Tax Saving Instruments (1)

We are heading now for the year end and everyone of us is looking for better prospects in this approaching year with our very well known lines “ acche din aane vale hai”.

And I hope each one of you is looking now for investments as the next agenda will be tax savings declarations. May be you are going for advises from your CAs or taking help from newspaper or other articles. But trust me, it would always be better to invest for long term.

Markets are booming with long jumps, in fact, BSE is establishing new highs almost on daily basis, which is an indication of more prosperous nature of markets in next 3-4 years to come. Gold has taken a leap of almost Rs.1000/- in the last week.

So, preparation should be to invest for next 3-4 years for heavy gains rather than saving taxes only. That would automatically be taken care once the direction for investment will be chosen carefully.

Still it depends upon individual, if only the tax saving is the motive; we are defining few of such schemes with our priority list   :

1)      Home Loans : the Repayment of Home Loan into 2 components:-

a)      Repayment of the Principal Amount

b)      Repayment of the Interest on Home Loan

The amount paid as Repayment of Principal Amount of Home Loan by an Individual/HUF is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs. 1, 50,000. (Increased from 1 Lakh to Rs. 1.5 Lakh in Budget 2014)

This tax deduction is the total of the deduction allowed under Section 80C and includes amount INVESTED in PPF Account, Tax Saving Fixed Deposits, Equity Oriented Mutual funds, National Savings Certificate, Senior Citizens Saving Scheme etc.

This tax deduction under Section 80C is available on payment basis irrespective of the year for which the payment has been made. The Amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C even if the Assessee has not taken Loan.

There is a catch in this also, tax benefit of home loan under this section for repayment of principal part of the home loan is allowed only after the construction is complete and the completion certificate has been awarded.

Tax Benefit on Home Loan for payment of Interest on Home Loan can be claimed as Deduction under Section 24 as well as under the newly inserted section 80EE.

The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs.

It is also important to note that this tax deduction of Interest on Home Loan under Section 24 is deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24 should be claimed on yearly basis even if no payment has been made during the year as compared to Section 80C which allows for deduction only on payment basis. Moreover, if the property is not acquired/constructed completed within 3 years from the end of FINANCIAL year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30 thousand only.

We would be continuing this in our next blog, For further Consultation or Help regarding IEC registration/modification please write to us on contact@munim.in

Munim Team

www.munim.in

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