Basics of Income Tax

Taxes are one of the essential instruments for the survival of the state.Taxes collected by the Government helps in running the development projects in the country, including defense and healthcare.

Tax payers of the country comprise of individuals, firms and institutions. Taxes are inevitable for anyone earning and spending money.

As individual tax payers, you pay taxes on your expenses and incomes. Taxes which apply to your expenses are ‘indirect taxes’, and the taxes applicable to your income are the ‘direct tax.’

Any person having income above the prescribed basic exemption limit is liable to file an Income tax return for the fiscal year, regardless of the tax liability. Also, you have various options to reduce your Income-tax liability. These are called ‘tax saving instruments.’

Following are the two types of tax saving instruments you can useto reduce your direct income tax out-flow:

1. Tax Saving Investments,

2. Tax Saving Insutruments

But you need to focus on tax saving only if you are liable to pay income tax.

Are You Liable to Pay Income Tax?

Indian direct tax system offers a calculation of tax liability based on tax slabs. It also offers a minimum threshold for zero tax liability, based on the age of the taxpayer. Meaning, if your taxable income falls within the first (lowest) slab, your tax liability would be zero.

The Minimum Threshold

The minimum income threshold depends on the age of the taxpayer (Resident/ Non-resident). The minimum threshold is:

  • Rs. 250,000 if you are below the age of 60 or filing tax as a Hindu Undivided Family (HUF)

  • Rs. 300,000 if your age is 60 to 79 years

  • Rs. 500,000 when you are 80 years and above

Tax After the Minimum Threshold

After you cross the minimum threshold, your excess income becomes taxable at the following rates:

The slabs are applied to the total income. However, the minimum threshold will vary as per the age of the individual tax payer.

That means if you are below 60, and your annual taxable income had been Rs. 700,000 your income tax liability can go up to Rs. 52,500.

That is, 5% of 250,000 after the minimum exemption threshold and 20% of remaining Rs. 200,000.

But this is a hypothetical scenario, where you have zero tax saving investments or spends.

If you allocate your savings in tax saving investments through the financial year, you may reduce your tax liability to as low as zero.How to File Your Income Tax Return?

You can file your income tax return electronically on the income-tax portal incometaxindiaefiling.gov.in provided by the Government of India.

Filing the return online is an easy and straightforward process. First, you need to create your login on the e-filing portal. You will need your PAN card details to create the login. It is advisable to assign your Aadhar Number as well to your ITR for easier processing.

Once you log in to the account, you can select your assessment status and year of filing to access the applicable ITR form.

Fill the information in the ITR form as prompted. If you are salaried, it is recommended to use Form 16 a from your employer and 26AS as well, while filing ITR online.

Alternatively, you can engage the services of aTax Return Preparers (TRPs) authorized by the Government of India.

How Much Tax Can You Save?

Considering that you maximize your tax savings using investments, and voluntary spends, you may reduce your taxable income up to Rs. 515,000 (details below) for A.Y. 2019-20.

Rs. 515,000 includes the following commonly available deductions:

Deductions

 

Max Amount (Rs.)

Standard deduction

40,000

Section 80C

150,000

Section 80CCD(1B) NPS

50,000

Section 80D

75,000

Section 24(b)

200,000

Total

515,000


Disclaimer: 
This limit only includes, investments and expenses any taxpayer can voluntarily incur. Taxpayers under certain conditions may be able to claim more than Rs. 515,000 as deductions.

The amount of tax you end up saving through the investments and expenses above depends on your income. See the cases below to get an idea:

ASE 1

Shobhit is a 27year old Business Analyst. His taxable salary income in the financial year 2018-19 is Rs. 7,50,000(without TDS).

His tax liability for A.Y. 2019-20would be:

  • Up toRs. 65,000*without tax saving investments

  • Zero with maximum tax saving investments

* as per the applicable tax slabs& cess

See Calculation Details

Without any tax savings, Shobhit’snet taxable income (Rs. 750,000)goes up into the 20% tax slab. Without tax saving investments his total tax would be:

Total Taxable Income

Rs. 750,000

(Minus) Tax Saving Investments/Spends

Nil

Net Taxable Income

750,000

Tax on Net Taxable Income:

 

20% of Rs. 250,000 (750,000 – 500,000)

Rs. 50,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 12,500

Total Tax on Income

62,500

(Add) 4% Cess

+ 1,500

Total Tax Payable in A.Y. 2019-20

Rs. 65,000

 

However, with tax saving:

Total Taxable Income

Rs. 750,000

(Minus) Tax Saving Investments/Spends

- 515,000

Net Taxable Income

235,000

 

Since the net taxable income ofRs2,35,000falls below the minimum taxable income of Rs 2,50,000, his tax liability reduces to zero.Since the net taxable income is Rs. 275,000 hence income tax liability will be nil after taking rebate of section 87A.

