Skip to main content

Income Tax Deductions for 2014 You Should Not Ignore

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

 

It’s that time of the year when you have to start submitting your investment proofs to your employer for tax deductions. Most of you may be planning your tax investments over the next couple of months, and we thought it would be a good idea to give a primer on some important sections of the Income Tax Act under which you can claim tax benefit.

Let’s start by discussing the “not-so-popular” sections of the Income Tax Act.

Sec 80D: Premium paid towards health insurance for yourself, spouse, dependent children and your parents is deductible from your taxable income. The limit is Rs. 20,000 in the case of senior citizens and Rs. 15,000 in all other cases. You can further claim Rs. 15,000 (Rs. 20,000 if parents are senior citizens) for buying health insurance policy for your parents.

Sec 80DD: Expenses incurred towards medical treatment of dependent parents, spouse, children and siblings suffering from a disability is eligible for deduction. The limit is Rs. 50,000 and this has been increased to Rs. 1 lakh for severe disability.

Sec 80DDB: Expenses incurred towards treatment of specified illnesses for self, spouse, children, siblings and dependent parents is eligible for tax deduction upto Rs. 60,000 for senior citizens and Rs. 40,000 for others.

Sec 80G: This is for Donations to recognized Charitable institution. Depending on the institution, you can get upto 50% to 100% of the donations made as tax deduction. You can claim deductions under Sec 80G, 80GGA and 80GGC.

Sec 80E: Interest on education loan taken by the borrower, parent or spouse from a recognized financial institution is fully tax deductible. The loan must be taken for a full-time course, which can either be a graduate course in engineering, medicine or management or post graduate course in engineering, medicine, management, applied sciences or pure sciences including mathematics and statistics.

Sec 24b: You can claim a deduction of upto Rs. 1.5 lakh a year on the interest payments on your home loan. In case of a let out or deemed to be let out property, interest paid is fully deductible. Further, if you buy a second home under another home loan, the entire interest paid on this can be claimed as a deduction.

Sec 80C: This is the most popular section under the Income Tax Act and used to the maximum by most assesses. The limit of investment under this section is Rs. 1 lakh per year, irrespective of your income and the tax bracket. Since there are no sub-limits under this section, you can choose your investments according to your wish. The following investments/payments fall under the ambit of Sec 80C:

1) Public Provident Fund
2) National Savings Certificate 
3) Equity Linked Savings Scheme
4) Bank fixed deposits above 5 years tenure
5) Infrastructure bonds (available over and above Rs. 1 lakh, upto Rs. 20,000)
6) NABARD Bonds
7) Unit Linked Insurance plans
8) Employee Provident Fund
9) Payment on Life Insurance policies
10) Full time education fees paid for up to 2 children’s education
11) Principal repayment on home loan

As you can see, there are several options for you to claim deduction under Sec 80C. One important consideration is the lock in period. Based on your Financial Priorities in the near future, you can choose Tax Saving Mutual Funds (Lock in period of 3 Years) to Public Provident Fund (Lock in period of up to 15 Years, based on opening date). While objective is to reduce tax liability, one should also not get stuck in a longer lock in period.

While many people plan their investments correctly to get the full benefit under this section, there are some people who under-invest, thus not obtaining tax deductions to the fullest. We have found this to be common among people below 35 years, who do not understand the importance of Tax Planning. It is highly recommended to invest up to the maximum limit of Rs. 1 lakh under Section 80 C to avoid payment of extra taxes, by choosing different options to diversify your investment portfolio.

There are many others who also over-invest under Sec 80C. You may be wondering how this could happen. More often than not, it is due to the principal repayment on home loan. The principal component of your EMI is eligible for tax deduction up to Rs. 1 lakh under Sec 80C. You may forget this component, and continue to make investments for tax purposes, only to realize later that you have invested way beyond Rs. 1 lakh.

The investments you make should not be with the sole intention of reducing tax outflow. It should be with a long term view of augmenting savings and retirement planning. It is thus recommended to avail the services of a Financial Planner who can help you in your investments and also tax planning.

 

 

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 Application Forms

---------------------------------------------

 

Best Performing Mutual Funds

    1. Largecap Funds             Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds         Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds          Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds   Invest Online

      1. DSP BlackRock MicroCap Fund

2.       Franklin India Smaller Companies

E. Sector Funds          Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
Read more

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...
Read more

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...
Read more

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...
Read more

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Read more
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