Income tax planning guide – Finan017-18 cial year 2:- 23/01/2018, by Anu Jose FCA, Jorshan Johnson

Income tax planning guide – Finan017-18 cial year 2:- 23/01/2018, by Anu Jose FCA, Jorshan Johnson

Tax Rate:

The Tax rate for income between Rs.2.5 lakh to Rs.5 lakh has been reduced from 10% to 5%.

Surcharge

10% surcharge introduced for income between Rs.50 lakhs to Rs.1crore.

Tax Rebate – section 87 A

The tax rebate reduced to Rs.2,500 for income up to Rs.3.5 lakhs.

TDS on Rent – section 194 IB

TDS of 5% applicable if the monthly rent paid is more than Rs.50,000/-

Loss from HP – section 71(3A)

The new section restricts the set-off of loss from house property to maximum of Rs.2 lakhs irrespective of the house is rented or self-occupied.

Penalty – section 234F

The additional fee shall be levied for delay in filing the tax return beyond the due date. The fees payable shall be Rs. 5,000 where the return is filed post the due date but on before 31st Dec and Rs.10,000 in other cases. It is restricted to Rs.1000 for taxpayers whose income is up to Rs.5 lakhs.

 Income tax slabs
Individual/HUF Senior Citizens Super Senior Citizens
Slab Rate Slab Rate Slab Rate
Up to Rs.2.5 lakh Nil Up to Rs.3 lakh Nil
Rs.2.5 – 5 lakh 5% Rs.3 – 5 lakh 5% Up to 5 lakh Nil
Rs.5 – 10 lakh 20% Rs.5 – 10 lakh 20% Rs.5 – 10 lakh 20%
Above Rs.10 lakhs 30% Above Rs.10 lakhs 30% Above Rs.10 lakhs 30%

 

 

 

 

Financial Year and Assessment Year

The Financial Year (FY) is the year in which you earn an income. The Assessment Year (AY) is the year following the FY in which the income is evaluated and filing is made.

Return of Income

  • The particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department through a return of income.
  • The return forms are known as ITR forms (Income Tax Return Forms).

Benefits of e-filing the return of income

  • Save time and efforts.
  • The e-filed returns are generally processed faster.
  • Easy to maintain the copies of the return filed.
  • Paper returns can only be filed by those who are above 80 years of Age or by an individual or HUF whose income does not exceed five lakh rupees and who has not claimed any refund in return of income.
  • e-Return can be filed by IDT portal or through ERIN such as integrated.
  • ITRV form to be sent to CPC, Bangalore within 120 days, from the e-filing date.
  • By verifying the return electronically (EVC), there is no need for sending the ITRV to CPC.
  • EVC can be done using assesse’s Bank Account, AADHAAR, Demat Account or by directly logging in e-filing portal.

Due date for filing the return

The due date for filing of return of income in case of individuals/HUF is 31st of July.

Income Sources and available Deductions

SALARY:

Income: Income from employer

Deductions : HRA, Medical Reimbursement, LTA, Conveyance allowance, etc.

HOUSE PROPERTY:

Income : Gain or Loss from property owned

Deductions : Standard deduction of 30% and interest on loan for buying/construction of property.

CAPITAL GAIN:

Income: Profit/Loss from sale of Capital Assets (Property, Jewellery, Shares, MFs)

Deductions : Depends on assets, holding period, cost of indexation, carried forward losses and investment in specified options.

OTHERS:

Income : Any income, other than the above

Tax Free : Dividends up to Rs.10 lakhs/SB interest up to Rs.10,000, Gift from Relatives, Interest from NRE accounts, PPF account etc.

Components of Salary

Fully Taxable

  • Basic Salary
  • Dearness Allowance (DA)
  • Special Allowance
  • Bonus
  • Arrears
  • Food Allowance

Partially Taxable

  • Medical Reimbursement up to Rs. 15,000 per year is exempted.
  • Transport Allowance up to Rs.1600per month is exempted
  • Leave Travel Allowance (LTA)
  • House Rent Allowance (HRA)

Tax Free

  • Newspaper / Journal Allowance – amount up to Rs. 12,000/- p.a.
  • Telephone / Mobile Allowance for office use.
  • Meal Coupons up to Rs.2200 per month.

