What is Cost Inflation Index (CII)

Can you guess, what these numbers are for 200, 220, 240 or 264?

Don’t worry it is not some math thing. These numbers are used as measures to save you from paying higher taxes on the sale of any capital asset like real estate or gold. It’s the value of the “Cost Inflation Index” (CII) from the financial year 2012 – 13 to 2016 – 17.

Let’s understand what is this and how CII can be used to save tax?

What is the Cost Inflation Index?

Imagine you have bought a house in 2015 worth Rs. 2 Cr. and you are selling it for Rs. 3 Cr. in 2018. So, what will be the capital gain here? It is Rs. 1 Cr., can you imagine how much tax you might have to pay for it? That will be really a big chunk of the profit to be paid as tax.

To save you from heavy tax payments, the government has come up with CII. It is used for calculating the estimated increase in the prices of goods and assets year-by-year due to inflation.

With the help of CII, the cost of purchase of an asset will be indexed, in other words, it will be revalued or increased from its original price, considering the effect of inflation and will result in lowering capital gain tax payable on the sale of the asset.

How?? we will see later, but lets first understand…

Why CII is used in income tax?

CII is used for capital assets like real estate, gold, debt mutual funds or debentures. Asset class whose price will increase by a period of time as the value of money gets eroded due to the country’s inflation.

However, we record capital assets at cost price, despite increasing inflation, they exist at the cost price and cannot be revalued. Therefore, when these assets are sold, the profit amount remains high due to the higher sale price as compared to purchase price. This leads to a higher tax to be paid on capital gain arisen on their sale.

In the above-mentioned example, we all know that the value of 2 Cr. at the time of 2015 can not be equal to the value in the year 2018, it will be increased. The house purchased in 2 Cr. will cost much higher today, and the reason is “Inflation”.

And therefore, the Cost Inflation Index is calculated to match the prices to the inflation rate. In simple words, an increase in the inflation rate over a period of time will lead to an increase in the prices of capital assets and eventually result in lesser capital gain and tax.

In simple words, CII helps in calculating Real gain =

Selling Price of the Asset – Inflation Adjusted Purchase Price of Asset

How the cost inflation index is calculated?

How will you calculate the Inflation Adjusted Purchase Price? If let on investor, each person will have his own view in inflation, hence the CBDT (Central Board of Direct Taxes) notifies a unique number based on their calculation on consumer price index every year in the official gazette, which is used for calculating the indexed cost.

Cost Inflation Index = 75% of the average rise in the Consumer Price Index* (urban) for the immediately preceding year.

Consumer Price Index compares the current price of a basket of goods and services (which represent the economy) with the price of the same basket of goods and services in the previous year to calculate the increase in prices. How CII is calculated is not much of our use, but let us see, what are the rates notified?

What is the concept of the base year in the Cost Inflation Index?

For this purpose, the government has defined a base year i.e 2001 – 02. For all purchases before 2001, the factor used is the base factor which is 100.

Any capital asset purchased before the base year of the Cost Inflation Index, taxpayers can take the purchase price as higher of the “actual cost or Fair Market Value (FMV) as on 1st day of the base year. Indexation benefit is applied to the purchase price so calculated. FMV is based on the valuation report of a registered valuer.

Suppose a land was purchased in the year 1995. So, for calculating the indexed cost of acquisition, the fair market value of land in the year 2001 – 2000 will be considered for calculation of the indexed cost of acquisition.

Change of base year from 1981 – 82 to 2001 – 02?

Initially, 1981-82 was considered as the base year. But, taxpayers were facing hardships in getting the properties valued which were purchased before 1st April 1981. Tax authorities were also finding it difficult to rely on the valuation reports.

Hence, the government decided to shift the base year to 2001 so that valuations can be done quickly and accurately.

Chart of Cost Inflation Index

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Financial Year Cost Inflation Index (CII)
2001 – 02 (Base Year) 100
2002 – 03 105
2003 – 04 109
2004 – 05 113
2005 – 06 117
2006 – 07 122
2007 – 08 129
2008 – 09 137
2009 – 10 148
2010 – 11 167
2011 – 12 184
2012 – 13 200
2013 – 14 220
2014 – 15 240
2015 – 16 254
2016 – 17 264
2017 – 18 272
2018 – 19 280
2019 – 20 289


Applicability of CII in capital gain tax calculation

The cost inflation index can be used for calculating long term capital gains (LTCG) for investments in securities and real estate.

Since LTCG is flat 10 % (above the gain of Rs. 1 Lac) for investments in Equities, hence it has no relevance for calculating LTCG for investments in shares and equity mutual funds. But, it is useful to calculate LTCG in debt-oriented mutual funds (especially Bond funds and Fixed Maturity Plans).

Debt Mutual Funds – LTCG can be claimed only if the holding period is more than 3 years.

Properties / Real Estate – In the case of property, LTCG can only be claimed if the holding period is more than 2 years.

How CII is applied?

When the indexation benefit is applied to the “Cost of Acquisition” (purchase price) of the capital asset, it becomes “Indexed Cost of Acquisition”.

[su_box title=”Calculation of Indexed Cost of Acquisition”]Indexed Cost of acquisition = Cost of acquisition * CII for the year of transfer / CII for the year of purchase or base year (in case of the asset purchased before 2001)[/su_box]

Let’s understand this with the help of the same example given at the start. You bought a house for Rs. 2 Cr in the financial year 2015 – 16 and sold it in F.Y. 2018-19 for Rs. 3 Cr. So, what will be the capital gain after considering CII?

CII for 2015 – 16 = 254

CII for 2018 – 19 = 280

Indexed Cost of acquisition = 2,00,00,000 * 280/254 = 2,20,47,244

Therefore, Capital gain = Cost of sale – Indexed cost of aquisition = 79.52 Lakh (3 Cr. – 2.20 Cr.) which would have been Rs. 1 Cr.withour CII.

Hence, taxed at 20% (rate for LTCG) saved on Rs. 20.48 Lakh i.e Rs. 4 Lakh approx.

I hope, this article helped you in understanding the concept of CII and its importance. Let us know what you think about CII and revision made by CBDT in the base year in the comment section.

How much tax benefit can be claimed u/s 80D? (Rules + Limits)

Are you clear about the tax-saving which you can do when you pay health insurance premiums every year? You will be glad to hear that it’s over and above sec 80C.

Yes, it comes under a separate section called section 80D!

What is section 80D?

Health Insurance policies have become very famous in the last 10 yrs and to encourage it, the govt gives tax benefit when you pay the premium for yourself, your family or your parents

Section 80D defines all the rules and limits related to health insurance premium payment and tax saving.

what is section 80D of Income Tax Act, 1961

How much can you claim under section 80D?

One can claim a deduction of premium amount on health insurance of self + family (spouse + dependent children below 18 yrs.) and parents. If one pays a health insurance premium of his brother or sister then he/she will not be able to claim a tax deduction. To make it more clear, I have mentioned the list of people who will come under this benefit –

  1. Self
  2. Spouse
  3. Dependent Children (below 18 yrs.)
  4. Parents

How much you can claim Tax benefit u/s 80D?

  1. You can claim a maximum Rs. 25000 of the deduction for premium paid on health insurance of you, your spouse and children (under the age of 18 yrs.), if you are below 60 years
  2. The same amount of Rs. 25000 you can claim for deduction of premium that you pay for your parents (father+mother).

And if the age of you or your parents is above 60 years then the limit will increase to Rs. 50,000/- in each case. In the above limits, exemption of Rs. 5000 for yearly health check is included.

For getting a clear understanding of the calculation part you can refer the info-graphic given below.

these are the tax benefits u/s 80D

image on 80D exemption limit

Let us now understand this through some examples –

Case 1 – Ram (35 yrs.) with a spouse and 1 kid + parents (mother 55 yrs. and father 57 yrs.)

