HRA, Rent and Home Loan - Tax Exemptions - Tax Saving

What is HRA Exemption?

The part of rent paid by you, which can be directly deducted from your taxable income.

How much HRA exemption can I get?

Lets say
A = Actual HRA earned in salary
B = Rent Paid - 10% of basic salary
C = 40% of basic salary (50% in case of metro cities)

Then HRA you can claim is minimum of A , B and C 

Documents required to claim HRA exemption

• If Rent is less than Rs.8000, then Rent receipts only
• If Rent is greater than or equal to Rs.8000 but less than Rs.16667, then Rent receipts + Rental Agreement + Owner's PAN (or a declaration that owner does not have a PAN) 
• If Rent is Greater than or Equal to Rs.16667, then  Rent receipts + Rental Agreement + Owner's PAN.

How can my House Loan help me save tax?

The amount of house loan paid by you in form of EMIs has 2 components: 

1. Principal
2. Interest

Principal can be shown as a part of your 1 Lac investment under sec 80C

Interest (upto a limit of Rs.2.5 lac per annum) can be claimed as loss on property, and is directly deducted from your taxable income.

However, the calculation is a bit different in case of let out. (ie. When you let out your own property and stay in a rented house)

Let Out

This one can be the most beneficial deal, as far as saving taxes is concerned.
You need to consider 3 things: 

1. Income from rent you earn
2. HRA exemption of the rent you pay
3. EMI

1) Income from the rent you earn from your let out property =  70% of total rent earned – property taxes.
(only 70% needs to be considered because remaining 30% can be exempted as maintenance cost)
This amount must be added to your taxable income under the header of income from other sources

2)HRA exemption
Same as explained above

3)House Loan EMI
Again, The amount of house loan paid by you in form of EMIs has 2 components: principal and interest
Entire Interest Amount  can be claimed as loss on property, and is directly deducted from your taxable income. Yes, in this case, Rs. 2.5 lac limit is not applicable.
Principal can be shown as a part of your 1 Lac investment under sec 80C

Invest in Gold - SBI Gold Exchange Traded Scheme

Why to invest in gold?

Long term investment in gold has always yielded positive returns in the past 30 years.

Here is data for past 30 years:

For a more relevant comparison, here is data for past 2 years:

Ideal way of investing in Gold

If you would like to invest in Gold but don’t like the hassle and cost of storing and safeguarding physical gold, you can go for a Gold Fund. Gold fund offers an ideal way to invest in Gold and Gold bullion. Units of any gold fund can be bought or sold through the National Stock Exchange, just like a stock.

After a little research, I was able to find a suitable fund - SBI Gold Exchange Traded Scheme. The exit and entry load for this fund is Nil. This means no extra cost or fees is involved in buying or selling. You just need to pay a nominal brokerage.

How to invest in SBI Gold Exchange Traded Scheme

There are multiple ways:

1. If you have a demat account (with any broker), you can buy units of SBIGETS just like any other stock.
2. You can visit http://www.sbimf.com/, and buy the units online.
3. You can visit an SBI branch, and fill a form!  SBI Branch Locator

How to find a good term insurance plan

Here are 7 questions you're looking answers to:

What is term insurance?

• Term insurance is the least expensive (cheapest) way to purchase a substantial death benefit. 
• You buy the policy by paying a certain amount (called premium) to the insurance company.
• In case of your unfortunate death during a certain period (called term), the company will pay a certain amount (called death benefit) to your nominees. 

NOTE: In case you survive through the term (thank God!), you don't get anything.

Why should I go for Term Insurance?

It is the cheapest life insurance.

It is risk-free and comes with a fixed death benefit.

How much insurance do I need?

10 times your annual income. Not a penny less. Simple as that.

How do I decide which policy to buy?

Based on following factors:

• Death Benefit: The coverage amount should be sufficient. as mentioned earlier, the sum total of death benefits of all your policies must be at least 10 times your annual income.
• Term: The coverage term should be long, very long. At least 30 years. If you don't go for a long term right now, and you buy another policy at a later stage in your life, you'd end up paying an insanely high premium.
• Insurance Company: The insurance company must have a very high claim settlement ratio. A good claim settlement ratio (above 90%) ensures that your company is highly likely to approve the death benefit in case of your death.
• Premium: The premium that you pay must be low and the mode of payment (one time/yearly/monthly) should suit your budget.

Where can I find details about reputation of Insurance Companies?

