“Savings
exists for the poor. For the rich, there is a tax exemption.”
~
Christian Bovee
We recommend
that you utilize the below Income Tax calculator provided by the income tax
department to choose the favorable tax regime. Old tax regimes allow you the
below tax deductions;
Sec 80 C
You can avail
of a deduction of ₹ 1.5 lakhs from life insurance premiums, home loan
principal repayment, EPF/PPF/NPS, etc.
Sec 80D
Deduction up
to ₹ 1,00,000/- p.a. from health insurance premiums paid
for self and aged parents as follows;
a. Self below
60 years - ₹ 25,000 p.a.
b. Self above
60 years - ₹ 50,000 p.a.
c. Parents
below 60 years - ₹ 25,000 p.a.
d. Parents
above 60 years - ₹ 50,000 p.a.
e. Preventive
health check-ups - ₹
5,000 p.a.
Standard Deduction
You can avail
a deduction of ₹ 50,000/- p.a.
under old tax regime whereas under new tax regime You can avail of a
deduction of ₹
75,000/- p.a. (which is only available for salaried
individuals)
Sec 24B
Under Section
24B of the Income Tax (I-T) Act, you can claim a deduction for interest payable
on a housing loan up to ₹ 2 lakhs per financial year, if you have a housing
loan.
NPS (National Pension Scheme)
1) Tax
deduction for the Employer contribution up to 14% of salary (Basic + DA)
Provided that Your Employer’s contribution to EPF, NPS and superannuation fund
is not exceeding ₹ 7.5 lakhs p.a.
2) An
additional deduction for self-contributions up to ₹
50,000 in NPS (Tier I account) is available exclusively to NPS subscribers
under subsection 80CCD(1B). This is over and above the deduction of ₹
1.5 lakhs available under section 80C of the Income Tax Act. 1961.
3) It is
recommended you to choose the active mode with 75% allocations to equity and
25% split equally between corporate and government bonds.
4) This might
need to be dynamically adjusted to reflect your ideal asset
allocation.
5) It is
recommended to Choose "HDFC Pension Fund Management."
6) The NPS can
only be withdrawn at the age of 60. The maximum amount that you can
withdraw at the age of retirement is 60% of the accumulated fund which is
tax-free and the balance of 40% of the accumulated fund must be utilized for
the purchase of an annuity.
Sukanya Samriddhi Yojana (SSY)
1) If you have
a girl child, consider investing in Sukanya Samriddhi Yojana (SSY)
2) Sukanya
Samriddhi Yojana can be opened by the parents/guardian in the name of
the girl child who is below the age of 10 years.
3) The maximum
deposit can be made up to Rs. 1.50 lakh in a Financial Year in
lumpsum or in multiple instalments.
4) Deposits
qualify for deduction under section 80C of the Income Tax Act.
5) Withdrawal
facility is available only after the girl child attains the age of 18 or passed the 10th
standard.
6) Interest
earned on this account is tax-free under Income Tax Act.
Public Provident Fund (PPF)
1) PPF is
primarily designed to encourage savings and provide financial security to
individuals
2) PPF comes
with a lock in period of 15 Years. Also, a PPF account can be further extended
in blocks of 5 years, with or without contributions
3) The minimum
investment amount for PPF is Rs 500 per financial year. As far as the maximum
limit is concerned, you can deposit up to Rs 1.5 lakh per financial year.
4) PPF Falls
under the exempt-exempt-exempt (EEE) category. The principal earned, interest
earned, and the maturity amount of PPF is completely tax free.
5) The current
PPF interest is 7.1% Per Annum.
Voluntary Provident Fund (VPF)
1) A VPF is an
extension of the EPF. The VPF option is available only to salaried individuals
who receive their monthly payments through a specific salary account.
2) The lock-in
period of a VPF account is five years. If an employee withdraws an amount from
EPF before five years, it will be liable to tax.
3) There is no
maximum or minimum VPF contribution limit per year. An individual can also
contribute 100% of his/her monthly income (salary + dearness allowance) towards
VPF. The employer is not obligated to contribute to the VPF account. Also, once
the VPF account is opened, it cannot be closed for five years.
4) VPF Falls
under the exempt-exempt-exempt (EEE) category. The principal earned, interest
earned, and the maturity amount of VPF is completely tax free.
5) The current
VPF interest is 8.25% Per Annum.
