All about TAX All about TAX

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Financial Year Financial Year

2009 – 20102009 – 2010  FromFrom -- WWW.SQUAMBLE.COM

Tax Slab for F.Y. 2009 - 2010

Taxable Income of Men Taxable Income of WomenTaxable Income of Senior

Citizens Tax

Upto Rs.1,50,000 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 : Following things will be discussed :

1. Tax Slab in 2009 for salaried employees1. Tax Slab in 2009 for salaried employees

2. How much will you save and2. How much will you save and

3. How to Save Tax3. How to Save Tax

The following incomes are completely exempt from Income The following incomes are completely exempt from Income Tax Without any upper limit.Tax Without any upper limit.

  

1. Interest on PPF/ GPF / EPF.1. Interest on PPF/ GPF / EPF.

2. Interest on GOI Tax Free Bonds.2. Interest on GOI Tax Free Bonds.

3. Dividends on Shares and on Mutual Funds.3. Dividends on Shares and on Mutual Funds.

4. Any Capital Receipt from Life Insurance Policies. i.e. 4. Any Capital Receipt from Life Insurance Policies. i.e. sums received either on death of the insured or on Maturity sums received either on death of the insured or on Maturity of Life Insurance Plans. However, in case of Life Insurance of Life Insurance Plans. However, in case of Life Insurance Policies issued after March 31, 2004, exemption on Maturity Policies issued after March 31, 2004, exemption on Maturity payment u/s.10(10)D is available only if premium paid on payment u/s.10(10)D is available only if premium paid on any year does not exceeds 20% of the Sum Assured.any year does not exceeds 20% of the Sum Assured.

Tax Free Incomes :Tax Free Incomes :

5. Interest on Saving Bank Account in Post Office.5. Interest on Saving Bank Account in Post Office.

6. Long term Capital Gain on sale of shares and equity MF6. Long term Capital Gain on sale of shares and equity MF

Dividend Income : Dividend Income :

  

Dividend income from companies / equity – oriented Mutual Dividend income from companies / equity – oriented Mutual Funds is Completely Exempt in the hands of investors. Funds is Completely Exempt in the hands of investors.

Dividend is also Tax Free in the hands of investors in case of Dividend is also Tax Free in the hands of investors in case of debt – oriented Mutual Funds Schemesdebt – oriented Mutual Funds Schemes

Tax Free Incomes :Tax Free Incomes :

Gift Tax was abolished with effect from Gift Tax was abolished with effect from October 1, 1998.October 1, 1998.

The gifts are no longer taxable in the hands The gifts are no longer taxable in the hands of donor or donee.of donor or donee.

However, with effect from September 1, However, with effect from September 1, 2004, any gift received by an individual or 2004, any gift received by an individual or HUF will be included in taxable income, HUF will be included in taxable income, provided the amount of gift exceeds provided the amount of gift exceeds Rs.50000/-.Rs.50000/-.

Gift TaxGift Tax

1.1. SpouseSpouse

2.2. Brother or Sister.Brother or Sister.

3.3. Brother or Sister of Spouse.Brother or Sister of Spouse.

4.4. Brother or Sister of either of parents of the individual.Brother or Sister of either of parents of the individual.

5.5. Any lineal ascendant or descendant of the individual.Any lineal ascendant or descendant of the individual.

6.6. Any lineal ascendant or descendant of the spouse of the Any lineal ascendant or descendant of the spouse of the individual.individual.

7.7. Spouse of the persons referred to in (2) or (6)Spouse of the persons referred to in (2) or (6)

8.8. Gifts received on the occasion of marriageGifts received on the occasion of marriage

9.9. Gift received under a WILL by way of inheritance are also Gift received under a WILL by way of inheritance are also tax free.tax free.

Gifts received from following is Tax Free.Gifts received from following is Tax Free.

1. Filing of income Tax Return is Compulsory 1. Filing of income Tax Return is Compulsory for all individuals whose Gross Annual for all individuals whose Gross Annual Income exceeds the Maximum Amount which Income exceeds the Maximum Amount which is not chargeable to income tax i.e. is not chargeable to income tax i.e. Rs.1,80,000 for Resident Women, Rs. Rs.1,80,000 for Resident Women, Rs. 2,25,000 for Senior Citizens and Rs. 2,25,000 for Senior Citizens and Rs. 1,50,000 for other individuals and HUFs.1,50,000 for other individuals and HUFs.

