Income tax benefits are available on home loans. Taking out a home loan can help you save tax under

 the provisions of the Income Tax Act, 1961. See the tax benefits available under the Act.

There are 2 components to paying a home loan:

1. Principal and

2. Pay interest

Since there are two different components to paying a loan, the tax benefit on a home loan is regulated by different sections of the Income Tax Act. The following are some of the benefits of taking a home property loan:

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1. Discount on Basic Payment The maximum discount allowed under 80C is Rs. ,50,000. This discount is available on a payment basis. But to claim this discount, the home property should not be sold within 5 years of possession. Otherwise, the previously claimed deduction will be added to the total income in the year of sale.

 

2. Exemption for Stamp Duty and Registration Charge (U/s 80C): A waiver for stamp duty and registration charge paid in case of purchase of a home property can also be claimed under 80C but within the total limit Rs. 1,50,000. This can be claimed in the year in which these costs are incurred.

 

3. Decrease in interest on home loan: As per section 24, the maximum deduction for interest payable on a loan is Rs. 200,000 where the loan has been taken for purchase or construction of self-occupied property on or after 01-04-1999 and the property has been acquired or constructed within 5 years.

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A maximum tax deduction of 24% interest on a loan in a self-occupied property is allowed at Rs. 30,000 where the loan was taken before 01-04-1999 or repair was taken for repair, renewal or reconstruction. There is no maximum limit for a home loan for which the home loan has been taken if it is not self-occupied and the taxpayer can deduct from the full amount of interest.

 

Additional deduction of interest under 80EEA: Additional deduction of interest on home loans from any financial institution is available to individuals up to the maximum limit. 1,50,000 provided satisfy the following conditions:

 

The stamp value of the property is not more than Rs. 45 lakhs.

 

1st must be approved between 1st April 2019 to 31st March 2021.

 

On the date of loan approval, the person does not own any other residential home property.

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5. Additional deduction of interest under 80EE: Additional deduction of interest on home loan from any financial institution, maximum Rs. 50,000 The following conditions are met:

 

Residential The value of residential house property is not more than fifty lakh rupees.

1st must be approved between 1st April 2016 to 31st March 2017.

 

The amount of loan approved for the acquisition of residential house property is not more than Rs. 45 Lakh. On the date of loan approval, the person does not own any other residential home property.

Summary

Section	Nature of Home Loan	Maximum amount of Deduction	Actual Conditions
24(B)	Home Loan Interest	Rs. 2,00,000	Construction must be completed within 5 years
80C	House Building Principal Amount	Rs. 1,50,000	Home can not be sold between 5 years of occupied.
80C	Registration Fee/ Stamp Duty	Rs. 1,50,000	Demand is allowed in the year of expense incurred.
80EE	Home Loan Interest	Rs. 50,000	Property Value below of Rs. 50 lakhs and the loan amount below of  Rs. 35 lakhs.
80EEA	Home Loan Interest	Rs. 1,50,000	Stamp value of property below Rs. 45 Lckh

 

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On August 30, 2021 by www.taxexcel.net

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 Tax Saving Fixed Deposit | To encourage retailers to reduce the interest on fixed deposits, the Ministry 

of Finance announced in 2006 that all fixed deposits with a term of less than 5 years would be eligible 

for exemption under Section 80C of the Income Tax Act. This type of fixed deposit is popularly known 

as tax saving fixed deposit.

This announcement was made by the notification dated 23/2006, through which the Ministry of Finance announced the Bank Deposit Term Scheme 2000-2006. This scheme sets clear guidelines for investing in this type of tax saving fixed deposit.

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Fixed Deposits for Tax Preservation: Guidelines

The Ministry of Finance has laid down the following guidelines for investing in tax saving fixed deposits.

Maturity: 5 years

• Minimum investment: Rs. 100 and more of it
• Maximum investment: Rs. 1,50,000 (Circular No. / 2013/2017, F.No.142/09/2017  Increased from Rs. 1 lakh to Rs. 1.5 lakh as per TPL)
• To discount available: Private, HUF
• Mat Premature withdrawal: Not available
• Advantage against this FD: Not available
• Interest rate: Paid by the bank from time to time
• Tax on interest earned: According to individual income tax slab rate
• TDS 10% on Interest

The interest rate paid on these tax-saving fixed deposits is decided by the bank with which the investment is made. You can check the rates offered by different banks as given below table-

Fixed Deposit interest Rates 2021

Last Updated 16th Jul 2021

The fixed deposits interest rate varies on factors such as Government policies, economic conditions and liquidity conditions in the market.

Banks	FD Interest Rates	Senior Citizen FD Interest Rates	Tenure
HDFC	6.20% - 6.65%	6.00% - 6.50%	33 months to 99 months
PNB Housing Finance	5.90% - 6.70%	6.15% - 6.95%	12 months to 120 months
Bajaj Finance	5.65% - 6.50%	5.90% - 6.75%	12 months to 60 months
SBI	2.90% - 5.40%	3.40% - 6.20%	7 days to 10 years
IDFC First Bank	2.75% - 6.00%	2.75% - 6.50%	7 days to 10 years
Axis Bank	2.50% - 5.75%	2.50% - 6.25%	7 days to 10 years

 

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Effective annual the interest rate on fixed deposits for tax protection

The following table shows the effective interest rates on such fixed deposits at an interest rate of 8.5%. 

