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Taxes | Ratekhoj.com, Best Fixed Deposits, Loans, Insurance Rates and Credit Cards
As a taxpayer, you are always exploring options to reduce your taxable income so that you can pay less taxes. Section 80C of the Indian Income Tax Act provides several avenues for deductions from your taxable income. Financial planning can help you take maximum advantage of these deductions.
As per section 80C, you are entitled to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,00,000:
  1. Insurance Premiums: Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the spouse or any child of the individual.
  2. Deferred Annuity Payments: Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (7) herein below on the life of the individual, the spouse or any child of the individual, provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity
  3. Deferred Annuity Deductions from Pay: Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary.
  4. Provident Fund (PF) or Public Provident Fund (PPF) Contributions: Any contribution made:
    • by an individual to any Provident Fund to which the Provident Fund Act, 1925 applies;
    • to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of an individual, or spouse or children [The Central Government has since notified Public Provident Fund vide Notification S.O. No. 1559(E) dated 3.11.05.]
    • by an employee to a Recognized Provident Fund;
    • by an employee to an approved superannuation fund; It may be noted that “contribution” to any Fund shall not include any sums in repayment of loan;
  5. National Savings Certificates: Any subscription :-
    • to any such security of the Central Government or any such deposit scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf.
    • to any such saving certificates as defined under section 2(c) of the Government Saving Certificate Act, 1959 as the Government may, by notification in the Official Gazette, specify in this behalf. [The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05.]
  6. ULIP Plan contributions: Any sum paid as contribution in the case of an individual, for himself, spouse or any child,
    • for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India
    • for participation in any unit-linked insurance plan of the LIC Mutual Fund referred to in clause (23D) of section 10 and as notified by the Central Government. [The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.]
  7. New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I, New Jeevan Akshay-II, Jeevan Akshay-III: Any subscription made to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify; [The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No. 1562(E) dated 3.11.05 and Jeevan Akshay-III vide Notification S.O. No. 847(E) dated 1.6.2006 ]
  8. Equity Linked Savings Schemes (ELSS): Any subscription made to any units of any Mutual Fund, referred to in clause(23D) of section 10, or from the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under any plan formulated in accordance with any scheme as the Central Government, may, by notification in the Official Gazette, specify in this behalf;
    [The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]. The investments made after 1.4.2006 in plans formulated in accordance with Equity Linked Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for deduction under section 80C.
  9. UTI Retirement Benefit Pension Fund: Any contribution made by an individual to any pension fund set up by any Mutual Fund referred to in clause (23D) of section 10, or, by the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the Central Government may, by notification in the Official Gazette, specify in this behalf. [The Central Government has since notified UTI-Retirement Benefit Pension Fund vide Notification S.O. No. 1564(E) dated 3.11.05.]
  10. National Housing Bank deposits or pension funds: Any subscription made to any such deposit scheme of, or, any contribution made to any such pension fund set up by, the National Housing Bank, as the Central Government may, by notification in the Official Gazette, specify in this behalf.
  11. HUDCO Fixed Deposit Scheme: Any subscription made to any such deposit scheme, as the Central Government may, by notification in the Official Gazette, specify for the purpose of being floated by (a) public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes, or, (b) any authority constituted in India by, or, under any law, enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. [The Central Government has since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No.37(E), dated 11.01.2007, for the purposes of Section 80C(2)(xvi)(a)].
  12. Home Loan Principal Payments: When you take a home loan, you have to make monthly payments towards repayment of the loan. This monthly payment (also known as EMI or Equated Monthly Installments) consists of a principal part and a interest part. The principal part of your EMI payments can be used for 80c deductions (The interest part of your EMI can also be used for tax benefits under section 24 of IT Act). 
  13. Tuition Fees for education: Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee. Full-time education includes any educational course offered by any university, college, school or other educational institution to a student who is enrolled full-time for the said course. It is also clarified that full-time education includes play-school activities, pre-nursery and nursery classes. It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature.
  14. Subscription to equity shares or debentures: Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution.
  15. Subscription to mutual funds: Subscription to any units of any mutual fund referred to in clause (23D) of Section 10 and approved by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company.
  16. 80C eligible Term deposits: Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes. [The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E) dated 28.7.2006]
  17. Subscription to NABARD bonds: Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf.
  18. Senior Citizens Savings Scheme: Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004.
  19. Post Office Time Deposits of 5 years duration: Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.
It may be clarified that the amount of premium or other payment made on an insurance policy [other than a contract for deferred annuity mentioned in (2)] shall be eligible for deduction only to the extent of 20 percent of the actual capital sum assured. In calculating any such actual capital sum, the following shall not be taken into account:
i) the value of any premiums agreed to be returned, or
ii) any benefit by way of bonus or otherwise over and above the sum actually assured which may be received under the policy.
Source: CIRCULAR NO. 9 /2008 [F.No.275/192/2008-IT(B)], Central Board of Direct Taxes, Ministry of Finace, Government of India.

 Are you looking for 80c investment avenues for next financial year? Bank term deposits have been designated as eligible for 80c deductions from assessment year 2007-2008 onwards.

These fixed deposits have a minimum term of 5 years and you can invest a maximum of Rs 1 lakh per year under these schemes.

Attractive interest rates are offered by banks for 80c fixed deposits. Tamilnad Mercantile Bank, a private sector bank, is offering the best interest rate currently of 9.75% for non-seniors. Karnataka Bank and Lakshmi Vilas Bank, both private sector banks, are offering the next highest interest rate of 9.50%.

Tamilnad Mercantile Bank, Karnataka Bank and Lakshmi Vilas Bank are all offering 10.00% for senior citizens under the tax savings term deposit schemes and this is the best rate offered for seniors.

