DEDUCTIONS
Have
you ever noticed certain items in your Form 16 appearing
under the heading "Deductions under Chapter VIA"?
Here
are some of the sections explained for your knowledge.
What
is Chapter VI- A?
Chapter VI-A enlists the deductions made from the
Gross Total Income to arrive at the Net Income or Taxable
Income. These deductions are standard and are mandatory
i.e. deducted from the Gross Total Income. Tax rebate
relates to investments done in order to reduce the tax.
What
if Gross Total Income is NIL?
The deduction under Chapter VI-A cannot be claimed If
Gross Total Income is NIL.
Under
which section can I seek deduction, If I have invested
in Pension Fund of Life Insurance Corporation or Unit
Trust of India?
You can claim deduction under section 80CCC upto a
maximum of Rs. 1,00, 000/- which is included in Section 80L.
How
much maximum deduction can I get if I have taken Mediclaim?
You can claim deduction under section 80D upto a maximum
of Rs. 10,000/- but if one of the dependants for whom
you are paying a Medical Insurance Premia is above 65
years old, the the deduction can be claimed till 15,000/-.
Can
I get exemption for donations to charitable institutions?
Donations can be claimed under section 80G. Each charitable
institution is given a certificate stating that either
50% or 100% of the amount received as donations is exempt
for the donor. Please ensure that you confirm the amount
of deduction available when you make the donation.
REBATES
What is the limit taxable income
for senior citizens?
A person who is 65 years
& above is from Rs.1,85,000 the taxable income.
What is the limit for taxable income for women?
The income is exempt upto Rs.1,35,000/-
If
I do not submit the proof of Investments made to the employer
can I still get deduction U/S 80C?
Yes, you can still get
deduction, when you file your income tax returns attach the
proof of investments made by you with the return. This
is known as claiming through refund.
What
are the instruments where can one invest to avail of the
deduction U/S 80C?
Provident Fund -
This is a retirement benefit scheme. Under this scheme,
a stipulated sum is deducted from the salary of the employee
and a corresponding amount is contributed by the employer.
Public
Provident Fund - Under this a PPF account is opened
with State Bank of India or any nationalized Bank. The
minimum amount that has to be deposited is Rs.500 and
the maximum that can be deposited is Rs.70,000/- in the
previous year.
ENSURE
THAT YOU DEPOSIT SOME MONEY EVERY MONTH IN PPF OR NSC
OR WHEN YOU RECEIVE ANY AMOUNT IN LUMPSUM LIKE BONUS SO
THAT YOU ARE NOT BURDENED WITH EXCESS LIABILITY IN THE
MONTH OF MARCH.
National
Saving Certificate - One can purchase National Savings
Certificates either from an agent or from the Post Office
to claim rebate under the above section. Interest Accrued
on NSC is also considered as an Investment for claiming
deduction U/S 80C every year.
Unit
Linked Insurance Plan, 1971 of the Unit Trust of India
- Contribution can be made in the name of any person mentioned
below:
i.
In the case of an individual, the individual, the wife
or husband and any child of such individual.
ii. In the case of a Hindu undivided family, any member
thereof.
Unit Linked Insurance Plan, 1971 of the L.I.C. Mutual
Fund- Contribution can be made in the name of any person
mentioned below,
iii. In the case of an individual, the individual, the
wife or husband and any child of such individual.
iv. In the case of a Hindu undivided family, any member
thereof.
PLAN
MY LIFE INSURANCE
Life
Insurance Corporation has various schemes designed for
women other than general schemes which are applicable
to all. Deduction's is available on LIC premia paid
by an individual, on her or on life of her spouse or,
on life of any child (including adult children and a married
daughter) of such individual.
Are
there any Insurance Schemes that are especially available
for Couples/ Married Women?
Yes, there are different
Schemes available for the Couples/Married Women.
JEEVAN
MITRA : This policy gives the benefits of Endowment
Assurance policy, this provides additional insurance
cover equal to sum assured in the event of death during
the term of the policy so that the total insurance cover
in the event of death is twice the basic sum assured.
Bonus will be reckoned on the basic sum assured at rates
applicable to endowment assurance.
JEEVAN
SAATHI : The sum assured will be payable on the
first death and again on the death of the survivor during
the term of policy. Vested bonuses would also be paid
along with the sum assured on second death. If one or
both the lives survive to the maturity date the sum
assured along with the vested bonuses would be payable
on maturity date. The premiums under this plan are payable
during the joint life time of the two lives and cease
on the first death or on the expiry of the selected
term, whichever is earlier.
