Buy home abroad, save tax in India

Sec. 54 of the Income Tax Act offers a way out of paying such tax. If the capital gain amount is invested in a residential house within one year before to two years after the sale, then the capital gains earned are fully exempted from tax. In case the investor intends to construct a house, the time limit is extended to within three years of the date of sale. Of course, if only a part of the capital gain is used, the exemption would be proportional and the excess will be chargeable to tax. So far, so good. Now comes the interesting part, especially for NRIs. Nowhere does Sec. 54 specify that the new house purchased should be within India. This means, to save capital gains earned in India, the NRI can even purchase a house in his or her own host country abroad and yet claim exemption. Why just NRIs, now even resident Indians can benefit from this rule. RBI allows an Indian resident up to $1,00,000 per annum to be invested abroad. Such investment could be even in property. So far, this was just a theoretical possibility based on a plain reading of the law. However, in a recent judgment, the Income Tax Tribunal in the case of Prema P Shah (Citation 282 ITR 211) has ruled that the exemption offered by Sec. 54 can indeed be extended to a property purchased in a foreign country. ..This judgment will have far reaching impact, especially on NRI investments and taxation. No one is born an NRI. Indian residents become NRIs when they go abroad for employment or business. More often than not, such persons own property in India, either the one they left behind when they went abroad and became NRIs, or one that is inherited. A number of such persons, who have set up a new life abroad definitely don't need a new property just to save on tax. Now, such persons can actually consider buying property abroad and claiming tax benefits in India.

Lost your Pan Card : How to get Duplicate Pan card

Its almost time for you to file income tax returns, and this is the last thing which you wanted to happen. You have lost your PAN card. Now you need to reapply for getting a duplicate PAN card. There is no need to panic as the procedure is not very difficult, however you shoul get yourself a duplicate PAN card as soon as possible.First you need to get a FIR filed at the police station about you loosing your PAN card.Now you need to know your PAN number. If you already know it then no problem, butif you don't then you cen get it by following ways .

1. Throug your Income Tax returns which you have already filed.

2. Credit Card department

3. From your Bank account

4. The cover letter which come along with the PAN card.

5. Through the PAN application counter foil numbers which you obtained at the time of PAN application. If the slip contains 15 digit acknoledgement No., then it is a NSDL application. If it contains 9 digits application number and 9 digit coupon number, then it is a UTITSL application. Fill these number on Income tax website and get your PAN number.Once you know your PAN number you can apply for a Duplicate PAN card.You can apply for a duplicate PAN card (its actually similar getting a fresh PAN card) in any UTI or NDSL branch. Pay Rs 67 fees, address proof, and colored photo. You can apply offline as well as online.

TAX SAVING TIP:LOSS FROM SHARES

To understand this tip first of all I would like to discuss the taxabilty provisions on Long term capital Gain/Loss From shares and securities
From 1.10.2004 onwards sale of a long term security (means where holding period is more than 12 month) ,on which STT paid (Securities Transaction Tax) is not liable for tax and fully exempted from Income Tax.
As the long term capital gain from the sale of securities is exempted from tax ,loss from such deals can not be adjusted from the other capital gain and can not be carry forward either.
Securities Transaction tax (stt) is payable for transaction made through stock exchanges.
what is the trick/tip
if you are planning to sell the shares on which you will have long term capital loss ,then sell them out of the exchange without paying STT and save tax .lets study with a example.
Example:Rajiv has sold a shares for 300000 which he has purchased for 500000 ,13 months back.similarly he has also sold a land for 500000 which he has purchased for 100000 four year ago.Rajiv has also salary income for Financial year 2008-09.
calculate tax in two situations
shares has been sold through stock exchange means stt paid.
shares has been sold to friend out of exchange.
Ans:Case -1:Calculation of tax Case one(through stock exchange)
income from salary =300000
Income from capital gain on capital gain =400000
(500000-100000)
tax liability=on 150000-300000 @ 10%=15000
20% on 400000 LTCG =80000
Net tax liability=15000+80000=95000
long term loss from shares sold through exchange being exempted income can not be adjusted from LTCG on land,and not not be carry forward either.
Case-2:(shares sold to friend out of stock exchange ) no stt paid
Income from salary =300000
Income from Long term capital gain
LTCG from land =400000
Less:LTCL from Shares=200000
net LTCG =200000
tax liability
salary=10% on 300000-150000=15000
Ltcg=20% on 200000 =40000
net tax liabilty =55000
so in First case Tax Liability is 95000 where as in second case the tax liability is 55000 means saving of 40000 tax by not selling shares through exchange !!!
Further if we have sold share out of exchange this year and made a loss and have no other long term capital gain then we can carry forward the loss for next eight years and adjust the loss from other long term gain,means the benefit is definite if we adjust it in this year or next eight year.
Note:
To avoid complication in calculation Indexation on cost of capital assets has not been done.
Shares and securities word has been used interchangeable though differently defined under the act.so read accordingly.
Sucharge and Cess on tax has also not shown to avoid complications.
You can also save tax from short term capital loss from same trick.
Short term capital gain saving another tip is here.