2. The last date of filing income tax return is 2. The last date of filing income tax return is July 31, in case of individuals who are not July 31, in case of individuals who are not covered in point 3 below.covered in point 3 below.

Filing of Income Tax Return :Filing of Income Tax Return :

3. If the income includes business or 3. If the income includes business or professional income requiring tax audit professional income requiring tax audit (turn over Rs.40 Lakhs), the last date for (turn over Rs.40 Lakhs), the last date for filing the return is September 30.filing the return is September 30.

4. The penalty for Non- Filing of Income 4. The penalty for Non- Filing of Income Tax Return is Rs.5000 (after Tax Return is Rs.5000 (after Assessment Year).Assessment Year).

Filing of Income Tax Return :Filing of Income Tax Return :

Income is Computed under the foll. 5 Heads:Income is Computed under the foll. 5 Heads:

1. Income from salaries1. Income from salaries

2. Income from House Properties2. Income from House Properties

3. Profit & Gains of Business & Profession3. Profit & Gains of Business & Profession

4. Capital Gains4. Capital Gains

5. Income from Other Sources 5. Income from Other Sources

Computation of Gross Computation of Gross Taxable IncomeTaxable Income

Salary or Pension IncomeSalary or Pension Income

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

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

Income from House PropertyIncome from House Property

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

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

Income from House PropertyIncome from House Property In case Property is given on rent, then we have to find In case Property is given on rent, then we have to find

out the :out the : Annual Rental IncomeAnnual Rental Income From this deduct Property Tax paid if anyFrom this deduct Property Tax paid if any From balance amount-deduct30% towards repairs & From balance amount-deduct30% towards repairs &

maintenancemaintenance From the residual figure- deduct the amount of From the residual figure- deduct the amount of

interest paid on loan taken for the purchase of the interest paid on loan taken for the purchase of the property.property.

The resultant figure is the Income from House The resultant figure is the Income from House PropertyProperty

Profit from Business / professionProfit from Business / profession

Income as arrived on the Income as arrived on the basis of Profit & Loss A/cbasis of Profit & Loss A/c

Income from InterestIncome from Interest Interest Income from the following Interest Income from the following

sources to be included in Gross Taxable sources to be included in Gross Taxable Income:Income:

Interest on company deposits.Interest on company deposits.

Interest on debentures/bonds.Interest on debentures/bonds.

Interest on savings bank account/ fixed Interest on savings bank account/ fixed deposits with banks.deposits with banks.

Income from InterestIncome from Interest Interest on post office savings schemes Interest on post office savings schemes

like MIS, NSC, KVP etc.like MIS, NSC, KVP etc. Interest on private loans given to relatives, Interest on private loans given to relatives,

friends or any other entity.friends or any other entity. Interest on government securities.Interest on government securities.

Note: Deduction u/s 80 L has been omitted Note: Deduction u/s 80 L has been omitted now and accordingly,interest income from now and accordingly,interest income from the above sources is Fully Taxable now.the above sources is Fully Taxable now.

Capital GainsCapital Gains Capital gain arises when certain assets like Capital gain arises when certain assets like

property (plot or a built up commercial / property (plot or a built up commercial / residential unit) or shares / mutual fund residential unit) or shares / mutual fund units / bonds etc are sold for a profit.units / bonds etc are sold for a profit.

The treatment of capital gains is slightly The treatment of capital gains is slightly different.different.

It mainly depends upon whether the capital It mainly depends upon whether the capital gain (profit on sale) is Short Term or Long gain (profit on sale) is Short Term or Long Term.Term.

Short Term Capital GainShort Term Capital Gain Capital gain is considered to be short term Capital gain is considered to be short term

if immovable property is sold / transferred if immovable property is sold / transferred within THREE years of acquisition.within THREE years of acquisition.

Similarly, if shares or other financial Similarly, if shares or other financial securities such as mutual fund units are securities such as mutual fund units are sold within ONE year of purchase, the sold within ONE year of purchase, the profit earned is treated as short term profit earned is treated as short term capital gain.capital gain.

Tax Treatment on Short Term Tax Treatment on Short Term Capital GainCapital Gain

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

Tax Treatment on Short Term Tax Treatment on Short Term Capital GainCapital Gain

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

Long Term Capital GainLong Term Capital Gain If Immovable Property is sold after THREE If Immovable Property is sold after THREE

years of purchase, Oryears of purchase, Or

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

Tax Treatment on Long Term Tax Treatment on Long Term Capital GainCapital Gain

With effect from October 1, 2004, With effect from October 1, 2004, long term capital gain on transfer long term capital gain on transfer of listed shares/units of equity of listed shares/units of equity oriented mutual funds schemes oriented mutual funds schemes has been exempted from tax, has been exempted from tax, provided securities transaction tax provided securities transaction tax has been paid on such sale.has been paid on such sale.

