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Calculation Tax

Getting a salary is a wonderful feeling. It makes you feel rewarded for all the hours of dedicated work that you put in. But the happiness fades away when a large chunk of your hardearned income gets converted into tax. It is essential to figure out how you can avoid that high deduction in tax.

Income

The components that make up your salary include your Gross salary, Provident Fund, Insurance, Leave pay, Gratuity Employee State insurance and Labour Welfare Fund This income that is reveived by an employee is taxed under “Income from Salaries”.

You need to find out the slab that your salary will pertain to. After figuring that out, you need to be prompt in declaring your investments. This allows the employer to take into consideration the portion of your earnings that you have invested and he/she will accordingly deduct tax from your salary.

Declaration helps you to avoid the cumbersome process of filing for refunds from the Income Tax department.

Tax Calculation

Taxes are calculated on the annual income of a person, and an annual cycle (year) in the eyes of the Income Tax law starts on the 1st of April and ends on the 31st of March of the next calendar year. The law recognizes and classifies the year as “Previous Year” and “Assessment Year”.

Income Tax Slab Rates:

Income tax slab rates are for different categories of taxpayers, who are taxed progressively higher based on their earning.
On all the tables listed below, Education Cess of 2% and SHEC of 1% will be levied on the tax computed using the rates given below.
Under Section 87(A), an Income Tax Rebate of Rs.2,000 is provided for all individuals earning an income that’s less than Rs.5,00,000 per annum.
Income Tax Slabs for male individuals below the age of 60 and HUF:

Income Tax Slabs Income Tax Rates
Total income less than Rs.2,50,000. -NIL-
Total income greater than Rs.2,50,000 but less than Rs.5,00,000. 5% of the amount by which it exceeds Rs.2,50,000.
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.

Income Tax Slabs for female individuals below the age of 60:

Income Tax Slabs Income Tax Rates
Total income less than Rs.2,50,000. -NIL-
Total income greater than Rs.2,50,000 but less than Rs.5,00,000. 5% of the amount by which it exceeds Rs.2,50,000.
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.

Income Tax Slabs for all individuals above the age of 60 – Senior Citizens:

Income Tax Slabs Income Tax Rates
Total income less than Rs.3,00,000. -NIL-
Total income greater than Rs.3,00,000 but less than Rs.5,00,000. 10% of the amount by which it exceeds Rs.3,00,000.
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.

Income Tax Slabs for all individuals above the age of 80 – Super Senior Citizens:

Income Tax Slabs Income Tax Rates
Total income less than Rs.5,00,000. -NIL-
Total income greater than Rs.5,00,000 but less than Rs.10,00,000. 20% of the amount by which it exceeds Rs.5,00,000.
Total income greater than Rs.10,00,000. 30% of the amount by which it exceeds Rs.10,00,000.

Deductions: There are various sections under which you can invest your salary and reduce the taxable amount.

Deductions for your taxable amount are available under various sections of the Income Tax act 1961. They are as follows: –

1. Public Provident Fund (PPF):
By contributing to your PPF account, you can get tax deduction under Section 80C, the Indian Income Tax Act, 1961.

2. Life Insurance Premiums:
You can get income tax deduction for paying premium towards life insurance policies for self, spouse and child under section 80C of the Indian Income Tax Act, 1961. The amount received on maturity of the policy is free from tax. However, it is subject to the terms and conditions mentioned in your policy.

3. National Saving Certificate (NSC):
The amount invested in NSC is eligible for tax deduction under section 80C of the Indian Income Tax Act, 1961. National Saving Certificates is one of the highly secured modes of investments in India. But, the interest earned from NSC is taxable. As an NSC is a cumulative scheme, interest is reinvested and qualifies for tax deduction.

4. Bank Fixed Deposits (FDs):
You can get tax deduction by investing in fixed deposits for a tenure of 5 years, under section 80C of the Indian Income Tax Act, 1961. Many banks in India offer tax saving fixed deposits. However, the interest accrued on FDs is subject to tax

5. Senior Citizen Savings Scheme (SCSS):
Senior citizens can get tax deduction by investing in Senior Citizen Savings Scheme offered by banks. These schemes are eligible for tax deduction under Section 80C of the same act. The interest earned from these schemes is entirely taxable.

6. Post Office Time Deposit (POTD):
Investing in a five-year POTD, you can get tax deduction under Section 80C. However, interest accrued on the same is fully taxable.