CASE 2

Rajni is a 40 year old businesswoman and runs her own clothing store. Her personal income in the financial year 2018-19 is Rs. 15,00,000.

She will need to pay the following amount as tax on her income in A.Y. 2019-20:

  • Rs. 2,73,000* if she does not invest or spend anything for tax saving

  • Rs. 1,17,000* if she maximizes her tax saving investments

* as per the applicable tax slabs& cess

She can save more than Rs. 150,000 in direct taxes using tax saving investments.

See Calculation Details

Without any tax savings, Rajni’snet taxable income (Rs. 15,00,000)goes up into the 30% tax slab. Thus, the total liability of Rs. 273,000:

Total Taxable Income

Rs. 15,00,000

(Minus) Tax Saving Investments/Spends

Nil

Net Taxable Income

15,00,000

Tax on Net Taxable Income:

 

30% of Rs. 500,000 (15,00,000 – 10,00,000)

Rs. 150,000

20% of Rs. 500,000 (10,00,000 – 500,000)

+ 100,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 12,500

Total Tax on Income

262,500

(Add) 4% Cess

+ 10,500

Total Tax Payable in A.Y. 2019-20

Rs. 273,000

 

However, with maximum tax saving, her net taxable income goes only up to the 20% slab:

Total Taxable Income

Rs. 15,00,000

(Minus) Tax Saving Investments/Spends

(Rs. 515,000)

Net Taxable Income

9,85,000

Tax on Net Taxable Income:

 

20% of Rs. 485,000 (10,00,000 – 500,000)

Rs. 97,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 12,500

Total Tax on Income

109,500

(Add) 4% Cess

+ 4,380

Total Tax Payable in A.Y. 2019-20

Rs. 113,880

Rajni can save up to Rs. 160,000 by maximizing her tax saving investments in F.Y. 2018-19.

 

CASE 3

Mukesh is 65 years old. He’sone of the Directors of a Consumer Electronics Firm. Histaxable income in F.Y. 2018-19 has been Rs. 20,00,000

Mukesh will need to pay the following amounts as income tax in A.Y. 2019-20:

  • Up toRs. 426,400*without tax saving investments

  • Only Rs. 265,720*with maximum tax saving investments

* as per the applicable tax slabs & cess

Mukesh can increase his after-tax income by more than Rs. 160,000 with maximum tax saving investments.

See Calculation Details

Without any tax savings, Mukeshgoes up into the 30% tax slab with his net taxable income of Rs. 20 Lakh. Thus, the total liability of Rs. 426,400:

Total Taxable Income

Rs. 20,00,000

(Minus) Tax Saving Investments/Spends

Nil

Net Taxable Income

20,00,000

Tax on Net Taxable Income:

 

30% of Rs. 500,000 (15,00,000 – 10,00,000)

Rs. 300,000

20% of Rs. 500,000 (10,00,000 – 500,000)

+ 100,000

(Add) 5% of Rs. 250,000 (500,000 – 300,000!)

+ 10,000

Total Tax on Income

410,000

(Add) 4% Cess

+ 16,400

Total Tax Payable in A.Y. 2019-20

Rs. 426,400

Minimum tax-exempt income is Rs. 300,000 for taxpayers between 60 and 80 Years of age

Although even with maximum tax saving, his net taxable income remains in the highest tax bracket, it reduces enough to reduce his total tax liability by little more than Rs. 160,000:

Total Taxable Income

Rs. 20,00,000

(Minus) Tax Saving Investments/Spends

(Rs. 515,000)

Net Taxable Income

14,85,000

Tax on Net Taxable Income:

 

30% of Rs. 500,000 (14,85,000 – 10,00,000)

Rs. 145,500

20% of Rs. 485,000 (10,00,000 – 500,000)

+100,000

(Add) 5% of Rs. 250,000 (500,000 – 250,000)

+ 10,000

Total Tax on Income

255,500

(Add) 4% Cess

+ 10,220

Total Tax Payable in A.Y. 2019-20

Rs. 265,720

 

Increase inpost-tax income for Mukesh with maximum tax saving is up to Rs. 160,000.

Commonly Available Tax Deductions

The commonly avialable dedcutions are available to any Indian tax-payer. Thus, if you are filing your income tax returns as a resident Indian, salaried or self-employed, or as a non-resident Indian (NRI) you can use these deductions to reduce your taxable income and tax liability.

Claim Deductions up to Rs. 150,000 U/S80C

Section 80C consists of multiple investments and expense items. If you invest money in any of the products or expenses listed below, you can reduce your taxable income by up to Rs. 150,000.

SR. NO

INVESTMENTS ELIGIBLE FOR TAX DEDUCTIONS

DESCRIPTION

1

Home Loan Principal Repayment

Applicable to the first house property.