In case 1, Ram pays a yearly premium of Rs 15000 (for self+spouse+1 kid) and Rs 34000 (both parents). So now let us see how much exemption Ram can claim u/s 8oD.

As self + family exemption limit is Rs 25000 and Parents exemption limit is Rs 25000. Then Ram can claim exemption of Rs 40,000 (15000 + 25000) u/s 80D.

Case 2 – Rakesh (48 yrs.) with a spouse and 2 kids + parents ( father 75 yrs.)

In case 2, Rakesh pays a yearly premium of Rs 32000 (for a self+spouse+2 kids), Rs 63000 (for father) and Rs 8000 (preventive medical check-up). So now let us see how much exemption Rakesh can claim u/s 80D.

As self + family exemption limit is Rs 25000 and parent (senior citizen) exemption limit is Rs 50,000. So, Rakesh can claim exemption of Rs 75,000 (25000 self + 50,000 parent). As Rakesh has already exhausted his self exemption limit so he won’t be able to claim his preventive medical check because preventive medical check is already included in the self exemption limit.

2 Benefits into 1

I think getting tax deductions on health insurance is a wonderful thing. Health Insurance in itself is a very important financial product most people should buy and you are also getting some tax benefits on it. So, do buy health insurance for yourself, your family and parents to protect your wealth and save tax.

Let us know your views in the comment section about this article.

Income Tax guide for Beginners – Exemptions, Deductions & TDS

Most of the investors are not aware of how income tax is calculated and the basic understanding of tax related concepts when they start their career. In this guide, you will learn how to calculate income tax in a very simple and easy to understand way without involving any complicated jargons.

how to calculate income tax

What is Income tax?

Income tax is a tax imposed by the government on the income of an individual in every financial year. To calculate your income, all the income sources like salary, business income, rent, dividends, etc are considered. Every citizen of the nation or even a non-residential individual also has to pay this tax to the government if he is earning any income in India.

The govt of any country has various kinds of expenses like paying pension to govt employees, building roads and infrastructure, start various schemes for the citizens benefit etc etc. For all this, they need money and income tax is one of the ways for the govt to earn the money.

The same money eventually is used to run the nation and its development. So when we pay the income tax, we get back various facilities like roads, public parks, and poor people also get various free services in health and education.

Every individual, who has yearly income more than a limit (current limit of 2018-19 is 2,50,000 per year) has to pay some part of their earning as tax to the Income-tax Department.

How to calculate income tax?

Calculating income tax is a little detailed, but simple procedure and it depends on 2 basic factors.

  1. Taxable income
  2. Age Slab

Let’s see the first factor i.e. taxable income.

What is taxable income?

Tax is paid on “Taxable Income” and not your full income. There is something called “Exemptions” and “Deductions” which are reduced from your income to arrive at “Taxable Income”. Formula to calculate taxable income is given below:

Taxable income formula

#1: What is Gross income?

Gross income is your total earning. It is the entire amount of your income without any deduction or exemptions. Gross income is not only your salaried income. It is the income you earn from all your earning sources.

For example: In one month, If you earn Rs.50,000 as salary, Rs 25,000 from your house rent and Rs.20,000 from your other business.

Then your gross monthly income will be : 50,000 + 25,000 + 20,000 = Rs. 95,000

There are various sources of income which are classified into 5 categories. The categories are called 5 heads of income.

5 heads of Income:

Each and every source of earning from where you are getting money is considered as your income. There are 5 main sources which are also called as 5 heads of income which are considered as the main income sources. These 5 heads are as bellow:

5 heads of income

Let me tell about these sources in detail.

1. Income from salary

The first head is “Income from Salary”, so if you are a salaried employee, then your whole year salary has to be added, less exempt HRA and other perquisites (covered below in this article) which are allowed to be tax-exempt. So, this amount is to be shown under the head of the salary. It does not matter if you are a govt employee or work in the private sector.

2. Income from house property:

If you have a property and you have given it on rent, then all the rent earned in a year will be considered as your “Income from House Property”.

3. Income from profit or gains from business:

If you have your own business, then all the profits you generate from that business will be considered under this head. For example, if you have a shop, and your revenue is 5 lacs a year, but your expenses in shop is 3 lacs, then your profit is Rs 2 lacs. This 2 lacs will be considered as your income under this head.

4. Income from Capital Gains:

Capital assets can be simply defined as the property you own, which includes Stocks, mutual funds, real estate, gold, etc.  So the profit you earn through the sale of these assets is considered as a capital gain and it will be taxable depending upon the class of asset from which capital gain occurred. For example gain on capital assets like equity stocks or equity mutual funds is taxable at 10% above Rs 1 lacs profits in a financial year.

5. Income from other sources:

The sources of income other than the above-mentioned classes are considered under 5th head of income. For example –  the money you receive from any relative or friend as a gift above Rs 50,000 or any award prize or lottery you won, etc will come under this head.

Most of the people who are salaried will not have to deal with the other 4 heads of income for many years.

#2: What are deductions and exemptions?

Now let’s understand the very important concept of “deductions” and “exemptions”. These two things can be reduced from your gross income and your taxable income can come down, which will result in lower taxes

In this article, we have covered exemption available to salaried employees on receipt of allowances and perquisites from employer. Let’s see the examples of Tax Exemptions and deduction:

Tax Exemptions

“Exemptions” are some of the defined benefits or heads which can be deducted from income. A person spends on some of the necessities in life like paying rent, spending money on children’s fees, and basic living expenses. So some of the exemptions allowed are

  • HRA (house rent allowance)
  • Standard Deduction of Rs 50,000 per year
  • Children Education Allowance + Hostel Allowance
  • LTA (Leave travel allowance)

Let’s understand these 3 things.

Exemption #1 – House Rent Allowance (HRA)

If you are receiving HRA as part of your salary and also pay rent for residential accommodation then you can claim the HRA paid to you as exempt from tax subject to certain limits and restrictions. These are as follows:

Minimum of the following HRA is exempt from tax –

(i) Actual HRA received

(ii) 50% of annual salary* if living in metro cities or else 40%

(iii) Actual Rent paid less 10% of Basic + DA

Exemption #2 –  Standard Deduction of Rs 50,000

Once can directly deduct a standard deduction of Rs 50,000 and bring down their income by that margin. Before Financial Year 2018-19, there was a deduction available for Travel Allowance (Rs 19,200) and Medical expenses (Rs 15,000) when you produced the bills, but now there is no requirement of producing any proof of expenses. One can directly take the benefit of Rs 50,000 standard deduction (for FY 2018-19, this was Rs 40,000, but later it was increased to Rs 50,000)

Exemption #3 – Children Education Allowance + Hostel Allowance

If you are receiving children education allowance or hostel allowance from your employer then you are eligible to claim a tax exemption under the Income Tax Act. However, here are the limits for these two exemptions

  • Children’s Education Allowance: INR 100 per month per child up to a maximum of 2 children.
  • Hostel Expenditure Allowance: INR 300 per month per child up to a maximum of 2 children.

Exemption #4 – LTA (Leave Travel Allowance)

A lot of employers give an allowance to employees for traveling on leave dates. An employee may travel for his holidays or vacations (alone or family) and will incur some expenses related to that. So this allowance is given for that on producing the bills and on doing the actual travel by taking leaves.

The actual rules for LTA are quite detailed, hence we are not covering it here in this article. Right now you just need to know that the employer can define the LTA allowance limit like Rs 50,000 (for example), so that employee can do travel expenses upto that limit twice in a block of 4 yrs and claim this exemption.

Tax Deductions

There are various deductions that are available under different sections of the income tax act. This deduction is against amounts that you have invested in some specific products like Insurance, ELSS, or ULIP and it also considers specific types of expenses that you incurred during a financial year like Principal repayment of loan, donations or health insurance premiums, etc.

