you can save up to Rs 44,000 Tax a year

From the point of retail investors the budget is good; he has given tremendous relief for income tax.

Salaried professionals: A male earning up to Rs 5 lakh a year will save Rs 44,000 by way of income tax. Now, he will pay only Rs 55,000 by way of income tax, which means that the effective tax rate is down to only 11 per cent. That means more money of up to Rs 44,000 per annum is available for investment.

For women, the difference is Rs 43,500 per annum. For senior citizens it is up to Rs 39,500 per annum. That will be a great saving for working professionals.

Also, if you buy medical insurance for your parents, you get an additional relief of Rs 15,000.

Short term capital tax: People will be forced to hold on to their shares for at least a year because short term capital gain has become 15 per cent. That is a positive disincentive to sell within in one year. If there is less selling pressure, the stock market will be forced to improve.

Stock market advice: One thing bothering everyone is this Rs 60,000 crore that will cost the exchequer. If banks are not reimbursed by the Finance Minister, than they (the banks) will take a hit and therefore banking stocks may fall. We have to wait and watch.

Wait and watch. Ultimately the stock markets will be driven by global trends. If markets fall in US, Asia etc, it will affect us. Investors must be cautious.



Senior citizens: Reverse mortgage loan scheme -- if you have a house, you can give your house (mortgage your house to the bank while still living in it) and take a loan. The money you receive will not be taxable. It can become your regular income.


Consumers gain: Two-wheelers, small cars, tea and coffee and other small things, will get cheaper.



Last words: No googlys! But I did not expect him to give so much relief on the personal income tax. It was a substantial relief to the middle class, to both the self-employed and to professionals.

Source : MoneyControl

Capital Gains 2008-09

Deductions under Capital Gains

You should provide data in this section if you have sold any of the following Capital assets -

-House property
-Securities (Equity stock, Debentures, Mutual Fund Investments, Zero coupon Bonds)
-Others – Agricultural land, Gold, Silver


Ascertain the type of Gain/Loss
The period of holding of your property determines the type of capital gain/ loss you have made.

Type of Asset Short Term Long Term
House property Held for less than 3 years Held for more than 3 years
Securities Held for less than 1 year Held for more than 1 year
Others Held for less than 1 year Held for more than 1 year


Computation of Gain/ Loss

a.Net Sales Value = (Sales Price less the cost incurred for sale)
b.Purchase price = (Purchase Price plus any other expenses incurred for purchase- indexed by the year of expense)
c.Profit / Loss (a-b)

Courtesy - Popular Sites

Deductions for AY 2008-09

Deductions under House Property

You are required to enter data in this section only if you owned a house property which was used for residential purposes, for any part of the year.

Self Occupied Property – if you have stayed in the property for the whole or any part of the year and for the rest of the year it was not available to be let out then it would be treated as self occupied property.

Let out property - If you have let out the property or have made the property available for rent for any part of the year then it would be treated as a let out property.

Deductions Available
1. If your property is not let out for the entire period for which it was available to be let out, you are entitled to a deduction for the period for which it was vacant.
2. If you have paid any amount as interest towards repayment of loan taken for the property then you are entitled to a deduction to a maximum amount of Rs 1.50 lakhs.

Deductions for AY 2008-09

Deductions under Salary

You are entitled to deduction upto an overall limit of Rs. 1 lakh for any amount that you have invested by making purchases in any of the schemes mentioned below during the corresponding financial year (FY) which starts from April 1 and ends on March 31:

Please note that if you have already provided the deduction details to your employer and the employer has already considered the same in computing the tax you MUST NOT ENTER THE SAME DATA AGAIN in the deductions list.
1. Your contribution towards Provident Fund which is deducted from you salary to a maximum limit of 12% of your basic salary.
2. Purchase of National Savings Certificates.
3. Any amount that you have paid towards life insurance premium for yourself and your immediate family.
4. Any amount that you have invested in Public Provident Fund.
5. Any amount that you have invested in Unit Link Insurance Policy.
6. Any principal amount that you have paid towards repayment of loan taken for a purchase of a property, construction of which is completed and has been handed over to you.
7. Any amount paid towards tuition fees of your children – maximum of Rs. 100 per month per child is allowed.
8. Any investments in schemes or funds which provide deduction under 80C.
9. Any amount paid towards any insurance policy which is governed under section 80CCC. This has a limit of Rs. 10000 per policy per annum.
10. Amount paid as donation to any charitable organization who qualify for deduction under section 80G. Please check whether the amount donated by you qualifies 50 percent or 100 percent. Dependent on the same you would be able to claim deductions. For example, if the organization qualifies for 50 percent of the amount donated and you have donated an amount of Rs. 1000 then you would qualify for a deduction of Rs 500 while if the organization qualifies for a 100 percent deduction then you would be entitled to the full amount of Rs1000.
11. If you have spent any amount for medical treatment for dependent children you are entitled to deduction for all expenses incurred by you on such treatment.

