What is Tax Planning?

The purpose of tax planning is to provide an online tool to the salaried employees so that they can instantly understand and compute the tax impact of various financial actions such as salary composition, house property income, home loan, investments, sale/purchase of assets, gifts, and interest-bearing deposits.

Is higher education deduction allowed for overseas studies?

For purpose of claiming education loan interest deduction under section 80E, 'higher education' means education whether in India or outside India.

In which year should I report my income from dividend?

Dividend is considered to be income of the year in which it is declared.

Highlights Quick Reference

of on

Union TDS

Budget Rates-FY

2010 -

2011 2011

GKM PROVIDES THE FOLLOWING INCOME TAX SERVICES: Preparation & Filling of Income return 1. For individuals, firms, companies, trust or HUF.

Specialization in US and India Tax preparation for NRIs & US citizens 1. 2. 3. Employees going abroad during the middle of the financial year NRIs coming back to India to live for sometime or for good. Executives going on L-1 Visa or H1 B visa obligated to file tax returns in India as well as in USA.

Permanent Account Number (PAN) and TAN number support services. Advisory services on Income Tax, Fringe Benefits Tax & Service Tax E filing of TDS returns, FBT & related tax returns. NRI Advisory services:

1. 2. 3. 4. 5.

Income tax planning Global Investment planning in movable and immovable properties Advisory on bank operations, borrowing & Lending in India Compliance support services on FEMA Advising NRIs settling in India on business Opportunities

Foreign Investment Services

1. 2. 3. 4. 5.

Formulating an entry strategy into India such as opening a liaison office, subsidiary etc,. Formulating an appropriate investment strategy for companies seeking to invest in India. Obtaining investment approvals from Foreign Investment Promotion Board (FIPB) or Reserve bank of India, as applicable Transfer pricing to include Designing TP Policy, Review of existing policy, documentation, and representation and assistance in advanced pricing arrangements.

PAYROLL PROCESSING

GKM offers payroll processing services to various companies ranging from small to Fortune 500 companies. We custom our software to suit the requirements of the corporate and use the same for complete payroll processing.

We offer end-to-end service solutions encompassing payroll, retirement benefits and Income Tax. Standard Model - O Hardware, Our Software & Our People

This is the traditional Payroll Outsourcing model where we collect inputs from the corporate, process the payroll at ou end and submit the statutory & non-statutory reports to the corporate on pre-decided dates.

Security, Confidentiality, Proximity, Continuity, Communication & Cost are the most critical factors which affect the performance of Payroll Management. We provide exemplary services by benchmarking best practices in the industry.
Deliverables Pay Slips Salary Register Statutory Reports Fulfillment of all statutory obligations

COMPLIANCE SERVICES:

(a) E- TDS Computation and filing:

E-TDS is a TDS return prepared on Form 24, 26 or 27 in electronic media as per prescribed data structure. All corporate and government deductors are compulsorily required to file their TDS return on electronic media. GKM helps in the preparation and submission of ETD returns on behalf of clients. We ensure that the returns are error free and transmittal and quick and easy.

(b) Company Law & Secretarial Compliances:

The Companies Act 1956 governs both public and private companies in India. Both these types of entities are governed by a set of legal and administrative requirements and guidelines under the said Act. Some of the services we provide are listed below:

Advice and consultation on Indian Companies Act, 1956 Company formation process Filing annual returns on behalf of the client

Preparation of all documentation related to minutes and resolutions Preparation and maintenance of statutory books Assistance in change of directors, shareholders, addresses, and office details Bonus Issues Share transfers

E- FILING OF SERVICE TAX AND CENTRAL EXCISE RETURN

The Central Excise department has introduced recently ACES (Automation of central excise and service tax) to facilitate electronic interface with the department and aims at reducing paper work , visits to the department offices and improving transparency, accountability and efficiency in indirect tax administration in India.

GKM FACILITATES E-FILING AT ACES.

