Let us understand all the important sections and new proposals with respect to Income Tax Deductions FY 2016-17. This list can help you in planning your taxes.

 

Section 80C, Section 80CCC , Section 80CCD(1) (Limit: 1.5 Lakh)

Kindly note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.

      A) Section 80C- The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues or expenses that can be claimed as tax deductions under section 80c are as below;

  • Public Provident Fund (PPF)
  • Equity Linked Saving Schemes (ELSS Mutual Funds)
  • Life Insurance Premium (LIP) or Unit Linked Insurance Plans (ULIP’s)
  • Children’s Tuition Fees
  • EPF (Employees’ Provident Fund)
  • Tax Saving Deposits – 5 Year Bank or Post Office Deposits
  • National Savings Certificates (NSC)
  • Senior Citizen Savings Scheme (SCSS)
  • Principal Repayment of Home Loan
  • Sukanya Samriddhi Account Deposit Scheme
  • National Pension System (NPS)

      B) Section 80CCC – Contribution to annuity plan of any Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.

      C) Section 80CCD – Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015. To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS. The 10% of salary limit is applicable for salaried individuals and Gross income is applicable for non-salaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to Pension Scheme, the whole contribution amount (10% of salary)can be claimed as tax deduction under Section 80CCD (2).

Section 80D ( Limit : Rs. 25k / 35k)

Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.

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Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, dependent children and parents).

Section 80DD ( Limit : Rs. 75k / 1.25 Lakh)

The Deduction limits for the disabled dependents that is for those who are having 40-80% disability is Rs. 75,000/- per annum. The Deduction for disability dependents that is for those who are having 80% or more disability the amount is Rs. 1, 25,000/- per annum .To claim this deduction, you have to submit Form no 10-IA.

Section 80DDB ( Limit : Rs. 40k / 60k / 80k)

This section mainly deals with offering deduction to tax payers who have incurred expenses with respect to medical treatment. The nature of treatment includes expenses made on Cancer Treatment, Aids, etc.

Status Deduction under Section 80DDB (INR)
Ordinary 40, 000
Senior Citizen 60, 000
Very Senior Citizen 80, 000

To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt or Private hospital.

The following shall be the eligible diseases or ailments u/s 80DDB:

  • Neurological Diseases where the disability level has been certified to be of 40% and above;

(a) Dementia
(b) Dystonia Musculorum Deformans
(c) Motor Neuron Disease
(d) Ataxia
(e) Chorea
(f) Hemiballismus
(g) Aphasia
(h) Parkinson’s Disease

  • Malignant Cancers
  • Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
  • Chronic Renal failure
  • Hematological disorders:
    1. Hemophilia
    2. Thalassaemia
Section 24 (B) ( Limit : Rs. 2 Lakh for Self- occupied Property)

The interest component of home loans is allowed as deduction under Section 24B. These limits of deduction is applicable assessee wise and not property wise. Therefore if an assessee owns two or more house property then the total deduction for that assessee remain same.

1) In Let Out Property/Deemed to be Let Out – No maximum limit

2) Self Occupied House (SOP) – Rs. 2,00,000.

In the following cases the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000

– Loan borrowed before 01-04-1999 for any purpose related to house property.
– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.
– If construction/acquisition is not completed within 5 years from the end of the financial year (3 years till financial year 2015-16) in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2011 then the deduction limit should reduced to Rs 30,000 if the construction/acquisition completes after 31 March 2017.

Section 80EE  ( Limit : Rs. 50k)

Under the section 80EE, there will be a tax benefit to the first time house owners who own the house of Rs. 50 lakh or less, and has acquired the loan amount of less than or equal to Rs. 35 lakh. The maximum limit is Rs. 1.5 lakh that can be claimed under this section. For this, the loan should be sanctioned between April 1, 2016 and March 31, 2017.)

Section 80U ( Limit : Rs. 75k / 1.25 Lakh)

Deduction of Rs. 75,000 to a resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] [w.e.f. assessment year 2005-06 including autism, cerebral palsy, and multiple disabilities as defined under National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999] [in the case of a person with severe disability, allowable deduction is Rs. 1,25,000] (subject to certain conditions).

