Top Investment Idea U/s 80C

Many of us start investment only in February or March, i.e. just before the Financial Year getting over. This could be a big mistake. You may invest your money without proper planning. You may lose interest/appreciation for the whole year. Right time to start planning to invest is start of the financial year. This way you would not only make well informed decisions but also can earn interest for the whole year.

Here we will discuss about investment and tax deduction under section 80C of Income Tax Act. Section 80C replaces Section 88. Section 80C has become effective from 1st April 2006. Section 80CCC on Pension Scheme also merged with this section. Section 80C of IT Act allows certain investment and expenditure to be tax exempt. 

The maximum limit of deduction under section 80 is Rs.1.50 lakh from F Y 2014-15 / A Y 2015-16. Before F Y 2014-15 the limit was Rs.1.00 Lakh.

Most of the Income Tax payer try to save tax by saving under section 80C. Must note that under this section you can not only just save tax on investment bust also save tax on certain Expenditure.

Top Investment idea U/s 80C:-

1. Life Insurance Premium: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in this section deduction.

2. Unit Linked Insurance Plan: ULIP covers life insurance with benefits of equity investments. They have attracted the attention of investors and tax-savers not only because it help us to save tax  but also give decent returns in long-term.

3. Provident Fund: PF is deducted from your salary every month and both you and your employer contribute to it. While employer's contribution is exempt from tax, your contribution will come under section 80C. This deduction is compulsory, so this has to be the first and also apart from tax saving, it builds a long term, tax free retirement corpus for you.

4. Public Provident Fund (PPF): Public Provident Fund  is one of the best investment. Interest is compounded yearly and the normal maturity period is 15 years. You can deposit minimum Rs.500.00 and maximum Rs.1.50 Lakh. Remember rate of interest may vary by govt. notification.

5. Equity Linked Saving Scheme (ELSS): This is a mutual fund (MF) specially designed to save tax. The investments that you make in ELSS are eligible for deduction under section 80C.

6. National Savings Certificate (NSC): It is good investment option with a maturity period of Five years and Ten Years. Compounded Interest accrued Half Yearly. Minimum investment in NSC is Rs.100.00 and No Maximum limit. You can withdraw NSC before maturity period in case of certificate holder. Remember Investment in NSC are eligible for deduction but accrue interest income is chargeable to tax in the same year.

7. Pension Fund: In this Section 80CCC investment limit is clubbed with the limit of Section 80C. It means total deduction limit under section 80C and 80CCC is Rs.1.50 Lakh. This means that your investment in Pension Funds upto Rs.1.50 Lakh can be claimed as deduction under section 80C.

8. Five Year Bank Fixed Deposit (FD): Tax Saving fixed deposits with tenure of 5 years are also entitled for section 80C deduction.

9. Five Year Post Office Time Deposit: This is similar to bank's fixed deposit scheme. Interest is compounded quarterly but paid annually. Interest is totally taxable.

10. Home Loan Principal Repayment : The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components- (i) Principal Amount (ii) Interest Amount. The principal component qualifies for deduction under section 80C. And interest component save your tax under section 24 of IT Act. If you have taken home loan this is an automated EMI deduction cum investment. 

11. Sukanya Samriddhi Account: If you have blessed with girl child then it is for you only. You can open account under this scheme from the birth of a girl child till she attains the age of 10 year with minimum deposit of Rs.1000.00 and maximum deposit of Rs.1.50 lakh per year. Accrued interest under this scheme is fully exempt from tax in that year as well as in the year of receipts. For more you can read details in Notification No. G.S.R.863(E) Dated 02.12.2014.

Decide and Analyze which investment idea suite you to save tax and save your money with good return. Decision is yours. Have a happy investment.

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Tax benefit on Payment and Maturity of Life Insurance Premium

People are using Life insurance policies as tax planning tool as premium paid on Insurance Policies are eligible for tax benefits under Section 80C of the Income Tax Act 1961 (Act) and Maturity Proceeds are also eligible for exemption under section Section 10(10D)  and  Section 10(10A)(iii). 
Life Insurance helps Assessee in saving tax, achieving their long term goals and it also provides Comprehensive financial protection against unforeseen events of their family.

Deduction U/s. 80C in respect of life insurance premium

Maximum Limit – Maximum Deduction allowed under this Section is Rs. 1.50 Lakh and the sum includes payment on other allowable investment option available Under Section 80C of the Income Tax Act,1961. It is to be further noted that combined Maximum limit of deduction under Sec 80C & 80CCC & 80CCD (1) is Rs 1,50,000.

