A lot of you think that filing of tax returns is not necessary if your income is not taxable. What's the point in filing returns when there is no tax to be paid in the first place, you might think?
However, do you know the advantages of filing your returns in this case?
At the same time, what if you are a tax payer who has exhausted her/ his Rs 1 lakh limit under Section 80 C? Is there any further scope for you to invest for tax saving?
In a chat with readers on July 10, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax planning.
For those of you who missed the chat, here is the transcript.
Part I: Five good ELSS funds to save your taxes
JAYAKUMAR asked, Good day Mr Mahesh. I would like to know if it makes sense to prepay housing loan if I have surplus funds. I am more into FDs where the interest rate is low. My worry is I will not be eligible for a rebate iff I do so. I am 40 years old and have a take-home salary of about Rs 35k.
Mahesh Padmanabhan answers, Good afternoon to you too. Considering the high interest rates prevailing currently it would definitely make sense to prepay the loan, if not fully then at least partly. The cost benefit between continuing the loan and availing the tax deduction needs to be worked out first before deciding the amount of prepayment.
In case the interest that you are currently paying is in excess of Rs 1.5 lakhs then you would do well to prepay certain amount of your loan. From the perspective of investment it has been our experience that only investment in equity has possibly beaten inflation rate which probably FD interest can never match (at least currently). In this regard you could at least start investing in mutual funds that have a diversified and balanced portfolio.
somesh asked, Good day Mr.Mahesh, I am earning Rs 7.4 lakhs per annum. Right now I have invested Rs 32,000 in LIC premiums. I need to know which other things can I invest in the remaining amount to avoid tax. Better than the best with high returns and minimum risks?
Mahesh Padmanabhan answers, ELSS mutual funds seem to be good option for you as these come with moderate risk profile and moderately high returns.
Shree asked, Hi Mahesh, can you suggest the ways to invest the money so that I can use the same money after around 3 years for purchasing a house. My take home CTC is Rs 6.5 lakhs.
Mahesh Padmanabhan answers, A three year time frame is a bit tight and probably the only avenue would be to invest in ELSS mutual funds as these come with a three year lock in period. But you would need to note that these are investments in equity and hence there could be a possibility of the market going down and you realising lower money than you invested. Next best option would be the five year lock in tax FDs where your principal amount would be secure.
bunty asked, Please advise: My wife is a house wife and earns Rs 6,000 per month through tuitions. She had also invested Rs 3 lakhs in shares, mutual fund etc, and her total income through this is Rs 44,000. We have also purchased one plot on her name (jointly). Please advise if this year do we need to fill income tax return if total taxable income is below Rs 1,50,000?
Mahesh Padmanabhan answers, Though currently your wife's income might be below the taxable limit requiring return filing, it would be better if you file your wife's return so as to bring her income flow on record declared with the tax authorities. This would ensure that later on there would be no problem questions as to the authenticity of your wife's income and asset.
Rohit asked, I have taken a home loan in December 2005. I changed my company in September 2006. My existing company is not ready to give me the loan interest benefit under 24B saying it's a risk for the company. They have asked me to claim it as refund from the IT department. Is there a way out to force the company to give me the benefit under 24B?
Mahesh Padmanabhan answers, If you are in a position to provide your provisional interest certificate issued by the financial institution then your employer would not be under any risk and could provide the deduction for such interest. Unless there are some other aspect probably your employer has not informed you. Moreover, my guess is that your employer would not be in a position to issue a revised Form 16 as they would have already filed their ETDS returns.
Gopathi Suresh asked, Hi, can you advise for tax savings? I have invested in a mutual fund. Is it that every mutual fund helps on tax saving.
Mahesh Padmanabhan answers, Not all mutual funds are tax savings funds. Specified funds are designated as Equity Linked Savings Scheme (ELSS) or Tax funds that are eligible for tax deduction. You would need to ensure that the MFs that you have currently invested in are such funds and if not then you would need to plan out accordingly.
anandpankaj asked, Hi Mahesh, I get a take home salary of Rs 31,117 per month after deduction of PF etc. I have taken a home loan and have to therefore pay EMIs which toatl upto Rs 1.5 lakhs annually. I am using my full Rs 1 lakh limit under 80C (Life insurance, principal on home loan). Is there any further scope or need for me to do anything?
Mahesh Padmanabhan answers, Depending on the structure of the salary you have, you could possibly claim deduction for medical expense, conveyance expense, or medical insurance etc. apart from the section 80C deduction.
Lalit asked, My wife is a finnance consultant. Her yearly income was commision earned by selling life insurance products. Her total income was Rs 30,000 even though insurance company has deducted TDS from her commision. Can she claim refund for the same?
Mahesh Padmanabhan answers, Yes you can claim refund if she holds proper TDS certificates for the tax deducted from the commission she received.
nilesh_07 asked, I have received Rs 3,00,000 as my retrenchment compensation. Will it attract tax?
Mahesh Padmanabhan answers, Section 10(10B) of the Income Tax Act, 1961 provides exemption for retrenchment compensation received by certain class of employees and subject to satisfaction of stipulated conditions. You would need to provide details to your tax counsellor to understand the exemptions available.
Mahesh Padmanabhan says, We thank all our viewers for participating in this session, we promise to be back for resolution of your queries.
Part I: Five good ELSS funds to save your taxes
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.