For many people tax planning is related to only making investments under Section 80C. But there are different provisions in the Income Tax Act and rules which, if used judiciously, may help in considerable tax saving and proper investment
Following are few ideas to save tax:
1.Transfer Fixed Deposit to Parents / Major Child
Salary employee have fixed deposit in their own name, the interest income becomes taxable in their hands and have to pay 30% tax. To save that they can gift amount to Parents and major children and create FD in their name. Transfer to Spouse should be avoided as it will attract clubbing provisions. Similarly businessman can gift to their major child or parents and create fixed deposit in their name. Interest income will be taxable in hands of Major Child / Parents. In that way individual can save 30% tax on Interest.
2.Claim deduction for Interest Paid to Friends and Relative for Home Loan
Most of time Individual take Loan from Financial Institution and avail interest deduction under section 24 up to Rs 2 Lacs and incase of Let out full amount of interest paid can be claimed. Few are aware that, in cases where Home Loan is taken from friends and relatives, Interest payment to friends and relatives can be claimed under Section 24 but only against a interest certificate received from them. The recipient of interest income who issues the certificate is liable to pay tax on the interest income. Further you cannot claim Principal repayment under Section 80C.
3.Claim HRA on rent to parents
Salaried individual who has HRA as component in salary and do not have any resident property can claim rental paid to parents as benefit under section 10(13A). Many Salaried individual do claim, however few are still not aware of the benefit.
4.Invest in Gold Bond
Investing in Gold this year? Buy Gold bond issued by GOI. You will get all the benefit of increase price of gold and additional return of 2.75% interest every year. The Interest earned on gold bonds is taxable. Maximum you can buy is 500 grams of gold. If the holding of Gold bonds is less than 36 month it is taxed as short term capital gains and if holding is more than 36 months it is taxed as long term capital gains.
5.Invest in National Pension Scheme
NPS is new option available to all investors to invest up to Rs 50,000 under the new Section 80CCD andgets additional tax deduction, over and above the Rs 1.5 lakh investment limit under Section 80C. The Investment option in NPS are many and depending upon your age and risk profile you can select the product of debt, equity and balance. However we recommend higher equity allocation as it has potential to grow in long term and beat inflation. The amount received as pension under NPS is taxable in hands of individual.
Following are few ideas to save tax:
1.Transfer Fixed Deposit to Parents / Major Child
Salary employee have fixed deposit in their own name, the interest income becomes taxable in their hands and have to pay 30% tax. To save that they can gift amount to Parents and major children and create FD in their name. Transfer to Spouse should be avoided as it will attract clubbing provisions. Similarly businessman can gift to their major child or parents and create fixed deposit in their name. Interest income will be taxable in hands of Major Child / Parents. In that way individual can save 30% tax on Interest.
2.Claim deduction for Interest Paid to Friends and Relative for Home Loan
Most of time Individual take Loan from Financial Institution and avail interest deduction under section 24 up to Rs 2 Lacs and incase of Let out full amount of interest paid can be claimed. Few are aware that, in cases where Home Loan is taken from friends and relatives, Interest payment to friends and relatives can be claimed under Section 24 but only against a interest certificate received from them. The recipient of interest income who issues the certificate is liable to pay tax on the interest income. Further you cannot claim Principal repayment under Section 80C.
3.Claim HRA on rent to parents
Salaried individual who has HRA as component in salary and do not have any resident property can claim rental paid to parents as benefit under section 10(13A). Many Salaried individual do claim, however few are still not aware of the benefit.
4.Invest in Gold Bond
Investing in Gold this year? Buy Gold bond issued by GOI. You will get all the benefit of increase price of gold and additional return of 2.75% interest every year. The Interest earned on gold bonds is taxable. Maximum you can buy is 500 grams of gold. If the holding of Gold bonds is less than 36 month it is taxed as short term capital gains and if holding is more than 36 months it is taxed as long term capital gains.
5.Invest in National Pension Scheme
NPS is new option available to all investors to invest up to Rs 50,000 under the new Section 80CCD andgets additional tax deduction, over and above the Rs 1.5 lakh investment limit under Section 80C. The Investment option in NPS are many and depending upon your age and risk profile you can select the product of debt, equity and balance. However we recommend higher equity allocation as it has potential to grow in long term and beat inflation. The amount received as pension under NPS is taxable in hands of individual.