Home loan EMI consists of two major components: Principal and Interest.

Section 80C allows you to claim tax benefits on the principal paid.

2

Life Insurance Premiums

Life insurance premium, includingpayments for unit linked insurance plans, are eligible for tax benefits under section 80C.

 

The limit for claiming the benefits is Rs. 1.5 lakhs, which means if you make no other investments but pay Rs. 2 lakhs towards your life insurance policy, then Rs. 1.5 lakh will be eligible for tax benefits.

3

Five-Year Bank Fixed Deposits

Term deposit with a tenure of at least five years qualifyfor deduction under section 80C.

4

Equity Linked Savings Schemes (ELSS)

Investment in mutual funds, especially the equity-linked savings scheme makes you eligible for tax exemption under this section.

 

ELSS funds provide maximum tax benefit up to Rs. 1.5 lakhs per annum and come with a lock-in period of 3 years.

5

Provident Funds

All contributions made under different types of provident funds like PPF (Public Provident Fund), EPF (Employee Provident Fund) and VPF (Voluntary Provident Fund) are eligible for tax benefits under Section 80C.

6

National Pension Scheme (NPS)

Investment into Tier I account (meant for retirement) of NPS, is eligible for deduction under sec 80C

6

National Savings Certificate (NSC)

Investment made in these certificates, which come with a maturity period of 5 and 10 years, is also eligible for tax benefits up to Rs. 1.5 lakhs.

7

Sukanya Samriddhi Account

Announced by the Indian government in early 2015, this specialaccount allows parents to open an account for their girl child. Parents can deposit money up to Rs. 1.5 lakhs each year and earn an interest of 8.1percenton it.

8

School/College Education Expenses

The amount paid by parents as tuition fees of their children, (at the time of admission or thereafter), is eligible as a deductionunder Section 80C.

 

However, the fees should be paid to a school, college, or university in India only.

9

Pension Funds

You can secure your retirement by investment in pension funds and become eligible for deduction under this section.

10

Senior Citizen Saving Scheme

This scheme is available only for individuals in 60 or above age group. The investment made into thisschememakes you eligible for tax benefits under this section.

11

Post Office Time Deposits

Similar to bank fixed deposits, time deposits held at post office also are eligible for tax benefits under section 80C.


Increasing Your Deduction to Rs. 200,000 U/S 80C

Section 80CCD(1B) - For NPS Subscribers

This is possible only for NPS subscribers.Under section 80CCD(1) subscribers of NPS Tier-I (retirement savings account) can claim deduction up to the normal 80C limit of Rs. 150,000.

However, they also have an option to claim a deduction on additional voluntary contribution to this account. The only condition is, it should be voluntary and above their mandatory limit of contribution, which is 10% of basic salary.

Thus, getting a Rs. 200,000 deduction [80CCD(1) + 80CCD(1B)] means:

  • If 10% of your basic salary is Rs. 150,000, you can invest additional Rs. 50,000 and increase your deduction to Rs. 200,000.

  • If 10% of your basic salary is Rs. 200,000, your maximum eligible deduction is Rs. 150,000. You will need to invest additional Rs. 50,000 to increase your deduction to Rs. 200,000

Note: For NRIs and self-employed ‘gross annual income’ will replace the ‘basic salary’ in the above examples.

Home Loan Principle Repayment - For Senior Citizens

If you are above 60 years of age and have a running home loan, this is the best time for prepayment of your home loan.

As a senior citizen tax-payer, you can avail a deduction of Rs. 200,000 for home loan principal repayment.

But this does not mean that if your total principal repayment is only Rs. 150,000 you can club other investments with it to claim Rs. 200,000 under section 80C.

You can avail more than Rs. 150,000 deduction only for home loan principal repayment.

How Tax EfficientAreYour Investments?

There are three types of tax exemptions investments enjoy in India:

  1. Exemption for Invested Amount

  2. Exemption for interest accrued or income paid every year

  3. Exemption for the gain at maturity

Best Investment Options for Saving Tax

Investment options which enjoy all the three types of exemptions are the best, or most tax-efficient. Usually, the order of exemption goes as follows:

 

Best Tax Saving

Still Better

Okay Option

Invested Money

Exempt

Exempt

Exempt

Interest/Income

Exempt

Exempt

Taxable

Maturity Value

Exempt

Taxable

Taxable

Investment type

EEE

EET

ETT

 

EEE Investment Options with Max Life Insurance

Max Life Insurance offers multiple investment plans which can save your income tax under 80C and offer tax exempt growth. You can invest in multiple of these plans as per your financial goals and needs.

