Taxing Time

It’s that time of the year again when reminders from the finance & Hr dept are filling up our mail box. ‘Investment Declaration’, ‘Tax’, ‘Exemption’, ‘HRA’, ‘Flexi’ are the only thing one hears about. I hate this time as much as I hate paying tax, but some things can’t be avoided. I’m listing some basic fundas I know about Income Tax India. If you know of something different or better, let me know!

 

What is the Tax slab for 2009-10?

taxes

 

What is Taxable Income?

Gross Salary Income + Income from any other source (Interest, House Rent etc)

LESS Exemption under HRA

LESS Conveyance Allowances of 9600/-

LESS Medi-claim/ LTA/ any other allowance

LESS Interest paid on Home loan up to 1, 50,000/-

= Gross Total Income

LESS Deductions under Sec 80 C up to 1, 00,000/-

LESS Deduction under Sec 80 D/E/G

= Total Taxable Income

 

What is the HRA exemption?

HRA Exemption – Least of (Actual HRA received OR Rent Paid by the employees less 10% of Basic OR 50% of Basic (metro city))

So, if you live in Delhi & 50% of your basic is 1 lk p.a., which is the HRA and the rent paid is also 1 lk then the tax exemption will be 90 thousand. (1lk- 10% lk)

The only way you’ll get HRA = tax exemption is when your rent is Rs.1.20 lk i.e. HRA+10%of Basic

 

What is deduction under Sec 80 D/E/G?

Sec 80 D Medical Premium for self / parent (up to 15,000/-)

Sec 80 E Interests paid on Education Loan

Sec 80 G Donations to approved fund (generally 50% of donated amount)

 

What is deduction under Sec 80 C?

Every one is always talking about the 1 lk investment. These are done under section 80C.

They include an employee’s contribution towards PF, so that investment that needs to be made is of

1 lk – PF deductions for the year (12% of basic). The rest of the investments may be made in one or all of the following:-

Ø Public Provident Fund

Ø Life Insurance premium (ULIP/ Traditional)

Ø Pension plans

Ø ELSS – Equity Linked Saving Schemes of mutual funds

Ø Infrastructure bonds

Ø National Savings Certificate

Ø Special Fixed deposits (5 years)

Ø Home loan principal repayment

 

What is the Tax on Bonus?

All Variable Income/ any one time variable payment (e.g. Incentive, Overtime and Other Allowance) have a higher tax rate which is calculated and deducted in the same month in which the payment is made.

 

Lastly, Tax Saving is a good idea but not Tax Evasion. Don’t fell bad about paying taxes, it’s our country that will benefit :).

 

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