All individuals whose income is over and above the threshold limit of 2.5 Lakhs per annum have to pay tax. It is a legal tender to pay tax to the government beyond the eligible tax deductions and exemptions applicable to him/her. The tax collected is used to disburse welfare, social security schemes by the government.
To encourage individuals towards savings and investments, Indian Government allows various sections to reduce tax -burden on the tax-payer.
An individual can reduce the tax burden by claiming 1.5 Lakh under section 80(c) which includes
3.Tution Fees paid to children
4.Senior Citizen Saving Schemes(SCSS)
5..National Saving Certificates(NSC)
Both SCSS and NSC are exempted for principal amount only-The maturity amount would be taxed in the hands of the tax payer,
6.Equity-Linked saving schemes which have lowest lock-in period (of 3 Years)
7.Home-loan Principal amount
8.Sukanya Samruddhi Yojana Contributions (Exclusive scheme for girl child below 10 Years)
9.Stamp Duty charges during registration of property
10.Tax- Saving Fixed Deposit(For 5 Year Period).
If the tax-payer falls under highest tax-bracket, he/she can claim additional 50,000 rs by investing in NPS (National Pension System)under section 80CCD(1b).
Section 80(D)includes premium paid for health insurance policy.
The maximum amount that can be claimed for family(self, spouse and dependent children upto 25 years of age) is 25,000rs per annum where additional 5000rs can be claimed for health-checkups(If any).
If the tax-payer is a senior citizen he/she can claim 50,000rs for health insurance premiums.
If the tax-payer is young and want to take health cover for whole family(including senior citizens)he/she can claim 75,000 rupees(25,000 rs for his family+50,000 rs for their senior citizen parents)
If the tax-payer is aged above 60 years and his parents fall under the same category, he/she can claim 1Lakh rupees as deduction under sec 80(d)
This is an educational loan deduction which allows the tax-payer to claim the “Interest” on the educational loan. These deduction can be claimed only on the interest income up to 8 Years(From the starting year f the loan or the student gets job) whichever is earlier.
There is no cap on the interest amount, total interest payable would be exempt up to 8years.
Section 80 TTA–
This would be applicable on the “Interest earned from Savings a/c‘”s of Banks and Post Offices. It would be applicable if the interest earned is below 10,000 rupees
It would not be applicable for Bank FD’s and RD’s.
If the tax-payer is living in a rented house, he can claim House Rent allowance(HRA) subject to-
- Rent Paid minus 10% of basic salary pay
- Actual HRA Received
- 40% of the basic pay(if living in non-metro city)or 50% of the salary(If living in metro city)
The Tax-Payer may claim HRA under “Whichever is Lower” from the above three
Under this section the tax-payer can claim 2 Lakh rupees beyond 1.5 Lakh principal amount claimed under sec 80(c) on taking home-loan from a bank/Private organisation.
This was exclusively for the first-time home buyers subject to-
- The value of the property must be less than 50 Lakhs
- Home-loan should not be more than 35 Lakh
- The property’s carpet area must be within 90 square meters or 968 square feet in non-metros and 60 square meters or 645 square feet.
The maximum deduction eligible is 1.5 Lakh which is over and above the threshold limit of 2Lakh under 24(b). That means total 5 Lakh can be claimed under section 80(c)-1.5Lakh, section 24(b)-2Lakh, Section 80EEA(1.5 Lakh)=5Lakh rupees*(1.5 lakh can be claimed by first-time home buyers only)
This deduction is for making donations to charitable trusts, institutions, trusts, societies etc. To Qualify for 80(G)one must donate in other modes(cheques, drafts)rather than in cash. To Claim 80(G) All Donations above 2000rs should be paid through cheques
These are all some of the tax exemption sections to save taxes legally in India. You may avail the above exemptions and deductions based on yout tax profile.