Before planning your taxes one should be aware of the total income and tax liability in order to be smart tax saver. The government has provided with many plans using which individuals can make better investment decision along with tax saving options. Individuals often get stuck with 80C tax benefits only during tax planning. While there is little doubt 80C investments are best for tax saving purposes, there are other investment options which can help you save tax if invested smartly.
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NPS The Government of India (GOI) launched the National Pension System for individuals in May of 2009. Under the NPS, each Subscriber will open an account with Central Recordkeeping Agency (CRA) which will be identified through unique Permanent Retirement Account Number (PRAN).
The NPS offers you an additional tax deduction for the investment up to Rs. 50,000 in under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under sec 80C of Income Tax Act. 1961. Returns would depend on the asset class that you choose. For example, you could select equity, which is a high-risk instrument or corporate debt or government debt.
Interest on education loan (Section 80E) The deduction is allowed only on the interest repayment part, not on the principal amount of education loan. Means that only interest repayment is available for the tax deduction while filing income tax return. This deduction is over and above the 80C limit and there is no maximum limit on claiming deduction under 80E. Not many are aware of the scheme, and one needs to educate people more on this section and its benefits.
House rent allowance (Section 80GG) If you are staying in a rented apartment or house and paying rent, you can claim tax deduction under Sec 80GG of the Income Tax Act. The amount of deduction is based on the city that you are residing. Again, some cities need to be revamped to factor in an increased rental in this city, but that has not happened so far. More details and exact break-up cannot be sought from your company, so it is best talking to the HR department on the exact tax benefits that you would get.
Home Loans In the Union Budget last year, Finance Minister Arun Jaitley increased the limit on deduction on home loan interest under Section 24 to Rs 2 lakhs.
An additional deduction of Rs 50,000 on home loan interest can be claimed to start the financial year 2016-17 under Sec 80EE of the Income Tax Act. However, to be able to claim this deduction, you must meet certain conditions.
The principal amount continues to be a part of the overall benefits under Sec 80C Max Rs. 1.5 Lakhs.
Health Insurance (Section 80D) Individuals should take a health insurance policy, which would enable them to save tax up to Rs 25,000 in the case of ordinary citizens and Rs 30,000 in the case of senior citizens.
So, one can go ahead and take a good health insurance policy. This is again a tax option that you have apart from the usual 80C benefits. The Sec 80D benefits also include the benefits on expenses incurred towards preventive health check-ups.
Donations (Section 80G) Section 80G of income tax law provides tax benefits on the amount donated to NGO’s. So, it maybe time to be a little more generous than before. However, the deduction can be made only if you are donating by cash or draft. The deduction can be either 50 per cent or 100 per cent. You have to claim this deduction when filing your tax returns and quoting of PAN number to the institution where you donated is a must. There is an entire list of institutions and establishments where you can donate.
Medical treatment under Sec 80DDB For certain specific diseases, Income Tax Act offers tax benefits to an individual under section 80DDB on the basis of expenses incurred by him for the treatment of such diseases or ailment.
This is not only for the person filing the tax returns but, also for individuals dependents of such an individual. However, this tax benefit is not available for Non-Resident Indians. In case it is a Hindu Undivided Family one can claim it for members of such an HUF.