A. HOUSE RENT ALLOWANCE
The HRA is stand for House Rent Allowance, refers to that allowance which is claimed by the salaried person. According to Indian income tax Act, It’s a deduction which is permissible under section 10(13a) , in the accordance with rule 2A of the income tax rule. The HRA deduction is based on salary, HRA received, the actual rent paid and place of residence. The place of residence is important. For Mumbai, Kolkata, Delhi or Chennai, the tax exemption on HRA is 50 percent of the basic salary, while for other cities it is 40 percent of the basic salary.
How HRA works in income tax:
Actual HRA received;
50% of [basic salary + DA] for those living in metro cities (40% for
Actual rent paid less 10% of basic salary + DA
B. INTEREST ON HOUSE LOAN
Section 24 of the income tax act, 1961 considered the interest that one pays for the property or home loans. This section is also known as ‘Deduction from Income From House Property’. In other words, section 24 allows an individual to claim exemption on home loan interest that one pays. Interest on house loan is a type of deduction in the rule of income tax under section 24, it is claimed by the house owner. Any house owners can claim that deduction of section 24 under income tax up to Rs.2lakhs on their home loan interest if the owner or his family resides in the
house property. Section 80c allows deduction against principal repayment of up to Rs.1.5lakhs every year. Additional deduction is available under section 80EE and 80EEA A salaried person cannot claim the interest on house lone if those persons have no property.
C. SECTION 80C INTEREST IN LIC, PPF, EPF
Section 80C, Is One Of The Most Popular And Favorite Sections Amongst The Taxpayers. As It Allows Reducing Taxable Income By Making Tax Saving Investments Or Incurring Eligible Expenses. It Allows A Maximum Deduction Of Rs 1.5Lakh Every Year From The Taxpayers
The Benefit Of This Deduction Can Be Availed By Individuals And HUFs. Companies, Partnership Firms, LlPs Cannot Avail The Benefit Of This Deduction.
Section 80C Includes Subsections, 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2).
It Is Important To Note That Overall Limit Including The Subsections For Claiming Deduction Is Rs 1.5Lakh Except An Additional Deduction Of Rs 50,000 Allowed U/S 80CCD(1b).
80C MUTUAL FUND
80C allows deduction for ELSS mutual funds only upto Rs 1.5 lakh. Hence any investment made in ELSS mutual funds can be claimed as deduction under 80C. Only investments in equity linked saving schemes or ELSSs qualify for tax deduction under section 80C. Investors can claim tax deduction of up to Rs 1.5 lakh under Section 80C of the
Income Tax Act. All ELSS funds qualify for the tax deduction under
80C REPAYMENT OF HOUSING LOAN
Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of a home loan is Rs. 1.5 lakh . The deduction is only possible after the house gets entirely completed and there is a completion certificate for the same
80C Contribution to SPF/PPF/RPF
Provident Fund is an excellent mode of saving. PF contributions are made by the employer with an equal and matching contribution made by the employee and deducted from his salary. A part of the employer’s
contribution also goes towards the pension scheme. The amount so collected is either transferred to the Regional PF Commissioner or to the PF trust constituted by the employer. The amount is calculated at 12 percent of the basic salary of the employee. The employer’s contribution to a Recognized Provident Fund (RPF) is exempt from personal tax up to 12 percent of the salary (i.e. basic salary and includes dearness allowance and dearness pay if the terms of
the employment so provide). The employee’s contribution to RPF forms part of salary and qualifies for deduction under Section 80C of the Income-Tax Act, 1961. The maximum limit for such deduction is Rs 1lakh along with other specified
investments. Also, the interest credited to RPF is also exempt from tax if it does not exceed the notified rate.
Statutory Provident Fund (SPF), this fund is mainly meant for Government/University/Educational Institutes (affiliated to university) employees. During Continuity of Job Employee’s Contribution Deduction under Section 80C is available. Employer’s Contribution is fully exempt. Interest on Provident Fund is fully exempt.