7. Unit-linked Insurance Plans (ULIP):
Investing in ULIPs for yourself, spouse and your children, you can get tax deductions under Section 80C.

8. Home Loan EMIs:
Equated monthly installments paid to repay the principal amount of your home loan are eligible for income tax deductions under section 80C of the same act.

9. Mutual Funds & ELSS:
Investing in mutual funds and equity-linked savings scheme, you are eligible for tax deductions under section 80C, the Indian Income Tax Act, 1961.

10. Stamp Duty and Registration Charges for a Home:
Stamp duty and registration fee paid for transferring property are entitled for income tax deduction under section 80C, the Indian Income Tax Act, 1961.

11. Retirement Savings Plan:
You can also get income tax deductions by investing in retirement plans offered by LIC or other insurance providers. Contribution to the National Pension Scheme is also eligible for tax deduction.

12. Tuition Fees:
Tuition fee paid for your children’s education qualifies for income tax deduction under section 80C. However, the fee needs to be paid for full-time education in an Indian university, college and school for any two children. Tuition fee does not include any donations or development fee towards education institutions.

13. Medical Insurance Premiums:
Health insurance premium paid for self, spouse and children qualifies for income tax deduction under section 80D of the Indian income Tax Act, 1961. The deduction allowed under this section is Rs. 25,000 for youngsters and Rs. 30,000 for senior citizens.

14. Infrastructure Bonds:
Investing in infrastructure bonds, you become eligible for income tax deductions under section 80CCF of the Indian Income Tax Act.

15. Charitable Contribution:
Donating for charitable tasks will help you reduce your taxable income under section 80G of the Indian Income Tax Act, 1961. However, make sure that you declare the whole contribution before 31st December each year.

16. Treatment of Disabled Dependents:
Under section 80DD of the Indian Income Tax Act, 1961, you can get income tax deductions for medical expense incurred in the treatment of any disabled dependent of yours.

17. Deduction for Preventive Health Check-ups:
An amount of Rs.5000 spent for preventive health check-ups of an individual or his/her family members qualifies for tax deduction under section 80D of the Indian Income Tax Act, 1961.

18. Interest Paid on Education Loan:
You can get tax deduction on the interest paid for an educational loan under section 80E of the Indian Income Tax Act, 1961. The loan can be taken to pursue higher education by the employee, or for his/her spouse, children or a student to whom the employee is a legal guardian.

19. Deduction on House Rent Paid:
An employee can get income tax deduction for the house rent paid, if the employee or his/her spouse does not own residential accommodation at the place of employment. This deduction is usually applicable for salaried taxpayers under section 80GG of the Indian Income Tax Act, 1961.

Income Tax E-Filing:
Once tax is deducted, any tax refund is facilitated only when you submit your income tax return for that year. So any TDS on rent payments for NRIs, or TDS deduction by banks on your fixed deposits will be refunded only once you file your tax returns and claim the desired tax deduction. You will need to file for tax refunds online once you file your ITR for that year.

You can e-file your Income Tax Return, TDS return, AIR return and Wealth Tax Return online ,E-filing your return has obvious advantages like the fact that you won’t have to deal with the hassle of paperwork and waste time sorting through it all. You can simply log on to the secure website and e-file your return.

Hope this article gives you a clear picture of how taxes are deducted from your salary and how you can take the measures to reduce your taxable income.

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Overdraft facility

What is meant by Overdraft facility?

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Overdraft facility is a credit line that is sanctioned to an individual against their assets. For example, you can mortgage your house with a bank and get a loan amount sanctioned against it.

If your house is worth 1 crore, then the bank might sanction you a loan of 50 lakhs after evaluating your repayment capabilities.

Why is there a need of an Overdraft Facility?

There are situations in life where in even the money saved for emergencies is not sufficient and this may lead to individuals in a dilemma. A lot of people keep 3months to 6months of expense aside on being advised by their financial consultants, however this might not be handy when there is an urgent need of cash.

This is where Overdraft facility comes in. Overdraft facility is a great way to raise funds for short-term if used wisely.

Usage of the overdraft money

The money is not disbursed immediately. You can keep withdrawing money from this overdraft account. It works similar to an approved personal loan. The interest will be charged from the day you borrow the loan. You can keep on borrowing and repaying it till the bank allows you to do so. The interest charged is 12-14 percent per year.