  • Term Insurance Plans & Protection Plans

    • Max Life Super Term

    • Max Life Online Term Plan Plus

  • Market Linked Investment plans for Long-term goal planning (ULIPs)

    • Max Life Fast Track Super Plan

    • Max Life Platinum Wealth Plan

    • Max Life Online Savings Plan

  • Children’s Education Goal Investment Options

    • Max Life Future Genius Education Plan

    • Max Life Shiksha Plus Super

  • Retirement Planning Investment Options

    • Max Life Forever Young Plan

    • Max Life Guaranteed Lifetime Income Plan

    • Max Life Perfect Partner Super

  • Guaranteed Saving and Income Plans

    • Max Life Savings Advantage Plan

    • Max Life Monthly Income Advantage Plan

    • Max Life Assured Wealth Plan

    • Max Life Whole Life Super Plan

    • Max Life Life Gain Premier

    • Max Life POS Guaranteed Benefit Plan

Deductionup toRs. 75,000 U/S 80D for Medical Insurance & Expenses

Section 80D offers a tax deduction for the following investments/expenses:

  • Premiums paid for Mediclaim/Health Insurance

  • Premium paid for critical illness health insurance plans

  • Preventive health check expenses

  • Healthcare expenses for senior citizen parents

DESCRIPTION

HEALTH PREMIUM PAID FOR

MAX DEDUCTION
U/S 80D

SELF, SPOUSE AND DEPENDENT CHILDREN

PARENTS

Everyone is below 60 years of age

Rs. 25,000

Rs. 25,000

Rs. 50,000

When your parents have crossed the age of 60

Rs. 25,000

Rs. 50,000 (incl. Expenses)

Rs. 75,000

You and your parents have passed the age of 60

Rs. 50,000

Rs. 50,000 (incl. Expenses)

Rs. 1,00,000

Preventive healthcare expense of up to Rs. 5000 is part of the maximum limit under this section.

 

Example of Estimating Deduction U/S 80D:

Paramjeet is 37 years old and married to Kiran, both are employed. They have two kids. Paramjeet’s parents are financially independent, but Paramjeet pays their health insurance premiums, as they don’t want to buy a health plan at their age. They are over 70 years of age. Similarly, Kiran has bought a senior citizen health plan for her parents.

Paramjeet and Kiran have paid the following amount of premiums and care expenses in the F.Y. 2018-19:

  • Paramjeet paid:

    • Rs. 18,000 for family floater policy covering him, Kiran and the kids

    • Rs. 4,000 for critical illness health insurance for self

    • Rs. 45,000 for family floater Mediclaim for his senior citizen parents

  • Kiran paid:

    • Rs. 3,500 for critical illness cover for self

    • Rs. 42,000 for Mediclaim cover for her parents

    • Rs. 12,000 on preventive healthcare for the family (not the parents)

Since both Param and Kiran file their separate ITRs, they can claim the following amounts u/s 80D:

Item

Param

Kiran

Family Floater Mediclaim Premium

18,000

 

Critical Illness Health Cover Premium

4000

3500

Premium Paid for Health cover for Senior Citizen Parents

48,000

42,000

Preventive Healthcare expenses (Max. 5000)

 

12,000

Total Applicable Claim

70,000

50,500

 

Thus, Paramjeet can claim Rs. 70,000 as deduction u/s 80D while Kiran can claim Rs. 50,500 (whereas she spent about Rs. 57,500).

Health Insurance Plans with Max Life Insurance

Max Life Insurance offers two health insurance plans which are eligible for 80D deduction:

  1. Critical Insurance Plan covering 40 critical illnesses

  2. Cancer Insurance Plan covering all stages of cancer

Deductionup to Rs. 200,000 U/S 24(b)for Home Loan Interest

This section helps you reduce your ‘income from house property’. If the income from house property (or multiple properties combined) is negative in a financial year, you can set off the loss up to Rs. 200,000 from other taxable incomes in the year.

For example:

Assume you own two houses, one of which you have occupied yourself,and the other one is occupied by a tenant. At the end of the financial year the net income from these properties, after deducting all the eligible expenses, comes out to be (-)Rs. 400,000.

While your taxable salary income from employment is Rs. 11,00,000. Your net taxable income would be only Rs. 900,000under section 24(B):

Total Taxable Salary Income

Rs. 11,00,000

30% tax bracket

(Minus) Loss from House Property (Rs. 400,000)

200,000

 

Net Taxable Income for the F.Y.

900,000

20% tax bracket

You can carry forward the remaining loss of Rs. 200,000 to be set-off in the next A.Y.

Section 24(b) or Home Loan Interest is one of the eligible expenses you can claim on both self-occupied first house or a rented second house.

How Much Can You Claim U/S 24(b)

Deduction up to Rs. 200,000

Buying a house can offer you an additionaldeduction if you avail a home loan from a housing finance institution or bank.