80C Premium paid In respect of life insurance policy If you have paid an insurance premium to insure your own life or the life of your spouse or child, such premium payments are eligible for deduction under section 80C of the Income Tax Act. Irrespective of your child being dependent or independent, minor or major, married or unmarried, the deduction under section 80C shall be allowed. For this, the insurance can be in your name or your wife and child’s name. The total amount that can be claimed for exemption should be 10% of the sum assured. 80C Payment of tuition fees to any university, college, school or other educational institute within India for full time education for max 2
children. A parent can claim a deduction on the amount paid as tuition fees to a university, college, school or any other educational institution. Other components of fees like development fees and transport fees are not eligible for deduction under Section 80C. The maximum deduction on payments made towards tuition fee can be claimed for up to Rs 1.5lakh together with the deduction with respect to insurance, provident fund, pension etc. in a financial year.
D. INVESTMENT IN NATIONAL PENSION
NPS is stand for National Pension System is a retirement benefit Scheme introduced by the Government of India to facilitate a regular income post retirement to all the subscribers. Pension Fund Regulatory and Development Authority Is the Governing Body for NPS Tax benefits for Salaried Individual
You can claim tax exemption up to Rs.5k under section 80CCD (1B). This benefit is over and above limit of Rs.1.5lakh under section 80C.
You may invest up to 10% of your basic salary + dearness allowance and claim tax exemption on the invested amount under section 80CCD (1). This tax exemption is subject to a limit of Rs.1.5lakh under section 80C of Income Tax Act, 1961.
Tax Benefits for Self Employed Individual
You can claim tax exemption upto Rs.5k under section 80CCD (1B). This benefit is over and above limit of Rs1.5lakh under section 80C.
You may invest upto 20% of your gross annual income and claim tax exemption on the invested amount under section
80CCD (1). This tax exemption is subject to a limit of Rs.1.5lakh under section 80C of Income Tax Act, 1961.
Note: – (for both parties) Employer contribution benefit is capped up to rs.7.5 lakhs for NPS, PF & Superannuation.
E. INVESTMENT IN MEDICAL INSURANCE
PREMIUM SELF OR PARENTS
Deduction for medical insurance premium as well as medical expenses for senior citizens is allowed to the Individual or HUF category of taxpayers only. Individual or HUF taxpayers, insurance can be availed for:
Any other entity cannot claim this deduction, For example, a Company or a firm cannot claim deduction under this section.The amount of deduction allowed under section 80Dm is Rs25k in a financial year. In the case of senior citizens, the deduction limit allowed is Rs.5k.
F. Section 80U
Under income tax laws of India there are certain sections for the disabled section of the society which provide tax benefits to them. A person with 40 percent disability, certified by medical authority can claim the tax benefit. A person suffering with at least 40% disability he/she can claim a deduction upto Rs. 75000 on the taxable income. A person suffering from severe disability i.e.80% disability he/she can claim a deduction upto Rs. 1.25 lakh
G. Section 80TTB
Old age is an age concerned with health issues both physically and mentally, which can affect their finances .Keeping in mind section 80TTB introduced . Under income tax law Section 8Ottb is a provision where a taxpayer who is a resident senior citizen of 60 years age or above at any time during a Financial Year, can claim a deduction of lower than Rs. 5k or amount from a specified income from his gross total income for that financial year.
H. Section 80TTA
Govt. always tries to encourage its citizens to make savings and so it gives some tax benefits on that savings account. And the interest received on that savings is taxable. Section 80TTA allows to claim a deductions on savings account deposits held in a post office , bank, or cooperative society on up to Rs. 10,000 received as interest on savings account deposit. Section 80TTA can be applied only in case of savings accounts and not on term deposits, fixed
deposits or recurring deposits.
I. Section 80GG
Section 80GG is a special provision under Income Tax Act, 1961, which provide tax benefit to those who do not avail House Rent Allowance (HRA).To avail the benefit of this deduction an individual must be residing in a rented property.
Tax deductions under this section are based on Tax Rule 2A. As per Section 10(13A), the least amount from the following calculations is considered a non-taxable income.
Rs.5000 per month or Rs.60000 a year.
The yearly rent amount minus 10% of the taxpayer’s adjusted total income.
25% of the adjusted total income for a year.
J. Section 80E
Section 80E gives the tax benefit on interest on education loan. If one has taken an education loan and is repaying it then the interest paid on that loan is deductible under section 80E from the total income. There is no benefit for the principle amount. The loan should be taken to pursue higher studies only .However it does not matter whether the
loan is taken for higher studies in India or outside India. The deduction allowed is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction.