Understanding Taxes

Its tax time again !!

Now that the Tax year 2009 has unfolded, we hope you have started to prepare for the most important time of the year!

If you haven’t started yet, we have some great tips for you to start off!

Spring into action!

Start compiling all your tax related documents.

Be careful, Laziness can ‘TAX’ you a LOT!!

Here are the few tips that can help you in collating the relevant documents.

• Do you know the, hefty rent paid by you can reduce your tax burden? Yes. If you remember to take the rent receipts from your landlord, a deduction can be claimed from your taxable income under Section 10(13A) (if you are salaried and receiving HRA) or 80 GG (if you are self employed or salaried and not receiving HRA).
• You can claim Leave Travel Deduction twice in a block of 4 years, if you can manage to keep your travel tickets (boarding passes) safe.
• If you haven't bought Mediclaim, do so now to avail a deduction up to Rs.15,000, (Rs. 20,000 if you are a senior citizen) but remember to pay the premium in Cheque and not in cash. Otherwise, you will lose the 80D benefit. You can have an additional deduction within the limits specified, if the Mediclaim is taken in your parent’s name. Further, the condition of parent being a dependent for deduction has been dispensed with.
• If you bought a house property and got it registered, do remember to claim deduction of Stamp Duty, registration fee etc. under Sec 80C.
• Do pay a visit to your housing loan financier, if you have not already received the certificate of your EMIs stating the total interest and principle paid. Interest paid on Housing Loan can be reduced from your taxable income subject to certain condition (Upto Rs. 1.5 lakhs if it is rented and unlimited if the house is self occupied) and 80C benefit can be availed for principal paid.
• Tighten your belt and invest in any of the qualified investments to claim tax benefit under section 80C within an overall limit of Rs.1 Lakh. Some of the good investments for 80C are -

1. Deposits in PPF - offers good tax-free Interest (can invest upto Rs.70,000).
2. Term deposit for a minimum period of 5 years with scheduled bank – safe and steady return
3. Do you know that the hefty tuition fees you paid for your child’s education can serve as effective tax savers under Section 80C? Tidy up your desk and find the tuition fee receipts issued by the school, college, university. This facility can be availed for maximum 2 children.
4. Equity linked savings schemes - Highly volatile, risky and rewarding if invested with a horizon of 3-5 years
5. Life Insurance Policies – for your loved ones.

• If you have made a donation, you need to submit the receipt issued by the institute (receiving the donation) to get the benefit of the deduction under Sec. 80G. If you have not collected such a receipt, do so soon. Please note donations in kind are not eligible for deduction.
• The most important thing to do is prepare a list of persons from whom TDS Certificate has to be obtained. TDS operates like tax already paid i.e. from your final tax liability you have to pay only such amount that is over and above the tax already deducted. It is important for all taxpayers to collect the TDS certificates after the end of the fiscal year. Though these don’t have to be attached with the tax return anymore, they have to be filed and kept on record and produced before the ITO if and when called for.
• If you are a trader, remember, Sec. 88E allows you to claim the Securities Transaction Tax as fully deductible expenditure against income from sale of listed securities.
• If you are a senior citizen above the age of 65, you can avail the special slab exemption of Rs. 2,25,000.
• The fairer sex got a better deal- if you are a female assessee under the age of 65, do not forget to take into account the special tax exemption slab of Rs 1,85,000 while arriving at your tax.
• Last but not least; get in order all your supporting documents of the tax planning/saving instruments that you have invested in. For employees, this directly affects the amount of TDS on your salary. If you are late, you would end up bearing a higher amount of TDS than what ought to have been deducted.
• The last date for payment of advance tax is March 15th. However, if your advance tax payable is less than Rs. 5,000, then you can pay such tax while filing the return. Also, if you earn any income after 15th of March, pay tax on it on or before 31st and such tax would also be treated as advance tax.

 So get started and wish you all the very best !

For InvestmentYogi by Rekha N S. The writer is Principal, Agarwal & Italia, Chartered Accountants.  She may be contacted at rekha@agarwalanditalia.com