Income Tax Deductions

Donations For Charity

Under section 80-G of the Income Tax Act, there are following relief in case of Donations:

Donation to certain funds, approved education institutions of national importance, charitable institutions.
The deduction will be 50% of the amount.

Deduction may be 100% if donation is given to Prime Minister Relief Funds, National Foundation for Communal Harmony, Blood Transfusion Council, The Africa Fund, Earth-quake Relief Fund.

In Case of Physically Handicapped Persons
A person who is suffering from permanent physical disability or mental retardation is entitled to deduction upto Rs. 40,000.

Handicapped must be certified by a physician, surgeon or a psychiatrist who is working in a government hospital.

Under section 80DD and 80U of Income Tax Act, physical disability must be one of the following:
Permanent or more than 50% disability in limb
Permanent or more than 60% disability in 2 or more limb
Permanent loss of voice
Permanent blindness
Mental Retardation in which mental intelligence is less than 50% of normal required intelligence
In Case of Treatment of Handicapped Dependents
All the person who are dependent on physically handicapped person comes under this category. There is provision of deduction in tax against expenditure on medical treatment, training & rehabilitation of handicapped dependents or amount paid in an approved scheme of LIC or UTI.

In Case of Repayment of Loan Taken For Higher Education u/s 80E
There is deduction in income tax in respect of repayment of loan taken by a student from a bank or any other financial institutions for higher education in India or worldwide.

In Case of Contribution To Pension Fund
Under section 80CCC there is a provision of deduction to an individual for any amount paid to keep in force annuity plan of the LIC for receiving pension from a fund set up by that corporation, as per section 10(23AAB) of Income Tax Act,1961. The amount received by assessee or his nominee will be taxable. There will be no rebate under section 88 to the persons whose deduction under this section has been approved.

In Case of Amount Paid as House Rent
Under section 80GG of the Income Tax Act there is a provision of deduction in tax on amount paid by a person (not a salaried person getting housing allowance) for residential accommodation. Deduction in tax will be measured under following parameters :-
The excess of actual rent paid over 10% of the total income (excluding long term capital gain & income, as per section 115A or 115D of Income Tax Act, 1961)
Deduction will not be allowed to an assessee who owns an residential accommodation at a place where he is temporarily residing
Deduction will not be allowed to an assessee who owns an residential accommodation at any place and has also claimed for deduction in respect of self occupied property

In Case of Remuneration Received in Foreign Currency by Employer
Under section 80RR an individual resident of India who is an author or writer or photographer or TV/ film cameraman or TV/ film director or musician or actor or sport person or other such artist whose source of income is foreign income and brings income to India according to foreign exchange regulation, then he is entitled to get a deduction of amount equal to 75% of such income as it is brought in India in convertible foreign exchange. This amount will be deducted from his taxable income within the period 6 months or period allowed by Chief Commissioner of Income Tax Department. It is necessary to show the documents in favor of your claim.

In Case of Remuneration Received For Services Rendered Outside India
Under section 80RRA of the income tax act, an individual who is getting remuneration in a foreign currency from an employer for his service in outside of India, will get a deduction of 75% of such income brought into India. This amount will be deducted from his taxable income within the period 6 months or period allowed by Chief Commissioner of Income Tax Department. It is necessary to show the documents in favor of your claim.

Case of Certain Investment
Under section of 80L of the Income Tax Act, there are few investment which is a matter of deduction in taxable amount. Here an assessee will get a deduction of amount upto Rs.12,000 - 15,000 from income on certain specified investments in government securities, UTI mutual funds, bonds and other tax saving schemes. An assessee will be entitled for deduction from his taxable income if he is getting interest or dividend on certain
Investments are as follows:

Investment in Securities of central or state government
Investment in National Saving Schemes
Investment in Debentures or Bonds of an institution/ authority/ public sector company/ cooperative society or other such organization notified by central government.
Investment in under National Deposit Schemes as notified by Central Government
Investment in under other schemes which are notified by central government like national saving schemes, time deposit schemes, recurring deposit schemes.
Investment in under monthly income scheme of the post office
Investment in units of UTI and Mutual Funds (under Section 10(23D) of the Income Tax Act)
Investment in with banking institutions
Investment in financial institution working for Industrial Development of India
Investment in an public company limited working for providing long term financing of housing accommodation
Investment in such authorities which are working for planning & development of cities and villages
Investment in co-operative societies

Interest on Securities
One of the most important deductions available to individuals and Hindu Undivided Families (HUFs) is the deduction for interest income in some cases. This deduction is limited to a maximum of Rs 9,000 a year, and is not available to firms or companies.