Assets that can be used as mortgage

Following can be offered to banks as assets: –
  • Insurance polices
  • Fixed Deposits
  • Shares
  • Bonds
The rate of interest varies for different collaterals.

The process

The process is similar to taking any other loan. You can offer a variety of collaterals to bank against your loan. There are pros and cons associated with different kinds of collaterals that you might offer. For example taking an overdraft against a property gives you a larger line of credit, however the time to evaluate is large. In case of fixed deposits as collaterals the process is much faster. Similarly the returns for life insurance properties are not good.

Depending upon the collateral, you should choose the limit. There is also a fee with a cap of 0.5 to 1 % charged while an overdraft is being granted.

Should one go for an Overdraft facility?

Overdraft facility is meant for disciplined individuals. If you use it for short-term trading in stocks, commodities etc, it may backfire. If you lose in these risk oriented measures, then you will have to pay the entire amount along with the interest incurred. Also if you fail to do so, then the collateral is liquidated. So choose very carefully.

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Celebrating Valentines’ day with EarlySalary

Valentine-blog

It’s the time of the year when promises are made new beginnings are carved, and bonds are strengthened.

It is the Valentine’s week. This is the week where people express their love for each other. This is the time when people exchange gifts with each other to showcase their affection.

However often we find ourselves in a state where our finances dwindle, and we are not able to fulfill our desires.

It is sad to acknowledge the fact that the most romantic day is approaching and we are low on cash. This makes us feel helpless and stressed. We even go in a state where we do not see the point in celebrating the day.

But EarlySalary never wants the lovebirds to miss out on such a day. We would want people to enjoy the day to it’s fullest without having to worry about cash.

With EarlySalary’s instant cash option, you can avail money whenever you want.

We would want you to cherish this day and make the most of it.

And not just the day of Valentine, EarlySalary would even suggest you to be the Earlybird where you get something unique for your loved one in the week prior to Valentine’s day.

Presents are always overwhelming, but they are even more endearing when given to people at the time when they are least expecting it.

With EarlySalary’s cash option, you can make Valentine’s day special in various ways. We can suggest some to give you a slight idea!

  • You can take your better half on a dinner date and celebrate the occasion in the grandest of days.
  • You can plan a holiday for your loved one, and travel to explore and experience
  • Valentine’s day falling on a weekday should not deter you in celebrating elaborately. You can make the weekday better than the weekend and paint the town red! You can take her out to the grooviest club and dance the night away!
  • You can get them something unique that will cause them to smile like never before
  • You can fill their wardrobes with the latest clothing and accessories
  • You can plan a weekend getaway for them away from the hustle and bustle of city life

We strongly believe that you all have a creative head and you can implement this Valentine’s day in the most special way for your loved one. EarlySalary’s always there as a friend when you need it!

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Personal loans

>What are Personal Loans?

Pr Personal loans are a category of loans that one can borrow from financial instruments available. These loans can be used for a variety of purposes such as renovation of home, repayment of debts, unexpected expenditure etc. However we must note that personal loans are not easy to obtain, and there are certain qualifications that one needs to have to get approved for a personal loan.

Below are certain points that you can pay heed to if you are considering to go for a personal loan.

Personal loans are unsecured.

This essentially means that in this case no asset or collateral is required as opposed to secured loans. Hence defaulting on personal loans means that the lender cannot set aside any property or mortgage against the loan. This is one of the major reasons for the difficulty in accessing personal loans. However the lender does have other actions to take. This includes reporting to the credit bureaus, having a collection agency or filing legal procedures for the same.

Personal loans have a fixed amount.

The amount that you can take as a loan is fixed in case of a personal loan. The amount fixed depends upon various factors such as the borrower’s income, credit rating etc. The borrower with a better credit score and a higher income can borrow a higher sum of money.

Interest rates for personal loans are calculated according to the customer’s salary

The interest rate is allocated according to the customer’s salary, the amount being borrowed, loan tenure and other criteria that differ from one lender to another.

Personal loans a fixed repayment period.

The repayment time period is fixed and ranges from 1 to 5 years.