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

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

Section 54 ECSection 54 EC Long-Term Capital Gain Tax (after availing Long-Term Capital Gain Tax (after availing

indexation benefit ) can be saved by investing indexation benefit ) can be saved by investing amount within 6amount within 6thth months in any of the following months in any of the following two schemes specified under section 54 EC two schemes specified under section 54 EC ( upto Rs. 50 Lakhs only):( upto Rs. 50 Lakhs only):

1 Bonds issued by Rural Electrification 1 Bonds issued by Rural Electrification Corporation ( REC )Corporation ( REC )

2 Bonds issued by NHAI (National Highways 2 Bonds issued by NHAI (National Highways Authority of India)Authority of India)

There are various Tax Saving There are various Tax Saving Schemes:Schemes:

Life Insurance Premium.Life Insurance Premium. Contributions to Employees Provident Fund/ Contributions to Employees Provident Fund/

GPFGPF Unit-Linked Insurance PlanUnit-Linked Insurance Plan Contribution to Public Provident Fund Scheme Contribution to Public Provident Fund Scheme

(Max. Rs.70,000).(Max. Rs.70,000). National Savings Certificates VIIINational Savings Certificates VIII Tuition Fees Upto Two Children.Tuition Fees Upto Two Children. Repayment of Housing Loan ( Principal)Repayment of Housing Loan ( Principal)

Pension scheme of LIC of India or any other Pension scheme of LIC of India or any other insurance company.insurance company.

Subscription to eligible issue of units of Subscription to eligible issue of units of Mutual Fund (ELSS).Mutual Fund (ELSS).

Interest accrued in respect of NSC VIII issue.Interest accrued in respect of NSC VIII issue.

Fixed Deposit with Banks having a lock – in Fixed Deposit with Banks having a lock – in period of 5 Yearsperiod of 5 Years

Premium on Mediclaim Policy.Premium on Mediclaim Policy.

Life insurance Premium:Life insurance Premium:

Life insurance is a Very Good Investment. Life insurance is a Very Good Investment. It gives Risk Cover, Tax Saving and Good It gives Risk Cover, Tax Saving and Good returns.returns.

It is a contract that pledges payment of an It is a contract that pledges payment of an amount to the person assured (or his amount to the person assured (or his nominee) on the death of insured person.nominee) on the death of insured person.

Savings through life insurance guarantee Savings through life insurance guarantee full protection against risk of death of the full protection against risk of death of the saver. saver.

Also, in case of demise, life insurance Also, in case of demise, life insurance assures payment of the entire amount assures payment of the entire amount assured (with bonuses wherever assured (with bonuses wherever applicable) applicable)

whereas in other savings schemes, whereas in other savings schemes, only the amount saved (with only the amount saved (with interest) is payable.interest) is payable.

Long-term savingsLong-term savings

““EASY Instalment” facility.EASY Instalment” facility.

Premium payment for insurance is either Premium payment for insurance is either monthly, quarterly, half yearly or yearly.monthly, quarterly, half yearly or yearly.

LOAN Facility Available.LOAN Facility Available.

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

A policy that has a suitable insurance plan A policy that has a suitable insurance plan or a combination of different plans can be or a combination of different plans can be effectively used to meet certain monetary effectively used to meet certain monetary needs that may arise from time-to-time. needs that may arise from time-to-time.

Children's education, start-in-life or Children's education, start-in-life or marriage provision or even periodical marriage provision or even periodical needs for cash over a stretch of time can needs for cash over a stretch of time can be less stressful with the help of these be less stressful with the help of these policies.policies.

Alternatively, policy money can be Alternatively, policy money can be made available at the time of one's made available at the time of one's retirement from service and used for retirement from service and used for any specific purpose, such as, purchase any specific purpose, such as, purchase of a house or for other investments.of a house or for other investments.

Loans are granted to policyholders for Loans are granted to policyholders for house building or for purchase of flats house building or for purchase of flats (subject to certain conditions).(subject to certain conditions).

