Naturally, every breadwinner earning more than a specific income per year pays taxes in India. But, as humans every one of us looks for ways to reduce the taxes we pay in one way or another. Thanks to different investment instruments in India that come with tax-saving benefits. Let us throw some light on some of the sections of the Indian Income Tax Act that will help you save on your tax payment.
Know About Section 80C
Section 80C of the Income Tax Act is the first thing that gets to the minds of investors when it comes to tax saving schemes in India. Tax deduction under this section can be claimed by an individual only when he opts for an existing or old tax regime in a particular financial year. But, if you opt for the new concessional tax regime, you cannot claim deductions under this section.
How Does Section 80C of the IT Act Work?
As this is one of the most popular sections, understanding how this section works will help a taxpayer like you:
- Using this section, you as an individual or even a HUF can bring down Rs.1.5 lakh from your gross total income in a particular financial year. In turn, you can gain a considerable reduction in the net taxable income. As a result, there will be a reduction in the tax you pay as well. When you use this section completely, you can save up to Rs.46,800 including a cess of 4%. This holds if you are an individual coming under the highest tax bracket of 30%.
- To claim this deduction, you will have to invest your income in one or more eligible tax-saving instruments. Otherwise, you will have to spend the money on a particular deductible in the same financial year. In other words, you can claim this tax benefit either by spending or investing up to Rs.1.5 lakh in avenues specified under this section.
- Investments that are eligible for deduction under this section are as follows, the tax saving schemes in India:
- Senior Citizen Savings Scheme
- Five-year tax-saving fixed deposit with a post office or a bank
- National Savings Certificate
- National Pension Scheme
- Sukanya Samriddhi Savings Scheme
- Equity-linked Savings Scheme
- Public Provident Fund
- Employees’ Provident Fund
- When you wish to invest in these instruments, you should remember one thing. Each of them has its own tax treatment on returns, liquidity, rate of return and investment limit.
- As mentioned earlier, some expenses can be claimed as a deduction under this section. They are school fees to your children, repayment of principal of a home loan and life insurance premium you pay.
Tax Saving Options Other Than Section 80C:
Now, you know certain things about Section 80C deductions. But, this is not the only section available under the Income Tax Act in India to help you save on your taxes. Yes, there are other options available. Majorly, these deductions are sub-sections of Section 80 of the IT Act. You can gain a better understanding of the exemption limit applicable for different sections from the table below:
| Section | Deduction on | Deductible Limit |
|---|---|---|
| 80CCC | The money you deposit in LIC or any other insurer’s annuity plan | |
| 80CCD (1) | Your contribution as an employee to National Pension Scheme Account | Up to Rs.1 Lakh |
| 80CCD (2) | The contribution made by your employer to National Pension Scheme Account | Up to 10% of the salaryUp |
| 80CCD (1B) | Extra contribution to National Pension Scheme Account | Rs. 50,000 |
| 80D | Health Insurance Premiums | Up to Rs. 60,000. |
| 80DD | Spending made on a handicapped dependent | Fixed amount of Rs.75000 if the disability is up to 80%.
In the case of dependants with severe disabilities, it is fixed at Rs.1.25 lakhs |
| 80DDB | Treatment of particular illnesses | Up to Rs.40000 for people aged up to 60 years.
Up to Rs.60,000 for treatment to people in the age group of 60 to 80 years Maximum of Rs.80,000 for treatment to dependants of more than 80 years |
| 80E | Interest payment on education loan | Actual interest paid |
| 80EE | Only for first-time homeowners interest paid on home loans | Up to Rs.50000 |
| 80G | Donations made to approved charitable institutions | 50 to 100% of the donated money |
| 80GG | Rent paid by employees not having HRA | Lower of the following:
25% of the total income Rs.5000 per month Rent paid over and above 10% of the total income |
| 80GGB and GGC | Contributions made by individuals and companies to a political party | For companies, no deductions apply
For individuals, 100% of the actual contribution only made by modes other than cash. |
| 80TTA | Interest income from savings account | Rs.10000 |
| 80TTB | Interest from banks and post office. This applies only to senior citizens | Maximum of Rs.50000 |
| 80U | Taxpayers with disability | For physical disability and mental retardation, Rs.75000 limit is applicable.
In the case of severe disabilities, the exemption limit is Rs.1.25 lakhs |
| 80RRB | Income from patent or royalty income | Up to Rs.3 lakhs |
What To Know About House Rent Allowance?
Are a person earning a salary? If so, you can get tax-saving benefits of House Rent Allowance. You might have this allowance shortly called HRA as a part of your salary. Let us consider that you are living in a rented house. In this case, you can claim HRA exemption from your total salary. The utmost exemption you can get in this way will be the maximum amount of the following:
- Rent paid
- 10% of yearly salary
- 50% of your salary if you live in a metro city in India. Otherwise, it is 40% of your salary if you live in non-metro cities.
- The actual amount of HRA received.
What Other Exemptions You Can Claim On Your Taxable Income?
Apart from HRA exemption, you have the option to avail tax exemption on medical allowance. The other allowances, where tax exemption apply are conveyance allowance, meal coupons and leave travel allowance. Further, the money you receive as gifts is free of taxes.
There is no upper limit on exemption applicable if you get the gift from your direct relatives. But, if the gifts are from your friends and not relatives, the tax exemption of Rs.50000 is applicable. It means that gifts that you receive from non-relatives are exempted from taxation up to Rs.50000. Cash gifts for your marriage are completely tax-free. This rule applies irrespective of whether they are received from your friends or family. Further, money received on will is also free of taxes.
