6 ways to pay less tax, legally
Post-Budget, many salaried Indians are left wondering whether the FM has left them richer or poorer. But hidden in the tangle of provisions are many ways and means that can help you save a chunk of tax. Did you know that renting out your second home is smarter than keeping it empty, or that sometimes HRA gives you a bigger break than a company flat? This Times of India-EY Guide is designed to help you understand the key tax proposals of the Budget and minimize the pinch 1. WHY YOUR TAXABLE INCOME IS NOT THE SAME AS YOUR INCOME A typical salaried employee is unlikely to earn any income which would fall under the head: 'Profits & gains from business or profession'. While your employer knows of your salary income and deducts tax (TDS) against that, it is easier to disclose details of all your other taxable income (such as bank interest) at the beginning of the financial year - so that this can be factored in while calculating TDS. It will save you the trouble of having to pay advance tax. However, even if the entire tax payable by you has been deducted at source, you still need to file your own income tax return. The tax law details how to determine the taxable amount under each head of income. You could get tax benefits under some heads, either by way of an exemption (eg: HRA) or a deduction (eg: interest on savings bank accounts up to Rs 10,000 in aggregate per year). As a salaried employee, the only possibility of your incurring a loss is when you sell your investments or properties or pay interest on your house mortgage. The law also provides for intra-head andor inter-head set-off of such losses. The income from all the various heads adjusted for loss set-off is your 'gross total income'. From your gross total income, you get a deduction for various eligible investments or payments made (All this and more is dealt with in sections of our article dealing with salary and savings). The resultant figure is your net taxable income on which you pay tax at the applicable tax rates. The tax provisions announced in Budget 2016 apply to income earned from April 1, 2016 to March 31, 2017 (Financial Year 2016-17). 2. USE THESE BENEFITS T0 BOOST YOUR TAKE-HOME SALARY Irrespective of whether it is your first job or whether you have conquered the corner office, income-tax duly deducted from your monthly salary pinches. Further, tax is levied not just on your basic pay and cash allowances that figure prominently on your salary slip, even taxable perquisites (such as car, or housing provided by your employer) are subject to tax. The sum total of your salary, allowances and benefits is referred to as Cost to Company (CTC) - the cost which your employer incurs to have you on the payroll. The key CTC components which could help reduce your tax liability and boost your take home pay are outlined below. These apply to all non-government employees. Your CTC components and various tax breaks Housing: To rent or live in an employer provided flat? It may be easier to live in a flat provided by your employer (if you are lucky to be given this option) rather than go house-hunting. But do bear in mind that rental payment to your landlord could help you reap tax benefits against the House Rent Allowance (HRA) which typically is a standard part of CTC. On the other hand, the employer-provided flat would leave you with a taxable perquisite. First an insight into both: House rent allowance (HRA) HRA is the most common CTC component. Those staying in rented accommodation can avail of an exemption against the HRA received and only the balance would be taxable. The exemption is limited to (a) rent paid less 10% of basic salary or (b) 50% of basic salary where the house is situated in any of the four cities of Delhi, Mumbai, Kolkata or Chennai, and 40% of basic salary in other cities or (c) actual HRA received, whichever is the lowest. If your CTC doesn't contain an HRA component, deduction for rent paid is available from gross taxable income, subject to various limits (maximum deduction Rs 5,000 per month or Rs 60,000 per annum). Caution point: For claiming HRA exemption, if your annual rent exceeds Rs 1 lakh, you should obtain not just the rental receipts but a copy of your landlord's PAN card for submission to your accounts department. Flat provided by employer The perquisite value varies depending on whether the flat is owned by the employer, taken on rent for you or hotel accommodation has been made available for you. The value will not exceed 24% of your salary when such accommodation is provided in a hotel and 15% of salary in other cases. This will be reduced by the amount recovered from you, if any. Where the employer provides furnished accommodation to you, another 10% of the cost of furnishing (if owned by employer) or actual hire charges payable (if leased by employer) is added to the perk value each year. Hot tip: Hotel accommodation provided by your employer for the first 15 days when you move to a new town is not a taxable perquisite. It's more than a vacation, it's a tax break Leave travel concession (LTC): Your annual holiday within India can get you a tax break. The tax exemption on any reimbursement of your travel expense while