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Tax saving is one of the important part in financial planning. In today’s time, earning is not sufficient. One has to plan their investment as well. Also, financial year is about to begun and both the salaried and non – salaried taxpayers would compare tax saving investment options.
In India there are lot of investment options are available to choose from. Some of them are traditional as well as new investments options that have become popular in recent years.
In this article, we have listed out some tax savings investments with tax exempt returns as well. And all the tax saving schemes differs in terms of features and asset – class. Hence, it is important to them before making a choice.
Equity – Linked Savings Schemes
Equity Linked Savings Schemes or ELSS is offered by Mutual Fund of India. It is also a tax benefit scheme under section 80 C of the Income Tax Act 1961. The lock in period or minimum maturity period is three years. The minimum investment is Rs 500. However, there is no upper limit on the maximum investment; tax is exempted only up to 1.5 lakhs per year.
The returns in ELSS depend on the performance of equity markets and also they are neither fixed nor assured.
There are two options for investing into ELSS; they are the Systematic Investment Plan (SIP) and the Lum Sum Investment Plan.
Public Provident Fund (PPF)
PPF or Public Provident Fund is a government backed scheme, which a tax is saving scheme floated under the PPF Act 1968 by the Central Government. This scheme is considered to be one of the safest investment product launched by the Indian Government. The main aim of Public Provident Fund or PPF is to encourage savings amongst the Indians and encourage them to create a retirement corpus.
The Reserve Bank of India specifies the rate of interest from time to time that is applicable to the PPF account. It is the Central Government who sets and announces the latest PPF Interest Rates. The current rate of interest of the PPF for the year 2017 – 18 is 7.9%.
There are various benefits of PPF such as it serves as a long – term investment option. As they offer a deposit period of 15 years and a lock – in – period of 7 years. And this scheme is quite beneficial for a retirement individual, as it provides long – term tenures, compounded and tax – free returns and capital protection make it perfect for building a retirement corpus.
Certain eligibility criteria’s has been fixed for PPF such as PPF accounts should be opened one account per person. The nationality of the individuals should be Indian. They should have attained an age of 18 years at least. There is no upper limit for opening this account.
Employees’ Provident Fund (EPF)
The Employees’ Provident Fund Scheme also known as the Employees’ Provident Fund and Miscellaneous Act 1952 is backed by the purview of the Government through the Ministry of Labour and Employment.
The main motive behind this scheme is to promote retirement savings for employees across India. The EPF is a corpus of funds that is built on a regular, monthly, contribution made by an employee and his / her employer. EPF is nothing but the balance deducted every month from your salary along with an amount that is contributed to your EPF Account by your employer. Opening an EPF account is considered to be a good idea for retirement savings.
In EPF the amount which is contributed to the fund is based on a fixed rate. An employee earns interest on their EPF balances. Both the interest earned and the total amounts withdrawn at maturity are tax – free, making this one of the most popular forms of long – term retirement savings among the working population in India.
There are various benefits of Employees’ Provident Fund (EPF) as well, which are as follows:
- The interest earned on funds held in an EPF account is tax – free
- Also in this account, savings is ensured as funds in the account are not easy to withdraw
- At the end the amount saved would provide financial security at the time of retirement. However, premature withdrawal are allowed in certain exceptional cases
- This is a sound savings option for employees with long – term investment goals
Certain eligibility criteria have been fixed for the scheme such as employees are eligible for membership on the day of joining an establishment. This includes eligibility for provident funds, insurance and pension. Establishments with 20 or more employees have to provide PF to their employees. The act does not apply to the State of Jammu and Kashmir.
Unit Linked Insurance Plan (ULIP)
ULIP or Unit Linked Insurance Plan is the market – linked products that offer the best investments schemes and programs provided by Insurance Companies. Unlike the other insurance policy programs, this insurance plan gives investors both insurance and investment under a single integrated plan. This plan is linked to the capital market and provides flexibility to invest in the equity or the debt funds. These products provide a risk cover for the policy holder along with the investment options to invest in any number of qualified investments such as stocks, bonds or mutual funds.
The aim of the Unit Linked Insurance Plan (ULIP) is to provide investment to those who are seeking to invest in an investment cum insurance product.
