Happy New Year to all! Wish you all a prosperous new year. Let us be more prosperous by unlocking the full potential of deductions available in Chapter VIA of Income tax Act which helps you in saving the outflow of taxes. We just have 68 more days remaining in the financial year, this article is all about the possible tax savings that can be made in the coming days before the end of financial year. This article primarily focuses on the Chapter VI A deductions w.r.t Individual/Salaried Assessees. You can check whether you have utilized all the possible and applicable deductions in full and reaped the maximum benefits. If you find a tax benefit available for you and if you are planning to invest in it, it should be done on orbefore March 31, 2019 to avail the below mentioned benefits for current FY 2018-19 (AY 2019-20).
Please make a note that all the benefits mentioned below are available for the current FY 2018-19 i.e April 01, 2018 to March 31, 2019, only if it is paid between April 01, 2018 and March 31, 2019.
Basics:The Chapter VI A deductions are available against the gross total income of the tax representative.First let us understand how gross total income is arrived to calculate tax and the tax slabs for the current year.For Salaried Individuals only:Taxable Income from Salary* xxxx
*Enter details as per Part B of Form 16 provided by the employer(It is the number after the allowances like HRA and ProfessionalTax are reduced and the taxable salary number is arrived)
Taxable income from House Property* xxxx
*This number is arrived at after deducting the standard deduction andthe allowable interest portion of EMI paid against the part of the houseproperty which is occupied
Total Taxable Income xxxx Less: Chapter VI Deductions xxxx (The Topic that we are going to discuss)
Net Taxable Income xxxx
Tax Amount xxxx
Less: TDS xxxx
Balance Tax Payable xxxx
The Net Taxable Income is taxed based on the slab rates applicable for the FY 2018-19.
Chapter VIA deductionsIncome tax department allows deductions on the Total Taxable Income as specified in the Chapter VI-A of the Income Tax Act. Chapter VI A has many types of deductions under it, like 80C, 80D, 80G etc., This article primarily focuses on the Sections that are broadly applicable to the individuals/ salaried tax payers. The tax payers can make use of these deductions if its applicable to them. For them to be eligible to claim these deductions the below mentioned they should have spent/invested between April 01, 2018 and March 31, 2019.
The deductions discussed in the article are not the only deductions available under Chapter VIA, there are various other deductions under VIA, the sections are chosen with an objective to benefit the commoner and majority of the readers.
1. Section 80C
Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total income. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C. The tax payer will get a total deduction of 1,50,000 from all the 80C deductions put together.a) Life Insurance Premium deduction is allowed in respect of life insurance premium that you pay on your LIC policy but policy must be in the name of the tax payer, his/her spouse or any child of such individual.Do note that before making the payment towards the premium, first check with agent or read the policy description whether it is eligible for deduction for income tax purpose. Also the interest paid on late payment of insurance premium cannot be claimed under 80C.b) Provident Fund, this deduction will be available for 99% of the salaried employees reading this article. The provident fund you can claim deduction in respect of your* contribution towards your Statutory Provident Fund or Recognized Provident Fund Account.
If the tax payer has not opted for Provident fund but has invested in Public Provident Fund, then the same can be considered for the 80 C Deduction. The Tax payer can also additionally claim PPF even if he is claiming PF.*Provident fund in your pay slip represents the provident fund contributed by you and hence the same can be directly taken from the payslip for 80 C purposes.c) Children’s Tuition Fees You can claim deduction for the payment of tuition fees of your children to any university, college, school or other educational institution situated within India for the purpose of education. However, deduction would not be allowed for payment towards any development fees or donation or payment of similar nature. This deduction is allowed for maximum two children.Note: Take the fee slip provided by the School and consider the amount against Tuition fee and do not consider the total value of the fee slip provided by the school.d) Principal Repayment of Housing Loan You can claim the deduction of principal repayment of your housing loan taken for purchase or construction of residential house property. Deduction can also be availed in respect of stamp duty charges, registration fee and other expenses paid for purchase of your house. To make it simple the corresponding Principal portion of the interest from the EMI paid, that is claimed under the head Income from House Property is eligible for deduction here.
