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Tax Planning through Investments

Tax Planning through Investments. DEDUCTIONS AVAILABLE TO INDIVIDUAL AND HINDU UNDIVIDED FAMILY TAXPAYERS. SECTION 80C. DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIA, DEFERRED ANNUITY, CONTRIBUTIONS TO PROVIDENT FUND, SUBSCRIPTION TO CERTAIN EQUITY SHARES OR DEBENTURES, ETC.

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Tax Planning through Investments

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  1. Tax Planning through Investments DEDUCTIONS AVAILABLE TO INDIVIDUAL AND HINDU UNDIVIDED FAMILY TAXPAYERS CA. Rajat Mohan B.Com(H),ACA, ACS, DISA

  2. SECTION 80C DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIA, DEFERRED ANNUITY, CONTRIBUTIONS TO PROVIDENT FUND, SUBSCRIPTION TO CERTAIN EQUITY SHARES OR DEBENTURES, ETC. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  3. (A).TAXPAYER CATEGORY- SECTION 80C This deduction is available to taxpayers, being individual or Hindu undivided family. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  4. (B).CONDITIONS SECTION 80C • (1). The aggregate deduction allowed under this section shall not exceed Rs. 1,00,000. • (2).Deduction is allowed for the whole of the amount paid or deposited in the previous year. • (3).Deduction would be available for following sums paid or deposited by assessee in the previous year: MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  5. (B). CONDITIONS SECTION 80C • (i) Life insurance premium — To keep in force insurance on the life of persons specified.Assessee Insurance on the life of persons specified Individual ,the wife or husband and any child of such individual. Hindu undivided family. Any member of Hindu undivided family. • This provision shall apply only to so much of any premium or other payment made on an insurance policy as is not in excess of 20% of the actual capital sum assured. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  6. (B). CONDITIONS SECTION 80C (ii)Withdrawal of deduction criteria — Where, in any previous year, an assessee terminates his contract of insurance, by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,— (a) In case of any single premium policy, within 2 years after the date of commencement of insurance; or (b) In any other case, before premiums have been paid for 2 years; MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  7. (B). CONDITIONS SECTION 80C then, no deduction shall be allowed to the assessee with reference to any of the sums, paid in such previous year; and the aggregate amount of the deductions of income so allowed earlier any preceding previous year, shall be deemed to be the income of the assessee of such previous year. (ii)Non-commutable deferred annuity — Such annuity is taken by individual for life of the individual, the wife or husband and any child of such individual. (iii) Deduction made from the salary of Government employee being a sum deducted in accordance with the conditions of his service, for the purpose of securing deferred annuity. This annuity should be for the benefit of individual himself, his spouse or children. Deduction is subject to maximum deduction of 1/5th of the salary. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  8. (B). CONDITIONS SECTION 80C (iv) Contribution by an individual to any provident fund to which the Provident Funds Act, 1925 apply. This contribution shall not include repayment of loan. (v) Contribution to any provident fund set up by the Central Government and notified by it in this behalf in the official gazette, where such contribution is to an account standing in the name of any person specified. This contribution shall not include repayment of loan. Assessee Persons specified Individual, the wife or husband and any child of such individual Hindu undivided family Any member of Hindu undivided family Central Government vide notification in official gazette specifies the public provident fund, established under the Public Provident Fund Scheme, 1968, for the purposes of this clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  9. (B). CONDITIONS SECTION 80C Contribution by an employee to a recognized provident fund. This contribution shall not include repayment of loan. Contribution by an employee to an approved superannuation fund. This contribution shall not include repayment of loan. Subscription to any such security of the Central Government or any such deposit scheme as that government may, by notification in the official gazette, specify in this behalf. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  10. (B). CONDITIONS SECTION 80C (ix) Subscription to any such savings certificate as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959, as the Central Government may, by notification in the Official Gazette, specify in this behalf. Central Government vide notification in official gazette specifies National Savings Certificates (VIII Issue) issued under the Government Savings Certificates Act, 1959 as savings certificates for the purposes of this clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  11. (B). CONDITIONS SECTION 80C (x) Contribution, in the name of any person specified, for participation in the Unit-linked Insurance Plan, 1971 (Unit-linked Insurance Plan) specified in Schedule II of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002. Withdrawal of deduction criteria — Where, in any previous year, an assessee terminates his participation in any unit-linked insurance plan, by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for 5 years, then deduction shall be withdrawn. Any deduction allowed to the assessee in any previous year (including any earlier preceding previous years also), shall be deemed to be the income of the assessee of such previous year. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  12. (B). CONDITIONS SECTION 80C MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  13. [1] Notification No. S.O. 1561(E), dated 3-11-2005. (B). CONDITIONS SECTION 80C (xi) Contribution in the name of any person specified for participation in any such unit-linked insurance plan of the LIC Mutual Fund referred to in clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf. Central Government vide notification[1] in Official Gazette specifies the Unit Linked Insurance Plan (formerly known as Dhanraksha 1989) of the Life Insurance Corporation Mutual Fund for the purposes of this clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  14. (B). CONDITIONS SECTION 80C • Withdrawal of deduction criteria — Where, in any previous year, an assessee terminates his participation in any unit-linked insurance plan, by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for 5 years, then deduction shall be withdrawn. Any deduction allowed to the assessee in any previous year(including any earlier preceding previous years also), shall be deemed to be the income of the assessee of such previous year. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  15. (B). CONDITIONS SECTION 80C (xii) To effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify. Central Government vide notificationin Official Gazette specifies the New JeevanDhara, and New JeevanAkshay, II Plans of the Life Insurance Corporation of India, as filed by that Corporation with the Insurance Regulatory and Development Authority, as the annuity plan of the Life Insurance Corporation of India for the purposes of this clause. Central Government vide notification in Official Gazette specifies the JeevanAkshay III Plan of the Life Insurance Corporation of India, as filed by that Corporation with the Insurance Regulatory and Development Authority, as the annuity plan of the Life Insurance Corporation of India for the purposes of this clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  16. (B). CONDITIONS SECTION 80C xiii) Subscription to any units of any Mutual Fund referred to in clause (23D) of section 10 or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf. Central Government vide notification in official gazette makes Equity Linked Savings Scheme, 2005. The Central Board of Direct Taxes has clarified[1] that investments made on or after 1 April, 2005, in plans, which are in accordance with ELSS 1992 or ELSS 1992 as amended in 1998 are also eligible for tax benefit under section 80C. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  17. (B). CONDITIONS SECTION 80C (xiv) Contribution by an individual to any pension fund set up by any mutual fund referred to in clause (23D) of section 10 or by the administrator or the specified company, as the Central Government may, by notification in the official gazette, specify in this behalf. Central Government vide notification in official gazette specifies the UTI Retirement Benefit Pension Fund set up by the specified company referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 as a pension fund for the purposes of this clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  18. (B). CONDITIONS SECTION 80C (xv) Subscription to any such deposit scheme of, or as a contribution to any such pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987, as the Central Government may, by notification in the Official Gazette, specify in this behalf. Central Government vide notification[1] in official gazette specifiesthe National Housing Bank (Tax Saving) Term Deposit Scheme, 2008 for the purposes of the said clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  19. (B). CONDITIONS SECTION 80C (xvi) Subscription to any such deposit scheme of: (a) A public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or (b) Any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both, as the Central Government may, by notification in the official gazette, specify in this behalf. Central Government vide notification[1] in official gazette specifies the d for an amount of rupees one thousand crore for the purposes of the sub-clause (a). MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  20. (B). CONDITIONS SECTION 80C (xvii) Tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter, (a) To any university, college, school or other educational institution situated within India; (b) For the purpose of full-time education of any of the any two children of such individual. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  21. (B). CONDITIONS SECTION 80C (xviii) Purchase or construction of a residential house property (the income from which is chargeable to tax under the head Income from house property or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of: (a) Any installment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or (b) Any installment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or (c) Repayment of the amount borrowed by the assessee from: MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  22. (B). CONDITIONS SECTION 80C • (1) The Central Government or any State Government; or • (2) Any bank, including a co-operative bank; or • (3) The Life Insurance Corporation; or • (4) The National Housing Bank; or • (5) Any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36; or • (6) Any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses; or MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  23. (B). CONDITIONS SECTION 80C • (7) The assessees employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act; or • (8) T he assessees employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society. • (d) Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee. • But shall not include any payment towards or by way of MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  24. (B). CONDITIONS SECTION 80C • (A) The admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or • (B) The cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or • (C) Any expenditure in respect of which deduction is allowable under the provisions of section 24. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  25. (B). CONDITIONS SECTION 80C • Withdrawal of deduction criteria — Where, in any previous year, an assessee transfers the house property referred hereinabove before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause, then deduction shall be withdrawn. Any deduction allowed to the assessee in any previous year (including any earlier preceding previous years also), shall be deemed to be the income of the assessee of such previous year. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  26. (B). CONDITIONS SECTION 80C (xix) Subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company or as subscription to any eligible issue of capital by any public financial institution in the prescribed form (Rule 20). (xx) Subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form. However, this clause shall apply if the amount of subscription to such units is subscribed only in the eligible issue of capital[1] of any company. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  27. (B). CONDITIONS SECTION 80C (xxi) Term deposit: (a)For a fixed period of not less than 5 years with a scheduled bank (b)Which is in accordance with a scheme framed and notified, by the Central Government, in the Official Gazette for the purposes of this clause.Central Government vide notification in Official Gazette makes Bank Term Deposit Scheme, 2006. (xxii) Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by notification in the official gazette, specify in this behalf. Central Government vide notification in Official Gazettespecifies the NABARD Rural Bonds of National Bank for Agriculture and Rural Development (NABARD) for an amount of rupees five thousand crore for the purposes of this clause. