All about TAX in Financial Year 2009 – 2010 

From -

Tax Slab for F.Y. 2009 - 2010
Taxable Income of Men Upto Rs.1,50,000 Taxable Income of Senior Taxable Income of Women Citizens Tax Upto Rs.1,80,000 Upto Rs.2,25,000 Nil

Rs.1,50,000 To Rs.3,00,000 Rs.1,80,000 To Rs.3,00,000 Rs.2,25,000 To Rs.3,00,000 10% Rs.3,00,000 To Rs.5,00,000 Rs.3,00,000 To Rs.5,00,000 Rs.3,00,000 To Rs.5,00,000 20% Rs.5,00,000 and Above Rs.5,00,000 and Above Rs.5,00,000 and Above 30%

Note : 3% Education Cess also on the tax amount after tax and surcharge (if any) What is surcharge? * If salary is above 10 lacs , 10% surcharge will also be applicable.

Following things will be discussed : 

1. Tax Slab in 2009 for salaried employees

2. How much will you save and

 

3. How to Save Tax

Tax Free Incomes :
The following incomes are completely exempt from Income  Tax Without any upper limit.   1. Interest on PPF/ GPF / EPF. 2. Interest on GOI Tax Free Bonds. 3. Dividends on Shares and on Mutual Funds. 4. Any Capital Receipt from Life Insurance Policies. i.e.  sums received either on death of the insured or on Maturity  of Life Insurance Plans. However, in case of Life Insurance  Policies issued after March 31, 2004, exemption on Maturity  payment u/s.10(10)D is available only if premium paid on  any year does not exceeds 20% of the Sum Assured.

Tax Free Incomes :
5. Interest on Saving Bank Account in Post Office. 6. Long term Capital Gain on sale of shares and equity MF Dividend Income :   Dividend income from companies / equity – oriented Mutual  Funds is Completely Exempt in the hands of investors.  Dividend is also Tax Free in the hands of investors in case of  debt – oriented Mutual Funds Schemes

Gift Tax
Gift Tax was abolished with effect from  October 1, 1998. The gifts are no longer taxable in the hands  of donor or donee. However, with effect from September 1,  2004, any gift received by an individual  or  HUF will be included in taxable income,  provided the amount of gift exceeds  Rs.50000/-.

Gifts received from following is Tax Free.
1. 2. 3. 4. 5. 6.

7. 8. 9.

Spouse Brother or Sister. Brother or Sister of Spouse. Brother or Sister of either of parents of the individual. Any lineal ascendant or descendant of the individual. Any lineal ascendant or descendant of the spouse of the  individual. Spouse of the persons referred to in  (2) or (6) Gifts received on the occasion of marriage Gift received under a WILL by way of inheritance are also  tax free.

Filing of Income Tax Return :
1. Filing of income Tax Return is Compulsory  for all individuals whose Gross Annual  Income exceeds the Maximum Amount which  is not chargeable to income tax i.e.  Rs.1,80,000 for  Resident Women, Rs.  2,25,000 for Senior Citizens and Rs.  1,50,000 for other individuals and HUFs. 2. The last date of filing income tax return is  July 31, in case of individuals who are not  covered in point 3 below.

Filing of Income Tax Return :
3.  If the income includes business or  professional income requiring tax audit  (turn over Rs.40 Lakhs), the last date for  filing the return is September 30. 4.  The penalty for Non- Filing of Income  Tax Return is Rs.5000 (after  Assessment Year).

Computation of Gross Taxable Income
Income is Computed under the foll.  5 Heads: 1.      Income from salaries 2.      Income from House Properties 3.      Profit & Gains of Business & Profession 4.      Capital Gains 5.      Income from Other Sources   

Salary or Pension Income

The pay which you get has many components ,  like HRA , conveyance allowance and others.

Out of this income some things are deductible  on your hand and after deducting you arrive at a  amount called Taxable income , on which you  have to pay tax.

Income from House Property

If the property is self occupied then the Income  from House Property is treated as  NIL.

If any loan is taken for the purchase of the  property then the amount paid towards interest  up to a maximum of Rs. 1,50,000/- is deducted  from taxable income. 

Income from House Property
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In case Property is given on rent, then we have to find  out the : Annual Rental Income From this deduct Property Tax paid if any From balance amount-deduct30% towards repairs &  maintenance From the residual figure- deduct the amount of interest  paid on loan taken for the purchase of the property. The resultant figure is the Income from House Property

Profit from Business / profession

Income as arrived on the 

basis of Profit & Loss A/c

Income from Interest

Interest Income from the following sources  to be included in Gross Taxable Income:
Interest on company deposits. Interest on debentures/bonds. Interest on savings bank account/ fixed  deposits with banks.

Income from Interest
 

Interest on post office savings schemes like  MIS, NSC, KVP etc. Interest on private loans given to relatives,  friends or any other entity. Interest on government securities. Note: Deduction u/s 80 L has been omitted  now and accordingly,interest income from  the above sources is Fully Taxable now.

Capital Gains
  

Capital gain arises when certain assets like  property (plot or a built up commercial /  residential unit) or shares / mutual fund units /  bonds etc are sold for a profit. The treatment of capital gains is slightly different. It mainly depends upon whether the capital gain  (profit on sale) is Short Term or Long Term.

Short Term Capital Gain

Capital gain is considered to be short term if  immovable property is sold / transferred  within THREE years of acquisition. Similarly, if shares or other financial  securities such as mutual fund units are sold  within ONE year of purchase, the profit  earned is treated as short term capital gain.

Tax Treatment on Short Term Capital Gain
 It is included in the gross taxable 

income like other sources of  income and normal rates of tax  apply, which depend on the gross  taxable income from all sources  including short term capital gains.

