How to save tax in this case?

Total income 6lakhs medical allowance(without bills). (15k) PT (2.5k) Investment us 80c (150k) Conveyance (800*12). (9.6k) Approx tax. Rs 17250 Rebate Rs 2000 Net tax. 15250 Go for investment in PPF interest income is exempt and interest rate is approx 8.75%. Or any other investment whose income is tax free. I think so you will also go for mediclaim for you and your family so in this u can claim an exemption for any paid subject to 20k maximum If your staying on rent go for HRA scheme under which you will claim tax benifits

Dear Naved

There is no such way we can avoid tax in this case but yes we for sure can cut it off to a lower extent.

This Training of medical student is under the professional capacity hence we can claim expenses of various nature of around Rs. 1,50,000/-(such as travelling exp,stationery,etc.) now income is around 4,50,000/-

 

Also see to it that Payment of stipend must have been received after deduction of TDS @ 10% from employer. in case that is not done ask him to invest In PPF as it is the best investment option at present keeping in mind return & security.which will bring down his income to around 3,50,000/-

Now the tax on above will come to Rs.10,000/- and after further rebate of Rs.2000/- U/s 87A final liability will be Rs.8,240/-

PLS NOTE: IN CASE TDS IS DEDUCTED NO NEED OF INVESTMENT.

FOR FURTHER CLARIFICATIONS DROP P.M.

THANK YOU

 

Agree with Mr. Saytashi.

Thanks

Ramanuj

 

bt if the college deducts tds considering it as salary, expenses cant be claimed. if u have received form 16, u can't do the above planning

ppf has a higher lock in period than 2 yrs. it is approx 5 yrs

Thank you for all replies..... tds is not deducted. What will be tax liability?

if at all it is stipend it is tax free , may be these CA guys dont know because our stpiend is far less than exemtion limit, but i do know it for sure beause articles of BIG 4 get stpiend in exces of exemption limit and it is tax free ( remember guys stpiend is not salary )

If finally tax liability comes to 50k. Investment of 50k in bank fd for 5 years would serve the purpose??

Stipend is not Salary. There are several case laws in this regard. In case of Stipend there is no employer employee relation between the parties. This canalso be the reason why the college is not dedcuting any TDS from the stipend. The stipend is paid by the principal for meeting the day to day expense of the student which will include books, professional materials etc.. 

Hence my recommnedation will be to invest your money as mentioned in the above posts, but dont file return or pay taxes. 

My question on above :If stipend is not salary, then will it not be INCOME FROM OTHER SOURCES?

 

Dear Sir,

In my opinion there are 2 ways in which we can tackle this issue:
1. Show this as income from other source and then claim the various expenses like rent,books, travelling, food etc.. against this income. In such a if the income is more than the taxable limit, then tax will have to be paid. If the income is more than the taxable limit, then as i suggested earlier the investment under chapter VI A can be used to reduce the income below taxable limit. This is a conservative approach which can be used to avoid any litigation.
2. The exemption u/s 10(16) can be claimed. In such a case the income will not be chargeable to tax at all. This view is supported by several case laws. One such case law is given below :
KarnatakaHigh Courtin A. Ratnakarv. Addl. CIT [1981] 128 ITR527can be applied.This was also followed by Tribunal in case of Income-tax Officer v. Dr. G.N. Ramachandran[1 ITD902]
Please also refer Dr. Rahul Tugnait. Versus Income-Tax Officer. - 2008 (6) TMI 229 - ITAT CHANDIGARH-B - Income Tax

This is an aggressive approach and the ITD can dispute this view which will then lead to litigation.
Again this exemption can be claimed only when the stipend is given for meeting the educational costs. Hence the terms of the stipend and the purpose for which it is obtained will have to be checked case to case. Salary disguised as stipend will not be covered under this.