Go AD-Free with CAclubindia Pro and get a FREE CCI Coffee Mug. Subscribe Now!

Income tax - personal

9880850625 (B.Com) (40 Points)

11 July 2016

Hi Sir, My friend is having salary income of 20lakh p.a. He is paying approx. 2 lakhs tax p.a. please advise where he can invest having good returns.

Reply
Follow
Share

3 Replies

sukanya (ARTICLE ASSISTANT) (43 Points)
Replied 11 July 2016

Hi,

Your friend is not interested to pay 2 lakh tax. Am I right.

Actually tax on 20 lakh will be 4,37,750/- including ed cess and shec. If any deduction under sec 80c taken by employer then tax will be 3,80,000/-. Any how Employer will be deducting TDS if the total taxable income exceeds basic exemption limit, to recover that TDS back better take a housing loan and show a small amount of rental income so that higher interest can be claimed as deduction from salary. As far as my knowledge is concerned this option is better to choose.

reply if any queries

Upgrade to CAclubindia Pro. Subscribe Now!

CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 11 July 2016

1. Save Tax under Section 80C, Section 80CCC, Section 80CCD
To promote the culture of savings and to direct the savings of the common man into the rightful resources, the Govt allows certain deductions provided the amount saved is invested in the Instruments as specified in Section 80C, Section 80CCC & Section 80CCD.

The maximum combined deduction allowed under these 3 sections is Rs. 1,50,000. If you’ve done proper tax planning during the year, you can claim these deductions to save tax by investing under any of these sections alone or in combination but the total deduction allowed would be limited to Rs. 1,50,000 only.

There are many instruments which are specified by the Govt through which tax planning can be done and these investments can be claimed as a deduction to save tax. The most popular instruments for investing for the purpose of tax planning to save tax are:-

PPF Accounts
5 Year Tax Saving Fixed Deposit
Equity Oriented Mutual Fund
Pension Plans
Contribution to Employee Provident Fund
Life Insurance Policy
National Savings Certificate (NSC)
All Tax Planning Options to save tax specified below are over and above the Rs. 1,50,000 deduction allowed under Section 80C, 80CCC & Section 80CCD as specified above.

An additional deduction of Rs. 50,000 under Section 80CCD has also been introduced for Investment in National Pension Scheme (NPS). This additional deduction has been introduced vide Finance Act 2015 (Budget 2015) and is applicable from Financial Year 2015-16 onwards.
2. Save Tax under Section 80D, Section 80DD, Section 80DDB
The Income Tax Act also allows for deductions to save tax if the expenditure has been made by the taxpayer for insuring his own health or the health of his relatives. Different amount of deductions are allowed under each of these sections which help in tax saving depending on the type of Insurance Policy which is as follows:-

Section 80D: Medical Insurance Premium of Self or Spouse or Children
Section 80DD: Medical Treatment of Handicapped Dependents
Section 80DDB: Treatment of Specified Diseases
3. Tax Planning through Home Loan
If you have taken a Home Loan, you are allowed to claim deduction for repayment of principal amount of home loan u/s 80C.

Moreover, you are also allowed to claim deduction of interest paid on home loan under section 24. The maximum deduction allowed in some cases is Rs. 2,00,000 and in some cases there is no maximum limit of claiming this deduction for payment of interest on home loan.

Tax planning for the purpose of saving tax by taking a Home Loan is highly advisable as the Deduction allowed for repayment of home loan can be claimed under 3 different sections resulting in huge tax savings to the taxpayer.

1 Like