There are various types of ULIP such as:
- ULIP for Retirement
- ULIPs for wealth collection
- ULIPs for children education
- ULIPs for health benefits
Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana (SSY) is backed by the government which is launched by the Prime Minister of India. SSY is a small deposit scheme which is specially meant for the “Girl Child”. It is a part of “Beti Bachao, Beti Padhao” campaign.
The aim of the SSY is to provide a better future for the girl child in India. This scheme will provide support to the girl child from the education to the marriage of a girl. This scheme focuses on the benefits in the field of education, hygiene, and security.
|Equity – Linked Savings Schemes
|Public Provident Fund (PPF)
|Employees’ Provident Fund (EPF)
|Unit Linked Insurance Plan (ULIP)
|Sukanya Samriddhi Yojana (SSY)
|Investment||ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity – related products||Pension mutual funds invest 40% of the money in equity and 60% in debt instruments.||EPF is a long term investment tool by investing in it one can secure their retirement days||ULIP is basically a fund operated investment tools in which charges are deducted for operational matters and rest goes as investment in various funds||One requires to invest in the scheme before 10th of every month, as the amount deposited after the 10th will not earn any interest|
|Returns||Not fixed. It depends on the performance of equity market. However, in the past, ELSS has given average returns of 12% – 14%||The returns in pension mutual funds are not fixed as it depends on the performance of the equity and debt market. Pension mutual funds have given an average return of 8% – 10% for a5 year and 10 year period||These are secured and steady instruments of investments and they provide guaranteed returns on your savings||The average category return of small and midcap ULIP funds is 16%, which is only slightly lower compared to their mutual fund counterparts||At present, it is 8.1 per cent and provides income – tax benefit|
|Lock – in – period||3 years||Until you reach the age of 58||5 years||5 years||Sukanya Samriddhi Yojana matures when the girl child, who is the account holder of the account, turns 21 years|
|Risk – factor||Risky investment||Risk – free investment||Risky investment||Risky investment||Zero risk factor|
|Online option||Online option for starting ELSS is available||One can invest in PPF online||One can invest in EPF online||One can invest in ULIP online||You can open Sukanya Samriddhi Account either in post office or any other commercialized banks|
|Liquidity||One can withdraw money from ELSS anytime after 3 years||One cannot withdraw the funds before retirement. The standard retirement age is taken as 58 years||Withdrawals after completion of 5 years of continuous service in the EPF are tax – free. However, withdrawals made before completion of 5 years of continuous service are subject to tax||There is no fixed amount that you can withdraw. However it varies across insurers and policies||The Sukanya Samriddhi account holder can withdraw up to 50% of the total savings for fulfilling the purpose of marriage or higher education of his / her girl child. It allows partial withdrawal only after the girl reaches the age of 18 years.|
Pension is a form of income which a person gets in his retirement, which comes in every working individual’s life. It is also a stage in life where people get apprehensive about their finances due to lack of regular pay checks. And people get conscious about their lifestyle and worry about their expenses.
At such a time, pension plans ensures that you continue receiving regular income after your retirement, once the regular work pay checks cease. In India, government offers many pension schemes to inculcate savings habit in people, so that they can retire gracefully.
Income Tax Rules for Pensioners
Pension is a compensation offered by the past employer and employee for offering their service in the organization. Also note that, pension paid is based on a previous agreement of service and not on agreement for services. And as per the, Section 60 of the CPC and section 11 of the Pension Act, pension is an allowance or stipend given to a person for providing his service to the past organization which comes to an end upon the death of an employer. Hence, if a pensioner is getting their pension from a nationalised bank, a pensioner will get several deductions on salary income such as under section 89 (1). Also during tax deduction at source from the pension, adjustment will be done in terms of tax rebate under section 88 and 88 B.
Income Tax Form for Pensioners
Let us discuss the income tax form which is required for pensioners.
Form No. ITR 1 – Also known as Sahaj and is filed by the assessee. And this form is meant for the individuals whose source of income is salary and not for any business enterprises.
Also, pensioners can file their income tax returns by filling this form. This form is used by majority of salaried taxpayers who own one house and have their income which is taxable (Income from other sources) in addition to their pension.
Method of Filing Form No ITR 1
Fill in the correct details and follow the below mentioned procedure:
- Part A – In part A, the applicants are required to fill their personal details such as his name, birth date, email id and other related information.
