Basics of the tax .....

Page no : 2

Sarthak (Student) (150 Points)
Replied 07 January 2012

SEC 80D: MEDICAL INSURANCE PREMIUM

Premium paid for medical insurance up to Rs. 15000 is eligible for deduction under Sec 80D; incase of senior citizens the limit is extended to Rs. 20,000.
The following table summarizes the provision:

Descripttion	Mediclaim premium paid in respect of		Total deduction u/s 80D
Descripttion	Self, spouse & dependent children	Parents (whether dependent or not)	Total deduction u/s 80D
No one has attained the age of 65 years	15000	15000	30000
Assessee and his family less than 65 years of age and parent is a senior citizen	15000	20000	35000
Assessee and the parent attained age of 65 years	20000	20000	40000

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Sarthak (Student) (150 Points)
Replied 07 January 2012

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*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 07 January 2012

So good work sarthak ... That's really nice

Sumher Mertia (STUDYING) (37 Points)
Replied 07 January 2012

Agricultural Income:

The only reason Agricultural income is added to basic Exemptio Limit and taxed, nd thn compared with tax on non agricultural Income is jst to TAX THE NON-AGRICULTURAL INCOME AT A HIGHER SLAB....

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Sarthak (Student) (150 Points)
Replied 07 January 2012

According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year.

The total income of an individual is determined on the basis of his residential status in India. It is determined on the basis of the physical presence of the individual as against nationality or domicile in India. It is determined for every previous year separately. A person may be a resident in one previous year and non¬resident in next year.

An individual may be resident, nonresident or not ordinarily resident.

a) Resident :

An individual is treated as resident in a year if present in India

i) for 182 days or more during the previous year

ii) for 60 days during the year and 365 days during the preceding four years (182 days in case of an Indian citizen or a person of Indian origin1 coming on a visit to India or in case of an Indian citizen going abroad as a member of the crew of an Indian ship or for employment).

Hindu Undivided Family or Firm or other Association of Persons is Resident of India in any previous year except where the control and management of its affairs is wholly situated outside India in that previous year.

Company is resident of India if

i) It is an Indian company

ii) During the previous year its control and management is Situated wholly in India.

b) Not ordinarily resident:

A resident who was not present in India for 730 days during the preceding seven years or who was non-resident in nine out of ten preceding years is treated as not ordinarily resident. In effect, a newcomer to India remains not ordinarily resident.

c) Non-resident :

Nonresidents are taxed only on income that is received in India or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a non-resident but is also liable to tax on income accruing abroad if it is from a business controlled in or a profession set up in India.

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Jinay (Article) (172 Points)
Replied 07 January 2012

Agree with Sumer, the idea behind it to combine both the incomes (agricultural and non-agricultural) and tax them at a higher rate.

Sarthak (Student) (150 Points)
Replied 07 January 2012

SEC 80E: DEDUCTION IN RESPECT OF INTEREST ON LOAN FOR HIGHER EDUCATION

The amount of interest paid on loan borrowed from any financial institution or any approved charitable institution is eligible for deduction under Sec 80E of the Income Tax Act, 1961, the loan being taken for the purpose of higher education.

The provisions simplified alongside:

Sarthak (Student) (150 Points)
Replied 07 January 2012

SEC 80G: DONATIONS TO CERTAIN FUNDS/ CHARITABLE INSTITUTIONS

Donations, charity need not necessarily be one-way traffic but could result in a win-win situation for both parties. To simplify it further, donations made to certain funds or charitable institutions are eligible for deduction under Sec 80G of the Income Tax Act, 1961. So while the receiving party benefits with the donation, you receive tax benefits arising from the deduction.
Institutions eligible for deduction under this section are categorized in three segments based on the amount of deduction allowed. The three segments have:

b.) 50% deduction allowed of restricted amount

100% deduction allowed without any limit
50% deduction allowed without any limit
a.) 100% deduction allowed of restricted amount

Where restricted amount is 10% of the adjusted total income

llustration: Mr. A an individual has total income for a year amounting to Rs. 4, 00,000. He makes a donation of Rs. 1, 50,000 to an approved charitable institution. Depending on the institution he invests in, we have 4 different scenarios that explain the benefits arising in each case.

