Some of the Tax tips for salary earners
The main aim of tax planning is to reduce the incidence of income tax on you. This becomes imperative if you are the sole earning member of your family.
Reducing Your Tax Liability
Being salaried, you can reduce the incidence of tax in two steps: Firstly, by structuring your salary in a manner that will enable you to optimally utilise all the deductions related to it.
Secondly, by making investments/payments in pre-determined avenues which offer a deduction from the total taxable income, to the extent of the investment /payment made, subject to the maximum permissible limit.
STEP 1
Minimising The Tax Liability On Your Salary Income
Here’s taking a look at the various components of your salary and the tax exemptions attached to them...
House Rent Allowance (HRA)
If you stay in a rented house and receive HRA from your employer, you can claim a tax exemption to the extent of the least of the following three: 50 per cent of your salary, if your house is situated at Mumbai, Calcutta, Delhi or Madras and 40 per cent, if it is in any other place or Actual HRA received or Rent paid less 10 per cent of the salary. Alternatively, if you are staying in your own house and you have taken a loan from a financial institution, on or after April 1, 1999, for the purpose of construction /acquisition of the house, then you can claim a deduction of up to Rs 1.5 lakh per annum from your total taxable income. If, however, you have taken the loan prior to April 1, 1999, then the deduction available is only Rs 30,000. employer (in the form of ticket restaurant coupons, etc.) do not attract tax.
Medical Reimbursement
You are eligible for a deduction of up to Rs 15,000 in the form of “medical reimbursements ” from your employer. However, in order to claim this benefit, you must produce proper vouchers, such as medical bills, certificates from your doctor, etc.
Leave Travel Allowance (LTA)
If the entire amount available under LTA is actually incurred for travel for two journeys which are undertaken in a block of four calendar years, the entire LTA component does not attract tax. However, if only a partial amount is utilised, then the balance (i.e. the LTA available less the actual expenses) will attract tax.
STEP 2
Availing Of Provisions Under Section 80
Under Section 80 of the IT Act, you can claim tax deduction from your total taxable income to the extent of the investment/payment made in certain pre-determined avenues. Here’s taking a look at some of them...
Section 80C:
This section allows you to claim a 100 per cent deduction from taxable income for any investment in or purchases of certain specified instruments up to a consolidated amount
Cash Vouchers
Non- refundable cash vouchers such as free meals provided by your of Rs 1 lakh per financial year. Some popular instruments allowed as deductions under this section include premiums paid for servicing life insurance policies, equity linked savings schemes of mutual funds, PPF and fixed deposits held with scheduled banks for a term of 5 years or more.
Section 80CCC:
This section offers a tax benefit on the servicing of pensions plans. As per the last union budget, the ceiling fixed for such deductions is Rs 1 lakh. However, there is a condition that the total deduction available to you under sections 80C, 80CCC and 80CCD (i.e. deduction in respect of contribution to pension schemes of the central government) are restricted to an aggregate of Rs 1 lakh.
Section 80D:
As per this section, premium paid towards servicing of health insurance can be deducted from your taxable income. However, this section comes with a ceiling of Rs 10,000 (Rs. 15,000 for senior citizens).
Section 80DD:
This section allows you to claim a deduction from your taxable income for expenses incurred for the medical treatment, training and rehabilitation of a dependant who has severe or ordinary disability. The benefit can be extended to specified amounts deposited in schemes framed by LIC, UTI and other identified institutions for the benefit of such dependants. Section 80DDB:
Under this section, deduction for expenses that you incur on the medical treatment of certain specified ailments is available to the extent of Rs 40,000. For senior citizens, the limit for the deduction is raised to Rs 60,000. However, if you receive any reimbursement for these medical expenses from an insurer or your employer, you have to reduce the reimbursement amount while arriving at the final deduction applicable under this section to you.
Section 80E:
This section allows you to claim a deduction for interest on loans taken for pursing higher education .
Section 80G:
Any sum that you have paid in the current financial year as donations to certain specified funds, charitable institutions, etc., can be deducted from your taxable income.
Hope this Would Help you to Save your Moner Legally. :-)
Thursday, June 8, 2006
Friday, June 2, 2006
Want to Invest??? Some Options...
INVESTMENT - Different Colors Of Investment...
We've already mentioned that there are many ways to invest your money. Of course, to decide which investment vehicles are suitable for you, you need to know their characteristics and why they may be suitable for a particular investing objective.
Bonds :
Bonds Grouped under the general category called "fixed-income" securities, the term "bond" is commonly used to refer to any of these securities founded on debt. When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money and eventually pay you back the amount you lent out.
The main attraction of bonds is their relative safety. If you are buying bonds from a stable government, your investment is virtually guaranteed (or "risk-free" in investing parlance). The safety and stability, however, come at a cost. Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities. The tutorial "Bond Basics" will give you more insight into these securities.
Stocks :
When you purchase stocks (or "equities" as your advisor might put it), you become a part owner of the business. This entitles you to vote at the shareholder's meeting and allows you to receive any profits that the company allocates to its owners--these profits are referred to as dividends.
While bonds provide a steady stream of income, stocks are volatile. That is, they fluctuate in value on a daily basis. When you buy a stock, you aren't guaranteed anything. Many stocks don't even pay dividends, making you any money only by increasing in value and going up in price--which might not happen.
Compared to bonds, stocks provide relatively high potential returns. Of course, there is a price for this potential: you must assume the risk of losing some or all of your investment. More information on this type of investment can be found in the tutorial "Stock Basics." After you have a grasp of what stocks are and how they function, you might want to read about how to choose them in "Guide to Stock Picking Strategies."
