How To Save Your Income Tax
The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act. Section 80C includes various investments and expenses that can be used to claim deductions. The Section 80C limit is ₹1.5 lakh in a financial year, which means that you can use this entire amount to reduce your taxable income.
The limits for claiming deduction under this section have increased substantially from FY 18-19 onwards. You can now avail a deduction of up to Rs 1 lakh which was Rs 60000 up till last financial year but there are many sub-limits that one has to take care of. An individual can avail a maximum deduction of Rs 25,000 for the premium paid for oneself, spouse or dependent children. One can get an additional deduction of Rs 25000 for the premium paid for one’s parents. In case of medical insurance premium paid for policies for senior citizens a maximum deduction of Rs 50,000 can be claimed from FY2018-19 onwards. Therefore, if a person takes policies for self, spouse and senior citizen parents then he/she can claim a total deduction of Rs 25,000 plus Rs 50,000 i.e. Rs 75,000.
The maximum deduction amount that can be claimed under this section is Rs 75,000 per annum. The same will be increased to Rs 1,25,000 in case the dependent is suffering from a severe disability. To claim this deduction, you need to attach a copy of the certificate issued by the medical authority (a neurologist or a civil surgeon) along with form 10-IA when you file your return. Disability includes autism, cerebral palsy, and mental retardation. A person with severe disability would be one who has 80 per cent or more of any of these disabilities, i.e., a medical authority has certified that his level of disability is greater than 80 per cent.
The deduction will be equal to the amount actually spent or Rs 40,000, whichever is less. If the person for whom the expenditure is made is 60 years or more, then the limit applicable will be Rs 1,00,000 in FY2018-19. If you have received any sum from an insurer as reimbursement for the expenditure incurred by you, then the amount received as reimbursement would be reduced from the amount of deduction under this section.
To claim this deduction, make sure that the loan is taken for higher education, i.e., any course pursued after completing 12th standard. This deduction is available for eight years, starting from the year in which the interest payment began.
There are a few conditions one has to fulfil to avail this deduction:
- The loan must be taken between April 1, 2016 and March 31, 2017.
- The loan amount should be below Rs 35 lakh.
- The value of the house should be below Rs 50 lakh.
- The said house property should be the only one in the individual’s name.
As a first time home buyer, suppose the interest paid by you during the financial year was Rs 2.25 lakh. Thus, you can claim the tax deduction of Rs 2 lakh as interest paid under section 24 and an additional Rs 25,000 under section 80EE.
If you have donated to a fund notified by the central government under this section, then you would be eligible for deduction of the amount donated, but it should not exceed 10 per cent of the adjusted gross total income. Starting from financial year 2017-18, you cannot avail the deduction of more than Rs 2,000 if the donation is made in cash. This amendment was announced in the Budget 2017 to curb its misuse.
Interest earned on savings bank account or/and post office savings account is allowed as deduction. The maximum amount that can be claimed as deduction under this section is Rs 10,000. This does not mean that interest of up to Rs 10,000 is exempted income; rather you should show this amount as ‘Income from other sources’ in your ITR and then claim deduction under section 80TTA.This deduction is not meant for senior citizens from FY 2018-19 onwards. From FY2018-19 onwards senior citizens can avail this deduction under a newly introduced section.
If you are the author of a book and have received payment in royalty, either in lump sum or otherwise, then you can claim that amount as deduction from your royalty income under this section. The maximum deduction that can be claimed when royalty is received in lump sum is Rs 3 lakh. When royalty is not received as lump sum then the amount of deduction will be restricted to 15 per cent of the book’s revenue that year.
If you are a patentee and have registered any patent after April 1, 2003 and receive royalty income for it, then you can claim deduction under this section for the amount received as royalty. The maximum deduction that can be claimed under this section is Rs 3 lakh.
Interest earned on deposits made with banks and post offices or cooperative societies, will be allowed as deduction in the hands of a senior citizen. Further, the maximum amount of deduction available under this section is Rs 50000 in a financial year.
It is available for the rent paid by the taxpayer for his own accommodation in a financial year. A declaration in Form 10BA has to be submitted to avail this deduction. The deduction amount will be the lower one of the following:
- Rent paid over 10 per cent of total income, or
- 25 per cent of the total income, or
- Rs 5,000 per month.
Here, total income is taken as income less of deductions available under Section 80C to 80U, except 80GG.
If you have donated to an institution carrying on scientific research or to a university or college which is approved by the government for the time being, then the amount so contributed would be eligible for deduction under this section. Deductions over and above Rs 10,000 can be claimed only if the contribution has been made by any mode other than cash. This deduction is not available to the taxpayer who has income from business or profession. Any sum paid under this section using any mode other than cash can be claimed for deduction without any limit.
If you have donated to a political party, then you can claim deduction under this section equivalent to the amount actually donated. There is no ceiling on the deduction amount that can be claimed under this section. The only condition is that the payment should be made by any mode other than cash.