Planning your income tax

In India's legal quagmire, you may very easily get confused and end up paying more than you have actually bargained for. There are numerous taxation schemes and amendments that still continue to bog our legal system and which, unfortunately, will be a regular feature for time to come. Here are some updates you have to keep in mind while saving your money.

Income from dividends is fully exempt now. All dividends from domestic companies are exempt from tax, irrespective of the amount. This is applies to all categories of assessees.

Long term capital gains of NRIs, arising from the sale of foreign exchange assets, is now to be taxed at a reduced rate of 10%.

Ceiling increased to Rs 20,000 on Standard Deduction on Salaries.

Amortisation of Telecom Licence Fee paid by the assessee for acquiring any right to operate telecommunication services over the period of licence. The amortisation is allowed in the year in which the amount is paid and in subsequent years during which the licence is in force.

Ceilings withdrawn on the deductibility of expenditure incurred on entertainment, advertisements, travelling and maintenance of a guesthouse.

A new taxation scheme for retail traders. The salient features of the scheme are as under:

The scheme is optional and is applicable to an assessee engaged in retail trade and whose turnover does not exceed Rs 40 lakhs
The profits of the assessee from such business shall be deemed to be 5% of the total turnover, or higher if the assessee declares higher income.
All expenses pertaining to the business, including the depreciation, will be deemed to have been allowed while calculating this profit. And so, no further deduction in respect of these sums shall be allowed.
The assessee opting for this scheme is not required to maintain any books of accounts.
If the assessee does not opt for this scheme, then the assessee is required to maintain the books of accounts and get them audited irrespective of the amount of his turnover.

Tax rebates to senior citizens. Under the amended provisions, a resident individual who has attained the age of 65 is entitled to a rebate Rs 10,000 from the amount of tax payable by him. This is in addition to the rebates available to an assessee under other provisions of the Act.

Filing the return of income has been enlarged to include people who fulfill any two of the following conditions:

An owner, tenant or occupier of a house property exceeding specified floor area notified by the Central Board of Direct Taxes.
Owner or a lessee of a vehicle.
Subscriber to a telephone.
He has incurred any expenditure on himself or any other person for foreign tour during the year.
If any two of these conditions are satisfied, and the person resides in a place notified by the board, then it is obligatory for him to file his return of income, irrespective of the amount.

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