Finally much awaited budget 2013 is come out without exciting the investors. This budget is very simple and there is no significant change for the tax payers, finally the budget disappoint the middle class people by not increasing the tax slabs. So, one more year with the same income in the rising inflation environment. This article explores the important changes announced in the budget and revisit of the earlier tax slabs. If you have any thoughts about the budget, please write it in the comments section.

• Top 10 announcements of union budget for 2012-13

1. No Change in Tax Slabs

There is no change in the tax slabs from the previous budget. This is the big disappoint for the tax payers because those who are in the lower income group would have expected at least some relief in the slabs. Now, another year we have to wait for the budget to get more income. The following are the existing tax slabs:

General Tax Slab

• Up to Rs. 2 lacs – No Tax
• Rs 2 lacs to Rs. Rs. 5 lacs – 10% Tax
• Rs 5 lacs to Rs. Rs. 10 lacs – 20% Tax
• Above Rs. 10 lacs – 30% Tax

Senior Citizen Tax Slab (Above 60 Years)

• Up to Rs. 2.5 lacs – No Tax
• Rs 2.5 lacs to Rs. Rs. 5 lacs – 10% Tax
• Rs 5 lacs to Rs. Rs. 10 lacs – 20% Tax
• Above Rs. 10 lacs – 30% Tax

Very Senior Citizen Tax Slab (Above 80 Years)

• Up to Rs. 5 lacs – No Tax
• Rs 5 lacs to Rs. Rs. 10 lacs – 20% Tax
• Above Rs. 10 lacs – 30% Tax

The only extra tax exemption in this category is Rs. 2000 credit for the lower income group of Rs 2-5 lacs.

2. Home loan exemption for new buyers

If you are buying a new house in the year 2013-14, there is additional Rs. 100000 tax exemption on home loans interest for this financial year. Note that this exemption is only for this year and only for the new buyers. Also the home loan amount must be under Rs. 2500000. If you taken a loan of Rs. 2600000, there won’t be any benefits under this announcement.

3. Service tax for AC restaurants

In the existing service tax laws, only the AC restaurants which serve the liquor has to pay the service tax. But, from this financial year onwards any AC restaurants has to charge service tax to the customers. This is a big below to the common man, it is very normal that most of the restaurants are having AC. So, our eating cost will be expensive.

4. 1% TDS on real estate transaction

If you sell any property other than the agriculture land worth more than Rs. 5000000, there is a TDS of 1% has to be paid as the tax. For example, if you sell your flat for Rs. 6000000, then you need to pay Rs. 60000 as the TDS to the income tax office.

5. Change Rajiv Gandhi Equity Saving Scheme (RGESS)

Earlier, RGESS scheme was only available to those investors whose taxable income is below 10 lacs, but now its increased to 12 lacs. Anyways, I feel RGESS is too complicated.

6. Mobiles, High end SUV car’s will be expensive

There is an increase in the excise duty for mobiles costing more than Rs. 2000, set top boxes and SUVs. This would cost more in the coming days.

Overall, the budget is very disappoint for everyone in the country. Every budget, would have satisfied at least any one category of people, but this budget is not bringing smile on any one’s face. There is a huge problem ahead for our country to manage the high fiscal deficit. The is the main reason why there is no great tax breaks in the budget. If you have any thoughts about the budget, please post it in the comments section.

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In my earlier posts, I have explained about what is form 16 and form 16a. This is not very difficult for everyone to understand, it is just an document you will be using for filing the income tax returns. Hundreds of readers have posted very basic questions about the topic without reading the complete article, I have decided to post another article on the same topic with the questions and answers type. This would be much better to understand everyone. This list itself not a complete one, if some one asks questions, the list will keep updated. I have tried answering most of the basic questions about form 16. If you still have questions, please write it in the comments section. If you are interested in receiving the future articles about investments, please subscribe here.

Form 16

1. What is form 16?

If you are salaried employee in an organization, a certificate or document issued to you after the completion of financial year which contains the tax deducted on your salary. In other terms, it Tax Deducted at Source (TDS) from your salary. This document simply reveals the total tax deducted from your salary by your employer with some more details like the data of the tax deducted and the reference number for that deduction (read more).

2. Is it compulsory for a company to issue form 16?

No. If an employee doesn’t pay any tax for the financial year, there is no compulsion for the company to issue the form 16. In most cases company may not issue form 16 for that employee. Even if it issues, there is no use for that document since there is no tax deduction.

3. When form 16 is issued to employees?

Form 16 is issued by organizations to all employees after the completion of a financial year. For example, employee will receive the form 16 for financial year 2012-13 at the beginning of financial year 2013-14. It may be April or May. It is that organization’s responsibility to send the form 16 to all the employees.

4. How many form 16 will be issued for each year?

If you are working for a company in the current financial year, there will be only one form 16 issued by that particular company. If you have worked on two different companies, you will receive separate form 16 from different companies. These documents collectively used for filing the income tax returns.

5. Tax deducted on my salary. But form 16 is not issued by my company. What should I do to get form 16?

Please check your monthly salary slip for the tax deduction under the head income tax. If so, you have the rights to ask your employer for the form 16.

6. Professional tax is deducted from my salary. There is no income tax deducted from my salary. Will I get form 16?

No. Professional tax is not fall under the category of income tax. There is no relation between professional tax and form 16.

7. Can I include my other sources of income in the form 16?

No. It is only meant for showing the tax deducted from your salary. Your other incomes will not be displayed in this document.

8. Can we file income tax returns without form 16?

Yes. Form 16 is only used as the supporting documnet for filing income tax returns. Income Tax officer will not ask for the document when you are filing the returns. You may file your income tax without this document. You can consider this document as the proof for the payment of tax. In the future date, if there is any questions arises for the tax payment against your PAN details, form 16 will be helpful to show as the proof.

9. What is TDS?

TDS is abbreviation of Tax Deducted at Source (TDS). You need not pay the tax directly to govt. if you are working for a company. Your employer takes the responsibility to pay the tax on behalf of you. The calculated tax will be deducted at your salary. This process is known as Tax Deducted at Source (TDS).

10. If I have form 16, is it compulsory to file the income tax returns?

If your total taxable income is above the prescribed limit of minimum tax slab by the govt. then you have to file the income tax returns. Form 16 is just a supporting document, whether you have that document or not, you are responsible for filing the income tax returns every financial year.

11. What is financial year?

Every country has their own financial year. This will be used for submitting the account statements of companies and paying the income taxes. In simple words, all the monetary transactions are calculated based on this financial year. In India, financial year starts from April  1st to March 31st.

If you still have questions, please write it in the comments section. If you are interested in receiving the future articles about investments, please subscribe here.

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In my previous article I have explained about the 26AS statement and how to view the statement. if you have a bank account with netbanking facility, then it is not required for you to register separately to view the tax credit statements. The bank itself provides an extra link where you can view the details for your account. When you open a bank account, the account is linked to your PAN and also you are submitting the Know Your Customer (KYC) form. This enables the income tax department to share your tax details to the bank website. This article illustrates with few simple steps to view the tax credit statement through ICICI bank. If you have any questions, please write it in comments section. If you are interested in receiving the future articles about investments, please subscribe here.

also read:

• How to apply pan card online?
• How to apply PAN card from abroad?
• Income tax refund online

Login to ICICI bank website with your customer id. You will see the 26AS statement link in the left side as below:

Once you click on the link, you will be taken to the another page which shows your registered PAN details with the bank. You need to confirm the PAN number and click to confirm the details.

