Skip to main content

Union Budget 2010 and Taxpayers

   THE finance minister has put more money in the hands of a large section of tax-payers. There are also some additional tax breaks in the form of investments made into infrastructure bonds and health insurance. Our Personal Finance team speaks to experts on the best way to manage the additional income depending on your age group.

IF YOU EARN BETWEEN RS 1,60,000- 5,00,000    

Assuming you earn Rs 5 lakhs per annum, you would end up saving Rs 20,601 a year as taxes, which translates into a monthly saving of Rs 17,17 a month.


   For working men and women
   
When seen as the incremental earning for the month the amount may appear small. However, even a small hike can lead to large savings.


   This is extra money coming your way and you would do well to invest it, rather than spend it. According to him, if you are under insured, this is the time to ensure that you adequately cover yourself, with the extra amount you have for yourself.


   Once that is done, assuming you want to invest Rs 1.2 lakhs (Rs 1 lakh under section 80C and Rs 20,000 under infrastructure bonds), go for a for a debt: equity ratio of 50:50 between equity and debt. Invest Rs 60,000 in your employers Provident fund or PPF, infrastructure bonds and your insurance plans,. The balance Rs60,000 should be invested in ELSS schemes, thereby helping you to achieve your growth objective saving taxes .


   For senior citizens


   
When you are above 60, health care is of prime importance. Senior citizens could use the money saved to increase their health cover. Besides this, the additional money could go into debt in schemes like the post office MIP, PPF or NSC or monthly income plans of mutual funds.

IF YOU EARN BETWEEN RS 5,00,000-8,00,000    

There is a bonanza for tax payers in this bracket as the percentage amount of tax they save would be highest among all brackets. Everyone in this bracket will now pay tax at 20%, plus education cess of 3%. The increase in annual disposable income would vary between Rs 20,000-51,000.


   For working men and women


   
1) The additional amount left in their bank account could be utilised to prepay a part of their home loan this year. This is important in the light of the Direct Tax Code - which could do away with tax benefits on interest paid on home loan – coming into force from April 1, 2011.


   2) The surplus could also be used to buy or enhance your health insurance cover. A lot of taxpayers do not exhaust the deduction of Rs 15,000 on health insurance premium paid (under section 80 D), as they simply do not have any surplus to do so.


   3) The Budget also offers an additional deduction of up to Rs 20,000 – over an above the deductions allowed under section 80 C of up to Rs 1 lakh – for investing in infrastructure bonds to be notified by the central government. This is approximately the amount that someone earning Rs 5 lakh would save due to change in slabs, which could be directed to these instruments.


   4) Make sure that you invest to fufill your financial planning requirements, and not merely to save on taxes. For instance, if someone earning Rs 6,00,000 invests Rs 20,000 in the proposed infrastructure bonds in 2010-11, he/she would save Rs 4,000 in taxes that year. If the amount is not redeemed for five years, it could grow to Rs 30,000 (assuming the bonds will carry an interest of 8% per annum). However, the gain of Rs 10,000 could be taxable in the hands of investor (clarification from the government is awaited on this aspect). The return would barely beat inflation. If the same amount is directed to equities or equity mutual funds, the investment could be worth Rs 40,000 after five years, assuming a return of 15% CAGR. Therefore, those falling in this tax bracket should ascertain if they would want to lock in their money for say five years merely from the short term viewpoint of obtaining tax incentives.


   For Senior Citizens


   
Senior citizens can use the additional savings (Rs 20,000-50,000) to enhance their investments in secure instruments like 9% senior citizens savings scheme (SCSS). The scheme comes with a lock-in period of five years, but yields quarterly interest at the rate of 9% per annum, thus ensuring liquidity. While returns above Rs 10,000 are taxable, investment made under the scheme is allowed as deduction u/s 80 C.

IF YOU ARE EARNING RS 8,00,000 AND ABOVE

For men and women
This income slab would be witnessing maximum tax savings in absolute terms of up to Rs 51,500 because of changes in income tax slabs. However, this income category would have exhausted the Rs 1 lakh limit under Section 80 C with the PF component of their salary and insurance. They could look at property investment as a tax saving instrument. They are in a position to invest in more than one property because of higher surplus income. If you buy a second house, any one property as per your choice is treated as self-occupied and its annual value is computed to be nil. The other house property is considered to be rented out hence a notional rent income will be considered as income under the head 'Income from House Property'. You can also avail of a deduction equal to 30% of the annual value of the house property is allowed as deduction towards repair and maintenance charges. You can also benefit from the loss of house property clause while computing taxes. The income earned from each of the properties is computed separately. If such a calculation results in a loss, it is allowed to be set off against your income from other heads. For example, if your annual interest component of the housing loan is Rs 6 lakh and you are earning a rental of Rs 2 lakh, there is a total loss of Rs 4 lakh. In such case there is a provision to offset this loss. The deduction for interest payable on home loans is not subject to any overall limit. But the limit of Rs 1, 50, 000 is applicable only for one self occupied property.


For Senior Citizens
It's difficult to find too many senior citizens in this tax bracket. From a tax-saving perspective, senior citizens should look at lesser lock in periods ranging from 3-5 years compared to their younger peers. In fact, easier exit option than tax saving should be a priority for senior citizens so as to provide for unexpected contingencies. These citizens could look at NSC, tax saver fixed deposits or senior citizens savings scheme.

 


Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now