Accident benefit will also be available in respect of
both the lives.
JEEVAN
SARITA : On both lives surviving to the date of
maturity :
One third of the Sum assured.
Monthly income benefits equal to one percent of the
balance two-third of the sum assured payable in arrears
as long as the last survivor of the two lives is alive.
Balance two- third of the sum assured on the death of
the last survivor.
On the death of either life, before the date of maturity:
One third of the Sum assured.
Monthly income benefits equal to one percent of the
balance two-thirds sum assured payable in arrears to
the survivor as long as the survivor is alive.
Balance two- third of the sum assured on the death of
the survivor.
Both persons dying simultaneously before maturity date:
Full sum assured.
JEEVAN
SNEHA : Specially for married Women Survival Benefits.
Death Benefit Guaranteed additions. Loyalty addition.
Encashment of Survival Benefits as and when needed.
Free Insurance Cover. Accident Benefit. Flexibility
to pay premium in advance. Pregnancy or child birth
risk is covered.
CAPITAL
GAINS
What
is Capital Gain?
Any profit that arises
on sale of a movable or immovable property is capital
gain.
Can
you tell me what comes within the scope of capital asset?
Any property whether movable
or immovable which is held by assessee, whether it is
connected with her business or profession, or it is held
as investment.
The following are not included in the definition of capital
assets:
Any stock-in-trade, consumable stores or raw materials
held for the purpose of business or profession.
Personal effects of the assessee Agricultural land in
India provided it is not situated In any area within the
jurisdiction of a municipality or a cantonment board having
a population of 10,000 or more; or in any area specified
by the Government.
61/2 per cent Gold Bonds, 1977 or 7 per cent Gold, 1980
or National Defence Gold Bonds, 1980 issued by the Central
Government. Special Bearer Bonds 1991.
Is
jewellery treated as a Capital Asset?
Yes, jewellery is treated
as Capital Asset even though it is personal effect.
Are Gold and Silver coins and bars used for puja of deities
treated as personal effect?
Gold
and Silver coins and bars used for puja of deities as
a matter of pride or ornamentation and normally not intended
for personal or household use are not personal effects
and are treated as capital assets.
What
about silver utensils which are held by assessee and are
used only on certain occasions?
Silver utensils, which are held by assessee and are,
used only on certain occasions, are not capital assets
but have personal effect.
What
about furniture?
Furniture that is held can be said to be movables
that are held for personal use.
Can
you tell me about foreign stamp collection?
Foreign stamp collection is not a personal effect.
Can a car, cycle, scooter, motorcycle owned by assesee
treated as a personal asset?
Yes,
car, cycle, scooter, motorcycle owned by an assesee as
a personal asset.
What
about securities?
Securities are not personal
effects.
Can
you tell me, if I have loose diamonds, are they personal
assets?
No they are not personal
effects.
CLUBBING
PROVISIONS OF INCOME
Remuneration
of a spouse. An individual is chargeable to tax in respect
of any remuneration received by the spouse from a concern
in which the individual has a substantial interest(if
he or she has more than 20% of the shares).This does not
apply if the spouse has professional or academic qualifications.
What
is included in remuneration for clubbing purposes?
Salary, Commission, fees
or any other remuneration received by the spouse, directly
or indirectly whether in cash or kind. Any other income,
which accrues and is, not included above, will not be
clubbed, even if it accrues to the spouse from a concern
in which he has substantial interest. How will the income
of spouse be clubbed when both husband and wife have substantial
interest? When both husband & wife has substantial interest
in the concern and both are in receipt of the remuneration
from such concern, then the remuneration will be included
in the remuneration of husband or wife whose total income
is more (excluding such remuneration).
Is
there any exception to the above?
Income, which is earned
because of technical or professional knowledge & experience
of the spouse, will not be clubbed and the salary is commensurate
with the qualifications and the salary is commensurate
with the qualifications.
What
happens when a spouse transfers assets and income is earned
from it?
When an individual transfers
the asset to her spouse, directly or indirectly without
any consideration or in agreement to live apart, any income
arising from such asset will deemed to be the income of
the transferor.
Is
it necessary that the relation of husband & wife should
subsist when an asset is transferred?
Yes, When an asset is transferred,
the relation of husband & wife should subsist.
When
is the clubbing provision not attracted?
Clubbing provision is not
attracted when:
The
assets are transferred before marriage.
The assets are transferred for adequate consideration.
The assets are transferred in connection with an agreement
to live apart.
The income accrues on that date, transferee is not spouse
of the transferor.
