Download Automated All in One TDS on Salary for Govt & Non-Govt Employees for F.Y. 2018-19 With how to Save Income Tax for Salaried and Professionals for FY 2018-19

Budget 2018: Changes in Income Tax Rules

1. Standard Deduction of Rs 40,000 for Salaried and Pensioners

2. Transport Allowance & Medical Reimbursement No more tax exempt for salaried

3. Cess hiked from 3% to 4% (renamed as Health & Education cess)

4. Rs 50,000 interest income for senior citizens tax exempted under newly introduced Section 80TTB

5. Health Insurance Premium Tax exemption limit increased to Rs 50,000 u/s 80D for senior citizens

6. Increased deduction for medical treatment u/s 80DDB for senior citizens up to Rs 1

1. Section 80C/80CCC/80CCD

These 3 are the most popular sections for tax saving and have lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.

You can choose from the following for tax saving investments:

1.                 Employee/ Voluntary Provident Fund (EPF/VPF)

2.                 PPF (Public Provident fund)

3.                 Sukanya Samriddhi Account

4.                 National Saving Certificate (NSC)

5.                 Senior Citizen’s Saving Scheme (SCSS)

6.                 5 years Tax Saving Fixed Deposit in banks/post offices

7.                 Life Insurance Premium

8.                 Pension Plans from Life Insurance or Mutual Funds

9.                 NPS

10.            Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)

11.            Central Government Employee Pension Scheme

12.            Principal Payment on Home Loan

13.            Stamp Duty and registration of the House

14.            Tuition Fee for 2 children

NEW PICTURE 1

2. Section 80CCD(1B) – Investment in NPS

Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS. This is continued this year too.

3. Payment of interest on Home Loan (Section 24B)

The interest paid up to Rs 2 lakhs on home loan for self-occupied or rented home is exempted u/s 24. Earlier there was NO limit on interest deduction on rented property. Budget 2017 has changed this and now the tax exemption limit for interest paid on home loan is Rs 2 lakhs, irrespective of it being self-occupied or rented. However, for rented homes, any loss in excess of Rs 2 lakhs can be carried forward for up to 7 years

4. Payment of Interest on Education Loan (Section 80E)

The entire interest paid (without any upper limit) on education loan in a financial year is eligible for deduction u/s 80E. However, there is no deduction on the principal paid for the Education Loan.

The loan should be for the education of self, spouse or children only and should be taken for pursuing full-time courses only. The loan has to be taken necessarily from an approved charitable trust or a financial institution only.

The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. So in all, you can claim education loan deduction for a maximum eight years.

Download Automated Income Tax TDS on Salary for Government & Private Employees for Financial Year 2018-19 and Ass Year 2019-20 [ This Excel Utility can prepare at a time your Income Tax Computed Sheet + Individual Salary Sheet + Individual Salary Structure + Automatic H.R.A. Exemption Calculation + Automated Arrears Relief Calculator U/s 89(1) with Form 10E from F.Y.2000-01 to F.Y. 2018-19 + Automated Form 16 Part A&B and Form 16 Part B for F.Y. 2018-19 ]

 5. Medical insurance for Self and Parents (Section 80D)

Premium paid for Mediclaim / Health Insurance for Self, Spouse, Children, and Parents qualify for deduction u/s 80D. You can claim a maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 50,000 above 60 years of age.

An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 50,000 in case of either parent being senior citizens). This deduction can be claimed irrespective of parents being dependent on you or not. However, this benefit is not available for buying health insurance for in-laws.

HUFs can also claim this deduction for premium paid for ensuring the health of any To avail deduction the premium should be paid in any mode other than cash. Budget 2013 had introduced deduction of Rs 5,000 (within the Rs 25,000/30,000 limit) is also allowed for preventive health checkup for Self, Spouse, dependent Children, and Parents. Its continued to this year too.

