Look in here for IncomeTax saving measures

Fri, Mar 24, 2017, 01:23 PM
Related Image Many will not like to pay Income Tax (IT). It is painful to pay a percentage of your hard earned income as tax. But it is the responsibility of everyone to pay IT as per law. However, there are many facilities that have been provided as per law, for saving on IT, like exemptions. If you learn about them, you need not pay IT or the percentage of your income, you pay as IT will be reduced.

As per the regulations in force, in the 2015-2017 financial periods, those who earn an annual income of Rs. 2.5 lakh, are exempted from IT.  Here is a legal provision under Section 80 C of IT Act that exempts payment of IT for another Rs. 1.5 lakh annual income. If you claim exemption under this Section, you might have to invest in various schemes opened by the government for this purpose. You can also show various kinds of expenditures and claim exemption, under this Section.

Employees' Provident Fund, Voluntary Provident Fund (EPF, VPF)

Every employee has to save every month for the future. Along with investing a certain percentage of monthly income as per regulations, he can invest some amount on his own. These amounts are exempted from tax, under Section 80 C. By investing in EPF and VPF, up to a sum of Rs. 1.5 lakh, you can earn exemption up to of a limit of Rs. 4 lakh.

Public Provident Fund

Anyone, including employees, can invest in this voluntarily. On the whole a sum of Rs. 1.5 lakh might be invested in this alone or along with other investments, under Section 80 C.

Insurance Premium
Insurance is a must for everyone. Especially for those who have taxable income, this is a must. Because, you will be exempted to pay IT, under Section 80 C, if you are paying premium for Life Insurance. If you have more number of policies, you can show all the premium amounts together as one premium. But if you are paying premium for Insurance in the name of your parents, then you cannot claim exemption.

Equity Linked Savings Scheme (ELSS)
ELSS are schemes offered by mutual funds companies, for exemption from IT. There is complete exemption for an investment of Rs. 1.5 lakh under these schemes, under Section 80 C. By investing in these schemes, over period of five years, you can earn high dividends. Through these schemes, you can not only earn exemption but also you can earn a lot of wealth, in long term.

Interest on housing loans
This the best IT savings scheme. Because, you can build your own house without having to pay IT. It is known that beneficiaries of housing loans, have to pay not only interest, but a party of the loan amount, in equal instalments, every month. For example, you might return Rs. 1 lakh at the end of a year, on a loan of Rs. 10 lakh. The amount of Rs. 1 lakh includes interest on loan as well as a portion of the principle amount. You can claim exemption under Section 80 C, on  part of the principle amount being repaid. There is a possibility of exemption on the interest amount also, under Section 8 EE or Section 24.

Sukanya Samruddhi Yoganarepresentative image
This scheme is meant for parents who have girl children. They can claim exemption by saving in the names of their daughters. But a maximum of two accounts, under the names of two daughters might be opened. The limit for investing under this scheme, annually, is from as low as Rs. 1,000 to a maximum of Rs. 1.5 lakh.

National Savings Certificate (NSC)
It exemption is applicable to this scheme. These are savings certificates for five years. An investment of even Rs. 100 can be made. Every six months the interest will be reinvested to the principle. IT is applicable to the interest amount. The interest amount is not given to the investors but invested back into the principle. As such you can claim exemption under 80 C. However, under this scheme, the interest amount in the last year of investment is taxable as it is not reinvested.

Infrastructure bonds
Tax exemption can be availed under Section 80 C on investments made under these bonds that are familiar as Infra bonds.

Bank Fixed Deposits
An exemption of Rs. 1.5 lakh can be claimed under Section 80 C, for the whole amounts of Fixed Deposits made in any scheduled bank.

Senior citizen's savings schemesrepresentative image
Just as the name suggests, this is a scheme for senior citizens. Those who are 60 years of age and above can avail this scheme. Those who have taken voluntary or special retirement can avail this scheme even at the age of 55 years. For ex-servicemen there is no age limit to avail this scheme and they can use it at any point of time. The investments made under this scheme are exempted from tax, under Section 80 C. At present, you can earn an interest of Rs. 8.5 per cent. It is not reinvested into the principle. If the interest is not withdrawn, it will not attract any interest. Moreover, the interest amount is taxable.

5-year Post Office time deposit
It is like a bank deposit. Deposits can be made for any number of years, like one, two, three or five. But only the 5-year long investments attract tax benefits under Section 80 C. Interest is reinvested into the principle every three months and it paid once a year. Interest is taxable. It has to be added to annual income.

NABARD rural bonds
Investments in National Agriculture and Rural Development Bank (NABARD) rural bonds, are also exempted from tax, under Section 80 C, up to a sum of Rs. 1.5 lakh. Moreover, interest rates are also high.

Unit-linked Insurance Plan (ULI)
It is a life insurance scheme. Even as it offers life insurance, a portion of the amount is flowed to equity markets, to give maximum benefits. With this, one can earn good dividends in the long term. At the same time, you will get tax exemption on the premiums paid.

Tuition fee
A lot of money is spent on tuition fees for children. This can be shown to gain tax exemption, under Section 80 C. But this is applicable just to tuition fees and not donations or development fees. It is applicable to school, college or university students.

National Pension System (NPS)
It is meant as a income-earning scheme for employees or ordinary citizens. Central and State government employees are at present enjoying the benefits of this scheme. Even ordinary citizens can join the scheme. Investments up to Rs. 2 lakh will be exempted from tax under NPS, as per two sections of IT Act. An investment of Rs. 1.5 lakh under Section 80 CCD, in NPS, is totally exempt from IT. Added to this, another Rs. 50,000 investment is also exempted under Section 80 CCD.

