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Tax Saving Tips u/s 40(b)

Section 40(b) places a restriction on firm on the payment of remuneration, interest, bonus, commission or interest to its partners.

In some cases it is not recommended to pay salary or interest to partners as it will ends up with the increment of tax burden on partners u/s 28(v).

Here are some events where a Firm should avoid giving interest or salary to its Partners: Read the rest of this entry


Various types of Life Insurance Policies

What is a life insurance policy?

life insurance policy provides financial protection to your family in the unfortunate event of your death. At a basic level, it involves paying small sums each month (called premiums) to cover the risk of your untimely demise during the tenure of the policy. In such an event, your family (or the beneficiaries you have named in the policy) will receive (more…)

New Tax Planning Guide 2013

taxplanningThis book contains various plans for reducing your tax payable Hope it will be helpful

Download the File here

How and when TDS can be avoided…

Even though many of us are familiar with tax filing, the process of TDS deduction is still confusing for many. When and where TDS is applicable, what are the procedures to reduce it and how to claim the deducted amount at the time of filing tax returns are few of the queries we have. So, here we discuss TDS deductions with a focus on how and when it can be reduced to help you in everyday life.

Understanding TDS:

The Indian tax structure is broadly a two dimensional approach towards payment of tax liabilities. In the first method- self assessment, taxes can be paid voluntarily after evaluation of income during a financial year. In the second method, Tax Deductions at Source or TDS, as the name suggests, is the spot deduction of tax from the income source itself, at the time of earning. This is to simplify the taxation procedure for the government and to ensure that the payment making and receiving individual / company is accounting the same without fail.

TDS is applicable for earnings from several financial instruments and business transactions like sale of property, interest income from banks, commissions and incentives, payment received for contracts and services, vendors, dividends and awards or prices earned as money.

There is no uniform rate for TDS deduction. Depending on the source of earnings, it can range from 1% for sale proceeds to 30%.

From Salary and Commissions

It is mandatory as per Indian Income Tax rules that companies as well as working professionals who earn above the aforementioned figure should deduct tax at source from the payments they make.

Employers normally will ask employees to fill an investment declaration form. If you have done an early homework to save your TDS deduction by investing in several tax saving instruments under Sections 80C, 80D, or planning to do within that financial year, do declare the details in the form with required proofs to save TDS. If despite all your investments, your salary is still above the exemption limit, TDS will be deducted monthly. The employer will issue a TDS certificate (also referred as Form No.16 (a)) at the end of the financial year which can be produced while filing income tax return to get the credit of the TDS (if applicable) during the personal income tax assessment.

TDS is applicable for payments including commissions, service fees, professional fees and payment via contracts. Here the TDS certificate issued will be Form 16 B which like Form 16 A, can be produced while filing income tax return to get reversed if applicable.

TDS from Property, Awards and Incentives:

TDS is applicable in case of earnings sale of property, rental / lease income, cash prizes, lottery winnings etc. The amount of deduction may vary from 1% in case of sale proceeds to nearly 30% in case of cash awards.

Individuals seeking TDS refund in the above mentioned situations can submit form 15G/H which is a self deceleration that your income is below taxable limit.

Chola Tax Plus Healthline: Meant for policyholders keen on maximising tax breaks

MUMBAI: Private sector general insurer Cholamandalam MS has recently launched a new health policy – Chola Tax Plus Healthline – targetted at policyholders looking to exhaust the maximum tax deduction of Rs 35,000 available under section 80D.

One can claim tax deduction of Rs 15,000 for premiums paid for yourself, spouse and children and another Rs 15,000 if you pay your parents’ health premiums. If your parents happen to be senior citizens, the limit is Rs 20,000. However, not many are able to fully ‘utilise’ this limit, as their premiums fall short of this mark.

Therefore, companies like ICICIBSE 1.31 % Lombard, Apollo Munich and now Cholamandalam have introduced products that pay for outpatient department treatment procedures, dental expenses, doctors’ consultation fees and so on, besides the regular hospitalisation expenses. Tax Plus Healthline, too, falls in the same category.

The OPD section in the policy covers expenses incurred on doctor’s fee, vaccines, spectacles, dental expenses, lab tests and medicines taken as an outpatient. Alternative forms of medicine like Ayurveda and Homeopathy are also covered for claiming benefits under this section. Unlike some other plans, there are no sub-limits on OPD expenses.

On the flipside, if you do not have to consult a doctor or visit a dentist during a year, you will have under-utilised the product’s features. For instance, say your premium under a regular policy would have amounted to Rs 4,000, but you are paying Rs 15,000 under this product. Now, if you do not incur costs up to Rs 11,000 on consultation, dental treatment and so on in a particular year, you would have paid additional premium without deriving any ‘benefits’ in return.

Upside: It will appeal to individuals whose main aim is to make the most of tax benefits under section 80D and get reimbursement for expenses incurred on consultation, dental treatment etc. Also, there are no sub-limits on admissible OPD expenses.

Downside: The additional premium paid on these policies could equal the actual OPD expenses incurred during some years, defeating the purpose of buying such a policy. Instead, parking the additional amount in short-term FDs or liquid funds might work out to be a better idea.

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