Download Automated Arrears Relief Calculator From F.Y.2000-01 to2018-19

 

6. Treatment of Serious disease (Section 80DDB)

The cost incurred for treatment of certain disease for self and dependents gets a deduction for Income tax. For senior citizens, the deduction amount is up to Rs 1,00,000;  while for all others it's Rs 40,000. Dependent can be parents, spouse, children or siblings. They should be wholly dependent on you.

To claim the tax exemption you need a certificate from the specialist from Government Hospital as proof of the ailment and the treatment. In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed. In case of partial reimbursement, the balance amount can be claimed as the deduction

Diseases Covered:

1.                 Neurological Diseases

2.                 Parkinson’s Disease

3.                 Malignant Cancers

4.                 AIDS

5.                 Chronic Renal failure

6.                 Hemophilia

7.                 Thalassemia

 

8. Physically Disabled Taxpayer (Section 80U)

Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases. The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability)

A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government Hospital would be required as proof for the ailment.

Disabilities Covered

1.                 Blindness and Vision problems

2.                 Leprosy-cured

3.                 Hearing impairment

4.                 Locomotor disability

5.                 Mental retardation or illness

6.                 Autism

7.                 Cerebral Palsy

 

9. Physically Disabled Dependent (Section 80DD)

In case you have dependent who is differently abled, you can claim a deduction for expenses on his maintenance and medical treatment up to Rs 75,000 or actual expenditure incurred, whichever is lesser. The limit is Rs 1.25 Lakh for severe disability conditions i.e. 80% or more of the disabilities. Dependent can be parents, spouse, children or siblings. Also, the dependent should not have claimed any deduction for self-disability u/s 80DDB.

To claim the tax benefit you would need disability certificate issued by the state or central government medical board.

You can also claim tax exemption on premiums paid for life insurance policy (in taxpayers’ name) where the disabled person is the beneficiary. In case the disabled dependent expires before the taxpayer, the policy amount is returned back and treated as income for the year and is fully taxable.

40% or more of the following Disability is considered for purpose of tax exemption

1.                 Blindness and Vision problems

2.                 Leprosy-cured

3.                 Hearing impairment

4.                 Locomotor disability

5.                 Mental retardation or illness

10. Donations to Charitable Institutions (Section 80G)

The government encourages us to donate to Charitable Organizations by providing a tax deduction for the same u/s 80G. Some donations are exempted for 100% of the amount donated while for others it's 50% of the donated amount. Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income. Please note that only donations made in cash or cheque are eligible for deduction. Donations in kind like giving clothes, food, etc are not covered for tax exemption.

How to Claim Sec 80G Deduction?

1.                 A signed & stamped receipt issued by the Charitable Institution for your donation is a must

2.                 The receipt should have the registration number issued by Income Tax Dept printed on it

3.                 Your name on the receipt should match with that on PAN Number

4.                 Also, the amount donated should be mentioned both in number and words

11. Donations for Scientific Research (Section 80GGA)

100% tax deduction is allowed for donation to the following for scientific research u/s 80GGC

1.                 To a scientific research association or University, college or other institution for the undertaking of scientific research

2.                 To a University, college or other institution to be used for research in social science or statistical research

3.                 To an association or institution, undertaking of any programme of rural development

4.                 To a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme

5.                 To the National Urban Poverty Eradication Fund set up

12. Donations to Political Parties (Section 80GGC)

100% tax deduction is allowed for donation to a political party registered under section 29A of the Representation of the People Act, 1951 u/s 80GGC. The maximum exemption you can claim is limited to 10% of your gross annual income

13. House Rent in case HRA is not part of Salary (Section 80GG)

In case, you do not receive HRA (House Rent Allowance) as a salary component, you can still claim house rent deduction u/s 80GG. Tax Payer may be either a salaried/pensioner or self-employed.