ZERO income tax upto Rs.13 lakhs income

Believe it or not, it's true.One would be forgiven for being sceptical because for the ongoing year (FY 2008-09), the total income exempt from income tax in the hands of a male individual is only Rs 150,000 and that for a woman taxpayer only Rs 180,000 (for senior resident Indian citizens above the age of 65 years, the tax exemption is higher at Rs 225,000 but for our purpose, we shall consider a family where all the members are below the 65 years of age.). So how, then, can an income of Rs 13.10 lakh be completely exempt from tax?You can achieve this by following one of the five golden rules of tax planning, namely, by spreading your income among your family members.This golden rule makes creative use of the classic power concept of divide and rule. The simple strategy is that each family member must have his or her independent source of income so as to legally become an independent taxpayer under the provisions of the Income Tax Law. When the entire income of a family belongs to just one member, the tax liability is very much higher than when the same income is divided among different members of the family.Thus, the first golden rule of tax planning requires that one develops income tax files for oneself, one's spouse, one's major children, the Hindu Undivided family, and for all other major relatives in the family, including one's parents.Now, under the income tax law it is not possible to arbitrarily divide or apportion one's income amongst different members of one's family - and then pay lower tax in the names of different family members. However, you can achieve this goal by intelligent use of the perfectly legitimate facility of gifts and settlements.Here is how:Generally, any gift you receive from various members of your family and specified relatives is not considered your income but a capital receipt. Thus, no income tax is payable on gifts received from relatives, and gifts received from parties other than relatives up to a sum of Rs 50,000 - and up to any amount at the time of marriage.Let us consider the example of a small family consisting of Mr. Zerotaxwala, his wife who is a homemaker and not a career person, his major son studying in college, and one major daughter studying in school. They also constitute a Hindu Undivided Family.Let us consider that the total combined income of all five members of the Zerotaxwala family, including the HUF, is Rs 13.10 lakh. Every member contributes Rs 70,000 in the PPF Account and has invested Rs 30,000 in an infrastructure or company or equity linked savings scheme, etc. such that each of the five assesses achieves full benefits of maximum deduction under Section 80C, namely Rs 100,000 each.Through an intelligent use of gifts and settlements by Mr. Zerotaxwala to all members of his family, each family member has investments in business, industry, house property, etc., in their own individual names in such a manner that each of the male members and the HUF would have a gross annual income of Rs 250,000 each, and both the female members have an income of Rs 280,000 each, in total adding up to Rs 13.10 lakh.And here is the beauty: this income of Rs 13.10 lakh can be totally tax-free. Here is how:Section 80C of the Income-tax Act, 1961 provides each individual taxpayer, including an HUF, a deduction of Rs 100,000 from his / her gross income when investments up to Rs 100,000 is made in stipulated investment avenues, such as PPF, infrastructure bonds, equity linked savings schemes, life insurance, etc. Thus, all the four family members, and also the HUF, can avail of this deduction under Section 80C to the extent of Rs 100,000 each.After availing of the deduction of Rs 100,000 each under Section 80C, the taxable incomes of the five taxpayers of the Zerotaxwala Family would be as follows:Mr. Zerotaxwala Rs 150,000Mr. Zerotaxwala's son Rs 150,000Zerotaxwala HUF Rs 150,000Mrs. Zerotaxwala Rs 180,000Mr. Zerotaxwala's daughter Rs 180,000There, we have it!The total tax liability of the Zerotaxwala Family is now ZERO, since the income of each taxpaying constituent individual / HUF is below the taxable limit which, as noted earlier is currently Rs 150,000 for male and HUF taxpayers, and Rs 180,000 for women tax payers.It may also be mentioned here that we have not considered the additional tax savings which are possible through a deity Trust, or a trust for an unborn person in the family, which would further increase the zero income tax level income to more than Rs 16 lakh.In addition, several items of fully exempted income, such as agricultural income, dividend income, income from mutual fund, etc., could be planned for each of the four family members, and also for the HUF, to secure a still higher level of zero income tax for the Zerotaxwala Family.By following the simple principles outlined above, you, too, can become a zerotaxwala family.

