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Monthly Archives: January 2022

Zero Tax on Salary of Rs. 10,00,000? Is it possible?

Zero Tax on Salary of Rs. 10,00,000? Is it possible?

Yes, even if your salary is up to Rs. 10,50,000, you will not be required to pay the taxes after reading this article.

1. Standard Deduction

⦁ Assumption – Salary Considered – Rs. 10,50,000. If even if it is less, you can still save the taxes to zero and yes, you heard it right – Legally, without having the sleepless nights of getting notices from the Income Tax Department.

⦁ the government provides the Standard Deduction of Rs. 50,000. So your taxable salary is Rs. 10,50,000 – 50,000 = Rs. 10,00,000.

2. Deduction under Section 80C. Confused about what comes under 80C – Read Below –

⦁ PPF, EPF, LIC premium, Equity-linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for the purchase of property, Sukanya Samriddhi Yojana (SSY), National saving certificate (NSC), Senior citizen savings scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds, etc.

⦁ The maximum deduction which can be claimed here is Rs. 1,50,000. Hence, considering you invest Rs. 1,50,000, your taxable salary becomes – Rs. 10,00,000 – Rs. 1,50,000 = Rs. 8,50,000 (taxable salary).

3. Deduction under Section 80CCD (1b) – National Pension Scheme –

⦁ You can claim a deduction of Rs. 50,000 by investing under NPS. Yes, it has restrictions for the withdrawal, but this will help you in building a retirement corpus.

⦁ The taxable salary after investing here will become – Rs. 8,50,000 – Rs. 50,000 = Rs. 8,00,000.

4. Deduction Under Section 80D – Medical Insurance –

⦁ Indians, yes you heard it right we Indians have started giving importance to Insurance policies and yes now we don’t ask ” Wapas Kitna Milega Kuch Nahi Hua To” – With this change in mindset and living in a pollutive environment we require medical insurance. “Sone pe Suhaga” is it will even save your taxes.

  • ⦁ For self, spouse & children – There is a cap of Rs. 25,000 or 50,000 (in case of senior citizen)
  • ⦁ For Parents – There is a cap of Rs. 25,000 or 50,000 (in case of senior citizen)
  • ⦁ Even body checkups are allowed and a deduction up to Rs. 5,000 can be claimed. But the upper limit is mentioned above.
  • ⦁ If your parents are senior citizens, and they don’t have medical insurance and they aren’t filing their Income Tax Return and if you paid for their medical treatment, you can claim up to Rs. 50,000.
  • ⦁ Hence, after section 80D, the taxable salary shall become – Rs. 8,00,000 – Rs. 25,000 = Rs. 7,75,000.

5. Interest on Housing Loan – Section 24b of Income Tax Act –

⦁ We Indians grow up hearing “Apna Ghar Apna Hi Hota Hai” and our minds start thinking about it as soon as we start family planning.

⦁ Interest on housing loans is allowed till Rs. 2,00,000 every financial year. Hence, your taxable salary becomes – Rs. 7,75,000 – Rs. 2,00,000 = Rs. 5,75,000.

6. Interest on Education Loan / Purchase of Electric Vehicle / Donation Under Section 80G —

⦁ Education has become very costly and middle-class parent cannot afford to pay from their pocket, hence education loan is taken by the number of students. The interest component of the loan is deductible under section 80E.

⦁ The world is shifting from Petrol/ Diesel to EVs and yes, you can even claim a deduction of up to Rs. 1,50,000 on interest paid for the purchase of EVs. The deduction is available u/s 80EEB. (Vehicle should be financed, notional interest cannot be claimed).

⦁ If none of the above is applicable, then donations are also allowed as deductions. Provided you are donating to charitable trust or NGOs which has got the certificate from Income Tax.

⦁ Now the overall objective is to reduce the taxable income from Rs. 5,75,000 to Rs. 5,00,000. Considering Rs. 75,000 deductions are claimed by using the above section. Then you need to pay zero taxes. Confused? Happy? How How? Let us see –

⦁ Now the Taxable salary is Rs. 5,00,000. The tax on income up to Rs. 2,50,000 is exempt from tax. Thus the tax payable would be Rs. 12,500 (5% slab from Rs. 2,50,000 to Rs. 5,00,000. Hence 5% of Rs. 2,50,000 is Rs. 12,500).

7. Rebate under section 87A –

⦁ If your income is Rs. 5,00,000 or lesser, you can claim a rebate under section 87A for a maximum of Rs. 12,500. Hurrah the tax payable is Rs. 12,500 (tax calculated above) – Rs. 12,500 (rebate u/s 87A) = 0 (Zero).

“Start Planning, you can thank us later “

⦁ Upcoming article – How to pay zero taxes on Rs. 20,00,000 salary. Stay tuned.