All returns such as ER-1, ER-2 etc. in Central Excise and ST-3 in Service Tax can be prepared and filed online through ACES. Offline return preparation utilities are also available at ACES website for download which can be used for preparing and uploading the returns at your convenience.

GKM ASSISTS IN

Obtaining Initial Registration of Service tax Minimization of tax exposure, structuring business transactions Assist in compliance with procedures, availing of tax benefits etc,. Assistance during Assessments

BANK RELATED SERVICES

Charge Creation & Search Reports Project report preparation Sensitivity analysis & IRR Computation

MANAGEMENT SERVICES

Financial planning & Advice Internal auditing & Compliance Carbon credit advisory services registration with UNFCCC & trading in CER & VER GKM provides accounting, tax, business setup, outsourcing, consulting and compliance services. GKM provides Indian & international companies with accounting, tax and regulatory compliance services in an integrated and comprehensive manner. GKM offers payroll processing services to corporate houses. GKM customizes the software to suit the requirements of the corporate and use the same for complete payroll processing.

Security Confidentiality Proximity Communication Cost

GKM is a team of dedicated and experienced professional accountants committed to delivering quality service to clients. GKMs professional team has successfully assisted our clients in realizing the outsourcing advantage and delivering sustainable competitive advantage. GKMs mission is to offer quality service in the areas of taxation, accounting, payroll, e-filing, auditing, venture capital funding, loan syndication etc. GKMs clientele includes such giants as State Bank of India, GE (a Fortune 500 Company) and Larsen & Toubro which in itself is a testimony to the quality and consistent services that GKM provides in the market place.

1. Who needs to pay Income Tax? Income Tax is a tax levied by the Government of India on persons who have earned income in India. It may be noted that the liability to pay tax arises only when your income exceeds a prescribed limit. 2. What are the different residential statuses applicable in India? The following are the residential status applicable in India ROR Resident Ordinary Resident

RNOR - Resident Not Ordinary Resident ROR - Resident Ordinary Resident NR - Non Resident

3. Why is it important to determine the residential status under the Income Tax Act?

Residential status under the Income Tax Act determines the taxability of various incomes. The income that is taxable for a resident may not be taxable for a non resident. Thus it is important to first determine the residential status. The residential status is determined by the number of days of stay in India.

4. What are my tax rates?

In India there are different tax rates for different slab rates depending upon the amount of taxable income.
Income Level If does not exceed Rs.1,50,000/-. If exceeds Rs.1,50,000/- but does not exceed Rs.3,00,000/-. If exceeds Rs.3,00,000/- but does not exceed Rs.5,00,000/-. If exceeds Rs.5,00,000/-. Income Tax Rate NIL 10% of amount exceeding Rs. 1,50,000/Rs. 15,000/- + 20% of the amount exceeding Rs.3,00,000/-. Rs. 55,000/- + 30% of the amount exceeding Rs.5,00,000/-.

5. Who has to file an income tax return?

You need to file an income tax return if your annual income exceeds the exemption limit. The exemption limit is Rs 150000 generally, Rs 180000 for women assessees and Rs 225000 for senior citizens for the AY 2009-10.

6. What is PAN? Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department. This serves as a unique identifying number. 7. Who must have a PAN? a. All existing assesses or taxpayers or persons who are required to furnish a return of income, even on behalf of others, must obtain PAN. b. Any person, who intends to enter into financial transaction where quoting PAN is mandatory, must also obtain PAN. 8. Where can I obtain an application form for PAN (Form 49A)? The application form for PAN (Form 49A) in the prescribed format can be obtained from TIN-Facilitation Centres (TIN-FCs), any other stationery vendors providing such forms, or from the NSDL-TIN website. 9. Where do I submit my completed application for PAN (Form 49A)? You can submit your signed PAN application form duly filled up, along with all supporting documents, to any of the TIN-Facilitation Centres (TIN-FCs) or PAN Centres managed by NSDL 10. Is there any penalty for quoting the wrong PAN?

The penalty for quoting an incorrect PAN is Rs.10000.

