Arjuna (Fictional Character): Krishna, all the salaried people might be busy in providing information to their employers for computing income tax, deductions and exemptions from their salary of the financial year 13-14 in this Jan to March 2014 quarter.
Krishna (Fictional Character): Arjuna, Salary earners has to inform in the beginning of the year to their employers about all saving, deductions, etc for Tax to be deducted from their salary receivable in the financial year 13-14. Accordingly Tax deduction can be made correctly and paid to the government after considering other incomes and deductions of the employee. At the yearend Employer has to collect and ensure the proof of all saving and deduction claimed by employee.
Arjuna: What options are available to Salary Earners for Tax Planning and Tax Savingin Financial Year 13-14?
Krishna: Arjuna, Tax planning in case of salaried person should be made after taking employer into confidence, because their tax liability is paid through their employers.
Further following things may be considered for tax saving.
1) Deduction upto Rs. 1.5 lakhs is available under per section 24 on interest paid on home loan, similarly deduction upto Rs.30,000/- is available on interest paid on loan taken for renovation, reconstruction and repairs of house, hence investments in house should be made.
2) Deduction upto Rs. One lakh is available Under Section 80C,if payment made for Life insurance premium, contribution to PF, repayment of Housing loan, new pension scheme, LIC,NSC etc.
3) Deduction upto Rs.15,000 is available for expenses made from medical reimbursement received from employer, for this the employee needs to produce the receipts for the expenses made.
4) Deduction upto Rs.1 lakh is available under section 80CCC for contribution made in any annuity plan of LIC or any other insurance company for receiving pension, subject to deduction U/s 80C.
5) Under Section 80CCG, if the annual income of salary earner is less than Rs.12 lakhs then deduction upto Rs.25,000 is available if investment is made in Rajiv Gandhi Equity Saving scheme.
6) Deduction upto Rs. 15,000/- is available under Section 80D if payment made for Medical insurance of self, spouse and dependent children. And an additional deduction of Rs. 15,000/- is available in case medical insurance premium of parents (father or mother or both) is made. In case of Senior Citizens deductions upto Rs. 20,000/- is available, so a maximum deduction upto Rs.40,000/-can be availed under this section.
7) Tax deductions are also available under sections 80D, 80U and 80DDB,if specified medical expenditure made on ailment of specified diseases.
8) Deduction is available under Section 80G in respect of specified donations made to certain Funds, Charitable Institutions etc.
9) Deduction upto Rs. 10,000 is available under Section 80TTA, in respect of interest earned on savings bank account.
10) Under Section 87, assessee whose gross total income is upto Rs 5 lakhs, may get a rebate of Rs 2000 or income tax whichever is less.
Arjuna: Krishna, what other precautions should salary earners take?
Krishna: Employees should provide all the details and receipts of the investments made by them to their employers. Employees should check whether TDS is correctly deducted and deposited to the government from his salary because if, TDS is not properly deducted then the benefit of it cannot be availed by the employee. Similarly details of other incomes/expenses like house rent, interest paid, purchase/sale of shares etc. should be given to employer, so as to enable him to compute income correctly and deduct the tax to avoid future penalties and interest on wrong or less deduction. Employee can check his deduction of tax and other details in Form 26AS on website incometaxindia.gov.in.
Arjuna: What precautions an employer should take while paying salary and deducting tax?
Krishna: Employer should every month calculate, deduct and pay TDS in time to the government on the basis of salary for the applicable financial year. The employers should inform their employee about the income tax provisions and accordingly collect supporting documents. Ultimately employer will be held responsible if tax is not correctly deducted from salaries of the employees. Similarly TDS certificate for tax deduction should be given to employees in time. So as to enable employees to file their income tax returns.
Arjuna: Krishna, It has become more complicated for claiming deduction of house rent paid this year, please guide regarding this.
Krishna: If an employee is staying in rented house and paying rent, then based on few conditions, deductions on house rent allowance on basis of actual paid can be availed. Now from this financial year, if annual rent paid is above Rs. 1 lakh then it is compulsory to provide PAN no. of the landlord, so as to avail deduction. Earlier many employees had taken benefit of this deduction but in most of the cases landlords did not remembered to pay taxes on such income to the government which reduced tax collection of the government. Now deduction on the basis of actual rent paid only should be availed otherwise both the landlord and the tenant will land in difficulties. So, tax saving can be made by making proper planning only.
Arjuna: Krishna, What is difference between Salaried persons and others financial life?
Krishna: Dear Arjuna, many times salaried person feels that, he is only paying more tax as compared to other like businessmen's, etc. They feel that they have very little scope for tax saving. But please note that, Business men generally faces Scrutiny, raids, survey of Income tax. Except when abnormal/ benami property is accumulated by salaried person. Thus who pay accurate Tax on his Income never get in trouble of Income Tax Department, which is true in majority of Salaried person, as they never face any inquiry for Income Tax Department. Further in case of salaried person, financial inflows are guaranteed, accordingly outflow can be planned. Whereas in case of businessmen it is not, hence they have risk of losses and loans repayment on their shoulders. A salaried person when come back to home from office, he may few tension of office, but he can spend good quality time with this family and on his health. Were as businessmen carries his business in his mind always, as he is only responsible of his growth, were as in case of salaried person, organization grows due to team efforts. Everyone one have own tension and issues, Hence in life one should not compare his grief and happiness with others, enjoy yourself and be happy in life.
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