Here is the table given below in which you can see various sections covered under section 80 (from 80C, 80D up to 80U), their meaning, maximum limit of deductions and who can avail the benefit of these deductions.

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(IN RS.)

Who can claim?

  80C Deduction on investment made in LIC, PPF, ELSS, ULIP, Payment towards Loan principal, tuition fee, etc. 1.5 Lac (for 80C, 80CCC, 80CCD) HUF & Individual
  80CCC Deductions for premium paid for annuity 1.5 Lac aggregate Individual
  80CCD Contribution to National pension scheme 50,000 above Rs. 1.5 Lac limit Individual
  80CCF Deduction on investments in infrastructure and other tax-saving bonds 20000 Individual & HUF
  80CCG Rajiv Gandhi equity savings scheme (RGESS) 25000 Individual & HUF
  80D Deduction on premium paid for Medical  insurance 25000 (50,000 in case of senior citizen) Individual & HUF
  80DD Deduction on medical expenses of   dependent  handicapped relatives 75,000 in case of general  disability (1.25 Lac in case of severe disability Resident Individual & HUF
  80DDB Deduction on medical expenses of self or  dependent relative 40,000 ( 80,000 in case of  senior citizen) Resident Individual & HUF
  80E Deduction for interest on education loan for  higher studies There is no limit on the maximum amount that is allowed as deduction. Individual
  80EE Deduction on interest paid for   home loan only  for first-time homeowners Up to 3 Lac Individual
  80G Deduction on donations for social causes Limits are based on donations All assesses
  80GG Deduction on House Rent when   HRA is not  paid 2,000 per month Person who is not getting   HRA
  80GGA Deductions for donations made towards scientific research or rural development. Limits are based on donations Taxpayers who have income from salary or property or capital gains and not from business
  80GGB Deduction on the amount paid to   any political parties by companies  Limits are based on donations Indian companies
  80GGC Deduction on the amount paid to   any political parties by an   individual  Limits are based on donations Non-corporate assesses or taxpayers
  80IA Deductions in respect of profits and gains  from industrial undertakings or   enterprises engaged in infrastructure development NA All assesses
  80IAB Deductions in respect of profits and gains by an undertaking or enterprise engaged in the development of Special Economic Zone. NA All assesses
  80IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings NA All assesses
  80IC Special provisions in respect of certain undertakings or enterprises in certain special category States NA All assesses
  80ID Deduction in respect of profits and gains from business of hotels and convention centers in specified area NA All assesses
  80IE Special provisions in respect of certain undertakings in North-Eastern States NA All assesses
  80JJA Deduction in respect of profit and gains from business of collecting and processing of bio-degradable waste 100% of profit for 5 successive  assessment years All assesses
  80JJAA Deduction in respect of employment of new workmen. 30% salary of full-time employees for 3 years Indian companies
  80LA Deduction in respect of certain incomes of Offshore Banking Units Rs.12000 (plus additional 3000) scheduled banks, IFSC and   banks established outside  India
  80P Deductions in respect of income of co-operative societies NA

Co-operative Societies

  80QQB Deduction in respect of royalty income, etc., of authors of certain books other than text-books. 3,00,000 Resident Indian authors
  80RRB Deduction on the income of Royalty of a Patent 3,00,000 Resident individuals
  80TTA Deduction from gross income for interest on savings accounts 10,000 per year HUF and Individual  taxpayer
  80U Deduction in case of physical disability 75,000 in case of general  disability (1.25 Lac in case of   severe disability Resident individuals
  24 Home Loan Interest Rs.2 lakh (for self-occupied house) No limit (for let-out property) Individuals


Let me show you an example of calculation of taxable income of a person who’s total earning is Rs.12,60,000. See the table given below.

**Examples in this article are mainly for salaried class of individuals having no other source of income like house property or capital gains.

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Person ‘A’s gross salary Rs. 12,60,000
His deduction under 80(C) act Rs.1,50,000
HRA benefit Rs.60,000
Standard Deduction Rs.50,000
Taxable income formula Gross income – exemption – deduction
12,60,000 (Gross income) – 1,50,000 (Deduction) -[60,000 – 50,000 (Exemption)]
Total taxable income 10,00,000


So from this example we got Rs.10,00,000 as a taxable income of that person.

You must have got an idea of calculating taxable income. So now let’s move toward calculating income tax applied on that taxable income.

The second factor essential for income tax calculation is your age. According to the age groups, there are three tax slabs and each tax slab has different tax rates. See below these three tax slabs and yours.

1) Tax slab below 60 years of age group:

In this group comes the youngsters both men and women having age below 60 years. Individuals in this group have to pay more tax than the other groups. Here the tax rate is highest among all three groups. See the table below to understand the tax rate –

IT slab 1

2) Tax slab between 60 to 80 years of age:

This is the group of individuals most of whom are already retired. In this group tax charges are different i.e. lower than the first group. The percentage of tax is given below.

IT slab 2

3) Tax slab above 80 years of age:

This is the last and most aged tax payer’s slab. The tax rates are lower here than the other two groups. The percentage of tax is given in the following table.

IT slab 3

Income tax calculation

Let’s take the same above example of taxable income of Rs 10 lacs and considering this person in 1st tax slab, his income tax can be calculated as follows.

Income upto Rs.2,50,000 is tax free.

(between Rs. 2,50,001 to 5,00,000) 5% tax = 5% of Rs. 2,50,000 = Rs.12,500

(between Rs 5,00,001 to 10,00,000) 20% tax that means 10,00,000 – 500000 = 5,00,000

Tax at 20% on 5,00,000 will be = Rs. 1,00,000

So the total income tax of this person will be –

Rs. 12,500 + Rs. 1,00,000 = Rs. 1,12,500 (plus Education cess of 4%)

The GIF given below will explain you complete tax calculation:

Income tax calculation

If the person is earning more than 10 lacs, than on the amount above Rs 10,00,000, it will be taxed at 30%.

What is TDS?

When you earn an income beyond a specified limit, the govt has mandated the person paying you the income to deduct one part of it as your advance tax on your behalf is called TDS. If you look at its full form its Tax deducted at SOURCE (whoever is paying it).

If you want to find out all the TDS deducted for you at one place, there is a form called form 26AS which can be downloaded from TRACES website. You can claim the TDS amount against the total tax payable by you. Incase your TDS amount is more than the tax payable, you can apply for the tax refund when you file your ITR.

Various ITR forms

After paying the income tax, one also has to file the IT return which is to declare your income earned from various sources, tax paid in advance, your TDS deducted in the financial year. It is also useful for claiming income tax refund.

There are different ITR forms for each class of individual i.e. salaried, or business/professional individual. Following is a brief classification of ITR forms –

ITR 1 or Sahaj :

This form is for an individual (Resident) earning less than Rs. 50 Lakhs in a financial year under heads of Salary or pension, one house property, Other sources (excluding winning from Lottery and Income from Race Horses) and agricultural income less than Rs. 5000 in F.Y.

ITR 2 :

This form is for HUF and an individual (including non-resident/resident not ordinarily resident)  who is earning more than Rs. 50 lakhs under head of Salary, House property, Other Sources (including Winning from Lottery and Income from Race Horses), agricultural income more than Rs. 5000 in F.Y. and also capital gains.

ITR 3 :

This form is used by HUF and resident individuals who have income under the head of Profit & Gains from business or profession. This return may also include income from house property, salary/pension and income from other sources.

ITR 4 :

This return form is to be used by an individual or HUF, who is resident other than not ordinarily resident, or a Firm (other than LLP) which is resident, whose total income for the assessment year 2019-20 does not exceed Rs.50 lakh and who has income computed on presumptive basis under section 44AD or 44AE or 44ADA.