11. I have been allotted more than one PAN. What do I do?

It is illegal to have more than one Permanent Account Number (PAN). In case you have been allotted multiple PANs by the Income Tax Department, surrender the additional PANs to the Department.

12. What is the mode of payment of taxes?

Income tax is normally paid in the following ways:

Tax Deducted at Source (TDS): For salaried employee, the employer would have deducted tax on a monthly basis from your salary. The employer finally issues a Form 16 at the year end with all the details of the tax deducted. Even for income other than salary where the tax has been deducted, the deductor would give Form 16A with all the details.

Advance Tax: Normally taxes are paid as Advance Tax. Advance Tax is paid in three installments by individuals: on 15th September, 15th December and 15th March.

Self assessment Tax: This is the tax paid at the time of filing the tax return after everything is finalized and the final tax liability determined.

13. What happens if I fail to pay the income tax?

In such a scenario, you have to pay interest at the rate of 1% per month from April following the financial year for which you failed to pay the taxes. This interest would be charged until you pay your taxes.

14. What do I do if the TDS deducted is more than my tax liability?

You can claim a refund of the excess taxes paid while filing the return. If the Income tax Department is convinced about the claim you will be granted a refund. This refund would be either credited directly to your bank account or sent by a cheque.

15. What are the common documents required while preparing my tax returns?

The following are some of the common documents required while preparing the return:

a. PAN Card / PAN Allotment letter b. Last years filed copy of the Income Tax Return and Acknowledgement c. Form No. 16 (Salary) d. Form No. 16A (TDS Certificate) e. Housing Loan Statement showing interest and principal components. f. Rent Receipts g. Shares and mutual Funds Activity Statements h. Bank Statement / Pass Book i. Copy of tax-saving investments, like Life insurance Premium Receipt,PPF Challan, NSC Certificate, ULIP Statement,Donation receipts,Tuition Fees Receipt,Medical Insurance Premium Receipt j. Tax Payment Challans k. Bank Account Information such as MICR code, account number etc

16. What are the different heads of income applicable in India?

The following are the heads of income applicable in India:

Income from salary Income from house property Income from business or profession Income form capital gains Income from other sources

Income from Salary: 17. What is the purpose of the " FORM-16 "? It is a certificate issued by your employer giving the details of salary, income from other sources declared by you, deductions claimed by you, tax deducted from your salary and paid to the income tax department by the employer. This serves as the evidence for the tax deducted from the salary paid to you.

18. My employer has already deducted taxes and paid the same to the Government. Do I still need to file my tax return?

Yes, you still need to file your tax return as the Form 16 is not an income tax return by itself. Further, the final tax liability might turn out to be different from the amount withheld by the employer. You might well have to pay the balance tax or claim a refund in case of excess withholding.

19. I was not able to declare certain income/claim certain deductions to my employer. Can I do so now?

Yes, you can include the additional information while preparing your final tax return. Of course, the resultant tax liability would also be different.

Income From House Property:

20. Which properties come under this particular head of income?

A property would come under the head of Income from House Property if the following conditions are satisfied:

The property consists of buildings or land adjacent thereto. The assessee must own property.

21. Can a house property be further categorized to determine taxability? A house property could fall under one of the following two broad categories:

Self Occupied Properties (SOP). Let Out Properties

22. What is a deemed to be let out property? If the you own more than one property all of which are not rented out but are self occupied, then you may choose any one property as self occupied and the remaining properties though not actually let out, will be deemed to be let out ie they will be assumed to have been let out and a notional rental value will be treated as 23. I have taken a loan for the purchase/construction of my house property. Do I get any tax benefits on the same? Your housing loan repayment would generally have 2 components - Interest and Principal. Both are deductible, but separately.

Interest can be claimed as deduction, irrespective of the source of the loan. The maximum interest you can claim as a deduction is Rs.1,50,000/, if the property is not rented out. In case of rented property, there is no such limit.

The principal repayment can be claimed as deduction only when the loan has been taken from Banks or Financial Institutions. This deduction is available in section 80C within the overall limit of Rs.1,00,000/-.

