“The hardest thing to understand in the world is the income tax.” – Albert Einstein
Well, how can we not agree with Einstein for crying out loud! Income tax is not only a dreaded subject to deal with but tax planning can leave us feeling completely lost. Keeping finances and tax arrangements in order, keeping a track of a series of tax sections and subsections are daunting tasks and something you definitely cannot avoid. In the Budget 2018, we have seen various tax changes coming into effect from April 1, 2018. Changes that would most definitely have an impact on how much taxes we will pay. And now is the time to assess the same – through saving, investments, and taxes. But this isn’t the article where we amplify your concern about tax planning rather we are here to take off your load a little bit. Before you start planning, you should know about some of the important sections of the Income Tax Act. Take a note.
Know about your Investments under Section 80C
This section remained untouched in the latest budget announcement. But, did you know there are at
least 13-14 instruments through which you can claim tax deductions under Section 80C? Here’s a
- PPF (Public Provident Fund)
- EPF (Employees’ Provident Fund)
- 5 years Bank or Post office Tax Saving
- National Savings Certificates (NSC)
- ELSS Mutual Funds (Equity Linked Saving Schemes)
- Children’s Tuition Fees
- Life Insurance Premium
- Sukanya Samriddhi Account Deposit Scheme
- SCSS (Post office Senior Citizen Savings Scheme)
- Repayment of Home Loan (Principal only) Deposits
- National Pension System
- NABARD rural Bonds
- Stamp duty charges for purchase of a new house
Under section 80C, a deduction of Rs 1.5 Lakhs can be claimed from your total income for FY 2018-
Government Pension Schemes Under Section 80CCD
Section 80CCD allows you to claim deductions for contributions made to the National Pension Scheme. The maximum contributions can be up to 10% of the salary (Basic + Dearness Allowance + any other bonus) for salaried or gross income in case of self-employed. From 2016-17 and the additional tax deduction of up to Rs 50,000, u/s 80CCD (1b) is allowed for excess employee contributions and this is over and above the limit of Rs 1.5 Lakhs. If the employer also contributes to Pension Scheme, the entire employer contribution (maximum 10% of the salary) can be claimed as a tax deduction under Section 80CCD (2). This is over and above the limit of Rs.1.5 Lakhs. Please note that the total deductions under sections 80C, 80CCD (1) and 80CCC put together cannot exceed Rs 1.5 lakhs for the financial year 2018-19.
Annuity plans under Section 80CCC
Contributions made towards Annuity plans available with any of the Life Insurance Companies for receiving the pension from the fund can be considered for tax benefit. The maximum Tax deduction allowed under this section is Rs 1.5 Lakhs.
Claims on Medical treatments under Section 80DD
Spends on medical treatments for your dependents (spouse, parents, children or siblings) can be claimed under section 80DD. Up to Rs 75,000 can be claimed in case of 40% disability. Up to Rs 1.25 lakhs can be claimed in case
of severe disability (80%).
Critical Illness Exemption under Section 80DDB
Under this section, a tax deduction of Rs. 40,000 can be claimed on the grounds of medical treatment for critical ailments namely Cancer, AIDS, Thalassaemia. It is allowed only for individuals below 60 years of age. This can also be claimed for his/her dependents. Senior Citizens (above 60 years) can claim up to Rs 60,000 and very Senior Citizens (above 80 years) can claim Rs 80,000 under this section.
Exemption under Section 80U
This section is similar to Section 80DD but here the Tax deduction is permitted for the employee himself who is physically or mentally challenged.
Health Insurance exemption under Section 80D
Up to Rs. 30,000 can be deducted towards the medical insurance premium for senior citizens (above 60 years) and up to Rs. 25,000 towards medical insurance of self and dependents (spouse &;children). A deduction of up to Rs. 25,000 towards medical insurance premium of parents (father/mother/both) is also available. If both the parents (Father & Mother) are senior citizens, then the deduction allowed is up to Rs. 30, 000.
Home Loan Benefit under Section 24
The maximum deduction allowed on payment of Interest paid on home loan under this Section for a self-occupied house property is upto Rs. 2 Lakhs.In case, the home Loan has been taken for the property which is not self-occupied, there is no maximum limit prescribed and the entire interest paid is fully exempted. If the taxpayer has availed a home loan for repair works or reconstruction, a maximum deduction of upto Rs 30,000 per financial year is permitted.
Home Loan Benefit under Section 80EE
For claiming tax deductions on home loan interest payments under this new section 80EE, the following factors need to be considered.
- The home loan should have been availed or sanctioned in FY 2016-2017.
- The Loan amount should be less than Rs 35 Lakhs.
- The value of the home should not be more than Rs 50 Lakhs
- The buyer should not possess any other residential house under his/her name.
Interest on Savings under Section 80 TTA
The interest you earn on your Savings Accounts in a bank, post office or a co-operative society is exempt from tax up to Rs. 10,000. This deduction cannot be claimed on income generated from interest on fixed deposits, recurring deposits or interest income from corporate bonds. However, Budget 2018 proposed to increase the tax benefit for Fixed Deposit/Recurring Deposit by senior citizens from Rs. 10,000 to Rs. 50,000 in a financial year. The benefit is available for all bank and postal FD/RD.
House Rent Allowance Under Section 80GG
If you are living in a rented house, the House Rent Allowance (HRA) is a great tax-saving option for you. The tax benefits that you get depend on your basic salary, HRA provided by your employer, your place of residence and the rent you pay.
Charity contributions under Section 80G
You can claim a tax exemption of up to 50% of the amount if you have contributed to a charitable organisation or relief fund via cheque, draft or cash (not exceeding Rs. 10,000). Although contributions such as clothes, food material, medicines, etc. are not eligible for deduction under section 80G.
Exemption under Section 87A
From 2017-2018, if the taxable income of a Taxpayer after various permissible income tax deductions, is below Rs 3.50 lakhs, he/she is eligible for upto Rs 2,500 on Tax payable as tax rebate under this section.
Education Loan Under Section 80E
Interest paid towards your education loan can be claimed under Section 80E as a tax deduction. The loan should have been taken for higher education for yourself, your spouse, your children or any student for whom you are the local guardian. Only interest paid can be claimed and not the principal. There is no specific limit on the amount of interest claimed as deduction. The deduction can be claimed for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.
A taxpayer can claim deduction for the amount that he/she has contributed to a political party or an electoral trust (any political party registered under the section 29A of the Representation of the People Act, 1951) formed to oversee the election process. Although contributions made in cash are not allowed for deductions.