- Part B – In part B, the applicants are required to fill their Gross Total Income i.e. the salary from income.
- Part C – In part C of the form, the applicants has to furnish his deductions as provided in Form 16 and total taxable income.
- Now applicants are required to provide details pertaining in their operational bank account along with IFSC code and the branch and bank code of the same.
- Now, verification of the details so furnished has to be done.
- Also the applicants have to furnish details related to advance tax as well as payments made towards self-assessment tax in the part mentioned as Schedule IT.
- Applicants are also required to furnish details related to TDS (Tax Deduction at Source) from salary, under the part mentioned as Schedule TDSI.
- Under the part mentioned as Schedule TDS2, the applicant has to furnish details related to TDS having income sources other than salary.
Method of Tax Calculation for Pensioners
Generally pension is calculated through one’s income earned through salary under the head of salary in one’s ITR form. Pension is either paid in a monthly or as a lump sum amount and is known as commuted pension, whereas, pensions paid on a periodical basis is known as un – commuted pension and is liable to be 100% taxed.
- Commuted pension is received by the family of the tax payer, which is a lump sum payment and may be exempted from tax under the head income from other sources.
- And un – commuted pension is received by the family of the tax payer, however, subjected to a minimum of Rs. 15,000 or 1 / 3rd of the total pension amount is exempted from tax.
- Also, in case of sudden death of the employee, family pension is given on a monthly basis to a family member of an employee by his employer.
How much tax do I pay on my Pension?
In case the income of an individual exceeds the exemption limit, that individual is required to file income tax returns. And the pension income from an employer is taxed as salary income while interest on various investments is taxed as income from other sources. However, when it comes to PPF (Public Provident Fund), the interest income will be tax exempted. In case of your taxable income is above the exemption limit, that individual is required to file their Income Tax Returns.
Filing an Income Tax Return by Post is quite easy just like a child’s play. You just need to get a form printed out which will take a few seconds and then post it to the required Income Tax Office Address which is located in Bangalore. Let us know the complete details about the process of Filling ITR offline by Post.
An Income Tax Return is the type of tax-form which is used to file income tax with the Income Tax Department. The Tax Return is usually a predefined worksheet formula with the income figures which are used to calculate the tax liability in the documents.
The Law states that the tax must be filled every year for an individual or business that received income during the year, whether through the regular income/wages, dividends, interests, capital gains or other sources.
Tax Return, regardless of whether it relates to an individual or a business, must be filled by a specific date. If the return shows that an excess amount of tax has been paid during a given year the assesse is eligible for a “Tax Refund”, subject to the departments, interpretations, and calculations.
How to fill ITR Offline by Post
For sending the ITR file through speed post a unique Pin Code (560500) is introduced and allocated to the Centralized Processing Center (CPC), Income Tax Department located in Bengaluru.
Steps from filling up the form offline to Posting and Sending It to CPC Bangalore.
Step 1. Visit the official website of the Income Tax Department. Download the ITR-V form the website.
Step 2. If you have downloaded the ITR-V form then you require a password to open it.
Password Format to Open ITR-V
The Password is your PAN Number in lower case letter along with the date of birth.
Date of Birth- 01/01/1982
After receiving the ITR-V (acknowledgment) you need to send it to the CPC, Bangalore within a time period of 120 days of e-filling your income-tax return.
An ITR-V form is called Income Tax Return- Verification form. It is basically a one-page document. It is received only when you file your IT Return Online without using a digital signature. This document is sent by the IT Department. Then the IT Department verifies the authenticity of your e-filing which does not have your digital signature. On the receipt of a form of ITR-V, you need to sign the copy of the form in blue ink.
Step-3. Send the form to the following address
Address of CPC Bangalore, for Speed Post:
Post Bag No. 1
Electronic City Post Office
This will take a period of 3-4 days to receive the documents. After receiving the documents, the CPC Bangalore sends an email acknowledgment on the receipt of ITR-V. It takes a minimum of 4-5 days.
You can check your status on the https://incometaxindiaefiling.gov.in/
if your ITR-V has not been marked as received after 10 years you can call on the Government Helpline Number 1800 4250 0025 / +91 80 2650 0025 from 9 am- 8 pm.
