How to Save Income Tax?

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Everyone wants to secure future and for this purpose makes various investment by buying different investment plans. But one needs to be thoughtful before buying an investment plan as burden to pay income tax may eat the benefits arising out of deposits or such long term investments.

Many tax saving schemes like National Savings Certificate (NSC), senior Citizen Savings Scheme (SCSS) and  1to 5 year time deposits with banks and post offices will not yield fruitful results though they saves actual investment from tax but income earned from interest is entirely taxed in the end of the year.

Hence one must buy or invest in such investment plans that will help in saving tax or provide exemption up to certain limit upon total taxable income from tax.

Here are some investment plans or schemes that will legally allow you to save income tax or absolve liability to certain extent from paying Income tax:-

Deductions under Section 80C of the income Tax Act, 1961:

The maximum deduction under 80 C is up to Rs.150000 on total income by investing under the following heads:

  1. Equity Linked Saving Schemes (ELSS)
  2. Public Provident Fund (PPF)
  • Senior Citizen Savings Scheme
  1. Sukanya Samriddhi Yojana
  2. General/Employees Provident Fund
  3. National Pension Scheme
  • Unit Linked Insurance Policy (ULIP)
  • NSCs
  1. Pension Plans
  2. Bank FDs
  3. Life Insurance Premium
  • Children Tuition’s Fee
  • Installments of Home Loan.

Interest Accrued on Home loan under Section 24:

Section 24 the Act offers a maximum deduction on interest payment of home loan up to Rs.200000. There is a limit of Rs.30000/- in case of loan taken for construction, renovation or reconstruction of property and tax payer can claim deduction only up to Rs. 30,000 on the interest paid on home loan.

Deductions under Section 80CCC of the income Tax Act, 1961:

This section enables an individual to claim Deduction towards contribution in Pension fund referred to in Sec. 10(23AAB). One can claim deduction on premium paid in any annuity plan of LIC or other insurance company.

Deductions under Section 80CCD of the income Tax Act, 1961:

National Pension Scheme Exempted under Section 80CCD (1B)

Tax benefit under NPS: After the amendment taken place in tax provisions in 2015 Budget, if any customer contributes voluntarily towards the NPS scheme, then he would get an additional benefit of ₹ 50,000 under section 80CCD (1B) in addition to earlier tax exemption limit that was up to ₹ 1,50,000 as prescribed under section 80 CCE.

Section 80CCE provides for combined limit on deductions under 80C, 80CCC and 80 CCD which is Rs. 1,50,000/-

Exemption on premiums paid on Medi-claim Policy under Section 80 D:

One can get exemption under sec. 80D of Income tax Act, 1961 by buying a medi-claim policy as premiums paid in any mode other than cash towards ensuring the health of self, spouse, and dependent children are eligible for deduction for up to 25,000 from one’s taxable income. Premiums paid on the health policies of senior citizen parents is also liable for an additional deduction of Rs.30000/- from one’s taxable income. This limit contains the expenses of up to Rs.5000/- incur on preventive health checkups.

Section 80DD provides deduction to an Individual or HUF (Hindu Undivided Family) residing in India who spent money for medical treatment of an handicapped dependent relative. If the disability is 40% or more but less than 80% then, a deduction of Rs.75000 is allowed. In case of severe disability or more than 80% disability of dependent this limit is extended up to Rs.1.25 lakh. It is important to note that the deduction under section 80DD is not subject to the amount spent on medical expenses hence if the amount spent medical treatment of disables dependent relative is less then also assesses will avail the full deduction.

Deduction under Section 80 DDB:

An assesse can claim deduction of Rs. 40000 or actually paid amount, whatever is less upon expenditure spent by the individual resident for self or for dependent relative for medical treatment of disease which are specified by the Income Tax Act. While a senior citizen can claim deduction up to Rs.80000 upon medical expenditure.

Section 80 E allows deduction upon interest arise from Education Loan for higher studies:

Interest paid on education loan is also non-taxable under section 80E of the Act. The said deduction is allowed for a maximum period of 8 years or till the time the interest is paid whichever is earlier.

Section 80 EE provides for an additional deduction of Rs.100000/- for the first time home buyers in regards to interest on loan taken for residential property.

Deduction under Section 80G in regard to donations made for social purposes:

Deduction up to 100 or 50% is available to an assessee who contributes or donates in any specified charitable institution or relief funds established by the Government. Any deduction exceeding Rs. 2000 made in cash is not qualified for tax saving purposes. To claim deduction under sec. 80G, donations should be made in any form other than cash.

Section 80 GG provides deduction on House Rent payment.

The deduction is available for house rent payment subject to the condition that payment of house rent has not been received from elsewhere.

The tax payer and his spouse or children should not have their own accommodation at the place of employment.

Any income arises from agriculture is tax feed in India. It includes income yielded from agriculture land, agriculture product and revenue arise from Agriculture produce etc.

Deductions under Section 80 TTA of the income Tax Act, 1961:-

A deduction of RS.10000/- can be claimed on Interest received from all Savings Bank Account and above this limit is taxable and added in the income of a person/HUF/GOP etc.

Deduction under Section 80U for disabled persons.

An individual resident who suffers more than 40% from any disability can claim deduction up to Rs.75000 (earlier it was Rs.50000, raised by 2015 amendment) and in case of severe disability the limit stands for Rs.125000/- (earlier it was Rs.100000, raised by 2015 amendment).

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