on leave is limited to the economy class air fare for the shortest route available to your vacation destination. No exemption is available for expenses such as hotel, local conveyance, etc. Keep the travel bill handy to submit to your accounts department to claim the exemption. Hot tip: LTC is allowed to you as a salaried employee in respect of two journeys performed in a block of four calendar years. The current block of four years commenced on January 1, 2014. So if you haven't taken that much-needed break last year, do so now. Keep proper tabs, retain relevant travel bills and claim your LTC. Caution point: Your travel expenses for a holiday abroad are not eligible for a tax break. If you are planning a long vacation covering destinations in India as well as a foreign country with one air-ticket, the tax man may not allow a tax break even for your cost of journey within India. Leave encashment: In case you haven't availed of your entitled leave, you may have an option to get it encashed. With an increasing realisation that employees who avail of annual leave are more productive, most employers permit such encashment only on retirement or resignation. While there are detailed rules to calculate tax exemption on such encashment, the maximum exemption available is Rs 3 lakhs. Caution point: Any leave encashed while on employment is taxable. Only the leave encashed on resignation or retirement is tax free. Further, the Rs 3 lakh limit is a lifetime exemption limit, if you have job hopped and availed of exemption, it will be reduced by the exemption claimed by you earlier under any previous employment. Other allowances and tax benefits Car perquisites: The tax treatment of an employer-provided flat has been illustrated earlier. There can be other perquisites also that are available to you. For instance, the perquisite value of a car provided to you depends on the cubic capacity of the car engine, whether you or the employer pays for its maintenance, running cost (including fuel), provision of a driver, and whether use is official or personal. Transport allowance: Any such allowance paid by your employer to meet your daily conveyance needs is tax exempt up to Rs 1,600 per month. Hot tip: For claiming the exemption, you don't need to submit any expense proof. However, if you are incurring expenses on official travel, your employer can reimburse on the basis of the claim submitted by you (backed by bills) and such reimbursement is not taxable. Children's education allowance: This component gets you a limited tax break of Rs 100 per month per child and Rs 300 per month per child for hostel expenses (both restricted to two children). Certain reimbursements: Certain reimbursements are exempt, such as medical expenses of up to Rs 15,000 per year or reimbursement of your telephone expenses including data charges. There is no cap prescribed under the tax laws regarding the maximum amount that can be claimed. However, your employer may pose an internal cap for this reimbursement. In addition, if you get meal vouchers, such as Sodexo coupons, these are exempt from tax to the extent of Rs 50 per meal. Make the most of your retirement benefits Employee Provident Fund (PF): From April 1, 2016, employer's contribution to PF is taxable if it exceeds Rs 1,50,000 a year. Employee's share is eligible for deduction under overall cap of Rs 1.5 lakh. From February 10, 2016, an employee may withdraw the full balance only at the time of retirement after 58 years. However, employee can withdraw his/her own contribution and interest thereon standing to the credit of his her PF account at the time of termination of employment subject to certain conditions. Withdrawal from PF to the extent of 40% of accumulated balance on withdrawal shall be tax free. The balance 60% shall be taxable for contributions made after April 1, 2016. PF authorities have introduced a new scheme where a 12-digit Universal Account Number is allotted to members. Once your new employer verifies the UAN, funds from the previous account will be transferred to your account with the new employer. Any such transfer of funds is not taxable. Gratuity: If you job hop after a continuous tenure of 5 years or retire after a continuous service of 5 years, you are entitled to a gratuity payment. While there are detailed rules to calculate exemption, the maximum amount of gratuity that is tax exempt is Rs 10 lakhs. Caution point: Rs 10-lakh ceiling is a life-time exemption limit. It will be reduced by the tax-free exemption claimed from any previous employment. Get an ownership right in the company through ESOPs ESOPs are commonly used by companies, especially start-ups to retain talent. The scheme typically enables an employee to purchase shares of the company in the future, at a discounted price. The life cycle of an ESOP has three key stages - grant, vesting and exercise. Grant: This is the first stage, where an option is granted to the employee which will vest over a predefined period of time and or is subject to meeting certain conditions Vesting: Here the employee gets the unconditional right to acquire shares. The employee does not receive actual shares at this stage. Exercise: Here, the employee can use his