How To Save Tax For FY 2019-20? - WordPress

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How to Save Tax for FY 2019-20?Incorporates changes made in Income Tax laws in Union Budget presented on July 5, 2019Amit KumarFounderByVersion 2.0Edited: July 7, 2019

How much tax Ineed to pay thisyear!What is the max Ican save on taxes?How do I learnabout myinvestment andtaxes?Can I use bothHRA and HomeLoan to savetaxes?Why did I buy thatInsurance thing Inever required?How I am payingmore tax than myboss with higherincome?How much benefit Ican get for my homeand education loan?Everyone is talkingabout 80C, 80CCC, 80D,80E, 80!@### - what’sthe mystery of 80’s intax planning?2PPF, FD orInsurance forsaving tax?If the above thoughts haunt you, this presentation is for you!

How to Use This Deck?This presentation (deck) is quick and simple "know how" of all tax saving instruments available in India for Individualtax payersThe focus is to help even the layman to understand tax saving instruments and plan accordinglyIf you seek more details on the topic you can click the boxes next toarticles on. This would redirect you to relevantIn case you find have any doubts or feedback, write me back at apnaplan.com@gmail.comI hope this helps you to understand the tax saving avenues available to Individual tax payers in India and help you save taxand your hard earned moneyThis deck would be continuously updated based on your feedback3

Income Tax New Rules in Budget 2019 Increased Tax Rebate u/s 87A: For individuals with net taxable income of Rs 5 lakh or less the tax rebate would be lesserof tax liability or Rs 12,500 whichever is lower Increased Tax for super-rich: Surcharge increased to 25% for income between 2 to 5 crore & to 37% for income beyondRs 5 crores Additional Tax Deduction of Rs 1.5 lakhs u/s 80EEA on home loans on purchase of affordable home Additional Tax Deduction of Rs 1.5 lakhs u/s 80EEB on Auto loans on purchase of Electric vehicles Standard deduction for Salaried and Pensioners increased from Rs 40,000 to Rs 50,000 No Tax on Notional Rental Income from Second House Capital gains exemption on reinvestment in two house properties: Tax payers can now buy two houses on sale of 1house if the capital gains are less than Rs 2 crore. This benefit can be availed only once in lifetime. TDS threshold increased from Rs 10,000 to Rs 40,000 on Bank Interest Income NPS withdrawal up to 60% tax free & NPS Tier II now eligible for tax saving u/s 80C (only for Central Govt employees)45 changes in Tax laws youmust know19 Highlights of Budget2019

How Much Tax you need to Pay?The first step for tax planning is to know how much Tax you need to pay!Income Tax Slabs for FY 2019–20 (AY 2020-21)General PublicSenior CitizensVery Senior Citizens(Below 60 Years of Age)(60 to 80 Years of Age)(More than 80 Years of Age)Income Tax SlabTaxIncome Tax SlabTaxIncome Tax SlabTaxUp to Rs. 2.5 LakhsNilUp to Rs. 3 LakhsNilUp to Rs. 5 LakhsNilRs. 2.5 – 5 Lakhs5%Rs. 3 – 5 Lakhs5%Rs. 5 – 10 Lakhs20%Rs. 5 – 10 Lakhs20%Rs. 5 – 10 Lakhs20%Above Rs. 10 Lakhs30%Above Rs. 10 Lakhs30%Above Rs. 10 Lakhs30%Income BandSurcharge on income taxLess than 50 lakh50 Lakh to 1 crore1 crore to 2 crore2 crore to 5 croreMore than 5 crore0%10%15%25%37% Health & Education Cess of 4% Tax Rebate of Rs 12,500 for income up to Rs 5 lakhs u/s 87A There are no separate slab for male and female5History of Income TaxSlabs in IndiaIncome Tax Calculator forFY 2019-20 (AY 2020-21)You should be connected to internet to download thisCalculate Tax onArrears in 7 Easy Steps

Tax Saving SectionsBelow is the list of all Tax Saving Sections available for Individuals in IndiaInvestments &ExpenditureMaximum Rs 1.5 Lakh Deduction from Income combining these 3 SectionsSection 80CSection 80CCCSection 80CCDLots of Options like PPF,ELSS, FD, etc.Pension ProductsCentral GovernmentEmployee Pension SchemeNPSSection 80CCD(1B)Additional exemption of Rs 50,000 for investment in NPS6Should you Invest Rs 50,000 in NPS toSave Tax u/s 80CCD (1B)?

