Search:



The Web

Rediff








 Latest Business news on mobile: sms BIZ to 7333

Home > Business > Business Headline > Report


Tax savers for individuals

February 25, 2003 19:03 IST

What are the tax benefits still available to an individual?

The Union Budget of 2002-03 was a little unfortunate for individuals. In that budget, a new surcharge of 5 per cent was imposed on individuals for national security. The section 88 benefit which offered a 20 per cent tax rebate for investment in certain instruments, was reduced to 15 per cent for individuals in the income group of Rs 1.5-5 lakh. The rebate was made nil for those in the income group of over Rs 5 lakh.

The administered rate on small savings was cut by 50 basis points. Dividend income from mutual funds and shares was made taxable in the hands of the investor. And a 5 per cent service tax was imposed on premiums payable on life insurance policies.

However, despite all these tax-cuts in the last budget, there are certain tax benefits still available to an individual to duck the tax blows. Section 88 offers a tax rebate for making investments of up to Rs 1 lakh in infrastructure bonds. Under section 80L, interest income from securities like National Saving Certificate qualifies for a deduction up to Rs 12,000.

Pension plans and deferred annuity schemes qualify for a deduction of up to Rs 10,000 in each financial year, under section 80CCC. Section 80D offers a rebate of up to Rs 10,000 on premium paid for medical insurance, which moves up to Rs 15,000 for senior citizens.

Then there is section 80E which offers a rebate on repayment of loans for higher education for an aggregate repayment of principal and interest up to a maximum of Rs 40,000. Section 80G and 80GGA allow an individual to donate money to specified charitable institutions and funds, such as the Prime Minister's National Relief Fund, to save tax. While some trusts qualify for a 100 per cent deduction, others offer a deduction of 50 per cent.

As per section 54EC, an individual can park his long-term gains in Nabard, National Highway Authority of India (NHAI) or the Rural Electrification Corporation (REC) to get an exemption to the extent of gains invested. And 54ED allows to claim an exemption, if the individual uses his gains from sale of shares or mutual funds to buy shares of specified capital issues by a public company. And lastly, section 24(2) of the Income Tax Act, 1961, grants an income-tax deduction for interest payment on housing loans of up to Rs 1.5 lakh.

Tax rebates: which instruments qualify?
SchemeSection 88 benefitTax implicationsMaturity proceeds
Fixed time depositNot applicableU/s 80L; no wealth taxTax-free
Company fixed depositNot applicableNilTax-free
Bonds/debenturesNot applicableU/s 80L for specific bonds from ICICI and IDBITaxable u/s 54 EC/ED
Infrastructure bondsApplicable only for income below Rs 1.5 lakh; 15% for income between Rs 1.5-5 lakhU/s 80L Tax-free
GOI Relief BondsNot applicableU/s 10 (15); no wealth taxTax-free
LIC policiesApplicable only for income below Rs 1.5 lakh; 15% for income between Rs 1.5-5 lakhU/s 80L; u/s 80 CCC(1) in some policies; Benefit of section 10 (10D)Tax-free
MediclaimApplicable up to an investment of Rs 10,000 (Rs 15,000 for senior citizens)U/s 80DTax-free
Public Provident FundApplicable only for income below Rs 1.5 lakh; 15% for income between Rs 1.5-5 lakhFully tax-free; no wealth taxTax-free
National Savings CertificateApplicable only for income below Rs 1.5 lakh; 15% for income between Rs 1.5-5 lakhU/s 80LTax-free up to the limits of section 80L
National Saving SchemeApplicable only for income below Rs 1.5 lakh; 15% for income between Rs 1.5-5 lakhU/s 80LTax-free
Kisan Vikas PatraNot applicableNoneTax-free
Post office recurring DepositNot applicableU/s 80LTax-free
Post office monthly income schemeNot applicableU/s 80L Tax-free
Pension plansApplicable only for income below Rs 1.5 lakh; 15% for income between Rs 1.5-5 lakhU/s 80CCCTax-free
Equity-linked savings schemeApplicable up to an investment of Rs 10,000NoneTaxable under capital gains tax
Deposit scheme for retiring employeesNot applicableU/s 80LTax-free
Bank savings accountNot applicableU/s 10(15)i; no wealth taxTax-free
Bank recurring depositNot applicableU/s 80L; no wealth taxTax-free
Monthly income schemesNot applicableU/s 80L; no wealth taxTaxable under capital gains tax
Note:
Section 88: Tax rebate on investment up to Rs 60,000 in a year and Rs 80,000 for additional investment in infrastructure bonds
Section 80 L: Interest income qualifies for a deduction up to Rs 9,000
Section 10D: All proceeds received by policy holders are tax-free
Section 80CCC: All contributions up to Rs 10,000 eligible for 100% deduction
Section 80D: Deduction is allowed up to Rs 15,000 for medical insurance premium
Section 10 (15)1: Interest in bank savings account is deductible u/s80L
Section 54 EC/ED: Short/long term capital gains tax

Run-up to the Budget 2003

Powered by


7333: The Latest News on Your Mobile!



Share your comments


 What do you think about the story?




Read what others have to say:


Number of User Comments: 11




Sub: 80 ccc

i want 2 buy 2 pension plans i.e for 10,000 each will i get tax rebate on 20,000?? what if my net income crosses 5 ...


Posted by sumit





Sub: Tax Savers

It is a sort of consolation that nothing has been digged on the deductions from intrest paid towards housing loans.


Posted by Sridhar.M





Sub: tax Deduction under LIC Policies

Like the General Insurance for the Motor Vehicles which is mandatory for all, the life Insurance for Humans also should be made mandatory so that ...


Posted by V V KALYANA RAMAN





Sub: deduction u/s 80l

sir, in footnote you have mentioned that dedection u/s 80L is available upto rs. 9000/-. but as i know this is rs. 12000/- plus 3000/- ...


Posted by brijesh thandar





Sub: Sec-88 Deductions...

I donot think Section 88: Tax rebate on investment up to Rs 60,000 in a year and Rs 80,000 for additional investment in infrastructure bonds ...


Posted by Sreedhar




Disclaimer




Article Tools
Email this article
Top emailed links
Print this article
Write us a letter
Discuss this article



Related Stories


Pension plan tax breaks may be cut

Jaswant may dilute savings sops

How Kelkar plan could hit India Inc



People Who Read This Also Read


Highlights of the Budget 2003-04

Budget: Kelkar proposals in focus

Standard deduction limit may go up







Copyright © 2005 rediff.com India Limited. All Rights Reserved.