right to acquire shares from the company on payment of a pre-determined price. Post allotment, the employee can hold these shares or sell them - based on the exit mechanism provided in the ESOP scheme. Taxability in your hands ESOPs are taxed at two stages: Stage 1 At the time of allotment of shares post a valid exercise, the difference between Fair Market Value (FMV) of the shares and exercise price is taxed as salary income. Stage 2 At the time of sale of shares, the difference between sale price and Fair Market Value on date of exercise is taxed as Capital Gains. The gains can be either long term or short term depending on how long the shares are held. Same CTC, different take home Your CTC structure shows items of salary components (reflected in your monthly pay-slip) and other perks and reimbursements, that you are entitled to receive from your employer. A well-structured CTC can reduce your taxable salary income and help you take home a fatter pay cheque, each month. Save the dates: Compliance calendar for income earned during FY 2016-17 Due dates for advance I-T payments: If you haven't disclosed all your income (say bank interest income, rental income etc) to your employer, the employer will only deduct tax at source against your salary income. This means you need to keep track and pay advance tax if your tax liability is more than Rs 10,000 per year. Advance taxes and any final payment of tax are accepted at authorised bank branches. Filing of tax returns: For salaried individuals, due date for tax returns is: July 31, 2017 Returns are to be filed in the appropriate form. E-filing is a must if your net taxable income is above Rs 5 lakhs. If a digital signature e-verification option is not used in the e-return, a hard copy of the electronic acknowledgement (ITR-V) obtained on e-filing has to be sent to the tax department's centralized processing office in Bengaluru. Alternatively, you can electronically verify your returns, via: Electronic Verification Code (EVC) sent to your registered mobile number and e-mail, which is valid for 72 hours Aadhaar OTP sent to your mobile number registered with Aadhaar Log in to e-filing portal via net banking Note: Form 16 furnished by your employer, providing details of your taxable salary and TDS (tax deducted at source), and Form 26AS, available for download on the tax department website, is the basis for you to file your mandatory tax return. If you have just returned rom your overseas assignment, you may also need to report your foreign assets (such as peak balance, at any time during the year, of overseas bank accounts; cost of overseas property, shares and debentures). Such requirement applies to you if you are a Resident and Ordinarily Resident (ROR) for tax purposes. If you have spent more than 729 days in India in last 7 years, you are likely to qualify as ROR. In addition, certain other conditions are also prescribed to determine ROR status. Caution point: The tax officer can impose a penalty of Rs 10 lakh for non-disclosure or inaccurate reporting of foreign assets. If the taxman calls - Keep these documents handy in case you get a call from tax department: - Copy of acknowledgement of filed tax return Form 16 and Form 12BA (annual withholding tax certificate) issued by the employer - Your monthly salary slips and proof of all expenses reimbursed by your employer - Proof of all deductions exemptions claimed in your tax return - Copy of statement of bank accounts with explanation to all major debit and credit items - Copy of credit card statements. Please establish a link with the source of income used for payment of your credit card bills. The taxman is more interested to know whether you have offered that income in your tax return - Details of your foreign trips - Supporting documents relating to the assets and investments - including purchase of immovable property - Copies of rent agreement lease deed and receipt of municipal tax paid in case you have any rental income - Interest certificate issued by the lending institution for home loan - Details of loans gifts taken or received - Copy of demat account statements 3. 80 SEE: MAKING YOUR SAVINGS WORK FOR YOU With galloping inflation and the need to keep up with the neighbours next door, it may not be easy to save. But, tax breaks on savings can act as an incentive. Do bear in mind, the overall cap of Rs 1.5 lakh for investments under the well-known section 80C. New Pension Scheme (NPS): The popularity of this scheme has increased manifold. Currently, NPS has more than 1.15 crore subscribers with total Asset under Management (AUM) of more than Rs. 1.09 lakh crore compared to a mere 67.11 lakh subscribers in 2014. NPS is a flexible retirement savings scheme which offers both a lump-sum amount and monthly pension ie a fixed income to an employee after retirement. The employee has various investment options available in NPS such as the percentage he wishes to invest in equity or debt. On resigning the employee can carry this account with him to the next place of employment. Employee's contribution to NPS will be deductible up to 10% of salary subject to overall cap of Rs 1.5 lakh (which includes investments under Section 80C). An additional