LoansHealth and Well BeingTax Saving Sections (Contd )7Section 80 DSection 80DDSection 80DDBSection 80UMedical Insurance forFamily and ParentsMaintenance & medicaltreatment of disableddependentTreatment of certainDisease/ AilmentPhysically Disabled AssesseDeduction Up to Rs1,00,000Deduction Up to Rs 1.25LakhDeduction Up to Rs1,00,000Deduction Up to Rs 1.25LakhSection 80 ESection 24Section 80EEASection 80EEBInterest payable onEducation LoanInterest payable onHousing Loan & HomeImprovement LoanNo Limit for DeductionDeduction Up to Rs 2 Lakh forHome Loan including Rs30,000 for HomeImprovement LoanAdditional Tax Deductionof Rs 1.5 lakhs on homeloans on purchase ofaffordable homeAdditional Tax Deductionof Rs 1.5 lakhs on Autoloans on purchase ofElectric vehiclesHow to Pay 0 Income Tax on Rs 16Lakh Salary?

OthersDonationsTax Saving Sections (Contd )8Section 80GSection 80GGASection 80GGCDonation to certain charitable funds,charitable institutions, etc.Donations for scientific research orrural developmentDonation to political partiesSection 80GGSection 80TTASection 80TTBFor Paying Rent in case of no HRAInterest received in Saving AccountInterest Income for Senior CitizensonlyDeduction Up to Rs 60,000Deduction Up to Rs 10,000Deduction Up to Rs 50,00025 Tax Free Incomes &Investments in IndiaIncome Tax HelplineNumbers

Section 80C/ 80CCC/ 80CCD The maximum deduction combining all these investments/ expenditures is Rs 1.5 lakhPublic ProvidentFund (PPF)SukanyaSamriddhiAccount (SSA)InvestmentOptions(Others)Life InsurancePremiumPension Plansfrom MutualFundsPension Plansfrom bt) Following options are available for deduction under sec 80C/80CCC/80CCDPrincipalPayment onHome LoanStamp duty andregistration costof the HouseTuition Fee for 2Children9Provident Fund(EPF/ VPF)How to Calculate Income Tax? –explained with exampleNational SavingCertificate(NSC)New PensionScheme (NPS)Senior Citizen’sSaving Scheme(SCSS)Tax Saving FixedDepositsTax SavingMutual Funds(ELSS)Central Govt.EmployeesPension Scheme(for 5 Years)Learn about Best Tax SavingInvestments u/s 80C

EPF/VPF (Employee Provident Fund) 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 is NOT required to match your VPF contributionThe GoodThe BadThe interest earned on EPF/VPF is Tax FreeMoney is locked till your retirementCan take loan against EPF and also do partial withdrawalunder certain conditionsThe EPF interest rates are market linked and set by EPFOevery yearConvenient to invest as the amount is directly deductedfrom salaryThis option is only for salaried employeesThe withdrawal of EPF takes time and paperworkYou can opt for VPF by giving a request to your company at the start of every financial yearOnly your contribution in EPF and VPF is considered for Tax DeductionIf you withdraw your EPF before 5 years the amount is taxable and TDS would be deductedIn case you change your job, you should transfer the previous EPF to your current employer10Check EPF Balance Online

PPF (Public Provident Fund) PPF can be opened at Post Offices and most BanksDownload PPFCalculator 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, hence would vary every quarterThe GoodThe BadThe interest earned on PPF is Tax FreeLonger Locking periodHighest Safety – backed by Govt. of IndiaInvestment can be done online (for most banks)The PPF interest rates are market linked and hence wouldchange every quarterCan take loan against PPF and also do partial withdrawalHUFs and NRIs cannot open PPF AccountIt cannot be attached by court ordersCheck latest &historical interest ratesInvestment done till 5th of the month earns interest for the month. So deposit your money before 5th of monthPPF can be opened on minors name with either parents as guardianThe total investment in your PPF and the minor child PPF account (for whom you are guardian) should not exceed Rs1.5lakh in a financial year11PPF Premature Closure: Rules

