Two sides of the New Income Tax system

 

The admirable words of L.H.Anderson, an American writer, “Be careful what you wish for, there’s always a catch” properly apply to the taxpayers of India. Keeping the demand of taxpayers in mind, the finance minister of India announced a new tax system with superfluity of tax slabs while presenting the Budget 2020. The new system is applicable from the financial year 2020-2021 onwards. The finance minister also gave taxpayers a choice between the new regime and existing one, leaving it to them to decide which they would like to select for. This has fabricated numerous confusions and chaos in the minds of taxpayers. All these factors made the tax laws more complex than unsophisticated. As the provisions of determination of tax liability and Tax Deducted at Source (TDS) would be different in the existing and new income tax system, depending on gross income and amount of tax-saving investments or deductions, selecting the right regime is very vital to avoid the excessive tax outlay. Incapable to reach out to the tax specialists for help due to the lockdown to restrain the spread of the extremely infectious novel Coronavirus, taxpayers are clueless on whether to select the old or new income tax system. The new scheme has seven slabs compared to four slabs in the old scheme. Taxpayers need not to pay tax on income up to 2.5 lakh rupees. They have to shell out 5 per cent on income above 2.5 lakh rupees to 5 lakh rupees, 10 per cent on income above 5 lakh rupees to 7.5 lakh rupees, 15 per cent on income above 7.5 lakh rupees to 10 lakh rupees, 20 per cent on income above 10 lakh rupees to 12.5 lakh rupees, 25 per cent on income above 12.5 lakh rupees to 15 lakh rupees and 30 per cent on income above 15 lakh rupees. As per the old regime taxpayers need not to pay tax on income up to 2.5 lakh rupees.  They have to shell out 5 per cent on income above 2.5 lakh rupees to 5 lakh rupees, 20 per cent on income above 5 lakh rupees to 10 lakh rupees and 30 per cent on income over 10 lakh rupees. Tax slab rates of new tax system are not distinguished based on age group unlike the old system where the basic income threshold exempt from tax for senior citizen (aged 60 to 80 years) and super senior citizens (aged above 80 years) is 3 lakh rupees and 5 lakh rupees respectively. Individuals not having business income can select between old or new system each year. So, they may exercise more useful option after vigilantly evaluating each financial year. Individuals having business income can exercise the option only once and that shall be conclusive. Individuals having salary have to choose between old and new schemes at the time of making their tax declaration to employer for the purpose of deducting tax at source.

 

Mixed Bag

The new system offers concessional tax rates compared to the existing regime. Maintenance of plethora of documents is not required as most of the exemptions and deductions are not available to the taxpayers. The new system treats all taxpayers equally and benefit of deduction or allowances would not be available. This is beneficial to the taxpayers who do not want to invest in options which have lock-in period criteria and want to invest in open-ended mutual funds or instruments or deposits, which delivers them handsome returns along with flexibility of withdrawal. The reduced tax rates of the new system would provide more disposable income to the taxpayer. In addition, taxpayers can customize their investment decisions under the new system.

 

The existing system restricts the investment choices for the taxpayer as he or she has to make the investments only in the instruments specified.

However, the major exemptions and deductions would not be available under the new tax system are plenty and they are Leave Travel concession or assistance, House rent allowance, allowances or benefits specifically granted to meet expenses incurred in performance of duties of office or employment, allowances or benefits granted to meet personal expenses in performance of duties of office or employment or to compensate for increased cost of living, Standard Deduction, Entertainment allowance, Professional tax, Interest on Home Loan on self-occupied properties, Deduction on family pension, Daily Allowance to MPs and MLAs, exemption of minor’s income up to 1,500 rupees per child, Life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, tution fee of children, home loan principal repayment, Contribution to certain Pension Funds, Contribution to pension scheme of Central Government, Voluntary contribution to pension scheme of Central Government, Investment made under an equity savings scheme, Health insurance premium, Maintenance including medical treatment of a dependent who is a person with disability, Medical treatment of specified diseases, Interest on loan taken for higher education, Interest on loan taken for residential house property, Donations to certain funds, charitable institutions, Rents paid, Donations for scientific research or rural development, Contributions given by any person to Political parties, Interest on deposits in savings account, Interest on deposits in case of senior citizens and Deduction in case of a person with disability.

Which is the right choice?