Types of Personal loans offered by financial instruments

  • • Personal Loan For Low CIBIL Score (Not easy to get)
  • • Business Startup Loan (For SME and Start-ups)
  • • Same day loans( For people with cash emergencies)
  • • Loans for the unemployed
  • • Govt. Loans for Small Scale Businesses( For small scale business)
  • • Small Business Loans for Women
  • • Corporate Loan (For existing businesses or industrial houses) • Home Improvement Loan
  • • Medical loan
  • • Marriage Loan

Personal loans affect your credit score.

There is no collateral for personal loans; however defaulting on a personal loan can affect your CIBIL score. However, everything from applying for a loan (which means a new inquiry on your credit report) to how timely you make payments will affect your credit. The key to maintaining a good credit score is making your loan payments on time each month.

EarlySalary here is a great option for individuals to get quick access to instant cash without any hassles involved. The personal loans are approved in a matter of just 10 minutes.

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Tax Free Allowances

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Tax rules vary from individuals with a salary to the ones having other/additional sources of income. They need to declare their salary income either offline or online to file their income tax returns.

Let’s first discuss allowance before proceeding ahead to Tax free allowances. Allowance is a moentary benefit provided by the employer to the employee that is over and above the base/regular salary. These benefits were introduced to cover the expenses that the individuals bore while at service. Some of the allowances are taxable, some partly taxable, and some of them are free from taxation.

There are various allowances on which benefits can be availed by salaried individuals on tax. These allowances are exempted under section 10(14) We will list them below:-
Special allowances under section 10(14)1 are

  • (i) Allowance granted to meet cost of travel on tour or on transfer.
  • (ii) Allowance granted on tour or journey in connection with transfer to meet the daily charges incurred by the employee.
  • (iii) Allowance granted to meet conveyance expenses incurred in performance of duty, provided no free conveyance is provided.
  • (iv) Allowance granted to meet expenses incurred on a helper engaged for performance of official duty.
  • (v) Academic, research or training allowance granted in educational or research institutions.
  • (vi) Allowance granted to meet expenditure on purchase/ maintenance of uniform for performance of official duty.

Under Section 10(14)(ii), the following allowances have been prescribed as exempt

Type of Allowance Amount exempt
(i) Special Compensatory Allowance for hilly areas or high altitude allowance or climate allowance. Rs.800 common for various areas of North East, Hilly areas of UP, HP. & J&K and Rs. 7000 per month for Siachen area of J&K and Rs.300 common for all places at a height of 1000 mts or more other than the above places.
(ii) Border area allowance or remote area allowance or a difficult area allowance or disturbed area allowance. Various amounts ranging from Rs.200 per month to Rs.1300 per month are exempt for various areas specified in Rule 2BB.
(iii) Tribal area/Schedule area/Agency area allowance available in MP, Assam, UP., Karnataka, West Bengal, Bihar,Orissa, Tamilnadu, Tripura. Rs.200 per month.
(iv) Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another place. 70% of such allowance upto a maximum of Rs.6000 per month.
(v) Children education allowance. Rs.100 per month per child upto a maximum 2 children.
(vi) Allowance granted to meet hostel expenditure on employee’s child. Rs.300 per month per child upto a maximum two children.
(vii) Compensatory field area allowance available in various areas of Arunachal Pradesh, Manipur Sikkim,Nagaland, H.P., U.P. & J&K. Rs.2600 per month.
(viii) Compensatory modified field area allowance available in specified areas of Punjab, Rajsthan, Haryana, U.P., J&K,HP., West Bengal & North East. Rs.1000 per month.
(ix) Counter insurgency allowance to members of Armed Forces. Rs.3900 Per month.
(x) Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of residence & duty. Rs.800 per month.
(xi) Transport allowance granted to physically disabled employee for the purpose of commuting between place of duty and residence. Rs.1600 per month.
(xii) Underground allowancegranted to an employeeworking in under groundmines. Rs.800 per month.
(xiii) Special allowance in thenature of high altitudeallowance granted to members of the armed forces. Rs. 1060 p.m. (for altitude of 9000-15000 ft.)
Rs.1600 p.m. (for altitude above 15000 ft.)
(xiv) Any special allowancegranted to the members of the armed forces in the nature of special compensatory highly active field area allowance. Rs. 4,200/- p.m.
(xv) Special allowance granted to members of armed forces in the nature of island duty allowance.(in Andaman & Nicobar & Lakshadweep Group of Islands) Rs. 3,250/- p.m.