Right Here : 
http://incometaxindian.blogspot.com/2013/03/claim-settlement-ratio-and-insurance.html

Where can I find details about good term insurance plans? 

The best way is to avoid third party websites and agents. Go to respective websites of the insurance companies. Here are the links to most reputed insurance companies:

• LIC
• http://www.licindia.in/term_assurance_001_benefits.htm
• http://www.licindia.in/amulya_jeevan-I_benefits.htm
• HDFC Life
• http://www.hdfclife.com/Products/ProtectionPlans/ProtectionPlans.aspx
• Birla Sun Life
• http://insurance.birlasunlife.com/Pages/Individual/Our-Solutions/Protection.aspx
• ICICI Prudential
• http://www.iciciprulife.com/public/Life-plans/Life-Insurance-Term-Plans.htm
• ING Life
• http://www.inglife.co.in/productcenter/productcenter-my-term-insurance.shtml

Is there any tax benefit?

Yes. Premium paid towards term insurance plan is exempted under section 80C. 

Claim settlement ratio and insurance companies reputation

Claim Settlement Ratio is probably the most important factor while buying insurance. This becomes even more critical for Life Insurance as you would like your dependents to run pillar to post to claim your sum assured in case of unfortunate death. The recently published Insurance Regulatory And Development Authority - IRDA Annual report 2010-11 has the settlement ratio for the following life insurance companies in India.

Please beware of  companies whose claim settlement ratio is below 90%.

Company	Claims settled	Claims Reputed	Claims Pending
LIC	97.03%	1.00%	1.46%
HDFC Life	95.41%	3.97%	0.61%
Birla Sunlife	94.66%	4.99%	0.35%
ICICI Prudential	94.61%	3.14%	2.25%
lNG Life	90.49%	3.53%	5.19%
Kotak Mahindra	89.30%	3.89%	6.81%
Bajaj Allianz	88.69%	7.08%	4.23%
Bharti AXA	87.17%	12.58%	0.25%
Metlife	85.43%	6.06%	8.30%
Aviva	84.15%	12.23%	3.62%
SBILife	82.24%	16.73%	1.03%
India First	82.01%	17.99%	0.00%
Tata AIG	81.93%	17.07%	1.00%
Reliance Life	81.36%	8.66%	9.85%
SUD Life	80.69%	1.38%	17.93%
Max  New  York	77.96%	14.90%	7.14%
Canara HSBC	71.02%	16.61%	12.37%
IDBIFedral	64.92%	21.00%	14.08%
Shriram	55.69%	25.87%	18.44%
Sahara	53.23%	14.39%	31.64%
Aegon Religare	52.31%	44.63%	3.08%
DLF Pramerica	51.22%	19.51%	29.27%
Future Generali	50.52%	21.53%	27.95%

Income Tax Calculator 2013-14

Here is an excel based income tax calculator. Click to download:

Income Tax Calculator for financial year 2013-14

You just need to input your income and investments. It does the rest for you. Anyone with basic knowledge of excel can use this.

Income Tax Slabs FY 2013-14

For a resident woman (who is below 60 years)
Net income range	Income tax rates
Up to Rs. 2,00,000	Nil
Rs. 2,00,000 – 5,00,000	10% of (total income – 2,00,000)
Rs. 5,00,000 – 10,00,000	30000 + 20% of (total income – 5,00,000)
Above Rs. 10,00,000	130000 + 30% of (total income – 10,00,000)

For a resident senior citizen(who is above 60 years but below 80 years)
Net income range	Income tax rates
Up to Rs. 2,50,000	Nil
Rs. 2,50,000 – 5,00,000	10% of (total income – 2,50,000)
Rs. 5,00,000 – 10,00,000	25,000 + 20% of (total income – 5,00,000)
Above Rs. 10,00,000	1,25,000 + 30% of (total income – 10,00,000)

For a resident super senior citizen(who is above 80 years)
Net income range	Income tax rates
Up to Rs. 5,00,000	Nil
Rs. 5,00,000 – 10,00,000	20% of (total income – 5,00,000)
Above Rs. 10,00,000	1,00,000 + 30% of (total income – 10,00,000)

For any other individual/HUF
Net income range	Income tax rates
Up to Rs. 2,00,000	Nil
Rs. 2,00,000 – 5,00,000	10% of (total income – 2,00,000)
Rs. 5,00,000 – 10,00,000	30,000 + 20% of (total income – 5,00,000)
Above Rs. 10,00,000	1,30,000 + 30% of (total income – 10,00,000)