-----------Excerpt from Tax-Free Incomes & Investments: A-to-Z Tax Guide (A.Y. 2009-10) by R. N. Lakhotia, published by Vision Books. Mr. Lakhotia is one of India's top taxation experts.

Send ITR-V through POST for 2009-10

"Since the Form ITR-V is bar-coded, assessee is advised not to fold the same and post it in A4 size envelope. The ssessee shall furnish the Form ITR-V to the Income-tax Department bymailing it to “Income Tax Department – CPC, Post Box No - 1, Electronic City Post Office,Bangalore - 560100, Karnataka” within thirty days after the date of transmitting the dataelectronically. The Post Box shall deliver all the Form ITR-V to the Centralized ProcessingCentre (CPC) of the Income-tax Department in Bangalore. Upon receipt of the Form ITR-V, theCPC shall send an e-mail acknowledging the receipt of Form ITR-V. The e-mail shall be sent indue course to the e-mail address furnished by the tax-payers in his return. No Form ITR-V shallbe received in any other office of the Income-tax Department or in any other manner."
As per the above statement from the circular 3/2009, any assessee filing ITR electronically without digital signature, has to send ITR-V (acknowledgement received from e-filing website) through post to the above mentioned address. There will be no acceptance of ITR-V at any Income Tax Offices.
This measure gives the scope for increased electronic returns as Assessee may feel easy to upload and send it across through POST / Courier. It is also heard that, success of this measure will ease the decision of making ITR e-filing mandatory for all Assessees, from coming year.
Towards other points in ITR for 2009-10, UTN has been introduced. However, during e-filing, UTN field can be kept blank.

Post office savings may gain if bank rates decline

When the choppy stock markets turned consumers to safer fixed-income products last year, India’s multiple post office saving schemes did not gain popularity as was anticipated. But financial planners say post office schemes may turn attractive if banks’ interest rates continue to fall.
Post office saving schemes include fixed deposits, recurring deposits, public provident fund (PPF), Kisan Vikas Patra and National Savings Certificate (NSC).