The limit of deduction on home loan interest paid is Rs. 200,000 for the current financial year (2018-19). This limit increases to Rs. 300,000 for senior citizens.

The limit for the financial year 2018-19 is same whether you are filing a return for all the following conditions:

  • Self-occupied house

  • Vacant house (neither self-occupied nor let-out)

  • Let-out house

  • Deduction up to Rs. 30,000

The deduction on the interest paid on the home loan on your first property will be limited to Rs. 30,000 if:

The property was under construction and

The purchase or construction must be completed within 3 years from the end of the financial year in which the loan was takenOther Expenses to Reduce Your Income from House Properties

Apart from the home loan interest following expenses also reduce your taxable income from house properties:

  • Municipal taxes

  • Standard Deduction of 30% of net annual value (NAV) for the property

Standard Deduction - for Salaried Taxpayers

Salaried taxpayers can save tax even outside the sections mentioned above. Two of the deductions that apply to salaried taxpayers are:

  • Standard deduction of Rs. 40,000

  • Tax credit of up to Rs. 2500 under Section 87A*is your annual income is below Rs. 350,000

*Section 87Aoffers a rebate in the form of deduction from your tax liability and will be 100% of your income-tax liability or Rs. 2,500, whichever is lower.

Other Tax Deductions for A.Y. 2019-20

Tax Saving for Tax-Payers Staying on Rent

  • Tax Saving for Salaried Individual Living on Rent

If salary is the major taxable income for you, you should look for the House Rent Allowance (HRA) on your salary slip. HRA is usually 50% of your basic salary and the second highest component of it.

How to Calculate HRA Tax Exemption?

HRA received by you from your employer is taxable based on the following conditions:

The tax-exempt portion of the HRA is the minimum of the following:

  • Actual HRA receivedin the financial year

  • 50 percent of your 'salary' if your accommodation is in metro cities (Mumbai, Chennai, Delhi, Kolkata) or else 40 percent for other cities

  • Rent paid minus 10 percent of your‘salary’

  • Definition of Salary for HRA: Basic salary + dearness allowance (DA) (only that part which forms part of the retirement benefit) + commission received based ona percentage of turnover

Example of HRA Calculation

Mr Kiran lives in Mumbai and earns a basic salary of Rs. 30,000.The actual rent paid by Kiran is Rs 10,000,and the HRA component of his salary is Rs. 15,000. In this case, how much exemption will he get?

To determine the exemption, calculate the amount for different factors affecting HRA calculation:

Actual HRA received:

Rs 15,000 x 12

Rs 180,000

Actual rent paid: excess rent paid over 10% of the salary

(Rs 10,000 x 12) – (10% of Rs 30,000 x 12)

84,000

50% of basic salary:

[(Rs 30,000 x 12) x 50%]

180,000

 

As Rs. 84,000 is the least among the above figures, MrKiranwill get an amount of Rs. 84,000 exempted.

Tax Saving for Self-Employed Living on Rent

You can still claim a deduction for the house rent paid, even if you are self-employed or do not receive HRA along with your salary.

Section 80GG of the Indian Income Tax Act allows a deduction of up to Rs. 60,000 for F.Y. 2018-19.

The deduction is applicable on per month basis with maximum amount limited to Rs. 5000 a month.

The amount you can claim a deduction will be the least out of the following:

  1. Rs. 5000 per month

  2. 25% of total income (excluding capital gains and royalty income)

  3. The amount of actual rent paid over 10% of income (excluding capital gains and royalty income)

See the example below to understand how much will apply to you:

Sandeep stays in a PG accommodation and pays Rs. 4500 as monthly rent starting Jan 2018. He paid the same rent till December 2018 and then the rent will increase to Rs. 5000 per month.

Sandeep is employed and earned salary income of Rs. 300,000 for the financial year 2018-19. He does not receive HRA.

Total amount of deduction he can claim under section 80GG will be the lowest of:

  1. Rs. 5000 per month or Rs. 60,000

  2. 25% of Rs. 300,000 or Rs. 75,000

  3. (Rent Paid – 10% of Salary) or (55,500 – 30,000) = Rs. 25,500

Thus, Sandeep can claim Rs. 25,500 as deduction under section 80GG.

Other Deductions & Exemptions Available to Indian Tax Payers

TYPES OF TAX SAVING ACTIVITIES

SECTION

MAX DEDUCTION LIMITS

Expenses on a handicapped dependent

 

80DD

For Disability up to 80%: Rs. 75,000

For severe disabilities (above 80%): Rs.1.25 Lakhs

Treatment of specified illnesses

 

80DDB

Based on Taxpayer’s Age:

Up to 60 years - Rs. 40,000

60 to 80 years - Rs. 60,000

Above 80 years - Rs. 80,000

Education loan interest payment

80E

Actual interest paid

Home loan interest payment for first-time home-owners

80EE

Up to Rs. 50,000 (additional deduction over sec. 24B)

Donations to approved charitable institutes

80G

50% or 100% of the donated amount

Contributions made to a political party by companies and individuals respectively

80GGB

80GGC

Nil. 100% actual contribution made, by other than cash only.