The tax details are hosted in the government website. The bank website is acting as just intermediately to view the tax details. Once you click the confirm button on the above screen, you will be taken to  another website as below.

Once you click on the link “View Tax Credit” in the above screen, the next page will display your details and all the previous years in the list. You can select the year and view the tax payment details.

I hope this instructions would help you to check your details with your bank. It is very simple and straight forward instructions to see your details. If you have any questions please write it in the comments section.  If you are interested in receiving the future articles about investments, please subscribe here.

• Buy: Income tax guidelines for 2013-14

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26AS statement is provided by the income tax department to all the tax payers as the proof of tax credit statement. If you have paid advance tax, TDS, tax deducted by your employer, etc. all the above tax payments by you should be reflected in the 26AS statement. In the simple words, the statement reflects what are the tax payments received by government from you. You can verify this document that if your employer is paying the tax deducted on your salary to govt. If something is missing in the statement, it means that the tax payment is not submitted to the government. 26AS s one of the important statements to be submitted at the time of requesting for the tax refund from the income tax department. This article explores how you can register and view the tax credit statement.

also read:

• How to apply pan card online?
• How to apply PAN card from abroad?
• Income tax refund online

• PAN holder can register through online website to create his new account. Click on the register yourself link and enter the required details.
• The registration request has to be verified by the TIN-FC. They have to verify that request is the right person who made the request and his details are correct.
• For getting the request verify by the TIN-FC, pan holder has to choose any of the below two options:
  • Personally visit the TIN-FC office of his choice. The fees for this is Rs. 17
  • Request the TIN-FC to visit his place and verify the details. In this case fees is Rs. 117
•  This process has to be completed within 15 days of submitting the request, other he has to register it again.
• Once you are able to login using your user name, you can view the tax credit statement.

The following are the content inside 26AS statement:

1. Part A – Details of Tax Deducted at Source
2. Part B – Details of Tax Collected at Source
3. Part C – Details of Tax Paid (Other than TDS or TCS but includes Self Assessment Tax & Advance Tax)

More details about the above three sections are explained in detail 26AS statement itself.

• Buy: Income tax guidelines for 2013-14

If you have any questions, please post in the comments section. If you are interested in receiving the future articles, please subscribe here.

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It is good news that there is a tax deduction for the tuition fees paid for your kid’s education. This deduction is not aware of many tax payers in the country. Many of us know only about the insurance premium, home loans, equity linked savings scheme and other traditional tax saving schemes. Only very few tax payers are educated with more information about the other tax saving instruments. The reason why other way of tax savings schemes are very popular because of the marketing done by the companies to sell their products like insurance policies, mutual fund schemes, etc.

If you have a kid and paying the monthly fees for their school, aware that you can submit those receipts and reduce the tax liabilities. This article explains that part in detail with other rules and regulations associated while getting the tax exemption. If you have any questions, please post it in the comments section. If you are interested in receiving the future articles about the investment, please subscribe here.

How much you can claim?

You can get maximum if Rs. 100000 as the tax exemption. Note that this exemption is fall under the category of section 80C which has the general cap of Rs. 1 lakh. If you are also investing on other areas like insurance, etc. then you can show this expenses for the remaining amount.

You can get the tax exemption up to two children. If you have more than two children, you can choose any of the two children and claim the tax deduction. If you and your spouse are working in a company, both can utilize this effectively by sharing the tax exemption categories. In the same time if you have more than two kids, if both are working then all the children’s school fees can be covered. The exemptions are only for the tuition/school fees, not for any other expenses.

Restrictions on school/course

As per the act, you can claim tax deduction only for full time courses, at any college, school, university or educational institution in India. So, you can’t claim this for the private tuition fees. Your kid must be studying in a school in the full time. Note that this includes the pre-school or play school of your kid. It is one of the good news for the parents. If your kid is going for a nursery school then you would be able to submit the fees receipts for the tax exemption.

I hope this information would be helpful for many of the parents who are reading this article. If you like this information, please share this with your friends. If you have any questions, please post it in the comments section. If you are interested in receiving the future articles about the investment, please subscribe here.

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It is the time again for you to submit the investment tax proofs for your whole investments made on this financial year. If you are salaried person, you would have already got the remainder from your employer about the submission of investment proofs within a specified timeline. The end date would be this month end. I am writing here to remind you again to submit the proofs without fail, if you miss the opportunity then you have to pay the extra taxes for not submitting the proofs. You need to file the income tax returns and get the refund after one year if you miss the deadline now. If you have any questions, please post it in the comments section. If you want to receive the future investment related guidelines, please subscribe here.

List of Tax Saving Investments

1. Home Loans
   1. Home loans principal repayment under section 80C
   2. Home loans interest payment under section 24B
2. Education Loans
3. House Rent Allowance (HRA)
4. Public Provident Fund (PPF)
5. Employee Provident Fund (EPF)
6. Infrastructure bonds
7. National Savings Certificate (NSC)
8. Tax Savings Fixed Deposit
9. Equity Linked Savings Scheme (ELSS)
10. Insurance
    1. Insurance policies
    2. Unit Linked Insurance Plan (ULIP)
11. Health Insurance

• Tax Planning for 2009 – Part 1
• Tax Planning for 2009 – Part 2
• Learn About Home Loans
• Investment vs Insurance

If you have any questions, please post it in the comments section. If you want to receive the future investment related guidelines, please subscribe here.

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You should be getting ready for this year’s most awaited budget and last budget for the current UPA government ruling. So, this budget would be considered as the election budget which will focus more on retain the tax slabs not changed or relax to make the working people more happy to harvest the vote banks. To make this clear, our finance minister has confirmed that there won’t be any hike on the taxes. There is lot more reasons for us to expect the good budget, because the inflation and prices are shoot up to the roof which is already making big hole on your monthly spending budget. If the budget is good, you would save some more money.

• Highlights of union budget 2012-13
• Book Review : 51 Income Tax Tips for Investors
• Tax Planning for 2009 – Part 1
• Tax Planning for 2009 – Part 2

Lets wait for the Feb 28 to know the budget details. I will keep update the news and investment chances based on the latest budget. If you want to received the future articles about the budgets, please subscribe here.

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In my earlier posts, many of the readers has asked about the tax implications of income from winning of lotteries, games show, etc. It is clear that many of us have the wrong opinion on tax calculation of winning prizes. Our income tax act considers winning prizes as special cases, so the normal income tax procedures not applicable. The following is one of the question received from our reader:

My daughter is not earning any income. She had won Rs. 1.5 lakh in a musical show after 30 percent TDS deducted at source. Can she claim the TDS amount and if so, what is the procedure? Please advise.

If your total income is below the prescribed tax slab by the government, then what ever tax you have paid in the year in the form of TDS can be claimed by filing the income tax returns. You are eligible in the normal scenario. But, this procedure is not applicable if the income is received from winning the lotteries, games, etc. You have to pay the 30.9% (including education cess) TDS as a flat rate. There is no way you can claim the tax refund from the government. In the above case, reader has paid only the 30% as the TDS, she has to still pay the remaining 0.9% as the education cess to the income tax officers.

