The financial year is about to end. We are left with only about a week to clear any backlog and finish any remaining financial planning. For individual retail investors, tax planning is a major task that has to be finished before the deadline of 31st March. We hope you have already invested wisely to save taxes this year. If you still haven’t, then this may be your last chance to do so.
In this article, we enumerate the current tax saving options available in India, and you can choose the ones that suit your needs.
Different investments falling under the section 80 are:
- PPF (Public Provident Fund) – lock in of 15 years
- EPF (Employees’ Provident Fund)
- 5 years Bank or Post office Tax saving Deposits
- National Savings Certificates (NSC) – Available for 5 or 10-year lock in period
- ELSS Mutual Funds (Equity Linked Saving Schemes) – 3-year lock in
- Children’s Tuition Fees
- Life Insurance Premium
- Sukanya Samriddhi Account Deposit Scheme – lock in of 21 years
- SCSS (Post office Senior Citizen Savings Scheme) – lock in period of 5 years
- Repayment of Home Loan (Principal only)
- National Pension System – Till 60 years of age
- Stamp duty charges for purchase of a new house
- Section 80CCC
The contribution made towards the annuity plans like the insurance payments of any life insurance company for receiving pension from any sort of funds comes under this section.
- Section 80CCD
The contribution to National Pension Scheme up to 10% of the salary and additional Rs 50,000 tax benefit under section 80CCD (1b) since budget 2015.
As per the previous budget, the self-employed can contribute up to 20% of Gross Salary and same can be deducted from the taxable income u/s 80CCD (1) of the Income Tax Act, 1961, as against current 10%.
The Total Deduction under section 80C, 80CCC and 80CCD (1) together cannot exceed Rs. 1,50,000 for the financial year 2018-19. The additional tax deduction of Rs. 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.
Contributions to ‘Atal Pension Yojana’ are eligible for Tax Deduction under section 80CCD.
- Section 80D
Health insurance and medical treatment comes under this section.
Under ITA 1961, the tax deduction allowed for senior citizen from FY 2018-19 is Rs 50000.
Under Section 80D an assessee, being an individual or a Hindu undivided family, can claim a deduction in respect of payments towards annual premium on health insurance policy, preventive health check-up or medical expenditure in respect of senior citizen (above 60 years of age).
- Section 80DD
Up to Rs 75,000 can be claimed under this section for spending on medical treatments of your dependents who have 40% Disability and for the dependents who have severe disability you can claim up to Rs 1.25 lakh.
- Section 80DDB
For an individual (under 60 years) or his dependents, Rs 40,000 can be claimed for the treatment of specified critical ailments. For senior citizen or very senior citizen the amount has been revised to Rs 100,000. To claim this, it is mandatory to claim the doctor’s prescription or certificate from a specialist working in a government or private hospital.
- Section 80CCG
Tax Benefits of Rajiv Gandhi Equity Savings Scheme (RGESS) under section 80CCG has been withdrawn. However, if an investor has invested in the RGESS scheme in FY 2016-17 (AY 2017-18), they can claim deduction under this Section until AY 2019-20.
- Section 24 (B) (Loss Under Head Income from House Property)
The exemption for the loan repayment on second house is restricted to Rs 2 lakh per annum.
- Section 80E
Tax payments of education loans comes under this section. The deduction of payment is available for eight years or the till the interest is paid whichever is earlier. And there is no limit on amount of interest you can claim under this section.
- Section 80EE
First time home buyers are eligible for an additional tax deduction of up to Rs 50,000 on home loan interest payments under section 80EE. For claiming tax deductions under this new section 80EE, the following criteria have to be met
- The home loan should have been availed or sanctioned in FY 2016-2017.
- The Loan amount should be less than Rs 35 lakh.
- The value of the home should not be more than Rs 50 Lakh.
- The buyer should not possess any other residential house under his/her name.
- Section 80TTA
Up to Rs 10,000 from the total gross income can be claimed towards income generated from interest on savings account deposits with a bank or post office or co-operative society under this section. For fixed deposits this deduction cannot be claimed.
- Section 80GG
The individuals who do not get the HRA from the employer and do not possess a residential property can claim this up to Rs 60,000 per annum under section 80GG.
The maximum tax deduction will be limited to the least of the following criteria;
- (Rent paid) – 10% of the total income.
- Rs 5,000 per month.
- 25 % of the total income.
- Section 80G
Contributions made to charitable institutions and certain relief funds are claimed as a deduction under Section 80G. This deduction can be claimed only when the contribution is made through cheque or draft.
- Section 80GGC
A taxpayer can claim deduction for the amount that he/she has contributed to a political party or an electoral trust formed to oversee the election process. The contributions made in cash are not allowed for deductions. (Political party refers to any political party registered under the section 29A of the Representation of the People Act, 1951)
- Section 54
If the residential house property held for at least two years is sold, the gains from this sale is eligible for exemption subject to these conditions. You can buy a new asset one year prior or two years from the date of sale or a new house can be constructed three years from the sale. The amount exempt is the investment in the new asset or capital gain, whichever is less. This can be claimed by an individual or a Hindu undivided family. Capital gain deposit account scheme is applicable during this period.
- Section 54B
The eligible assets that can be sold is the agricultural land that the assessee has used for agricultural purposes two years prior to the sale. You can buy a new agricultural land in two years from the sale. The amount exempt is the investment in the agricultural land or capital gain, whichever is less. Capital gain deposit account scheme is applicable. This can be claimed by an individual or a Hindu undivided family.
- Section 54EC
Post the Budget 2018, the Section 54EC exemption will only apply to long term capital gains (LTCG) from land and buildings. This means the exemption under this section for LTCG from plant, machinery, unlisted shares, bonds and debt mutual funds are not available. As per the new provisions of this section, the long term capital gains from the sale of land and buildings (held for a period of two years or more) can be set off by investing in bonds of NHAI or REC. The exemption amount is the investment in the new asset or capital gain, whichever is lower, subject to a maximum of Rs 50 lakh in a financial year. Capital gain deposit account scheme is not applicable. Also note the holding period of these bonds (provided they are purchased after 1st April 2018) will be five years instead of the previous limit of three years.
- Section 54F
The asset that can be sold is any long term capital assets other than residential property provided that on the date of transfer, the taxpayer doesn’t own more than one property. You can acquire a new residential house property before a year from the date of sale or two years after the sale or after three years if it is being constructed. If full amount of asset is invested in the new property or construction, then whole amount can be exempted under this section. And if the partial amount is invested then only proportionate amount of the investment will be exempted.