To avail this you need to satisfy the following conditions:

1.                 The rent paid should be more than10% of the income

2.                 No one in the family including spouse, minor children or self should own a house in the city you are living. If you own a house in a different city, you have to consider rental income on the same

The House Rent deduction is lower of the 3 numbers:

1.                 Rs. 5,000 per month [changed from Rs 2,000 to Rs 5,000 in Budget 2016]

2.                 25% of annual income

3.                  (Rent Paid – 10% of Annual Income)

You need to fill form no 10BA along with the tax return form

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Download Automated TDS on Salary All in One for Govt & Non-Govt Employees for F.Y.2018-19 including Save Tax u/s 80C For F.Y. 2018-19 Investments for Section 80C

You can claim a maximum deduction of Rs 1.5 Lakhs u/s 80C (including Sections 80CCC, 80CCD) by investing in eligible instruments. Unfortunately, investments and expenditures allowed u/s 80C is too crowded and that makes the choice difficult for most people.

Below is the list of investments/expenses eligible for deduction u/s 80C:

1.                 Provident Fund (EPF/ VPF)

2.                 Public Provident Fund (PPF)

3.                 Sukanya Samriddhi Account (SSA)

4.                 National Saving Certificate (NSC)

5.                 Senior Citizen’s Saving Scheme (SCSS)

6.                 Tax Saving Fixed Deposits (for 5 Years)

7.                 Life Insurance Premium

8.                 Pension Plans from Mutual Funds

9.                 Pension Plans from Insurance Companies

10.            New Pension Scheme (NPS)

11.            Tax Saving Mutual Funds (ELSS)

12.            Central Govt. Employees Pension Scheme

13.            Principal Payment on Home Loan

14.            Tuition Fees for up to 2 children

15.            Stamp Duty for registration of Home

Download: Free e-book for Income Tax Planning for FY 2018-19

The post below suggests the approach to select the investments for tax planning.

Expenditures Eligible for Tax Benefit:

The first step is to check all expenditures which are eligible for tax deduction. Below is the list:

1. Tuition Fees for up to 2 children

The expenses on tuition fees for full-time courses for a maximum of two children is eligible for deduction u/s 80C. However, the deduction is not available for tuition fee to coaching classes or private tuitions. The following expenses are not considered as tuition fees – Development Fee, Transport charges, hostel charges, Mess charges, library fees, Late fines, etc.

2. Stamp Duty for registration of New Home

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 cannot be carried forward to next year. Also, the house should be in the name of assessee claiming the deduction.

In case you have paid stamp duty for a new home, you most probably would exhaust your 80C limit for the year and no further investment might be required.

Compulsory Deductions:

There are some compulsory deductions that are eligible for tax benefit u/s 80C. Check if you contribute in any of such deductions:

1. Provident Funds (EPF/VPF)

EPF is a compulsory deduction for most salaried employees. The deduction can be 12% of the basic salary & dearness allowance or Rs 1,800 every month. Look at your salary statement to know how much have you contributed for the year. Count only your contribution. Employer’s contribution is not eligible for tax saving investment. You can also have some amount contributed through Voluntary Provident Fund (VPF), which can be up to 100% of the basic salary & DA.

2. National Pension Scheme (NPS)

NPS (Tier 1) is compulsory for most Government employees who joined after 2004. Look at your salary slip to check your deduction. Again only your contribution is a valid deduction. Employer’s contribution is not eligible. The good thing is you can use this contribution to claim an additional tax deduction up to Rs 50,000 under the newly introduced Section 80CCD(1B). We have explained this in the last paragraph of the post.

Recurring Deductions:

There are some deductions which happen year on year like home loan repayment, insurance premium etc.

1. Home Loan Principal Amount

Are you paying the home loan? The principal component paid every year is eligible as a tax deduction. For this, you can download the tax statement from the banks’ website. In case not get it from the loan provider. This would give you an estimate of principal and interest paid for the financial year.

2. Insurance Premium

Have you bought life insurance products like ULIP, Endowment Plan or Term Insurance where you need to pay the premium for subsequent years? If you want to continue investing in the same you can continue to claim tax benefit.

3. PPF (Public Provident Fund)

If you have PPF account you should contribute minimum Rs 500 in a financial year. In case you don’t do, a fine is levied.

4. Sukanya Samriddhi Account (SSA)

Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied.