Saving account interest

80TTA

Up to Rs. 10,000

Handicapped tax-payers can claim this deduction

80U

Disability up to 80% - Rs.75,000
Severe disabilities - Rs.1.25 lakhs

Royalty or patent income

80RRB

Up to Rs. 3 lakhs

Received Gift

56(2)

Up to Rs. 50,000

 

Smart Tax Saving Tips

Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” – F.J. Raymond

Tax saving is a benefit you can avail for selective investment options and expenses. You anyways need to invest money to achieve your financial goals. Investments which save tax can help you in two ways:

  • Invest more and have more disposable income

  • Grow your Investment faster

Then why not, invest in your goals using tax efficient investments.

Here are our top picks for tax saving instruments according to your life stage:

Smart Tax Saving for Young Unmarried Tax Payers& Single Income Couples

If you are in your late 20s and early 30s, andunmarried,or you are married,but only one of you is earning, the best tax saving options for you will be:

  • Save up to Rs. 150,000 under 80C

    • Buy Term Insurance cover with a Sum Assured equal to 15 to 20 times of your annual income

    • Start Investing at least 10% of your annual income in a pension fund, like

      • Public Provident Fund

      • National Pension Scheme (you can save Rs. 50,000 more)

      • Pension Funds from Max Life Insurance

    • Allocate at least 20% of your annual income to Market-linked Investment Options which offer EEE benefits. For example:

      • Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life

      • Equity Linked Savings Schemes (ELSS)

  • Save up to Rs. 75,000 more under 80D

    • Buy a Mediclaim health insurance cover for self

    • Buy a Mediclaim health insurance cover for parents

    • Cover yourself against critical illnesses like cancer (final stage only), renal failure etc.

    • Get cancer(all stages) cover for self

  • Invest in House Property for an Additional Tax Saving of up to Rs. 200,000

Smart Tax Saving Tips for Double Income Couples

If you are marriedand both of you are earning, jointly you can claim more than Rs. 850,000 in deductions with investments and insurance:

  • Save up to Rs. 300,000 under 80C

    • Both of you should buy separate term insurance covers with a sum assured equal to 15 to 20 times of your annual incomes

    • Start Investing at least 10% of your annual household income in a pension fund, like

      • Public Provident Fund

      • National Pension Scheme (you can save Rs. 100,000 more)

      • Pension Funds from Max Life Insurance

    • Allocate at least 20% of your annual household income to Market-linked Investment Options which offer EEE benefits. For example:

      • Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life

      • Equity Linked Savings Schemes (ELSS)

    • If you are a parent

      • One of you can claim the school fee paid (or if you have two kids divide the kids)

      • Invest in Child Plan

  • Save up to Rs. 150,000 more under 80D

    • Buy a Mediclaim health insurance cover for self (both spouses should opt for separate Mediclaim covers)

    • Buy a Mediclaim health insurance cover for your (applicable to both spouses) parents

    • Cover yourself against critical illnesses like cancer (final stage only), renal failure etc.

    • Get cancer (all stages) cover for self

  • Invest in a House Property for additional Tax Savings of up to Rs. 400,000

    • Invest in joint names or different properties

    • Both spouses can only claim the respective amounts they have paid towards the home loan interest

Smart Tax Saving Tips for Parents

If you are a parent, your investment options change a little to suit your financial goals. Investing as per your financial needs will not only help you save tax but also meet the goals of your kids:

  • Save up to Rs. 150,000 under 80C

    • Buy Term Insurance cover with a Sum Assured equal to 15 to 20 times of your annual income

    • Invest at least 10% of your annual income in a pension fund, like

      • Public Provident Fund

      • National Pension Scheme (you can save Rs. 50,000 more)

      • Pension Funds from Max Life Insurance

    • Allocate at least 20% of your annual income to Market-linked Investment Options which offer EEE benefits. For example:

      • Unit Linked Insurance Plans (ULIPs) or Wealth Plans from Max Life

      • Child Plans and ULIPs from Max Life

      • Equity Linked Savings Schemes (ELSS)

    • Additionally, you can also claim children’s tuition fee for deduction under 80C

  • Save up to Rs. 75,000 more under 80D

    • Buy a Mediclaim health insurance cover for self, spouse and kids

    • Buy a Mediclaim health insurance cover for parents

    • Cover yourself against critical illnesses like cancer (final stage only), renal failure etc.