deduction of Rs 50,000 is also available for any contribution made by employee to NPS. Employer's contribution will also be available for deduction up to 10% of salary (without any cap). Accruals from your NPS account are taxable only when you opt outwithdraw from the scheme or on maturity (at the age of 60). From April 1, 2016, any payment from NPS Trust on closure of account or on opting out is not taxable to the extent it does not exceed 40% of total amount payable. However, the whole amount received by the nominee on death of the account holder shall be exempt from tax. Similarly, any transfer from an approved superannuation fund to NPS account is also exempt from tax. The government has recently made it much easier to invest in NPS by introducing the eNPSonline subscriber registration and contribution facility. You can now contribute online via net banking or by using your credit or debit card. Hot tip: This additional amount of Rs 50,000 is over and above the overall cap of Rs 1.5 lakh under section 80 CCE. Other investments covered under section 80C Public Provident Fund (PPF): Contribution to PPF will get you a tax free interest of 8.7%. Plus the maturity proceeds are fully exempt from tax.You can invest Rs 500 to Rs 1.5 lakh every year in a PPF account opened with a post office or any authorised bank and claim deduction for the amount invested. PPF accounts can also be opened in the name of your spouse or child. Hot tip: There is a block-in period of 5 years for withdrawals. But a loan on the accumulated balance may be obtained (after expiry of one year from the end of the financial year in which initial deposit was made) for certain purposes such as marriage or buying property, subject to various limits. PPF account matures after 15 years from date of opening. However, from April 1, 2016, premature closure of PPF accounts is possible in genuine cases like serious ailment, higher education of kids etc by paying a penalty of 1% reduction in interest payable on whole deposit. This is possible only after 5 years from the date of opening of PPF account. National Savings Certificates (NSC): The amount invested in NSC schemes (managed through post offices in India) is eligible for deduction. The interest accrued annually on NSC is taxable as other income - but if you reinvest the interest each year, it will qualify for deduction. From April 1, 2016, compounding of interest will go from bi-annual to annual. Life insurance: You can claim deduction for premium paid towards life insurance policies for self, spouse and kids. Proceeds from the policies will be tax free subject to certain conditions. Small savings: A 5-year term deposit with a bank under a notified scheme or a post office qualifies for deduction. However, the interest that accrues on it is entirely taxable. Sukanya Samriddhi Account: Under Prime Minister's 'Beti Bachao Beti Padhao' campaign, opening a Sukanya Samriddhi Account - a deposit scheme framed for encouraging education of your girl child - gets you a tax break. You can open an account in the name of your girl child (limited to two, unless you have twins triplets) either in a post office or authorized bank, anytime up to her attaining the age of 10 years. An initial deposit of Rs 1,000 is required and the maximum deposit in a given financial year is Rs 1.50 lakh. Additional deposits can be made for the next 14 years. The deposits currently yield an annual interest of 9.2% which is tax free. The account matures on completion of 21 years from the date it was opened or the date of marriage of the girl child, whichever is earlier. However, the scheme also allows withdrawal (up to 50% of the balance) before maturity for the purpose of higher education and marriage (provided she has attained 18 years of age). Withdrawals are also exempt from tax. Other payments that get you a deduction under section 80C Deductions within the overall cap of section 80C are also available for various payments, such as repayment of your bank housing loan. Tuition fees paid for full-time education of your children (any two) in a university, college, school or educational institution in India is also eligible for a deduction. This does not include any development fees or donations that have been paid. Caution point: From April 1, 2016, interest rates of various small saving schemes such as Sukanya Samriddhi, 5-year term deposit, PPF, will be determined on a quarterly basis. Other tax breaks: Apart from investments or payments eligible for deduction under section 80C, there are a few other instances, where you can avail of a tax benefit. The entire interest paid by you in a year on educational loan for higher education of self, spouse, children qualifies for a deduction from your gross total income. Such deduction on interest payment is available for eight years starting from the financial year in which you first paid the interest. Interest earned on savings bank account (not your fixed deposits) with a bank or post office of up to Rs. 10,000 can be claimed as a deduction from your gross total income. Other investment options Gold monetization scheme: If you have gold stashed away in your bank locker (be it jewellery, coins or bars), you can utilize it