• What is TDS?
• Gift from mother is not taxable
• Do you have to pay tax for money inherited from your father?

Section 194B of Income tax act says that flat 30% is charged on any prize money excess of Rs. 10000. This is deducted at source (TDS). A Three per cent education cess is payable on the tax amount. While you are filing the income tax returns, the income from lotteries has to be included under the section income from other sources and, you must submit the TDS certificate as proof that you have paid all the tax due against the prize money.

If the prize is received in the form of cash and kind, the tax has to be paid for the total value of the price. For  example, if the cash price less and kind is more valuable, if the cash is not sufficient to pay the tax, receiver or distributor has to pay the remaining tax amount. It depends on the terms and conditions of the games. Say, you win a car with a market value of Rs 7 lakh and the conditions require you to bear the whole tax liability. You will have to cough up Rs 2.1 lakh tax, and Rs 6,300 education cess.

I hope that this article would have provided the basic information to know about the tax liability on winning the prize money. You must be very careful when winning the large amount as prize money. Income tax department may catch you if you have not paid the tax. If you have any questions related to this topic, please write it on the comments section. Please subscribe to our future articles here.

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Do you have inherited money from your father?. If the answer is “Yes”, do you know the income tax laws related the mentioned transactions. This transaction would fall under the category of gift received from relatives. In my earlier post I have answered a question about the gift from mother. This case also the same as receiving gift from mother with little difference.

Under section 56 of the Income-tax Act, any money received by an individual from a person during any fiscal year (FY) without consideration, the aggregate value of which exceeds Rs.50,000, is taxable under the head “income from other sources”. However, the exemption will be available if the money is received from the relatives. In this case, if you receive lump sum amount from father (whether he gifted or inherited, income tax laws treated both in same way), it is fully exempt from the tax.

• Income Tax Exemption and Rules on Gifts as Income of Source
• Income Tax for non-cash gifts effective from October 1, 2009
• NRI status for Gift Tax

But, keep in mind that only the money what you have received is not taxable. If you deposit that money in the bank account, whatever interest received for that money would be taxable on your hands.

I hope this post would have given you good idea on the gift from your close relatives whether it is gifted or inherited. If you receive any favor from your  father for very huge amount, it is advised to have the gift deeds to avoid any future income tax problems. If you have any questions on the gift taxes, please post it in the comments section. If you want to receive future articles from me, please subscribe here.

• Book Review : 51 Income Tax Tips for Investors

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If you receive a gift from any of your relatives or friends worth more than Rs. 50000, as per income tax laws, it may be taxable income on your hands in certain situations. I have earlier discussed about the various gift related rules in Indian income tax act, and received hundreds of queries from our readers. Read my previous article on income tax exemption and rules on gifts as income of source. This post has received numerous comments and many are answered by me.  I am writing this post to clarify one of the most frequently asked gift related question about gift from mother or father.

My mother gifted me Rs. X amount. Is this taxable?

The simple answer is “NO”. Any gift in the form of articles, shares or cash are not taxable on your hand. If you want to understand the gift related income tax laws, Under section 56 of the Income-tax Act, any money received without consideration which is exceeding Rs. 50000 is taxable on your hand. But, there is exception on certain situations.

• Income Tax Exemption and Rules on Gifts as Income of Source
• Income Tax for non-cash gifts effective from October 1, 2009
• NRI status for Gift Tax

The money is received from a relative, which includes, among others, any lineal ascendant or descendant of the individual is fully tax exempt on your hand. So, it is very clear that money received from your mother or father would be not taxable on your hand.

Another important point, if you want to claim the tax exemption on the gifts, please make sure that you have the gift deed executed and who is gifting signed on the papers. Without that the gift laws are not valid for claiming the exemptions. You may consult a lawyer for the documentation with respect to the gift transaction.

I hope this post would have given you good idea on the gift from your close relatives. If you receive any favor from your mother or father for very huge amount, it is advised to have the gift deeds to avoid any future income tax problems. If you have any questions on the gift taxes, please post it in the comments section. If you want to receive future articles from me, please subscribe here.

• Book Review : 51 Income Tax Tips for Investors

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This post would provide you the summary of earlier articles on Tax Deducted at Source (TDS).  As you know, TDS is one of the important income tax jargon used by many of the tax payers. Also it is mostly needed for the middle class tax payers since they all salaried who pay taxes through their employers and bank deposits. It is important to know about the TDS and how to manage it effectively to reduce the tax burden.

What is TDS?

Lets start learning about What is ?. In simple words, instead of you pay the tax to govt, on behalf of you, your company will deduct the tax from your salary and pay to the government. Your employer must have the TAN to pay the tax to govt.

• What is TDS and TAN?

TDS on Fixed Deposit

One of the most challenging tax debate is how much you need to pay for the fixed deposit interest income and how to calculate the total taxable income on interest.

• How to avoid TDS on Fixed Deposit?
• Minimising TDS on your fixed deposit
• Top 6 Rules for TDS on Fixed Deposit

What is Form 16?

Form 16 is provided by your employer for the proof of tax deducted on your salary. You have to use this document to file the IT Returns at the end of financial year. The following links provide you the details of form 16, difference between form 16 and 16a, if you have done some mistakes how to correct it.

• What is Form 16?
• What is form 16 and form 16a
• How to correct form 16 data?

Form 15G & 15H

Form 15G and 15H are used to reduce the tax liability on TDS if you don’t have any other income. The following links have good information on the topic, you also read the hundreds of comments posted on the topic to understand better from the conversations.

• What you should know about Form 15g and Form 15H?
• Download Sample Form 15G and Form 15H

Others

• Submit PAN to avoid the higher TDS deduction
• TDS in salary if you are second name in the home loans account…

I hope reading through above articles would give you enough knowledge on the TDS topic. If you have any questions, please post it in the comments section. If you would like to receive the future articles from us, please subscribe here.

Book Review : 51 Income Tax Tips for Investors

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Are you planning a vacation for this year? or you have the habit of going for vacation every year to visit the good locations in India. That is indeed a good refreshment to relax from the every day work tension. Before planning for the vacation, lets understand the Leave Travel Allowance (LTA) exemption on your taxable income. I have earlier written about LTA in this blog, this is just a refreshment on the old posts to teach the new readers. If you have any questions, please post it in the comment section.

Leave Travel Allowance (LTA)

Let’s first understand what is LTA?. LTA is allowance given by your company. If you check the tax declaration form, you would have noticed the LTA in it. This allowance is tax exempt if you are using it within the stipulated time. It is not tax free all the time, please read out the following points.

• What is Leave Travel Allowance (LTA)?
• No need to submit proofs for LTA

• This exempt is allowed only twice in the four calendar years.
• Also, these blocks are notified by the income tax department. For example, 2012 fall in the 2010-2013 block. In this period you can use this allowance for two times.
• If you have availed only once in the above duration, you can carry forward to the first year of next block 2014-2017. Also you are eligible for two more times for that block of years.
• If you and your spouse working in a company, both can not claim for the same journey.
• You can claim the expenses incurred on travel to and from the destination, other expenses like food, stay, etc. are not included as part of the exemption.
• The destination must be within India. If you go abroad for the vacation, you are not eligible for the exemption.
• The eligible members to claim the expenses are, spouse, two children, dependent parents, brothers and sisters.
• You have to submit the original proofs to your employer and claim the tax exemption. You are eligible for actual expenses or maximum eligibility LTA, which ever is lower.