You have learnt about the various schemes in which you can invest a maximum of Rs. 1.5 lakh out of your gross annual salary, or via housing loans instalments, which are exempted from taxes under Section 80 C. Many are not aware of these schemes. Similarly, there are other schemes that offer tax exemption, under various other sections of IT Act. The investments in these are higher than Rs. 1.5 lakh.

Medical life insurancerepresentative image

Under Section 80 D, the investments made in medical life insurance is exempted from tax. It is become inevitable to invest in medical life insurance in the present times, when you are spending huge amounts on medical bills even for a minor health problem. Medical life insurance can be done by the investor in his name or in the name of all his family members like wife, children and parents, as a group. However, the investment should be made through cashless transaction. The insurance company should have been approved by the government and IRDA. Tax exemption is allowed up to a maximum of Rs. 60,000 premium amount.  If a man takes a policy in the name of his wife and children, he can avail tax exemption over a premium amount of Rs. 25,000. Another Rs. 25,000 premium amount is exempted from tax, if he has taken policies in the name of his parents. He can also claim exemption for an additional Rs. 5,000, if he undergoes preventive health check-up.

Expenditure for disabled person
The expenditure that is incurred for taking care of a disabled person, be it wife, children, brother or sister, who is dependent on the investor, up to a sum of Rs. 75,000 is exempted from IT, under Section DD. If the condition of such a disabled person is critical, the limit for exemption can even be raised to Rs. 1.25 lakh. However, the doctor's certificate should be produced along with the returns. The exemption can be availed only by those who have dependents suffering from at least 80 per cent of autism, cerebral palsy or other mental disability.

Expenditure on diseases
An investor, who is spending on medical bills regarding chronic illness that has struck him, his wife, children, brother or sister, can claim exemption under Section 80DDB. The exemption is applicable to a sum of Rs. 40,000 or annual expenditure for the illness, whichever is lower. If the afflicted persons are above 60 years of age, exemption can be claimed on an amount of up to Rs. 60,000.  The amount can be raised to Rs. 80,000, for those who are 80 years and above. If the person already enjoyed a medical insurance, exemption can be claimed on the total expenditure after subtracting the reimbursement.
The exemption under this Section is, however, applicable only to patients with dementia, distain, muscular depressions, motor neuron disease, Ataxia, Chorea, hemiballismus, Aphasia, Parkinson's, malignant cancer, AIDS, chronic renal failure, haemophilia, Thalassemia etc., haematological disorders. If it is related to nervous disorders, doctors have to certify that is more than 40 per cent.

Education loan

You can claim tax exemption under Section 80 E, on interest amounts payable on education loans taken, for yourself or your wife and children. There is no limit on this. For example, if you take a loan of Rs. 20 lakh and pay Rs. 1.5 lakh in one year, that amount is exempted from tax. But only education loans taken for higher studies will attract such an exemption. That is education after Intermediate. The exemption is applicable for eight years, starting from the year that interest has been paid.

Exemption on housing loan interests

Even as there is an exemption on the returns of principle amount of housing loan, up to a sum of Rs. 1.5 lakh, under Section 80 C, you can claim exemption on the interest being paid for the same, under Section 80 EE. However, exemption can be availed on a maximum limit of Rs. 50,000 per year. This too is applicable only to housing loans taken before financial year 2016-17. The loan amount too should be within Rs. 35,000. The value of the house should be below Rs. 50 lakh and the house should be in the name of one person.

Exemption on charities
Exemption can be claimed on charities or donations made towards funds, set up by the government under NOTA, under Section 80 G.  This donation should however must not cross 10 per cent of the annual income. Donations made for renovation of temples, masjids, churches etc., come under this category. National Defence Fund, Jawaharlal Nehru Memorial Fund, Ministerial Drought Relief Fund, National Children Fund, Prime Ministerial National Relief Fund, Swach Bharat Kosh, Clean Ganga Fund, etc.

Payments on rentals
Those who enjoy benefit of House Rent Allowance (HRA) included in the salary, can avail exemption on this. 1. House Rent Allowance by the company 2. Annual rent being paid to the owner of the house, after deducting 10 per cent of the sum. 3. Up to 50 per cent of Basic D.A.(in metros and up to 40 per cent in non-metros. Tax exemption can be claimed on the least of these amounts. This is not applicable to those who are living in their own house, even if it is in the name of your wife or minor children. HRA should be shown as included in the salary and IT has to be paid according to the slab.

Salaries without HRA
Those who are not getting HRA along with salaries or self-employed persons too can enjoy tax exemption on their annual income. There are three methods of doing this. Ten per cent of the annual Basic D.A. , 25 per cent of annual income, or Rs. 5,000 per month; whichever is the  least amount, tax will be exempted on that.

Donations to educational institutions

Donations given to Science and Technological Research Institutes, Universities or colleges that are recognised by the Government, are exempted from IT, under Section 80 GGA. If the donation is more than Rs. 10,000, the amount should be paid through cashless transactions.

Donations to political partiesrepresentative image
Any quantum of donations made to political parties that are recognised by Election Commission of India, is exempted from IT, under Section GGC.

Interest earned on Savings Bank deposits
Annual Interest earned on Savings Bank deposits, up to a sum of Rs. 10,000, is exempted from IT. It should be included in the annual income. But exemption can be claimed under Section 80TTA, by showing it as income earned through other means.

Any publication house, when it sells a book by an author, gives a part of the price to the author as royalty. If the royalty is paid at one time, tax is exempted for a sum, up to a maximum limit of Rs. 3 lakh, under Section 80 QQB. It is given in instalments, it should be shown in annual income and exemption can be claimed for 15 per cent of the amount.

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