The property is transferred by a karta of HUF, gifting
coparcenary property to his wife.
The property is acquired by spouse out of pin money or
household savings.
What
is the provision if the assets are transferred to son's
wife and income accrues from such assets?
If the assets are transferred directly or indirectly
without adequate consideration and income arising from
such assets will be included in the total income of the
transferor.
PLAN
MY CHILD'S FUTURE
Will
the Income of minor child be clubbed with whose income?
Income of minor child will be clubbed with the income
of father or mother whose total income is greater.
How
much is the exemption if the income of minor child is
clubbed with the parent?
One can get an exemption of Rs.1500 for each child. As
we, are talking about children, one needs to plan for
their education, higher education etc.
For
planning higher education of children one needs to keep
3 things in mind
INVEST
RIGHT AMOUNT AT RIGHT TIME AND IN RIGHT SECURITIES.
Savings
are necessary for higher education, to cushion oneself
from sudden escalation's in the cost of education. For
higher education one needs to invest in those securities,
which gives steady seizable and long-term returns.
How
do I start?
First of all, you determine
a saving target and while determining the target take
into account future cost escalation's.
When
do I start saving?
One should start saving
or investing as early as possible so that the children's
education doesn't suffer.
What
are the best & secure investment options for higher education?
One of them is PPF, which
has many advantages. One a PPF a/c can be opened in the
child's name. PPF's 15 years tenure matches the savings
tenure required for college funds. The rate of interest
is 8% per annum and moreover the interest is exempt from
tax. This account can be extended by another 5 years.
One can invest upto 75% of child's higher education corpus
in PPF.
Other investments where a person can invest are deep discount
bonds issued by financial institutions, mutual funds schemes
like UTI's CGGF and CCCF. The advantages of these investment
options are that premature withdrawals are not allowed.
This ensures that the savings of children are left untouched.
What
happens when the investment becomes taxable?
As soon as the investment
becomes taxable, a smaller surplus is available for reinvestment
and the compounding effect is reduced.
What
is the best way to maximize the returns?
Deep Discount Bonds are
one in which there is one-time tax deduction, which occurs
at the end of tenure of the instruments.
Are
there other ways to minimize tax liability?
To set up a private discretionary
trusts. The objective of the trust should be for the benefit
of the child. The parents can act as trustees, with the
child being the beneficiaries. When the trust is established,
the parents partly loose control of their money. In these
types of trusts, parents retain the right to make decisions
regarding the use of money. If the trustees do not distribute
the income, then the trust is separate taxable entity.
The income that will be exempt will be Rs.50, 000/-and
the income above this is taxed at rate that is applicable
to individuals.
Are
there any Insurance Schemes for Children?
JEEVAN
KISHORE : The feature of this policy are like that
that of an Endowment Policy. Minimum term of this policy
is 15 years. Premium Waiver Benefit on the life of proposer
is available on payment of extra payment. The benefit
of this is that if the proposer expires, the future
premium upto the age of 18 of the child is waived. Bonus
is available.
JEEVAN
SUKANYA : This policy is specially designed for
female child. Life Risk cover is available . At the
age of 20 sum assured would be paid as survival benefit
which can be used for marriage. Her husband's life is
also covered under this Policy without payment of any
premium. If anything happens to the life of her husband,
her family will not be put into financial troubles.
At the age of 50, she again gets a lumpsum amount as
bonus, which can be used, for her old age.
CHILDREN'S
MONEY-BACK POLICY : Risk cover is available. Premium
has to be paid upto the age 18 of the child. At 18 and
20 years age of the child, 20% of the sum assured is
given. At 22 and 24 years of age, she receives 30% of
sum assured. At 26 years of age, she receives bonus
upto that period. Regular returns of money is used to
fulfill needs like education. Bonus can be used for
start up in life. TERM RIDER FOR FAMILY BENEFIT. This
benefit is known as family benefit. This can be added
to the policy. Under this benefit, if proposer dies
before the child is of 18 years, a sum equal to 20%
of the sum assured becomes payable to the family.
MARRIAGE
ENDOWMENT /EDUCATION ANNUITY POLICY: This is a fixed
term endowment Policy. One can choose a convenient term
(period) to coincide the maturity to marriageable age
of a child or to provide for the higher education of
child. The policyholder has to pay premium till maturity
or earlier death. In case of maturity, the policyholder
will get sum assured plus bonus. In case of death of
the policyholder before maturity, NO AMOUNT is paid,
but the future premiums are waived and the sum assured
plus bonus till maturity is paid only on maturity, to
the nominee.
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