    • Get cancer (all stages) cover for self

  • Invest in House Property for an Additional Tax Saving of up to Rs. 200,000

  • Use education loan to fund the kid’s higher education.Theinterest on education loan is completely deductible under section 80E

Tax Saving Tips for Retired or Pensioners

After retirement, the absence of monthly salary can become a problematic situation if enoughfundsare not available to manage your regular expenses.

Youcan overcome this problem by opting for annuity schemes, which not only provide regular income in your golden days but also help save on taxes.

‘Senior Citizen’s Saving Scheme’, is one such annuity scheme, which the first choice of most retirees.

Thescheme is available only to individuals above 60 and can be availed from a post office or a bank.

Investments in this schemeare eligible for tax benefits under Section 80C and allow premature withdrawals as well.

Insurance companies also offer special annuity products whichprovide a regular income post-retirement.

Annuity plans provide tax benefits as no tax is charged on your invested money until you plan to withdraw it.

Besides annuity plans, Unit Linked Insurance Plans (ULIPs)also make a good tool for retirement fund creation.

Moreover, keeping your funds invested in ULIPs allows you tax benefits under:

  • Section 80C: tax exemption of up to Rs. 1.5 lakh on your premiums

  • Section 10D: allows you to withdraw tax-free proceeds at maturity

This saves a substantial amount of your money as these tax-free withdrawalshelp replace your taxable pension (as withdrawals on annuity plans are taxed).

You can investinto the following tax-saving instruments you can avail benefits under section 80C and beyond.

Smart Tax Saving Tip for Tax-payers Falling in the Highest Tax Bracket

Whenyou fall into the highest tax bracket and have exhausted all options of tax saving, you can reduce your taxable income by:

  • Transferring large sums to your non-earning spouse against an asset, like jewellery, etc.

  • Invest in the name of your parents who are retired and may fall into the lower tax bracket.

Do not though, any transfer of an asset without adequate consideration will lead to clubbing of the income of that asset in your hands.

Smart Tax Saving Tips If You Are Running a Family Business

The business itself offers huge tax saving opportunity in the early stages. However, once you have a long-established business becoming a cash cow, your income from the business assets may rise greatly.

If your income from the family business is landing you and your family in the top tax brackets, you can form an HUF to reduce the tax outgo. HUF can help you evenly distribute the income among the family members and reduce your overall tax outflow on the income.

How to Form HUF?

  • A Hindu, Sikh, Jain or Buddhist family with at least one male member can form an HUF

  • Create the Deed for HUF

  • Karta can transfer income generating assets to HUF as gifts

  • Get a separate PAN card for the HUF

  • Open a bank account in the name of HUF

Benefits of Forming an HUF

There are several advantages of forming an HUF such as:

  • Family members can split the family’s income and file taxes separately, thus reducing their tax liability on both individual and HUF tax return.

  • Ancestral joint family assets are not a requirement for the HUF to exist.

  • Women in the family can make a gift towards the HUF and gift property in their name.

  • Getting loans is easier for the members of an HUF.

  • The official status of an HUF and its control can remain with the women of the family in the event of the death of the last male member, without any need to dividing the acquired or ancestral assets of the HUF.

  • Women can be the co-partner with their husband (or Karta) in the HUF even though they cannot start a separate account on their own

  • HUF can act as a taxpayer and invest in tax saving instruments

Impact of forming an HUF on Family’s Tax Liabilities

Let us understand the significance of HUF’s and their impact on tax savings with an example.

Consider a family of four - husband, wife and two children. Husband’s income is Rs.24 lakhs, and his wife’s income is Rs. 18 lakhs. They also have a family run business from which the annual earnings amount to Rs. 8 lakhs. These earnings can be either taxed in the hands of husband, wife or both.

Situation 1:

If the earnings are taxed in the hands of the husband, who is currently in 30% tax bracket, he would require paying 30% of Rs. 8 lakhs, i.e. Rs. 2.4 lakhs as tax.

Situation 2:

If the earnings are taxed in the hands of the wife, who is currently in 30% tax bracket, again she would require paying 30% of Rs. 8 lakhs, i.e. Rs. 2.4 lakhs as tax.

Situation 3:

If the earnings are taxed equally in the hands of both husband and wife, both would require paying tax at 30% on Rs. 4 lakhs, i.e. Rs 1.2 lakh each.

Situation 4:

However, if the income from the family-run business is taxed in the hands of HUF, the tax payable by the HUF as computed as per the tax slabs would be approx. Rs. 75,000.

Therefore, taxing the earnings from the family-run business under HUF would lead to a tax saving of Rs. 1,65,000 lakhs per annum (Rs. 2,40,000 – Rs. 75,000).