All IECs not been updated after 01.07.2020 will be de-activated –

⦁ All IECs (Import Export Code) which have not been updated after 01.07.2020 shall be de-activated with effect from 01.02.2022. The list of such IECs may be seen at the link (https://www.dgft.gov.in/CP/?opt=IECDL). The concerned IEC holders are provided an opportunity to update their IEC in this interim period till 31.01.2022, failing which the IECs shall be de-activated from 01.02.2022. Any IEC where an online updation application has been submitted but is pending with the DGFT RA for approval shall be excluded from the de-activation list.

⦁ It may further be noted that any IEC so de-activated, would have the opportunity for automatic re-activation without any manual intervention or any visits to the DGFT RA. For IEC re-activation after 31.01.2022, the said IEC holder may navigate to the DGFT website and update their IEC online. Upon successful updation, the given IEC shall be activated again and transmitted accordingly to the Customs system with the updated status.

Reference is drawn to Notification No. 58/2015-2020 dated 12.02.2021, 11/2015- 2020 dated 01.07.2021, 16/2015-2020 dated 09.08.2021, whereby it was mandated by DGFT to all IEC holders to ensure that details in their IEC is updated electronically every year during April-June period (for which no user charges were to be borne by the IEC holder). Based on representations received from the IEC holders who had not updated their IECs, the period of
updation was extended up to 31.07.2021 and subsequently to 31.08.2021. Due intimations were also provided vide Trade Notice 18/2021-2022 dated 20.09.2021 and Trade Notice 25/2021-22 dated 19.11.2021 prior to the phase-wise deactivation of the IECs not updated yet.

IEC-Updation last date notification, update otherwise will be deactivatedDownload

In continuation to the aforementioned notification(s) and Trade Notice(s) and as per para 2.05(e) of the Foreign Trade Policy (FTP), the third phase of deactivation of IECs which are not yet updated is being started.

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The textile industry is seeing a major shift in terms of growth –

The textile industry is seeing a major shift in terms of growth. It’s outperforming. Re-rating of the entire Indian textile industry in focus. Hold tight for big-time returns as robust export opportunities give strong and sustainable earnings visibility Textile company shares bucked the weak market trend and rallied on Thursday as improving exports of cotton and made-up apparel, along with attractive valuation and earnings growth visibility, made analysts bullish on the sector.

Shares of Super Fine Knitters, Super Spinning, and Filatex India rallied up to 10 percent on Thursday. Those of JCT, Surat Textile, Swasti Vinayaka, KPR Mill, Sumeet Industries, Bhandari Hosiery, Minaxi Textiles, and Bombay Rayon, gained between 4 percent and 5 percent, and Gokaldas Exports, Suryaamba Spin, and Vardhman Textiles also ended in the green.

In comparison, the S&P BSE Sensex fell over 1 percent, or 621 points, and closed the session in the 60,000-mark. Further, the US-China trade war and imposition of additional duties on Chinese T&A imports have forced US-based importers to scout other destinations such as India.

In December, the US signed into law legislation that bans imports from China Xinjiang region over concerns about forced labor. As Xinjiang makes up nearly 20 percent of the global cotton market, the supply re-adjustment on account of this ban has led to more demand for Indian cotton and cotton yarn, analysts at Spark Capital said while initiating coverage of the sector.

They highlighted that cotton and cotton yarn exports from India have surged at a 34 percent CAGR (between April and October) from FY19-21. The US market accounts for 15 percent of global T&A imports. Countries such as China, Bangladesh, Vietnam, and Cambodia have become reliant on India for their cotton requirements after the ban, and Indian cotton exports have skyrocketed in the past eight months. Separately, India has witnessed increased exports in the made-up segment. The demand in the segment has significantly increased because of lockdown-led home confinements and the pandemic-induced new standard operating procedures (SoPs) which has led to the underlying volume demand improving. India being the second-largest supplier of made-ups naturally benefitted on account of Chinese suppliers losing market share, Spark Capital pointed out.

The government’s stance on free trade agreements (FTAs) is a welcome policy change for the T&A players. The stocks in the sector are also ripe for a re-rating as robust export opportunities give strong and sustainable earnings visibility, say analysts at ICICI Securities. Revival in the hospitality sector, along with duty reimbursement by the government of India, and market share gain on China 1 theme will drive earnings trajectory. Spread between yarn and cotton prices continues to remain high and should enable yarn producers to report strong earnings for Q3FY22, said a note by JM Financial.

From an investment viewpoint, analysts suggest playing the theme by going long on Suryaamba Spin, Vardhman Textiles, Trident, Sutlej Textiles, Alok Industries, KPR Mill, Nitin Spinners, Welspun India, Indo Count, Himatsingka Seide, Gokaldas Exports. This should be seen as a buying opportunity. Whenever market gives a dip, focus on these stocks.