“The hardest thing to understand in the world is the income tax.” – Albert Einstein
Well, how can we not agree with Einstein for crying out loud! Income tax is not only a dreaded subject to deal with but tax planning can leave us feeling completely lost. Keeping finances and tax arrangements in order, keeping a track of a series of tax sections and subsections are daunting tasks and something you definitely cannot avoid. In the Budget 2018, we have seen various tax changes coming into effect from April 1, 2018. Changes that would most definitely have an impact on how much taxes we will pay. And now is the time to assess the same – through saving, investments, and taxes. But this isn’t the article where we amplify your concern about tax planning rather we are here to take off your load a little bit. Before you start planning, you should know about some of the important sections of the Income Tax Act. Take a note.
Know about your Investments under Section 80C
This section remained untouched in the latest budget announcement. But, did you know there are at
least 13-14 instruments through which you can claim tax deductions under Section 80C? Here’s a
PPF (Public Provident Fund)
EPF (Employees’ Provident Fund)
5 years Bank or Post office Tax Saving
National Savings Certificates (NSC)
ELSS Mutual Funds (Equity Linked Saving Schemes)
Children’s Tuition Fees
Life Insurance Premium
Sukanya Samriddhi Account Deposit Scheme
SCSS (Post office Senior Citizen Savings Scheme)
Repayment of Home Loan (Principal only) Deposits
National Pension System
NABARD rural Bonds
Stamp duty charges for purchase of a new house
Under section 80C, a deduction of Rs 1.5 Lakhs can be claimed from your total income for FY 2018-
Government Pension Schemes Under Section 80CCD
Section 80CCD allows you to claim deductions for contributions made to the National Pension Scheme. The maximum contributions can be up to 10% of the salary (Basic + Dearness Allowance + any other bonus) for salaried or gross income in case of self-employed. From 2016-17 and the additional tax deduction of up to Rs 50,000, u/s 80CCD (1b) is allowed for excess employee contributions and this is over and above the limit of Rs 1.5 Lakhs. If the employer also contributes to Pension Scheme, the entire employer contribution (maximum 10% of the salary) can be claimed as a tax deduction under Section 80CCD (2). This is over and above the limit of Rs.1.5 Lakhs. Please note that the total deductions under sections 80C, 80CCD (1) and 80CCC put together cannot exceed Rs 1.5 lakhs for the financial year 2018-19.
Annuity plans under Section 80CCC
Contributions made towards Annuity plans available with any of the Life Insurance Companies for receiving the pension from the fund can be considered for tax benefit. The maximum Tax deduction allowed under this section is Rs 1.5 Lakhs.
Claims on Medical treatments under Section 80DD
Spends on medical treatments for your dependents (spouse, parents, children or siblings) can be claimed under section 80DD. Up to Rs 75,000 can be claimed in case of 40% disability. Up to Rs 1.25 lakhs can be claimed in case
of severe disability (80%).
Critical Illness Exemption under Section 80DDB
Under this section, a tax deduction of Rs. 40,000 can be claimed on the grounds of medical treatment for critical ailments namely Cancer, AIDS, Thalassaemia. It is allowed only for individuals below 60 years of age. This can also be claimed for his/her dependents. Senior Citizens (above 60 years) can claim up to Rs 60,000 and very Senior Citizens (above 80 years) can claim Rs 80,000 under this section.
Exemption under Section 80U
This section is similar to Section 80DD but here the Tax deduction is permitted for the employee himself who is physically or mentally challenged.
Health Insurance exemption under Section 80D
Up to Rs. 30,000 can be deducted towards the medical insurance premium for senior citizens (above 60 years) and up to Rs. 25,000 towards medical insurance of self and dependents (spouse &;children). A deduction of up to Rs. 25,000 towards medical insurance premium of parents (father/mother/both) is also available. If both the parents (Father & Mother) are senior citizens, then the deduction allowed is up to Rs. 30, 000.
Home Loan Benefit under Section 24
The maximum deduction allowed on payment of Interest paid on home loan under this Section for a self-occupied house property is upto Rs. 2 Lakhs.In case, the home Loan has been taken for the property which is not self-occupied, there is no maximum limit prescribed and the entire interest paid is fully exempted. If the taxpayer has availed a home loan for repair works or reconstruction, a maximum deduction of upto Rs 30,000 per financial year is permitted.
Home Loan Benefit under Section 80EE
For claiming tax deductions on home loan interest payments under this new section 80EE, the following factors need to be considered.
The home loan should have been availed or sanctioned in FY 2016-2017.
The Loan amount should be less than Rs 35 Lakhs.
The value of the home should not be more than Rs 50 Lakhs
The buyer should not possess any other residential house under his/her name.
