Tips on how you can pay less tax and save more!

The Budget is over.

According to most financial analysts, though the Budget is not big bang, it is pro-growth.

There has not been much change to the taxation policy and people are keen to know how much can they save on the taxes post Budget.

Therefore, questions poured in from every corner during a live post-Budget tax chat on rediff.com hosted by Sandeep Shanbhag on Tuesday.

Sandeep Shanbhag is a chartered accountant and director of Wonderland Consultants, a tax and financial advisory firm in the business for over 20 years.

Here is the transcript:

Satish Pulli
Is VDF better than PPF?
sandeep shanbhag
maybe you mean VPF. VPF is your co pf. ppf is a general scheme fashioned something like a pf but that is open to the public. both are good. it is essential to invest the full amount of Rs. 1.50 lakh per year - whether in vpf or ppf

Vinay Shukla
What is the difference between recurring investment and regular investment term?
sandeep shanbhag
just as the name suggests - recurring investment is repeated investments - something like a recurring deposit or an SIP in a MF. Regular investment means one time lump sum investment done on a regular periodic basis

sumeet salgaonkar
Bank Fixed Deposits and Postal Schemes, will it be beneficial to invest in these?
sandeep shanbhag
I am not too big a fan of postal schemes and bank fds. the reason is that the interest from these avenues while being modest is fully taxable. after tax, the interest will not even cover inflation and you will actually be losing capital. better option would be a mix of debt & equity MFs.

Chitresh Gupta
If I invest 1.5L in PPF and 1.5L in Sukanya Samriddhi Ac every year, Will both have tax free maturity ?
sandeep shanbhag
Sukanya Samriddhi is a scheme that offers tax benefit under Sec. 80C. So you cannot invest 1.5L in both SS & in PPF. Combined limit of the two will be Rs. 1.5L

Sanjay Rao
My CTC includes an HRA component. I stay in my mother's house even though I have one flat in my name on the same floor. My mother is a senior citizen and has undergone a bypass surgery and so is dependent on me. I will be letting my flat out on rent next year and want to know if I can declare it yet show that I am paying rent to my mother. Thanks.
sandeep shanbhag
Technically you can do so - there is no provision in the law that stops you from the same. However, in cases where your own house is in a different locality (maybe in the same city) you would be justified. Now, it would just seem as if it is a tax evading mechanism. YOu should be willing to face litigation if ITO objects

Jyotsanarane
5 major tax reforms the FM could have initiated
sandeep shanbhag
borders on the farcical. An amount of at least Rs 50,000 is required to make this deduction meaningful.

sandeep shanbhag
lastly Education: The government wants to encourage education. However, education allowance for children has remained static for over twelve years now at Rs. 100 per month per child for a maximum of two children (earlier it was Rs. 50). Ditto for hostel allowance at Rs. 300 per month per child
sandeep shanbhag Increase in reimbursement for medical expenses Spiraling health care costs are a reality and there is no system of government sponsored health plans. In such circumstances, having a paltry limit of Rs. 15,000 borders on the farcical. An amount of at least Rs 50,000 is required to make this deduction meaningful

ramakrishna
I want to invest 50,000 per month for 5 years. How & what % to do it in VPF, Mutual Funds, Gold any thing else. I have health cover for 6 lacs & 5 Lacs LIC.
sandeep shanbhag
difficult to reply to this q without knowing your background, risk profile etc. However, as a thumb rule, invest 10% in gold, 20% in PPF and the rest in MFs that have a track record of at least 10 years. also buy term insurance of a value that would be meaningful to your family.

Sai Kanichat
So much vociferous talk on Inflation and common man's burden of continuing the living, but raising the Service tax even to the extent of Clean-Ganga cess and unaltering the Basic Exemption Limits on the contrary - Sir should we presume, there is a missing balance in the Governance or is this the Regimental voice of the new Government ? Matters go worse not accha din!
sandeep shanbhag
I agree. With a five year term and a clear majority, the government had pretty much a carte blanche to bring in big ticket reforms that would have not only made the country but also the entire world sit up and take notice. But inexplicably they chose not to do so.

