Income Tax for Dummies

LTA (Leave Traveling Allowance / Leave Traveling Assistance) given by your employer as part of your salary for your travel expenses while you are on leave. You will anyway receive this money from your employer but you need to pay tax if you have not really traveled unless you claim LTA tax exemption benefit. This exemption comes under the provisions of Section 10(5) of the IT Act according to which in the case of an individual, the value of any travel concession or assistance received by him will be exempt if it is received - from his employer, for himself and his family - in connection with his proceeding on leave to any place in India. Important point to note here :     You have to be on leave in the period for which your claiming the LTA. (or) travel after your retirement (or) travel after after termination of your service. This exemption covers only your travel expenses --- Hotel, food, sight-seeing, local conveyance etc are not included. You can not cl...

We have seen various tax saving options in previous articles. Apart from 80C tax saving options, you have other ways to save tax as well. Section 80D : Mediclaim Premium You can claim up to 15,000 for tax deduction on the amount you paid for mediclaim policy premium for self and other family members (spouse and dependents like parents/children). If you are senior citizen, maximum amount extends upto 20,000. If you are paying the premium for your parents (whether dependent or not), you can claim an additional maximum deduction of Rs. 15,000. Section 80DD : Dependent Treatment or LIC Policy According to the Income Tax Act, if you are paying a premium to Life Insurance Company (LIC) or any other insurance company (approved by the Income Tax board) for the medical treatment of a ‘dependent’ physically disabled person, you can avail exemption under the section 80DD. Here, the ‘dependent’ should be none other than your spouse, children, parents or sibling. If the person is...

House Rent Allowance (HRA) is an allowance given by an employer to an employee. The sole purpose of this is to meet the cost of renting a home. You can claim the HRA tax benefits only if You have a HRA component in your salary structure. You are staying in a rented accommodation. Rent exceeds 10% of your salary ( Basic +   Dearness allowance (DA)   ). To take this benefit you either need to submit the original rent receipts or the registered rent agreement. This is mandatory only if your rent exceeds Rs 3000 though. If you are living   with your parents and paying rent to them, then you can claim the tax benefit on that also. Please remember that your land lord or your parents need to show this as rental income in their returns. So, even if you are not actually paying rent to your parents, you could still take rent receipts signed by your parents and claim the tax benefit. If your parents fall in lower tax breaks then it would be beneficial to you as a fam...

This is by far most famous section in Income tax by most of us, because u/s 80C you can claim up to 1,00,000 as deductions. Here is the list of investments which can offer you these deductions under this section. Following investment are covered under section 80C 1. Provident Fund / Employee Provident Fund  If your salaried person, your employer deducts EPF from your salary. All such contributions are counted towards 80C. 2. Public Provident Fund You can open PPF account at post office or any national bank. All such contributions are counted towards 80C. 3. National Saving Certificate You can purchase NSC certificates at Post Office. NSC is for either 5 or 10 years. One important thing you need to note here is that, the interest accrued every year is taxable but such interest is deemed to be re-invested, so is eligible for deduction under 80C in the year in which you got the interest. 4. Five Year Bank Fixed Deposits All 5 year fixed deposits are eligible under this deduct...

Hi Everyone, My name is Ahmed Shareef. I work as Software engineer at a MNC. I am not an expert in Income Tax or on Personal Finance. But I am very passionate about Economics and Personal Finance. In this blog I will try to easily explain what is Income Tax, How to take benifits of various Income Tax Schemes or Regulations. I will try to answer some of the questions you have as well. These are number of blogs, websites which explain you regarding various rules of Income Tax. They often do very good job at it. But I figured that, the information I need is spread across multiple sites, and often it takes lot of time to understand all the rules and regulations. Also, I found it is very hard to understand it as well. In this blog, I will try to explain to you things in a more non-technical, easy to understand way. These are things I learnt while stuggling to understand these rules. Here, I will try to explain you how to save on your taxes -- remember I wont be teaching anything abou...