An Income Tax Refund is a refund which is issued to the taxpayer by the Income Tax Authorities when his tax liability is less than the actual taxes he/she paid. The Income Tax Department offers an online facility to check the Income Tax Refund Status.
The taxpayers can see their Income Tax Refund Status after 10 days the refund has been sent. You just need your PAN Number and then select the desired Assessment Year for which you want to check.
Check Income Tax Refund Status
- Visit the official website of e-Filling Portal- incometaxindiaefilling.gov.in
- Login using the details: PAN, Password, Date of Birth and Captcha Code.
- Go to “My Account” and click on “View Returns/Forms”.
- Select the “Income Tax Returns” and choose the relevant assessment year for which you want to check the refund status.
- Click on the acknowledgement number which is a hyperlink.
- A pop-up appears on the screen which displays the timeline of the filling of return activities. This includes the date and time when your ITR was filed and verified, date of completion and processing, date of issue and refund etc.
- It will also show the details of the assessment year, status, reason for failure, mode of payment.
Eligibility for Income Tax Refund
The different criteria’s for the eligibility of the Income Tax Refund is as follows:
- If the taxpayer has paid more tax as the self-assessment but should have paid less for the regular assessment.
- If the TDS deducted by the bank or the employer of the taxpayer is more than the latter’s tax liability through a regular assessment.
- If the same income of a taxpayer has been taxed in a foreign country (with which the Government of India has an agreement to avoid double taxation) and in India as well.
- If the taxpayers have not declared some of the investments which provided the tax benefits to him.
- What if you have e-Filed an Income Tax Return but have not received the refund yet?
If you haven’t received your refund to date, then there could be three possible reasons:
- Your Income Tax has not been processed yet.
- Your Income Tax Return has been processed but the Income Tax Department has determined no refund.
- Your Income Tax Return has been processed and a refund has been determined but the Cheque/ECS credit could not reach you.
- What if you have checked the status of the IT Return and it is displayed as “Refund Returned”. How can we apply it again?
Visit the official e-filling website and go to “My Account” section. From the drop-down menu of “My Account” select “Refund Re-Issue Request”. Select the mode of re-receiving the refund. ECS or Cheque. Provide the bank account number, if in case you have changed and provide the address details.
This same process goes for all the other cases such as the following:
- If in case your Bank Account Number has changed and you want to change the bank account number.
- If in case you have changed your address.
An advance tax is a tax that is payable on total income of the year earned from different sources including your salary, business profession, rent etc during the financial year. This tax has to be paid by the end of the year. The advance tax is payable if the tax liability exceeds Rs 10,000 in a financial year.
The advance is applicable for a person if he/she has other sources of income other than the salary. If one is earning through the capital gains, interests on investments, house property, lottery or business. Any rebate due to attracts an interest rate of 0.5 percent of every month and six percent annually in case of the income tax refund. A fine of one percent every month and 12 percent every year if you do not pay your advance tax on time.
Who needs to File For Advance Tax?
Advance Tax is not applicable for Salaried Class i.e. they need not pay the advance tax because they are already paying tax at source. The employer deducts the tax at source from his/her salary. If in case the person is earning money from other sources then he/she has to pay or file an advance tax.
Some of the income sources that can attract Advance Tax
- Income received through capital gains on shares
- Interests earned on fixed deposits
- Winnings earned from the lottery.
- Rent or income earned from the house property.
Salaried, Freelancers or Businessman- If your tax liability is more than Rs 10,000 in a financial year and you are not getting the income tax deducted at source then you need to pay an Advance Tax. Senior citizens who are above 60 years of age, and do not run any business are exempted from paying this tax.
Presumptive Business- If the business income assumes to be 8% of turnover then they are exempted from the tax. This was applicable for 2014-15 and 2015-16 taxable year.
Presumptive Business for 2016-17- Starting financial year tax payers who opt for the presumptive scheme have to pay a whole amount of their advance tax in one installment on or before 15th March. The businesses with the turnover of Rs 2 Crores or less can opt for this scheme.
When to File For Advance Tax
The Advance Tax or the self-assessment tax have to be paid on 15th September, December, and March in installments of 30% and 40% respectively. This scheme is applicable for the non-corporate. Whereas, the corporate need to pay their advance tax on 15th June, December, and March.