Tax Treatment on Short Term Capital Gain
 In case of Sale of equity shares or 

units of equity oriented Mutual Fund  schemes, short term capital gains are  taxed at a Flat Rate of 15%,  irrespective of the tax slab on other  sources of income, provided  securities Transaction Tax is paid on  such sale.

Long Term Capital Gain

If Immovable Property is sold after THREE years  of purchase, Or Financial securities such as shares, deep  discount bonds, units of open - ended or close –  ended schemes of mutual funds are  sold/redeemed/transferred after holding the same  for more than Twelve Months, then the gain is  considered to be long term capital gain.

Tax Treatment on Long Term Capital Gain
 With effect from October 1, 2004, 

long term capital gain on transfer  of listed shares/units of equity  oriented mutual funds schemes  has been exempted from tax,  provided securities transaction tax  has been paid on such sale.

Long Term Capital Gain
 Non listed shares/units of equity 

oriented mutual fund schemes, tax is  payable in respect of long term  capital gains at a flat rate 20% and  the amount of gain has to be  adjusted for inflation. This inflation  adjustment is known as indexation  benefit.

Section  54 EC
Long-Term Capital Gain Tax (after availing  indexation benefit ) can be saved by investing  amount within 6th months in any of the following  two schemes specified under section 54 EC  ( upto  Rs. 50 Lakhs only): 1  Bonds issued by Rural Electrification  Corporation ( REC ) 2 Bonds issued by NHAI (National Highways  Authority of India)

There are various Tax Saving Schemes:
   

  

Life Insurance Premium. Contributions to Employees Provident Fund/ GPF Unit-Linked Insurance Plan Contribution to Public Provident Fund Scheme (Max.  Rs.70,000). National Savings Certificates VIII Tuition Fees Upto Two Children. Repayment of  Housing Loan ( Principal)

Pension scheme of LIC of  India  or any other  insurance company. Subscription to eligible issue of units of Mutual  Fund (ELSS). Interest accrued in respect of NSC VIII issue. Fixed Deposit with Banks having a lock – in  period of 5 Years Premium on Mediclaim Policy.

Life insurance Premium:

Life insurance is a Very Good Investment.  It gives Risk Cover, Tax Saving  and Good  returns. It is a contract that pledges payment of an  amount to the person assured (or his  nominee) on the death of insured person.

Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Long-term savings “EASY Instalment” facility. Premium payment for insurance is either  monthly, quarterly, half yearly or yearly.

LOAN Facility Available. Also generally accepted as security, even for a commercial loan.

A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies.

Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).

National Saving Schemes (NSC) is used to be one of the popular Income Tax Saving schemes. But nowadays it is not so lucrative. This scheme is available throughout the year. It can be operated singly, jointly, or by a minor with his/her parent or guardian. Return on this scheme at interest rate of 8%.

National Savings Certificates (NSC) :

The minimum investment limitation of the scheme is Rs.100/- and with no upper limit. This scheme has a maturity period of 6 years. There is a provision of loan on the basis of this scheme.

Working on NSC Interest

Amt Invested Interest Earned @ 8% P.A. Tax @ 30% on Rs.8/Net Interest Received

Rs. 100.00 Rs. 8.00 Rs. 2.40 Rs. 5.60

  

Public Provident Fund (PPF) :

Under this scheme, there is a return at the interest rate of 8% p.a. The minimum investment limit is Rs. 500/- and maximum limitation is Rs. 70,000/-. It can be opened any time throughout the year. It can be operated either singly or jointly. In case of minor, with parent / guardian.

This scheme has a maturity period of 15 years. Loan Facility is available.

Loan amount can be returned in maximum of 36 installments. A person can withdraw an amount (not more than 50% of the balance). Tax Benefit Under Section 80C of Income Tax Act, 1961 is available. Interest on this scheme is tax free.

Mutual Fund (ELSS) / ULIP PLANS
 An

ELSS (Equity Linked Savings Scheme) is a mutual fund scheme that invests in equity & equity-related securities. ULIP Plans (Unit Linked Insurance Plan)

is a Plan that offers Tripple Benefit
Tax Benefit  Insurance Cover  Benefit from the long term growth potential of equities.

ULIP & ELSS are also eligible investments under section 80C of Income Tax Act 1961. ELSS have a lock-in period of three years. This allows the investors to benefit from the long term growth potential of equities.

ELSS / ULIP – Key Differentiation
ELSS is the only investment product that offers ….

Twin Advantages

•        Equity Returns  •        Tax Benefits

ELSS / ULIP – A Comparison
Instrument
National Savings Certificate - NSC Public Provident Fund - PPF Mutual Fund ELSS / ULIP

Expected Returns
8.00% 8.00% Around 15%-20%

Lock-In Period
6 years Up to 15 years 3 years

Investment Avenue NSC PPF ELSS / ULIP

1 Lac Returns 8.16% 8.00% 15.00%

End Value of Investment in Rs. Lac after - Years
3 1.27 1.28 1.52 6 1.60 1.63 2.31 8 1.87 1.92 3.06 10 2.19 2.26 4.05 15 3.24 3.40 8.14 20 4.80 5.11 16.37

Mutual Fund ELSS/ ULIP Plans returns are the assumed returns dependent on the markets and are not guaranteed or assured

Deduction u/s 80D  Mediclaim Policy
   

Medical Insurance Premium paid for (Self, Spouse and Children Rs. 15,000/-) additional for parent Rs. 15,000/- and in case of senior citizen Rs. 20,000/-

       I hope this information was helpful. If you need any further help you can get in touch with me via my email id harishsoneji@hotmail.com You can also get in touch with me on www.squamble.com

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