In this article, we tried to cover various income tax-related concept in nutshell, I hope it was beneficial for those who had no idea about it. We will try to cover this information in detail in various other articles dedicated to individual topics. Please ask your questions in the comments section so that we can answer those.

15 Best Tax Saving Options under Section 80C

What so ever we earn, even then if our income is taxable we don’t want to pay tax on that income. We have a soft corner for our income. In this way, we tend to avoid paying taxes. We must remember that paying taxes on time signifies that you are a good citizen of your country.

As we all know the Government of India knows that we work so hard to earn this income. So in order to save more money from being taxed, the Income-tax Act 1961 section 80C allows a certain deduction to lower tax liability against taxable income.

tax benefits of 80c

Who all can claim deductions under section 80C?

An individual and HUF (Hindu undivided family) can claim all deductions under section 80C.

Most of the people are concerned about taxes, especially newly joined employees. Everyone wants to know about the deductions under various sections so that they can invest their hard earned money and save tax. To help you understand more, I have listed down what all tax savings investments come under section 80C of Income Tax Act 1961.

Tax saving investments U/S 80C

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Options #1 – Equity Linked Savings Scheme (ELSS) Options #2 – 5 yr Tax Saving Fixed Deposits
Options #3 – Public Provident Fund(PPF) Options #4 – Sukanya Samriddhi Yojana
Options #5 – Life Insurance Premium Options #6 – National Savings Certificate(NSC)
Options #7 – Infrastructure Bonds Options #8 – Tuition Fees
Options #9 – Senior Citizen Saving Schemes(SCSS) Options #10 – Home Loan Payment
Options #11 – Registration expenses of House and Stamp duty Options #12 – Post Office Time Deposits
Options #13 – Unit Linked Insurance Plan(ULIPs) Options #14 – National Pension System(NPS)
Options #15 – Employees Provident Fund(EPF)


If you are in a rush and you want to cover all the points. So, we have attached a crisp video for you below.

Options #1 – Equity Linked Savings Scheme (ELSS)

ELSSs are equity mutual fund schemes that invest in stocks. They have a mandatory lock-in period of three years. They are riskier than other options like Public Provident Fund, National Saving Certificate, etc. However, they also have the potential to offer superior returns. ELSS category has offered an average return of 18.45 percent in the last five years. Investments in ELSSs qualify for tax deduction under Section 80C of the Income Tax Act. The maximum tax deduction allowed under Section 80C is Rs 1.5 lakh.

Options #2 – 5 yr Tax Saving Fixed Deposits

Tax saving fixed deposit (FD) is a type of fixed deposit, which comes under section 80C of the Indian Income Tax Act, 1961. This kind of deposit is offered for a lock-in period of 5 years. The maximum deduction an investor can claim through it is Rs 1.5 lakh. FD gives us 100% security of capital + guaranteed return on invested amount.

The rate of interest offered by banks ranges from 7 to 9% (may vary from banks to banks). The deduction is available to individuals, members of the Hindu undivided family (HUF), senior citizens and NRIs. As it is a lock-in fund, premature withdrawal is not allowed. This deposit account can be opened as single or joint holding mode. However, in case of a joint account, the tax benefit will be availed by the first holder of the deposit.

Options #3 – Public Provident Fund(PPF)

PPF is a long-term investment option of 15 years by the Government of India with an attractive interest rate of 8%(with returns fully exempted from Tax). One can invest minimum Rs. 500 to a maximum of Rs. 1,50,000 in one financial year. Deposits can be done in a maximum of 12 transactions only. One can also enjoy loans, withdrawals, and extension of the account. Loans can be taken against the Public Provident Fund between 3rd to the 6th financial year. A partial withdrawal facility can be taken from the 7th financial year onwards. The account can be extended for a period of 5 years after maturity but in a block-in mode.

Options #4 – Sukanya Samriddhi Yojana

This scheme is one of the most popular schemes by the Government of India. The aim of this scheme is to give a better future to the girl child in terms of education and marriage expenses. This scheme was launched in 2015 as a part of the Beti Bachao and Beti Padhao campaign. Parents or guardians can open the account anytime in the name of a girl child between the birth of a girl child till she attains the age of 10 years.

Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years. The interest rate on Sukanya Samriddhi Yojana is 8.1%. The investment amount is limited to a maximum of Rs.1,50,000 in a financial year. Investment, withdrawals & maturity amount are tax-free. The maturity of this account is after 21 years.

Options #5 – Life Insurance Premium

The life insurance premium is a payment made to secure our life. It is paid in the name of the taxpayer or the taxpayer’s wife and children. It is an eligible tax-saving payment under Section 80C. The deduction is valid only if the premium is less than 10% of the sum assured. One can get deductions up to 1.5lakhs a year.

Options #6 – National Savings Certificate(NSC)

NSC is a savings bond that encourages subscribers (mainly small to mid-income investors) to invest while saving on income tax. This investment is mainly a savings scheme for resident individuals only. Hence, Hindu Undivided Family (HUF), Trusts and NRIs cannot invest in this scheme. Indian individuals can buy it from the nearest post office in an individuals name (for a minor) or with another adult( as a joint account). This investment comes with 2 fixed maturity periods – 5 years and 10 years.

The minimum investment amount is Rs 100 with no maximum limit. Investments of up to Rs 1.5 lakhs in this scheme are allowed as a deduction under Section 80C of the Income Tax Act. The interest rate is fixed which 7.6% to 8.5% annually is currently. Many investors take loans on this certificate from the banks. The NSC can be transferred from one individual to another if the certificate holder intends to transfer.

National Saving Certificate

Options #7 – Infrastructure Bonds

A bond is an instrument to borrow money. Basically, they are borrowings that are to be invested in government-funded infrastructure projects within a country. They are issued by governments or government authorized Infrastructure companies or Non- Banking Financial Companies. Infrastructure bonds are not available all the time.

Whenever the government needs some money then they issue these bonds to raise money from the common people. An Indian resident(not minor) and HUF can invest in this bond with a maturity period of 10-15 years with an option of buy-back after a lock-in of 5 years.

These bonds are listed on Bombay Stock Exchange(BSE) and National Stock Exchange(NSE).Investments up to Rs. 20000 are eligible for income tax deduction under Section 80CCF of the Income Tax Act(this is over 1.5 lakhs of deduction available under section 80C).

Options #8 – Tuition Fees

Under section 80C, the government of India allows tax exemption on the tuition fees paid by the individual for their children. To be more precise the deduction is available only on the tuition fees part of the total fees paid. Other components of fees such as development fees, transport fees are not eligible for deduction u/s 80C. The deduction can be claimed for only 2 children.

For e.g, If a person has 4 children and father is the only earning member in the family whose income is taxable then he can claim an exemption for only 2 children and not 4 children. But if both the parents are working and both of there income is taxable then they both can claim and get an exemption for all the 4 children. Adopted Children’s school fees are also eligible for deduction.

Options #9 – Senior Citizen Saving Schemes(SCSS)

SCSS is a savings scheme for a senior citizen who falls under the age group of 60 years and above. Those senior citizens who are at the age of 55 years or more but less than 60 years (who have retired on superannuation or under VRS) can also avail of this scheme, within one month of receipt of retirement benefits and the amount should not exceed the number of retirement benefits.

The senior citizen can visit the nearest post office to avail of this scheme. A joint account can be opened with a spouse or husband only( with the first depositor as the investor). The account can be transferred from one post office to another.

There can be only one deposit in the account in multiple of INR.1000/- maximum not exceeding Rs 15 lakh. The current interest rate is 8.7% per annum. Maturity period is for 5 years. After maturity, the account can be extended for three years more (by giving an application in the prescribed format).

In such cases, the account can be closed at any time after the expiry of one year of extension without any deduction. TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a. Nomination facility is available at the time of opening the account and also after opening the account.