Hope the above points gave good idea on the leave travel allowance. LTA’s are introduced by the govt. to encourage the tourism in India. If you have any questions related to this topic, please post it in the comments section. If you want to receive future articles on related topics, please subscribe here. Please refer to our previous article on LTA to get more details.

• Book Review : 51 Income Tax Tips for Investors (Book Reviews)

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If you are salaried citizen who are often get frustration on finding the right way to save your tax and plan your investment, 51 Income Tax Tips for Investors is for you. This book is written by the income tax expert Subhash Lakhotia, who is most popular in India for his best selling books on financial planning topics. Everyone looks for the good information on internet to learn the tax planning, but it is not easy for everyone if the suggested ideas is worth trying in your real life. It is good idea to buy a book authored by industry expert who you can trust and follow his thoughts. Keeping in mind, I would like to review the content inside the book 51 Income Tax Tips for Investors in my blog.

51 Income Tax Tips for Investors [Book Review]

As the name of the book indicates, the book consist of 51 tips for the income tax payers. The tips are scattered across all the topics like Equity, Mutual Funds, Deposit, etc.

12 Top Investment Options for the Year 2012-2013

This section is good for taking into consideration of the current financial year. Author providing the tips based on the current market scenario. Also it refers to the latest amendments in the budget 2012-13

Tax Incentives for Home Buyer

It is one of the most important tax planning for most of the salaried people. If you have only one house, it would be simple for you to plan the tax. In cases where you have more than one house, there are many options you can wisely plan your tax payment. This book covers details on dealing with selling the property and rental income from more than one houses ( the section heading is Second Residential Property is a Tax Burden). I have written many such topics in our blog, you can read this article learn about home loans for full coverage.

In Whose Name to Buy Property to Save Capital Gains Tax

Another most challenging tax planning subject is dealing with the capital gains. Guys who are not familiar with the indexation, will find it difficult to understand the concept of calculating the capital gains. This book explains the long term capital gains with many examples to make readers understand the concept.

There are other interesting topics in the book:

• The New Pension System (NPS) – for senior citizen who are looking for the NPS
• Invest for Minor Children through Trusts for Big Tax Gains
• Deduction on Investment in Equity Shares

This book will be a comprehensive guide for readers to understand the income tax planning. After reading this book, readers would get a fair idea on income tax on various topics and without much help, they will be able to plan their investment to reduce the income tax payment. If you are looking for a copy, please buy 51 Income Tax Tips for Investors.

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PAN card is mandatory if you are earning income and liable to pay the taxes. It is very easy for everyone to get the PAN card. It is possible to apply through online for the PAN card. There are two sites where you can apply for the PAN card ( http://www.utitsl.co.in/pan/ amd https://tin.tin.nsdl.com/pan/index.html ). You will be able to apply for a new PAN card or reprint the existing PAN card. While visiting the website, please select the appropriate option and submit your application.

PAN Card Rates Revised now @ Rs.96/- only (Rs.962/- for NRI, card dispatch outside India) .

The payment for the PAN card can be done through online using your netbanking and print the acknowledgement. This document has to be affixed with the two recent photos and the space given for the photos. Once you fill the document, please send it to the following address with the required supporting documents:

• Income Tax PAN Services Unit,
  

• National Securities Depository Limited,
  

• 3^rd floor, Sapphire Chambers,
  

• Near Baner Telephone Exchange,
  

• Baner,

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If you are selling agriculture land, don’t assume that you are free from the capital gains. Agriculture land will attract the capital gains tax on certain scenarios. In my earlier articles, I have explained about capital gains, capital gains on agriculture land and capital asset. When looking in to the responses posted for this articles, most of the readers are confused about the capital gains calculation for the agricultural land. In fact, our income tax law itself not very clear on few points related to the capital gains on agriculture land. In this post, I will summarize the important facts on the subject in very simple language. Hope this would be beneficial for you to understand taxing on capital gains and agricultural land. If you have doubts, please share with us in the comments section.

When agriculture land is capital asset?

It is important to note that capital gains are levied only if the said property is fall under the capital assets. We are not going to discuss more about the capital assets in general, rather we discuss in respect to the agricultural land. If the said land is not fall under capital asset, then there is no question on levying the capital gains. There won’t be any tax and the sale amount can be used for buying any property.

• Should I pay taxes for capital gains?
• What is capital gains account scheme?

Section 2(14) of the income tax act defines the conditions used for determining the agriculture land as the capital asset. It states that,

• Agricultural land situated within a municipality or cantonment and the  population of that municipality or cantonment is more than 10,000 as per the last census. (or)
• Agricultural land situated within an area from local limit of municipality or cantonment are as notified by government in this regard.

If any one of the above condition is satisfied, said land is considered as the capital asset. Till now everything is good, but in some cases, the first condition is fulfilled and second condition is not fulfilled, then it is not considered as the capital asset.

Let us take one example, in the state of Haryana, agriculture land situated within 8Kms of municipal corporation of Fardabad is capital asset, the agricultural land situated within only 5Kms from the municipality in Bhiwani is considered as capital asset.

Why I have given the above example, when you selling the agricultural land, don’t take the first two conditions as the only thump rule for deciding the capital asset. Talk to the local bodies to see if the said land is situated in the notified area. Otherwise it will not be considered as the capital asset.

When should pay the capital gains on agricultural land?

• If your land is considered as the capital asset by the above conditions, you have to sit with your tax consultant and calculate the tax liabilities on your transactions.
• If the said land is not a capital asset, there is no capital gains for the sale. That means, you need not worry anything about the tax liabilities for that transactions. The whole transaction is exempt from the tax.

Tax Exemption on Capital Gains (Agricultural Land)

Under Income Tax act 1961, section 54B and 54F deals with the tax exemption on capital gains arising on selling the agricultural land.

Section 54B (Invest on agricultural land)

• Section 54B, when assessee  wants to show the tax exemption for the capital gains arising on agricultural land by investing on the agricultural land.
• Capital gains arising on transfer of agricultural land sold was used for the agricultural purposes will not be charged capital gains if the gain amount is invested in buying the agricultural land.
• Here the condition  is, the land should have been used for the agricultural purpose by assessee or his/her parents, immediately preceding two years from the date of sale.
• The new land (new investment) has to be purchased within two years from the date of selling agricultural land.
• Note that, assessee needs to invest in agricultural land only the capital gains not the actual sale amount of the property.  Assessee must calculate the capital gains and invest only that amount for the exemption.

Section 54F (Invest on residential property)

• Section 54F, when assessee  wants to show the tax exemption for the capital gains arising on agricultural land by investing on the residential property.
• The main difference between section 54B is, assessee  has to invest the net sale amount on the residential house to claim the full tax exemption. Not the capital gains.
• If you have bought a new house before one year from the date of transfer and within two year from the date transfer is valid for the tax exemption.
• If you are constructing the new house, you have to complete within three years from the date of transfer. Another important point is that, it is not necessary that you must start the construction only after the sale of land, you would have started earlier also, still it is applicable for the tax exemption.
• Investing on anything other than the residential house not covered for the tax exemption. If assessee  buying commercial property by selling the agricultural land, then assessee  can not claim any tax exemption.

