AXES SAVE HOW TO - TOI-EY INCOME TAX GUIDE - Times of India
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
M ON EYFESTO I 202 1
HOW TO
SAVE
YOUR
AXES
TO I -EY I N COM E TA X GU I DE
MO N EY FESTOI 2021
Dear TOI reader,
Most salaried taxpayers think they are paying too
much in taxes—and many of them are right.
Tax laws are obscure and numerous. That’s why
TOI-EY
Income Tax Times of India partnered with EY to bring you
Guide this simple and on-your-device e-guide.
To be updated and expanded continually, this is
one of the many tax and investment services we
will bring to your inbox and devices soon.
A very healthy, safe and prosperous 2021 to you.
Illustrations: Ajit Ninan
C O N T E N T S (Click to go to each section)
1 10 things individual taxpayers should know
2 Salary is not your only income
3 Which tax regime is good for you
4 Gig worker - Key points to know
5 Benefits for home buyers
6 5 things to know about home loan incentives
7 How your capital gains are taxed
8 Key points about Section 80C
9 Review your salary structure to save tax
10 For a bigger cheque, try these hot tips
MO N EY FESTOI 2021
1 10 THINGS ABOUT BUDGET 2021
TAXPAYERS SHOULD KNOW
Interest on employee’s share of HNI taxation juggernaut rolls on!
contribution to EPF on or after April 1, Proceeds from ULIPs issued on or
2021 will be taxable at the stage of after February 1, 2021 will be taxable
withdrawal, if it exceeds 2.5 lakh in as capital gains if the amount of
any year. This will lead to additional premium exceeds 2.5 lakh in any
tax liability, especially for HNIs, who year (except when received on death).
make higher contributions, and will Where a taxpayer pays premium for
also discourage
voluntary EPF
contributions.
Coupled with
taxation of
aggregate
employer’s
contributions in
excess of 7.5 lakh
to EPF, NPS and
superannuation
fund and interest
thereon introduced
last year, this may
make EPF an even less attractive more than one ULIP (issued after
retirement scheme. February 1, 2021) exemption shall
apply to those ULIPs where aggregate
Taxpayers will not be required
premium does not exceed 2.5 lakh.
to estimate their dividend income
while making advance tax payments. Senior citizens get some relief!
Advance tax will now be payable only Resident senior citizens, aged 75 or
when dividend is declared or paid above, earning only pension
by the company. This will save and bank interest income (from the
payment of interest by taxpayer same bank where pension is credited)
due to under-estimation while are not required to file income tax
paying advance taxes. return. On the basis of declaration
MO N EY FESTOI 2021
submitted by such a taxpayer, bank taxability of income from overseas
has to compute taxable retirement funds opened by a resident
income and deduct tax thereon. taxpayer while he was a residing
in a foreign country. This will provide
More is better! In addition to salary
relief from hardship faced on account
income, bank accounts, tax payments
of double taxation due to mismatch
and TDS details, pre-filled income-tax
in timing of taxation in different
returns will now also include details of
countries.
capital gains from listed securities,
dividend income, interest from banks, Time limit for filing delayed
post office, etc. (belated)/revised income-tax return is
reduced by 3 months: last date to file
income-tax return now stands at
December 31 after the close of tax
year. Similarly, timeline for completion
of assessment has been reduced by 3
months. While this will reduce
the overall tax compliance timelines, it
may create practical difficulties for
taxpayers with overseas income in
claiming tax exemption or relief where
such benefit is dependent on tax
Affordable housing — extension on
filing in the other country.
extension! Tax exemption for
affordable housing further extended Dispute Resolution Committee
by 1 year. It will benefit middle-class (DRC) to be set up to help taxpayers
first-time home buyers who will get with taxable income of up to 50 lakh,
enhanced deduction of 1.5 lakh (over and disputed income up to 10 lakh.
and above the existing deduction of All proceedings before DRC to be
2 lakh) for interest on housing loan faceless and jurisdiction-less. This will
for a house valued up to 45 lakh if the reduce litigation and provide impetus
loan is taken before March 31, 2022 to small and medium taxpayers to
(earlier March 31, 2021). settle disputes at initial stages.