Options #10 – Home Loan Payment

One can claim deductions on principal repayment for the home loan. The exemption is available up to Rs. 1,50,000 within the overall limit of section 80C.
Conditions for claiming the deduction are as follows-

  • The home loan must be for the purchase or construction of a new house property.
  • The property must not be sold in five years from the time one takes possession

Options #11 – Registration expenses of House and Stamp duty

Registration expenses of house and Stamp Duty charges and other expenses related directly to the transfer of house are also allowed as a deduction under Section 80C, subject to a maximum deduction amount of Rs. 1.5 lakhs. One should claim these expenses in the same year one makes the payment on them.

Options #12 – Post Office Time Deposits

The post office time deposit is a post office scheme. An individual and minor(for 10 years and above) can open an account here. Minor after attaining majority has to apply for conversion of the account in his/her name. A joint account can be opened by two adults. A single account can be transferred into joint and vice-versa. Nomination facility is available at the time of opening and also after the opening of an account.

The account can be transferred from one post office to another. The Interest is payable annually but calculated quarterly. One can make a minimum investment of Rs 200 with no maximum limit. The investment under 5 Years Time Deposit qualifies for the benefit of Section 80C of the Income Tax Act, 1961.
The interest rates increase year after year –

  • 1 year A/c is 6.9%
  • 2 year A/c is 7%
  • 3 year A/c is 7.2%
  • 4 year A/c is 7.8% (interest rates as on 01.10.2018)

Options #13 – Unit Linked Insurance Plan(ULIPs)

ULIPs stands for Unit-Linked Insurance Plans. It is a combination of insurance and investment. Here policyholder pays a premium monthly or annually. In this plan, a small amount of the premium goes to secure life insurance and rest of the money is invested just like a mutual fund does. ULIP offers investors to invest in equity and debt. Life insurance ULIP must be kept in force for 2 years to claim deduction u/s 80C.

Options #14 – National Pension System(NPS)

The NPS is a pension scheme by the Indian Government which allows the unorganized sector and working professionals to have a pension after retirement. This can be opened by any Indian citizen aged between 18 and 60. No limit on maximum contribution.

The interest rate varies between 12% – 14%. Partly withdrawals are allowed only after 15 years but under special conditions. Investments of up to Rs. 50,000 can be used to avail tax deductions under Section 80CCD. This limit of 80CCD is deductible over and above the maximum limit of section 80C (Rs.1.5lacs).

Options #15 – Employees Provident Fund(EPF)

EPF is a retirement scheme which is available to all salaried employees. 12% of basic salary + DA, is deducted by an employer and deposited in the EPF or other recognized provident funds. Any employee with a basic salary of 15000 per month can open the EPF account.

The interest rate payable is 8.55%. The basic requirement of this scheme is that both the employer and employee will have to contribute a minimum of 12% basic pay+D.A. The entire PF balance with interest is tax-free if it is withdrawn after 5 years of continuous service.

Case Study – Radha recently started working in an organization. She wanted to have a better life after retirement. So she decided to save more for her future and requested her employer to deduct more 8% from her basic pay in terms of EPF. So all together Radha invested 20 % of her basic pay every month for her better and secure future in EPF. This phenomena of voluntarily investing more in EPF is called VPF (Voluntary Provident Fund).


So, by now you all have come to know the various options to save your hard-earned money from getting taxed. Rather than just sticking to one option, don’t you think you should invest a little-little in few options so that you can get good interest rates and lump sum amount after maturity.

Please let us know your views about this article. If you have any doubts or query, leave in the comment section.

How to check a fake GST number online in just 30 seconds

Now a days various restaurants and businesses are putting fake GST number on the bills and charging extra from the customers without registering with the GST department. In this article, we will teach you how you can check the validity of the GST number and its really valid of not in just 30 seconds. It’s a simple process that can be done with 2 clicks.

GST is now a reality and almost everywhere GST is charged. You can see that suddenly those restaurants who never mentioned any taxes in their bills have also started adding 18% more on the bill on the name of CGST and SGST (more on that later)

How fake GST number on bills is creating a hole in your pocket?

GST is a big reform in the country and while govt claims that it’s a simple tax, there are lots of inherent complications to this taxation system. A common man thinks that now everything has got costly by an extra 12% or 18% (especially in smaller cities)

One of my friend in Varanasi told me that a small shop near his place is charging extra Rs 2 on a packet of biscuits now telling the poor customers that its GST tax which is now to be paid.

example of charging GST without valid number

While that’s an example of a mid-level city, many restaurants have also started putting fake GST number on the bill and have started charging extra taxes which they will never deposit to anyone.

How to verify the GST number?

Verifying the GST number online is a very simple procedure. First of all check the GST number on the receipt. It’s 100% mandatory to mention the GST number on the invoice or bill.

Example of how GST number looks like on the bill

If someone is charging GST, without mentioning the GST number, then it’s illegal. Earlier it was service tax, now it’s GST number which is mandatory to put on the invoice.

Here is how to check if GST number is real or fake?

  1. Check the GST number on the bill and note it down
  2. Visit this page of GST website and enter the GST number as shown below
  3. Enter Captcha and press Submit.
  4. You will see the business name registered, match it with the name of the business on invoice

How to check if a GST number is fake or real ?

What if I don’t have a GST number?

Some businesses still don’t have the registration number confirmed, but they have the provisional GST number with them, so you can also check the provisional GST number online and verify them. Even you can verify the business based on their PAN.

Here the steps to verify GST number in this case

Go to this link and you will be asked various details which you need to enter.

Fake GST number


Here you need to fill the data required correctly i.e. state, ID type (PAN number, GST number or Provisional ID), ID number and verification code. At last click on submit and then scroll down to see the details of the registered business.

How to find a fake gst number online

This is how you can verify if GST number is valid or not with the help of a provisional ID or PAN number. As of now, there is no way of finding or verifying the GST number just by entering the name of the business entity.

GST is a 15 character code

It’s an important point to know that GST number is 15 characters which are a combination of numbers and characters. These 15 digits are broken into 5 parts as follows

  • First 2 digits are state code where the business is registered
  • Next 10 digits are PAN number of the business
  • 13th digit is registration number of that store or business with same PAN number
  • 14th digit is Z by default for right now
  • And the last i.e. 15th digit is a check code

GST number structure

What is someone says “I have applied for GST number”?

Some shopkeepers and business owners are playing the trick of “I have already applied for GST number, It’s not yet approved?”. This is to give a feeling to customers that they are rightfully charging GST. But this is again a fraud.

Because when they apply for GST number, they get a provisional GST number anyways and they need to either put a GST number or provisional GST number on the invoice/bill

Don’t fall for this trap and demand to see the GST number.

Where to complain about fake GST number?

GST department has dedicated the helplines for you to complain or ask any queries regarding GST. Here are the emails and phone numbers

  • GST Complaint mail id: [email protected]
  • GST Helpline Number: 0124-4688999 or 0120-4888999

Let us know if you have more questions on how to check if the GST number is valid or fake?

How to File RTI Online in 4 simple steps (screenshots + process)

Earlier RTI filing was too much pain, because it was very much time-consuming as it was an offline process.

A form was to be filled and then a Rs 10 stamp was to be attached and the entire form had to be sent by post to the required department of the government. The form took approximately 3 to 4 days to reach the concerned department.

So many people who wanted to file RTI refrained from doing it.

How to file RTI Online ? Steps and process explained

However now filling RTI is just a click away because we can file it online. I will tell you 4 SIMPLE and EASY steps to file RTI ONLINE without any hassle. But before that, let me explain to you in brief what is an RTI act.

What is the RTI?

The Right to Information Act 2005 commonly known as RTI is a law using which an Indian citizen can request for information from state or central government departments and offices. And such a request should be processed in a timely way as mandated by the RTI Act.

