Tax Planning Guide for FY 2016-17

How to Save Income Tax for Fy 2016-17

How to Save Income Tax for Fy 2016-17?

We are releasing the eBook on Tax Planning for FY 2016-17. This is a short 45 slide power point presentation which gives the details of tax saving sections and investments available to individual tax payers.

But first lets look at the changes in the Income Tax rules in Budget 2016.

Changes in Income Tax Rules:

1. There has been no change in the income tax slabs.

2. For people with net taxable income below Rs 5 lakh, the tax rebate has been increased from Rs 2,000 to Rs 5,000 u/s 87A. This would benefit people who have net taxable income between Rs 2.7 Lakhs to Rs 5 Lakhs.

3. Additional exemption for first time home buyer up to Rs. 50,000 on interest paid on housing loans. This would be applicable where the property cost is below Rs 50 Lakhs and the home loan is below Rs 35 lakhs. The loan should be sanctioned on or after April 1, 2016.

4. Tax Exemption u/s 80GG (for rent expenses who do have HRA component in salary) has been increased from Rs 24,000 to Rs 60,000 per annum. This is a good move to align the exemption amount with today’s rent and keep the section relevant.

5. For people with net taxable income above Rs 1 crore, the surcharge has been increased from 12% to 15%

6. Dividend Income in excess of Rs. 10 lakh per annum to be taxed at 10%

7. 40% of lump sum withdrawal on NPS at maturity would be exempted from Tax. This rule now also applies to EPF. So now in case of EPF income tax would be applicable on 60% of the corpus on maturity.

8. Presumptive taxation scheme introduced for professionals with receipts up to Rs. 50 lakhs. The presumptive income would be 50% of the revenues.

The eBook covers the following income tax sections available for individual tax payers:

1. Section 80C/80CCC/80CCD

These 3 are the most popular sections for tax saving and have lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.

You can choose from the following for tax saving investments:

  1. Employee/ Voluntary Provident Fund (EPF/VPF)
  2. PPF (Public Provident fund)
  3. Sukanya Samriddhi Account
  4. National Saving Certificate (NSC)
  5. Senior Citizen’s Saving Scheme (SCSS)
  6. 5 years Tax Saving Fixed Deposit in banks/post offices
  7. Life Insurance Premium
  8. Pension Plans from Life Insurance or Mutual Funds
  9. NPS (New Pension Scheme)
  10. Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)
  11. Central Government Employee Pension Scheme
  12. Principal Payment on Home Loan
  13. Stamp Duty and registration of the House
  14. Tuition Fee for 2 children

2. Section 80CCD(1B) – Investment in NPS

Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS. We have done a complete analysis and concluded that it would be beneficial for you to discard this benefit and invest after tax money in a good equity mutual fund.

3. Payment of interest on Home Loan (Section 24/80EE)

The interest paid up to Rs 2 lakhs on home loan for self-occupied home is exempted u/s 24. There is no limit for home given on rent.

Budget 2016 has provided additional exemption up to Rs 50,000 for payment of home loan interest for first time home buyers. To avail this benefit the value of home should not exceed Rs 50 lakhs and loan should not be more than Rs 35 lakhs.

4. Payment of Interest on Education Loan (Section 80E)

The total interest paid on education loan can be claimed as tax exemption. There is no upper limit for the same.

5. Investment in RGESS (Section 80CCG)

Deduction Up to Rs 25,000 (50% of amount invested) is allowed if you make investment in preapproved stocks and mutual funds in Rajiv Gandhi Equity Savings Scheme (RGESS). This is available to first time equity investors subject to certain conditions.

6. Medical insurance for Self and Parents (Section 80D)

You can get tax deduction up to Rs 60,000 by paying medical insurance premium for self, your dependents and your parents. There is also sub limit of Rs 5,000 for preventive medical checkup.

7. Treatment of Serious disease (Section 80DDB)

You can claim deduction up to Rs 80,000 for treatment of certain diseases like AIDS, renal failure, etc for self or dependents

8. Physically Disabled Tax payer (Section 80U)

Physically Disabled Tax payer can get tax exemption up to Rs 1.25 lakhs u/s 80U

9. Physically Disabled Dependent (Section 80DD)

You can claim deduction up to Rs 1.25 lakhs for maintenance and medical treatment of Physically Disabled dependent

10. Donations to Charitable Institutions (Section 80G)

Deduction up to Rs 40,000 is allowed for Donation to certain charitable funds, charitable institutions, etc.