Sukanya Samriddhi Account (SSA) Sukanya Samriddhi Account is a new scheme by Government to promote all round 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 250 required every year to keep the account activeDownload SSACalculator Interest Rates paid are market linked & is reset every quarter.The GoodThe BadThe interest earned on SSA is Tax FreeLonger Locking periodHighest Safety – backed by Govt. of IndiaThe SSA interest rates are market linked and hence wouldchange every quarterInvestment can be done online50% withdrawal allowed when girl turns 18 formarriage/higher educationHUFs and NRIs cannot open SSA AccountDocuments Needed – Date of Birth proof for Girl Child, Your Identity and Address ProofMinimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is leviedAccount can be closed before 21 years in case of marriageOnly resident Indians are eligible to open SSA account124 changes in Small Saving SchemesCheck latest &historical interest rates

NSC (National Saving Certificate) NSC is Tax saving Fixed Deposit Scheme from India PostCheck latest &historical interest rates It is available for 5 years (NSC VIII) – 10 Year NSC has been discontinued from 2016 The interest is market linked and changes every quarter. 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 10000The GoodThe interest accrued for NSC qualifies for Sec 80Cdeduction in subsequent yearsHighest Safety – backed by Govt. of IndiaNSCs can be kept as collateral security to get loan frombanksThe BadThe interest earned is taxableYou need to go to post office to invest and redeem. Thereis still no online investment/ redemption facilityTrust and HUF cannot investNo Tax deduction at sourceNSC is better tax saving option than banks Tax Saving FD (offering similar interest) as interest accrued for NSC qualifies forSec 80C deduction in subsequent yearsNSC would now be issued in form of Passbook rather than actual certificates13Tax Notices and What to do about it?

Tax Saving FD from Banks/ Post Offices These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while 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 0.60% additional interest for Senior Citizens and their employees As of today banks are offering 7% - 8% for general public and additional 0.25% - 0.6% for Senior CitizensThe GoodThe BadConvenient to invest. Many banks offers online facility forTax Saving FDThe interest earned is taxableRedemption on maturity comes directly to your bankaccountCannot be pledged to secure loan or as securityHigh Safety - FD up to Rs1 Lakh is insured by RBICannot be withdrawn prematurelyClick for Best Tax Saving FDRates – updated monthlyThe Post Office Time Deposit Account (which is FD offered by Post Office) of 5 Years maturity also qualifies for 80Cdeduction.Don’t be mislead by banks advertisements about their yield on Tax Saving FDs. Those are manipulative calculationsBe cautious of small co-operative banks as they have higher risk than bigger private and public sector banks14How safe is your BankFixed Deposit?How you LooseMoney in FD

Senior Citizens Savings Scheme (SCSS) As the name suggests, SCSS is for senior citizens who are 60 years or above on the date of opening of the account. Alsopeople 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 No partial withdrawal is permitted before 5 years. The account may be extended for a further period of 3 YearsThe GoodThe BadThe interest is paid quarterly to the saving account, hencecan serve as regular income for retiredRedemption on maturity comes directly to your bankaccount or through post dated chequesThe interest from SCSS is taxableBank would deduct TDS if the total interest in a year isover Rs 10,000NRIs and HUF are not eligible to open an accountHighest Safety – backed by Govt. of IndiaYou can open SCSS with Post offices, 19 nationalized bank or ICICI bankCheck latest &historical interest ratesSCSS account can be closed after 1 Year (with penalty) but in case you have availed Sec 80C benefit, it would be reversedIf your income is not taxable, you can provide form 15H or 15G so that banks don't cut TDSAny retired Defense Services personnel is eligible for SCSS irrespective of his age15LIC Varishtha PensionBima Yojana 2017How to fill Form15G/H to prevent TDSDownload SCSSCalculator

National Pension Scheme (NPS) NPS was introduced in April 2009 and has two types of Accounts – Tier 1 and Tier 2 Tier 2 account is optional and contribution to Tier 1 account is eligible for Tax Deduction u/s 80CCD Tier 1 account requires a minimum investment of Rs 1,000 annually and Rs 500 per transaction Investment to Tier 2 account is now eligible for Tax deduction u/s 80C for Central Govt Employees only (Budget 2019) Salaried employees can claim deduction up to 10% of your salary, which comprises basic DA, while for self employed itscapped at 20% of gross total incomeThe GoodThe BadThis is lowest cost Pension plan in the countryNPS is partially taxable at withdrawalYou can choose your investment profile based on yourrisk. NPS can invest maximum of 75% in equity.The locking is till you are 60 years of ageOn death the entire amount is paid to the nomineeYou can withdraw max of 60% at maturity and have tocompulsorily buy annuity for min 40% corpusYou should opt for 75% equity investment when young and slowly move to debt as you approach your retirement60% lump-sum withdrawal in now tax free (Budget 2019)Budget 2015 has announced additional tax exemption of Rs 50,000 for investment in NPS u/s 80CCD(1B)NPS can be opened up to 65 years of age (changed in November 2017 from 60 years)16How to Open NPSAccount?NPS – Maturity, PartialWithdrawal & Exit Rules