24. Do I have to declare even my self occupied property on the tax return?

Yes, even if the property is being used by you for self occupation, you still have to declare the same.

25. Can interest payable but not paid be claimed as a deduction?

Yes, you will be eligible for deduction even with respect to the interest payable, but to claim principal you have to make payment.

Income from Capital Gains:

26. When does a transaction fall under this head of income? The requisites of a charge to income tax of are :-

There must be a capital asset. The capital asset must have been transferred. There must be a gain arising on such transfer of a capital asset.

27. What are the common assets on which the capital gains arise? Following are some of the assets the transfer of which attracts capital gains:

Immovable property Shares Units of a mutual fund Bonds Debentures Jewellery, paintings etc

28. What are long term and short term capital gains? Gains on sale of capital assets held for more than three years (one year for listed securities or mutual fund units) are treated as long-term and are taxed at concessional rates compared to short-term . While calculating taxable long-term , the cost of acquisition and the cost of improvement are linked to a cost inflation index. As a result, the indexed cost of acquisition is deducted from the sale consideration received, to arrive at gain. 29. What is STT? STT refers to Securities Transaction Tax and is paid when the securities are sold through a recognized stock exchange. 30. What is the income tax implication for STT? When you hold shares for more than 1 year, they become Long Term Capital Assets. Any profit earned is exempt from income tax (10% tax for short term capital gain), if the following conditions are fulfilled:

1. Such shares are sold through a recognized stock exchange. 2. Securities Transaction Tax (STT) has been paid on the sale of such shares.

31. Can I claim a deduction for the STT paid? No, STT paid is not an allowable expense for the purpose of income tax. 32. What is the indexed cost of acquisition? "Indexed cost of acquisition" is the amount, which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year, in which the asset is transferred, bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later.

33. Are there any exemptions from capital gains on sale of residential house property? Yes, provided you had held Residential Property for more than 3 years and you comply with the following additional conditions:

a) You have either purchased another residential house, one year before the Date of Sale or

b) You plan to purchase another residential house within two years from the date of sale or to construct another residential house within three years from the date of sale. In case of (b) you need to deposit the amount of Capital Gain in a Capital Gain Account Scheme before the due date of filing your income tax return. 34. Can I claim any improvement costs also while computing the cost of the property? Any expenses incurred for major improvements/repairs which have the effect of enhancing the value of the property may be claimed as improvement cost. However it may be noted that routine repairs and maintenance expenses would not be covered here. Income from Other Sources: 35. What incomes come under the head Other Sources? This is a residual head; income which does not meet criteria to go to other heads is taxed here. Also there are also some specific incomes which are to be taxed under this head.

Income by way of Dividends Income from horse races Income from winning of lotteries Any amount received from key man insurance policy.

36. Are there any income which are exempt from tax? The Indian Income tax act specifically exempts certain income from tax. Examples of such income are:

Money received from an Insurance company as proceeds of an insurance policy (by way of an insurance claim, or by maturity) is generally exempt. However there are three types of payments under life insurance policy that are not tax free . Maturity proceeds of a Public Provident Fund (PPF) account. Dividends

37. Do I have to declare the exempt income also? Yes, you have to declare all your income irrespective of the fact that they are tax-exempt or not. 38. Are any deductions allowable from taxable interest on securities? In case of taxable dividend income and interest from securities, any reasonable sum paid by way of remuneration or commission for the purpose of realizing such income including interest on borrowed capital if such borrowed capital is used for making investment in shares or securities would be allowed as a deduction. 39. I am receiving family pension. Will I get any deductions from the same? In case of family pension received by legal heirs of an employee, a standard deduction of 1/3rd of such amount or Rs 15,000 whichever is less will be allowed by way of deduction.

Tax Deduction at Source: 40. What is the procedure under Tax Deduction at Source?