Saving grace: Financial planners say post office savings schemes could turn attractive if the interest rates offered by banks continue to fall. Harikrishna Katragadda / MintCash-starved banks raised their one-year deposit rates to 10.5% in September last year, as against 8% return offered by post office saving schemes. However, bank deposit rates have since come down to 6.5-8.25% for one-year deposits.
A senior official in the department of posts said the total outstanding balance in post office savings schemes actually registered a fall, coming down to Rs5.5 trillion in the year ended March from Rs5.64 trillion the previous year.
“There has been a decline because people are shifting from postal savings to other instruments, which have better returns. Also, because of an increase in investment options under section 80C of the Income-tax Act, people have got more choices,” the official said, requesting anonymity as he is not authorized to speak with media.
Section 80C of the Income-tax Act, 1961, offers deductions in respect of certain payments in computing the total income of an assessee.
Bank deposits in 2008-09 stood at Rs39.52 trillion, compared with Rs32.97 trillion a year ago.
But bankers say the rate of interest offered by post office schemes should be brought down. “Administered rates distort the market. It forces money to flow from banks... Then banks can’t get deposits at lower rates and, therefore, can’t lend at lower rates,” said Hemant Kaul, executive director, Axis Bank Ltd. “Post office should decide (interest) rates depending on the cost to other players in the market. But that situation is far off. The issue needs to be addressed immediately.”
NSC, among the most popular post office schemes, offers an interest rate of 8% per annum, which is compounded half-yearly. The effective interest, which is a taxable income, comes to 8.16% per annum. PPF, too, gives an interest of 8% per annum, but it is compounded annually and is tax-free. In both the schemes, interest accumulates and is not paid out every year.
“Post office savings have gone down because the bank interest rates were pretty good in the last two years compared with post office schemes,” said Surya Bhatia, a New-Delhi based financial planner. “Investment in post office schemes may, however, go up if rate cuts happen further. Currently, both are offering around 8%.”
Some economists expect the soft rate regime to continue till the second half of fiscal 2011. In a research noted dated 1 June, Bank of America Securities-Merrill Lynch economist Indranil Sen Gupta pointed out that the gap between the 10-year bond yield and the prime lending rate of banks, at about 550 basis points, is too high to sustain and should come down. “This should protect our soft lending rate regime until second half of FY11,” Sen Gupta said in his report.
“Higher interest rates offered by banks and better returns from income funds over last two years caused a decline in post office schemes. Going forward, if interest rates fall further, we might see an increase in postal savings. We have to see how things pan out in the next six months,” said Gaurav Mashruwala, a Mumbai-based financial planner. “Given that post office schemes have sovereign guarantee and do not fluctuate with the market conditions, they are good avenues to invest in.”
Himanshu Kohli, a founder partner of Client Associates, a Gurgaon-based wealth management company, said that in 2008 people preferred to hold cash instead of making long-term investments. Since post office investments are binding, people didn’t go to post offices, he said.
But he said this year may be different.
“We may expect half to 1% fall in interest rates over 12 months. With 2-3% real rate of interest and (section) 80C benefits, post office savings offer a long-term hedge to beat inflation and provides safety, too.”

A salary structure that can save you taxes

To save taxes, it is important to factor in other components of compensation which might help in saving taxes. So next time you negotiate your compensation with your employer, keep the following points in mind:
HRA: It is possible to maximise the benefit received through HRA by balancing the figure in such a way that the figure calculated under all three methods is approximately the same.
PF: The contribution made by an employee to his/her PF is deductible under the overall limit of Section 80C. The most hassle-free way of saving taxes is by increasing the amount of this contribution. This will result in an automatic saving and one will not have to worry about making the necessary investments.
Other tax-free allowances: You can factor in fully exempt allowance in your compensation such as daily allowance, subsistence allowance, helper allowance, etc.
Perquisites: Non-taxable perquisites such as free lunch, club membership, company car, etc., can be added to the compensation package.
In addition to structuring your salary intelligently, you can also save tax by availing of various deductions available under the Income Tax Act.
Section 80C: As stated above, investments up to an amount of Rs 1 lakh annually are deductible from your taxable income under this section. This translated into a tax saving of Rs 30,000 in case you are in the highest tax bracket. This provides the individual with the double benefit of tax savings as well as investments.
Housing loan interest: In case you take a home loan to buy your dream house you can claim benefit on the interest you pay on it, up to an amount of Rs 1.5 lakh annually. This can result in a tax saving of up to Rs 45,000.
Educational loan: The interest that you pay for the repayment of any educational loan taken by you is deductible from your total income. There is no limit set for this amount.
Medical expenses: An individual can claim a deduction of up to Rs 40,000 per annum in respect of expenditure incurred in the treatment of one of the following diseases:
Neurological diseases
Cancer
AIDS
Chronic renal failure
Haemophilia
Thalassaemia
LTA: Travelling expenses incurred by the individual and his/her family on outstation trips can be claimed as LTA deductions twice in 4 years