How To Pay Advance Tax
There are two modes of paying
- You can pay through the tax payment challans at the bank branches which are specially authorized by the Income Tax Department. It can be deposited by the authorized banks such as ICICI Bank, Reserve Bank of India, State bank of India, HDFC Banks, Allahabad Banks and much more.
- Another mode of paying advance tax is by paying it online through the official websites of Income Tax Department and National Securities Depository.
Online Method of Paying Advance Tax
The Advance Tax Challan 280 allows people to pay their income tax online on the official website of Income Tax Department. The individual have to visit the official website and select the challan and fill in the form with required details and use it to pay the tax online. You can also make the payment offline by downloading the challan from the Income Tax Welcome and fill it and submit in the bank.
The online tax can be paid online. This online facility is provided by the Income Tax Department. Listed below are the steps how to make payment for the advance tax online.
- Visit the official website: www.nsdl.co.in
- Select the right challan to pay your advance tax.
- Provide the form with the correct details. The information include right assessment year, address, phone number, e-mail address, bank name, captcha code and other important details.
- Once you are done with the details filing, you are then redirected to the payments page. The bank offers the Net Banking mode. Make sure that you recheck the amount that is shown on the screen.
- Next, you’ll get the details of the payment done including the challan number.
- It is important to report your payment after you are done with the payment. You can do this by adding an additional entry under the paid tax page.
Late Payment of Advance Tax
If the individual forgets to pay the advance tax before the deadline, then he will be charged with the interest. The individual will be charged at 1% on the defaulted amount every month until and unless the tax is paid off completely. The same interest penalty is applicable if the tax is not paid during the second and third deadline.
Calculating Advance Tax
An individual can calculate the advance tax on their own. Below listed are the steps where you can calculate the advance tax
Determine the income- Determine the income you receive other than your salary. It is important to include any ongoing agreements that might pay out later.
Minus the expenses- Deduct the expenses from the income. You can deduct the expenses related to your work especially “freelancing” such as rent of the work, place, travel, expense, internet and phone costs.
Sum up the Income- Add other income like the payments you receive from rent, interest income etc. Then deduct the TDS from your salaried income.
Total Resulted Advance Tax– If the tax amount exceeds to Rs 10,000 then you receive the total advance tax.
Advance Tax Schedule
Listed below is the advance tax schedule for the Financial Year. As per earlier advance tax and tax schedule-
|Due Dates||Estimated Income For the Whole Year||Advance Tax Paid of the Estimated Income||Advance tax payable on actual income||Shortfall in advance tax payment||
Interest u/s 234C
|By 15th of June||Rs 1200000||0||0||0||0|
|By 15th of Sept||Rs 1500000||84975||131325||46350||1400|
|By 15th of Dec||Rs 1700000||207030||262650||55620||1700|
|By 15th of March||Rs 200000||437750||437750||0||0|
As per the New Advance Tax Schedule and Tax Laws for the Financial Year 2017-18-
|Due Dates||Estimated Income For the Whole Year||Advance Tax Paid of the Estimated Income||Advance tax payable on actual income||Shortfall in advance tax payment||
Interest u/s 234C
|By 15th of June||Rs 1200000||28580||65660||37080||1100|
|By 15th of Sept||Rs 1500000||127460||196990||69530||2100|
|By 15th of Dec||Rs 1700000||258790||328310||69520||2100|
|By 15th of March||Rs 200000||437750||437750||0||0|
The amendment has increased from Rs 3100 to Rs 5300. That means there is a hike of 71% of the interest burden on the tax-payer.
Refund of Advance Tax
At the end of the year, if the Income Tax Department knows that you have paid more tax than you should have paid then the department will refund the extra amount. The taxpayers can claim their refund by filing and submitting a Form 30. The claim has to be done within a year period from the last year of the assessment year.
Form 30- It is a claim request where the excess tax paid is refunded. The claim request form must be submitted by the person by the end of the financial year. The request is accompanied by a return in the form.
Advance Tax Benefits
- Helps in reducing the stress of the tax payers.
- It boosts up the tax collection process.
- It increases the Government Funds, as the Government can earn interest on the collected amount.
- Advance Tax saves people from defaulting on their tax payments.
- It manages the business as well as their finances and provides an idea of the income they have earned throughout the year.