Tax deduction at source means the tax required to be paid by the assessees, is deducted by the person paying the income to him. Thus, the tax is deducted at the source of income itself. Examples: Employer deducting tax before paying salary, Contractee deducting tax before making contract payments etc. 41. What are the common types of income for which tax would have been deducted? The following are the common TDS payments: Salary and all other positive incomes under any head on income Interest on securities Interest other than interest on securities Payments to contractors and sub-contractors Payment of rent Payment of fees for professional or technical services 42. Which is an authentic source of information for viewing the details of the tax deducted at source? The details of tax deducted at source and other pertinent information can be viewed on the website www.tin-nsdl.com. 43. How to ensure that I smoothly claim the credit for the TDS deducted from my income? Whenever any person deducts TDS from the payments to you, ensure that you are tracking the same. You have to insist on being provided a Form 16/16A with all relevant complete details mentioned therein. You can then claim credit for the TDS based on these certificates. Deductions from Income: 44. What do you mean by deductions from income? Deductions from income refer to the amounts that can be deducted from the gross total income by a taxpayer. These deductions are allowed based on the investments/payments made by the taxpayer for the specified purposes. 45. What are the common deductions from income? The most common deductions are those specified in section 80C. These include payments such as:

Life Insurance Policy premium payments Principal portion of the housing loan repayment. Provident Fund payments Investments in National Savings Certificate 5 year Bank Deposits Equity Linked Saving Schemes Investments in equity oriented mutual funds. Tuition fees payment for children

46. What is the overall limit for deductions under section 80C? The limit for deductions under section 80C is Rs 100000. This means that if you have made the specified payments exceeding Rs 100000, still your deduction will be limited to Rs. 100000. 47. Are payments for medical insurance premiums also deductible? Yes, payments made for medical insurance premiums are deductible under section 80D subject to the conditions regarding mode of payment

and for whom the payments have been made. 48. I have made donations to some charitable institutions. Can I claim any tax benefits for the same? Donations made to approved funds, financial institutions would be eligible for deduction from the total income. It may be noted that certain donations are 100% deductible while others are 50% deductible based on institution/fund to which the donation has been made. 49. Can I claim a deduction for the interest paid on any education loan? You can claim a deduction for the interest paid on higher education loan that satisfies the prescribed conditions. It may be noted that this deduction is for the interest component of the loan. 50. My minor child has a PPF account which has earned interest. Will this be taxable? No as the interest earned on a minor childs PPF account is not taxable. 51. What is the tax treatment for the interest earned on the National Savings Certificate? The interest earned on the NSC has to be declared as income. However it is also to be noted that the same is deductible under section 80C from the total income. 52. I have made medical insurance premium payments for my dependent parents. Can I claim this also as a deduction? Yes, you can claim the medical insurance premium payment made for your dependent parents as a deduction from your total income.

Individuals

We understand your unique tax filing needs. In today's fast-moving world where time is everything, we offer online tax filing solutions for individuals that help you save time in achieving Tax Compliance. The solution is simple, smart and easy to use. We also provide tools and tips to help you file an accurate tax return without missing any tax benefit that you can claim. Addressing these needs, we offer you three solutions that help you comply better.

Filing Solutions

Taxsmile Silver So simple, even beginners can file their own taxes! Taxsmile Gold Total efiling solution, complete with Digital Signature!

Sign and file your tax return without leaving your desk!

Efiling is faster than traditional filing. Yet you need to post a copy of your ITR-V to Income Tax Departments CPC and wait for eacknowledgement. You can save this time, if you choose to sign and file using a digital signature. What better way than with e-Mudhra digital signature certificates!

What is a Digital Signature Certificate? A digital signature is to electronic documents what a handwritten signature is to printed documents. A digital signature is an electronic signature that can be used to authenticate the identity of the sender of a message or the signer of a document. The Information Technology Act, 2000 provides for the use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents. Digital Certificates are issued only through a valid Certification Authority (CA), such as e-Mudhra .

What is e-Mudhra? e-Mudhra is a digital signature issuing authority licensed by Controller of Certifying Authority, India, to issue Digital Signatures in India.