Old vs New Tax Regime - Which benefits more for the
salaried individuals
|
Income
Level
|
Break
Even Deduction Limit
|
|
₹ 700,000
|
₹ 200,000
|
|
₹ 800,000
|
₹ 300,000
|
|
₹
1,000,000
|
₹ 500,000
|
|
₹
1,400,000
|
₹ 568,750
|
|
₹
1,600,000
|
₹ 618,750
|
|
₹
2,000,000
|
₹ 758,335
|
|
₹
2,400,000
|
₹ 837,500
|
|
₹ 25 Lakhs
Up To ₹ 5 Cr
|
₹ 850,000
|
Note:
1) For
individuals earning between ₹ 25 lakhs up to ₹ 5
crores, if the combined total of deductions and exemptions exceeds ₹
8.50 lakhs, the old tax regime is more beneficial. Otherwise, the new tax
regime scores well.
2) Deductions
+ Exemptions > Breakeven: Old Tax
Regime
3) Deductions
+ Exemptions < Breakeven: New Tax Regime
Mutual Fund Taxation in India
|
Name of the Investment
|
Holding Period
|
STCG
|
LTCG
|
|
|
|
Listed Equity, Equity ETF's and
Equity Mutual Funds (>65% in Domestic Equity)
|
12
Months
|
20%
|
Capital Gains up to ₹
1.25 lakhs is exempted and the excess gains are taxed at 12.5%
|
|
|
|
|
|
Listed Bonds & Debentures
|
Slab Rate
|
10%
|
|
|
|
Real Estate
|
24 Months
|
Slab Rate
|
20% With Indexation Benefit
or
12.50% without Indexation Benefit
|
|
|
|
Unlisted Equity
|
24 Months
|
Slab Rate
|
12.50%
|
|
|
|
Physical gold, Gold Mutual Funds
and Gold ETF's
|
|
|
|
International Equity &
International Mutual Funds ( < 65% in Domestic Equity)
|
|
|
|
Hybrid Funds (> 35% in Domestic
Equity)
|
|
|
|
Unlisted Bonds & Debentures
|
24 Months
|
Slab Rate
|
12.50% without Indexation Benefit
|
|
|
|
Debt Mutual funds (<35% in
Domestic Equity)
|
NA
|
Slab Rate
|
|
|
|
Sovereign Gold Bonds (SGB's)
(Listed)
|
24 Months
|
Slab Rate
|
12.50%
|
|
|
1) Dividends
distributed will now be taxable in the hands of the investor as per slab
applicable rates.
2) Additional
tax on income distributed by mutual funds has been abolished.
3) For
Resident Individual/HUF/Domestic Companies – 10% TDS (Tax deducted at source)
on dividend income exceeding ₹ 5,000 & for NRI – TDS of 20%
Exit Loads
Exit loads of
most equity funds would be at 1% on the amount invested if you redeem before
one year. The detailed product notes carry more information applicable to each
fund.
Section 54 of Income Tax Act
· Section
54 of the Income Tax Act offers a tax exemption on capital gains earned from
selling a residential property.
· The benefit
of section 54 is available only to an individual or HUF.
· The asset
transferred should be a long-term capital asset, being a residential house
property.
· Within a
period of one year before or two years after the date of transfer of old house,
the taxpayer should acquire another residential house or should construct a
residential house within a period of three years from the date of transfer of
the old house. In case of compulsory acquisition, the period of acquisition or
construction will be determined from the date of receipt of compensation
(whether original or additional)
· As of April
2023, the maximum exemption is limited to Rs. 10 crores. Any investment
exceeding this amount in the new property won't be considered for tax relief.
Section 54F of Income Tax Act
· Any
individual or HUF can avail tax exemption under 54F exemption for the capital
gains arising out of any long-term capital assets other than a residential
house, if the net consideration received from the transfer of long-term capital
asset is invested in purchase of any residential house within 1 year before or
after the date of transfer or if the residential house is constructed within 3
years from the date of transfer.
· The
Individual / HUF should not own more than one residential house at the time of
sale to avail this exemption. As per Budget 2023, the maximum deduction under
54F is capped at 10 crores.
· The entire
long term capital gains are exempted if the full net sale consideration is
invested in the residential house.
· In case if a
portion of net sale consideration is invested then the exemption = (LTCG*
amount reinvested)/net sale consideration.