Are you looking to save some tax?

YOUR first port of call should be Section 80C of the Income Tax Act. Section 80C provides for deduction from Gross Total Income for certain eligible investments and payments. Key points to note:

Employee Provident Fund (EPF): Salaried individuals are compulsorily required to contribute minimum 12% of the Basic Salary to EPF. This amount is deducted from monthly payroll. Employer is also required to make a matching contribution towards Employees retirement kitty. Employer has to contribute 8.33% of Basic Salary towards Employee Pension Scheme (EPS) and balance 3.67% towards EPF (for the purpose of Employer contribution to EPS, basic Salary is restricted to maximum Rs 6500 per month, i.e. maximum contribution to EPS is Rs 541 per month and balance of Employer’s 12% contribution will go into EPF). For the purpose of Section 80C deduction, Employee’s own contribution towards EPF is eligible. Note Employer’s Contribution to EPF is not eligible for Section 80C deduction. 

Voluntary Provident Fund: Employee is free to voluntarily make contribution to EPF over and above 12% of Salary as required by law. This voluntary contribution by an individual towards EPF is also eligible for Section 80C deduction. 

Public Provident Fund (PPF): 

1. Contribution made by an individual to PPF account is eligible for Section 80C deduction. Contribution to PPF account of spouse and children also eligible
2. HUF can contribute to PPF account of any member of the HUF
3. PPF account can be opened with Post office and select branches of State Bank of India, other PSU banks and even some Private banks 
4. Minimum deposit is Rs. 500 and Maximum is Rs. 70,000 in a financial year (1st April to 31st March). One deposit with a minimum amount of Rs.500 is mandatory each financial year
5. Lock-in for 15 years. Partial withdrawal after 7 years allowed 

Pension Funds: Contribution towards Pension Funds is EPF is eligible for Section 80C deduction. Note Section 80CCC which restricted Pension Fund contribution to Rs. 10,000 is not applicable with effect from 1st April 2006.

Superannuation fund: Contribution to approved superannuation fund is eligible for Section 80C deduction.

Deferred Annuity:

1. Payment in respect to non-commutable deferred annuity plan taken in the name of self, spouse or child is eligible for Section 80C deduction
2. Deferred annuity deducted from Government employee, subject to maximum of 20% of salary is also eligible 

Life Insurance Premium: 

1. Life insurance premium paid for yourself, your spouse or your children
2. HUF can claim Section 80C deduction in respect of premium paid for insuring life of any member thereof
3. Life insurance premium paid by an individual towards insuring life of his parents (father / mother) or in-laws or brother / sister is not eligible 
4. If there is more than one policy, aggregate amount of premium paid will be eligible for deduction. Also it is not compulsory to have the insurance policy from Life Insurance Corporation (LIC), even insurance bought from private players is allowed
5. If policy is surrendered within 2 years of commencement, no deduction in respect of the Insurance premium paid is allowed. Moreover the aggregate amount of the deductions allowed in respect of such policy in the preceding years is added to the income 

Unit Linked Insurance Policy (ULIP): 

1. Premium paid for ULIP is eligible
2. Maximum premium eligible is restricted to 20% of sum assured
3. If policy is surrendered within 5 years of commencement, no deduction in respect of the premium paid is allowed. Moreover the aggregate amount of the deductions allowed in respect of such policy in the preceding years is added to the income of the year in which policy is surrendered

Equity Linked Savings Scheme (ELSS): 

1. Contribution to Mutual fund schemes notified under Section 10(23D) of the Income Tax Act (normally referred to as ELSS Mutual Fund Schemes or Tax Saving Mutual Fund Schemes) is eligible
2. Investment in ELSS has a lock-in period of 3 years. Pre-mature withdrawals isnot allowed under any circumstance

Home Loan Principal Repayment: The principal component of the Equated Monthly Installment (EMI) is eligible for Section 80C deductions. Follow the link to download an Excel based model to calculate Principal and Interest component of the EMI, i.e. EMI Amortization Schedule. Also note, if the Home is sold within 5 years from the end of the financial year in which possession of such property is obtained, no deduction in respect of the principal repayment is allowed. Moreover the aggregate amount of the deductions allowed in respect of principal repayments in the preceding years is added to the income of the year in which the Home is sold.