 

Appendix 1: Tax Slabs & Total Liabilities A.Y. 2019-20 (F.Y.2018-19)

Health & Education Cess at 4% of Max Tax Liability will apply to all taxpayers.

Tax Slab for Individuals below 60 Years of Age

AGE

INCOME TAX SLABS

TAX RATE

MAX. LIABILITY (Rs.)

 

Less than 60 years

Up to 2,50,000

Nil

Nil

2,50,000 to 5,00,000

5%

12,500

5,00,000 to 10,00,000

20%

112,500

More than 10,00,000

30%

112,500 + 30% of (Income – 10 Lakh)

 

Tax Slab for Individuals ageing between 60 to 80 years

AGE

INCOME TAX SLABS

TAX RATE

MAX LIABILITY (Rs.)

60 years to 80 years

Up to 3,00,000

Nil

Nil

3,00,000 to 5,00,000

5%

10,000

5,00,000 to 10,00,000

20%

110,000

More than 10,00,000

30%

110,000 + 30% of (Income – 10 Lakh)

 

Tax Slab for Individuals ageing Above 80 Years of Age

AGE

INCOME TAX SLAB

TAX RATE

MAX LIABILITY (Rs.)

 

Above 80 year

Up to 2,50,000

Nil

Nil

2,50,000 to 5,00,000

Nil

Nil

5,00,000to 10,00,000

20%

100,000

More than 10,00,000

30%

100,000 + 30% of (Income – 10 Lakh)

 

Surcharge on the Tax

If your taxable income is more than Rs. 1 crore in the financial year 2018-19, a surcharge may apply to the total tax payable.

The surcharge,like the Health & Education Cess,is applicable to the tax payable on the total taxable income. The surcharge can be calculatedusing the below-mentioned rates:

  • Surcharge: 10% of income tax, where the total income exceeds Rs.50 lakh up to Rs. 1 crore

  • Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore

Appendix - 2: Deductions Available to Resident Individuals& HUF

TYPES OF TAX SAVING ACTIVITIES

SECTION

MAXDEDUCTION AMOUNT

Investments & Expenses

80C

up to Rs. 1,50,000

80CCC

Additional NPS Investments

80CCD(1B)

up to Rs. 50,000

Expenses on a handicapped dependent

 

80DD

For Disability up to 80% - Rs. 75,000

For severe disabilities –Rs.1.25 lakhs

Treatment of specified illnesses

 

80DDB

Age

Up to 60 years - Rs.40,000 
60 to 80 years – Rs.60,000 
above 80 years – Rs.80,000

Education loan interest payment

80E

Nil. Actual interest paid

Home loan interest payment for first-time home-owners

80EE

Up to Rs.50,000

Donations to approved charitable institutes

80G

50% or 100% of the donated amount

Rent paid by employees not having HRA

80GG

Lesser of the following:

  • 25% of total income

  • Rs.5000 per month

  • Rent paid to exceed 10% of total income

Contributions made to a political party by companies and individuals respectively

80GGB

80GGC

Nil. 100% actual contribution made, by other than cash only.

Saving account interest

80TTA

Up to Rs.10,000

Handicapped tax-payers can claim this deduction

80U

Disability up to 80% - Rs.75,000
Severe disabilities - Rs.1.25 lakhs

Royalty or patent income

80RRB

Up to Rs.3 lakhs

Received Gift

56(2)

Up to Rs. 50,000

 

Appendix 3: Deductions Available to NRIs and PIOs (Person of Indian Origin)

TYPES OF TAX SAVING ACTIVITIES

SECTION

MAX DEDUCTION AMOUNT

Investments & Expenses

80C

up to Rs. 150,000

80CCC

Education loan interest payment

80E

Nil. Actual interest paid

Home loan interest payment for first-time home-owners

80EE

Up to Rs. 50,000

Donations to approved charitable institutes

80G

50% or 100% of the donated amount

Contributions made to a political party by companies and individuals respectively

80GGB

80GGC

Nil. 100% actual contribution made by other than cash only.

Saving account interest

80TTA

Up to Rs. 10,000

Royalty or patent income

80RRB

Up to Rs. 3 lakhs

Received Gift

56(2)

Up to Rs. 50,000

Why Choose Max Life

Here are some of the numbers which speak about our accomplishments

Why Choose Max Life

Here are some of the numbers which speak about our accomplishments
Claims Paid Percentage

98.74%

98.74%

(Source : Annual Results Release FY18-19)

Max Life Presence

239 Offices

239 Offices

(Source : Annual Results Release FY18-19)

Sum Assured

₹7,03,972 Cr.

₹7,03,972 Cr.

In force (individual) (Source : Public disclosure FY18-19)

Assets Under Management

₹62,798 Cr.

₹62,798 Cr.

(Source : Public disclosure FY18-19)

More reasons why our customers choose us

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