Tax Planning And Tax Saving Tools In India

TAX PLANNING AND TAX SAVING TOOLS IN INDIA

You must consider to do Tax planning, employing these Tax saving tools in India.

Tax Planning using SECTION 80C and 80CCC

  1. Deduction under these sections  is available to individuals or HUF
  2. The deduction is available on the gross total income for the whole amount paid on the aggregate of following

-Life Insurance premiums or annuity plans paid for self, spouse or children or any member of HUF (in case of HUF)

-Payment made for annuity plans by individuals on his/her life or his/her spouse or child

-The Employee portion of PF contributed for the statutory or recognized provident fund by individual

-National saving scheme

-Public provident fund

-National saving certificate

-Interest reinvested on NSC

-Tution fees for full-time education paid up to 2 children to any university, school, college or educational institution in India

-Repayment of housing loan

-Term Deposit for a fixed period of 5 years or 5 years time deposit with Post office

-Subscription to specified bonds, debentures or equity shares covered under this section

Tax Planning using Section 80CCD

Deduction under this section is available to employee/assessee in respect of contribution to pension scheme of Central Government.

  1. Deduction on employee’s/assessee’s portion-Deduction is available under section 80CCD(1) for his/ her contribution to this scheme on account of:

a) Up to 10% of salary of previous year paid or deposited by the employee in his account

b) Up to 20% of gross total income in the previous year

Maximum limit specified under section 80CCD(1B) upto which deduction can be claimed under section 80CCD(1) is Rs 50,000

2. Deduction on employer’s contribution-Deduction is available under section 80CCD(2) to assessee on contribution paid by the employer towards National pension scheme for an amount up to 10% of salary of the employee in the previous year

Tax Planning using Section 80CCE

Maximum deduction available is upto Rs 150,000 under section 80C, section 80CCC and section 80CCD(1)

The new Finance Act 2020 has introduced an aggregate monetary limit of Rs 750,000/- in respect of the employer’s contribution to PF, NPS and Superannuation Fund. Contribution by the employer in excess of this limit and any annual accretion on such excess would be taxable perquisite under section 17 of the Income Tax Act, 1961.

Tax Planning using sections 80D, 80DD and 80DDB

Section 80D

  1. The deduction is available only to

– individuals for expenses incurred on self, spouse or parents

-to  HUF for membersThe deduction is available out of gross total Income for insurance premiums paid or expenses incurred on preventive health check-ups for self, spouse, dependent children or parents  for an amount not exceeding Rs  25000.

For preventive health check ups-maximum deduction available is limited to Rs 5000

a)  An additional deduction is available for an amount not exceeding Rs 50000 in case

b) premium or preventive health check-up amount is paid for senior citizens or

c) if a senior citizen is not insured, in that case, medical expenditure is incurred on his treatment

 d) Mode of payment should be other than cash except in case of preventive health check-up where limit is Rs 5000.

Section 80DD

The deduction is available to individual or HUF resident in India.  The deduction is available out of Gross Total income for expenditure incurred on medical treatment of dependent

-being the person suffering from disability for an amount not exceeding Rs 75000

-being a person with severe disability for an amount not exceeding  Rs 125000

Section 80DDB

The deduction is available to individuals or HUFs resident in India for medical expenditure incurred on treatment for himself or dependents or members in case of HUF for an amount not exceeding Rs 40,000 (Rs 100,000/-  for senior citizens).

Section 80E-Interest On Loan Taken For Higher Education

Deduction under this section is available only to an individual on interest on loan taken for pursuing higher education for assessee or any of his relatives.

Conditions to claim deduction under this section:

  1. The loan must have been taken from a financial institution or an approved charitable institution.
  2. The deduction is available on payment basis i.e. deduction is available in the year in which interest has actually been paid.
  3. The amount should be paid out of income chargeable to tax.
  4. The deduction is available only for 8 assessment years starting from the year from which the assessee starts paying off interest or till the interest is paid on by the assessee in full, whichever is earlier.
  5. Higher education means all field of studies (including vocational studies) pursued after passing the Senior Secondary Examination or its equivalent from any school or board or university recognised by the Central Government or State Government or Local authority or any other authority authorized by the Central Government or State Government or Local authority.

Note: There is no condition that higher education should be in India only.

Section 80GG-Rent Paid

The deduction is available to individual paying rent but not entitled to HRA provided neither his spouse, minor child or HUF (of which he is a member) owns residential accommodation.

Quantum of the deduction is a minimum of the following amounts:

  1. Excess of rent paid over 10% of adjusted total income
  2. 25% of the adjusted total income
  3. Rs 5000 per month

ADJUSTED TOTAL INCOME- Adjusted total income means the Gross total income as reduced by

  1. Long term capital gains
  2. Short term capital gains u/s 111A
  3. All deductions permissible u/s 80C to 80U except deduction u/s 80GG
  4. Income referred to in section 115A, 115AB, 115AC or 115AD

INTEREST ON HOUSING LOAN U/S 24b

The deduction is available under the head Income from house property under section 24(b) to individuals on interest paid on housing loan as follows:

For Self occupied property:

1. Not exceeding Rs 30,000 for interest paid on money borrowed for repairs

2. Not exceeding  Rs 200,000 for interest paid on money borrowed for acquisition or construction

Other than the self-occupied property:

No limit. Any amount paid as interest on repairs, acquisition or construction is allowed to claim a deduction.

SECTION 10(13A)-HOUSE RENT ALLOWANCE

Exemption in respect of HRA is available to an individual. Quantum of exemption is calculated as follows (Least of the following is exempt):

  1. 50% of  salary (40% in case of the non-metro city)
  2. HRA received
  3. Rent paid

Excess of rent paid over 10% of salary (basic+Dearness allowance)

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