Let me now share what steps you should take to file RTI form online.

Step #1 – Create your free login or file RTI as a guest

To create a login, visit RTI website and click on sign up option.

If you do not want to create login then continue as a guest (by directly clicking to submit request button). To make it simpler I have attached the screenshot of the login page.

RTI login page where you can sign up and login to file your RTI request online

When we log in or even directly click on “submit request”, then the below image will appear and you just have to tick on “I have read and understood the guideline and click on submit button”. Below is a snapshot!

RTI guidelines

Step #2 – Fill the RTI form

The next step is to fill the main RTI form, you can access it directly by clicking here.

Filling an RTI form is a bit tricky. There are lots of things you should take care. There are dozens of govt departments and ministries which handle a different kind of work. So it’s important to know which department or ministry handles your RTI form.

Whatever is your complaint, it is important to write to the point and not hit around the bushes and also to write in bullet points because it will be very easy and eye-catching for the RTI OFFICER to understand your query and reply you even faster.

Let me make it easier for you by giving an example.

CASE STUDY – Mr. Shyam wants to file RTI for reasons for delay in roads repairs.

After the rainy season was over, Shyam noticed that the road was not at all in good shape. He also noticed that there were frequent accidents on that road and many people were losing their precious lives. He complained to the authorities, but no actions were taken and 3 months had already passed.

Shyam finally decided to file an RTI to know what is the reason behind so much delay.

How to fill online RTI form

If you are not sure which ministry you should choose while filing the RTI, then just Google search about it, and most probably you will find that information.

Step #3 – Make the fees payment

Once you click on submit, then the final step is to make the fees payment. The Fees for filing RTI is Rs 10 only. Two modes of payment are mentioned as

  1. Internet Banking (only SBI bank option in there)
  2. Credit or Debit Card / Rupay Card

how to make online payment for RTI application

Step #4 – Submit your application

The last and final step

  1. Once you have made the payment click on to the submit your application. A unique registration number is generated. (please save it for future reference).
  2. Now, wait and watch for a maximum of 30 days and you will mostly get a reply for your query.
  3. If you have not received the reply or you are not satisfied with the answer from RTI department, then you can file the first appeal, which is free of cost for the first time. Learn more about first appeal here

You can’t File RTI to State Govt departments online

Note that the facility of filing online RTI is available only for central govt departments and ministries. You can’t file RTI for State govt departments through this online portal. For that, you should follow the offline process of RTI only.

I hope this article has taught you about filing RTI online and answered most of your basic queries. Please feel free to ask any questions in the comments section below.

How much HRA can you claim? (with calculator and video explanation)

Do you get HRA as part your salary? If yes, then it’s critical for you to understand how the HRA exemption amount is calculated?

In this article, we will talk about things like what is HRA? How to calculate HRA? And various other things related to house rent allowance. You can check out the video below to quickly understand everything about HRA

What is HRA?

HRA i.e. House Rent Allowance is the amount paid as a part of salary by the employer to the employee. Employee can get tax benefit on this HRA amount if he is living in rented house and paying rent. This simply means that if your salary skip has HRA component, then you don’t have to pay income tax on this amount. However you can’t save income tax on the full amount.

There is a rule on how much HRA you can claim and save tax on it. In this article, we will look at the rules and calculations. But before we move ahead, here is one good news.

If an employee does get HRA as part his salary, but paying rent, even then he/she can claim some part of HRA for saving tax and there is separate calculation for that. We will also look at that today.

How to Calculate HRA amount?

Lets now see how the HRA is calculated, but the calculation depends whether you are getting salary component from your employer or not (it should be mentioned in your salary slip).

Case #1 – When you get HRA from employer

Actual HRA offered will be the lowest of the following 3 things:

  1. Actual HRA received.
  2. 40% (in non-metro city) or 50% (in metro city) of your salary.
  3. Actual paid rend is reduced from 10% of basic salary.

Let’s take an example of how HRA is calculated.

Example: An employee who lives in a metro city, has basic salary Rs.30,000 per month and the HRA part is Rs.15,000. The actual rent he pays is Rs.10000 per month. Then the exemption he will get is –

  • Actual HRA received = (15,000 x 12) = 1,80,000
  • Actual rent paid – 10% of basic salary = (10,000 x 12) – [(10/100) x (30,000 x 12)] = 84,000
  • 50% of basic salary = (30,000 x 12) x 50/100 = 1,80,000

Now the lowest amount in above calculation is 84,000. So the employee will get exemption of Rs.84,000.

Case #2 – When you don’t get HRA from employer

If you are living in a rental house or paying for your accommodation and do not get HRA from your employer then also you are applicable for the tax deduction in income tax return. These people can also claim for HRA exemption under section 80(GG) of IT act.

Actual HRA offered will be the lowest of the following 3 provisions:

  1. Rs.5000 per month
  2. 25% of your total income
  3. Actual paid rend is reduced from 10% of basic salary.

Though there are some conditions which should be fulfilled if you want tax deduction in this case. The criteria are as bellow:

  • You should be salaried or self-employed and paying rent for accommodation.
  • You haven’t received any HRA in the financial year in which you are claiming for HRA exemption.
  • As per HUF our spouse or minor child should not own house registered on their name.

If you do not meet any of the above criteria then you can’t claim for HRA. Here is chart which explains the same thing which we talked above.Do you get HRA?Important points regarding HRA?

  • HRA is applicable only to the salaried person and not to those who are self-employed. If a person is living in his/her own house then also he/she can’t claim for HRA benefits.
  • If the employee living in a rented house is paying more than Rs.1 lac on rent in one financial year then he has to submit PAN details of landlord along with HRA claim.
  • If a person is living in his parents’ house and paying rent to them, he is applicable for HRA claim. However he cannot claim if he states that he is paying rent to his spouse or child.

Documents required for claiming HRA

The first thing you need to know is that you don’t need to submit anything to Income tax department to claim HRA. You only need to submit the documents to your employer and your employer will verify documents and give you the exemption and then issue form 16 and include these details in that form.

If there is any enquiry by the income tax department, only in that case you need to present further documents asked by them.

So basically at the start of the year, you need to update your employer on the rent you are paying each month and based on that data the employer will deduct the TDS from your salary. Finally at the end of the year, you will have to submit following documents

  • Rent receipts or the proof of paying rent
  • Form 12BB (here is more details)
  • PAN card of landlord if the amount is above Rs.,1,00,000.
  • Some employers may ask for lease and license agreement

Also, In last few years, many tax payers were found submitting fake documents for HRA claim in many cases. This is the reason that IT department is asking for more and document while claiming for HRA exemption. If there is any scrutiny by income tax department, you might have to submit some more documents like

  • Electricity bills
  • Water supply bill
  • Agreement or a letter from housing society

Some cases when charges of IT department can make enquiry are

  • If a person has a house loan and also applying for HRA.
  • If a person living with parents without paying any rent but still apply for HRA and says that he pay rent.
  • Adding higher amount in receipt than he actually pays.

Download HRA Calculator

We have created a nice HRA calculator and analysis tool, which will help you to calculate your HRA and also help you know how much HRA are you not able to utilize and how much is it covering your rent paid.

If you look at the same example which is mentioned above in this article (salary = Rs 30,000 per month, HRA = Rs 15,000 per month, and Rent paid = Rs 10,000 per month, and living in metro) and if you do the HRA analysis , you will find out two things

  • He is only able to claim 46% of his HRA provided to him (84k our of 1,80,000)
  • He is able to cover 70% part of his rent paid through HRA (84k out of 1,20,000)

Here is a snapshot of our HRA calculator

HRA calculator

Click here to download HRA calculator

Can you claim both HRA & deduction on home loan interest?

If you have bought a house in a different city and you are doing job in different city, then in that case, you can claim HRA benefits as well as home loan interest too. However if you have the house in the same city of your job, you cannot claim the HRA benefits.