Deductions Available

Particulars of deduction Limit
Investment /Tuition Fees/Housing Loan principal – Section 80C Rs.1.5 Lakhs
National Pension System – Section 80CCD(1B) Over and above 80C Limit

Additional Limit : Rs.50,000

 

Medical Insurance Premium – Section 80D

 

Limit : Rs.25,000/Rs.30,000

 

Educational Loan Interest – Section 80 E

 

No Limit
Donation – Section 80G Limit : 10% of Gross Total Income

 

Rent Paid – Section 80GG Limit : 5000 per month

 

Interest on Home Loan – Section 24 Limit : Rs.2,00,000

 

Additional deduction of Rs 50,000 under section 80EE Subject to conditions
Long term Capital gains exempted from tax in respect of STT paid equity shares/MF under section 10(38)

 

No limit
Dividend Income exempted under Section 10 (34) Limit : Rs.10 lakhs

 

80C     – Tax Saving Options

Section 80C of Income Tax Act, allow deduction of investment or spending from income tax. But here’s how you can maximise your savings by making some common investments.

Market linked investments:

  • ELSS – Mutual Fund Equity Linked Savings Scheme (MF ELSS) : This has lowest lock-in period of 3 years. In case of a monthly SIP, each instalment has a 3 year lock-in.
  • ULIP – Unit Linked Insurance Plans (ULIPs) : ULIPs are market linked investments offered by insurance companies; lock-in period of 5 years and gain post lock-in tax free.
  • NPS – National Pension System (NPS) : Investments of up to Rs.1.5 lakh can be claimed for tax deduction in a financial year. Besides, an additional deduction of up to Rs.50,000 can be claimed under section 80CCD (1B).

Fixed income investments :

PPF/EPF/VPF

  • Employee Provident Fund : This is your contribution towards provident fund that gets deducted from your salary. Contributions towards        Voluntary Provident Fund can also be considered for deduction.
  • Public Provident Fund : This investments has one of the longest tenures of 15 years with further extension of 5 years allowed each time. The interest rates are linked to that of government securities.
  • National Saving Certificate (NSC) : Investment in NSC can be claimed as deduction.
  • Bank Fixed Deposits : Fixed deposit of 5 years with a scheduled bank are eligible for deduction
  • Tax saving fixed deposits/post office time deposit
  • Senior Citizen Savings Scheme (SCSS) : Investments in SCSS can also be claimed as deduction

Other expenses:

  • Life insurance Premium: You can claim this deduction when you pay the life insurance premium for yourself, your spouse or your children.
  • Tuition Fees: If you have paid tuition fees towards full-time education of your children, you can claim deduction for up to two children.
  • Home loan principal repayment: Repayment of principal amount towards a Housing loan can be considered.

Form 26AS

Form 26AS is known as annual statement which contain all tax related information of a tax payer. The details give a clearer picture of the tax commitments of the tax commitments of a tax payer. It is associated with PAN.The form also contains details of

  • Tax Deducted at Source (TDS)
  • Tax Collected at Source (TCS)
  • Details of Advance Tax, along with Refunds and
  • High value Transactions done by the tax payer.

FORM 16

Form 16 (known as TDS certificate) is an important document that contains details of salary income received, quantum of deduction the employee has availed of and how much of tax has been deducted by the employer during the financial year. The employer has to issue Form 16 to the employees showing the total TDS deducted on income.

FORM 16A

Form 16A is also a TDS Certificate. Form 16 is for salary income, where as Form 16A is applicable for TDS on Income other than salary. Banks issue a Form 16A when TDS is deducted by them on interest earned by you in fixed deposits. If you are freelancer, your clients will issue you form 16A if they have made TDS deductions from payment they make to you. Form 16A is also issued for TDS deductions on insurance commission paid. This certificate also has details of name & address of deductor / deductee, PAN/TAN details, and details of TDS deducted & deposited. The income on which TDS is deducted is also specified.

Due Dates for Advance Tax Payments

There is no need for payment of advance tax for a senior citizen who does not have income from business / profession.

  • 15% of estimated tax – June 15, 2017
  • 45% of estimated tax – September 15, 2017
  • 75% of estimated tax – December 15,2017
  • 100% of estimated tax – March 15, 2018

Advance taxes and final tax can be paid at authorized bank branches and remember that all tax payers have to file their ITR.

Documents to be kept ready for ITR filing

  • Form 16/Form 16A
  • Form 26AS Housing Loan Interest Certificate
  • Donation Receipts
  • Photocopy of PAN
  • Photocopy of Aadhaar
  • Challan copy of Tax paid

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