Other Home Related payments:

1. Stamp duty, registration fee and other expenses for the purpose of transfer eligible
2. Admission fee, cost of share and initial deposit not eligible
3. Cost of any addition or repair after issue of completion certificate or after the house property has been occupied or been let out is not eligible

National Savings Certificate (NSC): The amount invested in National Savings Certificate (NSC) can be included in Section 80C deduction. 

Infrastructure Bonds under Section 80CCF:
Deduction under Section 80CCF of upto Rs 20,000, for subscription to long-term infrastructure bonds was available for FY 2010-11 and FY 2011-12 (AY 2011-12 and AY 2012-13). This deduction was in addition to overall limit of deduction of upto Rs. 100,000 under section 80C. This deduction is not applicable from FY 2012-13 onwards (AY 2013-14 onwards).

Rajiv Gandhi Equity Saving Scheme (RGESS) under Section 80CCG:
A new scheme Rajiv Gandhi Equity Saving Scheme (RGESS) was introduced w.e.f. FY 2012-13 (AY 2013-14). RGESS is applicable for first time retail investors in securities market having annual income less than Rs. 10 lakhs. Investment has to be made in notified Shares, Mutual Funds and ETFs. The maximum investment permissible under RGESS is Rs. 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year.

Bank Term Deposits: Term deposits with scheduled bank for minimum tenor of 5 years

Term deposit with Post Office: Minimum tenor 5 years

NABARD Bonds: Investment in notified bonds issued by National Bank for Agriculture and Rural Development (NABARD) is also eligible for Section 80C deduction.

Senior Citizens Savings Scheme: Deposits in an account under the Senior Citizens Savings Scheme Rules is also eligible for Section 80C deduction.

Tuition fees:

1. Tuition fees paid for the purpose of full-time education for yourself, your spouse or your children (maximum two children)
2. Tuition fees must be paid to any university, college, school or other educational institution situated within India
3. Development fees or donation not eligible

Conclusion

As can be seen from above, there is considerable amount of flexibility an individual / HUF has in terms of deciding where to invest in order to claim Section 80C deduction. While where to invest would essentially vary across people depending on their financial goals, risk appetite, etc, as a general rule one can look at the following investment options in terms of preference:

1. EPF: For Salaried individuals EPF investment happens automatically and compulsorily.
2. Home Loan Principal Repayment: If you have taken Home Loan and are paying EMI, principal component of the EMI is automatically eligible
3. Life Insurance: Every individual should have adequate amount of Life Insurance coverage. Term Policy which is pure risk cover is recommended as the premium payable for required insurance amount is less and more importantly it helps in segregating insurance from investment.
4. ELSS / PPF: Whatever balance amount is left can be invested in ELSS or PPF depending on the risk appetite of the individual. While PPF would provide stable and assured returns, ELSS is expected to provide higher return over a longer investment horizon. In case of non-salaried individuals since there is no EPF investment, some allocation to PPF is highly recommended. For relatively younger individuals (I don’t know how to define this term, but let’s say individual below the age of 45 years) greater allocation to ELSS is advisable since equity as an asset class has traditionally provided highest return over a long investment horizon. Even within ELSS, it would be strongly recommended to go for Systematic Investment Plan (SIP), as it would help in spreading the investment over a period of time. Follow the link to download an Excel based model to calculate the value of Mutual Fund SIP Investment over a period of time, i.e. Mutual Fund SIP Calculator.

To conclude, while there is no “one size fits all” solution, key is for an individual to match his financial goals with the varied investment options available for claiming the Rs 100,000 deduction under Section 80C.

Save tax under 80G

Deduction U/s 80G of Income Tax act 1961 for donation.

INSPITE of all the contributions made to social causes, there is a huge gap between the demand of money from the needy and the amount donated by philanthropists. This probably, is the reason why the Government has given tax benefits on donations. The amount donated towards charity attracts deduction under section 80G of the Income Tax Act, 1961. Section 80G has been in the law book since financial year 1967-68 and it seems it’s here to stay. Several deductions have been swept away but the tax sop for donations appears to have survived the axe. The main features of tax benefit with respect to charity are as follows:

Allowable to all kind of Assessee:- Any person or ‘assessee’ who makes an eligible donation is entitled to get tax deductions subject to conditions. This section does not restrict the deduction to individuals, companies or any specific category of taxpayer.

