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Budget 2016, 6 Ways to Pay Less Tax, Legally – Personal | Corporate

Budget 2016

Finance Minister of India, Arun Jaitley has unveiled his 3rd Budget 2016 in the Lok Sabha on Monday.  The budget is extensively focusing on the agricultural sector as being pro-poor which has been legally considered by many experts. Economic plan of the ruling party is outlined by the Finance Minister, in union budget for 2016-17. With the announcement of union budget many salaried Indians are exhibiting their personal opinions, whether the FM has left them richer or poorer. Ways to propose less corporate tax rate has been proposed for small firms with a turnover of below Rs.5 crores with the intension to boost entrepreneurship.

Budget 2016

Outlay of Budget 2016-17:

A total expenditure of Rs 2.21 lakh crores has been made for infrastructure in his third budget agenda of the ruling Narendra Modi-led government, of which Rs 97,000 crores will be spent on roads, especially ones in rural areas. It addresses sectors which need highest priority. In the rural sector and priority has been given to social sector and infrastructure.

Indian Union Budget

In a relief to small tax payers, the budget proposes to raise the ceiling of tax to Rs 5000 from Rs 2000 for incomes not exceeding Rs 5 lakhs a year. In this category, two crore tax payers are there who would get a relief of Rs 3000 each in their tax liability.

Marginal Relief:

Those who don’t have a house of their own and don’t get house rent allowance from employers will get a deduction of Rs.60000 a year as against the existing Rs 24,000. Budget 2016 is a bitter-sweet pill for the common man. For giving relief to Aam Aadmi, so that they can afford to buy homes, he has made cars costlier. This marginal incentivization has been provided to encourage savings.

Rail Budget

Focal points of Budget 2016:

With upcoming assembly elections in five states, Jaitley’s main focus was on schemes for agriculture and farmers’ welfare for which he provided a whopping Rs 35,984 crores. Another massive amount, of Rs 87,765 crores, was allocated for the rural sector while Rs 2000 crores was earmarked to give concessional LPG connections to BPL families.

This Budget is a combination of several things and details on how to determine the taxable amount under each head of income and various ways to lower the tax rate are well assembled below.

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6 Ways to Pay Less Tax, Legally

1) Why Your Taxable Income Is Not The Same As Your Income

  • A typical salaried employee is unlikely to earn any income which would fall under the head: ‘Profits & gains from business or profession’.
  • It is easier to disclose details of all your other taxable income (such as bank interest) at the beginning of the financial year if employer knows of his salary income and deducts tax (TDS)- so that this can be factored in while calculating TDS. It will save you the trouble of having to pay advance tax.
  • However, even if the entire tax payable by you has been deducted at source, you still need to file your own income tax return.
  • You could get tax reimbursement under some heads, either by way of an exemption or a deduction. The tax law details how to decide the chargeable quantity under each head of income.
  • As a paid employee, the only possibility of your acquire a loss is when you sell your savings or properties or pay interest on your house credit. The law also provides for intra-head and or inter-head set-off of such losses.
  • The income from all the various heads used to loss set-off is your ‘gross total income’.
  • From your gross total income, you get a deduction for different eligible savings or payments made.
  • The resultant figure is your net taxable income on which you pay tax at the applicable tax rates.
  • The tax provisions announced in Budget 2016 apply to income earned from April 1, 2016 to March 31, 2017 (Financial Year 2016-17).

2) Use These Benefits T0 Boost Your Take-Home Salary

  • The sum total of your salary, allowances and benefits is referred to as Cost to Company (CTC) – the cost which your employer incurs to have you on the payroll.
  • The key CTC components which could help reduce your tax liability and boost your take home pay are outlined below. These apply to all non-government employees.
  • Irrespective of whether it is your first job or whether you have conquered the corner office, income-tax duly deducted from your monthly salary pinches.
  • Further, tax is levied not just on your basic pay and cash allowances that figure prominently on your salary slip, even taxable perquisites (such as car, or housing provided by your employer) are subject to tax.