The interest incomes eligible for a deduction are:

-Interest on bank and co-operative bank accounts and deposits.
-Interest on National Savings Certificates -- VI, VII and VIII issues.
-Interest on some post office deposits and accounts.
-Interest on debentures/bonds issued by co-operative societies, some notified institutions like state electricity boards, IRCI, IFCI, and some public sector companies. Before investing, check whether you are eligible for a -Deduction on the interest income under Section 80L.
-Interest on deposits under the National Deposit Scheme.
-Interest on deposits under National Savings Scheme.
-Interest on deposits with financial corporations like IDBI and ICICI.
-Interest on deposits with public companies providing long-term finance for construction or purchase of houses.

The EMI route to tax savings

Can housing loans aid in tax savings?

YES

you could save up to Rs 40,000 more on your income tax outflow every year. Suppose your salary is Rs 30,000 per month. Any housing finance company will give you a loan of Rs 10 lakh. On a loan of that amount for 15 years, your monthly installments would be Rs 12,896. If the figure looks daunting, don't worry - your real outflow could be as little as Rs 3,000 per month, or even less. That is if you fall in the highest tax bracket. On a 15-year loan, you can save more than Rs 5 lakh in income tax (see Table). If you are in the 25 per cent or 20 per cent bracket, your saving will be correspondingly lower. It works like this. A monthly installment of Rs 12,896 translates into an annual outgo of Rs 1,54,752. Of this, the interest component is Rs 1,30,000, and the principal Rs 24,752. In last years budget, interest payment on a house loan up to Rs 100,000 and principal up to Rs 20,000 per year were exempted from income tax. If you are in the highest slab, you can save Rs 40,000 per year on an exemption of Rs 1.20 lakh. So, what do you have? In effect, an increase of Rs 3,400 per month in your net income, without your employer actually giving it! Add to that the rent that you will probably be saving every month, and your real outflow could be as little as Rs 3,000 per month - or even less. Isn't it time you thought of buying a house? A housing loan today is perfect for the middle-class salaried-income group, says S N Nagendra, area manager, HDFC. Earlier, the huge EMIs were scaring borrowers away. A family with a monthly income of Rs 20,000 would baulk at paying Rs 8,000 per month towards a house loan. Now, the burden looks less threatening, thanks to the tax break. But, there are many who still get touchy about a loan, especially a long-term loan. Despite the tax advantage, many borrowers rush to pay up their loan amounts before maturity and write off debts. Should you really do it? Not in the present environment. In fact, it pays to carry debt, particularly on a house loan. If you calculate your repayment schedule carefully, you can save a neat sum through tax rebates, and also get the benefit of inflation, as money gets cheaper by the year. The effective interest you pay is almost 40 per cent less than you thought. Together with inflation over 15 years, you really have a good deal going. But there is a time when you should think of prepaying your loan. On a 15-year, Rs 10,00,000-loan, for instance, it would make sense to pay off all the outstandings after the eleventh year, because the amount you save on interest payment is greater than the tax benefits you would get otherwise, by more than Rs 75,000! And the amount you have to repay - about Rs 5.5 lakh - would not be too much of a strain. Even the housing financiers agree with this. For one, the tax break on housing loans is unlikely to be discontinued. In fact, the housing finance companies are hoping for more sops in the next budget. Right now, it pays to borrow.


-cortesy popular website

Tax Saving Investments

Tax Saving Mutual Funds In India

A mutual fund is a trust that holds the savings of a number of investors - institutional and individual - who share a common financial goal. The accumulated money is then invested in capital market instruments such as shares, debentures, and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common investors as it offers an opportunity to invest in a diversified and professionally managed basket of securities at a relatively low cost. Mutual fund investments are, however, subject to tax exemptions.


Income Tax exemptions on mutual funds of India:


Chapter III of the Income Tax Act, 1961 provides for exemptions in income tax. There are few specified incomes on which a person can get exemptions. It means that at the time of calculating annual income, this type of income will not be added. For claiming any of these exemptions, it is necessary to furnish documents which shows that your income comes under this list.

Income of specified Mutual Funds registered and/or set up under/by SEBI Act, 1992, public sector bank/financial institution/RBI fulfilling such conditions as specified. Ref. Income Tax Act 10(23D).