Equity Linked Saving Scheme ELSS is popularly known as Tax Saving Mutual Fund The minimum investment is Rs 500 There is no limit for maximum investment but the maximum deduction you get 1.5 Lakhs every yearThe GoodThe BadOnly investment option which can beat inflationHas the shortest locking period of 3 yearsELSS can be bought and redeemed onlineThe returns are dependent on stock market. So its highrisk investment. You might loose money at the end of 3yearsBudget 2018 has imposed Long Term Capital Gains/Dividend Distribution Tax of 10% on Equity Mutual FundsDoing SIP (Systematic Investment Plan) in one or two ELSS Fund is the best way to investDividend Reinvestment option in ELSS has been discontinued from February 2015Do not overdiversify by investing in multiple mutual fundsHow to invest in“DIRECT” Plans?You should try to invest directly to fund as this would give you 0.5% to 1% higher returns as compared to when youinvest through broker17How are MutualFunds Taxed?Dividend or GrowthOption?

Life Insurance The only product you should consider from Life Insurance companies is – 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!How much Insurance? Your life insurance should be adequate to replace your income This roughly turns out to be at least 7 to 10 times your present annual incomeHow are Life Insurance PoliciesTaxed on Surrender & Maturity? This might vary widely based on your assets, liabilities and situationOnline Term Plans are cheaper than products sold by agents. So if you are comfortable with online purchasing go for itNever hide anything from insurance companies. A wrongly stated fact might deny insurance to your dependents whenthey need it mostPPF along with Term Plans are better products than Endowment Plans. Similarly Mutual Funds with Term plans turn outbetter option than ULIPsThe maturity proceeds of life insurance is tax free u/s 10(10)D, subject to certain conditions18Does Your Life InsuranceOffers Tax Benefit?9 Tips to Buy the RightLife Insurance

Pension Plans from Insurance Companies 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 atleast 3.5%Why you should never buy these Pension Plans? Low Returns: They don’t invest in equities, which is must for long term wealth creation If you want to surrender these, you loose a lot in terms of returns On surrendering, the tax benefit you claimed earlier, would be reversed and you would need to pay these taxes back On maturity, you cannot withdraw the entire corpus and have to compulsorily buy AnnuityDon’t invest in pension plans just by seeing their emotional advertisements. They are high cost products and would ruinour retirement planningPPF/ EPF & VPF turns out to be a better plan for retirement even for most risk averse investorNPS is also good alternative to these Pension plans19When and How can Tax BenefitsClaimed Earlier be Reversed?

Popular Personal Finance Books (Indian Authors)The20above list in not list of recommendation but list of Popular Personal Finance Books by Indian Authors available on Amazon

Tuition Fee The expenses on tuition fees for maximum of two children is eligible for deduction u/s 80C In case a couple has four children, both can claim tax benefit as both have a separate limit of two children each The parent who makes the payment gets the tax advantage. If both parents are working and pay taxes, both can claimindividually up to the amount of fees paid 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 universityThe following expenses are not considered as tuition fees – Development Fee, Transport charges, hostel charges, Messcharges, library fees, Late fines, etcThis deduction is not available for tuition fees for self or spouse21Child Plans from MutualFunds – Should you Invest?

Stamp Duty & Registration Charges Stamp duty and registration charges up to Rs 1.5 Lakh can be claimed for 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 cannotbe 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 only22Example of Newspapers PublishingWrong Math to Fool Investors!

4 Income Tax New Rules in Budget 2019 Increased Tax Rebate u/s 87A: For individuals with net taxable income of Rs 5 lakh or less the tax rebate would be lesser of tax liability or Rs 12,500 whichever is lower Increased Tax for super-rich: Surcharge increased to 25% for income between 2 to 5 crore & to 37% for income beyond Rs 5 crores .

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