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Your CTC components and various tax breaks:

  1. Housing
  2. First an insight into both:
  • House rent allowance (HRA)
  • Flat provided by employer

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Tips To Reduce Direct Tax:

Hotel accommodation provided by your employer for the first 15 days when you move to a new town is not a taxable perquisite.

  1. Leave travel concession (LTC)
  2. Leave encashment

Other allowances and tax benefits:

  1. Car perquisites
  2. Transport allowance
  3. Children’s education allowance
  4. Certain reimbursements

To claim the exemption, you don’t need to submit any expense proof. Though, if you are acquiring expenses on official travel, your employer can repay on the basis of the claim presented by you and such reimbursement is not taxable.

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  • Make the most of your retirement benefits:
  1. Employee Provident Fund (PF)
  2. Gratuity
  • Get an ownership right in the company through ESOPs:
  1. Grant
  2. Vesting
  3. Exercise
  • Taxability in your hands:

ESOPs are taxed at two stages:

  1. Stage 1
  2. Stage 2

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Save the dates: Compliance calendar for income earned during FY 2016-17:

  1. Due dates for advance I-T payments
  2. Filing of tax returns

If the taxman calls:

  • Copy of credit card statements.
  • Please create a link with the basis of income used for payment of your credit card bills.
  • The taxman is more involved to know whether you have accessible that income in your tax return
  • Copy of demat account statements
  • Keep these credentials handy in case you get a call from tax department
  • Keep a Copy of acknowledgement of filed tax return Form 16 and Form 12BA (annual withholding tax certificate) which is issued by the company
  • Details of your foreign trips
  • Supporting documents relating to the assets and investments – including purchase of immovable property
  • Copies of rent agreement lease deed and receipt of municipal tax paid in case you have any rental income
  • Interest certificate issued by the lending institution for home loan
  • Details of loans gifts taken or received
  • monthly salary slips and proof of all expenses pay back by your employer
  • Proof of all deductions exemptions declared in your tax return
  • Copy of statement of bank accounts with clarification to all major debit and credit items

 3) 80 See: Making Your Savings Work For You

  • New Pension Scheme (NPS)

Railway Current Affairs

Tips To Reduce Direct Tax:

This additional amount of Rs 50,000 is over and above the overall cap of Rs 1.5 lakh under section 80 CCE.
Other investments covered under section 80C

  • Public Provident Fund (PPF)

Tips To Reduce Direct Tax:

PPF explanation older after 15 years from date of opening, though, from April 1, 2016, early closure of PPF accounts is possible in genuine cases like serious disorder, superior education of kids etc by paying a consequence of 1% reduction in interest payable on total deposit. There is a block-in period of 5 years for extraction. But a loan on the buildup balance may be obtained for convinced reason such as marriage or buying property, subject to various limits. This is possible only after 5 years from the date of opening of PPF account.

National Savings Certificates (NSC)

  • Life insurance:
  • Small savings
  • Sukanya Samriddhi Account:

Other payments that get you a deduction under section 80C

Other tax breaks

Other investment options

  • Gold monetization scheme:
  • Sovereign gold bonds scheme

4) Home Advantage: Buying, Letting Out & Selling Explained

  • Buying a new house
  • Interest payable on home loans and the tax benefit
  • What is ‘self-occupied’ property
  • Set-off your interest payment

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Tips To Reduce Direct Tax:

If anyone has purchased a new residence together – say, with their other half and are also paying the home loan together, then each of them is free to subtraction up to Rs 2 lakh-2.5 lakh. In case they have a working child and the bank is willing to divide the loan three ways, all three can benefit deduction, subject to given state of affairs.

Your TDS obligations:

  • Best to let out your 2nd house
  • Selling your apartment
  • Reinvesting in residential property or securities

Tips To Reduce Direct Tax:

Exemption is also accessible for savings / investments made in confident bonds or notified fund by central government within 6 months of sale of a capital asset. There is a cap of Rs 50 lakhs on such investment.

5)  Medical: Cashless Cover Plus Cash In Your Pocket

  • Group medical insurance provided by your employer
  • Buying a medical insurance policy
  • Other medical-related tax benefits


  • Tax free dividend
  • Tax free bonds
  • Set off provisions for capital losses

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