Tax Planning – How to save income tax in FY 2015-16 (AY: 2016-17), with Automated Master of Form 16 Part B for F.Y. 2015-16 and One by One Prepare Form 16 Part A and B and Part B for F.Y.2015-16

Click here to Download Automated Form 16 Part A&B and Part B for F.Y. 2015-16 [ This Excel utility prepare One by One Income Tax Form 16 ]

How to save income tax in 2015-16

The question that I am asked most often is that my income is Rs. XXXXXXX, what tax planning can I do to save tax?
This article is dedicated to answering that question on income tax planning. A comprehensive list of all the provisions that you can utilize to reduce your taxable income.

Income Tax Slabs

Income tax slabs have been changed this year. Standard deduction limit has been raised to Rs. 2,50,000 for both Male and Female assesses.

Download Automated Income Tax Form 16 Part B for F.Y.2015-16 [This Excel Utility can prepare at a time 50 employees Form 16 Part B]

 Income Tax Exemptions: 

1) Section 80 C Limit – New item added this year 

·                                 Deduction on premium paid for a life insurance policy, taken after 1 April 2012, will be allowed only if yearly premium is less than 10% of sum assured.  If its more than 10% then it will be not eligible for deduction u/sec. 80C
·                                 ELSS (Mutual Fund)
·                                 PPF (upto Rs. 1,50,000)
·                                 EPF
·                                 FD for 5 years
·                                 Pension Plans
·                                 NSC
·                                 Expenditure on Children Education (For up to 2 children only for full time education)
·                                 Tuition fees (Only Tuition fees excluding Development Fees, Donations, etc)
·                                 Housing loan principal 
·                                 Deferred Annuity
·                                 Approved Super Annuation Fund
·                                 Investments under Sukanya Samriddhi Scheme. Even interest is exempt.

2) Section 80CCD – Raised this year 

Deduction under this section can be claimed only if the contribution to your NPS account is made by your employer and the deduction is limited to a maximum of 10% of your basic salary. Returns on NPS are tax free, but withdrawal is still taxable. The deduction under sec 80CCD is over and above the deduction available under sec 80C. Max deduction allowed is Rs. 50,000.

3) Section 80 D – Raised this year 

Deduction under section 80D
·                                 Deduction of Rs. 25000/- is allowed if the same is paid as premium for Medical Insurance taken for self / dependents or towards preventive health check-up (max Rs. 5000). In case any of self / dependents is a senior citizen, the deduction allowed is Rs. 20000/-
·                                 Additional Rs. 15000/- is allowed as deduction if the same is paid as premium for Medical Insurance taken for parents. In case the parent is a senior citizen, the deduction allowed is Rs. 30000/-
Age profiles
Premium paid for medical   insurance
Total Deduction under Sec. 80D
Yourself, your spouse and kids, if any
Every one is under 60 years
You and your family are less than 60 years & parents are above 60 years
You and your parents are of 60 years and above

4) Section 80 CCD (1B) – New include Max. Rs. 50,000/- out of  Max Limit of U/s 80C 1.5 Lakh

Click here to Download Automated Form 16 Part B for F.Y.2015-16 [ This Excel Utility can prepare One by One Form 16 Part B]

 5) Section 80DD – Raised this year

Deduction under section 80DD
·                                 Exemption given for expenditure made for a disabled dependant towards Medical Treatment/Training/Rehabilitation. It also includes the LIC/Insurance premium paid towards maintenance of such dependant.
·                                 Maximum deduction allowed is Rs. 75,000/- in case of normal disability and Rs. 1.25 Lakh in case of severe disability.

6) Section 80DDB – Raised this year

Deduction under section 80DDB
·                                 Exemption given for expenditure incurred on specified disease or ailments such as cancer/aids.
·                                 Maximum deduction allowed is Rs. 80,000/-
List of ailments covered:
(i) Neurological Diseases where the disability level has been certified to be of 40% and above,
1.                              Dementia ;
2.                              Dystonia Musculorum Deformans ;
3.                              Motor Neuron Disease ;
4.                              Ataxia ;
5.                              Chorea ;
6.                              Hemiballismus ;
7.                              Aphasia ;
8.                              Parkinsons Disease ;
(ii) Malignant Cancers ;
(iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
(iv) Chronic Renal failure ;
(v) Hematological disorders :
1.                              Hemophilia ;
2.                              Thalassaemia.

7) Section 80E – Unchanged this year

Deduction under section 80E
Deduction is allowed for repayment of interest component of Higher Education loan. All education after Class 12 is allowed, either vocational or Fulltime. But should be from a school/institute/university recognized by the government.

8) Section 80G – Unchanged this year

·                                 Contribution to exempt charities – 25/50/75/100% depending on the charity and as per approval
·                                 100% exemption on donation to political parties 

9) Section 80U – Unchanged this year

·                                 Deduction upto Rs. 75,000/- is allowed in case of Permanent Disability.
·                                 In case of Permanent Disability exceeding 80%, maximum deduction allowed is Rs. 1,25,000/-.

10) Section 24(1)(vi) & Section 80EE – Unchanged this year

·                                 Housing loan interest. Maximum allowed limit raised to – Rs. 2,00,000 (for loans taken after 1 April 1999. For loans before that Maximum Investment Limit was 30,000).
·                                 Additional deduction of Rs. 1 lac will be applicable to persons taking first home loan of up to Rs. 25 lacs for property worth upto Rs. 40 lac. For such persons, the total deduction will be Rs. 2.5 lacs (Rs. 1.5 lac available under section 24(1)(vi) and Rs. 1 lac available under this new section 80EE).

10) Superannuation – Unchanged this year

Any contribution made by a company to superannuation fund upto Rs. 1,00,000 tax free in the hands of the employee.

11) Conveyance/Transport Allowance – Raised this year

Any Conveyance / Transport Allowance given to an employee is tax free upto Rs. 19,200 /- P.A. (No Supporting Bills required).& Phy.Disable persons can get relief Rs. 38400/- P.A.

12) Medical Allowance – Unchanged this year

Any Medical Allowance given to an employee is tax free upto Rs. 15,000 /- (Supporting Bills required).

13) HRA – Unchanged this year

Any House Rent Allowance given to an employee is tax free upto the minimum value of the following conditions (subject to – when an employee can produce rent paid receipts from landlord for the period and if the employee has not availed of tax exemptions for home loan interest / principal repayment):
1.                              50% of Annual Basic (40% of Annual Basic in case of non-metros)
2.                              Actual HRA received
3.                              Rent Paid – (10% of Annual Basic)

14) Section 80TTA – Savings Bank Interest – Unchanged this year

No tax will be charged on interest earned on balance in savings bank account subject to a maximum of Rs. 10,000 per year.

15) Section 87A – Tax Rebate – Unchanged this year

Tax rebate of Rs. 2000/- will be given to all those whose total annual income is up to Rs. 5,00,000.

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