Interest on Savings under Section 80 TTA
The interest you earn on your Savings Accounts in a bank, post office or a co-operative society is exempt from tax up to Rs. 10,000. This deduction cannot be claimed on income generated from interest on fixed deposits, recurring deposits or interest income from corporate bonds. However, Budget 2018 proposed to increase the tax benefit for Fixed Deposit/Recurring Deposit by senior citizens from Rs. 10,000 to Rs. 50,000 in a financial year. The benefit is available for all bank and postal FD/RD.
House Rent Allowance Under Section 80GG
If you are living in a rented house, the House Rent Allowance (HRA) is a great tax-saving option for you. The tax benefits that you get depend on your basic salary, HRA provided by your employer, your place of residence and the rent you pay.
Charity contributions under Section 80G
You can claim a tax exemption of up to 50% of the amount if you have contributed to a charitable organisation or relief fund via cheque, draft or cash (not exceeding Rs. 10,000). Although contributions such as clothes, food material, medicines, etc. are not eligible for deduction under section 80G.
Exemption under Section 87A
From 2017-2018, if the taxable income of a Taxpayer after various permissible income tax deductions, is below Rs 3.50 lakhs, he/she is eligible for upto Rs 2,500 on Tax payable as tax rebate under this section.
Education Loan Under Section 80E
Interest paid towards your education loan can be claimed under Section 80E as a tax deduction. The loan should have been taken for higher education for yourself, your spouse, your children or any student for whom you are the local guardian. Only interest paid can be claimed and not the principal. There is no specific limit on the amount of interest claimed as deduction. The deduction can be claimed for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.
A taxpayer can claim deduction for the amount that he/she has contributed to a political party or an electoral trust (any political party registered under the section 29A of the Representation of the People Act, 1951) formed to oversee the election process. Although contributions made in cash are not allowed for deductions.
The use of traditional, inconvenient in-house payroll systems are on the decline, and for good reason – they’re repetitive, complicated and prone to human error. Switching to a payroll solution can reduce costs, minimize mistakes and free you up to focus on growing your business. But the decision to outsource payroll for most businesses is not a small commitment. It’s one of the most intimate tasks where the wrong choice can let down your employees and waste a significant investment of time and money. Payroll service providers have different technology, support and expertise that make some a better fit than others. Sure you will do your research before bringing one on board. To help you out, here are 5 essential questions to ask that will give you better perspective when choosing the right payroll partner for your organization!
1. What support can you provide?
Now before hiring a payroll service provider, you got to decide what services you want from them specifically. Some low cost outsourced payroll services only help to calculate the remuneration, superannuation and tax. While others may help you in calculating wages, taxes, applying pay rule conditions, then distribute all payments to the employees, relevant agencies, authorities and others. They can also help you to handle new employee reporting, deduct benefits, including health and insurance benefits, handle various earnings and deductions, like bonuses, reimbursements, commission, etc. You have to foremost identify your specific payroll requirements and search for a vendor that delivers everything you need. Ensure you ask exactly where your payroll provider’s services start and stop.
2. What add-on services do you offer?
A reputed payroll service provider can integrate a broad range of in-house employment management services including recruitment, employment law, workplace health and safety support, recruitment, time and attendance and HR. If you look around you might even find a single platform that provides a full HR, safety, performance and payroll solution. Make sure you ask for such add-on services. That way you can save a lot of money and improve efficiency.
3. What are advanced payroll platform you using?
Now using software developed ages back can make things difficult to customize, costly to implement and limit its ability to integrate with other platforms. So make sure you ask what technology they generally use when it was developed and what it can offer. Do your homework in advance. Also, take time to evaluate their technology. Can they demonstrate functionality? Is it a stand-alone system or scalable? Does it have functionality that enables you to use it in your internal payroll system? Make sure to get answers to each of these questions before considering their services.
4. Can we meet your dedicated payroll professional?
The way you regularly meet your employees working for you; it’s important to meet the professionals who would provide critical services for your company. This is perhaps the most important and often overlooked question. Spend time to meet the payroll professional who will be your payroll officer to assess how knowledgeable they are. It’s important that the person or organization knows and understands your industry or sector so he can handle the challenges that may arise. Generally, the reputed providers don’t offer you direct access to a payroll specialist. Instead, your account is managed by a system specialist (almost like a middle-man) who helps you with technical & operational issues.
5. How secure is your service?
It’s important to know how a potential payroll provider protects its data center – which will hold your sensitive financial information away from the hands of hackers, break-ins, and other disasters. You’ll want to verify that vendors keep data safe using the highest encryption standards available. They should also have multiple layers of security, including biometric scanning for controlled access, as well as key card, PIN number restrictions, etc. Also, it’s best to look out for security camera provision that can monitor all of the provider’s locations around-the-clock, along with onsite staff to protect against unauthorized entry.