Income Tax Returns: Payments and investments that will help salaried employees claim tax deductions
- Section 80C of Income Tax Act 1961 allows individuals to claim deduction up to ₹1.50 lakh
The tax season is here and professionals have started filing income tax returns (ITR) for the financial year 2020-21, The deadline for ITR filing for this financial year (Assessment year 2021-22) has been extended from July 31 to September 30, 2021, due to the coronavirus pandemic.
Read on to find out what deductions can be claimed unless one has opted for the new tax regime.
Payments for life insurance premium, pension schemes, provident fund
Section 80C of Income Tax Act 1961 allows individuals to claim deduction up to ₹1.50 lakh in payments towards investment/payment for Life Insurance Premium, Provident Fund, subscription to certain equity shares, National Savings Certificate, principal paid on housing loans, and tuition fees paid for up to two children.
Section 80CCC allows individuals to claim deduction for payments made to annuity plans and pension plans of insurance companies
Section 80 CCD (1) allows deduction for payments made on Central government pension schemes
Investment in National Pension System (NPS)
Section 80 CCD (1B) allows a deduction up to ₹50,000 towards payments made to the Pension Scheme of the Central Government, excluding any deduction that has already been claimed under 80CCD
Under Section 80 CCD2, a deduction towards contribution made by an employer to the pension scheme of the Central Government can be claimed, but under two conditions
For individuals employed by state governments, PSU, or private entities the deduction limit is 10% of basic salary plus dearness allowance(DA).
For individuals employed by the Central government the deduction limit is 14% of basic salary plus DA.
Payment for health insurance premium
Section 80 D, allows deduction on premium paid to purchase health insurance for self and dependent family members and towards preventive health check-ups. Deduction of ₹25,000 can be claimed for self/spouse/ and dependent, this goes up to ₹50,000 in case of senior citizens. Whereas for preventive health checkups, only ₹5,000 deduction is allowed.
Home loan interest payment
Section 80EE, allows homeowners to claim a deduction of up to ₹50,000 towards interest payment made against the loan taken for the acquisition of a residential property. This deduction is applicable only for loans sanctioned between 1st April 2016 to 31st March 2017.
Under Section 80EEA, a deduction up to ₹1.5 lakh is available on interest payments made on any home loan taken for the purchase of a residential house property for the first time if the loan is sanctioned between April 01, 2019 and March 31, 2022.
Income from house property
Section 24(b) allows an individual to claim tax benefit for interest payment on home loan and home improvement loan on self-occupied property to the tune of ₹2 lakh. As per Income Tax Rules, the upper limit for deduction of interest paid on housing loans is ₹2 lakh in the case of a self-occupied property. For those opting to file returns under the New Tax Regime, this deduction will not be available from this year.
Interest paid on education loan
Section 80E allows deduction of total amount paid towards interest payments on higher education loan of self, or dependent child or spouse, there is no upper limit on this deduction.
Interest paid on electronic vehicle loans
Section 80EEB allows a deduction up to ₹1.5 lakh to be claimed on interest payments of loan for the purchase of an electric vehicle. Available only for loans sanctioned between 1st April 2019 to 31st March 2023.
Expenses incurred for maintenance/treatment of disabled dependent
Section 80 DD (1B), allows a deduction up to ₹40,000 for payments made towards medical treatment of self or dependent for specified disease. This deduction limit has been raised to ₹1 lakh in case the person is a senior citizen.
House rent payment for those not getting Home Rent Allowance
Section 80 GG allows individuals to claim deduction on house rent if house rent allowance is not part of one’s salary.