Seven ways your family can help you save taxes

Your family is always there to give you support – not just emotional, but sometimes financial as well. For instance, your family members can be of great help for saving on taxes. However, all your investments and spending for your family are not eligible for tax rebates. There are rules and some of them are pretty complex. To make things simpler, here we list 7 perfectly legal ways your family can assist you cut your tax bill.
1. Buy health insurance for the family:

Section 80C investments should be guided by your needs

The last few months of the financial year are addressed towards ensuring that the tax benefits that are available are utilised effectively. One of the most widely used benefits covers the deduction under Section 80C of the Income Tax Act and while making use of this there is a need to take a careful look at the overall strategy that one is following. This will ensure that there is no wastage of funds and that the best use of the money is possible. There are a few parameters that can be followed for this purpose and here is a detailed look at what an individual investor needs to do in this regard.

Reach the limit.

One of the first things that people with a high income needs to do is to ensure that they are making the full use of the Section 80C limit available under the Income Tax Act. This is Rs 1.5 lakh per annum and if there is no full use of the limit then it would mean that some amounts that could have been taken have been allowed to lapse. This can result in a rise in the tax liability as the reduction of the amount from the taxable income is less. The overall limit that is being utilised by the existing investments should be checked and there should be a plan to ensure that the figure that is required is achieved during the year. Some of the options that are suitable for last minute investing include those like PPF, NSC and for senior citizens the Senior Citizens Savings Scheme.

Do not make excess investments.

There are times when the individual will realise that they have already crossed the limit of Rs 1.5 lakh that has been allowed and their eligible investments are already above this figure. This is a tricky situation because it could mean that there are some additional investments that are not required but are still being made and hence an effort needs to be undertaken to try and cut down the investments. This is difficult because in some cases it might not be possible to do so with an example being the payment of an insurance premium where if this is curtailed then the benefits on the policy can be terminated. This is the reason why any investment should be checked for its future impact before it is actually made rather than during this exercise after the process has been completed. An overall review of the excess investments will show whether there can be some investments that can be cut down and the money directed elsewhere.

Actual need.

For some people there might not be the need to make the full use of the Section 80 C deduction because they might not have the necessary income that can be reduced by the investments. Take for example someone who has a total income of just Rs 3.5 lakh. In this case since there is no higher inflow that is present the individual need not invest more than Rs 1 lakh in order to bring down their tax liability to zero. The basic exemption limit is Rs 2.5 lakh for those below 60 years and hence this plus the Rs 1 lakh deduction will reduce the taxable income to Nil. This means that there would be a reduced pressure on the finances of the individual in trying to make the highest use of the available limits because there might not be the need for such an effort. This can help in the overall financial planning process because it will free up the amounts that can be used effectively for some other investment that can actually yield better benefits in terms of the achievement of other goals. Or it could be that the investment can yield higher returns than what would have come had the amount just been directed towards tax saving debt investments.

All about TDS – Tax Deducted at Source

TDS or Tax Deducted at Source, is a means of indirect tax collection by Indian authorities according to the Income Tax Act, 1961. TDS is managed by the Central Board of Direct taxes (CBDT), which comes under the Indian Revenue Services (IRS).

TDS is collected as a means to keep a stable revenue source for the government throughout the year, while desisting people from avoiding taxes.

How is TDS Deducted?

Income and expenditure such as salary, lotteries, interests from banks, payment of commissions, rent payment, payments to freelancers, etc. fall under the ambit of TDS. When making payments under these segments, a percentage of the overall payment is withheld by the source that is making the payments. This source, which can be a person or an organization, is known as the Deductor. The person whose payment is getting deducted is called the Deductee. For instance, a deductor is the employer paying salary to an employee (the deductee).

Advantages of TDS:

TDS is based on the principle of

Investing: Save tax, maximise returns


For salaried employees, investments for tax planning must have prudent asset allocation of debt and equity. This will ensure that such investments made every year not only save on tax outgo but also build a corpus in the long-run, which is inflation protected.

At present, one of the most important components of tax savings is Section 80 C of the Income Tax Act, 1961. An individual can invest up to R1.5 lakh in a fiscal year in financial instruments like Public Provident Fund (PPF), life insurance premiums, five-year bank or post office fixed deposits, five or 10-year National Savings Certificates of India Post, employee’s contribution to provident fund, Equity-Linked Savings Scheme (ELSS) of mutual funds and unit-linked insurance plans (Ulips) of life insurance companies. Moreover, a tax-payer can avail an additional exemption under Section 80CCD of R50,000 by investing in government’s National Pension Scheme which is a mix of equity and debt instruments.


Tax rules NRIs need to know for realty deals

Non-resident Indians (NRIs) may sell their property in India, either to seek capital appreciation on their investments, or they may want to dispose of their properties in India in order to acquire some assets in their country of residence. It is imperative that they understand the applicable tax rules and regulations with respect to such a transaction.

Any profit earned through sale of property is taxable as capital gains. In case the property is held for more than 36 months, the gains are classified as long-term capital gains (LTCG); else, they will be classified as short-term capital gains (STCG). STCG is taxable at the applicable slab rates; however, LTCG on the sale of property is taxed at a beneficial rate of 20%.

The law also allows an indexation benefit in case of LTCG. Indexation basically factors for the effect of inflation by applying the cost inflation index (CII) resulting in a higher Cost of Acquisition (CoA).