Donation to Foreign Trust:- Donations made to foreign trusts do not qualify for deduction under this section.

Donation to Political Parties:- You cannot claim deduction for donations made to political parties for any reason, including paying for brochures, souvenirs or pamphlets brought out by such parties.

Only donation made to made to prescribed funds and institutions qualify for deduction: - All donations are not eligible for tax benefits. Tax benefits can be claimed only on specific donations i.e. those made to prescribed funds and institutions.

Maximum allowable deduction:- If aggregate of the sums donated exceed 10% of the adjusted gross total income, the amount in excess of 10% ceases to be entitled for tax benefit.

Documentation Required for Claiming deduction U/s. 80G

• Stamped receipt:  For claiming deduction under Section 80G, a receipt issued by the recipient trust is a must. The receipt must contain the name , address & PAN of the Trust, the name of the donor, the amount donated (please ensure that the amount written in words and figures tally). In case of donation which are eligible for 100% deduction recipient should also insist on form 58 from trust. Form 58 contains the details of project cost (for which the donation is received), amount authorised under this project and the actual amount collected. Without form 58, the claim for 100% deduction could be rejected even if the receipt mentions 100% deduction.
• Mention of Registration No. of the Trust Under 80G on receipt:- The most important requirement is the Registration number issued by the Income Tax Department under Section 80G. This number must be printed on the receipt. Generally, the Income Tax Department issues the registration for a limited period (of 2 years) only. Thereafter, the registration has to be renewed. The receipt must not only mention the Registration number but also the validity period of the registration.
• Validity of Registration U/s. 80G  on the date of Donation:- The donor must ensure that the registration is valid on the date on which the donation is given. For example, the registration of a trust may be valid from April 1, 2007 to March 31, 2009. Now, if the trust does not get its registration renewed on or after April 1, 2009 then even if donation receipt is issued by the trust to the donor for donations received on or after April 1, 2009, the donor would not get any tax benefit.

With Effect from 1st October 2009 it is not required for a trust to apply for renewal of 80G certificate, if the same is valid on 01.10.2010 or valid upto a date thereafter unless department specifically ask Trust to apply for renewal.  So Old 80G certificate will remain valid if the same is valid

• Photocopy of  the 80G certificate :- Check the validity period of the 80G certificate. Always insist on a photocopy of the 80G certificate in addition to the receipt.

Only donations in cash/cheque are eligible for the tax deduction:-Donations in kind do not entitle for any tax benefits. For example, during natural disasters such as floods, earthquake, and many organisations start campaigns for collecting clothes, blankets, food etc. Such donations will not fetch you any tax benefits. No deduction under this section is allowable in case of amount of donation if exceeds Rs 10000/- unless the amount is paid by any mode other than cash.

Donation made by NRI: - NRIs are also entitled to claim tax benefits against donations, subject to the donations being made to eligible institutions and funds.

Deduction if donation deducted from Salary and donation receipt certificate is on the name of employer:- Employees can claim deduction u/s 80G provided a certificate from the Employer is received in which employer states the fact that The Contribution was made out from employee’s salary account.

Limit on donation amount: -There is no upper limit on the amount of donation. However in some cases there is a cap on the eligible amount i.e. a maximum of 10% of the gross total income.

Deduction amount U/s. 80G:- Donations paid to specified institutions qualify for tax deduction under section 80G but is subject to certain ceiling limits. Based on limits, we can broadly divide all eligible donations under section 80G into four categories:

a) 100% deduction without any qualifying limit (e.g., Prime Minister’s National Relief Fund).

b) 50% deduction without any qualifying limit (e.g., Indira Gandhi Memorial Trust).

c) 100% deduction subject to qualifying limit (e.g., an approved institution for promoting family planning).

d) 50% deduction subject to qualifying limit (e.g., an approved institution for charitable purpose other than promoting family planning).