How is a tax return signed digitally? When you buy Taxsmile Gold, you get an e-Mudhra digital certificate as part of the filing package. This is a Class ll certificate and is valid for one year. Once your income tax return is prepared and ready for filing, you will be prompted to affix your Digital Signature before the income tax return is sent to the Income Tax Department. By affixing your Digital Signature, you are electronically signing the tax return and authenticating your identity. Once you affix your Digital Signature to the electronic return, there is no need to sign and send the physical copy again to the Income Tax Department.Isn't this easy and convenient? It saves you time too!

Do I need to apply for an e-Mudhra signature even if I have chosen the Gold product? Although the Gold product includes a digital signature as part of the package, you need to make an application for it by going to the eMudhra tab. Then, send the completed application and required attested supporting documents. Once these are received and approved by e-Mudhra, you will receive instructions by email to download your digital signature. You can download the Instruction Manual from the website for step-by-step guidance about the application procedure and on how to download your digital signature.

I have chosen the Silver product. Can I still use a digital signature to sign my return? Yes. You can e-file using digital signature even if you chosen Silver product. You can choose Gold product if you do not have digital signature and wish to procure it.

Who can apply for an e-Mudhra digital signature and which type of digital signature is offered by Taxsmile? Only Indian Residents who have completed the age of 18 years can apply for an e-Mudhra digital signature. Taxsmile offers a Class ll digital signature certificate from e-Mudhra with one-year validity.

Do I need to submit any documents while applying for a digital signature? You need to submit the Application Form generated online, after duly affixing your colour photograph, signing across the photograph and at end of the Form. Also attach an attested Proof of Identity and Proof of Address as selected by you while applying online.

How can I obtain the e-Mudhra digital signature?

Choose our Gold product, prepare your return and make the payment. If you are a Silver user wanting to buy a digital signature, you need to upgrade to Gold.

Once you have made the payment, go to the e-Mudhra tab and fill up your Application Form online.

Send the completed Application Form along with the attested Proofs of Identity and Address that match with your application details. Your application will then be taken up for processing.

Once your application is approved, you will receive necessary instructions via emails from e-Mudhra.

Tax filing solutions for your Employees

Companies today look for creative ways to tell their employees and customers, "we are here for youwe care for you." At Taxsmile, you will find solutions that help you express this in a practical way. Your employees and customers will thank you for helping them eliminate their tax worries. Tax filing solutions for your Employees.

Tax filing solution for your Organisation

Taxsmile offers smart desktop application that helps you automate managing employee data: eF16 Signing the Form 16 physically for thousands of employees is undoubtedly tedious. eF16 helps you convert Form 16 data for each employee into an electronic format. You can then bundle all the Form 16s and affix your companys digital signature. All Form 16s will be duly signed at just one go! Save time choose eF16 today.

Forget physically signing Form 16 for each employee separately !

eF16 is an application that helps you to generate digitally signed Form 16's for your employees.

Benefits of getting eF16

Eliminate physically signing each Form 16. Keep employee data secure - install the password-protected eF16 application on your desktop. Directly import payroll data of all employees to eF16. Distribute Form 16's promptly yet securely, by digitally signing and emailing them directly to the respective employees. You can also distribute physically signed copies of the same. (A physical printout may be required in case an employee has resigned.) Empower your employees to directly upload their Form 16 data onto our website and complete their income tax return. Increase productivity by automated generation of Form 16.

Tax Professionals Outsource your tax filing process.

As a tax professional, you are best equipped to offer expert advice to your clients. Have you ever wished there was a system that could do the number-crunching and other routine work for you so you could focus on your core skills? We are sure you have!

eFiling Gateway
Now you can manage e-filing for all your clients with just a single username and password, on Taxsmile. Just upload all their XML files and outsource your tax filing process and authorize us to submit these on the IT Department's e-filing website. Learn more about eFiling Gateway.