National Savings Certificates National Savings Certificates (NSC) :(NSC) :

National Saving Schemes (NSC) is used to be National Saving Schemes (NSC) is used to be one of the popular Income Tax Saving one of the popular Income Tax Saving schemes. But nowadays it is not so lucrative. schemes. But nowadays it is not so lucrative.

This scheme is available throughout the year.This scheme is available throughout the year.

It can be operated singly, jointly, or by a It can be operated singly, jointly, or by a minor with his/her parent or guardian. minor with his/her parent or guardian.

Return on this scheme at interest rate of 8%.Return on this scheme at interest rate of 8%.

The minimum investment limitation of The minimum investment limitation of the scheme is Rs.100/- and with no the scheme is Rs.100/- and with no upper limit. upper limit.

This scheme has a maturity period of 6 This scheme has a maturity period of 6 years. years.

There is a provision of loan on the There is a provision of loan on the basis of this scheme.basis of this scheme.

Working on NSC InterestWorking on NSC Interest

Amt Invested Rs. Amt Invested Rs. 100.00100.00

Interest Earned @ 8% P.A. Rs. 8.00Interest Earned @ 8% P.A. Rs. 8.00 Tax @ 30% on Rs.8/- Tax @ 30% on Rs.8/- Rs. 2.40Rs. 2.40 Net Interest Received Net Interest Received Rs. Rs.

5.605.60

Public Provident Fund (PPF) :Public Provident Fund (PPF) :

Under this scheme, there is a return at the Under this scheme, there is a return at the interest rate of 8% p.a.interest rate of 8% p.a.

The minimum investment limit is Rs. 500/- The minimum investment limit is Rs. 500/- and maximum limitation is Rs. 70,000/-. and maximum limitation is Rs. 70,000/-.

It can be opened any time throughout the It can be opened any time throughout the year. It can be operated either singly or year. It can be operated either singly or jointly. In case of minor, with parent / jointly. In case of minor, with parent / guardian. guardian.

This scheme has a maturity period of This scheme has a maturity period of 15 years.15 years.

Loan Facility is available.Loan Facility is available.

Loan amount can be returned in maximum of Loan amount can be returned in maximum of 36 installments.36 installments.

A person can withdraw an amount (not more A person can withdraw an amount (not more than 50% of the balance). than 50% of the balance).

Tax Benefit Under Section 80C of Income Tax Tax Benefit Under Section 80C of Income Tax Act, 1961 is available. Act, 1961 is available.

Interest on this scheme is tax free.Interest on this scheme is tax free.

Mutual Fund (ELSS) / ULIP PLANSMutual Fund (ELSS) / ULIP PLANS

An ELSS (Equity Linked Savings Scheme) An ELSS (Equity Linked Savings Scheme) is a mutual fund scheme that invests in is a mutual fund scheme that invests in equity & equity-related securities.equity & equity-related securities.

ULIP Plans (ULIP Plans (Unit Linked Insurance Plan) Unit Linked Insurance Plan) is a Plan that offers Tripple Benefitis a Plan that offers Tripple Benefit Tax BenefitTax Benefit Insurance CoverInsurance Cover Benefit from the long term growth Benefit from the long term growth

potential of equities.potential of equities.

ULIP & ELSS are also eligible ULIP & ELSS are also eligible investments under section 80Cinvestments under section 80C of of Income Tax Act 1961.Income Tax Act 1961.

ELSS have a lock-in period of three ELSS have a lock-in period of three years. This allows the investors to years. This allows the investors to benefit from the long term growth benefit from the long term growth potential of equities.potential of equities.

ELSS / ULIP – Key DifferentiationELSS / ULIP – Key Differentiation

ELSS is the only investment product that offers ….

Twin Advantages

• Equity Returns • Tax Benefits

ELSS / ULIP – A ComparisonELSS / ULIP – A ComparisonInstrument Expected Returns Lock-In Period

National Savings Certificate - NSC 8.00% 6 years

Public Provident Fund - PPF 8.00% Up to 15 years

Mutual Fund ELSS / ULIP Around 15%-20% 3 years

Investment 1 Lac End Value of Investment in Rs. Lac after - Years

Avenue Returns 3 6 8 10 15 20

NSC 8.16% 1.27 1.60 1.87 2.19 3.24 4.80

PPF 8.00% 1.28 1.63 1.92 2.26 3.40 5.11

ELSS / ULIP 15.00% 1.52 2.31 3.06 4.05 8.14 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 Deduction u/s 80D Mediclaim PolicyMediclaim Policy

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

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