Housing.com has explained it in a nice way.

Rules regarding HRA and home loan benefits

Are you claiming HRA tax benefits? Do you follow any other process which is not part of this article? Can you share some more HRA related tricks which you have learned over part few years?

8 Benefits of filing ITR, even when income is below exemption limit

Have you filed your income tax return?

Yes /No?

There are many investors who have very low or zero tax liability and therefore they skip filing their income tax return. Then, there are investors who do not file their returns for years and only when something urgent comes up which requires their last few years of ITR, they go to a CA and file their old tax returns.

what are the 8 benefits of filling ITR?

Today, I will share with you why you should file your income tax return, even if you have income below the taxable limit.

Before that, let me share with you what exactly is ITR, for those who are not aware of it.

What is Income Tax Return (ITR) and who should file it?

An Income Tax Return is a form, where a taxpayer discloses details of his/her income, claims applicable deductions and exemptions and taxes that are payable on the taxable income.

As a responsible citizen of India, everyone who has an income should file an ITR, because in this way we are actually declaring all sources of income whether taxable or non-taxable.

The Income Tax Department mandates everyone to file an income tax return if one’s gross total income (before allowing deductions under section 80C to 80U) exceeds Rs. 250,000 in a financial year.

One can also file it even their income is below the taxable limit or its zero (in which case it’s called NIL return). Filing Nil return will act as proof of accumulated funds in your bank accounts or other investments.

Here are the 8 benefits of ITR.

There are various benefits if one files ITR irrespective of their income. Below I have listed a few benefits of filing ITR.

Benefit #1 – Proof of accumulated earnings over the years

It might happen that a person is earning some small income over the years which is below the taxable limit and over the years they accumulate good corpus. Now it may happen that they might get tax scrutiny for some reason after a few years.

If someone has not filed the ITR over the years, it will be a lengthy and tiresome process to explain the sources of earnings over the years. However, with ITR, it will be legal proof of income earned in each year.

Benefit #2 – VISA processing

If you are traveling overseas or planning to travel in the near future, proof of earning is required. If you are salaried than the employer certificate will work but if you are self-employed than income details are needed to be submitted. So, ITR return will work as income-earning proof.

ITR is required as one of the documents for visa application

Benefit #3 – ITR serves as proof of income for Self-employed

Being self-employed does not provide earning proofs such as salary certificate from the employer and form 16. So, having ITR ready with you as proof of income is the most convenient proof.

Benefit #4 – One can Carry forward capital losses

If you have incurred capital losses, the Income Tax Act allows you to carry forward losses for eight consecutive years, and balance it against future gains and income.

To keep a track of your losses, the Income Tax Department has laid out that, Losses for a year cannot be carried forward unless that year’s return has been filed before the due date. So, even if it’s a loss return, you do not have any income to show – do file your return before the due date to declare the capital loss incurred.

Benefit #5 – Helpful for those with very small earnings

There are many people who get some small incomes such as

These people total income might be below the taxable limit and they might feel that they are not supposed to file any tax returns, as they don’t have to pay any tax (because TDS is already deducted). But by filing ITR they will get legal proof of income (in case they need it).

Benefit #6 – Claiming Tax Refund

If you have paid excess tax on your income, then you can file for a refund from the income tax department. In order to get this refund, it is mandatory that you file ITR.

Getting a refund of your taxes feels like getting a paycheck credited. Many salaried people don’t file their ITR as they feel that the tax on their income has already been deducted and they have form 16. But, it might happen that, the employer has paid more tax on your behalf, not taking into consideration your actual house rent, tax-saving investments or insurances. So, in that case, filing of ITR will lead you to ask for a refund from the IT department.

Benefit #7 – Ease of getting loans

If you apply for any loans such as a home loan, car loan, etc., then ITR for the last 2-3 yrs is asked as the mandatory documents. ITR will help your lender to assess your repayment capacity and is an important document. A lot of people who have not filed ITR on time rush at the last minute for these documents, so why not better file it on time?

Benefit #8 – Buying a high life cover

When you buy higher life insurance cover the Insurance company asks for proof of income to assess the cover amount to be provided to you. For this salary slip, bank statements or ITR of the last 3 consecutive assessment years are required.

It might happen that you don’t get a salary receipt or your monthly income is being paid from different groups so bank statements will also not work as strong proof. So, better to have an ITR return filed.

Do you know someone who should file ITR in your circle/family?

I hope the above points will make you understand why it is always preferable to file ITR, even if it might be NIL return. In a lot of families, there are people whose name there are small incomes like dividend income, income from tuition fees, small business income and this article applies.

So make sure you start filing an ITR for them and save yourselves from the future hassles involved.

Do share your views, experiences and ask queries through comments.

Is it right to submit fake rent receipts at my office to claim HRA?

If you are living in a rented house and using any fake documents for HRA claim then be careful.

Because from now on there will be a big trouble for those who are using fake rent receipts to claim HRA, as Income tax department have started asking for more document.

fake rent receipt to claim HRA

Many times it is seen that people claim for HRA by submitting fake rent receipts. This also helps to get them tax benefit. But now as there is increase in the number of fraud HRA claims, IT department has started to ask for some other legal proofs.

Documents which IT department can ask in case of verification

Before you know about the documents needed for verification purpose, lets understand what is HRA (for those who are new to this)

HRA i.e. House Rent Allowance is an amount or we can say a part of salary of an employee which an employer pays if the employee lives in a rented house. It is beneficial for the employee as it lowers the tax which he/she pays on accommodation per year.

What is HRA

If you claim for HRA exemption then you need to submit some legal documents like a receipt or an agreement and ID proof of landlord. You can also claim for HRA exemption on your income tax by filling 12BB Form

If the IT department suspects that a person is providing fake receipts for HRA then they can ask for some other related documents. The list of documents which IT department can ask is as follows –

5 documents which IT department can ask in case of verification

  • Copy of leave and license agreement
  • Electricity bills
  • Water supply bill
  • Agreement or a letter from housing society
  • PAN card of landlord if the amount is above Rs.,1,00,000.

Is there any risk in submitting fake rent receipts to claim HRA?

People are asking various question related to fake rent receipt. You can see the snapshot given below…

fake rent receipts related question

The verification process is going to be more strict day by day so there is a risk in claiming for HRA exemption by providing any kind of fake documents. If a person wants to apply for HRA with fake receipt by knowing all the risks he has to prepare all the fake documents and as we know submitting each and every document fake is not that much easy.

In many cases employees asks their parents or relatives to sign the documents for HRA claim or sometimes employees shows the higher amount on their rent receipt than they actually pay so that they can get the exemption. In case IT department suspects your case as fraud, in that case you will have to go through verification

Some example where enquiry can happen

  • If a person has a house loan and also applying for HRA.
  • If a person living with parents without paying any rent but still apply for HRA and says that he pay rent.
  • Adding higher amount in receipt than he actually pays.

To know about this in detail you can watch this video..

IT department has stared cross checking the address on ITR ( Income Tax Return) form and the receipt submitted. They are also checking the records so that they can know who is the legal owner of the house to verify the Leave license agreement.

What are your thoughts on this issue? Do you know anyone who is submitting fake rent receipts?

Have you linked your Aadhaar with PAN? If not PAN may be blocked soon…

Government has decided to make it compulsory for every individual to link their Aadhaar Card with PAN card by 31st July, 2017. This is part of the digital India campaign and an attempt to digitalize everything.

Why it is mandatory to link Aadhaar with PAN?

There is a great chance that there are a lot of fake PAN cards in India, because it can be easily applied online with fake identities and anyone with a little luck can get a duplicate PAN card. Hence in order to identify those fake PAN cards, govt wants to link Aadhaar card with PAN.

