tax advisor april 2011

8/6/2019 Tax Advisor April 2011

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In This Issue

Financial Year 2011-12 Do these things and save Taxes

Taxes on Leave encashment/Leave Salary

Investment Review-Reliance Gold Saving Fund

Received a tax refund mail-It a SCAM!!! Be Careful!!

April 2011

Design, Developed & Published by

Team Taxation

C-160, Okhla Phase-I, New Delhi-110020

# 011-40578000 Extn: 5166

[email protected]

TAX ADVISOR



Financial Year 2011-12-Do these

things & save Taxes

Financial year 2011-12 beckons as the last year for the Income Tax Act, 1961 as the Direct Tax

Code (DTC) would come into effect from the next year (April 1, 2012). As the New financial

year starts, the taxpayers should keep in mind following things, this will help them to plan

their tax investment as to maximize their returns and minimize taxes

Tax Slab for the Financial Year 2011-12

For the Financial Year 2011-12, male assesses will get additional basic exemption limit of Rs.

20,000 i.e. the limit extends from Rs. 160,000 to Rs. 180,000. Limit for Female assesses remains

same as in the last year i.e. Rs. 190,000. Limit for senior citizen has been raised from Rs. 240,000

to Rs. 250,000. Moreover, the age limit for senior citizen is reduced to 60years. Further, there will be a new category of tax payers from the Financial Year 2011-12; ‘very senior citizen’ having age

of 80 years or more will enjoy tax exemption upto Rs. 500,000.

Open a Public Provident Fund (PPF) Account:

PPF is one of the most popular investments in the country, due to security of the fund and an 8

per cent compounded annual return. Further, investment in the PPF has tax benefits under Section

80C, which effectively makes the return higher than 8 per cent. The investment can be made upto

a maximum of Rs 70,000 per annum in the PPF, minimum of Rs 500, in instalments or in one go,

depending on the cash scenario.



Get Additional Tax Benefit under section 80CCF

The limit for deduction from taxable income is Rs. 100,000, if you invest in tax saving invest-

ments like tax saving fixed deposits, or tax saving mutual funds, Public Provident Fund and oth-

ers.

Section 80CCF allows you to invest an additional Rs. 20,000 in infrastructure bonds, and have

that reduced from your taxable income in addition to the Rs. 100,000 deduction you get from the

other instruments.

One thing to note here is, that the tax benefit is there only in the first year, which means that if

you buy bonds worth Rs. 20,000 in this year – Rs. 20,000 will be deducted from your taxable in-

come while calculating tax this year. There is no tax benefit from next year onwards. While there

may be no TDS on the interest on these bonds, they are taxable, and the interest will be added to

your income, and it will be taxable.

Take housing loan and own your dream house

Indian Tax laws provide incentives for those who buy residential property. The interest paid on a

housing loan taken to buy or construct a house is deductible from the total income of an income

tax assessee. The deduction is available for both let out and self-occupied property during the

previous year.

The main condition is that the assessee should borrow the money and the interest should be

payable on borrowed capital for acquisition of property, construction of property and not for Re-

pair of property or Reconstruction of property. The maximum amount of deduction available is

Rs 1.50 lakhs out of interest paid or payable, provided some conditions are satisfied. Whereas,

the principal element can be claimed under section 80C.

In case a property has been acquired or constructed with borrowed capital, the interest payable

on the amount borrowed for the period prior to the previous year in which the property has been

acquired or constructed is also eligible for deduction. The interest is deductible in five equal in-

stallments commencing from the previous year in which the house has been acquired or con-

structed.



Opt for Post Office Schemes

Post office scheme over the period of time have become the popular tax saving plan and invest-

ment plan for retired individuals for their post retirement life. Investment avenues under the post

office schemes include National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS)

and the Post Office five-year time deposits. The best part about these schemes is that they have

uniform presence and their interest rates do not vary frequently in comparison with banks/other

deposits schemes.

These were few of tax saving tools, one can opt for to save taxes and secure future.