Good news for individuals with National Faceless Income-tax
overseas retirement funds! Central Appellate Tribunal Centre
government will announce rules to proposed to be set up for all
determine the manner and year of second-level appeal cases.
MO N EY FESTOI 2021
RELIEFS THAT MAY NOT APPLY TO YOU
Relief from income-tax return limit of 10% in variation will
filing for senior citizens (aged continue to apply.
75 or more) will not be available LTC cash scheme is only applicable
if the individual has more than one for the financial year 2020-21. No tax
bank account or has income other benefit on LTC is available for goods or
than pension and bank interest. services purchased after April 1, 2021.
Gap of up to 20% between stamp There is lack of clarity on whether
duty value and sale consideration is EPF interest will be taxable even where
only allowed for first-time allotment of the employee’s contribution
residential unit between November 12, exceeding 2.5 lakh was made
2020 and June 30, 2021. For all other before April 1, 2021 but the interest
cases (such as purchase of house accrued on such past contributions
from an existing owner), the current after April 1, 2021.
MO N EY FESTOI 2021
PRIMER
2 SALARY IS NOT YOUR
ONLY TAXABLE INCOME
It is important to know what constitutes your total taxable income.
Your income is from five broad sources
Deductions/exemptions available
SALARY Income from Standard deduction ( 50,000), HRA,
1 employer, including value LTC, etc if you don’t opt for the new
of perks and allowances ‘simplified’ personal income tax regime
HOUSE PROPERTY Std deduction (30% of income post
2 Income from rent house tax); interest paid on home loans
and losses from previous years
BUSINESS Net profit from Business-related expenditure
3 business or profession incurred and brought-forward
losses, subject to conditions
CAPITAL GAINS Profit or Depends on holding period of asset,
4 loss from sale of assets, availability of indexation benefit and
investments, jewellery, investments in eligible options and
property, etc brought-forward losses
OTHERS Miscellaneous Specified gifts from relatives or
5 income, like dividend, bank those received on certain occasions like
interest, and lottery weddings are tax-free.
earnings Interest from PPF is also tax-free
MO N EY FESTOI 2021
3 WHICH TAX REGIME IS
GOOD FOR YOU
With Budget 2021 leaving tax slabs undertake fact-specific evaluation
unchanged and restricting incentives keeping in mind his/her income,
to ease of filing returns, it has become various exemptions and investments to
all the more important for taxpayers to decide the right regime to opt for.
re-examine the pros and cons of the
Given that the new tax regime was
new taxation system and the old one to
introduced last year, many taxpayers
make the most of their income.
still have questions around the
Last year’s budget introduced the applicability/benefits of the scheme.
new concessional tax regime that offers For starters, taxpayers can choose
an individual the option to choose lower
tax rates in lieu of forgoing certain tax
exemptions and deductions. These
include standard deduction, exemption
towards house rent allowance, LTA,
house property loss and deduction
towards provident fund contribution and
life insurance premium.
Tax brackets were retained
The new regime prescribes tax rates in the 2021-22 budget
ranging from 5% to 30% with the
highest rate applicable for income of afresh from the options every year,
above 15 lakh. This option is provided there is no income from
beneficial in those cases where an business or profession. You can
individual has fewer exemptions and intimate your employer if you want to
deductions to claim. As the opt for the new regime and the
accompanying graphic shows, the old employer will deduct tax accordingly.
regime is more beneficial for The only bar is that once intimated to
individuals with higher income levels the employer, the option cannot be
and tax-saving investments qualifying modified during the year. However, you
for deductions or exemptions. can change the option at the time of
filing of tax returns.
Each taxpayer would have to
MO N EY FESTOI 2021
Tax you pay Old regime
is better if
Taxable
...in old ...in new Saving investment/
income
regime regime exemption
more than...