Mutual Funds:
A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which in turn enables you (as part of a group) to pay a professional manager to select specific securities for you. Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain industries, stocks in certain countries, and the list goes on.
The primary advantage of a mutual fund is that you can invest your money without needing the time or the experience in choosing investments. Theoretically, you should get a better return by giving your money to a professional than you would if you were to choose investments yourself. In reality, there are some aspects about mutual funds that you should be aware of before choosing them, but we won't discuss them here. You can, however, check out the "Mutual Fund Basics" tutorial if you'd like to explore the advantages and disadvantages of mutual funds.
Alternative Investments:
Options, Futures, FOREX, Gold, Real Estate, Etc.So, you now know about the two basic securities: equity and debt, better known as stocks and bonds. While many (if not most) investments fall into one of these two categories, there are numerous alternative vehicles, which represent the most complicated types of securities and investing strategies.
The good news is you probably don't need to worry about alternative investments at the start of your investing career. They are generally high-risk/high-reward securities that are much more speculative than plain old stocks and bonds. Yes, there is the opportunity for big profits, but they require some specialized knowledge. So if you don't know what you are doing, you could get yourself into a lot of trouble. Experts and professionals generally agree that new investors should focus on building their financial foundation before speculating. (For more on how levels of risk correspond to certain investments, check out: "Determining Risk and the Risk Pyramid.")
We've already mentioned that there are many ways to invest your money. Of course, to decide which investment vehicles are suitable for you, you need to know their characteristics and why they may be suitable for a particular investing objective.
Bonds :
Bonds Grouped under the general category called "fixed-income" securities, the term "bond" is commonly used to refer to any of these securities founded on debt. When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money and eventually pay you back the amount you lent out.
The main attraction of bonds is their relative safety. If you are buying bonds from a stable government, your investment is virtually guaranteed (or "risk-free" in investing parlance). The safety and stability, however, come at a cost. Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities. The tutorial "Bond Basics" will give you more insight into these securities.
Stocks :
When you purchase stocks (or "equities" as your advisor might put it), you become a part owner of the business. This entitles you to vote at the shareholder's meeting and allows you to receive any profits that the company allocates to its owners--these profits are referred to as dividends.
While bonds provide a steady stream of income, stocks are volatile. That is, they fluctuate in value on a daily basis. When you buy a stock, you aren't guaranteed anything. Many stocks don't even pay dividends, making you any money only by increasing in value and going up in price--which might not happen.
Compared to bonds, stocks provide relatively high potential returns. Of course, there is a price for this potential: you must assume the risk of losing some or all of your investment. More information on this type of investment can be found in the tutorial "Stock Basics." After you have a grasp of what stocks are and how they function, you might want to read about how to choose them in "Guide to Stock Picking Strategies."
Mutual Funds:
A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which in turn enables you (as part of a group) to pay a professional manager to select specific securities for you. Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain industries, stocks in certain countries, and the list goes on.
The primary advantage of a mutual fund is that you can invest your money without needing the time or the experience in choosing investments. Theoretically, you should get a better return by giving your money to a professional than you would if you were to choose investments yourself. In reality, there are some aspects about mutual funds that you should be aware of before choosing them, but we won't discuss them here. You can, however, check out the "Mutual Fund Basics" tutorial if you'd like to explore the advantages and disadvantages of mutual funds.
Alternative Investments:
Options, Futures, FOREX, Gold, Real Estate, Etc.So, you now know about the two basic securities: equity and debt, better known as stocks and bonds. While many (if not most) investments fall into one of these two categories, there are numerous alternative vehicles, which represent the most complicated types of securities and investing strategies.
The good news is you probably don't need to worry about alternative investments at the start of your investing career. They are generally high-risk/high-reward securities that are much more speculative than plain old stocks and bonds. Yes, there is the opportunity for big profits, but they require some specialized knowledge. So if you don't know what you are doing, you could get yourself into a lot of trouble. Experts and professionals generally agree that new investors should focus on building their financial foundation before speculating. (For more on how levels of risk correspond to certain investments, check out: "Determining Risk and the Risk Pyramid.")
Calculating EMI
Hi Friends,
Here is the way you calculate your Equated Monthly Installments:
(P x r) (1 + r) n / (1 + r) n - 1
Being...
P = Principle Amount
r = Interest Rate
n = Number of Years of Loan
Example :-
P = $ 4000000
r = 15% (0.15)
n = 20 Years
= (4000000 x 0.15) (1+0.15) 20 / (1+0.15) 20- 1
= 600000 x 16.36 / 15.36
= 9816000 / 15.36
= $ 639062.5 p.a
Therefore Per month EMI would be = $ 639062.5 / 12 = $ 53255.208
Hope this would help you in understang the Concept before you go for a LOAN
Here is the way you calculate your Equated Monthly Installments:
(P x r) (1 + r) n / (1 + r) n - 1
Being...
P = Principle Amount
r = Interest Rate
n = Number of Years of Loan
Example :-
P = $ 4000000
r = 15% (0.15)
n = 20 Years
= (4000000 x 0.15) (1+0.15) 20 / (1+0.15) 20- 1
= 600000 x 16.36 / 15.36
= 9816000 / 15.36
= $ 639062.5 p.a
Therefore Per month EMI would be = $ 639062.5 / 12 = $ 53255.208
Hope this would help you in understang the Concept before you go for a LOAN
Subscribe to:
Posts (Atom)