11. Donations to Charitable Institutions (Section 80GGA)

Deduction up to Rs 1 lakh is allowed for donations for scientific research or rural development

12. Donations to Charitable Institutions (Section 80GGC)

Deduction up to Rs 60,000 is allowed for donations to political parties

Along with the tax saving options, it also has details about all the common salary components and their tax treatment. This section can help you to plan your salary components in case your company offers such facility.

We hope that this eBook would help you in understanding, planning and saving taxes.

Please give us your feedback and help us improve!

53 thoughts on “Tax Planning Guide for FY 2016-17

  1. These tax planning guide are of general nature only and have been provided to assist tax payers
    with some general ideas in relation to their tax affairs. Tax payer can make the better use of tax saving from the
    changes done in Budget on the year 2017 just by investing in mutual funds, which gives you the benefit of
    tax saving.

  2. BISWAJIT DATTA says:

    MY OFFICE IS WANTING MEDICAL BILLS FOR MY AUTISTIC CHILD U/S 80DD. HOW CAN I GIVE BILL FOR THE MAINTAINENCE OF MY CHILD ?????

    • For claiming the deduction in respect of the AUTISTIC CHILD u/s 80DD, you have to furnish a medical certificate of disability from a Government Hospital certifying the disability of the dependent. The certificate needs to be renewed periodically.

      For people having Autism, Cerebral Palsy or multiple disabilities, form number 10-IA needs to be filled up. There are two other formats for person suffering from mental illnesses and all other disabilities.

      People have to furnish self declaration certifying the expenditure incurred on account of medical treatment (including nursing), training and rehabilitation of the handicapped dependent.

      You do not have to preserve the actual receipts for expenses incurred.

      In case your employer does not agree you can claim the amount while filing your Tax returns!

  3. Nice Article Amit. Can you please which scheme has the minimum lock in period for Tax Saving Investment under Section 80 C?

  4. pls help me with procedure to open NPS AC FOR SAVING TAX

  5. Query: I am already investing Rs 1.5 lacs under section 80C through various schemes (excluding NPS). My NPS contribution is approx 55 K. Can I move that to claim benefit (50K benefit for 2nd NPS) under section 80CCD(1b). I have only one NPS account & I’m not interested in opening another NPS account just to save taxes?

  6. Amit,
    I have following queries:
    1. How would I show my previous year NPS contribution both employee and employer which I received as arrears in current year while filling my declaration and return so that these can be over and above of my existing deductions limit of my current year?
    2. Can I show NPS deductions of employees in parts under 80CCD1 and 80CCD1(B).?
    3. I hav some DA arrears and one month salary of previous year in my current year, so how should i calculate the relief under sec 89 and while calculating dat relief do I need to add employer contribution to my income of previous year salary n das

  7. I congratulate the mr amit’s team for making noble efforts in spreading the tax awareness among the needy, i may ask you that i am investing Rs.15,000 per girl child limited my two kids, whether this 30,000 totally exempted from taxable income or only it comes under 80 -C ?

  8. I have been received children edication allowance against education expenses now max. limit is Rs.18000/- upto 12th std., but How much amount I can show as a income i.e. only tution fees or all amount reimbursed? and How much amount we can show in 80-C for saving i.e. only tution fees or all amount reimbursed?. because actually we have expenditure more than Rs.18000/- but tution fees is less than Rs.18000/-.please clarify.

  9. I was looking for a scheme where I could invest my money and could earn a tax free income along with ensuring the security of my principal amount.Can you please provide me with the details of various interest rates prevailing in the market at present especially if I have to invest my money for a time span of 3-5 years in government bonds.

  10. Sushil Chandran says:

    I am staying in a serviced apartment. The owners are ready to give rent receipt and PAN but there is no rent agreement. Will it affect my HRA exemption claim. Rent is Rs 12000.00 pm.

    • Most employers only need rent receipt & landlords PAN number. So claiming HRA should not be a problem. In case you need rent agreement you can easily get it done through lawyers/property dealers for Rs 200 to 500.

  11. Dear Amit,
    I have taken ICICI I Protect Term Insurance for I Crore and i pay 23000 per year premium. Under which category can i get income tax benefit for the premium. And suppose if my 80C 1.5 lacs is covered, other than Housing Loan where can i invest money to get tax benefit.

    • Term plan premium payment gives you tax deduction u/s 80C. Just go through the presentation and check if you have explored all tax saving options!

  12. Good Quality Information!
    Its is pretty useful to get a quick overview.. I think better than BankBazaar in terms of tax Info..
    Hope this work continues to strive excellence.

  13. i am paying 3,00,000/ for life insurance annual premium in my name only, paid by me only. For taxing purpose under 80c 1,50,000/ is deducted in my name. Can the remaining 1,50,000/ be claimed u/s 80c in my wife or mothers name. Kindly Give me a solution.

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