Some Tax Saving Mutual Funds India available, are -

-SBI Mutual Funds
-Prudential ICICI
-Bank Of Baroda
-Bajaj Capital
-DSP Merrill Lynch Mutual Fund India
-Franklin Templeton Mutual Fund India
-Standard Chartered Mutual fund India

Tax Saving Mutual Funds India generally maintains the following rules of the SEBI while granting tax benefits on their schemes -

Any special tax benefits for the mutual fund company and its shareholders (only section numbers of the Income Tax Act and their substance should be mentioned,without reproducing the text of the sections).
Tax benefits are to be declared under the column of "objects of the offering".

For further information on Tax Saving Mutual Funds India, visit
www.sebi.gov.in

TAX SAVING SCHEMES & INVESTMENTS

( comprehensive information on Tax Saving options in India)

Tax Saving Schemes

Post Office Savings Schemes
  -National Savings Certificates (NSC)
  -Public Provident Fund (PPF)
  -Kisan Vikas Patra (KVP)
  -Post Office Scheme (POS)
  -Postal Life Insurance
Investment in Mutual Funds / Units of UTI
Company Fixed Deposits
Bank Deposits
Bonds / Debentures
Capital Gains Investments u/s 54 EC
Government of India / RBI Bonds Shares / Life Insurance
Shares - Dividend
Special Schemes For Retiring Person

Descriptions

National Savings Certificates (NSC)
National Saving Schemes (NSC) is one of the popular Income Tax Saving schemes which is available throughout the year. It can be operated by single, joint, or minor with his/her parent or guardian. There is a return on this scheme at interest rate of 8%. The minimum investment limitation of the scheme is Rs.100/- and with no upper limit. Other investments can be done in multiple of Rs. 100/-. This scheme has a maturity period of 6 years. It is transferable and also there is a provision of loan on the basis of this scheme. Under section 88 of the Income Tax Act, 1961 any person can take benefit in income tax on amount invested in this scheme and under section 80L of Income Tax Act, 1961 there is a provision of benefit on interests coming from scheme.

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 single or jointly. In case of minor, with parent/guardian. There is also a facility of nomination in this scheme. This scheme has a maturity period of 15 years. The first loan can be taken in the third financial year from the date of opening of the account, or upto 25% of the amount at credit at the end of the first financial year. Loan amount can be returned in maximum of 36 installments. A person can withdraw an amount (not more than 50% of the balance) every year. Under Section 88 of Income Tax Act, 1961 there is a provison of tax benefit by investing in this scheme. Interest on this scheme is tax free.

Kisan Vikas Patra (KVP)
Money invested in this scheme doubles in 8 years. There is a minimum investment limitation of Rs.100/- with no upper limit. This scheme is available throughout the year. It can be operated either single or jointly. In case of minor, with parent/ guardian. Facility for nomination is also available under this scheme. Currently there is no tax benefit on investment under this scheme.

Post Office Scheme (POS)
It is one of the best Income Tax Saving Scheme. It can be operated by either single or jointly. In case of minor, with parent/ guardian. It is available throughout the year. There are several types of post office schemes depending upon the type of investment and maturity period. Post office schemes can be divided into following catagories:
Monthly Deposit
Saving Deposit
Time Deposit
Recurring Deposit


Special Schemes For Retiring Person
Government Employees : There is a return at the rate of 8% per annum. The minimum investment is Rs.1000/- and maximum, amount equal to the total retirement benefit. Maturity period of this scheme is 3 years. According to Income Tax Act, 1961 interest on this scheme is tax free.

Public Sector Employees: Under this scheme there is a return of 9.5% payable half-yearly on 30th June and 31st December respectively. There is a minimum investment limitation of Rs.1000/- and the maximum limitation is the amount equal to total retirement benefit. It can be operated by retired PSU employees in his/her own name or with the spouse, jointly. In this scheme, there is a facility of premature encashment. Entire balance or part thereof can be withdrawn after the expiry of three years from the date of deposit. Maturity period of this scheme is 3 years. According to Income Tax Act, 1961 interest on this scheme is tax free.

Postal Life Insurance
This scheme is in operation for the last 117 years. This scheme started in 1884 as a welfare measure for the employees of Postoffices & Telegraphs Department under Government of India to the Secretary of State (having dispatch No. 299 dated 18-10-1882). But after few years, various departments of Central and State Governments were extended its benefits. Now it is open for employees of all departments of Central as well as State Government, Nationalized Banks, Public Sector Undertakings, Financial Institutions, Local Bodies like Municipalities and Zila Parisads, Educational Institutions aided by the Government. According to Income Tax Act there is also a provision of special relaxation in income tax on the basis of investment done in urban or rural areas.

Dividend
According to Income Tax Act,1961 there is a provision benefit in Income Tax if assessee has an income as a dividend on investment in any of the following:
Shares
Mutual Funds
Unit of UTI
This dividend can be given by any company or cope