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For Assessment Year 1999 - 2000

What are the various tax-planning avenues?

For claiming tax concessions, Section 88 offers an excellent opportunity to reduce your tax liability. Under this Section, any amount paid out of your income chargeable to income tax in certain specific schemes qualifies for deductions from tax payable at a flat rate of 20 per cent. Presently, the limit for making such investments is Rs.60,000 for some specified schemes. However, you can also invest an additional Rs.10,000 in new equity and debenture issues of infrastructure, power and telecom sector companies.
This way, you will reduce your tax outgo by Rs.14,000. (20% of Rs.70,000)

Tax Savers

See IDBI Tax-Saving Bond

What are capital gains?

When you sell any capital assets, viz., stocks, bonds, mutual funds or real estate, the  profit you make is called "capital gains". As per the Income Tax Act,1961 if you hold stocks, bonds, or mutual funds for more than a year, profit on such sale would be termed as "long-term" capital gains. If you sell them within 12 months, profit, if any, would be termed as "short-term" capital gains. Of course, in case of real estate, the minimum holding period for making long term capital gains is  3 years. Capital Gains invite concessional tax rates @ 20 per cent only.

How can I claim exemption from capital gains?

As it is, long term capital gains enjoy a unique advantage which reduces your income tax liability. It is called INDEXATION BENEFIT, by which, your capital gains is reduced by a notional rate of annual inflation rate. Thus, your effective tax liability is reduced. For example, if you had purchased a flat in April 1982 for Rs.2,00,000 and sold it in 1998 for Rs.15,00,000. Without taking indexation benefits into account, you would have paid capital gains tax on Rs.13,00,000 (Rs.15,00,000 minus Rs.2,00,000). But if you consider indexation benefits, you would pay tax on Rs.8,92,660 only. Because of indexation benefits, your cost of acquisition has been inflation-adjusted to Rs.607,340 (as against Rs.2,00,000 only). See the Indexation table below.

For claiming exemption from long term capital gains, you have two sections -Section 54 EA and Section 54 EB under the I.T.Act. Under Section 54 EA, if you invest the entire NET SALES CONSIDERATION  in any eligible investments for a lock-in of 3 years, you get fulll exemption from capital gains tax. Alternatively, you may choose to invest only capital gains under Section 54 EB in any eligible investments for a lock-in of 7 years, and claim full exemption from capital gains.

So far, most of the mutual funds and bonds are eiligble investments for claiming exemption from capital gains under Sections 54 EA and 54 EB.

Note: Budget 1997 Flash! Indexation Benefits for bonds removed. In order to hedge the investor against a notional loss due to inflation, the government had earlier allowed investors to offset the rate of inflation against his capital gains (known as indexation benefit). However, in the Budget 97, this indexation benefit has been withdrawn for the bonds and debentures

COST INFLATION INDEX (INDEXATION FACTORS)

FINANCIAL YEAR INFLATION INDEX
          

What are the due-dates with tax?

If you are a company : 30th November
If your accounts are to be audited : 31st October
If you have income from business or profession : 31st August
In all other cases (including Salaried employees): 30th June

What are the prescribed forms to be filed ?

1. In case of companies - Form- 1

2. In case of a person other than a company :

• Where the total income includes profits and gains of business or profession - Form-2
• In any other case - Form-2A or 3.

3. In case of charitable or religious trust - Form-3A.

Is quoting PAN/GIR compulsory?

It is mandatory to quote PAN/GIR numbers in respect of certain transactions namely:

Purchase and Sale of immovable property

Purchase and Sale of motor vehicles

Transactions in shares exceeding Rs.50,000

Investing in Fixed Deposits of more than Rs.50,000

Applications for telephone connections

Payment to hotels exceeding Rs.25,000.

It is no longer mandatory to quote your PAN/GIR no. for opening a new bank account.

What are the other eligible deductions under the Income Tax Act?

Section 80 CCC - Premium on LIC’s annuity plan JEEVAN SURAKSHA upto Rs.10,000

Section 80 D - Premium on Mediclaim policies upto Rs.10,000 for individuals under 70 years

Section 80 DD - Deduction of Rs.15,000 for medical treatment of a dependent relative who suffers from a permanent physical disability

Section 80 DDB - Deduction of Rs.15,000 on treatment of protracted diseases for an individual for himself or a dependent relative and to an HUF for any member of the family.

Section 80 E - A ceiling of Rs.25,000 for 8 successive years in respect of loan for higher education

Section 80 G - Deduction of 50 - 100 per cent for donations to specified bodies

Section 80 L - Deduction upto Rs.15,000 (of which Rs.3,000 is reserved additionally for dividends from mutual fund units and interest on government securities) in respect of income from interest and dividend.