Few know, the tax implications are different for Non Resident Indian (NRI) For example, any income that is accrued in India is taxable and get the basic exemption of Rs.1,60,000/- irrespective of their gender and age. This leads to a lot of confusion and NRIs often find themselves seeking the help of friends and relatives in India to understand, manage their taxes and for tax filing purposes. Taxsmile now makes tax management very simple for NRIs. We offer a complete range of services including understanding tax, its components, calculating the tax and filing returns. Taxsmile Premium for NRIs :

Simple, Intuitive User Interface for Income Tax Return Preparation and e-Filing Choose to get Income Tax Return reviewed by Indian Tax Expert All Queries related to Indian Income Tax answered by Tax Professionals (10 queries included as part of package) Get the Advantage of e-filing with Digital Signature (class II eMudhra Digital Signature Included) Fast and hassle-free way to achieve Tax Compliance Support in your region *

* USA, UK, Australia and Adding more countries

Paying tax often pinches an investors pocket but no tax planning creates a further hole in the pocket!

Search hits for tax oriented article around the financial year end normally resemble the Sensex graph from 8000 to 21000 levels; the reverse is true at other times of the year. Its time investors understand that being aware of and planning taxes is the smarter and surer way to save money. In this article we try to focus on the various tax benefits available under Sec 80C, 80CCF, 80D, 80G and 80E.

Sec 80C: Deduction in respect of Life insurance premium, contribution to PPF, principal repayment on home loan, etc.
You are entitled to a tax benefit provided you make investments in certain instruments which are eligible for deduction under Sec 80C of the Income Tax Act, 1961, with the maximum total exemption being Rs. 1, 00,000. That is, if your income is 5,00,000 you can claim tax exemption up to 1,00,000 which leaves you with a taxable income of 4,00,000. Following are a few options that permit this exemption:

Instruments
Provident Fund Tax saver Mutual Funds -ELSS Principal repayment on home loan Life insurance premium Others - tuition fees -small saving schemes

Summary
Contribution to public/recognised provident fund Investment in any ELSS (Equity linked saving scheme) Repayment of any loan borrowed for purchase or construction of residential house property. Premium paid towards life insurance policy Payment made as tuition fees for your child Investments in National Savings Certificate, post office savings bank account, senior citizens' savings scheme and others

Restrictions
Lock-in-period of 15 years Lock-in-period of 3 years Interest is exempt till 1,50,000 under section 24 Amount of premium not exceeding 20% of the policy sum insured 1. Should be a full-time course 2. Maximum 2 children Interest rates, minimum investment amount if any, lock-in-period etc would differ in case of each instrument.

Sec 80CCF: Deduction in respect of subscription to long term infrastructure bonds

Any investments made in long term infrastructure bonds as notified by the central government shall be allowed as deduction to the extent of Rs. 20000. This is in addition to the limit of Rs. 100000 allowed under Sec 80C of the Income Tax Act, 1961.

Sec 80D: Medical Insurance Premium

Premium paid for medical insurance up to Rs. 15000 is eligible for deduction under Sec 80D; incase of senior citizens the limit is extended to Rs. 20,000. The following table summarizes the provision:
Mediclaim premium paid in respect of Description Self, spouse & Parents (whether dependent children dependent or not) Total deduction u/s 80D

No one has attained the age of 65 years

15000

15000
20000

30000
35000

Assessee and his family less than 65 years 15000 of age and parent is a senior citizen

Assessee and the parent attained age of 65 years

20000

20000

40000

Sec 80E: Deduction in respect of interest on loan for higher education

The amount of interest paid on loan borrowed from any financial institution or any approved charitable institution is eligible for deduction under Sec 80E of the Income Tax Act, 1961, the loan being taken for the

purpose of higher education. The provisions simplified alongside:

