How Salaried Individual Can Save Tax Through Section 80C and Beyond
Salary is chargeable to tax on “due” or receipt basis whichever is earlier. The laws of tax changes every year and the taxation system prevalent in India is progressive. According to our tax system the individuals who earn more money have to pay more. The individuals who earn more than Rs.10 lakhs per year can’t escape from the maximum tax bracket of 30% . There are number of ways being within the purview of the income tax act for employees to save tax. But most people are not getting benefits by this because of lack of knowledge. Here are some points which help you to understand these provisions.
Benefits of 80C
The gross total income is defined as the aggregate of income computed under different heads after dubbing of incomes and set off of losses. There are many sections under an assessee can make investments and by this way save tax by reducing the amount chargeable to tax. Following are those sections:
1. Tax saving by investing in80C (LIC, PPF, and ULIP etc.)
According to section 80C maximum eligible deduction is Rs 1 lakh. And these deduction allowed for individual and HUF assessee. With respect to the following deduction is available:
(a) Life insurance premia ( The life policy is issued on or after 1-4-2012, then maximu deduction available shall be limited to 10% of sum assured)
(b) Deferred annuity
(d) Term deposit ( 5 years will be the lock in period)
(e) Repayment of housing loan.
(f) Subscription to notified bonds issued by NABARD.
(g) Tuition fees of any children of the individual.
(h) 5 year time deposit in an account under post office time deposit rules.
(i) Quantum of deduction : Actual amount paid/deposited subject to a maximum of Rs. 100000.
(j) Tuition fees: paid for full-time education in an Indian university, college, school, educational institution, for any two children are eligible for deduction under Section 80C.
(k) Investment in National Saving Certificate.
(l) Subscription towards certain eligible equity shares or equity linked saving scheme (ELSS) mutual funds.
2. Investing in certain pension funds also help to save tax:
According to Section 80CCC this investment allowed maximum Rs 1 lakh. Investing in certain pension funds leads deduction. And any amount received on surrender and as pension received will be TAXABLE.
3. Contributing towards notified pension schemes is an another way for tax saving.
Under Section 80 CCD maximum of Rs 1 lakh deduction is available. and deduction is available in respect of contribution to pension scheme of central government. Individual employed by the Central government or any other employer or to an individual who is self employed are eligible for this. If any amount which is not invested in the same previous year of annuity plan received on surrender and pension shall be taxable.
4. Investing under an equity savings scheme also helps to save tax.
On basis of this 50% of amount invested or Rs. 250000 whichever is lower stated under Section 80CCG. This is an only one time deduction in life time and lock-in period is 3 years. This scheme started from FY 2012-13 onwards.
5. Deduction for making payments of MEDICLAIM INSURANCE Premium or contribution to central government health scheme or any payment made on account of preventive health checkup of his family.
Under Section 80D this deduction is stated and is available for individual and HUF assessee. This deduction in respect of any sum paid in the previous year to GENERAL INSURANCE CORPORATION (GIC) or any other insurer towards medical insurance premium on the health of himself/his family/his parents whether dependent or not. It also includes payment made on account of preventive health checkups of the assessee or his family or his spouse.
6. Deduction on payment made towards insurance premiums for dependents with disability.
This is under Section 80DD and residential individual or HUFs are eligible for this. Deduction of Rs. 50,000 or Rs.100,000 in case of person with severe disability. This deduction is available with respect of insurance premiums paid for the medical treatment of the dependent physically disabled. Dependents include, spouse, children, parents, brothers and sisters.
7. Deduction also available for payments made towards medical expenses for dependents with disability.
This deduction is available under section 80DDE and individuals and HUF are eligible for this. Deduction available according to the maintenance including medical treatment of a dependent who is a person with disability. Dependents include Spouse, Children, Parents, Brothers and Sisters.
8. Deduction according to the payments made towards payment of interest for loan on higher education.
This is available under section 80E for only individuals and for the loan to be taken only from institution. Deduction for entire amount of interest paid on a loan taken from any financial institution or approved charitable institution for pursing higher education of assessee himself or his relative on full time basis. No exemption for part time courses.
9. Deduction on rent paid satisfying certain conditions. Under section 80GG this deduction is available for individuals whose spouse, minor children or his HUF does not own house at any place.
10. Deduction on certain donations for approved research association or institution or rural development. Under Section 80GG this deduction is available for individuals who has self or spouse, minor children or his HUF does not own house at any place.
11. Deduction in respect of certain donations for approved research association or institution or rural development.
This is stated under section 80GGA and available for assessee who has no business & professional income.
12. Housing loan interest u/s 24
An individual is eligible for Rs. 1.50 lakhs housing loan interest as deduction u/s 24. This amount is beyond housing loan capital repayment as per section 80C.