Rama Nageshwara-Rao
I have invested in Shares, Mutual funds, PPF and ULIP. Does Budget 2015 will have any impact on these things? Is there any change required?
sandeep shanbhag
no impact of budget directly on these investments. change if at all is that ensure that if you invest in ulips, the charges are at a bare minimum.

sheetal
What is the Medical expenditure for self and dependant under Section 80DDB of the Act?
sandeep shanbhag
Under sec. 80DDB a deduction is available up to Rs. 40,000 (Rs. 60,000 for senior citizens) for amount incurred on medical treatment of certain chronic and protracted diseases such as Cancer, AIDS, Thalassaemia, Haemophilia etc.
sandeep shanbhag
Further, a higher limit of deduction of up to Rs. 80,000 for similar treatment of very senior citizens has been proposed.

sandeep shanbhag
also no requirement of a certificate from a govt hospital doc. certifcate rom doc from pvt hospital will also do
manoj
Are the charges of pension plans offered by life insurers, higher than those of the NPS?

sandeep shanbhag
yes - nps is cheapest
SREEKAR MOHAPATRA
earlier when 80c limit was 1 lakh, NPS contribution was exempted as over and above 80c limit. Has it been over and above 1.5 lakhs this financial year ? if no, does it mean I can still save another 50 k in ELSS (assuming i am already invested 38k py for last 2 years) or my extra investment must go to NPS only ?

sandeep shanbhag
80C limit is 1.50 lakh. nps there is an additional 50K limit
31 minutes ago  
Debasis Majumdar
Any minimum time to remain invested in NPS?

sandeep shanbhag
there are 2 kinds of accounts - tier 1 & tier 2 tier 1 is mandatory and withdrawals only possible after attaining 60 yrs of age - tier 2 is more of an investment oriented account where no time limit on withdrawal
Rachit Patil
Is Sukanya Saving (Girl Child) is the part of 80C now?

sandeep shanbhag
yes
vijay
What is the limit of reduction on Health Insurance? Is there any reduction on Health insurance for senior citizens?

sandeep shanbhag
Section 80D to individuals and HUFs in respect of health insurance premium had been fixed way back in 2008 at Rs.15000/- and Rs.20,000/- (for senior citizens) respectively. In view of continuous rise in the cost of medical expenditure, Budget 2015 proposes to raise the limit of this deduction to Rs. 25,000 and Rs. 30,000 respectively.
sandeep shanbhag
Further, very senior citizens (80 years or more) are often unable to get health insurance coverage and are therefore unable to take tax benefit under sec. 80D. Accordingly, as a welfare measure towards such very senior citizens, it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen

sandeep shanbhag
if no payment has been made to keep in force an insurance on the health of such person, would be allowed as a deduction up to Rs. 30,000. However, if such a very senior person does have a health insurance policy, then the aggregate deduction available (medical insurance plus medical expenditure) would be limited to Rs. 30,000.
john
What is ELSS funds ?

sandeep shanbhag
elss funds are equity mfs that offer 80C benefit. lock in is 3 yrs. best tax saving option for young ppl
sandeep shanbhag
tax saving wealth creation. its like getting paid to save tax

rahul
Best investment options under Section 80C to save tax?
sandeep shanbhag
combination of elss & ppf according to your age. younger age - elss bias. as one becomes older bias shifts towards ppf. but at the end of the day, ppf elss = tax planning

Vinay BK
Hi Sandeep, How do i open NPS.?
sandeep shanbhag
most banks will open an account for you. even icicidirect & cams if I am not mistaken offer nps accounts.

romil
Has the transport allowance increased for salried people?
sandeep shanbhag
yes has gone up to 1600 pm The increase will reduce taxes by Rs 2,966 in the 30% tax slab, by Rs 1,978 in the 20% slab & by Rs. 990 in the 10% slab

hardik
For salaried people who do not get provident fund, what are the options for him to Get tax benefits?
sandeep shanbhag
those who dont get pf - should create their own pf by investing in PPF. PPf is nothing but self created pf

Rashmi Lokar
Is there any benefit for the small and the mid income earners from this budget?
sandeep shanbhag
No change in Exemption Slabs, Tax Rates or even the Sec. 80C limitThis is the trifecta that affects the amount of tax that you and I pay. Lower taxes can only be brought about by making changes to one or more of either the basic exemption limit, the actual tax rate or tax deductions.
sandeep shanbhag
But med ins limits have doubled. nps contribution 50K more limit.wealth tax abolished.

Keki Patel
Service Tax increased to 14% is the worst possible tax levy in this budget. Price of EVERYTHING used daily by the Aam Aadmi will increase. Intolerable. No increase in IT tax slab another downer.
sandeep shanbhag
Service tax, though an indirect tax, directly adds to our cost of living. Expenses on almost all amenities such as telephones, electricity, restaurants, transport, credit cards etc., are subject to service tax. As this service tax is passed on by the service provider, in effect, it is the common man, irrespective of his income, who bears it
sandeep shanbhag
Any increase therein would further add to the burden of the aam aadmi – something the government could have avoided especially in the current environment where general price levels remain elevated

Nagaraja S-P
[SKB] Has the transport allowance increased for salried people?
sandeep shanbhag
Yes it has doubled to 1600

Budget 2015: Complete Coverage