Unluckily, there is no single answer to the above query. And the biggest culprit again is the convolution and complexity of the Indian tax structure. Apparently, the reduced tax rates of the new scheme should result in lower taxes. But the removal of exemptions and deductions has proven that the advantage of lower tax rates is insignificant and worthless. People invested in various instruments to claim tax reliefs will not find the new regime gorgeous. Old scheme is advantageous for the taxpayers claiming total deductions or exemptions above 2.5 lakh rupees. In case of annual income more than 15 lakh rupees and 2.5 lakh rupees annual tax-saving investments or deductions, the new scheme won’t have any advantage over the existing system. Therefore, if substantial amount of tax breaks were being availed by the taxpayers, it would be safer to be part of old scheme. Taxpayers eyeing to satisfy various financial compulsions, such as wealth creation through investments in tax-saving instruments, paying premiums to take care of insurance needs, paying children’s tuition fees, paying equated monthly installments of an education loan, buying a house with a home loan etc. the older regime still works in their interest. Taxpayers having no home loan, staying in rent-free accommodation and desiring to make small or no investments may find the new scheme advantageous.

As a final point, all the changes introduced do not categorically make things calmer and cooler for Indian taxpayers. Although finance minister of India mentioned that the new tax system will boost consumer demand, it could come at a heavy cost in the form of poorer household savings. The discretionary tax structure endangers a prominent concept that goaded taxpayers of India to save money for the future. Moreover, taxpayers have to do a comparative assessment of both schemes, before framing the final decision. Since the system is new and has many tricky provisions, taxpayers have to consult a proficient tax expert who can recommend the ideal route.

 Mind Map

NEW TAX REGIME

 · Has seven slabs of tax rates

· Optional and applicable from the financial year 2020-2021 onwards

· Tax slab rates of new tax system are not distinguished based on age group.

· Maintenance of plethora of documents is not required as most of the exemptions and deductions are not available to the taxpayers.

· Taxpayers can customize their investment decisions due to high disposable income in hand.

· Major exemptions and deductions (approximately seventy) would not be available.

· Suitable for taxpayers having no home loan, staying in rent-free accommodation and desiring to make small or no investments.

 

 OLD TAX REGIME

 

· Has four slabs of tax rates

· Mandatory

· Three different basic exemption limits has been prescribed for different age groups.

· Taxpayers have to maintain many documentary evidences to support their investments and claims to avoid the tax disbursement.

· Taxpayers have to make the investments only in the instruments specified.

·  Taxpayers can avail all exemptions and deductions.

· Suitable for taxpayers who were being availed substantial amount of tax breaks and eyeing to satisfy various financial compulsions through insurance and borrowings.

 

-Shivanand Pandit

Goa

 

 

Secure your future!!

 

Mutual Fund Sahi Hai!!  LIC zindegi ke sath bhi zindegi ke baad bhi!! Na sir Jhuka hai kabhi na sir jhukega kabhi!! 

We all have come across these Tv ads time and often and always wanted to save and acquire more money for our future. But I am a middle class man with limited income and unlimited expenses and there is no way I am able to manage my expenses and save for the future.

Stop right there!! Your search is over my friend. Today I am going to tell you how you can save money for saving money for the future.

1. Time Your Saving – Make a small Fixed deposit(FD) by using internet banking application on the very day you receive your salary. You can make multiple FDs of very small amounts and will break those FDs by month end whenever they are required. If u can spend your month with at least one FD, you will become a champion saver.

2. Understand Lifestyle Spending- We unknowingly spend a lot of money on our unnecessary lifestyle. These are the spending which can be reduced without compromising the quality of life we are leading. These include restricting eating outside, reducing the number of clothes and accessories we are buying and maintaining and repairing our appliances and items for prolonged use.

3. Save Health and Money- We are a very lethargic generation. The ecommerce and home delivery have made us very comfortable in our homes. We tend to use bikes or rickshaws for small market visits or for coming back home from bus stops or railway stations. The small amount which is consumed by using rickshaw and bikes can be saved by walking those distances and making ourselves healthy. This way we can make ourselves healthy and save a lot of money.

4. Buy what is needed – We are welcomed by lot of awesome deals every now and then. Do not get provoked by these sales. The mega online events say bigger than ever sale, the greatest Indian festival, big billion days. You will always find deals which may seem better than ever and the best deal of lifetime. But do not fall for those marketing gimmicks as you will always find deals when you are in need of the products. So buy only when its required and not when it is on some never seen before sale.

Everyone has their own income and their proportionate expenses. So there will be always expenses for your income, but it’s the small lifestyle changes and the saving culture and habit which can make you rich or can leave you as you are. So choose wisely!

