It's that time of the year when you need to submit your investment proof at your office to save the tax deducted at source (TDS) by your employer from your salary.
It’s that time of the year when you need to submit your investment proof at your office to save the tax deducted at source (TDS) by your employer from your salary. If you fail to make your planned investments and submit the proof on time, pending tax payable would be deducted from your salary of subsequent months till March 2020.
The most common and popular section to avail the tax benefits is 80C, which includes Life Insurance Premium (LIP), payment in respect of non-commutable deferred annuity, deposits in (i) Public Provident Fund (PPF), (ii) Unit Linked Insurance Plan (ULIP), (iii) approved Debentures/ Shares/ Mutual Funds, (iv) Fixed Deposit for 5 years or more, (v) Sukanya Samridhi Yojana (SSY) Account and (vi) National Saving Certificates (NSC), as well as interest on NSC purchased in previous years, payment of Children Education Fee (Tuition Fee Only), repayment of Housing Loan (only Principal Amount), employee’s own contribution to EPF etc.
The current limit u/s 80C of the Income Tax Act is Rs 1.5 lakh, which also includes contribution to Pension Plans u/s 80CCC and employee’s own contribution to NPS u/s 80CCD(1).
Although 80C is the most popular and well known section to save tax, but presence of so many options make the limit of Rs 1.5 lakh quickly exhausted. So, to save more tax, investors look for other investment options to minimise tax outgo.
There are some options available to save tax on the basis of some expenses, like – u/s 80D, a person may avail benefits up to Rs 25,000 on premium paid on health insurance for self and family and same amount for premium paid for parents’ policy. In case of senior citizens, the limit is Rs 50,000. So, in case of a person, who is not a senior citizen, he/she may avail the benefits up to Rs 75,000 by paying premium on policies of self and family, as well as for senior citizen parents. Similarly, a senior citizen may avail deductions up to Rs 1 lakh by paying premium for self and family, as well as for his/her parents’ policy.
While, benefits up to Rs 5,000 each may be availed u/s 80D for expenses on preventive health checkup for self, family and parents within the above-mentioned limits, senior citizens may also avail the benefits on medical expenditure withing the overall limit of up to Rs 1 lakh.
Similarly, expenses made on treatment of handicapped dependents or on some specified diseases also qualify for deductions from taxable income under some other sections.
However, to save taxes through further investments in financial assets, there are limited options available before you. Apart from the 80C limit of Rs 1.5 lakh, benefits up to Rs 50,000 may be availed u/s 80CCD (1B) by making voluntary contribution to National Pension System (NPS) Tier-1 account or to Atal Pension Yojana (APY).
Although, there is a provision for new retail investors to invest up to Rs 50,000 in eligible securities under RGESS (Rajiv Gandhi Equity Savings Scheme), and avail additional tax benefit up to Rs 25,000 under Section 80CCG, but there is no scheme available now to avail the benefit.
So, apart from opportunity to avail benefits on interest paid on loans taken for higher education and purchase of physical assets, like – house property, electric vehicle etc, presently you may make voluntary contributions in NPS and/or APY to avail additional tax benefit up to Rs 50,000 over and above the 80C limit of Rs 1.5 lakh.