Section 80GG ( Limit : Rs. 60k )

As per the budget 2016 proposal, the Tax Deduction amount under 80GG has been increased from Rs 24,000 per annum to Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).

The extent of tax deduction will be limited to the least amount of the following;

  • Rent paid minus 10 percent the adjusted total income.
  • Rs 5,000 per month.
  • 25 % of the total income.
Section 80G (100% or 50% With or Without Restriction- subject to clause)

For a common man, Section 80G is an opportunity to claim deduction by way of making donations and charity. This deduction can only be claimed when the contribution has been made via cheque or draft or in cash. But deduction is not allowed for donations made in cash exceeding Rs 10,000. In-kind contributions such as food material, clothes, medicines etc do not qualify for deduction under section 80G.

Deduction under Section 80G is computed on the basis of gross total income. As a tax payer, first your gross salary is taken and then deduction in respect of PPF (Public Provident Fund) and CPF (Company Provident Fund) is made. The end result is Gross Total Income. To illustrate:

Gross Income – Contributions to PFF and CPF = Gross Total Income.

Now, deduction under Section 80G is available on the amount which is lower of the two mentioned below:

  • Donated Amount, or
  • 10% of Gross Total Income

The lower of the two amount will qualify as deduction. However, there is an additional clause attached to the whole scenario. Various donation have different exemption limit. Some donations may have 100% deductions, whereas some have 50% deductions. Donation to private organizations mainly offer 50% deductions. Hence, the amount qualified as deduction will be reduced to half and will be applied as a deduction.

Section 80GGA (100% Contribution)

Section 80GGA allows deductions for donations made towards scientific research or rural development. This deduction is allowed to all assessees except those who have income (or loss) from business and profession. Donations can be made in cheque or by draft or in cash; however cash donations in excess of Rs 10,000 are not allowed as a deduction.100% of the amount that is donated or contributed is considered eligible for deduction.

Section 80E ( Limit : Not Applicable)

If you’ve taken an Education Loan for higher studies (after completing Senior Secondary Exam)and are repaying  the same, you can always claim deduction under Section 80E of the Income Tax Act for the Repayment of Interest on Education Loan. However, this deduction is only available to Individual and not to HUF. This loan should have been taken for higher education for you, your spouse or your children or for a student for whom you are a legal guardian. Principal Repayment on educational loan cannot be claimed as tax deduction.This deduction under Section 80E is allowed to be claimed in the year in which the Individual starts paying the Interest on Education Loan and in 7 succeeding years. Thus, this deduction is available for a maximum period of 8 years or until the Interest is repaid by the Individual in full (which ever is earlier), There is no maximum limit for claiming this deduction under Section 80E.

Section 87A Rebate ( Limit : Rs. 5k )

Rebate of up to Rs. 5,000 for resident individuals having total income of up to Rs. 5,00,000 as per Sec-87A of Income Tax Act, 1961 for A.Y. 2017-18 i.e. F.Y. 2016-17.The rebate shall be equal to the amount of income tax payable on the total income for assessment year 2017-18 or an amount of Rs. 5,000, whichever is less.

Key Point :-

  • Individual resident of India,
  • Whose Total Income is up to Rs. 5,00,000,
  • Shall be allowed a rebate, From Income Tax,
  • 100% of Income Tax or Rs.5,000, Whichever is Less.
Section 80 TTA ( Limit : Rs. 10k )

Saving account held by an Individual or HUF (Whether resident or non resident) with a banking company, a co-operative bank or a post office is eligible for deduction. Deduction is not available on interest from fixed deposits (FD).

Deductible Amount – Interest on deposits in saving account (not being time deposit) upto a maximum of rs. 10,000.

 

Key Intake 

Don’t rush at the last hour(at the end of financial year) just to save taxes by investing in unwanted life insurance polices or in any other financial products . It’s always better to plan your taxes based on your financial goals at the beginning of the Financial Year itself. Plan your taxes right away from from April itself, instead of waiting until late December – March corridor.

Do not invest just to save TAXES. The cost of buying wrong financial products may not be less than the cost of taxes paid. Tax Planning is just an important ingredient of Investment Planning.

The above ‘Income Tax Deductions 2016-17’ are applicable for financial year 2016-2017 (Assessment Year 2017-2018).

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