Summary

I hope this article would have been more useful to get the clear understanding on capital gains arsing out of agricultural land. If i have missed any important points in this post, please post it in the comments section. When your are investing in the new property for the tax exemption, in that period sale amount can be deposited into the capital gains account scheme. It will fetch interest amount till you have time to invest in new property. Thank you for reading my blog!! If you have any doubts, please post it in the comments section.

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Raj is an engineer from Bangalore, has sold his land in native place for Rs. 75 lacs and wondering what to do with that money. Assumes he owns all the money and there is no liability for him to pay the tax if he has any profit for that transaction. He is not aware of the hefty tax payment on the capital gains. Also he had no clue on how to calculate the tax for capital gains. It is worrisome if income tax authority caught him and put the penalty of non payment of tax. It is the same scenario with many of the working generation who had no experience or learning on the income tax issues.

• Buy : How to Save Tax on Capital Gains: AY 2013-14

Capital Gains is one of the tricky trap which would put you in trouble if you are not planning   for the tax liability. If you have enough knowledge on the capital gains and tax exemption associated with it, you could avoid the 100% tax on your profit. This article explores the important aspects on the capital gains and various rules involved on taxing the capital gains. Since I have already published many articles on the capital gains, this piece would serve as the compilation of all the articles and add up the missing point on other articles. I would look forward to your thoughts and queries. Please post it in the comments section.

also read:

• What is capital gains account scheme?
• Should I pay taxes for capital gains?
• Capital Loss and Tax Calculation

What is Capital Gains?

Any profit from selling the capital assets considered as the capital gains.  So it can be shares, units of UTI, debentures and land. Also the following materials considered as the capital assets:

• furniture
• personal belongings
• agricultural land (subject to certain criteria)
• Special Bearer Bonds, 1991, Gold Deposit Bonds (1999 scheme), 6.5 per cent Gold Bonds, 7 per cent Gold Bonds, National Defence Gold Bonds issued by the Central Government and raw material held for the purpose of business is not termed as a capital asset.
• From the year 1973-74, jewellery is treated as a capital asset.

Different Types of Capital Gains

There is two types of capital gains.

• Short Term Capital Gains
  • If you own the capital assets less than three years at the time of selling, then it is considered as the short term capital gains. In case of shares, mutual funds, equities, if you are selling with in one year after the purchase, it is considered as the short term capital gains.

• Long Term Capital Gains
  • If you own the capital assets more than three years at the time of selling, then it is considered as the short term capital gains.  In case of shares, mutual funds, equities, if you are selling after one year from the date of purchase, it is considered as the short term capital gains.

Capital Gains on Agricultural Land

When Agriculture Land is Capital Asset?

• Buy : Tips On Property Buying, Selling, Renting & Tax Planning

If the agricultural land is treated as the capital asset, then the sale of that land would fetch the capital gains. You must know the rules applied to find a land is whether it is  capital asset or not.The following points are important to consider while deciding whether the agricultural land is coming under the capital assets:

• In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or
• In any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.

If the land is situated under municipality area where the population is above 10000 or the distance from the municiplaty to the specified land is less than 8 KM, then the land is not agricultural land.

Tax Exemption on Agriculture Land

If you have agriculture land and for the pat two year have been used for the farming activities, the sale of land will not attract the capital gains tax. The following are the list of rules when sale of agricultural land will not attract any capital gains tax.

• The land should have been used by the assessee or his parents with in two years immediately preceding the land sale or transfer date.
• The asses see should have been purchased the agricultural land with in two years immediately preceding the land sale or transfer date.
• The whole amount should have been used for purchasing the new agricultural land. Otherwise the difference amount will be charged for the capital gains tax.
• The new asset purchased should not sold with in three years of time.
• If the agricultural land should have been used for the agriculture purpose.
• Exemption is not available to a Hindu Undivided Famiy (HUF) or any other taxpayer.

Tax Exemptions on Capital Gains

In the above sections, we have learned about the capital gains and when you are liable to pay the capital gains. But, the good thing is that there is laws to help you get the complete tax exemption on your capital gains. Only thing is you should know the process of utilizing the capital gains amount.

• Buy : Income Tax Guide for the Taxpayer: A.Y. 2013-14

To avoid paying the capital gains tax, you must buy a new property within two years or construct new house within three years. For example, if you are selling a capital asset on October 2010, there will be capital gains in the profit arise from the sale. To avoid that, you must buy another property before October 2012 or construct new house before October 2013. Here the problem is that, you must file the IT returns before July 31st of every year. In the above case, you have show the capital gains and pay the tax if you are not invested in buying a new house or constructed one.

Capital Gains Account Scheme

you must create a new Capital Gains Account Scheme in any of the nationalized bank and deposit the amount. This amount must be used for buying the house or constructions before the stipulated time given by the income tax act. If you are not doing so, the amount deposited in the account will be subject to the capital gains tax.

There is two types of accounts under this scheme. One is deposit account A, which is savings account. Second one is term deposit account B which is term deposit account.

• In the first option, the amount withdrawn should be utilized for the purpose within sixty days of the withdrawal. Any un-utilized amount should be redeposited in Deposit Account A. In case the amount deposited is not utilized wholly or partly for the purchase or construction of the new property within the period specified, then the un-utilized amount will be charged as income of the previous year in which the period of three years from the date of the transfer of the original property expires. Interest rates will be give at the savings bank interest rates.

• In the second option, it is similar to the term deposits. It comes with cumulative and non-cumulative. The interest rates would at par with the other fixed deposits offered by the bank.
• Important Points:
  • The interest amount on this account is taxable.
  • If you are selling the two different asset classes in different time, you need to open the two separate accounts.
  • Using this deposit, you can not get any loans.

Summary

Are you facing the issues on managing the capital gains, if you need advice please post it in the comments section. This article talks more comprehensive details about the capital gains with various articles published in the site. If you are looking to learn more details on to the subject, please buy the book How to Save Tax on Capital Gains: AY 2013-14 which will be very useful for the beginner.

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After a long awaiting, the Union Budget of India has been delivered by our finance minister Pranab Mukarji. There is mixed opinion on this budget, but seeing the opinion from the experts, the budget mainly lack of the focus on India’s future growth. Also the expectation was huge for this budget because India’s financial deficit is piling up and our Govt. is under a pressure to reduce the deficit to avoid getting more loans from the World Bank.

We have already more loans in the foreign bank which would start bringing the economy down if we are not reducing with proper plan. It is very clear that budget don’t have the focus for our economy growth. Also it disappointed the salaried segment with just Rs. 20000 increase in the tax exemption which they expected up to Rs. 300000 from the current slag of Rs. 180000. This article lists down the key changes in the budget which would affect the individual’s life.

