Thursday, 4 August 2011

Declare tax saving investments to employer

Salaried people should declare their tax saving investments with proof to the employer to avoid over deduction of TDS (Tax Deducted at Source). As per income tax rule the salary should be disbursed only after deducting proportionate tax every month. IF your expected gross salary for a particular year is more than the no tax limits (Rs. 190000 for ladies and Rs. 180000 for Gents for the assessment year 2011-12) the employer is liable to deduct tax from your salary every month and should be deposited to the income tax account.

There are so many exemptions are available to reduce your tax liability. Under section 80C of income tax act allow you to get exemption up to Rs. 100000 for certain tax saving investments which includes Provident Fund (PF), Public Provident Fund (PPF), National Savings Certificate (NSC), Equity linked Savings Schemes (ELSS – Equity linked tax saving mutual funds), Tax Savings Fixed Deposits with Banks – Special Fixed deposits with the maturity period after 5 years, Some expenses such as Tuition fee paid for your children who are studying in recognized regular schools or institutions, Principal amount of housing loan reimbursement etc.

You can get an additional exemption of Rs. 20000 under section 80CCF for an investment in infrastructure bond of recognized Non Banking Financial Institutions.

Rs. 15000 exemption can be claimed for medical insurance premium of self, spouse and children under section 80D and an additional exemption of Rs. 15000 for the medical insurance premium of your parents. The exemption amount will be Rs. 20000 if any of the insured is a senior citizen. But please note that in this case the age of senior citizen is 65 years. Not 60 years.

If you have a housing loan for purchasing a built up house or housing loan for a construction linked house property and the construction is completed you can claim exemption for the interest payment of housing loan up to Rs. 150000 in a year under section 24(b). For this purpose you have to submit a certificate from the bank where you have taken housing loan. For the declaration purpose get a provisional certificate from the bank and at the end of the year produce the copy of original certificate.

If you are paying rent for your residence, declare the same and produce rent receipts and copy of rent deed to your employer for availing HRA exemption. If you are paying rent and you or your spouse or minor child do not own a house and at the same time HRA is not a part of your salary, you can claim up to Rs. 2000 per month only if you produce form 10B for claiming rent exemption under section 80GG.

If you plan properly you should not pay any tax for an income of Rs. 485000 in a year. The following table shows how you can avoid tax for an income of Rs. 485000 and for ladies the amount will be Rs. 495000.

Tax Saving investments under section 80C                       Rs. 100000

Infrastructure bond under section 80CCF                          Rs.   20000

Medical Insurance under section 80D                                 Rs.   15000

Medical Insurance for parents under section 80D             Rs.   20000

Interest on housing loan exemption under section 24(b)  Rs. 150000

Nil Tax limit for Gents                                                            Rs. 180000

Total                                                                                       Rs. 485000

But, for getting benefit from all the above savings and payments declare your investments, medical insurance and loan repayment to your employer, well in advance, so that he can consider these exemptions while deducting your Tax. Do not forget to produce self attested photocopy of the documents as a proof of your investments and payments. And also remember that all these savings and payments should be paid form your salary account.

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