e) Sukanya Samriddhi SchemeIn lines with the Beti Bachao, Beti Padhao campaign, this scheme was launched on 22nd January, 2015 by Prime Minister Narendra Modi. You claim deduction under this scheme for any sum deposited by you in the Sukanya Samriddhi Account of your girl child or any girl child for whom you’re her legal guardian. The minimum limit of deposit under this account is Rs 1000 annually and maximum Rs 1,50,000. Interest earned and money withdrawals from this account are tax free.
f) Mutual Funds (Equity Linked Saving Scheme)You can claim deduction in respect of subscription to units of UTI or mutual funds specified u/s 10(23D) of Income Tax India, 1961.
g) Bank FDR’s (Known as 5 Year Tax Saving FDR’s) Almost everyone invests in Bank FDR’s but did you know that you can claim deduction for it too. Investment must be made in term deposit for a fixed period of 5 years or more with scheduled banks to avail the deduction. If the amount is withdrawn before the end of 5 years, then the amount will become taxable with interest and penalty.
h) Post Office Tax Saving FDR’s (Post Office Time Deposit Scheme) Similar to Bank FDR’s, 5 year FDRs of Post Offices are also eligible for deduction under section 80C.If you have paid excess taxes, by not considering any of the above while submitting the Investment Proof details to your HR, you can still claim deduction of the same under 80C, while filing your Income Tax Return.The above mentioned options are not the all the options available under 80C, I have highlighted only the options that is applicable to the majority of the readers and you can contact your Chartered Account to know about the other options available under 80C.
2. Section 80D: (Medical Health Insurance)
Medical health insurance is important to cover yourself from financial crisis in case of any medical emergency. This deduction is allowed in respect of Health Insurance premium paid by you or contribution made towards CGHS or payment made for preventive health checkup of yourself, your spouse, dependent children or dependent parents. However, there are certain limits for availing deduction under this section:
|Maximum Deduction allowed for Health Insurance Premium||
Total Deduction under 80D
|Yourself, spouse & Dependent Children||Parents|
|No family member is over 60 years of age||Up to Rs. 25,000||Up to Rs. 25,000||Rs. 50,000|
|Your parents are over 60 years of age and neither you nor your wife is more than 60 years.||Up to Rs. 25,000||Up to Rs. 30,000||Rs. 55,000|
|You or your wife has attained more than 60 years of age.||Up to Rs. 30,000||Up to Rs. 30,000||Rs. 60,000|
The above-mentioned limits include a limit of Rs. 5,000 for any expenditure made for the purpose of Preventive Health Checkup.If any medical expenses are incurred on a Super Senior Citizen (above 80 years of age), it will be considered a part of the limits mentioned above provided that no policy is taken for him/her.
3. Section 80E Education Loan: It is available on the interest component of an educational loan.
It starts from the year when an individual starts repaying the loan. However, it is to be noted that the deduction can be availed only for eight years, beginning from repayment from the first year. There is no limit in the amount claimed under this section.
4. Section 80EE – First time Home Buyers: This deduction is a boon for the first time home buyers.
The deduction allowed under this section is over and above the deduction u/s 24. The amount of deduction is maximum Rs 50,000 per financial year and shall be allowed until the loan is repaid. However, for availing benefit under this section you have to fulfill the below conditions:
- You are not the owner of any other house i.e. this is your 1st house
- Value of the property should be Rs 50 lakhs or less
- The amount of Loan shall be Rs 35 lakhs or less
- Loan has been sanctioned between 01.04.2016 to 31.03.2017
5. 80GG: Deduction where House rent is paid and HRA not received
You’re eligible for availing deduction if you don’t receive House Rent Allowance (HRA) from your employer or if you’re self-employed.However, 80GG deduction for FY 2018-19 would not be allowed in the following cases:
- If you, your spouse, minor child or HUF of which you’re a member owns any accommodation at the place where you’re employed or doing business.
