Let’s say you have taxable income in the range of Rs 6-11 Lakhs. There are tax deductions which can reduce taxable income to just Rs 5 Lakhs.
Piyush Goyal in the Interim Budget 2019 proposed a rebate under Section 87A. The limit of tax rebate under Section 87A has been increased to Rs 12,500. Those with income up to Rs 5 Lakhs don’t pay tax.
This means those with taxable income up to Rs 5 Lakhs get full tax rebate under Section 87A of the Income Tax Act. This is great for the lower and middle-income group. All citizens, whose taxable income is close to the magic mark of Rs 5 Lakhs, would use eligible tax deductions to bring gross taxable salary to Rs 5 Lakhs.
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You first calculate gross income by adding income from all sources. You then use tax exemptions (HRA, LTA and so on) and tax deductions which are subtracted from this figure to get taxable income. Your taxable income decides if you can avail the 100% tax rebate and pay Zero taxes. If you can bring taxable income to Rs 5 Lakhs, use the rebate and pay Zero taxes.
If your gross total income is around Rs 6 to Rs 11 Lakhs, claim deductions and reduce net taxable income to Rs 5 Lakhs.
You can avail tax deductions up to Rs 1.5 Lakhs a year, under Section 80C of the income tax act. This is a collective deduction up to Rs 1.5 Lakhs a year.
Investments in PPF, employee contribution to EPF, ELSS, Post Office Time Deposit, 5 Year Tax Saver FD, NSC, Sukanya Samriddhi Yojana enjoy Section 80C deductions. Premiums paid on life insurance plans, Principal paid on home loan, Tuition fees paid by parent towards educating his/her child enjoy Section 80C benefits.
Section 80CCD(1B): You can claim additional deduction up to Rs 50,000 a year by investing in NPS. Investing in tax saving instruments which enjoy Section 80C and Section 80CCD(1B) results in tax saving up to Rs 2 Lakhs in a financial year.
Section 80CCD(2): You can claim tax deduction on employer contribution to NPS. You get maximum deduction of 10% of basic salary + dearness allowance.
Section 80D: You get this deduction on health insurance premiums paid for self + family, up to Rs 25,000 a year. (This is for yourself + spouse + dependent children). If parents are senior citizens (above 60 years), you get tax deduction up to Rs 50,000 a year on premiums paid towards their health insurance plans. You can avail a maximum deduction up to Rs 75,000 a year under Section 80D for health insurance premiums paid for self + spouse+ dependent children + senior citizen parents.
Section 80DD: You get this deduction on expenditure incurred for a differently-abled dependent, who depends on you for support and maintenance. You get deduction up to Rs 75,000 a year if disability is between 40% to 80%. If the disability is more than 80%, the deduction limit gets raised to Rs 1,25,000 a year under Section 80DD.
Section 80DDB: This is for expenditure incurred for yourself or dependents for medical treatment of certain diseases. Some of the diseases covered are Dementia, Parkinson’s Disease, Renal Failure, Malignant Cancer, Hematological Disorders, Hemophilia and others.
Age of person who avails medical treatment
Amount of Deduction
Age less than 60 years
Rs 40,000 or actual expenses whichever is less
Age of 60 years and above
Rs 1,00,000 or actual expenses whichever is less
Section 80E: Interest paid on education loan for self + spouse + kids is tax deductible under Section 80E. The deduction can be claimed from year repayment starts and not from the year the loan was availed. The deduction is availed for a maximum of 8 years or till interest is paid, whichever is earlier.
Section 80EE: You get a tax benefit up to Rs 50,000 a year on interest paid for home loan. This is over and above the Rs 2 Lakh limit a year on home loan interest under Section 24. These conditions must be met:
Section 80G: Contributions made to certain notified relief funds and charitable institutions qualify for Section 80C deductions. Deductions may be 50% or 100% of the donation.
To get this deduction show receipt containing name, address, PAN, registration number of trust. The name of the donor and the donated amount must be mentioned.
Cash donations must not exceed Rs 2,000 to get tax deduction.
Section 80GG: If you are staying on rent and don’t get HRA (House Rent Allowance), claim deduction under Section 80GG. To get this:
The deduction available is lower of:
Section 80U: You get a deduction under Section 80U on suffering from specified diseases like blindness, low vision, locomotor disability, hearing impairment, mental illness among others. The amount of deduction is same as Section 80DD.
Section 80TTA: You get this deduction up to Rs 10,000 a year on being below 60 years on interest earned from SB Accounts with bank and post office. This deduction is not available on interest from FDs, RDs or any other time deposits.
Section 80TTB: Senior citizens get a deduction up to Rs 50,000 a year on interest earned from bank and post office deposits. This is interest earned from SB accounts, FDs, RDs and post office schemes.
So use the tax deductions to reduce taxable salary to Rs 5 Lakhs. Use the Section 87A income tax rebate of Rs 12,500 and pay zero tax.
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