Image Source: LiveMint

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Default on loan can severely affect your credit score!

credit-score2

Authored article by Akshay Mehrotra, Co-Founder & CEO, EarlySalary.com

Default on a loan can severely affect your credit history and may dramatically reduce your chance of getting any credit.

Sometimes when we are young we choose not paying credit card for various reasons. Sometimes we just don’t have the money, sometime, the utility of the benefit accrued from the loan is long gone and other priorities calls for money ahead of repayment or Sometimes, we are just outright lazy and keep doing late payments while knowing the consequences.

The fact is if once a delinquent, always a delinquent customer, Banks and other financial Institutions treat you with caution. It is necessary to understand how Financial Institutions look at your repayment track record and what are these credit bureaus. In 2005, CICRA (Credit Information Companies (Regulations) Act) came which paved way for specialized institutions for monitoring and recording all loans taken from Banks and other Financial Institutions. These companies (known as CICs) collect, process and present information about each borrower and assign a credit score. Today, there are four CICs in India, CIBIL, Equifax, Experian and CRIF High Mark. Hence, A credit history of every customer submitted to all four bureaus, which allows Financial Institutions to dive into and judge whether a customer applying is worthy to give loan or not.

Credit information by definition could means any information relating to :—

  • The amounts and the nature of loans, amounts outstanding by a credit institution to any borrower;
  • The nature of security provided by borrower;
  • The guarantee furnished;

Does giving guarantee for someone else’s Loan also impact Scores? – The answer in short is yes. The financial institutions send the guarantor details to CICs, in addition to a person taking loans. Hence it is important to understand that the role of a guarantor is crucial. If the borrower defaults, then you as the guarantor will suffer too as you too will be in the “defaulter” basket. Thus, Think hard before becoming a guarantor.

Not performing on loans and credit products severely impacts your credit score; a credit score basically is a system that enables a credit institution to assess the creditworthiness and capacity of a borrower to repay his/her loan and advance. While it is subjective and depends on Institutions’ internal policies, but according to my understanding a late payment on a credit card will severely impact one’s chance of getting a personal or Home loan.

Hence, taking a loan from one bank and thinking no other bank will know the credit history, is a fool’s paradise. If you are not repaying your credit, the information will be accessed by the financial institution who can lend to you and it will affect their decision.

Image Source:moneycrashers.com

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Save your neck! Save your tax!

savetax Often it happens that salaried people end up paying more tax than actually needed. This happens mostly because of lack of knowledge about tax saving. If you feel that you have a similar story and are figuring a way out to reduce the tax burden, then this article is for YOU… Indeed, there are many ways; you can save tax while you are earning your salary. Here are 5 simple and legal tips to save tax. (more…)

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How to save your salary till month – end!

How-to-save-money-each-month It’s really hard to live a life when you are too dependent on your paychecks. Having your life decisions depend so much on the date of your next paycheck can be frustrating. Things like going out for a dinner with your friends or catching up the rock concert in town needs to be cancelled! The country’s economy might be doing well, but that does not mean you don’t have to save right? Isn’t this a very serious problem to look upon to? Well, if you’re spending more than you are earning, then naturally you’re bound to run out of cash. The good thing for you is it is still not late. Since you have realized it now you can turn the tables down. We have noted some simple steps which one can take up and easily control his spending with little efforts. (more…)

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Factors impacting your CIBIL Score

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         Nothing is worse than having a bad credit score, as it can tarnish your social image. How do I improve my credit score, what are the factors which hit your CIBIL score hard and what should we do to avoid them, are some of the common difficulties, most of the people go through but they lack awareness or ignore it. This ignorance is the cause of the diminishing CIBIL score.    Many people are stuck with a bad credit score due to their poor credit behavior of the borrowers or the lender’s mistakes. Having a good CIBIL score can help you get loans easily. Below highlighted are some common mistakes which should not be ignored. (more…)

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6 Ways to save Money at the Cinemas

shutterstock_225075286-970x546 (1) We all love going to the movies. It’s not the idea of seeing the only latest blockbuster but – it’s the two hours of mindless entertainment summed up with a tub of popcorn and a coke. It’s pretty much heaven for us. Isn’t it? What actually pricks us the most is the cost. Every year, box office prices go up, and going to a movie theatre today seems to be a hefty affair. So paying Rs.100 for a mere popcorn bucket sounds ridiculous. (more…)
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