- If you own any residential house at the place other than place of your residence, then such property should not be assessed as self-occupied property.
Deduction allowed is lower of the following amount:
- Rent paid minus 10% of your adjusted total income
- 5000/- per month
- 25% of your adjusted total income
Here, adjusted total income = Gross Total Income (From All Heads) – Long Term Capital Gain – Short Term Capital Gain – Deductions (except deduction under 80GG).
6. 80TTA: Deduction in respect of interest on deposits in Savings Account
Under this section, you can avail deduction in respect of income by the way of interest on deposits in Savings Bank Accounts of Banks, Co-Operatives Banks or Post Office. The quantum of deduction allowed under this section is Rs. 10,000 or the actual interest earned, whichever is lower.
7. 80TTB: Deduction in respect of interest from deposits held by Senior Citizens
Section 80TTB allows a deduction upto Rs 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases
8. 80G: DONATIONS
The deduction under section 80G for FY 2018-19 is available in respect of donations made by you towards certain specified funds, charitable institutions etc.If you have made contributions to any Trusts/Charitable Institutions that is eligible under 80G, then you are eligible to claim a deduction of 50% of the total funds contributed to such trusts.Interestingly during the current year, if you have contributed towards Kerala Floods against Kerala Chief Minister Relief Fund and Tamil Nadu Floods against Tamil Nadu Chief Minister Relief fund, the entire amount that your have contributed will be eligible for deduction under this section. Kindly note that if you paid to any other 80G Registered Trusts against the Relief and not the Chief Minister’s Fund, then you will be eligible for only 50% of the amount contributed and not 100%
9. Section 80U – Physical Disability: Deduction for Person suffering from Physical Disability
If an individual, is certified by the medical authority or a government doctor to be a person with disability, then he is allowed deduction of Rs. 75,000 under this section. In case the person is certified by the medical authority to be a person with severe disability, then the quantum of deduction allowed under this section will be Rs. 1, 25,000.
10. Section 80DD – Disabled Dependent: Deduction in respect of maintenance including medical treatment of a dependent with disability.
You can claim Sec 80DD deduction for AY 2018-19 in respect of a dependent person with a disability when you incur expenditure on their training, rehabilitation, medical treatment, payment made to LIC, Unit Trust of India or any other specified scheme or deposit on behalf of such dependent.The deduction is allowed from the following two amounts:
- Rs. 75,000 fixed, in case the dependent has 40% of more disability but less than 80%.
- Rs. 1, 25,000 fixed, in case the dependent has 80% or more disability.
- Dependent person includes your spouse, children, parents, brothers and sisters. In case of HUF, any member of HUF.
- Benefit under this section is available only if the dependent person has not claimed deduction u\s 80U.
- A certificate of disability is required from prescribed medical authority.
- This is a fixed deduction and not based on actual expenses.
11. Section 80DDB: Deduction in respect of medical treatment on specified disease
Deduction u/s 80DDB for FY 2018-19 can be availed by you in respect of payment for medical treatment of a specified disease or ailment (such as AIDS, cancer, hemophilia, chronic renal failure or other neurological diseases specified under Rule 11DD). Deduction under this section can be availed for yourself or dependent up to the amount actually paid or Rs. 40,000 (Rs. 60,000 in case of a senior citizen or Rs 80,000 in case of very senior citizen) whichever is less.
This deduction is subject to the following two conditions:a) You must mandatorily obtain a prescription for such medical treatment from the prescribed specialist.
b) The amount of deduction will be reduced by amount, if any `received, in respect of insurance or reimbursement by your employer for the treatment of the person concerned.
Dependent person includes your spouse, children, parents, brothers and sisters.
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