S. No.	Particulars	Amount (Rs.)
		Slab Rate – 30%	Slab Rate – 20%	Slab Rate – 10%
A	Amount Invested	10,000	10,000	10,000
B	Immediate Tax Saving         (assuming 30% Slab Rate)	3090	2060	1030
C	Effective Investment  (A-B)	6910	7940	8970
D	Maturity Amt of Original Investment (Interest @8.5% p.a.)	13,382	13,382	13,382
E	Total Pre-Tax Benefit on Deposits (D-C)	6,472	5,442	4,412
F	Effective Annual Yield (5 years)	14%	12.50%	10.50%

To invest in such tax-saving fixed deposits which are allowed as a discount under section 80C, the investor has to submit an application for the same at the time of deposit and also submit a copy of his PAN card to the banker.

 

These investments can be made in either a single name or a joint name. Investing in a joint name, only the 1st holder can claim this discount and the 2nd holder will not be able to avail the benefit of Section 80 discount for investing in this type of tax saving fixed deposit.

 

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The difference between tax-saving fixed deposit vs. PPF investment

 PPF, as well as tax-saving fixed deposits, are both regular income-earning investments that give the investor a predetermined guaranteed return. In addition, an investor can also claim a maximum discount of Rs. 2,000 / -. 50 150,000 to invest in any one of these investments.

However, there are some differences between PPF and Tax Saving Fixed Deposit which are discussed below: - 

Particulars	Tax Saving Fixed Deposit	PPF
Maturity	5 years	15 years
Deduction is available u/s 80C	Rs, 1,50,000	Rs. 1,50,000
Interest Rate	Fixed by the Bank*	Fixed by the Govt*
Tax on Interest earned	As per Income Tax Slab Rate	Exempt
Premature Withdrawal Facility	Not Allowed Maturity after 5 years	Available from 5th year onwards but only to a certain extent
Loan Facility	Not Allowed Maturity after 5 years	Can be availed from 3rd year onwards

 

(* Although the interest on tax-saving FDs and PPFs is fixed by different companies, they are almost the same with only slight differences)

 

PPF is a better instrument than tax-saving fixed deposit. However, the only drawback of PPF is the long maturity period. If a person feels comfortable in the long run, he should opt for PPF for tax saving fixed deposit.

 

And if you have already invested a maximum of Rs 1.5 lakh in PPF, after which you can invest in tax saving fixed deposit.

 

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On August 29, 2021 by www.taxexcel.net

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 Tax Changes on P|F Contributions for Government Employees as per Finance Bill 2021| The EPFO 

has amended the provisions of Section 10 (11) and Section 109(12) of the Finance Act, 2021 to bring

 interest on the Statutory Provident Fund (MPF) and Employees Provident Fund (EPF) to the

 employees of the companies covered by the EPFO. Tax net 

Currently, the entire interest on GPF and EPF is exempt from tax. However, up to AIY 2021-22, the amount of interest on taxes on employees in PF accounts is more than the amount of Rs 250,000 tax in a financial year. For employees contribution in PF account only Rs. There will be a tax deduction of Rs 250,000 in a financial year. The same was introduced in the Lok Sabha on February 1, 2021, as per the original amendment proposed in the Finance Bill.

 

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When the Finance Bill was passed in the Lok Sabha on 23.03.2021, it was proposed to amend the provisions of Section 10 (11) and Section 10 (12) to provide an increased limit for more employees to contribute such PF to the PF account. Contributions ranging from Rs. 2,5 Lakh to Rs. 5,00,000 only in cases where the employer makes no contribution to the PF account of the employees.

 

According to the EPF rules, an employer is required to contribute to the employee's EPF account at the rate of 12% of the employee's initial salary and DA. Under no circumstances can an employer be exempted from the mandatory requirement to deposit in an EPF account. Therefore there can be no situation when an employee can enjoy the advanced limit of Rs. 5,00,000 under section 10 (12)

 

Similarly, in the case of PPF accounts, the employer has no contribution. In fact, the PPF account is not in the model of the employer-employee relationship. Therefore, no contribution to the PPF account is attracted by these amendments. Anyone including a self-employed person can open a PPF account.

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Even if a person opens a PPF account, whether he is an employee elsewhere, in government service or not, it is not because of an employer-employee relationship, but because he is open to his own ability. Being an employee is not a prerequisite for opening a PPF account. PPF can also hold a minor. Earlier, HUF was also allowed to keep PPF accounts.

 

Further, there is a limit to the annual contribution. 1,50,000 in the PPF account, therefore, the proposed revised provisions of duty on interest on additional deposits in the PPF account will not be applicable.

 

 

The finance minister has also made this clear in Parliament. In response to a question about the imposition of interest tax on PF amount and Rs. 5,00,000/- within the increased limit, FM replied,  Often, both the employee and the employer contribute, but in cases where there is only one

contribution from the employee and no contribution from the employer, the amount is increased to Rs 2,000.

 

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Similarly, in the case of PPF accounts, the employer has no contribution. In fact, the PPF account is not in the model of the employer-employee relationship. Therefore, no contribution to the PPF account is attracted by these amendments. Anyone including a self-employed person can open a PPF account.

 

 

Even if a person opens a PPF account, whether he is an employee elsewhere, in government service or not, it is not because of an employer-employee relationship, but because he is open in his own capacity. Being an employee is not a prerequisite for opening a PPF account. PPF can also hold a minor. Earlier, HUF was also allowed to keep PPF accounts.

 

Further, there is a limit to the annual contribution. 1,50,000 in the PPF account, therefore, the proposed revised provisions of duty on interest on additional deposits in the PPF account will not be applicable.

 

In short, the government amendments proposed in Section (11) and Section (12) of Section 10 to increase the tax-free limit of the contribution of employees to Rs. 5,00,000 /- in a fiscal year for government employees alone. It does not affect contributions to any PPF account. The duty-free limit for employee contribution to any EPF account is Rs. 2,50,000 only. The benefit of the extended limit of Rs. 5,00,000/- not extended to private-sector workers

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On August 28, 2021 by www.taxexcel.net

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