Submission of investment proof: All you need to know to minimise tax deduction

By: |
January 27, 2021 11:02 PM

To minimise the tax deduction, you should know the provisions of tax-saving investments under various sections of the Income Tax Act.

income tax, tax-saving investments, submission of investment proof, know to minimise tax deduction, tax deducted at source, TDS, 80C, PF, PPF, NPS, ELSS, ULIP, life insurance premium, Sukanya Samriddhi Yojana Account, health insurance premiumThe annual deduction limit u/s 80C is Rs 1.5 lakh together with section 80CCC and 80CCD(1).

Generally salaried individuals need to submit their investment proof by December end, so that tax deducted at source (TDS) may be adjusted – in case there are differences in proposed investments and actual investments – against the salaries of January, February and March.

While most of the employees may have submitted their investment proof, others may still do it by January end to allow the respective employers to adjust the TDS from the salaries of February and March.

To minimise the tax deduction, you should know the provisions of tax-saving investments under various sections of the Income Tax Act.

Following are the current deduction limits that you may avail under different sections:

80C

The annual deduction limit u/s 80C is Rs 1.5 lakh together with section 80CCC and 80CCD(1). Section 80C includes deduction in respect of life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc, while 80CCC contains deduction in respect of contribution to certain Pension Funds and 80CCD(1) contains deduction in respect of employee’s own contribution to National Pension System (NPS).

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The components u/s 80C are as follows:

  • Premium payments for Life Insurance, Unit Linked Insurance Plan (ULIP)
  • Payment in respect of non-commutable deferred annuity
  • Deposit in Public Provident Fund (PPF)
  • Investment in National Saving Certificates (NSC VIII Issue)
  • Interest on NSC purchased in previous years
  • Payment of Children Education Fee (Tuition Fee Only)
  • Investment in Approved Debentures/ Shares/ Mutual Funds
  • Investment in Fixed Deposit (FD) for 5 years or more
  • Repayment of Housing Loan (only Principal Amount)
  • Deposit in Sukanya Samriddhi Yojana Account

80CCD(1B)

Section 80CCD(1B) contains deduction up to Rs 50,000 in respect of voluntary contribution to Tier 1 Account of NPS. The deduction available is over and above the 80C limit of Rs 1.5 lakh.

80D

Section 80D contains deduction up to Rs 25,000 for individuals below 60 years of age in respect of premium paid for health insurance. It also contains deduction up to Rs 5,000 in respect of expenditure made on preventive health check up within the overall limit of Rs 25,000.

The limit for senior citizens u/s 80D is Rs 50,000, which also includes medical expenditure incurred on senior citizen family/parents. But to claim this exemption you must need to satisfy the following conditions:
a. Health insurance is not taken for such a person (Senior Citizen)
b. Payment is made by any mode other than cash

Expenditure up to Rs 5,000 is also allowed on preventive health checkup within the over limit of Rs 50,000.

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