Individuals whose Annual Income is above Rs 2,50,000/ p.a- will be liable to pay Taxes on the earnings above the prescribed amount. However, Individuals earning below Rs 5,00,000/- p.a can avail Tax Credit up to Rs 5000/- on the Tax payable. Now we will look at the Tax Deductions available under the Income Tax Act and Sections applicable. We would also find out Investment and Savings options which could be availed.
Deductions are available to the Individuals under Section 80C, 80CCD, 80CCC up to the extent Rs 1,50,000/-. These are now effectively clubbed under Section 80C with the aggregate deduction ceiling of Rs 1,50,000/-.
Contribution to Employee’s Provident Fund (EPF) Varies year to year (Generally between 8.75%-9.5%)approx
Public Provident Fund (PPF) Declared on Quarterly Basis (Generally between 8.10%-9.5%)approx 15 years, Can be extended.
Equity Linked Saving Scheme (ELSS) Varies as it is Market Linked. 3 years, Can be extended.
National Saving Certificate (NSC)
Unit Linked Investment Plan (ULIP) Varies as it is Market Linked.
Life Insurance/Flexi Insurance Policies
8.6%. To be declared by Govt Quarterly Investment for 14 years, Maturity after 21 years.
Pension Scheme Issued by Life Insurance Companies Varies with Companies and Policies Generally 10 Years or More.
Senior Citizen Savings Scheme 8.7% To be declared on Quarterly Basis
Please refer to the links provided below to read more about the various Investment option available:
DEDUCTIONS U/S 80 CCD (1b)
Deduction up to Rs 50,000 up and over the deduction U/S Section 80C of Rs 1,50,000/- is available on Contribution made to National Pension Scheme (NPS) and Atal Pension Yojana (APY). Individuals may invest in both the schemes and avail cumulative deduction upto Rs 50,000/- on the investment. Further deductions up and above the Deductions availed U/S 80C & 80CCD (1b) is available U/S 80D on Health Insurance Premium. It covers the premium paid on the Health Insurance cover for self and family. Deduction of Rs 25,000/- can be availed for the premium paid for Self, Spouse and dependent children. Additional deductions are available on premium paid on the Mediclaim Insurance of the parents. So further deduction of Rs 30,000/- can be claimed and if the parents are above 60 years respectively.
Health Insurance: Types of Health Insurance Plans
Deduction to the extent of Rs 40,000/- on Medical Expense of Self and dependent relative can also be availed. In case of very Senior Citizens the limit goes up to Rs 80,000/-. Deduction is also available on the education loan for higher studies (Graduation or Post Graduation) in the fields of Medicine, Engineering, Management, or Science. The deduction is available from the 1st year and subsequently for next 7 years. Deduction available is Rs 40,000/- p.a on the EMI paid as principal cum interest. Deductions are also available for the donations made to notified NGO’s, Charitable Institutions are eligible for 50% or 100% deduction as provided under the act. However the maximum limit to the deduction claimed is 10% of the Adjusted Gross Total Income after claiming other deductions.
Some of the Prescribed Notable Institutions where 100% Deduction is available without qualifying limit:
National Defence Fund
Prime Minister Relief Fund
Swacch Bharat Kosh
National Sports Fund
National Children’s Fund
Clean Ganga Fund and many more….
Deduction available in respect of House Rent Paid, the least of the following: 1. Rent paid less 10% of the total income. 2. Rs. 5000/- per month. (Maximum Deduction available is 60,000/-) 3. 25% of total income, provided that Assessee or his spouse or minor child should not own residential accommodation at the place of employment, or anywhere else and is not receipt of House Rent Allowance. Deductions up to Rs 2,00,000/- is available on the interest paid on the Loan availed for purchase/construction of self occupied House Property. However the acquisition and construction of such house property should be completed within 3 years from the end of Financial year in which Home Loan was taken. The sum should be borrowed on or after 01/04/1999 to be eligible for deduction. Additional Deduction of Rs 50,000/- is available for 1st time home buyers on loans upto 35 lacs, provided the value of house does not exceed 50 lacs. Deduction of Rs 75,000 U/S 80DD is available to meet the expenses and medical treatment of disabled dependent person. In case of severe disability (more than 80%) the Deduction limit is raised to Rs 1,25,000/-. Deduction of Rs 75,000 U/S 80U is available to meet the expenses and medical treatment of Resident Individual (Self). In case of severe disability (more than 80%) the Deduction limit is raised to Rs 1,25,000/-. Deduction from Gross Total Income up to a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account (not time deposits) with a bank, co-operative society or post office.