My dad is a super senior citizen having Gross income of around 10 lakhs.I would like to know about the legal way of reducing the tax to the maximum extent possible. I heard about the tax saving deposit scheme.
21 February 2016
For a super senior citizen, the minimum income exempt from tax is Rs. 5.00 L against Rs.3.00 L for senior citizens. Further there are prescribed modes of Investment under section 80 C of the Income Tax Act, 1961, by which a further sum of Rs. 1.50 L can be invested and tax thereon saved. This will result in your father's taxable income being reduced to Rs.3.50 L and tax thereon would be Rs.70,000/-.
The investments approved under section 80 C of the Income Tax Act, 1961 are: (a) Provident Fund (PF) & Voluntary Provident Fund (VPF) (b) Public Provident Fund (PPF): (c) Life Insurance Premiums (d) Equity Linked Savings Scheme (ELSS) (e) Home Loan Principal Repayment (f) Stamp Duty and Registration Charges for a home (g) Sukanya Samriddhi Account (h) National Savings Certificate (NSC) (VIII Issue) (i) Infrastructure Bonds (j) Pension Funds – Section 80CCC (k) 5-Yr bank fixed deposits (FDs) (l) Senior Citizen Savings Scheme 2004 (SCSS) (m) 5-Yr post office time deposit (POTD) scheme (n) NABARD rural bonds (m) Unit linked Insurance Plan (n) Children’s education expense.
Keeping in mind your father's age, he may opt for any one or more of (d),(h),(i),(k),(l) & (m), up to Rs. 1.50 L. In case of (l) above the maximum investment can be only Rs.15.00 L per person. The lock in period in each of theses cases is 5 years, i.e. the principal is repayable after 5 years except ELSS (d) above where the lock in period is three years. The interest accrued / received would be added to the taxable income of your father. In the unforeseen event (GOD FORBID) of your father's demise, early withdrawal is permitted by the nominee. and in all cases except SCSS (l) above the holdings may be in joint names with operating choice of Either or Survivour. In all cases your father should be the first holder.
23 February 2016
Dear Sir, My dad invested in SCSS for an amount of 150,000. I think this is the maximum he could do in order to save tax for 2015-16.If any other options to reduce his tax liability,please advise
26 February 2016
Unfortunately, the tax saving schemes, restrict the deduction from taxable income only to the extent of Rs.1,50,000/-. Though more investments may be made, it will not help in reducing the taxable income.
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