If a taxpayer has exhausted the limit of Rs 1.5 lakh under Section 80C of the Income-tax Act,1961 then additional tax can be saved by investing Rs 50,000 in NPS. The deduction claimed will be over and above Section 80C deduction of Rs 1.5 lakh.
Deduction under section 80C of the Income-tax Act, 1961 can reduce up to Rs 1.5 lakh from the gross total income in a financial year. Here is how this section works and can help you save tax in a financial year.
For FY 2020-21, if you have opted for the old tax regime, then there are various ways to save tax. Here is a quick look at how you can save tax in a financial year.
In the case between S Kumars Nationwide and Chief Commissioner of Income Tax, the NCLAT ruled the liquidator is not required to prepare a balance sheet and profit & loss account and get it audited during the liquidation process.
“The cap is not applicable on PPF because there is already a limit of ₹1.5 lakh contribution in a year to PPF,” the official said. The government has proposed changing taxation rules for provident funds by levying income-tax on the interest earned on contributions exceeding ₹2.5 lakh in a financial year.
Effective interest earned will fall sharply, particularly for those in topmost income slabs. The return falls marginally to 8.06% for someone contributing Rs 3 lakh a year to PF but falls sharply as the contribution goes up, declining to 6.12% for those putting in Rs 24 lakh a year.
On the plain reading of the budget documents, it appears that tax will apply to the interest earned on contributions made to Employees' Provident Fund (EPF), Voluntary Provident Fund (VPF) as well as Public Provident Fund (PPF).
In order to encourage first time homebuyers, deduction on account of home loan interest up to Rs 1.5 lakh which was available on loans taken up to March 31, 2021, has now been extended by one year to March 31, 2022.
If your current basic salary is up to Rs 1,73,611 per month and you are not contributing to VPF then you do not need to worry about the tax imposed by this budget. Majority of salaried individuals with current salary below this level will not be impacted by this tax at present.
Gifts from specified relatives or those received on certain occasions like marriage; interest from PPF account is also tax-free. Your salary includes income from employer, including value of perks and allowances. Here are other sources of income.
When securities (listed other than a unit/equity oriented MF/zero coupon bonds) are held for up to a year, the gain is treated as Short Term Capital Gain (STCG). For all other type of capital assets, holding up to 24/36 months will qualify as STCG.
Finance minister Nirmala Sitharaman on Monday announced the Union Budget for 2021-22. While the government has kept the tax slabs unchanged, taxpayers will have some relief in dealing with their personal finances.
Even a loan taken from an employer, friend, private lender is eligible for deduction — but only on the interest and not principal. And you’ll need a certificate from the lender.
For those who have been eyeing a home for years, 2021 may be a good year to jump in. Home loan rates are down, as are property prices. States such as Maharashtra and Karnataka have also slashed stamp duties. The bonus is that you get tax breaks.
You can intimate your employer if you want to opt for the new regime and the employer will deduct tax accordingly. The only bar is that once intimated to the employer, the option cannot be modified during the year.
The silver lining of being a gig worker is that you can claim various expenses. Against capital expenditure incurred on purchase of assets such as furniture, computer, or laptops you can deduct depreciation from your income – in short, the deduction for impairment in asset value is spread over a number of years at the prescribed rates.
This is the fourth time that the deadline of the scheme has been extended- first from March 31, 2020, to June 30, 2020, secondly to December 31, 2020, and thirdly to January 31, 2021.
The time-limit for belated or revised returns (to correct any errors) is shorter, and these can now be filed three months before the end of the relevant assessment year, or before the completion of the tax assessment, whichever is earlier. Let us look at a case study.
With this amendment, return on investment up to Rs 2.5 lakh in PF will remain tax-free while the return on the portion exceeding that amount will be treated as income in the investor's hand. This portion will be taxed at the rate at which the investor’s income is taxed, said Sonu Iyer of Ernst and Young.
The tax on PF interest comes after the last budget had capped the tax exemption on employers’ contribution to PF, NPS and superannuation fund to Rs 7.5 lakh. That impacted only employees with very high salaries. This year’s proposal has a wider impact.
The finance minister on Monday said that tax officials can only go three years back in time to scrutinise any lapses in tax payment, a step that would help the government control the much feared ‘tax terrorism’.
Disappointment was writ large on the face of the common man on the street after the Union Budget was presented by Union finance minister Nirmala Sitharaman with many saying that it had nothing much for the middle class.
While no changes have been proposed to the personal tax rates, the budget contains various relief measures and proposals to facilitate ease of compliance for the taxpayers.
This proposal may be bad news for those who are otherwise not mandatorily required to file income tax return under the tax laws but have total income comprising of interest income, dividend income, annuity received from insurance companies etc.