	*100% deduction without any limit*	*50% deduction without any limit*	*100% deduction of restricted amount*	*50% deduction of restricted amount*
Adjusted total Income	4,00,000	4,00,000	4,00,000	4,00,000
Tax payable	22,000	22,000	22,000	22,000
Donation made to institutions	1, 50,000	1, 50,000	1, 50,000	1, 50,000
Amount qualified for deduction	1, 50,000	75,000	1, 50,000	75,000
Deduction under Sec 80G (restricted to 10% of income)	NA	NA	40000	40000
Taxable income post deduction	2,50,000	3,25,000	3,60,000	3,60,000
Tax payable post deduction	7,000	14,500	18,000	18,000

Note: Education cess has not been calculated

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 07 January 2012

@ sumer ...

really nice explanation , a really good reason

@ Sarthak ....

ur last post is really good and to the point . sorry my thanks limit has finished

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Sarthak (Student) (150 Points)
Replied 07 January 2012

IN A NUT SHELL

Let’s understand these deductions and its impact on your tax liability by way of the following illustration:
Mr. X and Mr. Y have total income for a year amounting to Rs. 5, 00,000 each.

*Following are the particulars furnished by Mr. X*	*Amount*
Life insurance premium paid, sum of the policy assured Rs. 2,00,000	Rs. 60,000
Contribution to public provident fund	Rs. 20,000
Tuition fee payment for 3 children pursuing a full-time course	Rs. 10,000 each
Housing loan principal repayment	Rs. 30000
Invested in ELSS mutual fund	Rs. 20,000
Invested in IDFC Infrastructure bonds	Rs. 20,000
Premium paid on Mediclaim policy	Self- Rs. 15000 Parent (senior citizen)- Rs. 20000
Donation made to Prime Minister’s National Relief Fund	Rs. 20000

Computation of tax liability
	Mr. X		Mr. Y
Particulars	Amount (Rs.)	Amount (Rs.)	Amount (Rs.)
Total Income for the year	-	5,00,000	5,00,000
Deduction under Sec 80C	-	-	-
*Life insurance premium paid	40,000	-	-
Contribution to public provident fund	20,000	-	-
**Tuition fee for children pursuing a full-time course	20,000	-	-
Housing loan principal repayment	20,000	-	-
Investment in ELSS mutual fund	20,000	-	-
Deductions under Sec 80C restricted to	-	1,00,000	-
Deduction under Sec 80CCF	-	-	-
Invested in IDFC Infrastructure bonds	-	20,000	-
Deduction under Sec 80D	-	-	-
Premium paid on Mediclaim policy	-	-	-
-Self	-	15,000	-
-Parent (senior citizen)	-	20,000	-
Deduction under Sec 80G	-	-	-
***Donation made to Prime Minister’s National Relief Fund	-	20,000	-
Taxable Income after deduction	-	3,25,000	5,00,000
Tax liability	-	14,500	32,000

Notes:

* Restricted to 20% of the sum of the policy assured i.e. 20% of Rs. 2, 00,000. Therefore eligible amount Rs. 40,000

** Tuition fee paid is eligible for deduction under Sec 80C for maximum two children. Therefore Rs. 20000 shall be allowed.

*** Donation (this fund) eligible for 100% deduction without any limit

Education cess has not been calculated

The illustration above clearly states the benefits enjoyed by an investor taking advantage of the various deductions available in a planned manner.

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Sumher Mertia (STUDYING) (37 Points)
Replied 07 January 2012

CONCEPT OF AGRICULTURAL INCOME:

I. Rent of Land:

whn a person (landlord or tenanat) lets out a piece of land, which is situated in India, for agricultural purposes, the rent received either in cash or kind from the tenant is considered as agricultural income.

II. Revenue income derived from agriculture:

Whn the landlord or tenant cultivates the farm, gets the product and sellsit or appropriatees it for his individual needs, the difference between the cost and selling price (including the value of self consumption on the basis of average market rate for the year) is the income derived from agriculture.

III. Income from making the product fit to be taken to market:

The crop as harvested might not find a market. if in order to make the product a saleable commodity, the cultivator or receiver of rent-in-kind performs some operation (manual or mechanical) and enhances the value of the produce, the enhancement of value of the produce is also agriculture income. Such income to be regarded as agricultural income, the following conditions mst be satisfied:

a. The operation mst b 1 which is ordinarily employed by the cultivator to make the produce fit for market, i.e.; threshing,winnowing,cleaning,drying,etc.

b.Tthere is no market (ready and willing and not a theoritical market) for the produce as vreceived from the farm

c. The process to make it marketable has been performed either by the cultivator or receiver-in-kind.

d. The produce must not change its original charecter.

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