As the financial year begins, this is the best time to plan your tax saving options for the year ahead. However, before you do so, analyse various sections of deductions under Income Tax Act,1961 as tax planning does not end with Section 80C. Let’s see some of them briefly:
Tax deduction under this section qualifies for mediclaim policies. The premium is paid for medical insurance policy for self and family members to protect them from sudden medical expenses. The maximum amount allowed for exemption annually for self, spouse and dependent parents/children is Rs. 15,000. In case of a senior citizen, the maximum amount extends up to Rs. 20,000. If you are paying the premium for your parents you can claim an additional maximum deduction of Rs. 15,000.
If you are paying a premium to LIC or any other insurance company (approved by the income tax board) for the medical treatment of a dependent physically disabled person, you can avail exemption under the section 80DD. Here, the dependent should be none other than your spouse, children, parents or sibling. If the person is suffering from 40% of any disability, a fixed sum of Rs. 50,000 can be claimed in a year. Similarly, if the disability is 80%, the fixed sum goes up to Rs. 1,00,000 per year. You need to submit the medical certificate issued by a medical authority along with the return of income for this.
If you have incurred expenses for the medical treatment of self or your dependents, you can claim a deduction of up to Rs. 40,000 or the actual amount paid, whichever is less, under the section 80DDB. For a senior citizen, the maximum exempted amount is Rs. 60,000, or the amount actually paid for medical expenses. You need to submit a medical certificate from a doctor working in a government hospital to avail this.
The interest paid on loan taken for pursuing higher education of self or any dependent is exempted from tax under section 80E. An education loan can be taken for wife, children and minors for whom you are the legal guardian. This deduction is applicable for a period of eight years or till the interest is paid, whichever is earlier. “Higher education” means any course of study (including vocational studies) pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the central or state government or local authority or by any other authority authorised by the central or state government or local authority to do so. No exemption is applicable for part-time courses.
One often donates on philanthropic grounds to help the destitute. Such an amount can be donated to trusts, charitable institutions and approved educational institutions, and qualifies for deduction. The exemptions can be up to 50% or 100% of the donations made. Funds in which the donations are eligible for tax exemptions include the National Defence Fund, Prime Minister Drought Relief Fund, National Foundation for Communal Harmony, National Children’s Fund, Prime Minister’s National Relief Fund, etc.
If a salaried or self-employed person staying in a rented house does not receive any kind of HRA, they can claim a deduction under this section. However, you cannot avail any such benefit if you, your spouse and/or your child owns any residential accommodation in India or abroad. You can claim the least of the following: 25% of the total income, or Rs. 2,000 per month, or excess of rent paid over 10% of total income.
Any monetary contribution to any political party or electoral trust is eligible for tax exemption.
A resident of India suffering from any kind of specified disability is eligible to claim tax deduction under this section. In order to avail this, one should be suffering from not less than 40% of the following diseases: blindness, low vision, mental illness, mental retardation, hearing impairment. The deduction provided is flat Rs. 50,000, irrespective of the expense incurred. If the disability is severe, the deduction can be up to Rs. 1 lakh. One needs to provide a copy of all the certificates issued by a medical authority to avail this benefit.
The Finance Act 2012 introduced a new Section 80CCG to offer 50% tax break to new investors who invest up to Rs. 50,000 and whose gross toatal income is less than or equal to Rs. 10 lakh.
(The writer is an assistant professor of taxation at Kirori Mal College, Delhi University.)