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Income - Tax - Deduction

Rohit Pandey 
Updated on 28 June 2016

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INTRODUCTION

Often you find yourself holding your Income in one hand and Taxes in other. Income Tax Deduction is one such aspect which is ignored by large.

What if you can replace your taxes with deductions (Income Tax Deductions)? Wouldn’t it be a win-win situation for you!

People are unaware of the fact that the area which is neglected by them can save them from the pain of paying taxes. If not zero, they can certainly bring down their taxes substantially.

WHY DEDUCTIONS ARE IGNORED?

Reason for ignorance among masses is that it (Income Tax Deductions) seems too complex with sections, law and technical words involved. Common man doesn’t wants to get into this mess. People feel better off by spending their time, focusing on how to earn more money rather than getting into this deductions’ swamp.

TABULAR PRESENTATION OF INCOME TAX DEDUCTIONS

Therefore, to get you out of this chaos and simplify your thoughts, deductions are presented in explicable format as under.

S.No.

Saving Scheme/ Charging Section

Limit

Tax benefits for earnings

Remarks

1

National Savings Certificate (NSC)/ 80C

150,000.00

Interest earned on NSC is taxable

These deductions can give you an accumulated benefit upto Rs. 150,000.00

2

Public Provident Fund or Provident fund (PPF or PF)/ 80C

150,000.00

Interest earned on PF is taxable

3

Life Insurance Policies/ 80C

150,000.00

Exempt under section 10(10D)

4

Unit Linked Insurance Plan(ULIP)/ 80C

150,000.00

Exempt under section 10(10D)

5

Tuition fee including Admission fee/ 80C

150,000.00

Not Applicable

6

Repayment of housing loan principal/ 80C

150,000.00

Not Applicable

 7

Payment of stamp duty and registration charges for house/ 80C

150,000.00

Not Applicable

8

Subscription to notified bonds issued by NABARD

150,000.00

Chargeable to tax under capital gains

9

Fixed deposit for more than 5 years

150,000.00

Interest income is chargeable to tax

10

Payment made into an account under the Senior Citizens Savings Scheme Rules, 2004

150,000.00

Interest income is chargeable to tax

11

Payment made as five year time deposit in an account under the Post Office Time Deposit Rules, 1981

150,000.00

Interest income is chargeable to tax

12

Subscription to units of equity linked mutual funds

150,000.00

Long term capital gains and dividend income is exempt from tax

13

Premium paid for Medical Insurance/ 80D

40,000.00

Not Applicable

Rs. 20,000 – In case of senior citizen

Rs. 15,000 – In case of others

Additional benefit of Rs. 15,000/ 20,000, as the case maybe, available if premium paid towards insurance of Parents.

Rs. 5000 available for preventive health check up within existing limit of Rs. 15,000/ 20,000; as the case maybe.

Note: Deduction is limited to least of premium paid or specified limit in section.

14

Medical expenditure of handicapped & dependent relative/ 80DD

50,000/ 100,000

Not Applicable

Rs. 50,000 for normal disability and Rs, 100,000 for severe disability is allowed subject to actual expenditure incurred, whichever is less.

Disability includes Blindness, Low vision, Leprosy-cured, Hearing impairment, Locomotor disability, Mental retardation, Mental illness, Autism, Cerebral palsy & Multiple disabilities.

Person having not less than 40% of above disabilities is covered under this section and severe disability means 80% more of disability.

15

Medical expenditure incurred for specified disease or ailment of dependent relative/ 80DDB

40,000/ 60,000

Not Applicable

Deduction is available upto Rs. 40,000 & Rs. 60,000, if relative is senior citizen, subject to actual expenditure incurred, whichever is less.

Specified disease or ailment includes Neurological diseases, Cancer, AIDS, Chronic renal failure and Haematological disorders.

16

Interest on education loan from financial institution or approved charitable institution for higher studies/ 80E

No limit

Not Applicable

Deduction allowed upto 8 financial years.

Education loan must taken for higher studies only.

Interest on loan taken for self, spouse and children is eligible for deduction

17

Donation to certain funds or charitable institution/ 80G

100%/ 50% of donation made

Not Applicable

18

Deduction for rent paid/ 80GG

Least of - 1) Rs.2000 pm, 2) 25% of total income and 3) Rent paid less 10% of total income

Not Applicable

Deduction available only if assessee, spouse or minor child does not have any residential house property in their name.

Assessee does not receives House Rent Allowance (HRA)

19

Deduction in respect of interest on saving bank deposit/ 80TTA

10,000

Not Applicable

Deduction is allowed for interest earned on saving bank deposit to the extent of Rs. 10,000 or actual interest earned, whichever is less

20

Deductions if person suffers from disability/ 80U

50,000/ 100,000

Not Applicable

Deduction to individual of Rs. 50,000 is allowed if he/she suffers from disability and Rs. 100,000 for severe disability.

Deduction is allowed irrespective of expenditure incurred.

21

Rebate if income is upto Rs. 5 Lakhs

2000

Not Applicable

If total income of individual does not exceeds Rs. 5 Lakhs, then rebate, maximum to the extent, of Rs, 2,000 is allowed on tax liability.

SHIFT IN PARADIGM

Gradually people are learning the importance of saving money and they are realizing that saving money for future is equally important like earning money in present. An old saying, ‘A Penny saved is a penny earned’ gives you an insight of saving money. Claiming income tax deductions doesn’t only saves you taxes but also induces a habit of saving in you.

I have a question here. Why people view income tax deductions just as a tool of saving taxes?

Sometimes, what we see is not what it’s like. We need to get out of this narrow thinking and join a broader perspective. Deductions not only save you taxes but also earn you an extra income, if not today than certainly tomorrow.

ROLE OF CHARTERED ACCOUNTANT

You take care of your business and we will take care of you and your income. That’s what a Chartered Accountant believes.

A Chartered Accountant can give you expert advice that no layman can give. We know the intricacies involved in laws and taxes and who better than a CA itself, can serve you better.

  • If you still find income tax messy, we are here for you.
  • If you are focused on saving taxes and don’t know how, we are here for you.
  • If you want to earn and save money at the same time but don’t know how, we are here for you.
  • If you have any reservations or doubts on income tax, we are here for you.

CONCLUSION

Future is uncertain and our present deeds must be done not only taking care of our present but also our future. People must do what they are good at i.e. managing their business or outperforming in their jobs. And let your income tax worries be handled by an expert, A CHARTERED ACCOUNTANT.

The author can also be reached at rohitofficial@hotmail.com


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