Save your Tax under 80C and 80D with Proper Planning
Indian youth are not concentrating properly on saving tax on their earnings. That is the reason why majority of Indians in the age group of 25 – 30 years pay higher tax than people of 35 and higher. According toTaxspanner.com, Indian youth below the age of 30 years are paying 12% tax on average on their income. But people who are 34-years old and above are paying only 6%. It is even less in case of senior citizens as they fully utilize the tax deductions under section 80C.
Most of the youth plan their tax savings in the end of financial year. But experts suggest it is better to plan the investments to save tax in the beginning of the financial year to get maximum benefit. Now 6 months are already over in this financial year, it is better to plan at least now to save income.
The financial year starts from April 1st and ends on March 31st in India. The income earned in the financial year is to be filed at the end of the financial year that is in the preceding year which is known as the assessment year. For example, the income earned during April 1st 2013 to March 31st 2014 is to be filed in the assessment year 2014-2015.
The current financial year (F.Y.) is 2014-2015 i.e. the assessment year (A.Y.) is 2015-2016. In the financial year 2014-2015, there is no tax on income up to Rs. 2,50,000 and 10% tax has to be paid on the income range of Rs. 2,50,001 – 5,00,000 for normal citizens. For senior citizens (people above the age of 60), tax is exempted up to Rs. 3,00,000 and 10% tax has to be paid after that and up to and Rs. 5,00,000. Super senior citizens (who completed the age of 80 years) are exempted from tax up to Rs. 5,00,000. The tax is 20% on the income range of Rs. 5,00,001 – 10,00,000 for all citizens and 30% above Rs. 10,00,000.
The deduction limit under section 80 C has increased to Rs. 1,50,000 from Rs. 1,00,000 in F.Y. 2014-2015. PPF investment which lies in section 80 C has also increased to Rs. 1,50,000. The premium paid on life insurance policy taken after 1 April 2012 will be allowed for deduction under section 80C if the yearly premium is less than 10% of assured sum. Otherwise, it is not allowed for deduction under this.
Mutual funds, EPF, Pension plans, NSC, Post Office SB, infrastructure bonds, FDs for 5 years, expenditure incurred on children’s education (only for 2 children), Tuition fees of a maximum of Rs. 15,000 (does not include donations etc.) and Housing loan principal fall under section 80C.
Total deductible limit under section 80D is Rs. 30,000 if the tax payer and his/her parents are under 60 years. Maximum of Rs. 15,000 is allowed on the premium paid for medical insurance or preventive health check-up taken for self or dependents (spouse and children). This is Rs. 20,000 if the taxpayer or dependents are senior citizens. Additional Rs. 15,000 is allowed for deduction if the premium is paid for medical insurance of parents. It is Rs. 20,000 if the parents are senior citizens.