The due date for filing the Income Tax return is not far. Tax filing is mandatory for all the individuals whose gross total income is above Rs 2.5 lakh in a financial year. The Income Tax Act allows deductions under various sections to plan your tax-incidence. As individuals, the awareness of these deductions comes in handy in order to reduce the tax liability. These deductions are mainly given on account of your insurance policies to medical expenses.
If you have not been filing your income tax return and seeing your money being transferred to the taxman’s vaults in the form of tax deducted at source, then beware and be aware. You get the benefit of tax refund only when you file your income tax return. Also, your annual tax incidence can be nil if you deploy these tax deductive instruments to the fullest.
The important tax deductions allowed under the Income Tax Act to reduce your tax liability are:
Deduction U/s 80G
If you have made donations to certain funds and institutions established for “charitable purposes” then you can claim a deduction of 50% of the amount donated. However, this deduction is not available if money is donated to a wholly religious trust. Moreover, deduction above Rs 2000 can be provided if the sum is paid by any mode other than cash. It has been done to curb the movement of unaccountable money.
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Deduction U/s 80C
Under this section, you are allowed a total deduction of Rs 1.5 lakh paid towards life insurance premium, Public Provident Fund, tax-saving FD, National Saving Certificate, Equity Linked Saving Schemes, National Pension Schemes, term insurance, ULIPs etc. Moreover, a deduction is allowed to pay a premium towards the life insurance of spouse and children.
Apart from this, one can also claim tax deduction benefits against expenses like tuition fees, home loan principal repayment, statutory expenses like stamp duty and registration fee for buying a house etc. The total limit is Rs 1.5 lakh for a financial year.
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Deduction U/s 80CCG
If you are a new retail investor and a resident individual, then you can avail the tax-benefit of investment made under the notified equity saving scheme. The Rajiv Gandhi Equity Saving Scheme is one such scheme. However, your gross total income shall not exceed Rs 12 lakh and investment shall be locked for a period of 3 years. The deduction limit is 50% of the amount invested in equity shares which are restricted to Rs 25,000 in a year.
Deduction U/s 80D
For premiums paid towards health insurance policies and expenditure on preventive health check-ups, the deduction is allowed till Rs 25,000. For citizens above 60 years of age, the deduction is allowed till Rs 30,000. Moreover, it includes deductions towards the premium paid for the spouse, dependent children and parents (dependent or otherwise). Moreover, one can claim a deduction of Rs 30,000 for the medical expenditure on the health of a super senior citizen (if mediclaim insurance is not taken). The payment should be made by any mode apart from cash and preventive health check-up can be made by cash.
Deduction U/s 24B
Under this section, one can claim tax deductions towards interest paid on a home loan. The limit is Rs 200,000 per annum.
Deduction U/s 80E
You can avail tax benefits for education loan taken from approved banks or financial institutions. You get tax deduction benefits against interest paid on the education loan. There is no upper limit for claiming deduction under 80 E.
Deduction U/s 80EE
It is allowed for interest paid on loan taken for the acquisition of a residential property. A deduction is available even if the property is under construction. The amount of loan sanctioned shall not exceed Rs 35 lakh and the purchase price of the house does not exceed Rs 50 lakh. The extent of deduction is interest on a loan or Rs 50,000, whichever is less.