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  28. (B). CONDITIONS SECTION 80C (xxiii) Deposit in account under the Senior Citizens Savings Scheme Rules, 2004. If any amount (including interest accrued thereon), is withdrawn by the assessee from his account, before the expiry of the period of 5 years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn. However, the amount liable to tax shall not include the following: (i) Any amount of interest, relating to deposits which has been included in the total income of the assessee of the previous year or years preceding such previous year MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  29. (B). CONDITIONS SECTION 80C • (ii) Any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  30. (B). CONDITIONS SECTION 80C (xxiv) 5 year time deposit in an account under the Post Office Time Deposit Rules, 1981:- If any amount (including interest accrued thereon), is withdrawn by the assessee from his account, before the expiry of the period of 5 years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn. However, the amount liable to tax shall not include the following: (i) Any amount of interest, relating to deposits which has been included in the total income of the assessee of the previous year or years preceding such previous year (ii) Any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  31. SECTION 80CCF DEDUCTION IN RESPECT OF SUBSCRIPTION TO LONG-TERM INFRASTRUCTURE BONDS. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  32. (A). TAXPAYER CATEGORY-SECTION 80CCF • This deduction is available to taxpayers, being individual or Hindu undivided family MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  33. (B).CONDITIONS - SECTION 80 CCF • (1).Amount is paid or deposited by assessee in long-term infrastructure bonds as may, for the purposes of this section, be notified by the Central Government. • (2).Such amount is paid or deposited during the previous year (2010-2011). MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  34. (C). AMOUNTOF DEDUCTION SECTION 54EC • Deduction shall be lower of: • (1). Amount paid; or • (2).20,000. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  35. SECTION 80D • Deduction in • respect of • health insurance premia MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  36. (A).TAXPAYER CATEGORY- SECTION 80D This deduction is available to taxpayers, being individual or Hindu undivided family. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  37. (B).CONDITIONS -SECTION 80D • (1).Assesseehad paid an amount to effect or to keep in force an insurance on the health. • (2). The amount is paid in the previous year. • (3). The amount is paid by any mode, other than cash. • (4) The amount is paid out of the income chargeable to tax of the assessee. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  38. (C). AMOUNT OF DEDUCTION- SECTION 80D MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  39. (E). MEANING – SECTION 80D ‘Insurance’ means insurance in accordance with a scheme made in this behalf by: The General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 and approved by the Central Government in this behalf (b) Any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  40. SECTION 80DD DEDUCTION IN RESPECT OF MAINTENANCE INCLUDING MEDICAL TREATMENT OF A DEPENDANT WHO IS A PERSON WITH DISABILITY. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  41. (A).TAXPAYER CATEGORY-SECTION 80DD This deduction is available to taxpayers, being individual or Hindu undivided family MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  42. (B). CONDITIONS- SECTION 80DD • (1).Assesseebeing an individual or Hindu undivided family shall be resident in India. • (2).Assesseehas, during the previous year: • (a)Incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or • (b)Paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the administrator or the specified company subject to the specified conditions and approved by the board in this behalf for the maintenance of a dependant, being a person with disability. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  43. (B). CONDITIONS- SECTION 80DD • (3). Assessee shall furnish a copy of the certificate issued by the medical authority in the Form no. 10-IA in prescribed manner (Rule 11A), along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed. Where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any assessment year relating to any previous year beginning after the expiry of the previous year during which the aforesaid certificate of disability had expired, unless a new certificate is obtained from the medical authority[1] in the form and manner, as may be prescribed, and a copy thereof is furnished along with the return of income. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  44. (B). CONDITIONS- SECTION 80DD • 4.Dependant predeceases criteria— If the dependant, being a person with disability, predeceases the individual or the member of the Hindu undivided family, an amount equal to the amount paid or deposited under a scheme framed shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  45. (C).AMOUNT OF DEDUCTION-SECTION 80DD Deduction shall be at a flat rate of Rs. 50,000. However, in case dependant is a person with severe disability, Deduction shall be at a flat rate of Rs. 75,000. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  46. (E). MEANING – SECTION 80DD • i) ‘Dependant’ means: • (i) In the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them; or • (ii) In the case of a Hindu undivided family, a member of the Hindu undivided family, • dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  47. (E). MEANING – SECTION 80DD ii) ‘Disability’ shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 and includes autism, cerebral palsy and multiple disability referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. iii) ‘Person with disability’ means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  48. (E). MEANING – SECTION 80DD iv) ‘Person with severe disability’ means (i) A person with eighty % or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995; or (ii) A person with severe disability referred to in clause (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  49. SECTION 80DDB DEDUCTION IN RESPECT OF MEDICAL TREATMENT, ETC. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

  50. TAXPAYER CATEGORY-SECTION 88DDB This deduction is available to taxpayers, being individual or Hindu undivided family. MOHAN AGGARWAL & ASSOCIATES Chartered Accountants

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