Tax Planning : The last time for tax filing is near. You can invest for tax savings till March 31. The new financial year will start from 1st April. There are many options available for tax saving. Among them, Section 80C and 80D of the Income Tax Act, 1961 are used the most. We will tell you in detail about both these sections as well as other sections of Tax Savings.
What is section 80C?
Under this section, you can claim deduction up to Rs 1.5 lakh in a financial year. Life Insurance, Tax Savings FD in Bank, National Pension Scheme, PPF, NSC, Sukanya Samriddhi Yojana, ELSS come under this section. Two more things come under this. First, school or college fees for up to two children. Second, the principal’s share of the home loan. You can claim tax deduction by investing a maximum of Rs 1.5 lakh in a financial year in any one or more of the above instruments.
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What is section 80D?
Tax exemption is also available on mediclaim policies. You can buy health insurance for yourself, spouse and children and claim tax deduction on the premium amount. For this, a limit of Rs 25,000 is fixed in a financial year. In case of senior citizens, this limit increases to Rs 50,000. You can claim a deduction of Rs 50,000 annually by purchasing a mediclaim policy for your elderly parents. Deduction can also be claimed on expenditure up to Rs 5,000 per annum on health checkup.
Section 80CCD (1)
Under this, tax deduction is available on investment in NPS. A person of 18 to 65 years can take advantage of this. Let us know about it in detail.
A. The maximum deduction limit is fixed under this section. It can be up to 10 percent of your basic salary or up to 10 percent of gross income.
B. From the financial year 2017-18, this limit has been increased for the self-employed person. The limit is 20 percent of the gross total income. The maximum limit has been fixed at Rs 1.50 lakh in a financial year.
Another amendment was made in the 80CCD in the Union Budget 2015. This is called sub section (1B). Under this, a person can claim an additional deduction of Rs 50,000. It is for both the salaried and the self-employed.
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This increases the maximum deduction available under 80CCD to Rs 2,00,000. You have to note that the deduction under 80CCD(1B) is in addition to the deduction available under section 80CCD(1).
The benefit of this section of the Income Tax Act is available when the employer (company) contributes to the NPS of his employee. The amount contributed to the NPS of the employee under this section will be different from the contribution to EPF. This facility is only for the salaried person. This section allows a salaried person to claim deduction up to 10 per cent of his basic salary.
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According to the Income Tax Rules, an individual has the right to claim deduction on the employer’s contribution to his NPS account. The maximum deduction will be 10 percent of the salary. Up to 14 per cent deduction is allowed if you are a Central Government employee. In this year’s budget, the limit for state government employees has also been increased to 14 percent.
Let us now understand with an example that how much deduction a person working in the private sector can claim by investing in NPS. Suppose your annual basic salary is Rs 8 lakh and your company (employer) contributes Rs 80,000 to your Tier-1 NPS account. In such a situation, you can claim deduction of 10 percent of your basic salary i.e. Rs 80,000.
Tags: income tax, income tax law, Income Tax Planning, income tax return, Tax
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