File your Return of Income/ Tax return at the Earliest

We hope that you would have filed your return of income/ Online return filing/ tax returns for

Financial Year 2009-10, in case you missed to file the same, you can still file the same. The last

date for the return filing for 2009-10 is 31st March 2012, however the assessing officer can levy

penalty for late filing of the same.

Further, even though the last date for the filing of return of income/ tax return for the Financial

Year 2010-11 is 31st July 2011, still we recommend that you should file the return of income at the earliest to avoid the last minute rush. Further, you should arrange all the documents, like

Form 16 from your employers, TDS certificates from the Banks and other investment proofs.



Taxes on Leave Encashment /Leave Salary

Normally every employee is entitled to certain number of leaves per month/annum. If this

leave is not availed then unutilized leave either get lapsed or get carry forward and at the

time of retirement/otherwise or on leaving the employer, pay equivalent to leave remaining unutilized in the employee account will be paid to employee.

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Now, the question arise that “Leave Salary is Taxable or not”? For this you should know the in-

come tax treatment of Leave Salary as per Income Tax Act, 1961. The income tax treatment de-

pends on two things:

• Status of Employee – Government employee or Non government employee.

• Nature of Leave Encashment – Leave are encashed mainly on two occasions: Leave encash-ment during Continuity of employment or Leave encashment at the time of retirement / leaving

job.

You get some amount in return whatever the reason for encashing the leaves and consequently,

there are income tax implications for this amount. Thus, Taxability of Leave Salary for following

type of employee is given below:

Government Employee – Government employee means an employee of the central or state

government. It does not include employees of local authorities or bodies like municipal corpora-

tions or panchayats.

1. Leave Encashed during the continuation of service – Amount received from Leave encash-

ment during the continuation of service is added to your income, and is fully taxable.

2. Leave encashed at the time of retirement or superannuation (leaving the job) – Amount re-

ceived from Leave encashment at the time of retirement or superannuation (leaving the job) is

fully exempt from tax under Section 10(10AA)(i) of the Income Tax Act,1961.



Non – Government Employee – Non – Government Employee means employee other then Gov-

ernment employee.

Leave Encashed during the continuation of service – Amount received from Leave encashmentduring the continuation of service is added to your income, and is fully taxable.

2. Leave encashed at the time of retirement or superannuation (leaving the job) – Exemption of

amount received from Leave encashment at the time of retirement or superannuation (leaving

the job) is limited to the least of the following:

a) The amount actually received from leave encashment

b) The cash equivalent of leaves available in your account (leave balance) (not exceeding 30 days

per year of actual service)

c) Last 10 months’ average salary

d) Amount specified by the Government i.e., Rs. 3 Lakhs

Other points to be kept in mind

• The limit on exemption is applied on the total payment received towards leave encashment

from two or more employers, in the same year or in different years.

• Salary means last drawn salary and includes basic salary + Dearness Allowance (if terms of

employment so provide) + Commission based on a fixed % of turnover.

• Cash equivalent of leaves can be calculated on maximum allowable leave per year which is 30

days i.e., even if your company allows, say, 50 days of encashable leaves every year, you need to

count only 30 days per year.

• Average Salary is calculated on the basis of average salary for the 10 months immediately pre-

ceding the retirement or superannuation.



Reliance Gold Savings Fund: Review

Reliance Gold Savings Fund is the first gold fund of fund in India which opens a new avenue

for investing in gold as an asset class. The Fund seeks to provide returns that closely corres-

pond to returns provided by Reliance Gold Exchange Traded Fund (RGETF) which in turn in-

vests in physical gold. It enables to reap returns of gold in paper form without the need of a demat account.

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What are the benefits of investing in Reliance Gold Savings Fund?

Reliance Gold Savings Fund opens a new avenue for investing in gold. This fund enables

to reap returns closely to returns provided by Reliance Gold ETF.

“Open door for non – demat a/c holders: Investors can invest in this fund through the physical mode across the country thereby making it easily available and convenient for

non demat a/c holders”

Systematic Investment Plan (SIP): a long term disciplined investment technique under

which you invest a fixed sum of money on a monthly or quarterly basis in a scheme at the

prevailing NAV. This allows you to save and invest regularly while you are earning.

