TAX PLANNING in INDIA

  "The only things certain in life are death and taxes.”  is  a famous quote by Benjamin Franklin.  There are innumerable quotes like this about tax. Here is another one from Albert Einstein, “The hardest thing in the world to understand is the income tax."
 "Death and taxes may be certain, but we don't have to die every year." -- Unknown.

Even though the income tax rates and allowable  deductions  are published in the Finance Act   well  before the beginning of the Financial Year, there will be a mad rush by the taxpayers/tax assesses  at the fag end of the financial year to buy  tax saving instruments.   These hasty decisions may force them to park their hard earned money  into schemes which are illiquid or with low return.  It can be avoided  by early  tax planning.  

     Let us take a look at the Income Tax slabs  and   Income Tax exemptions under various sections of Income Tax Act and Finance Act 2010.

Income Tax Rates for male resident individual   below the age of 65

           Assessment Year 2011-12 (FY 2010-11) 

                       Income                           Tax Rate

                Upto Rs. 1,60,000                  Nil.

Rs. 1,60,001 to Rs. 5,00,000                10 %

Rs. 5,00,001 to Rs. 8,00,000                20 %

              Above Rs. 8,00,000               30 % 

            for female resident individual   below the age of 65
                             Income                      Tax Rate

                 Upto Rs. 1,90,000                  Nil.

Rs. 1,90,001 to Rs. 5,00,000                10 %

Rs. 5,00,001 to Rs. 8,00,000                20 %

              Above Rs. 8,00,000                30%

                 For Senior Citizens
                       Income                      Tax Rate

               Upto 2,40,000                       Nil
              2,40,001 to 5,00,000             10%
              5,00,001 to 8,00,000             20%
              Above 8,00,000                    30%

Deductions are allowed from income  under the  following Sections.

Section 80C

  We can claim a maximum deduction of up to Rs. 1, 00,000 under section 80C.  The various investment  options available under this section are :

          Life Insurance Premium.
          Employees Provident Fund

          Public Provident Fund.          (Maximum.70000)

          National Savings Certificate.

          5 Year Fixed Deposits with banks and post offices. 

          Tuition Fees paid for children's education.
          ELSS- Equity Linked Savings Schemes (Tax Saving Mutual Funds)


SECTION 80CCF
                    Additional investment of 20000 in infrastructure  bonds over and above Rs 1 lakh in 80C

Section 80D
         Health Insurance premiums.   max. 15000.  for senior citizens - 20000.
            Another 15000 is allowed for buying health insurance for parents. (20000 if any of them is senior citizen).
Section 80DD
          for medical treatment of handicapped dependents.  50000 or actual expenses whichever is lesser.


Section 80DDB
                for treatment of specified diseases:    max. 40000, for senior citizens  - 65000
                           neurological diseases.
                           Parkinson's disease.
                           malignant cancers.
                           AIDS
                           Thalasaemia
                           chronic renal failure
                           haemophilia


                        
                        
Section 80E
             Interest paid on educational loan.  No maximum limits.

SECTION 80GG
                      HRA exemption

SECTION 24
                 Interest repayment on housing loan. max.150000.