Restriction on Deduction limit: Deduction will be allowed only for premiums upto a maximum of 10% of the sum assured for policy issued on or after April 1, 2012. In case of policy issued before March 31, 2012, deduction will be allowed only for premiums upto a maximum of 20% of the sum assured.

Allowable on Payment- Only life insurance premium paid or deposited during the year are allowable as deduction under Section 80C. 

Disallowance: 

The deductions claimed earlier will be taxable as income if the policy is terminated either by notice or by failure to pay any premium in case of,

Single Premium Policy : within 2 years after the commencement date
Regular Premium Policy : before premiums have been paid for 2 years.

Individual and Hindu undivided family (HUF) can take tax deduction's benefit u/s 80C. It can be paid :-

(i) in the case of an individual (Resident or Non Resident)
- On his own life
- On Wife/Husband (Dependent or Not)
- Child
- Major or Minor (Dependent or Not
- Married or Unmarried Daughter / Son (Dependent or Not)

(ii) in the case of a Hindu undivided family (HUF), any member thereof;

Please note that life insurance premium paid by you for your parents (father / mother / both) Brother, Sisters or your in-laws is not eligible for deduction under section 80C.

If you are paying premium for more than one insurance policy, all the premiums can be included.

It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.

Tax-ability on Maturity

Section 10(10D)

The proceeds under a life insurance policy are exempt under Section 10(10D) of the Act, subject to the provisions of the said section.

Section 10(10A)(iii)

Commuted Pension received from Pension fund (Pension Plans approved by IRDA) would be tax-free.

Goods And Service Tax (Earlier Service Tax) on Life Insurance Premium

All premiums and charges are subject to applicable taxes (i.e. GST) as applicable under the prevailing tax laws.

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Documents Require To File IT Return & Claim Deductions

Financial Year is going to close. All Income tax Assesses are in hurry about their tax assessment. Getting sure about done adequate investment (Limit U/s 80C Rs.1,50,000/-) to  claim & save maximum tax rebate. Arranging documents pertaining to investment and tax return. 

First, all you need to know about Form 26AS. It is a summary of taxed deducted on your behalf and taxed paid by you. This summary is provided by Income Tax Department. It shows all details of deducted on your behalf by deductors, details of tax deposited by taxpayers and tax refund received in the Financial Year. This form can be accessed from Income Tax Department's Website.

Second, All Salaried Tax Assess needs to get Form 16 issued by their employer to get file their Income Tax Return.

Third, Documents Require for Interest Income, 

> Assesses needs to update his bank statement/pass book for interest on 

   saving bank account.

> Interest Income Statement (accrued or credited) on their Fixed Deposits.

> TDS certificate (Form 16A), if any, issued by banks or other financial 

    institution.

> Interest Accrue Certificate on NSC / Kishan Vikas Patra etc.

Fourth, Proof for Investment in Section 80C, Investment made under PPF, NSC, ULIPS, ELSS, RGESS are qualifies for deductions Under Section 80C.

Last Minutes Checklist to File Your IT Returns :

1. Pan Card

2. Bank Statement 

3. TDS Certificates

4. Tax Payment Challans (Advance Tax or Self Assessment Tax)

5. Form 16 / Salary Certificate received from the Employer.

6. Interest Certificates issued on your deposits

7. Rent Receipts copy (If You Are on Rent)

8. Life and Medical insurance payment receipts.

9. Tuition Fees Receipts.

10. Stock statement in case of trading in shares 

11. PPF Passbook for interest

12. Dividend warrants /amount

13. Interest Certificates on bonds

14. Details of interest accrue on NSC during the year.

15. Sale and Purchase deed of the property including Stamp Valuation of the           property (for land/building)

16. Repayment/Interest Certificate for Interest paid on housing loan and                 Principal amount Paid.

17. Donation Receipts for Section 80G (with PAN details of donnee)

18. Details of Expenses incurred on transfer of Re-Investment in property.

19. Any Other Tax Saving Investment receipts/proof.

20. Aadhar Card Copy (Mandatory for e-filing)

Remember all above documents are proof of income require for ITR filling purposes only does not require to attache along with ITR.

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Tax Relief For Agents

LIC agents main earning is commission. So, Income Tax Department allows some relief to favour Insurance agent. But this relief is for small commission earning agent. If commission earned from LIC insurance business is below Rs.60,000/- p.a. and if no separate books of accounts maintained then the entitlement for deduction is as follows:

i) On First Year Commission - deduction is 50%  

ii) On Renewal Commission - deduction is 15%

The LIC Commission after claiming deduction was mentioned above will be included and can be disclose with other source of income for tax purpose.