5. NPS

Do you have NPS account? A minimum contribution of Rs 1,000 is required every financial year to keep the account active.

For many people, the 80C deduction limit is reached by this time. In case not, choose from the list below depending on your risk profile and investment goals:

New Investment for 80C:

1. Term Life Insurance

Do you have dependents? Would they survive financially in case something happens to you? Do you have enough life insurance? If no go get a term insurance first. It’s important to opt for protection first.

Useful Tips:

§                    Online term plans are much cheaper than offline. So it makes sense to go for online plans.

§                    Do not provide false information in the insurance form. The insurance claim can be rejected for wrong information.

§                    Do not buy anything other than Term Plans from insurance companies. No money back, endowment plans!

2. ELSS (Equity Linked Saving Scheme)

Popularly known as Tax saving Mutual Fund. These are equity-based mutual funds and one of the best investment options to create wealth in the long run while saving tax. In case you can digest the volatility of the stock market, this is the recommended option.

Lock-in Period: 3 Years

The Good:

§                    Among the tax saving investments, ELSS has least lock-in period of 3 years.

§                    The gains on ELSS Fund is Tax-Free.

§                    Convenient to buy and manage as ELSS can be bought and redeemed online.

The Bad:

§                    There can be considerable volatility in returns and you can get negative returns at the end of 3 years.

Helpful Tips:

§                    Invest through SIP (Systematic Investment Plan). This helps in tiding over volatility to some extent.

§                    Choose “Growth” option over “Dividend Payout” as this creates wealth in the long run.

§                    Try to invest directly to fund as this would give you 0.5% to 1% higher returns as compared to when you invest through a broker If doing lump-sum check for stock market valuations. If you invest at high valuations, you might see very low or negative returns at the end of 3 years.

§                    Avoid “closed-ended” ELSS NFOs which are launched at this time of the year.

 Download: Excel-based Income Tax Calculator for Govt & Non-Govt Employees All in One TDS on Salary for FY 2018-10 [AY 2010-20 [ This Excel utility can prepare at a time your Income Tax Computed Sheet + Individual Salary Sheet + Individual Salary Structure + Automatic H.R.A. Calculation + Automated Arrears Relief Calculator U/s 89(1) with Form 10E from F.Y.2000-01 to F.Y. 2018-19 + Automated Income Tax Form 16 Part A&B and Form 16 Part B for F.Y. 2018-19 ]

3. PPF (Public Provident Fund)

PPF is another popular tax saving investment option for 80C, especially for people without any other provident fund.

Lock-in Period: 15 Years. However partial withdrawal is allowed from 7th year

The Good:

§                    The interest earned on PPF is Tax-Free

§                    After opening the PPF account, investment can be done online every Year (for some banks)

§                    Highest Safety – backed by Govt. of India

The Bad:

§                    The lock-in is for 15 years but there is partial liquidity from 7th year onwards.

Helpful Tips:

§                    Investment done till 5th of the month earns interest for the month. So deposit your money before 5th of a month

§                    You can use a combination of PPF and ELSS for tax saving investments. In case you find stock market over-valued, PPF is a good option.

4. Senior Citizen’s Saving Scheme (SCSS)

SCSS is a good option for senior citizens (above 60 years of age) as it gives regular quarterly interest income directly in a bank account.

Lock-in: 5 years

§                    Highest Safety – backed by Govt. of India

§                    The interest rate offered is highest among the small saving schemes

The Bad:

§                    The interest received is taxable.

§                    TDS would be deducted if the total interest in a year is over Rs 10,000. However, if eligible Form 15H can be submitted to avoid TDS.

Helpful Tips:

§                    SCSS account can be closed after 1 Year (with penalty) but in case you have availed Sec 80C benefit, it would be reversed.

§                    The joint account can be opened only with your spouse. There is no age limit applicable for the joint account holder.

5. Sukanya Samriddhi Account (SSA)

SSA can be opened by parents of girl child subject to certain conditions. SSA can be a good option for fixed income investment for the child. However, you should also invest in ELSS or other equity mutual funds for goals related to the child.

