TAX PLANNING- INDIVIDUALS PERSPECTIVE- PART 4

1.    Section 80G: Donation to Certain Funds, charitable institutions

Deductions can be claimed by assesses

Gross qualifying amount- Amount of donation made by assessee.

Category 1

1. PMNRF
2. PM Armenia Earthquake relief fund
3. PM Africa Public contribution of India fund
4. National foundation of communal Harmony
5. Any institution of national importance
6. National illness Assistance Fund
7. Zilla saksharta Samithi formed for rural education
8. National or state blood transfusion council
9. Fund for providing medical aid to poor
10. Army, Airforce, navy welfare
11.  Chief ministers relief fund
12. National sports fund
13. National cultural fund
14.  Technology department fund setup by central government
15. National defence fund
16. National trust for welfare of persons suffering from autism, mental retardation etc.

For all the above mentioned items in category 1, deduction is 100% of donation.

Category 2

1. PMs draught Relief fund
2. National Childrens fund
3. Nehru memorial foundation
4. Indira Gandhi foundation
5. Rajiv Gandhi foundation

•  Gross qualifying amount and net qualifying amount will be same. But deduction u/s 80G will be only 50% of NQA.

2.    Section 80 TTA DEDUCTION IN RESPECT OF INTEREST FROM SAVINGS ACCOUNT

·         It is applicable to individuals and HUF and for this purpose Sec 80TTA has been introduced.

·         Deduction up to Rs 10,000 in aggregate in respect of any income by way of interest on deposits (not being time deposits) in a savings account with a banking company, a co-operative society or post office.

3.    Rajiv Gandhi Equity Scheme

·         The scheme would allow for income tax deduction of 50 per cent to new retail investors, who invest up to Rs50,000 directly in equities and whose annual income is below Rs10 lakhs. The scheme will have a lock-in period of 3 years.

·         Rajiv Gandhi Equity Savings Scheme (RGESS) is a new equity tax advantage savings scheme for equity investors in India. Only direct equity investments in equity will be eligible for tax deductions, and not the Mutual fund investments.

·         Only new retail investors are allowed to invest up to Rs 50,000 directly in equities, an income tax deduction of 50 per cent. The scheme would have a lock-in period of three years and churning of portfolio is not permitted during the first one year. The scheme can be availed only once in a lifetime.

Facts of RGESS:

·      Who can invest?
New equity investors with annual income less than Rs 10 lakh

·      Investment amount
Rs 50,000 (Maximum amount one can invest under the scheme)

·      Deduction available on
Rs 25,000 (50 per cent of Rs 50,000)

·      Maximum benefit
Rs 5,000 (Investors with annual income of 10 lakh fall under 20 per cent income tax slab)

·      Lock-in period
Three years (to get tax deduction in addition to 80 C).

·      Premature withdrawal / Early Exit

·      In Rajiv Gandhi Equity saving scheme, nothing is clear on this as of now for premature withdrawal.

·      Investments under the new scheme may initially be allowed only in the top 100 or 200 companies (on the basis of market capitalization) listed on various stock exchanges.

·      Probable downsides of the scheme:-

·       Scheme opens only to new investors (not existing investors).

·      Only a segment of retail investors can invest in RGESS scheme as those whose annual income is Rs 10 lakh or more are not allowed to invest in this scheme.

·       Limit on Investment amount.

·       Investment will only be through direct equities, not mutual funds.

·       Tax benefit is not adequate.

Income from House Property

1.    Self Occupied Property

·         Self occupied property means a house property which is self occupied throughout the year for own residential purpose or for family.

·         Unoccupied property- Assessee is not able to occupy the house by reason of his employment carried on at any other place.

·         Municipal taxes and standard deduction of 30% is not available.

·         Interest on loans borrowed up to a maximum of Rs 1,50,000 is allowed as a deduction.

·         If building is self occupied for business purpose, it will be treated as income from business.

2.    Deemed to be let out property

·         Property is not let out but it will be deemed that property is let out.

·         When assessee owns two or more houses meant for self occupation, he can opt for one property as self occupied and other as deemed to be let out.

·         Generally house with higher gross annual value shall be liable to tax as deemed to be let out property.

·         Interest deduction can be claimed without any limit.

·         Municipal taxes and standard deduction of 30% is available.

3.    Municipal Taxes

·          It should be borne by assessee.

·         It should be actually paid.

·         No deduction can be claimed for self occupied/ unoccupied property.

·         Advance municipal tax cannot be claimed as deduction.

4.    Deduction u/s 24

·         30% statutory deduction can be claimed only if NAV is positive.

·         Deduction on interest on loan taken for acquisition or construction of residential house.

Format

Particulars	Amount (INR)
Gross Annual Value Less: Municipal Taxes = Net Annual Value Less: Deductions u/s 24          30% statutory deduction          Interest on Loans	XXX XX XXX XX XX
= Income from House property	XXX