides driver

- In case the car is owned by you, the reimbursement of running and maintenance

cost up to

- Rs 1,800 per month (for car less than 1600CC) and

- Rs 2,400 per month (for car greater than 1600CC)

- along with Rs 900 for driver salary is tax free

- Meal Coupons like Sodexo or Ticket are tax free subject to Rs 50 per meal

- So assuming 22 days working month and 2 meals a day, meal coupon up to Rs 2,200

per month are tax free

- Annually this amount comes to Rs 26,400

- The reimbursement of mobile and internet bills used for company purpose is tax free

- There is no limit on the amount of reimbursement and is fixed by company depending

on work profile

- You can claim LTA twice for two domestic trips with family in block of four years. The present

block is 2014 - 2017

- The meaning of ‘family’ for the purposes of exemption includes spouse and children and

parents, brothers and sisters who are wholly or mainly dependent on you

- There is no maximum limit of LTA and is decided by employer

- Only expenses incurred in travelling is covered. You cannot claim hotel stay and food bills

Leave Travel Allowance (LTA)

CA Gopal R Rathi Mob. 9762227144

At present, Post Offices, 24 Nationalized banks and one private sector bank

are authorized to handle the SCSS and PPF

Bank of Maharashtra

State Bank of Bikaner and Jaipur

United Bank of India

Allahabad Bank

Indian Bank

State Bank of Travancore

Corporation Bank

Bank of India

Central Bank of India

Dena Bank

IDBI Bank

Syndicate Bank

Bank of Baroda

Indian Overseas Bank

Punjab National Bank

Union Bank of India

State Bank of Hyderabad

State Bank of India

ICICI Bank Ltd.

State Bank of Mysore

State Bank of Patiala

Andhra bank

Vijaya Bank

Canara Bank

UCO Bank

Banks for Opening SCSS & PPF

SEC 80C

Sec 80G: List of eligible Organizations

1. National Defense Fund

2. Prime Minister's National Relief Fund

3. Prime Minister's Armenia Earthquake Relief Fund

4. Africa (Public Contributions-India) Fund

5. National Foundation for Communal Harmony

6. Approved university/educational institution

7. Chief Minister's Earthquake Relief Fund

8. Zila Saksharta Samiti

9. National Blood Transfusion Council

10. Medical Relief Funds of state govt

11. Army Central Welfare Fund, Indian Naval Ben.

Fund, Air Force Central Welfare Fund.

12. National Illness Assistance Fund

13. Chief Minister's or Lt. Governor's Relief Fund

14. National Sports Fund

1. Jawaharlal Nehru Memorial Fund

2. Prime Minister's Drought Relief Fund

3. National Children's Fund

4. Indira Gandhi Memorial Trust

5. Rajiv Gandhi Foundation

6. Donations to govt./ local authority for

charitable purposes (excluding family planning)

15. National Cultural Fund

16. Govt./ local authority/ institution/ association

towards promoting family planning

17. Central Govt.'s Fund for Technology Development

& Application

18. National Trust for Welfare of Persons with Autism,

Cerebral Palsy, Mental Retardation & Multiple

Disabilities

19. Indian Olympic Association/ other such notified

association

20. Andhra Pradesh Chief Minister's Cyclone Relied

Fund

21. National Fund for Control of Drug Abuse (NFCDA)

22. Swachh Bharat Kosh

23. Clean Ganga Fund

7. Authority/ corporation having income exempt

under erstwhile section or u/s 10(26BB)

8. Donations for repair/ renovation of notified

places of worship

9. World Vision India

10. Udavum Karangal

100% Exemption

50% Exemption

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