1. Changes in Tax Slab

Bad news for women, there is no special tax slab for the women working group. They will be fall under the common tax slab which is applicable for the men. The previous tax slab for general group is Rs. 180000. It has been increased to Rs. 200000 for Nil tax. Those who are under the age 60 would fall under the general tax slab. Details of the each tax slab as under:

General Tax Slab

• Up to Rs. 2 lacs – No Tax
• Rs 2 lacs to Rs. Rs. 5 lacs – 10% Tax
• Rs 5 lacs to Rs. Rs. 10 lacs – 20% Tax
• Above Rs. 10 lacs – 30% Tax

Senior Citizen Tax Slab (Above 60 Years)

• Up to Rs. 2.5 lacs – No Tax
• Rs 2.5 lacs to Rs. Rs. 5 lacs – 10% Tax
• Rs 5 lacs to Rs. Rs. 10 lacs – 20% Tax
• Above Rs. 10 lacs – 30% Tax

Very Senior Citizen Tax Slab (Above 80 Years)

• Up to Rs. 5 lacs – No Tax
• Rs 5 lacs to Rs. Rs. 10 lacs – 20% Tax
• Above Rs. 10 lacs – 30% Tax

2. EPF Interest Rates Fetches only 8.25%

• Update: EPF interest rates to get 8.5% for FY 2012-13

The current interest rates for the EPF account is 9.5% p.a. It gives the good return for the salaried employees compared to any other debt instruments like Fixed Deposit or Public Provident Fund (PPF). But, for the year 2011-12, the EPF organization would give you only 8.25%. It is announced by the finance minister in the Budget. This has been due to the lack of fund with the EPF organization. It is big below to the salaried segment, when the inflation is peeking up, reducing the interest rates for common man’s scheme is totally disappointing.

3. Tax exemptions on Saving bank interest upto Rs 10,000

It is not having any magnificent impact on your income. Till now the interest earned on your savings bank account is taxable. In this budget, if you are earning more than Rs. 10000 on your savings bank account then only you need to pay the tax. Note that it is only for the savings bank account, Fixed Deposits are  still taxable.

The savings bank account includes the banks, post office and any other banks offering the savings bank facilities. But, only very few people pay the tax for the savings bank account and also the interest income earned on the savings bank account would be very less. We never keep more money into the savings bank account.

4. Life Insurance Tax Exemption only if 10% on Sum Insured

This is new clause introduced in this budget for the tax exemption for the Life Insurance premium. Till now if you are buying a life insurance, if the premium amount is under 20% of the sum insured, then it is eligible for the tax exemption. But, with the new proposal it is eligible only if the yearly premium is less than 10% of the sub assured. (ie.) If you are buying an insurance with the sum assured value of Rs. 500000, If the yearly premium is under Rs. 50000 (10% of Rs. 5 lacs) then only it is eligible for the tax exemption. Note that, it is for the policies which is bought only after the April 2012. The existing policy holders need not worry.

5. Changes on Service Tax

The important part of the budget, service tax has been increased from the existing 10% to 12%. This would empty your pocket each time you are paying the bills your shopping. (ie.) If you are paying the telephone bill, till now you would pay 10% extra on the bill as the service tax. From next month on wards, your bill will have 2% extra and it will be charged 12% as the service tax. It is another big below to the common man who would suffer most from this change.

Because the service tax is applicable to almost anything we purchase from the shop which is billed. Even we are paying the service tax for the health insurance premiums. You will have to pay more from the next installments. So, this budget is going to be the negative return for the common man.

6. No Tax Benefits for Infrastructure Bonds

In two years back, under section 80c, additional Rs. 20000 exemption for the investment on infrastructure bonds have been introduced. It helps the infra companies to get more investment from the public to boost their operations. This scheme has been removed from this budget.

7. Pay 1% of TDS for the property sale

It is a good move if it is implemented properly. If you are selling your residential plot or house or flat, if the selling price is more than Rs. 50 lacs, you must pay the compulsory 1% TDS on the profit from the sale. It will help the Govt. to gain more income from this tax announcement since India’s real estate is always most loved investment options. But, the issue is that even if you are not liable to pay after the profit (Read Capital Gains Profit and Tax Exemption), the TDS @ 1% is compulsory. If you are not liable to pay the tax, you have to file the IT return and get the refund.

8. Health check-ups upto Rs 5,000 under section 80D

A new deduction is included in the medical insurance , that is “preventive health checkup”. You can claim up to Rs. 5000 under this category. Till now you can claim Rs. 15000 for the health insurance premium paid you, spouse and kid. It is another category in the same section 80D and the amount is included in the Rs. 15000 not the additional one.

9. Rajiv Gandhi Equity Saving Scheme

Another equity related scheme is introduced in this budget for the small investors. As of now, if you are investing directly investing in the equity and sell after one year, it is fully tax exempt. In this scheme, a new investor can claim the 50% of the equity investment subject to the maximum of Rs. 50000 as the tax exemption. The details of the scheme is not released and it would be available to the public very soon. It is very early to tell anything about this scheme, we have to wait and see how it performs in the future. Also, what is the necessity to name this scheme as “Rajiv Gandhi“?. The following are the points on this scheme.

• The lock in period for the investment is 3 years
• The 50% of the investment or maximum of Rs. 50000 is eligible for the tax exemption.
• You are eligible for this scheme, only if your total income is less than Rs. 10 lacs.

10. Changes on Securities Transaction Tax (STT)

If you are making any transaction to buy or sell equities, you have to pay 1.25% as the Securities Transaction Tax (STT). This has been reduced to the 1.0% from this budget. It means when you are doing the equity transactions, it costs you less than the earlier transactions. It is very useful for the regular investor on equities.

Summary

The above lists are the most notable changes in the budget and would impact the individual’s earnings. I have not discussed anything on the corporate changes. In the overall, the feedback of this budget is negative (you can see the poll conducted in our site!!!). It is not focused and missed many of the expectations from the business men and common man. This could be because the general elections far away (year 2014) from now. Finance Minister would have postponed many things for the next year’s budget. But, national interest has to be priority if we need real growth on our country. We have to wait and see how the Gross Domestic Product (GDP) and financial deficit would affect on these changes.

What is your take on this budget? Are you happy with the changes or expected some specific additions?. Please share your thoughts in the comments section.

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Form 16 is one of the important component on filing your income tax. It has been detailed out in my previous article on What is form 16 and form 16a?. If you read the hundreds of comments posted on the article, it shows that there are many readers who are still having the doubts and looking for more clarity on the topic. This article would summarize the facts about form 16 once again, the points may be repeated from the previous article and new ones based on the comments. If you are looking to read more about form 16, please read on.

What is Form 16?

In simple words, Form 16 is the document proof given by an employer to all its employees with the complete details of income (salary) , the amount deducted as income tax (TDS) for each month and the total tax payment. This document will be used by employee to submit the income tax returns to the government. He need not submit the form 16, it is only proof for his income and the tax payment. It is safe to keep all your form 16, if there is any issue in the income tax returns, form 16 has to be used as the proof. Note that, issuing form 16 is applicable only for the salaried employees. Normally, form 16 would issued after the current financial year.

also read:

• What is TDS and TAN?
• Book : How To Save Income Tax Through Tax Planning
• Top 6 Rules for TDS on Fixed Deposit
• How to correct form 16 data?

The following are the important points to know about the form 16.