List of Institution donation to whom is eligible to 100% deduction without any qualifying limit,  eligible to 50% deduction without any qualifying limit,  100% & Subject to qualifying limit and of those eligible for 50% deduction subject to qualifying limit are as follows :-

Donations with 100% deduction without any qualifying limit:

1. Prime Minister’s National Relief Fund
2. National Defence Fund
3. Prime Minister’s Armenia Earthquake Relief Fund
4. The Africa (Public Contribution – India) Fund
5. The National Foundation for Communal Harmony
6. Approved university or educational institution of national eminence
7. The Chief Minister’s Earthquake Relief Fund, Maharashtra
8. Donations made to Zila Saksharta Samitis.
9. The National Blood Transfusion Council or a State Blood Transfusion Council.
10. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
11. Army Central Welfare Fund, Indian Naval Ben. Fund, Air Force Central Welfare Fund.
12. National Illness Assistance Fund
13. Chief Minister’s or Lt. Governor’s Relief Fund
14. National Sports Fund
15. National Cultural Fund
16. Govt./ local authority/ institution/ association towards promoting family planning
17. Central Govt.’s Fund for Technology Development & Application
18. National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
19. Indian Olympic Association/ other such notified association
20. Andhra Pradesh Chief Minister’s Cyclone Relied Fund             

Donations with 50% deduction without any qualifying limit.

1. Jawaharlal Nehru Memorial Fund
2. Prime Minister’s Drought Relief Fund
3. National Children’s Fund
4. Indira Gandhi Memorial Trust
5. The Rajiv Gandhi Foundation
6. Donations to govt./ local authority for charitable purposes (excluding family planning)
7. Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB)
8. Donations for repair/ renovation of notified places of worship
9. World Vision India
10. Udavum Karangal       

Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income

1. Donations to the Government or a local authority for the purpose of promoting family planning.
2. Sums paid by a company to Indian Olympic Association      

Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income

1. Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.

Qualifying Limit:- The qualifying limits u/s 80G is 10% of the adjusted gross total income. The limit is to be applied to the adjusted gross total income. The ‘adjusted gross total income’ for this purpose is the gross total income (i.e. the sub total of income under various heads) reduced by the following:

• Amount deductible under Sections 80CCC to 80U (but not Section 80G)
• Exempt income
• Long-term capital gains
• Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies.

Eligible Donation:- There are thousands of trusts registered in India that claim to be engaged in charitable activities. Many of them are genuine but some are untrue. In order that only genuine trusts get the tax benefits, the Government has made it compulsory for all charitable trusts to register themselves with the Income Tax Department. And for this purpose the Government has made two types of registrations necessary u/s. 12A & U/s. 80G. Only if the trust follows the registration U/s. 12A, they will get the tax exemption certificate, which is popularly known as 80G certificate. The government periodically releases a list of approved charitable institutions and funds that are eligible to receive donations that qualify for deduction. The list includes trusts, societies and corporate bodies incorporated under Section 25 of the Companies Act 1956 as non-profit companies.

Tax benefit depends on rate of Tax applicable to the Assessee:- Let us take an illustration. Mr. X an individual and M/s. Y Pvt. Ltd., a Company both give donation of Rs. 1,00,000/- to a NGO called Satyakaam. The total income for the A.Y. year 2011-2012 of both Mr. X and Ms. Y Pvt. Ltd. is Rs. 3,00,000/-. The tax benefit would be as shown in the table:

	Mr. X	MS. Y Pvt. Ltd.
i) Total Income for the year 2011-12	3,00,000.00	3,00,000.00
ii) Tax payable before Donation	14,000.00	90,000.00
iii) Donation made to charitable organisations	1,00,000.00	1,00,000.00
iv) Qualifying amount for deduction (50% of donation made)	50,000.00	50,000.00
v) Amount of deduction u/s 80G (Gross Qualifying Amount subject to a maximum limit 10% of the Gross Total Income)	30,000.00	30,000.00
iv) Taxable Income after deduction	2,70,000.00	2,70,000.00
v) Tax payable after Donation	11,000.00	81,000.00
vi) Tax Benefit U/S 80G (ii)-(v)	3,000.00	9,000.00

Note :

• Education Cess & Sec. & Higher Educ. Cess has not been included in working of tax benefit.