5 lakh Nil Nil Nil Nil
6 lakh 33,800 23,400 10,400 50,000
7.5 lakh 65,000 39,000 26,000 1,25,000
10 lakh 1,17,000 78,000 39,000 1,87,500
12.5 lakh 1,95,000 1,30,000 65,000 2,08,333
15 lakh 2,73,000 1,95,000 78,000 2,50,000
50 lakh 13,65,000 12,87,000 78,000 2,50,000
1 crore 32,17,500 31,31,700 85,800 2,50,000
Figures in
A home chef earning around 6 lakh per annum will
save 10,400 in taxes in the new regime
MO N EY FESTOI 2021
4 ARE YOU NOW A GIG WORKER?
9 THINGS YOU NEED TO KNOW
A harsh fallout of the pandemic were job losses. If you have joined the
freelance economy – be it as a freelance graphic designer, interior designer,
an architect, a consultant, etc – the fees you get from your clients will be
taxed under the head ‘Profits and Gains from Business or
Profession’. Unless you are running a business, such as
buying or selling goods, you will be treated as
a professional and not a
businessman. It is
important to know
the difference as
the threshold
norms for various
compliances vary
between the two.
The silver lining of being a gig You need to maintain books of
worker is that you can claim various account if your income from business
expenses. Against capital expenditure or profession exceeds 2.5 lakh or
incurred on purchase of assets such gross receipts exceed 25 lakh in
as furniture, computer, or laptops you any of the previous three financial
can deduct depreciation from your years. If it’s a new set up, the income
income – in short, the deduction for of the first year is considered to
impairment in asset value is spread determine this obligation.
over a number of years at the
prescribed rates. Other routine Tax audit requirements kick in in
expenses, related to your business or case your gross revenue during a
profession, such as office rent, financial year exceeds 1 crore (for
stationery, data and telephone bills, business) and 50 lakh (in case of a
travel, etc can be entirely deducted. profession). The threshold of 1 cr for
However, you cannot claim business becomes 2 cr if you opt for
standard deduction, which is presumptive taxation and 10 cr if
available only to the salaried. receipts in cash and payment in cash
M O N EY F ESTOI 2021
do not exceed 5% of your receipt or salaried employee can switch year-
payment, respectively. on- year).
Barring a few exceptions such as Don’t forget to pay your advance
for commission/brokerage agents or tax each quarter. You are required to
those in transport business, an option do so if your total tax liability on
to be taxed on presumptive basis is projected taxable income is 10,000
available. Presumptive taxation or more in a financial year. A minimum
scheme can be used by businesses of 15% of the advance tax is payable
having a total turnover of less by June 15, 45% by September 15,
than 2 crore and eligible 75% by December 15 and 100% by
professionals with gross receipts of March 15 of the financial year.
less than 50 lakh in a financial year.
Your customers may have to deduct
If you opt for it, you do not have to
tax at source while paying you for
maintain books of accounts and 8%
your services. Access Form 26AS on
of gross receipts in case of a business
the I-T e-filing portal to find out the
(6% if receipts are via banking
TDS deducted, which is set off against
channels); or 50% of your gross
your tax liabilities.
professional income is treated as your
taxable income. Of course, if the TDS obligations arise if your gross
receipts/income declared by you is income from business exceeds
higher, then tax is imposed on the 1 crore in a fiscal year ( 50 lakh for
higher sum. The downside, you professional income). This requires
cannot claim any expenses. If you you to deduct tax at source, at the
have opted for the presumptive tax applicable rates, against payments
regime you can in a subsequent year made to others — say towards office
revert to the normal taxation regime rent or to sub-contractors. You will
— having done so, no option change is need to file the TDS returns and
allowed for five years. deposit the tax deducted at source.
As a gig worker, you too can opt for As a gig worker, you should register
the concessional tax regime, where in under GST and file periodic returns if
lieu of forgoing certain deductions your total receipts exceed 20 lakh
such as those available under section in a financial year ( 10 lakh for
80C for investments, you can opt to certain states) and issue a GST
be taxed at concessional rates. If you compliant invoice to clients. Other
exercise this option, you have once in requirements such as filing of
a lifetime opportunity to opt out (a returns, audits, etc follow.