The benefit of Adhoc deduction will not be available to agents who have earned total commission of income more than Rs.60,000/- during the year.

In case gross commission earned by an Agent from LIC exceeds Rs.60,000/- per annum  then, he will be not entitled for claiming deduction referred above. He has to maintain books of accounts as required under the Income Tax Act. The following books and documents are recommended to be maintained :

1) Cash Book

2) Bank Book

3) Ledger Book

4) Journal Book

5) Vouchers And Bills

6) LIC Commission Statement

7) TDS Certificates Received from LIC

8) Bank Pass Book, Cheques Book, Deposit Voucher

9) All Other Connected Documents 

Also Read : deduction U/S 57 For LIC Agents

LIC Agents are entitled to claim all expenses incurred for generating LIC Commission such as :

a) Salary to Staff

b) Rent for Office Premises, in case own office then maintenance for the same

c) Fuel Expenses and maintenance for maintaining vehicles.

d) Books, Publications, Periodicals expenses connected to business

e) Printing And Stationery

f) Electricity Expenses

g) Travelling / conveyance Expenses

h) Telephone / Mobile / Internet Expenses

i) Postage Expenses

j) Depreciation Expenses on Vehicles, Computers and Other Office Equipment

k) Gifts, Diaries, Calenders Expenses etc.

l) Staff Welfare Expenses

m) Any Other Expenses related to generate commission.

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Health Insurance And Tax Benefit

Health is Wealth or You may say Health is the greatest assets for a human being. Our overall health is severely affected by our lifestyle. Unhealthy Eating Habits, Lack of Adequate Sleep, Stress can affect our health. A Mediclaim policy acts as savior & it protect you from facing a financial crunch in a medical emergency. Since Inflation has made medical bills costlier, having a heath insurance policy is necessary as other necessities.

There are dual benefits of the health insurance. First it ensures your financial stability and give coverage against expensive medical bills and also offer you benefit of Tax Deduction under section 80D upto Rs.25,000/- to Rs.30,000/- (for Senior citizen).

In order to enjoy tax deductions along with health coverage, you need to check which policy suits you & your family and how much premium required for. The premium amount paid by you can be utilize as Tax Rebate Tool. Remember, if the premium paid by your employer, you will not be eligible for tax rebate. Under the IT Act, 1961 medical allowance is not considered as an allowance, which is exempted. 

Generally, medical allowance is confused with medical reimbursement. Medical reimbursement is paid by an employer to their employees when they submit medical bills. 

When it comes to tax planning, people generally don't consider their parent's health insurance as a tax saving tools. If you are paying for your parents health insurance, you can claim upto Rs.30,000/- as tax deduction benefit in your annual income tax return. 

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Service Tax Paid on Insurance Premium U/s.80C

Many question arise about "can we take benefit of paying service tax paid on Insurance Premium!" If we check insurance premium receipts properly we get that the we pay three cost heads; Net Premium + Service Tax + E. Cess. On this basis final gross premium is calculated.

Now question is "can we take claim under section 80C of service tax paid along with insurance premium?"

The current tax rules states that "any amount paid to keep in force a life insurance policy qualifies for a tax deduction under section 80C." It is a common perception that Premium Paid all Life Insurance Policies are qualifies for deduction under section 80C of Income Tax Act, 1961. 

As per Section 80C(2) of the Income Tax Act, 1961 any amount paid to an insurer to buy or to keep a life insurance policy in force can be claimed as a deduction from gross total income by the policy holder. This implies that premium paid for a life insurance policy can be deducted from gross total income before arriving at taxable income subject to certain condition.

Section 80C(2) also clarifies that in order to claim the deduction from gross total income for a particular year the gross amount of premium must be paid or deposited in that particular financial year itself.

But when you ask insurance provider to provide Total Insurance Premium Paid Statement then they will provide you only statement of net premium paid. 

Tax experts interpret this to mean that the entire premium inclusive Service Tax and Cess, qualifies for a tax deduction.

Ideally, you need to mention the entire premium or gross premium for the purpose of availing a tax deduction under section 80C.

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Financial Duties Of An Individuals

Every citizen have some financial duties and rights that they should know but most of them are unknown to it. We have listed some are here Financial Duties here for your information.

(1) Duty to Pay Tax On Due Date:-
If your income is above taxable limit then you should consult a tax consultant and pay tax as per given slab. Income  Tax paid by you is used by the Government to build the infrastructure of the nation. you can be shock after knowing that only approx 3% of the population file Income Tax Returns and pay taxes. 

(2) Duty to be Truthful with Financial Planning:- 

Now a days livelihood is very expensive. Calculate your insurance cover properly to take adequate amount of insurance. Less or More may misplan your financial future needs. Declare true fact while you are filling proposal form of insurance, any incorrect information can result in your claim being reject.

(3) Duty to Nominate in Time:- 

Mentioning Nomination at the time of filling proposal form is better than later because unexpected risks may happen any time and dependent may come in problem in your absence.

(4) Duty to Sign Filled Form Only:- 

You should know that only you are responsible for the form you signed. So, don't handover any blank form. Fill out the form you are signing yourself or have it done in your presence. Self attested documents are good to prevent frauds.

(5) Duty To Pay Your Dues On Time:- 

Late payment of your dues may impact your credit ability in market. Some time late payment of credit card dues or loan installments can derail your financial planning. Late payment fees are hefty and so always try to avoid it.

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Income Tax Rate Slab For F. Y. 2017-18 ( A.Y. 2018-19)

As per Budget 2017 proposed by our Fin. Minister  on 01.02.2017 new revised income tax rates in case of every individual (other than those mentioned in (ii) and (iii) below or HUF family or every Association of Persons or Body of Individuals, whether incorporated or not, or every Artificial Judicial person referred to in Sub-clause (VII) of Clause (31) of Section 2 of the Act (not being a case to which any other Paragraph of Part III applies) are as under : -

BUDGET 2017-  PROPOSED
INCOME TAX RATE CHART FOR F.Y. 2017-18
INCOME LIMIT		TAX RATE		SAVE AMOUNT
		F.Y. 2016-17	F.Y. 2017-18
INDIVIDUAL TAX PAYERS     (BELOW 60 YEARS)	UPTO 2.5 LAKH	NIL	NIL	NIL
	2.5 LAKH – 5 LAKH	10%	5%	12500
	5 LAKH – 10 LAKH	20%	20%	12500
	10 LAKH - ABOVE	30%	30%	12500

In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year -

BUDGET 2017-  PROPOSED
INCOME TAX RATE CHART FOR F.Y. 2017-18
INCOME LIMIT		TAX RATE		SAVE AMOUNT
		F.Y. 2016-17	F.Y. 2017-18
INDIVIDUAL TAX PAYERS     (BETWEEN 60 YRS – 80 YRS	UPTO 3.0 LAKH	NIL	NIL	NIL
	3.0 LAKH – 5 LAKH	10%	5%	10000
	5 LAKH – 10 LAKH	20%	20%	10000
	10 LAKH - ABOVE	30%	30%	10000

In the case of every individual, being a resident in India, who is of the age of 80 years or more at anytime during the previous years -

BUDGET 2017-  PROPOSED
INCOME TAX RATE CHART FOR F.Y. 2017-18
INCOME LIMIT		TAX RATE		SAVE AMOUNT
		F.Y. 2016-17	F.Y. 2017-18
INDIVIDUAL TAX PAYERS     (ABOVE 80 YRS	UPTO RS.5 LAKH	NIL	NIL	NIL
	5 LAKH – 10 LAKH	20%	20%	NIL
	10 LAKH - ABOVE	30%	30%	NIL

The amount of income tax computed in accordance with the preceding provisions of he Paragraph shall be increased by a surcharge at the rate of :-

(1) 10% of such Income Tax in case of a person having a total income exceeding Rs.50.00 Lakhs but not exceeding Rs.1.00 Crore.

(2) 15 % of such Income Tax in case of a person having a total income exceeding Rs.1.00 Crore.

*Rebate U/s 87A is applicable as earlier for those whose income is below Rs.5.00 Lakh.

From AY 2018-19, this rebate shall be available only for individuals having income up to Rs. 3,50,000/-

Further up to AY 2016-17, rebate u/s 87A was restricted to Rs. 2,000/- . 

Rebate was later increased to Rs. 5,000/- w.e.f. AY 2017-18. 

Now, w.e.f. AY 2018-19, rebate has been deflated to Rs. 2500/-.

It means, having regard to exemption limit of Rs. 2,50,000/-, tax could have bill NIL for Income up to Rs. 2,70,000/- up to AY 2016-17. 

For AY 2017-18, tax could be NIL on Income up to Rs. 3,00,000/-. 

For AY 2018-19, tax again would be NIL up to 3,00,000/-, because of tax rate being reduced to 5%.

Hence the reduction in tax rate by 5% has been compensated by reducing rebate u/s 87A.

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Insurance And Tax Savings

Earlier we says for Insurance nowadays we also add Insurance with Tax Savings. Mostly people invest for tax saving purpose. And before taking any insurance plan peoples ask how much tax benefit they may get!