ILLUSTRATION OF BENEFITS UNDER SECTION 80G

1. Donations to private trusts

Step 1: Find out the qualifying amount

The qualifying amount under this category will be lower of the following two amounts:

a) The amount of donation

b) 10 per cent of the gross total income as reduced by all other deductions under Chapter VI-A of the Income Tax Act such as 80C (PPF, LIC etc.), 80D (mediclaim), 80CCC (pension schemes etc.).

For example, a taxpayer named Laxmi Arcelor as taxable salary of Rs 500,000. He has deposited Rs 70,000 in Public Provident Fund and Rs 60,000 in his company provident fund. He donates Rs 45,000 to CRY (Child Relief & You) trust. Presuming he has no other income & presuming that Donation is eligible for 50% deduction, his taxable income will be computed as under:

Gross salary	Rs 500,000
Less: Deduction under section 80C restricted to	Rs 100,000
Gross total income (before 80G)	Rs 400,000

After making donation to CRY, his qualifying amount for 80G will be:

Actual amount of donation	Rs 45,000
10% of Gross total income as computed above	Rs 40,000 whichever is lower

Since 40,000 is lower, the qualifying amount will be Rs 40,000

Step 2: Find out actual deduction
The next question that arises is how much would be the actual deduction? In the case of donations to private trusts, the actual amount of donation would be 50 per cent of the qualifying amount.

Therefore, in the example given above, since the donation is made to a private trust, the deduction will be 50 per cent of the qualifying amount ie 50 per cent of Rs 40,000 = Rs 20,000.

So,

Gross total income (Before 80G)	Rs 400,000
Less: deduction under section 80G	Rs 20,000
Total income (taxable income)	Rs 380,000

Step 3: Check upper limit
Finally, the deduction under section 80G cannot exceed your taxable income. For example, if your income before deduction is Rs 3 lakh and if you have given donation of Rs 5 lakh to the Prime Minister’s National Relief Fund, please do not expect to claim a loss of Rs 2 lakhs. Your income will be NIL (Rs 3 lakh – Rs 3 lakh). The deduction will be restricted to the amount of your income.

ii) Donations to trusts/funds set up by the Government
In this category, the entire amount donated i.e. 100 per cent of the donation amount is eligible for deduction. There is a long list of 21 funds/institutions/purposes for which donations given would qualify for 100 per cent eligibility. Notable among this list are:

- The National Defence Fund

- The Prime Minister’s National Relief Fund

- Any fund set up by the State Government of Gujarat for earthquake relief

The funds that figure in this long list are all set up by the Government. Private Trusts do not figure in this list.

Thus, in this category of donations, the ceiling of 10 per cent of the gross total income as reduced by all other deductions under Chapter VI-A of the Income Tax Act does not apply.

In the above example, if instead of donating to CRY, had the donation been given to say, The Prime Minister’s National Relief Fund, then the calculations would have different as shown below:

Gross Total Income (Before 80G)	Rs 400,000
Less: Deduction under section 80G	Rs 45,000
Total Income (Taxable Income)	Rs 355,000

Your Home Loan & its TAX benefits..............

Buy Home is best option to save tax as well as got a huge benefit of investing your hard earned money

How save income tax in india

Before you decide to invest in a tax-saving instrument, go through this guide and rating of the most widely used options under Section 80C.

Take a home Loan you get triple benefit
1. Property rate is Increasing day by day
2. You will get tax rebate on both principle as well as Interest.
3. You get rent of your property.

Multiple options. Contradictory advice. And a deadline that's approaching fast. Many taxpayers find themselves in this situation at the beginning of the year when they have to make tax-saving investments. Are you also confused? Before you make a choice, go through our cover story to know which is the best option for you. We have rated the most common investments under Section 80C on five basic parameters: returns, safety, flexibility, liquidity and taxability. The rating separates the chaff from the grain. Whether you are a novice or a seasoned investor, it will help you cut through the clutter and choose the investment option that best suits your financial situation.