Tax Savings with enhanced limit various Sections for the Financial Year 2016-17
How to Save Tax on Salary Income? This question is popping up in the mind of every salaried employee. Since March is fast approaching, HR department has started buzzing employees about the tax savings investment he has made.
Tax Savings investments have to be made before 31st March to claim the tax benefit and maximize savings. But before rushing to invest, one needs to and plan out his investment keeping in mind the changes made in the Budget 2014 to maximize his tax savings.
Tax Savings does not necessarily mean acknowledging various sections of Income Tax Act, few sections along with your salary slip can very well accomplish the peculiar task of tax planning for you. In this article, we will discuss the additional tax benefit and marginal relief’s offered by budget 2016.
Click here to download Automatic Master of Form 16 Part A & B for F.Y.2016-17 [ Prepare at a time 100 employees Form 16 Part A &B]
Click here to download Automatic Master of Form 16 Part A & B for F.Y.2016-17 [ Prepare at a time 50 employees Form 16 Part A &B]
Maximum limit of Section 80C
Budget 2014 has augmented the limit of section 80C from Rs.1 lakh to Rs.1.5 lakhs. This enhanced limit gives additional tax relief of Rs.15,450 for the person falling in the tax slab of 30%, similarly Rs.10,300 to a person falling in the tax bracket of 20% and Rs.5,150 to the person falling in the lowest tax bracket of 10%.
Home Loan Benefit U/s 24B & 80C & 80EE
Budget 2014 has also enhanced the limit of deduction for Home Loan Principal u/s 80C and Home Loan Interest u/s 24.
Tax Benefits on Home Loan – Principal Repayment
Principal Repayment of the Home Loan taken from Financial Institutions is eligible for deductions u/s 80C but restricted to the maximum of Rs.1.5 lakhs per annum. Remember this limit of Rs.1.5 lakhs includes all deduction u/s 80C i.e. PPF, Tax Savings Bank FD, NSC, EPF, LIC etc.
Tax Benefits on Home Loan – Interest Component
Threshold limit of deduction of Interest on the home loan u/s 24 is also increased in budget 2014 by Rs.50,000. Now you can get the maximum of Rs.2 lakhs deduction on the accrued interest on Home Loan per annum.
Remember section 24 is applicable for the self-occupied house only i.e. capping limit of Rs.2 lakh applies when you hold a self-occupied house. In case the house is not self-occupied than you can claim the actual amount of interest paid which can even exceed Rs.2 lakhs.
Contribution towards Provident Funds
Section 80C comprises for various instruments but contributions towards Provident Fund i.e. Employees Provident Fund or Public Provident Fund are best amongst them. Being EEE scheme (Exempt, Exempt, Exempt) these provide the best solution for accumulating corpus for retirement. Point to note is that provident fund is a long term investment scheme, so opt this scheme considering it for post-retirement life.
National Savings Certificate (NSC) and Tax Savings Bank FD
Both National Savings Certificate (NSC) and Tax Savings Bank FD offers the same rate of interest and same tax treatment. The only things that make NSC more lucrative than tax savings bank FD are the method of interest calculation. The interest is compounded annually in the case of tax savings bank FD while the interest is compounded half-yearly in the case of NSC.
Equity Linked Savings Scheme
ELSS also enjoys EEE tax treatment as EPF and PPF but it comes with a high degree of risk. Since ELSS is exposed to market the risk involved is similar to any other mutual fund but the quantum is increased due to lock-in period of 3 years
Tax Rebate of Section 87A
Last year budget has introduced tax credit system under which person having gross salary up to Rs.5,00,000 can get an additional tax rebate of Rs.2,000 from the income tax payable. This year budget did not drop this section and thus letting taxpayer to get benefited this year also.