to earn an interest income. Under the Gold Monetization Scheme (GMS), a gold savings account has to be opened and gold in physical form deposited. The interest income receivable is determined on the basis of gold weight and also on the appreciation in your gold value. The deposit period with the designated banks can be short term (1-3 years), medium term (5-7 years) or long term (12-15 years). Authorized collection and purity testing centres and licensed refiners help you in checking your gold's purity and provide you with a certificate on purity and gold content once you decide to deposit. Redemption is possible in both ie in form of physical gold or in rupees. The deposit certificates issued under Gold Monetisation Scheme, 2015 has been excluded from the scope of capital asset. Under section 10(15), exemption from tax is provided on interest earned from such certificates. Thus, there is no tax on the gold appreciation value or on interest income earned by you. Any medium term deposit is allowed to be withdrawn after 3 years and any long term deposit after 5 years. These will be subject to a reduction in the interest payable. Caution point: For depositing gold under this scheme, you need to be a resident Indian and also provide identification documents. Gold deposited will not be returned in the same form but you have the option to receive your gold back in the equivalent of 995 fineness gold or in Indian rupees. You need to choose this option at the time of deposit. Thus, if you love a favourite piece of jewellery, don't deposit it under this scheme. Sovereign gold bonds scheme: Sovereign Gold Bonds (SGBs) are government securities, which are a substitute for holding gold in physical form. Your investment would be denominated in terms of grams of gold (each individual can invest between 2 grams to 500 grams per financial year). You can make this investment through cash, cheques, demand draft or even via an electronic fund transfer. The tenure of the bonds is 8 years, however you can redeem the bonds early after the fifth year of your investment. SGBs can be held in paper or demat form. You would get interest at the fixed rate of 2.75% per annum on the amount of initial investment. At the time of redemption, you will receive both the interest and prevailing market value of grams of gold originally invested. As per government statistics, when the bonds first opened from November 6 to November 30, 2015 approximately Rs 250 crores worth were subscribed. Caution point: For investing in SGBs, you need to qualify as a resident of India as per exchange control norms. Further, interest income will be taxable in your hands. Also, at the time of redemption of bonds, capital gains tax will not be levied. However, long term capital gains arising on transfer of the bonds is subject to tax and eligible for indexation benefit. 4. HOME ADVANTAGE: BUYING, LETTING OUT & SELLING EXPLAINED It's always exciting to buy your own home. And why stop at one if you can afford two - as an investment or a weekend getaway. What's more, a home loan gets you a tax break. Buying a new house: If you have several years of employment ahead of you, home loan is an ideal option. In fact, it works better than dipping into your savings, as the tax law provides for benefits both for the payment of interest and repayment of the principal amount. Typically, the longer the loan tenure, the lower is the monthly EMI but higher is the interest outgo. For instance, one bank charges an EMI of Rs 42,889 for a loan amount of Rs 20 lakh for a duration of 5 years. For a loan tenure of 10 years, the EMI charged is Rs 26,875. But shop around for a home loan since banks offer different rates and terms. Interest payable on home loans and the tax benefit: Irrespective of whether you are paying interest to a bank or to your employer or friend, interest payable on home loans for 'self-occupied' property is subject to a maximum deduction of Rs 2 lakhs under the head 'Income from house property'. For first-time home buyers, with effect from April 1, 2016, an additional deduction of Rs 50,000 per annum on account of interest paid on housing loan is available under Section 80EE. The deduction would be available if loan is sanctioned by a bank during April 1, 2016-31 March, 2017, the value of loan sanctioned is up to Rs 35 lakh and the value of this house does not exceed Rs 50 lakhs. It may be cheaper to book an apartment under construction. In this case, you can claim the total interest paid during the pre-delivery period as a deduction in five equal instalments starting from the financial year in which the construction was completed or you acquired your apartment (generally this denotes the date of possession). Of course, the maximum you can claim as deduction per year continues to be Rs 2 lakhs if the loan is taken before April 1, 2016 or Rs 2.5 lakhs if the loan is taken on or after April 1, 2016 by a first-time home buyer. What is 'self-occupied' property: It's best to be clear on what constitutes 'self-occupied' property. Here is some guidance: If you are suddenly transferred to another city (where you live in a rented apartment), your own property will be considered as 'self occupied'. Also, if you