This investment technique enables you the following benefits: Small, regular invest-

ments: A simple way to enter the market by investing small amounts. Small but regular

investments go a long way in creating wealth over time

Rupee cost averaging: Fewer units during rising markets and more units during falling

markets, thereby reduces the average cost per unit

No need for ‘timing the markets’: No need to select the right time and quantity to buy and

sell as timing the market is time consuming and risky. It eliminates the need to actively

track the markets.

http://www.investologic.com/mutual-funds/reliance-gold-savings-fund/

http://www.investologic.com/mutual-funds/reliance-gold-savings-fund/



Availability of add-on facilities: Ease of availing add on facilities like Systematic Trans-

fer Plan/ Systematic Withdrawal Plan / Systematic Investment Plan/ auto switch /trigger

facility etc.

Liquidity: An investor of Gold Savings Fund can subscribe and redeem units on all busi-

ness days directly from the AMC, while purchase and sale of gold ETF units is a factor of

liquidity on the exchange.

Ease of investing: Investing in gold through Reliance Gold Savings Fund, the investor

can directly subscribe/ redeem units through the physical mode at the various designated

investor service centre across the country thereby making it easily accessible and conve-

nient.

Cost Effective: Investing in gold through the Reliance gold Savings Fund in physical ap-

plication mode enables you invest in a low cost manner as the investor does not have to

incur charges like annual maintenance charges for demat account , delivery brokerages

charges, transaction charges incurred for investing through the dematerialized mode.

The investors will be bearing the recurring expenses of the scheme, in addition to the ex-

penses of underlying Scheme.

Taxation Benefits: Investments in the fund are eligible for long term capital gains tax af-

ter 1 year of investments whereas in case of physical gold the investor is eligible for long

term capital gains after a period of 3 years. The investments in the fund get similar taxa-

tion as debt mutual fund schemes.

Asset allocation of Reliance Gold savings Fund:

Under normal circumstances, the anticipated asset allocation would be:

Benchmark : The Scheme’s performance will be benchmarked against the price of phys-

ical gold

Why should one invest in Reliance Gold Savings Fund?



Reliance Gold Savings Fund provides an easy and a convenient way for Portfolio Diver-

sification

It endeavors to inculcate a regular savings habit to accumulate gold in small amountsthrough MICRO Systematic Investment Plan and Systematic Investment Plan

Opens doors for non –demat account holders as it provides the facility to invest through

the online medium and through physical application mode

It enables you to avail long term taxation benefits from 1 year unlike physical gold

wherein long term taxation can be availed after 3 years

The fund invests in Reliance Gold ETF which in turn invests in physical gold of purity of

99.5 % or higher, thereby relieves you of any impurity concerns.

The gold invested in Reliance Gold ETF is stored with the custodian; hence you need not

worry about the storage cost.

Review:- One can buy with a view of long term investment. This is only fund in gold

ETF which gives you flexibility to buy in systematic investment Plan (SIP). Individuals

who do not have DEMAT A/C can also participate. A good option for a small investor.



Received a Tax Refunds mail- It’s

a SCAM!! Be Careful!!

Recently many of us must have received an e-mail stating that there is some

amount which is due for refund and in order to claim that money one needs to

click a link which takes to Income tax website.

The body of the mail says



When you click on the link "CLICK HERE", it takes you to

http://beauxartsschool.com/webalizer/web/1/refunds/index.html?id=refund

which looks like a fishy website, as IT Dept websites will always have https or .in

or .gov in the web address.



If you select AXIS BANK/ HDFCBANK or any other bank, it will take you to re-

spective Bank's Homepage but the web url address stills remains of

http://beauxartsschool.com.



DO NOT ENTER ANY BANK DETAILS DATA IN ANY OF THESE OR YOU WILLBE PARTED WITH YOUR HARD-EARNED MONEY IN A JIFFY.

Please send your query/suggestions on [email protected]

tax advisor april 2011

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