All about Income tax saving sections

Income tax is a hot topic for every high paying taxpayer. Every time we meet with our associates, we discuss about tax planning and tax saving. It has been seen for last many years that salaried class is paying income tax higher than business class taxpayers. Hence salaried individuals are very much concerned about their income tax and regular seek advises and find the new methods to save more taxes.

We are here to present you the few important sections that allow you to reduce income tax. Few important sections are discussed below that individual taxpayer should not forget to take benefits of:

Section 80C: Deduction in respect of Life Insurance, Fixed Deposits, Provident fund, Tuition fees, etc. Section 80C is common section that every taxpayer knows. The purpose of this section is to promote the taxpayers to invest for their future.

This section is applicable on Individual and Hindu Undivided Family (HUF) that means only Individual and HUF can claim the benefit of this section. Section 80C of income tax act has long list of investments, hence we will cover the important and few common investments adopt by taxpayer.

1. Life insurance premium:

     – Individual can save tax by paying premium of insurance for himself, his wife, and any child of taxpayer

     – in case of HUF, on life of any member of the HUF

2. Contribution of employee to a recognised provident fund

3. Contribution of employee to an approved superannuation fund

4. Amount can be deposited by an individual or in the name of girl child of an individual or in the name of the girl child for whom such an individual is the legal guardian

5. Subscription to notified savings certificates [National Savings Certificates (VIII Issue)]

6. Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children

7. Certain payments for purchase/construction of residential house property

8. Term deposits for a fixed period of not less than 5 years with a scheduled bank.

9. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981

Important points to be noted for claiming deduction under section 80C:

  1. Deduction is limited to the maximum amount of Rs. 1.50,000.
  2. Deduction amount is limited to Rs.1,50,000 is aggregate of deduction may be claimed under section 80C, 80CCC and 80CCD.
  3. Premium of life insurance which is in excess of 10% of actual capital sum assured shall not be part of deduction amount.
  4. Deduction under section is allowed on payment basis. Taxpayer is not allowed to claim deduction under this section on due basis.

Section 80CCC: Section 80CCC of income tax act 1961 allows deduction upto Rs.1,50,000 for contribution to certain pension funds of LIC and any other insurer. The deduction amount of Rs. 150,000 should not be more than in combine of 80C and 80CCC.

Section 80CCD: Contribution to pension scheme notified by Central Government up to 10% of salary.

Contribution made by employer shall also be allowed as deduction under 80CCD(2) while computing total income of the employee. However, amount of deduction could not exceed 14% of salary where contribution is made by central government and 10% of salary, where contribution is made by any other employer.

Section 80D:

  • Deduction under section 80D is allowed only to Individual or HUF. No other person can claim deduction under this section. Deduction under section 80D to the extent of Rs.25,000 is allowed in respect of the premium paid for health insurance of self, spouse, and dependent children.
  • A Further deduction of Rs. 25,000 is allowed for any insurance paid for the health of parents. It is not relevant that parents are not dependent.
  • Quantum of deduction limit is increased to Rs.50,000 in case of individual and parents attain the age of 60 years or more at any time during the previous year.
  • Deduction of Rs. 5,000 is allowed for preventive health check-up of self, spouse, dependent children and parents.

Important point: It is to be noted that cash payment is allowed in case of preventive health check-up only. In other case payment other than cash is allowed.

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