Following are the income tax rates for financial year 2008-2009:

A. Normal Rates of Tax

Where the total income does not exceed Rs.1,50,000/-. Nil
Where the total income exceeds Rs. 1,50,000 but does not exceed Rs. 3,00,000/-. 10 per cent, of the amount by which total income exceeds Rs.1,50,000/-
Where the total income exceeds Rs. 3,00,000/- but does not exceed Rs. 5,00,000/-. Rs. 15,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 3,00,000/-.
Where the total income exceeds Rs. 5,00,000/-. Rs. 55,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.

B. Rates of tax for a woman, resident in India and below sixty-five years of age at any time during the financial year

Where the total income does not exceed Rs. 1,80,000/-. Nil
Where the total income exceeds Rs. 1,80,000 but does not exceed Rs. 3,00,000/-. 10 per cent, of the amount by which total income exceeds Rs.1,80,000/-
Where the total income exceeds Rs. 3,00,000/- but does not exceed Rs. 5,00,000/-. Rs.12,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 3,00,000/-.
Where the total income exceeds Rs. 5,00,000/-. Rs. 52,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.

C. Rates of tax for an individual, resident in India and of the age of sixty-five years or more at any time during the financial year

Where the total income does not exceed Rs. 2,25,000/-. Nil
Where the total income exceeds Rs.2,25,000 but does not exceed Rs. 3,00,000/-. 10 per cent, of the amount by which total income exceeds Rs.2,25,000/-
Where the total income exceeds Rs. 3,00,000/- but does not exceed Rs. 5,00,000/-. Rs. 7,500/- plus 20 per cent of the amount by which the total income exceeds Rs. 3,00,000/-.
Where the total income exceeds Rs. 5,00,000/-. Rs. 47,500/- plus 30 per cent of the amount by which the total income exceeds Rs.5,00,000/-.

Surcharge on income tax:
The amount of income-tax computed in accordance with the preceding provisions of this paragraph shall be increased by a surcharge at the rate of ten percent of such income tax where the total income exceeds ten lakh rupees.

However, the total amount payable as income-tax and surcharge shall not exceed the total amount payable as income tax on a total income of Rs.10,00,000/- by more than the amount of income that exceeds Rs.10,00,000/-.

Additional surcharge on income tax (Education Cess on income tax):
The amount of income-tax as increased by surcharge, if any, mentioned above shall be further increased by an additional surcharge (Education Cess on Income Tax) at the rate of two percent of the income-tax and surcharge.

Additional surcharge on Income Tax (Secondary and Higher Education Cess on Income-tax):
From Financial Year 2007-08 onwards, an additional surcharge is chargeable at the rate of one percent of income-tax and surcharge (not including the Education Cess on income tax).

Surcharge, Education Cess, and Secondary and Higher Education Cess are payable by both resident and non-resident assessees.

A circular from Central Board of Direct Taxes, Government of India, provides details on the income tax rates for financial year 2008-2009 (i.e., Assessment year 2009-2010) as well as rules for income tax exemptions and deductions.

What section of IT Act covers tax benefits for health insurance policies?

Section 80(D) of IT Act.

Scope

Health Insurance Premium paid for a health insurance scheme provided by any insurer in India that is approved by the Insurance Regulatory & Development Authority (IRDA).

Assessees Allowed Deduction

  1. Individuals
  2. Hindu Undivided Family (HUF)

Mode of Payment for Health Insurance Premium

Premium must have been paid by any mode other than cash to avail tax benefits.

Who is covered?

Amount of Deduction Allowed

To encourage individual assessees to supplement the efforts of their parents to get medically insured, the government allows an additional deduction of Rs. 15,000 to an assessee, being an individual, on any premium payments made in effect to keep in force an insurance on the health of his/her parent or parents. In this case, the existing condition of dependent with respect to parents is dispensed with. This deduction will be in addition to the existing deduction available to individual assessee for medical insurance on himself/herself, spouse and dependent children. Further, if either of the individual assessee’s parents is a senior citizen and is medically insured, the deduction would be allowed upto Rs. 20,000 or the health insurance premium, whichever is lower.

For example, an individual pays (through any mode other than cash) health insurance premia as under during the previous year:

  1. Rs. 12000 to keep in force an insurance policy on his health and the health of his wife and dependent children
  2. Rs. 17000 to keep in force an insurance policy on the health of his parents.

He will be allowed a deduction of Rs 27,000 (Rs. 12,000 + Rs. 15,000) if neither of his parents is a senior citizen. If any of his parents is a senior citizen, he will be allowed a deduction of Rs. 29,000 (Rs. 12,000+Rs. 17,000). Whether his parents are dependents or not, is not a consideration for taking this deduction. In other words, you can avail of this deduction on parents’ health insurance premiums paid even if they are not your dependents.

Further, in the above example, if the cost of insurance on the health of parents is Rs. 30,000 out of which Rs. 17000 is paid (by any non-cash mode) by the son and Rs. 13000 by the parent (who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs. 17000 (in addition to the Rs. 12000 for medical insurance on self and family) and the father will get a deduction of Rs. 13000.

Consult your tax advisor for the exact computation of your deduction for health insurance premiums under section 80D and consequent tax liability when you file your taxes.

Oct 17, 2008, Ratekhoj.com. Syndicate Bank, a public sector bank, has increased its fixed deposit interest rates effective October 16, 2008. The increase is for terms between 1 and 3 years. The highest interest rate offered by Syndicate Bank to non-senior citizens is now 10.50% for a term of 500 days to less than 2 years. Senior citizens get the highest rate of 11.00% for the same term.

Syndicate Bank also offers a interest rate of 9.50% for its tax savings fixed deposit scheme (SyndTax Shield scheme) with a term of 5 years and above.