Lock-in: Deposit to the account to be made for 14 years and account matures at 21 years from the date of opening

The Good:

§                    The interest earned on SSA is Tax-Free and also higher than that offered to PPF

§                    50% withdrawal allowed when a girl turns 18 for marriage/higher education

§                    Highest Safety – backed by Govt. of India

The Bad:

§                    No provision of Loan or pre-mature withdrawal unlike PPF

Helpful Tips:

§                    Minimum deposit of Rs 1,000 needs to be made every year else penalty of Rs 50 is levied

§                    Account can be closed before 21 years in case of marriage

6. National Saving Certificate (NSC)

NSC can be bought at post offices to save tax u/s 80c. It is available for 5 years (NSC VIII) only. The interest offered is 7.8%.

Lock-in: 5 Years

The Good:

§                    The interest is higher than most tax saving bank fixed deposits.

§                    Certificates can be kept as collateral security to get a loan from banks

§                    No Tax deduction at source

§                    The interest accrued for NSC qualifies for Sec 80C deduction in subsequent years

§                    Highest Safety – backed by Govt. of India

The Bad:

§                    The interest earned is taxable

§                    You need to visit the Post office for buying and redeeming NSC units. This can be a hassle for people who shift addresses frequently.

Also Read: Calculate Tax on Arrears in 7 Easy Steps

Helpful Tips:

§                    You can buy NSC in denominations of Rs 100, 500, 1000, 5000 and 10000

§                    NSC is better to tax saving option than banks Tax Saving FD (offering similar interest) as interest accrued for NSC qualifies for Sec 80C deduction in subsequent years

7. Tax Saving Bank Fixed Deposits

India loves fixed deposits and FD which saves tax is obviously very popular.

Also Read: Highest Tax Saving Bank Fixed Deposit Rates U/S 80C across 44 banks

Lock-in: 5 years

The Good:

§                    Convenient to invest. Many banks offer online facility for Tax Saving FD

§                    High Safety – FD up to Rs 1 Lakh is insured by RBI

The Bad:

§                    The interest received is taxable. (Tax treatment of Fixed Deposits)

§                    Cannot be withdrawn prematurely

§                    Cannot be pledged to secure a loan or as security

Helpful Tips:

§                    The minimum tenure is of 5 Years. Some banks offer special schemes for longer tenures with slightly higher interest rates

§                    Don’t be mislead by banks advertisements about their yield on Tax Saving FDs. Those are manipulative calculations. [SBI Tax Saving Deposit Scheme – Interest & Annual Yield]

§                    Be cautious of small co-operative banks as they have a higher risk than bigger private and public sector banks.

8. Pension Plans from Mutual Funds

There are Pension plans from mutual funds which offer tax benefit u/s 80C:

1.                 Templeton India Pension Plan

2.                 UTI Retirement Benefit Pension Fund

3.                 Reliance Mutual Fund Pension Plan

The above funds are hybrid or balanced mutual funds – the first two funds are debt oriented mutual fund while the one from Reliance has two funds – one debt oriented and other equity-oriented.

Lock-in: 5 years

Helpful Tips:

§                    Reliance Mutual Fund Pension Plan is a better option among the three funds as you use Wealth option (which is equity oriented fund) to create the corpus and then switch to Income option (which is debt oriented fund) for regular income after retirement.

§                    All 3 funds levy exit load to discourage people from exiting early

Download: Excel-based Income Tax Calculator for Non-Govt Employees All in One TDS on Salary for FY 2018-19[AY 2019-20 [ This Excel utility can prepare at a time your Income Tax Computed Sheet + Individual Salary Sheet + Individual Salary Structure + Automatic H.R.A. Calculation + Automated Income Tax Form 16 Part A&B and Form 16 Part B for F.Y. 2018-19 ]

9. NPS (National Pension Scheme)

Some of you might have to contribute compulsorily to NPS. In this case, you can take a deduction up to Rs 50,000 under the newly introduced Section 80CCD(1B). And then you can choose a more efficient investment in 80C.

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