MO N EY FESTOI 20215 PRIMER
TAX BENEFITS FOR HOME BUYERS
For those who have been eyeing a of the financial year in which the loan
home for years, 2021 may be a good was taken; else the deduction will be
year to jump in. Home loan rates are limited to 30,000.
down, as are property prices. States
such as Maharashtra and Karnataka An additional tax deduction of up to
have also slashed stamp duties. The 1.5 lakh has been introduced
bonus is that you get tax breaks for interest on home loan taken during
the period April 1, 2019 to March 31,
TAX BENEFITS 2022 for purchase of residential
ON PRINCIPAL house with stamp duty value up to
Equated monthly instalments (EMIs) 45 lakh. However, the individual
are typically divided into principal (the should not own any other residential
amount you took as loan) and interest property at the time of sanction of
(the cost of servicing the loan). The loan. If you still haven’t purchased
principal is allowed as a deduction your first home, do so at the earliest.
from your gross total income (subject
to an overall cap under section 80-C
with other eligible investments
of 1.5 lakh).
TAX BENEFITS ON
INTEREST PAID
Interest payable on ‘self-occupied’
property is subject to a maximum
deduction of 2 lakh under the head
‘Income from house property’. It can If you have rented out your property,
be set off against other heads of the difference between the rent you
income, which includes salary get after adjustment of municipal
income, in the same year. taxes paid by you, standard deduction
This reduces your total tax liability. and the entire interest on housing loan
But to claim this, it is essential that is your ‘loss from house property’
the acquisition or construction is which you can set off up to 2 lakh
completed within 5 years from the end against your other income, say salary.
MO N EY FESTOI 2021Scenario 1
Net annual value = Rent less House 1 Let House 2 Self
Total
municipal taxes less 30% out occupied
standard deduction A 5,00,000 Nil
Interest on housing loan B -7,00,000 -5,00,000
Deduction for interest C -7,00,000 -2,00,000
Net income/loss from
D = A-C (2,00,000) (2,00,000) -4,00,000
House Property (HP)
Loss from HP
E -2,00,000
set off available
Loss eligible to be carried
forward to next year for -2,00,000
set off with HP income
Salary income
F 9,00,000
of current year
Total taxable income G = E+F 7,00,000
Deduction of interest on Scenario 2
housing loan from a self- House 1 House 2
occupied house property is Self Self Total
not available under new occupied occupied
‘simplified’ personal income A Nil Nil Nil
tax regime. B -7,00,000 -5,00,000 -8,00,000
Loss under head House C -2,00,000
Property shall not be allowed D = A-C -2,00,000
to set off from any other
E -2,00,000
head of income and cannot
Nil
be carried forward under
new ‘simplified’ personal F 9,00,000
income tax regime. G = E+F 7,00,000
Please note that no notional rent will be added to the taxable
income of your second self-occupied house property. Thus, if you
don’t find a ready tenant you can keep it self-occupied. Also, do note
that this leeway is available only for up to two houses
MO N EY FESTOI 2021TAX RELIEF ON DIFFERENCE BETWEEN
CIRCLE AND MARKET RATES
The existing rule stipulated that the difference of 12 lakh would be
transaction value of the property considered as deemed income in your
purchased should not be less than the hands and taxed accordingly. Last
circle rate (stamp duty valuation) — November, to boost the real estate
but a variation of 10% was acceptable. sector, (under the Atmanirbhar Bharat
If the stamp duty valuation rate was 3.0 scheme), the variation threshold
higher by 10% of the declared has been hiked to 20%, but it is only
purchase value, then the difference with respect to first time allotment of
was taxed as income in the hands of residential units. This benefit is
the buyer. For example, if you declared available for purchase transactions of
a purchase value of 60 lakh but the 2 crore or less from November 12,
circle rate was 72 lakh, then, the 2020 up to June 30, 2021.
MO N EY FESTOI 20216 5 THINGS ABOUT HOME LOAN
INCENTIVES YOU SHOULD KNOW
Even a loan taken from an all three can avail deduction up to
employer, friend, private lender is 2 lakh each on self-occupied
eligible for deduction — but only property. Add to it the additional
on the interest and not principal. interest (if applicable for rented or
And you’ll need a certificate deemed to be let out property) and
from the lender. the savings can be significant.