NRIs are entitled to claim certain exemptions while calculating the taxable LTCG under the Act, as below:

Investment in property: The individual taxpayer may claim exemption of LTCG arising on sale of a residential house property/ land, through purchase of another residential house in India. LTCG on sale of a residential house property can be claimed to the extent of capital gains utilised LTCG on sale of a land can be claimed to the extent of sale consideration utilised. To avail this benefit, one must ensure that the new house property should be purchased within one year before or two years after the sale; or this can be claimed if a new property is constructed in India within three years from the date of sale of property.

Investment in specified bonds: LTCG can be claimed as exempt from tax if the capital gain is invested in specified bonds (NHAI and RECL bonds), within six months from the date of sale of property, up to R50 lakh.

NRIs may further evaluate the benefits as may be available under the relevant Double Taxation Avoidance Agreement which India has with their country of residence while computing their capital gains tax liability in India. For the sale of property by NRI, the buyer is under an obligation to deduct tax at source while making the payment of sales consideration.

Tax is required to be deducted @ 20% in case of LTCG and at applicable slab rates in case of STCG. The mechanism of such tax deduction at source was introduced by the government in order to ensure the appropriate collection of tax from NRIs who are mostly based out of India.

As the above mentioned benefits and exemptions can only be claimed by the NRIs at the time of filing their India tax return, they need to apply for Tax Exemption Certificate from the I-T department if they would like Nil/ lower tax deduction on such transaction.

Under Section 197 of the Act, NRIs can obtain Tax Exemption Certificate on the basis of estimated capital gains tax computation and submission of relevant documents. After going through the information furnished by the NRI, the jurisdictional Assessing Officer/ Tax Officer may issue a certificate authorising the buyer of property to deduct tax at a lower rate or nil rate as the case may be.

What to expect from Budget 2016?

As is human nature, we place high expectations on our governments. Especially those running on a massive mandate, have too many promises to keep.

Our government though has a lot going on. Given the connected world we live in, our economy is not immune to global challenges. There are a bunch of domestic challenges too. Businesses want GST to take shape, while the common man wants more money in their pockets. Keeping 1.2 billion people happy is not an easy job. What then is a reasonable expectation from the finance minister this budget, let

Declarations and payments made under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015- regarding

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 came into force with effect from 1st July, 2015. The Act provided for a one time compliance window to declare assets held abroad and pay due taxes and penalty on the value of assets declared.

A total of 644 declarations were made under the compliance window provided in the Act which closed on 30th September, 2015. The amount involved in these 644 declarations was 4,164 crores.

The declarants were liable to pay tax at the rate of 30 percent and a like amount of 30 percent by way of penalty on the value of assets declared, by 31st December, 2015. The amount received by way tax and penalty upto 31st December, 2015 is Rs 2,428.4 crores. The shortfall is primarily on account of certain declarations, in respect of which there was prior information under the provisions of Double Taxation Avoidance Agreements/Tax Information Exchange Agreements or receipt of payment after 31st December, 2015.

Issue of refunds of smaller amounts – regarding


In an initiative to reduce taxpayer grievances and enhance the taxpayer satisfaction, the Central Board of Direct Taxes had issued instructions to Central Processing Center (CPC), Bengaluru and the field officers in December, 2015 to issue refunds of amounts less than Rs.50,000/- expeditiously.

As a result of the special drive to issue smaller refunds, 18,28,627 refunds below Rs.50,000/- involving a sum of Rs.1,793 crore have been issued between 1 st December, 2015 and 10th January, 2016. These refunds relate to Assessment years 2013-14 to 2015-16.

In order to further expedite the process of issue of small refunds, CBDT has also directed CPC-Bengaluru and the field units that refunds up to Rs.5,000/-, and refunds in cases where outstanding arrears are up to Rs.5,000/- may be issued without any adjustment of outstanding arrears. Office Memorandum F. No. 312/109/2015-OT dated 14th January 2016, conveying these directions of CBDT is available on the website of the Department

PAN must for cash payment of hotel bill over Rs 50,000 from January 1, 2016

Furnishing PAN will be mandatory from Friday for cash transactions such as hotel or foreign travel bills exceeding Rs 50,000 – a move aimed at curbing the black money menace.

Besides, PAN will be a must for all transactions, including purchase of jewellery, above Rs 2 lakhs in cash or through card with effect from January 1, 2016, the Finance Ministry said in a notification.

PAN will also be mandatory on purchase of immovable property of over Rs 10 lakh. This will be a relief to small home buyers as previously the government had proposed to make PAN mandatory for property worth Rs 5 lakh.

Quoting of Permanent Account Number (PAN) will also be mandatory for term deposits exceeding Rs 50,000 at one go or Rs 5 lakh in a year with banks, Post Offices and NBFCs.

The notification said PAN would be mandatory for payments of more than Rs 50,000 for cash cards or prepaid instruments as well as for acquiring shares of unlisted companies for Rs 1 lakh and above.

It has also been made mandatory for opening all bank accounts except Pradhan Mantri Jan Dhan Yojana accounts.

Finance Minister Arun Jaitley had earlier this month announced in Parliament that PAN would be made mandatory for all cash and card transactions beyond Rs 2 lakh.

The limit is double of Rs 1 lakh that he had proposed in 2015-16 Budget, but is lower than the existing threshold of Rs 5 lakh.

Making cash deposit of more than Rs 50,000 or purchase of bank draft/pay orders/bankers cheque of equal denomination on a single day, payment of life insurance premium of Rs 50,000 in a year would also require quoting of PAN.

In keeping with the government’s thrust on financial inclusion, opening of a no-frills bank account such as a Jan Dhan account will not require PAN.

Other than that, the requirement of PAN applies to opening of all bank accounts including in co-operative banks.