Here highlighting some LIC Plans with tax benefit as per Income Tax Act.

1) Deductions Under Section 80C  

   

    (i) Life insurance premium paid in order to effect or to keep in force an insurance policy on the life of the assessee or on the life of the spouse or any child of assesee and in the case of HUF, Premium paid on the life of any member thereof under an insurance policy, (Other than a contact for a deferred annuity) issued on or before the 31st day of March 2012 shall be eligible for "deduction only to the extent of 20% of the actual capital sum assured or actual  premium paid whichever is less." 

   And issued on or after the 1st day of April 2012 shall be eligible for "deduction only to the extent of 10% of the actual capital Sum Assured or Actual Premium paid  whichever is less".

     Where the policy, issued on or after the 1st day of April 2013, is for insurance on life of any person, who is - 

     (a)a person with disability or a person with sever disability (Section 80U)

     (b) Suffering from disease or ailment as specified in the rules under section              80DDB.

   (ii) Contribution to deferred annuity plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

  (iii) Contribution to Annuity Plans like - New Jeevan Dhara, New Jeevan Dhara -I and Jeevan Akshaya -VI.

Under Section 80CCC

 New Jeevan Nidhi Plan & New Jeevan Suraksha - I Plan :- A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plans for receiving pension is allowed.

*The aggregate amount of deductions under U/S 80C, 80CCC & 80CCD (1) shall not in any case exceed Rs.1,50,000/- (Rupees One Lakh Fifty Thousand)*

2) Deductions Under Section 80D

a)    Deduction allowable upto Rs.25,000/- if an amount is paid to keep in force an insurance on health of assessee or his family (i.e Spouse & Dependent children) or any contribution made to the central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf or on account of Preventive health check-up of the assessee or his family.

b)    Additional deduction upto Rs.25,000/- if an amount is paid to deep in force an insurance on health of parents or on account of Preventive health checkup of the parent of the assessee, whether dependent or not.

(c) In case of HUF, deduction allowable upto Rs.25,000/- if an amount is paid to deep in force an insurance on health of any member of that HUF.

(d) If the sum specified in (a) or (b) or (c) is paid to effect or keep in force an insurance on the  any person specified therein who is a senior citizen, then the deduction available will be up to Rs.30,000/-. Here senior citizen means the person who is of sixty year or more during the previous year.

(e) In case the amount are paid in (a) or (b) or (c) on account of preventive health check up, the deduction for such amounts shall be allowed to the extent it does not exceed in aggregate Rs.5,000/-

(f) For the purpose of deduction, the payment shall be made by  - any mode, including cash, In respect of any sum paid on account of preventive health check up and Any mode other than cash in all other cases.

(g) the insurance as mentioned above shall be in accordance with the scheme framed by (i) the GIC of India or any other insurer approved by IRDA.

3) Deductions Under Section 80DD

Jeevan Aadhar Plan - Deduction from total income upto Rs.75,000/- allowable on amount deposited with LIC under Jeevan Aadhar Plan, Jeevan Vishwas for maintenance of an handicapped dependent (Rs.1,25,000/- where handicapped dependent is suffering from severe disability)

4) Exemption in respect of commutation of Pension under Jeevan Suraksha & Jeevan Nidhi Plans : 

Under Section  10(10A)(iii) of the Income Tax Act, any payment received by way of commutation of pension out of the Jeevan Suraksha & Jeevan Nidhi Annuity Plans is exempt from Tax.

5) Income Tax Exemption on Maturity / Death Claims proceeds under section 10(10D) :

As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life Insurance Policy, Including the sum allocated by way of Bonus on such policy is exempt from tax where the sum s received as a death benefit. However, to get exemption under above section for sum received other than death benefit.

* Policy shall not be issued under Section 80DD(3)  Or

* Policy shall not be issued as Keyman Insurance Policy  Or

* Policy which has been issued on or after April 1, 2003 and the premium paid      in any of the years during the term of the policy not exceeding 20% of the          Actual Capital Sum Assured.

* Policy which has been issued on or after April 1, 2012 and the premium paid      in any of the years during the term of the policy not exceeding 10% of the          Actual Capital Sum Assured.

Where the policy issued on or after the 1st day of April 2013 is for insurance on life of any person, who is - 

(i) a person with disability or a person with severe disability as referred to in section 80U, or 

(ii) Suffering from disease or ailment as specified in the rules made under section 80DDB,

*Exemption under this section shall be available only if the premium payable in any of the years is not more than 15% of the actual Capital Sum Assured.*

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