• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Tax planning often brings to mind the need to shell out funds for investment, but how about saving taxes without investing? Not a single penny goes out of your pocket and you still save taxes! Many of these options would be expenses that you would anyway incur, and yet allow you to save tax. We cover the range of options of saving tax without investing.

Exemptions can go a long way in enabling you to save taxes, often one fails to take adequate advantage of these. We take a quick trip across various exemptions that one can claim to reduce taxes significantly. Many of the exemptions do not have a value limit, but are limited indirectly through a set of conditions as seen in Table 1.

Company Car EMI arrangement: The EMI paid towards your car will be directly reduced, thereby reducing your tax liability. Food coupons, petrol/telephone re-imbursements are all items that will reduce your taxability.

Many of these are tax-free in the hands of the employee but are taxable in the hands of the company through Fringe Benefit Tax (FBT). Many companies recover the FBT from the employee. This is still a better option, because the FBT tax rate is much lower than the normal tax rate that an employee pays.

Home loans provide significant tax breaks. Housing loan Equated Monthly Instalments (EMIs) have two components — Interest Payment and Principal Repayment. The interest paid towards such loan can be claimed under section 24 under the head ‘Loss from House Property’.

For a self-occupied property, the overall limit is Rs 1.5 lakh towards Interest. There is no limit for the let out property and is computed based on the Net Annual Value which is Rent — Municipal Taxes.

There is a 30 per cent deduction towards Maintenance from the Net Annual Value. Interest on home loan can be set off from this, irrespective of limit. Apart from the Interest benefit above, the principal is eligible for benefit Under Section 80C. One must keep in mind that under Section 80C there are other tax saving investment options.

Provident Fund (PF): There is a mandatory component set aside from your salary, 12 per cent of your basic, which will qualify for deduction under section 80C. The employee’s contribution will qualify for this deduction.

Interest from National Savings Certificate: If you have invested in NSC, then the interest accrued thereof will qualify as deduction under section 80C.

However, such interest is also taxed under head ‘Income from other sources,’ thereby effectively striking off the benefit.

Children Education Tuition Fee: The inclusion of Children’s Tuition Fees under Section 80C is a welcome move for parents as education costs have spiralled. However, keep in mind that the benefit is only available for tuition fees and not under any other head.

It is common practice for schools to give multiple receipts. Only the portion marked as Tuition fees will be eligible.

There are definitely many ways to save tax apart from the tax-saving investments. Use them to increase your take-home and create wealth.

More Stories on : Investments | Income Tax | Young Investor

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line