Why to link Aadhaar card with PAN

Because each person will have only one Aadhaar card, they will only be able to link it with a single PAN. Rest other PAN cards will be of no use after this process. This is an important move and is necessary for an orderly society and also to keep pace with the technology.

Importance of linking Aadhaar with PAN

PAN card and aadhaar card are the unique identification cards which can be used for verifying a person’s income and address respectively. Let’s have a quick view why this linking is important.

link PAN with Aadhaar

Some reasons behind linking aadhaar with PAN in details are as below:

  • Fraud PAN cards– Because of this linking a person can use only one PAN card wherever it is necessary which is linked with his aadhaar card. Though he has any fraud/duplicate PAN card, it will be of no use.
  • Tax Evasion – with the help of this, government will be able to track on the taxable transactions of an individual or an entity.
  • Tracing money launders- Aadhaar card is a full-proof identification of an individual and it cannot be duplicated easily so that linking of aadhaar with PAN can also be useful for tracing money launders.
  • There are fewer chances to have a duplicate aadhaar card as it is a more secured source of identification. Because Aadhaar card is the only identity proof which has all the possible information including Bio-metric. So it is little bit difficult to have a fake aadhaar card as compared to PAN Card and voter ID.
  • Curb corruption: This is also useful to curb corruption to a significant level as the record of each transaction will be verified by the government.
  • ITR-V: While paying tax, now you don’t need to send your ITR-V acknowledgement if your Aadhaar card is linked with your PAN Card.

Also, the government wants to get every individual identified by their Name, Address and also their income. A lot of PAN cards were very old, and many people have changed their address, contact details etc which were given to govt at the time of applying for the PAN card decades earlier. With this linking, all the data will also get updated.

What is the process to link aadhaar card with PAN?

If you are unable to link your aadhaar card with PAN, no need to worry. Here are the steps to link your aadhaar card with PAN.

  • Visit the page of Income tax e-filling portal & register if you are not registered with it. If you have your registration already then just login.
  • Login with the details i.e. registration ID, Password or date of birth.
  • Your PAN no. will be your registration ID
  • once you login you will immediately get a pop-up to link your aadhaar with PAN
  • If you don’t get a pop message then check the blue bar above and click on “Profile setting” and then on “Link aadhaar” in the list.

Aadhaar linking with PAN card

  • Or you can also see the option “Link Aadhaar” on the left side of the site when you open it without logging in. Simply click on it.


how to link aadhaar with PAN card


  • The details like your name, gender and date of birth will be given there already as per the registration. Just check that the details available there are same as on your aadhaar Card.
  • If the details match with aadhaar card then fill your aadhaar card number and captcha code and click on “Link Aadhaar”.
  • Once you submit you will get a pop-up that your aadhaar has been linked with your PAN successfully.

What happens in case of name mismatch between Aadhaar and PAN?

UPDATE: Now you can link your aadhaar card with PAN without changing your name as the option “Name on Aadhaar” has given there.

procedure of linking Aadhaar with PAN card

Now it’s suggested that you first decide what is the exact name you want to keep for future, in case you have different names on various documents.

If your aadhaar card has the name which you want to keep, then you should change your name in PAN. However if your PAN has the desired name, then change it in Aadhaar card.

Now, for those who want to change their name in aadhaar card, they can follow this process or watch the video below.

And if you want to change your name in PAN, follow this link

We really feel that one should have the proper name in Aadhaar card, because it’s going to be the universal documents in future.

UPDATE: New Feature by IT department

Besides this, there is also a new option on the e-filling site from where you can link you Aadhaar card with you PAN card without changing your name.

Only date of birth, Name and Gender on both the documents should match, however we feel that as a long term solutions it’s a good idea to have the same name on both the documents.

What to do if I don’t have one of the documents (Either PAN or Aadhaar)

Now a days, almost all the people at least in urban areas have both aadhaar and PAN, very rarely it happens that someone does not have both the documents. However incase one of the documents is missing, here is what you should do ..

For those who do not have PAN

If you don’t have PAN card, then this rule is not applicable to you right now. You don’t need to take any action at the moment.

When you apply for PAN in future, at that time you can give your Aadhaar details as the address proof while applying for PAN offline or you can choose an option called digital e-kyc and e-sign, where you will be asked for aadhaar number and it will be automatically linked to your PAN. Below is a snapshot of the e-KYC looks like.

link aadhaar card while applying for new PAN

What do you if you don’t have Aadhaar?

If you don’t have Aadhaar card then you should apply for it soon, because anyways it’s going to be the universal mandatory documents very soon and every PAN has to be anyways linked with aadhaar. You can apply for aadhaar card by online or by visiting its office and providing you essential documents.

How to Check whether your PAN card is linked with Aadhaar card or not?

For some people their PAN might be already linked with Aadhaar card. To check this you just have to visit the official page of e-filling and click on the login button on the right corner of the site. Fill your PAN number and captcha code and click on OK.

If your card is already linked then it will show “Your Aadhaar is already linked with PAN” and if your card is not linked then it will show “User ID does not exist”.

Below is the demo of this process

Is it safe to link your PAN details with Aadhaar?

Recently there was a news that M. S. Dhoni’s Aadhaar details were leaked somehow, which shows that aadhaar details are not 100% secured. If this can happen to a big celebrity, this can happen to anyone.

Many people are wondering if it’s safe to link their Aadhaar with their PAN?

  • Will their bank details be exposed ?
  • Will there be any fraud involved?
  • Will others get access to their income tax data ?
  • Will others get access to my personal data like Mobile number, Email and Bio-metric details?

But, you don’t need to worry!

The solution to problem is here. There is no need to worry about the security of your PAN after linking with Aadhaar. UIDAI has introduced safety features of aadhaar Card.

Now there is a facility of “Lock” and “Unlock” of aadhaar details.

If you “Lock” your aadhaar details, all your data will be freezed and the access to any third party will be blocked. All you will need to do is, verify the OTP which is sent to you when you apply for this “Lock” feature online. If you want to get details about all the safety features, you can download this PDF.

What will happen if your Aadhaar card is not linked with PAN card?

  • As per this amendment if a person do not link his aadhaar with PAN card then there is possibility that he could lose his access to the PAN card after December 31,2017 as per Hindustan Times.
  • You will be unable to file IT returns and pay the dues or claim the IT returns.
  • It’s been also said that the use of PAN cards may stop in upcoming days as Aadhaar card will be the unique Identity proof. So if you don’t link it now you have to link it with your PAN in future in any ways.
  • Because your PAN card will be blocked, and for higher value transactions PAN is mandatory, you will not be able to do many high value transactions online as the bank will keep asking for PAN

UPDATE:   What if I have both the documents but don’t have any Income Tax Returns?

If you don’t file any Income Tax Return then this rule is not for you. It will not affect either you link your Aadhaar card with PAN or not.

But if you have both the documents, we suggest to link the documents.

UPDATE:   What if I’m an NRI and have only PAN card?

NRI’s can also apply for the Aadhaar card. The procedure and documents required for NRI and Foreigners are same as Indian residential’s. Only thing is they have to be physically present at any of the Aadhaar card center in India.

But it is not mandatory for NRI’s till date because as per Indian Government Aadhaar is an unique identity for the person who is living on Indian soil. Read this PDF by UIDAI.

How can I apply for Aadhaar if I’m out of India?

If you are not in India currently and wanted to apply for Aadhar crad then the procedure is almost same. But you should have an introducer who can introduce you by providing his/her own Aadhaar card.

The verification of your identity will then become the responsibility of the introducer.

So, what are you waiting for ?

You should quickly complete this whole process as it’s just a 5-10 min work. Not completing this can impact you in negative way, so do not wait for the last minute.

Also you should spread this news among your friends and help others to complete this important step in their financial life.

In case you have any questions, I will be happy to answer them in comments section