have opted to purchase a new apartment in a tier 2 town where property is cheaper, and continue to stay in a rented premise, this new apartment will be regarded as 'self-occupied' entitling you to deduction of housing loan interest. Caution point: A certificate from the lender is required to claim deduction for interest even if the lender is an employer or a friend. To claim deduction, it is essential that the acquisition or construction is completed within 5 years from the end of the financial year in which the loan was taken; else the deduction allowed will be limited to Rs 30,000. Set-off your interest payment: As income from a 'self-occupied property' is nil, deduction of interest, in technical parlance, will mean a loss under the head 'Income from house property'. This "loss" can be set off, in the same year, against your income under other heads (including salary income). Such set-off will reduce your total tax liability. Any loss not set-off within the same year can be carried forward and setoff in the next 8 years. However, in the subsequent years, such set-off is possible only against 'Income from House Property'. So even if you let out your property next year, this carry forward of loss can bring a marginal dip to your tax liability. Hot tip: If you have purchased a new apartment jointly - say, with your spouse and are also paying the home loan jointly, then each of you is entitled to deduction up to Rs 2 lakh-2.5 lakh. In case you have a working son/daughter and the bank is willing to split the loan three ways, all three can avail deduction, subject to given conditions. Repayment of housing loan: The principal repayment of the housing loan is allowed as a deduction from your gross total income, subject to an overall cap with other eligible investments of Rs 1.5 lakh. Caution point: Unlike deduction of interest, deduction of principal repayment will be allowed only if the loan is taken from specified institutions - like banks or LIC. Your TDS obligations: If the value of your proposed flat is more than Rs 50 lakhs, you are required to deduct withholding tax at the rate of 1% from the payment made. In case you are paying the builder in instalments, as the property is still under construction, but the total value of the property exceeds Rs 50 lakhs, the same rules for withholding tax apply. Tax has to be deducted against each instalment paid by you. Tax withheld has to be deposited by the 7th of each subsequent month (except March where due date is April 30). In addition, you will be required to furnish information about the tax deducted and deposited online on the Tax Information Network (TIN) website in Form 26QB (URL is https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp). Further, you will also have to download Form 16B, which is the TDS certificate from the website (URL is https://www.tdscpc.gov.in/app/login.xhtml) and issue it to the seller. In case of failure to comply, you will have to pay interest and penalties. Best to let out your 2nd house: Make sure not to keep your second house (which is not a self-occupied property) unoccupied. Your second house if locked and empty will still attract tax on its 'deemed rental value'. In other words, tax is calculated at expected market rent. Interestingly, if you let out the second house, you can deduct the entire interest you are paying on it from the rent received. If there is a loss, you can deduct the loss from your taxable income. For example, if your interest outgo is Rs 15 lakhs and the rent is Rs 10 lakhs, you can get a tax benefit on Rs 8 lakhs (Rent Rs 10 lakh less: (a) Standard deduction of 30% of rent which is Rs 3 lakhs and (b) Interest Rs 15 lakhs). This is applicable for any number of houses and there is no cap on the amount of deduction you can claim. Selling your apartment: If you sell your house, whether it is self-occupied or your second apartment, you will incur capital gains (given that there has been appreciation in property prices, it is unlikely that you will be making a loss). Capital gains is the difference between the sale proceeds and the cost of acquisition of the apartment you are selling. If the house is held for not more than 36 months, you will incur a short-term capital gain, which is subject to tax based on your ap plicable slab rate. If you fall in the lower tax bracket with a tax rate of 10.3%, short-term capital gains will not pinch you. Else you could end up with a tax rate of nearly 35%. If the property is held for more than 36 months, LTCG arise. The cost of acquisition used for computing LTCG is the indexed cost of acquisition (in other words, an adjustment is made for inflation). Tax is levied on LTCGs at 20% (plus surcharge and cess as applicable).Save on LTCGs: Reinvestment of capital gains could get you tax breaks. Reinvesting in residential property or securities: To be able to save tax on capital gains, you must invest the entire LTCG from the sale of residential property in another (i.e. only one) residential property in India (one year before or two years after the date of sale). You could also construct another residential house property in India within three years of sale. Also, you may put the amount of capital gains in capital gains account scheme with a bank where investment in new property is not made before filing of tax return. If the entire amount is not reinvested or not deposited in capital gains account scheme, the remaining portion of the gain will be taxable. Caution point: Exemption from LTCG will not be available in case the reinvestment is made in more than one flat (even if the same are adjoining flats) or in commercial property. Nor can you reinvest in overseas property. Hot tip: Exemption is also available for investments made in certain bonds or notified fund by central government within 6 months of sale of a capital asset. There is a cap of Rs 50 lakhs on such investment. 