1. Form 16 contains the details of income and the tax deducted.
2. It is not compulsory to give the form 16 to the employees if there is no TDS deducted.
3. If the company don’t have the TAN, they can not deduct the TDS. In that case, they will not provide the form 16.
4. It is employers responsibility to issue form 16 if they have deducted tax on your salary.
5. Form 16 may be used for applying the home loans. Some of the banks ask for the form 16 as the income proof.
6. Form 16A is different from form 16. Form 16a is issued for the TDS other than salary income.
7. If the information in the form 16 is wrong, you can correct it.
8. It is not compulsory that everyone need form 16, if you are self employed then there is no way for you to get the form 16. In that case, it is very important for you to submit the income tax returns and show that as proof for your income.
9. If you are working in an consultancy and not getting the tax deducted by them, you would not get the form 16 too. Don’t need to try getting it, because you can get form 16 only when the tax deducted from your salary.

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Last year central board of direct taxes (CBDT) has announced an exemption for filling the income tax returns if your income is below Rs. 5 lacs. But, it came with the lots of restrictions which makes it is almost impossible for the tax payer to use the exemption. The condition is that if you are earning only the salary and interest income for your amount then you need not file the IT returns. You have to submit the interest earned on savings bank account to your employer, they will deduct the taxes. It is very unlikely that people don’t invest on any other areas like Fixed Deposits, Corporate Bonds, etc. However I have pointed out the conditions to meet the exemption to avoid filing the IT returns.

1. The total income should not exceed Rs. 500000
2. The income should be only from salaries and salary account interest.
3. The interest earned on bank account should not exceed Rs. 10000
4. The bank interest must be reported to employer and tax must be deducted from your salary.
5. Permanent Account Number (PAN) must be notified to the employer.
6. Form 16 from employer must say the PAN, income and TDS details.
7. No more tax should be payable by the tax payer.
8. There should not be any refund claim in the year.
9. The tax payer should have received salary from only one employer.

If you want to satisfy all the above conditions, it is very unlikely to happen. We should hope that in this year budget there should be more relaxation to avail this benefit.

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If you are salaried employee in a company, your payslip would have a component called HRA Allowances every month which is given by the companies to all the employees. The purpose of this component is to pay the rent for their house. Also, this is the great component to get the tax exemption if you are staying in the rented house.

In the latest circular, Income Tax dept. has announced about the compulsory submission of landlord’s PAN details if the rent amount exceeds the certain limit. This article explores the news in details. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.

also read:

• PAN card is must on jewellery purchase
• Submit PAN to avoid the higher TDS deduction
• How to apply PAN card from abroad?

Submit PAN if the total rent exceeds Rs.180000 in a year

If you are paying the rent to your landlord and getting the HRA allowances every month, you are eligible for the tax excemption as per the prescribed limit of HRA exemption. If you want to get the benefits, you must submit the rent receipts to your employer every year at the time of tax proofs collection. If you don’t have much idea on this exemption, please read about HRA exemption carefully and submit your rent receipts, it would save you lot of money from the tax payment.

Till the last year, you can submit the any amount as the rent without additional documents except the rent receipts. But, in the latest regulation, if your total rent payment exceeds Rs.180000 in a year (it means Rs.15000 per month), you have to submit the PAN card copy of the landlord.

In the case, if the landlord doesn’t own a PAN card, he must sign the self declaration saying that he don’t have the PAN card and that copy must be submitted to the employer to get the HRA exemption.  This would enforce the tenants to inform the landlords to get the PAN if they don’t have.

Summary

The intention of this update is to maximize the tax collection for the government because there is millions of people not coming under the tax radar but still they are earning more money. It is good move to catch the landlords who are earning lump sum from the rental income and not paying the taxes. If you have doubts, please post it in the comments section.

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In my previous article I have listed down the investment proofs needs to be submitted for this financial year 2011-12. I would be writing in detail about the each topic. This article explores the details of employee provident fund (epf) and how it can be used to show an tax exemption component. It is compulsory deduction on your salary and many don’t consider this while computing their total investment needed for the tax exemption. If you have any doubts, please post it in the comments section. Please subscribe to our future articles here.

Section 80C

As we know that there is maximum of Rs.100000 can be invested for the tax exemption under section 80c. This includes various investments like Life Insurance, Home Loans, Health Insurance, Public Provident Fund (PPF), etc. These investments has to be invested by you and submit the proofs while end of the year. But, EPF is compulsory deducted by every employer for their employees to save for their retirement planning. By default, EPF savings fall under the section 80c’s Rs.100000 category.

When you are planning to invest Rs.100000 for this year to utilize the section 80c, you must include your contribution towards EPF and plan your investment.  For example, your employer is deducting Rs. 3000 for every month towards EPF, your yearly contribution would be Rs.36000 (3000 x 12). In this case, under section 80c you are left with Rs.64000 (Rs. 100000 – Rs. 36000) for the tax exemption investments. You are not required to submit the proofs for EPF, since your employer would calculate and send to the govt.

What is EPF?

also read

• Invest in EPF for retirement planning
• EPF Balance Information on SMS
• EPF Transfer and Opening PPF Account
• EPF (PF) Transfer and Form 13

The above section explains the tax computation part using the EPF. This section explains the EPF and what are the benefits. The following are points you must know about the EPF:

• Interest rates for employee provident fund (EPF) is 9.5% monthly cumulative. It is the best investment avenue for low risk category.
• Minimum 12% of your basic salary would be deducted towards EPF. Also, you can increase your EPF investments by submitting the declaration form.
• If your salary is above Rs.6500 per month, then you would be eligible for the EPF deduction.
• Interest income on provident fund is not taxable.
• When you are switching your job, you can transfer your EPF to your new employer by submitting the form 13. If you would like to withdraw your savings, you have to submit the form 19.
• If you are withdrawing EPF before the five years, the amount is taxable.
• The maximum amount can be shown under tax exemption is Rs.100000
• You can find more details in the official site.

Summary

I hope this would have given the basic idea on EPF and its benefits. It creates the lump sum corpus for your retirement and helps in saving the tax. But, make sure that you are not withdrawing or closing the EPF account. The power of compounding is important for your long term goals. If you have any doubts, please post it in the comments section.

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It is time for getting ready with the investment proofs which is declared by you at the time of financial year beginning. For the salaried people, the month December will be busy in submitting the proofs for all your investments and future investment till the march month. This task is easy for those who are ready with the documents before the actual time starts for collecting the proofs. It is good idea to start collecting the proofs for all your investments from now to avoid any last minute rush.

Also, if you have not utilized the maximum investments opportunities, this is the last chance for you to find out the scheme to park your money for the tax saving. This article summarizes the list of investments available for the tax savings and would continue in the next articles to explain the each investment in details. This would help you to understand the tax savings investment. If you have any doubts, please post it in the comments section. Please subscribe to our future articles here.

List of Tax Saving Investments

1. Home Loans
1. Home loans principal repayment under section 80C
2. Home loans interest payment under section 24B
2. Education Loans
3. House Rent Allowance (HRA)
4. Public Provident Fund (PPF)
5. Employee Provident Fund (EPF)
6. Infrastructure bonds
7. National Savings Certificate (NSC)
8. Tax Savings Fixed Deposit
9. Equity Linked Savings Scheme (ELSS)
10. Insurance
1. Insurance policies
2. Unit Linked Insurance Plan (ULIP)
11. Health Insurance

• Tax Planning for 2009 – Part 1
• Tax Planning for 2009 – Part 2
• Learn About Home Loans
• Investment vs Insurance

Summary

The above are only the list of investments for tax exemption purposes. In the next articles, I would explain the each topic in detail. I would have missed few categories in the list, but the above are the mostly used by the salaried employees in a company. If you find any important category is missing, please post it in the comments section.

