Tax saving tips you must know!

Tax saving tips you must know!

In our earlier posts we discussed about how you could save tax through famous Sec 80 C  and how your house could save taxes for you. Now we will have a look at other tax saving options available. Combined together this post would make you tax savvy and come handy while you plan your taxes.

Lets see what’s in the store !

A.Section 80 D – Health or Medical Insurance for self/family

We commonly call it a medi-claim policy or a health insurance. Apart from insuring your health, this can also save your taxes. Income tax act allows deduction for premium paid for health insurance policy subject to defined limits.

Whom can we take the policy for?

You can pay the premium for yourself, spouse, children and parents to be eligible for deduction

How much deduction will you get?

The amount of deduction depends upon your age, the person for which you are paying the premium and that person’s age.

You are under 60

  1. If you are under 60 years and paying the premium for yourself, your spouse or your children, you would be eligible for a deduction of the actual annual premium paid (subject to max. of 25000)
  1. If you are also paying for your parents, you get eligible for an additional deduction of the actual annual premium paid for parents (subject to max. of 25000), however if your parent are senior citizen, you become eligible for an enhanced deduction of 30000 instead of 25000.

(Note that Rs 25000/30000 is in total for the persons described above i.e. you cannot claim 25000 /30000 for each one separately.)

You are 60 or above

  1. If you are 60 years or above and paying the premium for yourself, your spouse or your children, you would be eligible for a deduction of the actual annual premium paid (subject to max. of 30000)
  1. If you are also paying for your parents, you get eligible for an additional deduction of the actual annual premium paid for parents (subject to max. of 30000).

Points to note

  1. This deduction can be claimed irrespective of parents being dependent on you or not.
  2. Buying health insurance for in-laws does not make you eligible for deduction
  3. Premium paid by you should be in any mode other than cash

B. Section 80 TTA- Deduction of interest earned on savings bank account

If you earn interest on savings bank account, you can get a deduction of the interest so earned subject to a maximum of Rs 10,000.

C. Section 80GG- Deduction of house rent in case you do not own a house property and you do not get HRA as well

If you or your spouse or children do not own a house in India or abroad and you do not receive HRA (House Rent Allowance) as a part of your salary, you can still claim deduction for the house rent which you are paying.

Amount of deduction would be the minimum of the following:

  1. 25 % of the total income earned by you
  2. Rent paid minus 10 % of total income
  3. Rs 5000 per month

D. Section 80E- Deduction of interest paid on educational loan

If you have taken an educational loan for higher studies (only full time courses) for yourself, spouse or children and paying interest on it, you can avail the deduction for the interest so paid.

Entire interest paid would be eligible for deduction for 8 consecutive years, there is no deduction for principal repayment

To be eligible under this section, loan must be taken from an approved financial institution like banks or charitable trusts

E. 80 GGC Deduction of donations made to political party

If you have paid donations to a political party registered under the Representation of the people Act, you can get a deduction of the donation so paid subject to a maximum of your total gross annual income

F. Deductions for spending on medical treatment for self & relatives

I. Section 80DD- If you spend for medical treatment & maintenance of handicapped dependents

If you spend on medical treatment & maintenance on a dependent such as parents, spouse, children or siblings who are differently abled, you can claim deduction of such spending up-to a maximum of Rs 75000 (Rs 1.25 lakh in case of severe disability)

II. Section 80DDB- If you spend for treatment of specified diseases

If you spend for treatment of specified disease for self, spouse, children or siblings, you can claim a deduction of amount so spent, up-to maximum of Rs 40000 (Rs 60000, if spent for senior citizen & Rs 80000, if spent for very senior citizen dependent)

G. Section 80G- Deduction of donations made to notified charitable funds & institutions

You might have paid certain donations to charitable institutions, you could save taxes by doing so.

Amount of donation that can be availed as deduction depends on the specification of donation in the law.

The various donations specified under 80G are eligible for deduction of 50 % & 100 % of the amount of donation made. However, some of these donations provide restricted deduction.

The various funds are notified in the law and are as follows:

Donation which fetch you 100 % deduction with no restriction are:

  • National Defence Fund set up by the Central Government
  • Prime Minister’s National Relief Fund
  • National Foundation for Communal Harmony
  • An approved university/educational institution of National eminence
  • Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
  • Fund set up by a State Government for the medical relief to the poor
  • National Illness Assistance Fund
  • National Blood Transfusion Council or to any State Blood Transfusion Council
  • National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
  • National Sports Fund
  • National Cultural Fund
  • Fund for Technology Development and Application
  • National Children’s Fund
  • Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
  • the Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
  • The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6, 1993
  • Chief Minister’s Earthquake Relief Fund, Maharashtra
  • Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
  • Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001) or
  • Prime Minister’s Armenia Earthquake Relief Fund
  • Africa (Public Contributions – India) Fund
  • Swachh Bharat Kosh (applicable from FY 2014-15)
  • Clean Ganga Fund (applicable from FY 2014-15)
  • National Fund for Control of Drug Abuse (applicable from FY 2015-16)

Donations which fetch you 50 % deduction with no restriction are:

  • Jawaharlal Nehru Memorial Fund
  • Prime Minister’s Drought Relief Fund
  • Indira Gandhi Memorial Trust
  • Rajiv Gandhi Foundation

Donations which fetch you 100 % deduction with restriction are:

Donations to the following would be eligible for 100 % deduction restricted to 10 % of adjusted gross total income:

  • Government or any approved local authority, institution or association to be utilised for promoting family planning
  • Donation by a Company to the Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India.

Donations which fetch you 50 % deduction with restriction are:

Donations to the following would be eligible for 100 % deduction restricted to 10 % of adjusted gross total income:

  • Any other fund or any institution which satisfies conditions mentioned in Section 80G(5)
  • Government or any local authority to be utilised for any charitable purpose other than the purpose of promoting family planning
  • Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both
  • Any corporation referred in Section 10(26BB) for promoting interest of minority community
  • For repairs or renovation of any notified temple, mosque, gurudwara, church or other religious places.

Let’s understand what does adjusted total income mean?

Adjusted gross total income is the gross total income i.e. the sum of income under all heads

Less: Amount deductible under Sections 80CCC to 80U (but not Section 80G)

Less: Exempt income

Less: Long-term capital gains

Less: Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies

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