Booking an apartment which is No notional rent will be added to
under construction is sometimes the taxable income for your second
cheaper. I-T law permits you to claim self-occupied house property.
the total interest paid during the pre- Thus, if you don’t find a ready tenant
delivery period as a deduction in five you can keep it self-occupied. Do
equal instalments starting from the note, that this leeway is available only
financial year in which the for up to two houses. A third house
construction was completed or you which is not let out will still attract tax
acquired your apartment (generally on its ‘deemed value’. In other words,
this denotes the date of possession). tax will be calculated at expected
Of course, the maximum you can market rent.
claim as a deduction per year
The total loss from house property
continues to be 2 lakh, in case of
which can be adjusted with any other
self-occupied property (Although,
income (salary, other source) has
you could be eligible for the
been capped at 2 lakh. Further, if you
additional interest deduction of
are unable to set-off the interest
1.5 lakh for your first house).
of 2 lakh against any of the heads of
It makes tax sense to purchase the income, the (surplus) interest which
new apartment jointly — say with could not be set-off can be carried
your spouse, then each of you is forward only for eight assessment
entitled to a deduction of 2 lakh for years. Additionally, such set-off is
interest funded by each of you, as possible only against ‘Income from
explained above. In case you have a house property’. It becomes a
working son/daughter and the bank sunk cost if you haven’t let out
is willing to split the loan three ways, your house on rent.
MO N EY FESTOI 2021PRIMER
7 HOW YOUR CAPITAL
GAINS ARE TAXED
EQUITY SHARES: Dividends are taxable at slab rates
EQUITY MUTUAL FUNDS: Dividends are taxable at slab rates
DEBT MUTUAL FUNDS: Dividends are taxable at slab rates
TAX-FREE BONDS: Notified tax-free bonds are exempt from tax
DEBENTURES: Interest is taxable at slab rates, unless notified
TAX IMPLICATION AT TIME TO SALE
LONG TERM SHORT TERM
CAPITAL GAINS CAPITAL GAINS
EQUITY SHARES: Gains up EQUITY SHARES: 15%**
to Rs 1 lakh are exempt.
EQUITY MUTUAL FUNDS: 15%***
Balance taxable @10%
without indexation* DEBT MUTUAL FUNDS: Tax at slab rate
EQUITY MUTUAL FUNDS: TAX-FREE BONDS: Tax at slab rate
Gains up to Rs 1 lakh are DEBENTURES: Tax at slab rate
exempt. Balance taxable
@10% without indexation *Exemption available if securities transaction
tax paid on sale and STT also paid on purchase,
DEBT MUTUAL FUNDS: in case of equity shares acquired on or after Oct
20% with indexation 1, 2004 (subject to certain exceptions notified)
LISTED TAX-FREE BONDS: **If STT of 0.1% each is paid by seller and buyer
in both cases
10% without indexation
*** If STT of 0.001% is paid by seller
LISTED DEBENTURES: #STT rates mentioned above are for delivery-
10% without indexation based transactions only
MO N EY FESTOI 2021What is long term 24/36 months will qualify as STCG
capital gains? Set off provisions
Capital gain on sale of all listed for capital gains are
securities in India mentioned quite restrictive
above (other than debt-oriented
MFs), held for more than 12 Loss from transfer of a long-term
months are treated as LTCG. capital asset can be set off against
Unlisted shares and immovable gain from transfer of any other
property have to be held for more long-term capital asset in the same
than 24 months to qualify for LTCG. year. But, long-term capital loss
In all other types of capital assets, cannot be set off against
including debt oriented MFs, sale short-term capital gains
after 36 months will qualify as Loss from transfer of a short-term
LTCG capital asset can be set off against
What is short term gain from transfer of any other
capital gains? capital asset in the same year
When securities (listed other than Any unutilised capital loss after
a unit/equity oriented MF/zero absorption in the same year can be
coupon bonds) are held for up to a further carried forward to next eight
year, the gain is treated as years and be utilised under the same
STCG. For all other type of conditions as above
capital assets, holding up to You should file your I-T return
before July 31 to carry forward
any losses
MO N EY FESTOI 2021PRIMER
8 KEY POINTS ABOUT
SECTION 80C
Section 80C of Income-Tax Act allows exemption of investment or
spending from income tax. Those with taxable income at 30% can
save 45,000 by claiming 1.5 lakh as deduction under Section 80C
and not opting for the new ‘simplified’ personal income tax regime.