-Nilanjan Kala

 

Mutual Funds Sahi Hain Dost

 Investing is a tool for building wealth. It is not only for the wealthy. Anyone can get started on an investing program, and various options make it easy to begin with small amounts and add to a portfolio periodically. In fact, what differentiates investing from gambling is that it takes time—it is not a get-rich-quick scheme. Investing is also about making priorities for your money. Spending is easy and gives instant gratification. But investing requires prioritizing our financial futures over our present desires.

No one investing strategy or approach fits all. Every investor has different reasons for investing, different goals, different time horizons and varying degrees of comfort with investing. It’s important to define and articulate your own parameters. The only way to attain financial security is to save and invest over a long period of time. You just need to have your money work for you. That’s investing.

For many of us, money and investments weren't discussed at home. It is the primary responsibility of parents to teach their children how to deal with the money. It is the primary duty of husband and wife to discuss about money matters. It is sad that many couples don’t discuss the investment planning issues together. Remember, discipline begins at home.

In order to build a fortune you must invest your money. It takes only minimum effort to set aside a small amount each month and make your money grow. A good way to reduce your risk is to spread your money within each type of investment. This is known as ‘diversifying’.

With interest rates staying low and investor interest in real estate fading, savings are finding their way into mutual funds. Investors experience with mutual funds is getting better every year. A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds and other securities. Mutual funds are highly popular investment option for achieving various financial goals like retirement planning, tax planning, wealth creation, children education and so on. As an investor, you can buy mutual fund 'units', which basically represent your share of holdings in a particular scheme. Value of per unit is known as Net Asset Value (NAV).

One of the best ways to invest in mutual funds is SIP i.e. Systematic Investment Plan. You can invest specified amount on specified date every month. A few fund houses offer more frequent SIPs - even weekly/daily. SIPs fosters discipline. This route has gained popularity among the retail investors in recent years – really good development. They take away the risks associated with ‘timing the market’ and help investors to neutralize the downsides of market volatility by averaging the cost of purchase. It is a simple and effective tool.

After deciding to start SIP, it is important to give sufficient time to that investment. Do not focus on timing the market and quick money. It is your time in the investment which makes money for the investor. Sachin Tendulkar accumulated maximum runs in test cricket by staying on the pitch as long as possible and facing as many deliveries as possible. He did not try to hit every ball a four or over the fence. Spend time in the stock market to make money. Thus, SIP is the eighth wonder of the world and suitable for many of your financial goals.

Let’s look into the some parameters to be considered while investing in mutual funds:

Systematic approach

Regularly invest and disciplined investment helps you to create huge wealth and enhance your life cycle considerably. Many investors have followed this rule and grown.

Asset allocation

Returns from mutual funds are largely dependent on your appropriate asset location rather than scheme selection/fund house selection/timing the market. Allocate among three: equity, debt, cash. 100 minus your age in equity is preferable and not more than 10% of your portfolio in cash is acceptable.

Comprehend your risk appetite

Knowing your risk appetite and selecting the scheme accordingly is the key to success. Many times investors think that they can take enough risk, but the risk thermometer categorizes them differently.

High expense ratio

Expense ratio for different schemes must be examined before selecting the scheme. You must ask your financial planner about that ratio and act.

Ideal time to exit

Simple question has the simple answer. You should exit when your goal has arrived like retirement or your daughter’s marriage and not when the market is seemingly high.

Nomination

Succession planning must be kept in mind. It is recommended that every investment must have a proper nominee des-ignated by the main investor.

Volatility

The second name for volatility is equity market. Please remember that volatility gives you an opportunity to invest in markets when they are low and you can enjoy superior returns.

Invest in Indian funds

More global investors are investing in Indian stock market for improving the returns of their investors. In such situation international funds are avoidable.

Review

Most ideal frequency of reviewing your portfolio is once every quarter. The review should indicate that your portfolio is doing well. This should be done religiously as you go for physical health checkup at regular intervals.

Aim

You should have clearly defined aims or goals. The year in which goal is expected to arrive must be kept in mind. Do not forget to factor in inflation which will increase the amount required for various goals.

Track record

While choosing schemes you must ask questions about track record of fund managers. Their experience and research capabilities count. Future prospect of the scheme is more important than past record of the schemes. It should not be the only criteria for selecting the scheme.

-Shivanand Pandit

Good Investments

The IPL season is going on. We are constantly providing our opinion about which team should take risk and which team should not. We all have our opinions and discussions about what is a safe option and what is a risky one. While the IPL is going on we have come across different tv commercials like “Mutual Fund sahi hai”. Most of us have watched it and ignored it. So what is a Mutual fund? Where should we invest? Where should be put our money? While watching a match, we analyse the safe option and risky option for a team but when it comes to money, most of the time we donot portray such knowledge and analysis. Lets analyse in this month’s issue what are the different investment options available and where can you park your money and what is the risk associated with it?

i). Fixed Deposit - It is a tool through which you can keep your money safe in a bank. It is a one time payment scheme and you can select your tenure and the bank will provide you a fixed rate of return for that period. Yes you heard it right. The bank will keep your money safe and provide you additional money for that. So the scheme sounds interesting and you want to do it every month. No worries. You donot need to visit the branch every month. Just advice the branch to deduct the fixed amount every month and they will call it a recurring deposit. This is the most safest option and return is low to moderate depending upon time duration of investment.

ii). Equity – Always wanted to have a chunk of a very big company and got fascinated by the terms in the primetime news like Sensex, Nifty, BSE, NSE, Bazaar, Stock Exchange. Yes, you can be a part of it and have a chunk of big companies like TATA, Birla, Reliance. These companies sell the shares of their company in the stock market and you can buy it and become an investor in those company. A word of caution is investing in equity requires some prior knowledge and idea about the industry. Otherwise you will end up losing more than your earning. This a high risk and high reward option.

iii). Mutual Funds- You don’t have the knowledge and time to do your homework and still want to invest in stock market and gain some decent amount of money with less risk than equity and more risk than bank deposits. Don’t be disheartened. The finance wizards has something for your needs as well in their kitty. It is mutual funds. A knowledgeable fund manager will invest for you and give you the earnings from those investments and the manager will take a minimal charge. There are two types of Mutual funds – Equity mutual fund and Debt mutual fund. Equity mutual fund schemes predominantly invest in equity stocks. As per the Securities and Exchange Board of India (Sebi) Mutual Fund Regulations, an equity mutual fund scheme must invest at least 65 percent of its assets in equity and equity-related instruments. It has moderate-high risk profile and high returns. Debt mutual fund schemes are for those who want steady returns. They are less volatile and less risky compared to equity mutual funds and provide less return than equity mutual funds. Debt mutual funds primarily invest in fixed-interest generating securities like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments.

iii). Gold- The safest and oldest investment options since ages. You can buy online gold, gold sovereign bond and ornamental gold which can be used to take loan or sell it a higher price to gain from gold. Investing in gold has become very easy nowadays. You can invest from as low as 1 rupee and maximum to the amount as per your capability and now you don’t have to store it at your home as well.

iv). NPS and PPF- The national pension scheme and public provident fund is savings for the future. These tools are used by the people for securing the future. These are safe options and usually yield high returns and the only catch is the amount saved under the PPF can be withdrawn after 15 years and for NPS its after 60. Both of these provide good returns with less risk.

Hope you have much better idea about some of the investment options and this list is not an exhaustive list. There are many more tools for investment. Next time you check your passbook or account statement, don’t keep it there idle and let the money in your account money for you.

-Nilanjan Kala

Will it iron out tax wrinkles?

 W ith an intention of boosting revenues to meet imminent fiscal crunches, many developing countries introduce new tax reforms. Major changes happened in Indian direct tax system since 1962 for a variety of reasons. Amid 1962 to 1990, the Income Tax Act had been dismembered more than three thousand times and prompted the renowned constitutional and tax jurist, Nani Palkhivala to observe the Act as a national disgrace! However, still the unending march of amendments is on and refining the efficiency of the tax system continues to be a key confront in India.

To renovate tax administration further and to erase the possibility of corruption and overreach by tax officials, Prime Minister Narendra Modi recently uncovered new tax reforms. According to him new reforms will benefit sincere taxpayers of the nation, whose hard work sways the evolution of the nation. Unleashing the “Transparent Taxation – Honouring The Honest” platform through video conference, the Prime minister showed grief towards low number of taxpayers in India and urged citizens of India who owe taxes to take bold step to contribute to nation building.

Modi’s new tax mantra

Aiming to have fundamental reforms in India‟s tax configuration and to create taxpayers friendly environment the government launched a fully digitized tax system on August 13, 2020. Faceless Assessment, Faceless Appeal and Taxpayers' Charter are the main components of the transparent taxation proposal. The faceless assessment and taxpayer charter will come into force from August 13, 2020 whereas the faceless appeal system will be effective from September 25, 2020

Faceless assessment targets to ensure fair and polite treatment for tax payers by tax officials. The scheme makes the Income tax department accountable for maintaining the tax payers‟ nobleness. The department must entrust the taxpayer and should not disbelieve anyone without evidences. This scheme aims to eradicate the face-to-face communications between taxpayers and income tax officers. A central computer selects tax returns for scrutiny or inspection based on risk and mismatch considerations. These cases will be allotted to team of administrators randomly. At another arbitrarily selected location this allocation will be studied by officers and if they agree, a notice will be remitted by the centralized computer system which has to be responded by electronic mode. Income tax surveys to gather information for scrutiny assessment will be assumed only by the investigation wing.

The previous system permitted tax administrators from inspector onwards to originate the survey with approval from the joint commissioner of income tax. Nevertheless exceptions will be made in cases of serious fraud, major tax evasion, sensitive and search matters, international tax charges, Black Money Act and Benami property. To make the current tax system seamless, painless and faceless, the Central Board of Direct Taxes which is in charge of administration of personal and corporate tax, will liftoff faceless appeals scheme on September 25 as part of the proposal to diminish physical boundary between tax officers and taxpayers. Random allotment of appeals to officers, no visit to tax offices by tax payers, concealment of the identity of the tax administrators deciding the appeals and team based appellate decisions are the main features of faceless appeals plan.

Supporting the statement made by the Finance Minister of India during the 2020 Union Budget, the government has introduced tax payers‟ charter. The charter lists out accountabilities of the income tax department and taxpayers. The charter commits to provide fair, courteous, and reasonable treatment, treat taxpayer as honest, to provide mechanism for appeal and review, to provide complete and accurate information, to provide timely decisions, to collect the correct amount of tax, to respect privacy of taxpayers, to maintain confidentiality, to hold its authorities accountable, to enable representative of choice, to provide mechanism to lodge complaint, to provide a fair & just system, to publish service standards and report periodically and to reduce cost of compliance. In return, it expects taxpayers to be honest, compliant, to be informed, keep accurate records, know what the representative does on his behalf, to respond in time and make payments in time as per law.

Taken as a whole, new tax reforms target to ease compliance burden of taxpayers, to bring fair objective and just system and to erase physical interface between the department and taxpayers. With this tax transparency era will definitely begin. Hence, the new tax proposals smell good. But taste to be tested.

Gloomy side of the policy

Generally many policies or reforms in the Indian setting are as good as ink spilled on paper. Things begin to crush at the execution stage. Though the enhanced features of the reforms available to an honest taxpayer are yet to be released, any action taken by the government will be felt by an honest taxpayer only when he or she is not saddled with illogical assessment of tax returns and harassment of tax collection against capricious tax demands.

Many tax experts including tax officials found the charter feeble and ambiguous. The new born legally approved charter is much different from prevailing citizens‟ charter which has no legal backing but prescribes time deadline for delivery of services. Moreover, tax officers are confused and do not know whether taxpayer charter or citizens‟ charter to be followed. In the taxpayers‟ charter there is nothing tangible for a taxpayer to pursue compensation or for a supervisor to castigate an officer. With respect to believing taxpayers or respecting their conduct, the provisions of the taxpayers‟ charter are not justiciable or not subject to trial in a court of law. It is not clear that whether citizen‟s charter and taxpayers‟ charter will run analogous.

The association, Joint Council of Action, embodying income tax officers and employees has aired anguish over not being taken into confidence and underlined the unease among 97 per cent of the income tax department workforce towards the reforms. The association urged that no employee should be made jobless due to the reforming exercise.

Section 132 and 132A of the Income Tax Act authorizes the income tax department can conduct a search and seizure. These were amended three years ago and now the department can raid anyone if it has reason to believe or reason to suspect. However, the department is not responsible to reveal the reason to any authority or even the appellate tribunal. To support this, Section 132 (1) was amended retrospectively from April1, 1962 and Section 132 (1A) from 1st October, 1975. Although tax payer pays the tax amount due on his own along with the penalty applicable, failure to file tax returns in time attracts severe sentence for six months to seven years, plus a fine if the tax amount is greater than rupees one lakh. This prompts to raise the prime question and the question is, is it a just and honest system that the charter is talking about?

The income tax department has been given stringent revenue targets year after year to nourish the monster of big government. This gives more powers to tax officers to harass us. Thus, this tactic and more draconian laws present in the Act cannot reduce the tax harassment and department‟s attitude has become more and more vindictive. There are even targets for issuing prosecution or trial notices and other disciplinary provisions, which are supervised weekly by New Delhi.

Tax administrations have conventionally been both the regulator and enforcer of tax laws with restricted care to taxpayer service. Devoted bodies like the Ombudsman in Australia, Canada, United Kingdom, Brazil, South Africa and tax mediators in Belgium and France examine tax connected complaints. These entities are self-reliant of the tax organization and have been established under a specific legislation. The chief objective of this arrangement is to guarantee that taxpayers have a chance to raise worries when they feel they have been treated crookedly. Unfortunately, taxpayers of India do not relish this privilege and there is no tax ombudsman in India.

R egrettably taxmen are not reprimanded for delaying cases and for imposing the harsh penalties. Many taxmen keep cases alive by simply raising a monotonous enquiry from time to time. Few years ago, the Comptroller of Auditor General pointed out that to augment tax revenues, an improper demand was made and the State Bank of India was enforced to make a payment of more than Rs.10,000 crore on March 30. This aided the taxman attain his year end goals and within a week in the new fiscal year the amount was refunded. In India, no harsh penalties are levied on such officials.

As a final point, the Income Tax department known for its wrongs than rights it has practiced in the previous decade of tax reforms. Although the government proposes to narrow the trust deficit between taxpayers and the department, but the allegations of annoyance by the latter decline to go. The tax payers will feel and develop trust in the government only when they get fair treatment. It would be important for the income tax department to assure that new promises do not remain only on paper. It is significant to publicize the reforms including the charter and create an awareness movement leading to a novel era. While the taxpayer charter is founded on relaxing compliance, the policy declarations must also replicate in the functioning of the tax administration. Proper training has to be provided to tax officers to shift the emphasis from simply raising tax orders to supporting taxpayers and truly rationalizing assessments. This will surely augment tax collection, permit the government to spend more freely and shrink the burden on truthful taxpayers. Otherwise, painless, seamless, faceless tax platform initiative will be hopeless, fruitless, worthless.

-Shivanand Pandit

(Tax Specialist||Financial Adviser )

How to Save Income Tax?

How would you feel if you have to sacrifice a large amount of money without your will? It is harrowing and hurtful when someone takes away your hard-earned money. Every year we go through this same feeling again and again. Yes, you guessed it right!! Its taxes. A report of Times of India states that an average salaried employee has to pay more than 50 percent of their salary as direct and indirect taxes in the form of income tax, service tax, GST, etc. Horrifying Right!! But there are some avenues left which an employee can use and reduce the mammoth burden of taxes. Here in this article, we are going to explore the different ways which can be used to save our hard-earned money and increase our savings.

i). Home Loan- Always dreamt of buying your dream house! Buying a house on loan will not only fulfil your dream of staying in that house, it will also be light on your tax statement. A salaried employee can save Rs. 1, 50,000 taxes under 80c on the payment of principal towards housing loan.

ii). Health Insurance Policy- Residents can claim the premium amount paid towards insurance policy under section 80D. For people whose age are below 60 years of age, the exempted premium amount will be Rs. 25000 and for people above 60, the amount is Rs 50000.

iii). Investments- Some investments in the capital market can help not only in creating wealth but also in saving taxes. The Equity linked saving schemes(ELSS funds) help you save tax under 80C.

iv).Investment in Government Schemes – People can get a good assured return on investment by investing in government schemes and can also save taxes under 80c. The schemes which come under 80C are Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), National Pension Scheme (NPS), Public Provident Fund (PPF), National Pension Scheme (NPS)

v). Rented Premises - What if you cannot take loan for your dream house and have to stay in a rented apartment. You can claim Tax exemptions for House rent allowance (HRA) under Section 10(13A). Your salary slip should contain an HRA component to get the compensation for the same. Although, the total tax exemption on rent paid is calculated as the minimum value of three components:

a).Annual HRA received from the employer

b). 50% of the annual salary if the individual is residing in a metro city (40% in case of non-metro cities).

c). Total annual rent should be 10% of the basic salary.

vi). Charity – Doing charity not only makes you feel good but also provide a relief in your tax billing. Donations made to different charitable organisations in cash are eligible for tax waiver amounting to ₹2,000 under Section 80G. Online or bank transactions enjoy complete or partial tax exemptions.

One thing to note here is one can claim a maximum of Rs.1, 50,000 under section 80C.The deadline to file the tax return has been extended till November 30, 2020. Hopefully when you file for tax return in 2021, there will lot of returns you will be expecting based on the above tools of tax savings.

-Nilanjan Kala