5. MEDICAL: CASHLESS COVER PLUS CASH IN YOUR POCKET Increasing costs of hospitalization make it imperative for you to have a medical insurance policy that would cover you and your family needs. More so, in case your employer doesn't provide a group medical insurance cover. Group medical insurance provided by your employer: It may be likely that your employer has covered you under a group medical insurance policy. At the time of joining employment, you do need to check which members of your family can be covered and nominate them accordingly. In subsequent years, updates of nominee details are called for. Typically, companies provide a medical insurance cover for the employee, spouse and dependent children. Some extend it to employee's parents and in-laws. It is also worth checking which ailments are not covered (say dental related) or which have a cap beyond which expenses will not be reimbursed. Many group insurance policies have a cap on various common ailments, such as for cataract surgery - hospital expenses beyond this cap are not reimbursed and have to be borne by you. Both the premium paid by your employer for you and your family members is tax free in your hands. If during a year, under this policy cover, you make a claim, the money received from the insurance company is also tax free. Buying a medical insurance policy: In case you aren't covered under a group medical insurance policy or wish to have added coverage, you can buy a medical policy and reap certain tax benefits. Searching for the most suitable medical policy may be a good idea - for instance, a particular insurance company may cover ambulance or post-hospitalization expenses to the full extent, another could cap it or not cover it at all. As in the case of a group insurance policy, any claim amount that you receive from the insurance company, whether it is for your own illness or that of other family members covered by you is tax exempt in your hands. Premium paid is available as Premium paid is available as a tax deduction from your gross total income, gross total inco subject to certain limits. In case you are unable to get your parents, who are very senior citizens (above 80 years) insured, or they are no longer covered by an insurance policy, fret not. A deduction of up to Rs 30,000 is available on expenditure towards their medical expenses. Other medical-related tax benefits: Over and above the Rs 15,000 of medical expenditure which you can avail of as a tax-free reimbursement in a year, certain other medical related expenses also entitle you to a tax deduction from your gross total income. These range from expenditure incurred for preventive health check-ups to those for specific diseases such as malignant cancers. Tax deduction for medical expenses if you or your loved one is differently abled is also available. 6. MARKET INVESTMENTS: CUT THE PAIN FROM THE GAIN Tax free dividend: As an investor you enjoy tax free dividend, be it from shares or units of mutual funds, if it is less than Rs 10 lakh a year. Tax free long-term capital gains: Long-term capital gains on sale of listed shares and equity-oriented mutual funds are also exempt. To qualify for long-term capital gains exemption, these securities need to be held for a period of at least 12 months by the investor. Only a minimal securities transaction tax (from 0.001% to 0.1% of sale price) is payable by the seller (this tax cost is payable both by buyer and seller in case of a share deal on a stock exchange). In some cases, you even get a tax benefit at the time of making the investment. Caution point: Debt-oriented mutual funds need to be held for at least 36 months to qualify as a long term capital asset (as opposed to listed shares and equity-oriented mutual funds which require a holding period of just 12 months). However, even on sale after this period, the long term capital gains that arises is subject to a tax of 20% (surcharge and cess as applicable) with indexation (Refer to table showing tax impact on your 'listed' investments). Tax free bonds: Among the various market related investments detailed in the table - 'Tax Impact on Your Listed Investments' - Tax Free Bonds, which made a re-appearance after Budget 2015, are the flavour of the season. Investment in such bonds provides you with an opportunity to obtain higher interest rates. Tax Free Bonds are similar to other coupon bearing bonds which provide a fixed income but unlike other bonds, the interest income from tax free bonds is exempt. However, the redemption of bonds will attract tax.