A listing below shows what you can do under Section 80C
You can invest
Principal
500 to
Your Provident component of
1.5 lakh every
Fund (PF) your housing loan
year in a Public
contribution from prescribed
Provident Fund
institutions
(PPF) account
Life insurance Contribution
Tuition premiums for to Unit-linked
fees of two self, spouse Insurance Plan
children and kids for self, spouse
and children
Invest in A 5-year term Investment of up to
National Savings deposit with a 1.5 lakh a year in
Certificates bank under a Sukanya Samriddhi
(NSC) schemes notified scheme Account in the name
(through post or a post office of your daughter
offices) (limited to 2 children)
MO N EY FESTOI 2021SAVINGS BEYOND 80C rehab, treatment or training of self,
If you have not opted for the new dependent spouse, child, parent or
‘simplified’ personal income tax even sibling. This can either be
regime and your basic salary is over claimed by the dependent or by the
1 lakh a month, your 80C limit individual on whom he/she is
will be used up by provident fund dependent
contributions alone. Treatment for certain diseases such
Want to save more? You can save up as AIDS or malignant cancers for self
to 82,500 a year in taxes over and and dependents up to 40,000
above the 1.5 lakh limit allowed (up to 1,00,000 for patients who
under 80C if you invest 50,000 in are 60 years or more)
NPS, pay 25,000 for medical
insurance and also
repay interest of
2 lakh on housing
loan for a self-
occupied property.
Over and above few
more deductions
are also available
Interest earned on
savings bank account
with a bank or post
office If you are less
than 60, up to 10,000 (even for NRO Donation: 100% or 50% of the
savings a/c). If you are 60 or more, up amount donated (subject to
to 50,000. Interest from FD also conditions), depending on the
exempt for senior citizen institute/fund to which contribution is
Interest on education loan. No limit, made. No deduction is allowed if
but deduction is available for donation is made in cash over 2,000
maximum 8 years
Deduction of 1.5 lakh on the
Disability-related tax benefits interest paid on loans taken to
75,000 ( 1,25,000 in case of severe purchase electric vehicles from any
disability) for expenditure towards financial institution .
MO N EY FESTOI 20219 REVIEW YOUR SALARY
STRUCTURE TO SAVE TAX
HOUSE RENT certain expenses such as telephone,
ALLOWANCE (HRA) internet, printing and stationery
This is the most common CTC expenses you need not pay tax on
component. Those staying in rented these reimbursements. You may
accommodation can avail of an need to provide the requisite bills
exemption against the HRA received to the employer for claiming these
and only the balance will be taxable reimbursements, as per
the corporate policy.
The exemption is limited to
the lowest among While computers and laptops
1 Rent paid less provided by employers do not
give rise to any taxable
than 10% of salary
perquisite, provision of any
(includes basic
other asset say a swivel chair,
salary and dearness
computer desk or printer,
allowance)
would be taxed as a perquisite
2 50% of salary, if
as per Rule 3 (7) (vii) in the
the house is situated hands of the employee, at the
in Delhi, Mumbai, Kolkata or Chennai rate of 10% of the original cost of the
or 40% of salary in other cities asset as reduced by any charges
3 Actual HRA received
recovered from the employee.
If your CTC doesn’t contain HRA,
deduction for rent paid is available
LEAVE TRAVEL
from gross taxable income, subject to
CONCESSION (LTC)
various limits (maximum deduction LTC exemption is allowed on two
` 5,000 per month) domestic journeys taken in a block of
four years. The new block commenced
If you live in a house you own, the
on January 1, 2018. Restrictions apply.
HRA component is fully taxable
For example, if you are travelling by air,
WORK FROM HOME it is limited to economy class airfare for
EXPENSES the shortest route to your destination.
If you are working from home fulltime No exemption is available for hotel and
and your employer is reimbursing local conveyance expenses.
MO N EY FESTOI 2021LEAVE ENCASHMENT: If you haven’t The money must be spent on
availed of your entitled leave, you may goods or services attracting
have an option to get it encashed – GST of 12% or more.
your employer may permit this only
The payment must be made
on retirement or resignation. The
through digital mode and employee
maximum aggregate exemption
must produce the GST invoice.
available in a lifetime is 3 lakh.