Sec 80G: Donations to certain funds/ charitable institutions

Donations, charity need not necessarily be one-way traffic but could result in a win-win situation for both parties. To simplify it further, donations made to certain funds or charitable institutions are eligible for deduction under Sec 80G of the Income Tax Act, 1961. So while the receiving party benefits with the donation, you receive tax benefits arising from the deduction. Institutions eligible for deduction under this section are categorized in three segments based on the amount of deduction allowed. The three segments have: 1. 100% deduction allowed without any limit 2. 50% deduction allowed without any limit 3. a.) 100% deduction allowed of restricted amount b.) 50% deduction allowed of restricted amount Where restricted amount is 10% of the adjusted total income llustration: Mr. A an individual has total income for a year amounting to Rs. 4, 00,000. He makes a donation of Rs. 1, 50,000 to an approved charitable institution. Depending on the institution he invests in, we have 4 different scenarios that explain the benefits arising in each case.
100% deduction without any limit 50% deduction without any limit 100% deduction of restricted amount 50% deduction of restricted amount

Adjusted total Income Tax payable Donation made to institutions Amount qualified for

4,00,000 22,000 1, 50,000 1, 50,000

4,00,000 22,000 1, 50,000 75,000

4,00,000 22,000 1, 50,000 1, 50,000

4,00,000 22,000 1, 50,000 75,000

deduction
Deduction under Sec 80G NA (restricted to 10% of income) NA 40000 40000

Taxable income post 2,50,000 deduction Tax payable post deduction 7,000

3,25,000 14,500

3,60,000 18,000

3,60,000 18,000

Note: Education cess has not been calculated To know more about the list of institutions, Click here

In a Nut shell
Lets understand these deductions and its impact on your tax liability by way of the following illustration: Mr. X and Mr. Y have total income for a year amounting to Rs. 5, 00,000 each.

Following are the particulars furnished by Mr. X

Amount

Life insurance premium paid, sum of the policy assured Rs. 2,00,000 Rs. 60,000 Contribution to public provident fund Tuition fee payment for 3 children pursuing a full-time course Housing loan principal repayment Invested in ELSS mutual fund Invested in IDFC Infrastructure bonds Premium paid on Mediclaim policy Rs. 20,000 Rs. 10,000 each Rs. 30000 Rs. 20,000 Rs. 20,000 Self- Rs. 15000 Parent (senior citizen)- Rs. 20000 Rs. 20000

Donation made to Prime Ministers National Relief Fund

Computation of tax liability Mr. X

Mr. Y Amount (Rs.) 5,00,000 -

Particulars Total Income for the year Deduction under Sec 80C *Life insurance premium paid

Amount (Rs.) 40,000

Amount (Rs.) 5,00,000 -

Contribution to public provident fund **Tuition fee for children pursuing a full-time course Housing loan principal repayment Investment in ELSS mutual fund Deductions under Sec 80C restricted to Deduction under Sec 80CCF Invested in IDFC Infrastructure bonds Deduction under Sec 80D Premium paid on Mediclaim policy -Self -Parent (senior citizen) Deduction under Sec 80G ***Donation made to Prime Ministers National Relief Fund Taxable Income after deduction Tax liability Notes:

20,000 20,000 20,000 20,000 -

1,00,000 20,000 15,000 20,000 20,000 3,25,000 14,500

5,00,000 32,000

* Restricted to 20% of the sum of the policy assured i.e. 20% of Rs. 2, 00,000. Therefore eligible amount Rs. 40,000 ** Tuition fee paid is eligible for deduction under Sec 80C for maximum two children. Therefore Rs. 20000 shall be allowed. *** Donation (this fund) eligible for 100% deduction without any limit Education cess has not been calculated
The illustration above clearly states the benefits enjoyed by an investor taking advantage of the various deductions available in a planned manner.

Conclusion:
To reiterate, an investor needs to consider his overall investment objective rather than frantically making investments with the sole purpose of saving tax. The idea is not just to throw light upon these deductions but also to explain the underlying concept of tax planning. Hope this provides you a leg-up in your tax saving investments.

Tax slabs for your reference: Income tax slabs 2011-2012 for General tax payers Income tax slab (in Rs.) Tax 0 to 1,80,000 No tax 1,80,001 to 5,00,000 10% 5,00,001 to 8,00,000 20% Above 8,00,000 30%

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