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Many of us aware that Leave Travel Allowance(LTA) can be used in the tax exemption. I found it confusing for many people when deciding the eligibility to apply for the LTA. Most of them are not aware of the rules and policies related to the LTA. In this article I will explain the restrictions associated with applying the LTA and who can apply for it?. I hope this article will be useful for you. If you have any doubts please post it in the comments section. Please subscribe to our future articles here.

• No need to submit proofs for LTA
• Income Tax Guidelines & Mini Ready Reckoner 2012-13 And 2013-14
• Leave Travel Allowance

What is Leave Travel Allowance (LTA)?

LTA is given for the salaried people for any travel they have spent money and it can be tax exempt. This is allowed only for the salaried people. Every four years you can claim the LTA two times. There are lot of restrictions around claiming the LTA. Please read the following sections.

Points to Remember on LTA

• The amount you want to claim on LTA should be actually spent on travel. It could be of Air, Rail or Bus. Any other expenses like food,etc. can not be claimed as LTA.
• LTA can be claimed only for your family. However, you must travel with your family to eligible for the LTA. Here family means, spouse and children (including adopted children and stepchildren). Parents, brothers and sisters are also included if they are dependent on you.
• This travel should be with in India. If you travel outside India, you can not claim LTA.
• You must submit the proof of the travel. In this case, it will be tickets of flights , rail or bus. If you are traveling taking the car for rental, you must submit the bills from the rental company. Please note that any non-transport component (like driver allowance) is not considered for income tax exemption.
• You must note that the travel should be on the shortest distance to the destination. For example, if you are traveling to Mumbai, you must choose the shortest route to reach the destination to eligible for the claim. Also, the last route will be taken for the claim. If you are traveling by air, you must choose the economic class. If you are traveling by Train, the maximum allowed is first class (AC I Class).
• Another most important point is that LTA can be claimed on the block of four years. That means you can claim two times in the specified block. This window is created by govt. These blocks of 4 years are predefined by the government. These are:
  • 2002 – 2005
    2006 – 2009
    2010 – 2013 And so on. The current block is 2010 – 2013. Please note that it is calendar years (January to December). Not that financial years.
• You can not claim all the two LTA in the same year. For example, if you have traveled two times in the year 2010. You are eligible to claim only once. If your spouse also working, then she an claim another travel. There is an option to carry forward one travel to the next window. If you have utilized only one LTA in the current window, you can use three LTA claim in the next window. But, with restriction that you have to use it in the first year of the next block of 4 years.
• If both are working in a family, same LTA can not be claimed by both. If you have traveled  two times in a year, then both of you can claim one LTA.
• The maximum eligible amount for LTA is Rs.20000 for each journey. The remaining amount will be paid after the tax deducted. For example, if you have spend Rs.18000 on the journey, then you are eligible to claim only Rs.18000 as the LTA exemption. The remaining Rs.2000 will be taxable. In the same way, if you have spent more than Rs.20000, the maximum eligibility is Rs.20000.

Summary

The above are the important points to consider on Leave Travel Allowance (LTA). You must remember that it is only the tax exemption, not the reimbursement of the entire amount. Instead of paying taxes for that Rs.20000, you can claim tax benefits on the expenses. If you are interested in journeys and tours, it will be good or you to claim these benefits. If you have any questions, please post it in the comments section.

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As we are aware, July 31st is the last date for filing the IT returns. In this year, 31st July, 2011 is dead line to submit your income tax returns. Even though this is the last date for filing, govt. still opens the last date till the 31st of march next year with the penalty. But, if you have missed the initial deadline, it will affect you many others ways. It is important for you to fill the income tax returns before the last date. In this article, I will explain the consequences if you have not filled the income tax returns before the due date. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.

Can not revise the IT Returns

It is common mistakes that human causes the typing or number errors in the returns form. If you have filed the returns after the due date, you will not be able to correct those errors. But, if you have submitted your returns before the due date, you can change the errors in the returns within two years of time.

• Submit IT Returns Online
• How to use ITR-1 form?

Can not Carry Forward the losses

As per the income tax law, you are allowed to carry forward the certain losses to the next year. For example, you have some losses on the mutual funds or shares, you can carry forward that losses for the next eight years.

But, if you are not filled the returns on time, you will not be able to carry forward the losses.

Need to pay interest for Outstanding Taxes

This is very important point to remember, as it involved monetary loss for you if missed the dead line. In cases if there is pending taxes  to be paid and you have missed the last date for the income tax returns filing, you have to pay the 1% per month interest charges for the due amount from the due date. This rule is applicable for advance tax payers too.

Summary

The above three points are important to consider because the last date for the income tax returns are very near. Please don’t wait till the last minute rush. Act fast and file your returns today through online submission. Hope this article would be very useful. If you like this article, please subscribe here.

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In my previous article I have explained about How to use ITR -1 form? and also I have added brief explanation on the new announcement from the finance minister that there is no ITR filing is required for the income group less than Rs. 5 lacs. In this article, I would explain that in more details and there are many other things to be considered while calculating the total income and criteria to not filing the tax returns. If you have any doubts, post it in the comments section.

How to calculate the total Income?

File Your IT Returns Online

Here the rule says that, those who are getting the total taxable income less than Rs. 5 lacs need not submit the income tax returns. You need to calculate the total taxable income by deducting all your tax exempt investments. This would include the following things:

• Investments under section 80C (PPF, Life Insurance premium, home loans principal, PF, NSC, Tax saving fixed deposits, etc)
• Home Loans interest payment under section 24B
• Medical insurance premium under section 80D
• HRA exemptions under section 13A
• Education loan exempt on section 80E

All the deduction must be deducted from the total income. Looking into the deductions, if the total income is above Rs.8 lacs also good come under this category. But, there are some other restrictions which needs to be considered. Please read the following sections.

Who has to submit the IT Returns?

If your taxable income is less than Rs. 5 lacs and fall into any of the following category, then you must file the ITR.

• If you have applied for the tax refund from previous year.
• If you have not received the form 16 from your employer.
• If you have worked for more than one employer in that financial year (FY).
• If you have not submitted your banks savings account interest income to the company for the tax deduction. if the income is above Rs. 10000, then you must file the IT returns.
• If you have any capital gains from sale of mutual funds, shares, etc. Even if you need not pay any tax also you have to file the IT returns.

But, the general opinion on the public is that this announcement is not much useful to the many. Because, most of the people would fall into any one of the above category.

Apart for that, submitting the savings bank interest rates to employer is extra work since company also has to calculate the tax for the interest income.

What is the process?

In the above sections I have explained who need not file the IT returns. The following is the process which needs to be followed if you are not submitting the ITR:

• Calculate the interest income from all your bank savings account. Note that it should be below Rs.10000
• Give the details of your interest income to the employer.
• Employer will deduct the TDS on your bank savings account income and pay to the government. This details will be added into the form 16.
• Employee must provide the PAN details to employer.
• Since you are not filing the ITR, it is required to get the Form 16 from employer for the future purpose. It is necessary for you to apply home loans from the banks.

Summary

I hope this article would provide good idea on who really need not file the IT returns. If you are in doubt, please clarify here or your friends whether you have to submit the returns. Please post your thoughts in the comments section.

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