The tax exemption will be restricted
LTC CASH VOUCHER to the deemed LTC fare up to a
SCHEME maximum of 36,000 per person. This
You may have made plans to travel in exemption is only available for the
2020 (during the four-year block financial year 2020-21.
period starting January 1, 2018), but
owing to the pandemic found yourself EMPLOYEE PROVIDENT
stuck at home. Well, if you have not FUND (EPF)
opted for the simplified personal tax PF withdrawal after five or more
regime, you can avail of the LTC cash years in continuous service is
voucher scheme tax free. However, interest
that lets you earned on accumulated
purchase some balance in PF account post
goods and services. end of employment or
retirement is taxable.
However,
If employee’s contribution to
some conditions
PF on or after 1 April 2021
have to be met:
exceeds 2.5 lakh in any year,
You need to buy goods or services Interest on contribution above 2.5
worth three times the deemed LTC lakh shall be taxable on withdrawal.
fare between October 12, 2020 and
March 31, 2021. If you spend less you GRATUITY
don’t get the full exemption. For Gratuity received under the Payment
instance if the deemed LTC fare for a of Gratuity Act after completion of
family of four is 80,000, then the 5 years of continuous service is
employee is required to spend 2.4 eligible for exemption of up to
lakh. However, if he spends only 75% 20 lakh. But remember the
of this amount ( 1.8 lakh). In this case, exemption is the cumulative of all
only 60,000 (75% of the deemed gratuity payments received by an
LTC) will be eligible for tax exemption. individual in his/her lifetime.
MO N EY FESTOI 2021Illustration: Application of the LTC Cash Voucher
Scheme for a private sector employee
Mr. A is an employee of a private company. His family consists
of four members. The company has adopted the LTC Scheme and
offered a deemed LTC fare of 36,000 per family member.
Particulars Amount ( )
Eligible deemed A = 4*36,000 1,44,000
LTC fare
Amount to be spent B= 3 times of A 4,32,000
[3*1,44,000]
Situation A Amount spent C 4,50,000
by Mr. A
Eligible amount of Min of (1/3rd 1,44,000
non taxable of C or A)
allowance
receivable
Tax savings at 30% 43,200
Situation B Amount spent D 4,20,000
by Mr. A
Eligible amount of Min of (1/3rd 1,40,000
non taxable of D or A)
allowance
receivable
Tax savings at 30% 42,000
Note: If you haven’t availed of your entitled leave, you may have an option to
get it encashed – your employer may permit this only on retirement or
resignation. The maximum aggregate exemption available in a lifetime is 3 lakh
MO N EY FESTOI 2021FOR A BIGGER CHEQUE,
10 TRY THESE HOT TIPS
BUY GOLD IN providing cover for more than one
BLACK & WHITE year, the deduction shall be allowed
Buy RBI-issued Sovereign Gold Bonds on a proportionate basis, subject to
rather than physical gold for the specified monetary limit.
investment purposes.
Investors pay the issue
price, which is based on
current gold value and
the bonds are redeemed
on maturity at prevailing
gold prices.
Unlike physical
gold investment, you will
get interest @2.5% p.a.
on money invested in
bonds. When you sell
your physical gold, the gain is subject
EPF ADVANCE
to capital gains tax. However, there is
NOT TAXABLE
no capital gains tax if Sovereign
Considering the need of funds by
Gold Bonds are held till maturity.
individuals to deal with the pandemic,
PAY THAT PREMIUM the government announced that
You can claim deduction of up to members of an Employee Provident
25,000 ( 50,000 if senior citizen is Fund (EPF) scheme can claim ‘non-
covered) under Section 80D for refundable advance’ from their EPF
medical insurance paid for you and account to the extent of the basic
your family. If you insure your parents, wages and dearness allowances for
you get additional deduction of three months or up to 75% of the
up to 25,000 ( 50,000 if they are amount outstanding in the EPF
above 60). No such deduction is account, whichever is less.
allowed for parents-in-law as yet. If This non-refundable advance
you have paid premium on your policy received is not taxable.
MO N EY FESTOI 2021BONUS LINKS
Simple and most comprehensive tax calculator
How to make Indians part with gold
How EPF penalises those who need it the most
Why salaried class deserves a standard deduction
New, or old: Which tax regime makes the most sense for you?
Income tax guide for startups
MO N EY FESTOI 2021MO N EY FESTOI 2021
You can also read
