Basics of Income Tax

With the end of financial year 2011 coming up, I would like to start the discussion on some ‘Income Tax’ saving tips for ChatpataDun-ites!

 Income Tax planning is something which could help you save good amount of money and in turn increase your in hand salary.

First Let us understand the different heads where you can invest in order to save income tax: Section 80C: This section is for the investment in ELSS (Equity Linked Saving Scheme), ULIP (Unit linked Insurance Plan), Employee Provident Fund (Employee’s contribution only), Tax Saving Fixed Deposits, PPF, NSC, Life Insurance Premium, Children’s Tution Fees, Repayment of Housing Loan (Principal Component only).

Section Limit: Rs. 1.0 Lacs only

Minor Points to note here – For the employees working in a company, a provident fund account is opened for each employee. Each month, employee as well as company makes the equal contribution to this. Only the employee contribution is considered for 80C limit. Housing Loan Prepayment – Principal Component: When you pay the EMI for the housing loan, it consists of two components – Principal Component and Interest Component. Only the principal amount paid in the entire financial year is considered under 80C. In case the total investment including Children’s Tution Fees exceeds Rs. 1 lacs, only Rs 1 lac is considered for the tax exemption purposes.

Next forum, we will discuss about long term infrastructure bond investments and different tax slabs.

good once

Continuing with the discussion. Let us discuss the infrastructure bonds. Whenever Government wants to promote any sector or it wants some investment from the public, it creates new tax saving avenues. For example, infrastructure industry is on the radar of the government and government has allowed the companies to issue the infra bonds. When the citizens invest in such funds, the benefit they will get is that they will save tax on their investments.

Some cool strategy used by our government, but no harm investing. Right??