Tax planning, tax saving options

Investing up to Rs 1,00,000 can result in a 100% tax deduction benefit, which effectively reduces your taxable income, potentially pushing you into a lower tax bracket and reducing your overall tax liability. It's important to note that this benefit is in the form of a deduction, not a rebate, meaning the entire saved amount can be deducted from your taxable income.

Here's an overview of current tax rates specific to mutual funds, which are subject to the latest tax laws:

Income Tax Rates:

For General Taxpayers:

• • Income up to Rs 2,00,000: No tax
  • Income from Rs 2,00,001 to Rs 5,00,000: 10%
  • Income from Rs 5,00,001 to Rs 10,00,000: 20%
  • Income above Rs 10,00,000: 30%

For Female Taxpayers:

• • Income up to Rs 2,00,000: No tax
  • Income from Rs 2,00,001 to Rs 5,00,000: 10%
  • Income from Rs 5,00,001 to Rs 10,00,000: 20%
  • Income above Rs 10,00,000: 30%

For Senior Citizens (Aged 60 to 79):

• • Income up to Rs 2,50,000: No tax
  • Income from Rs 2,50,001 to Rs 5,00,000: 10%
  • Income from Rs 5,00,001 to Rs 10,00,000: 20%
  • Income above Rs 10,00,000: 30%

For Very Senior Citizens (Aged 80 and above):

• • Income up to Rs 5,00,000: No tax
  • Income from Rs 5,00,001 to Rs 10,00,000: 20%
  • Income above Rs 10,00,000: 30%

Please note that there is no surcharge, but a 3% cess is levied on the above tax amounts.

(a) For resident women below the age of sixty years, the basic exemption limit is Rs 2,50,000. (b) For resident individuals aged sixty years or above but less than eighty years, the basic exemption limit is Rs 2,50,000. (c) For resident individuals aged eighty years or above, the basic exemption limit is Rs 500,000. (d) Surcharge is not applicable, but a 3% education cess on income tax is charged. (e) Marginal relief may be available.

Capital Gains:

Short-term Capital Gains Tax Rates (a)

• • Sale transactions of equity shares or units of equity-oriented funds with STT: 15%
  • Sale transactions other than those mentioned above:
    • Individuals (resident and non-resident): Progressive slab rates
    • Firms including LLP (resident and non-resident): 30%
    • Resident Companies: 30%
    • Overseas financial organizations specified in section 115AB: 40% (corporate) or 30% (non-corporate)
    • FIIs: 30%
    • Other Foreign companies: 40%
    • Local authority: 30%
    • Co-operative society: Progressive slab rates

Long-term Capital Gains Tax Rates (a)

• • Sale transactions of equity shares or units of equity-oriented funds with STT: Nil
  • Sale transactions other than those mentioned above:
    • Individuals (resident and non-resident): 20% with indexation; 10% without indexation (for units/zero coupon bonds)
    • Firms including LLP (resident and non-resident): 20% with indexation; 10% without indexation (for units/zero coupon bonds)
    • Resident Companies: 20% with indexation; 10% without indexation (for units/zero coupon bonds)
    • Overseas financial organizations specified in section 115AB: 10%
    • FIIs: 10%
    • Other Foreign companies: 20% or 10%
    • Local authority: 10% without indexation (for units/zero coupon bonds) or 20% (for others)
    • Co-operative society: 10% without indexation (for units/zero coupon bonds) or 20%

(a) These rates may increase further with applicable surcharge and education cess.

Eligible Investments for Deduction under Sec 80C:

Public Provident Fund (PPF) up to Rs 100,000 per year: Investing in PPF is recommended, ensuring compounding benefits by depositing funds before the 3rd of any month. Equity Linked Savings Scheme (ELSS) in mutual funds: This option offers market-linked returns with a 3-year lock-in period. Principal component of Home loan: You can claim a deduction of up to Rs 100,000 under Sec 80C for the principal component of your home loan. Tuition fees for child education: An exemption is allowed for a maximum of two children. Five-year fixed deposit in a scheduled commercial bank. Other eligible investments under Sec 80C. Senior Citizen Savings Scheme 2004: This option has recently been introduced as a savings option, but the interest is taxable. Employee Provident Fund (EPF): Only the employee's contribution is eligible for tax deduction benefit. Voluntary Provident Fund: Salaried individuals can invest up to 88% of their salary towards VPF, but withdrawals may be subject to TDS. Life Insurance and ULIP plans: Suitable for individuals looking to save through insurance. Pension plans: Important for long-term retirement planning, with contributions eligible for tax deduction under Sec 80C up to Rs 100,000.

Additionally, salaried individuals can seek additional tax benefits through various components of the Salary Structure, including HRA Deduction, Conveyance Deduction, Medical Benefit Deduction, and Leave Travel Allowance Deduction. These deductions can significantly reduce taxable income.

In conclusion, it's essential to align your savings with your financial goals and consult a Certified Financial Planner for personalized guidance.

For more information, please visit: www.dilzer.net