“Instances have come to the notice where high net worth individuals are claiming exemption under this clause by investing in ULIP with a huge premium. Allowing such exemption in policy/policies with huge premium defeats the legislative intent of this clause. The intention was to provide benefit to small and genuine cases of life insurance” says the budget memorandum.
The FM's budget proposal will bring payment of dividend tax on par with capital gain tax in terms of compliance which is paid only after realisation of the gain in the hands of the taxpayer. This will also save the unnecessary late fee and interest which taxpayers would have incurred thanks to late payment of advance tax due to failure to estimate dividend income.
A big reduction in taxable income is possible if he pays rent to parents and claims exemption for the HRA. That will shave off Rs 2.4 lakh from his taxable income and bring him close to the Rs 5 lakh threshold.
This is largely happening in the cases where the difference on account of deductions and exemptions shown in the Form 16 and the ones claimed in final ITR is big.
As per a government press note in 2012, if the amount of income tax refund or tax payable is this much, then you are neither liable to pay such tax demand amount nor will you receive such refund amount in your pre-validated bank account.
A possible reform is to raise the tax-exempt limit of Rs 1.5 lakh on savings schemes for individuals, unchanged since 2014-15, to let taxpayers (mostly the salaried) diversify their financial savings to more rewarding instruments.
ET Wealth assessed 10 popular tax-saving instruments on eight key parameters. We have also explained the pros and cons of each tax-saving option to help readers invest in the one that suits them best. Find out how the different options scored this year.
The facility allows for the filing of complaints by persons who are existing PAN/Aadhaar holders as well as for persons having no PAN /Aadhaar. An individual can file a complaint either without reward or by becoming informer and claim reward.
As per income tax laws, exemption from capital gains tax on sale of equity shares, being long term in nature, is available in Sec 54F if the sale proceeds are utilised for the purchase or construction of a new residential property.
If you take any gift from your son, the amount is not treated as income itself and there is no column in which such amount can be reported and you may need to explain the same during any assessment by the tax authorities.
To bring ease to the taxpayers, the income tax department has sent an email containing the link of the tax calendar for 2021. If you have not received the link, here is a link for you to bookmark the important income tax dates for 2021.
Paying too much income tax? ET Wealth tells readers how they can optimise their tax by rejigging their salary, other income and investments to minimise the tax liability.
As per the press release, the deadline of filing ITR for other taxpayers whose accounts are required to be audited (including partners of a firm) and/or those who have to submit a report in respect to international financial transactions has been extended to February 15, 2021.
Income tax is a tax levied directly by the central government on the incomes earned by the individuals and other non-individual entities such as Hindu Undivided Family (HUF), partnership firm and so on during a financial year. These various sources of income include salary, pension, capital gains, sale of financial investments, interest income, other incomes and so on.
Unlike the Goods and Services Tax (GST) Council where the Union Finance Minister and State Finance Ministers decide the rates, the income tax rates are announced by the Finance Minister during the year’s Union Budget.
The rate at which your total income earned during the year will be taxed depends on the slab in which your income falls. Over and above the income tax, a cess and surcharge is levied. The cess is payable by all taxpayers. For those earning more than Rs 50 lakh a year, a surcharge is levied between 10 percent and 37 percent.
The total income earned by a taxpayer during a financial year has to be reported to the government in the assessment year by filing income tax return (ITR filing).
Financial year is the year in which income is earned by a taxpayer; a financial year is between April 1 and March 31. Assessment year is the year immediately following the financial year for which the return is to be filed.
Income earned from various sources such as salary, pension, interest from fixed deposits (FDs), savings account, capital gains from sale of house, equity mutual funds, debt mutual funds and so on have to be reported in ITR.
1. What is the basic exemption limit for individuals aged below 60 years? According to income tax laws, it is mandatory to file ITR if your income exceeds the basic exemption level. The basic exemption level depends on the age of the individual during the financial year.
Currently, for individuals below 60 years of age, the maximum income exempt from tax is Rs 2.5 lakh in a financial year. This can change depending on the announcements made in the Union Budget.
2. What are the tax rates at which income is charged? The income tax slab rates are 5 percent, 20 percent, and 30 percent.
Also Read:Latest income tax slabs
3. How to file income tax return An individual can file income tax return by registering himself on the incometaxindiaefiling.gov.in or via private e-filing websites.
4. What is the difference between gross total income and net total income? Gross total income refers to the total income earned by the taxpayer. Income tax laws allow an individual to claim certain tax-exemptions (such as house rent allowance) and deductions under various sections such as section 80C for investments made in Public Provident Fund, equity mutual funds etc. of up to Rs 1.5 lakh.
Gross total income minus tax-exemptions and deductions would result in net total income. The tax liability of the person will be calculated on the net total income.
5. What is the last date to file income tax return? The last date to file income tax return for individuals is July 31, unless extended by the government.
