Taxes are said to be as inevitable in life as death and it is our social responsibility to pay them. Taxes are burdensome for all taxpayers. Saving money in taxes is high priority in Financial planning exercise. There are legally permissible ways to reduce taxes and retain more of your hard-earned money in your savings kitty. There are various tax deductions available under the present Income tax act and you should take advantage of them.
Here are some tips to lower your tax bill:
Deductions under Section 80C
Section 80C tends to be most popular since you can get an exemption of up to Rs 1 lakh on contributions to a wide range of investments.
Broadly these deductions can be classified into two options:
- Investment Oriented &
- Non Investment Oriented
Investment Oriented options would comprise of the following.
- Premium paid on life insurance policies
- Payment for deferred annuities
- Contributions to provident funds
- Contributions to super-annuation funds
- Contributions to Unit Linked Insurance Plans
- Subscription to notified security
- Subscription to NSC
- Payments towards annuity plans of LIC or other insurers
- Subscription to notified mutual funds or UTI
- Subscription to Home Loan Account Scheme of National Housing Bank
- Investment in companies engaged in providing infrastructure facilities
- Term deposits (5 Years)
- Senior Citizens' Saving Scheme.
Non -Investment Oriented options would comprise of the following.
- Payments for acquisition of a residential house
- Tuition fees paid for education of children
Section 80C provides for an outright deduction on certain contributions/payments subject to following conditions:
- The contributions/payments must have been made during the relevant previous year
- The aggregate amount qualifying for deduction should not exceed Rs.1 Lakh.
Section 80 D - Medical insurance
If you take a medical insurance plan for yourself, your spouse, dependent parents and dependent children, you can under Section 80D claim deduction up to Rs 15,000 for the premium paid. A bonanza is available in the form of an additional deduction of Rs.15,000 towards medical insurance premium paid for your patents. For senior citizen taxpayers, the limit now has been enhanced to Rs.20,000. One condition being that the premium should be paid through a cheque.
In case you have paid any amount for the medical treatment of any disabled person dependent on you then again you are entitled to a deduction in the range of Rs. 40,000 to Rs. 75,000.
However, to claim any deduction under this section, certification by a medical authority is mandatory.
Interest component of home loan - Sec 24 (b)
Your home is not only your living shelter but also your tax shelter. You can claim a deduction for the interest paid on a housing loan, even on loans taken for repair, renewal or reconstruction of an existing property. The interest component of home loan is allowed as a deduction under the head 'income from house property' under Section 24(b) up to a limit of Rs 1.5 lakh a year in case of self-occupied house.
One condition being that your house must have been financed by a housing loan taken after April 1, 1999. It is also essential that the acquisition or the construction of the property is completed within three years from the end of the financial year in which the loan is taken.
Cash gifts
Cash gifts received from specified relatives are exempt from income tax, and there is no upper limit also. Similarly, cash gifts of any amount and from anyone received during your childbirth, marriage or any other specified event are totally tax-free.
However, if you receive a cash gift of more than Rs 50,000 from a friend, you are required to pay tax on the excess amount exceeding Rs 50,000.
Charity - Sec 80 G
You get a tax relief if you donate to institutions approved under Section 80G of the Income Tax Act. The rate of deduction is either 50 or 100 per cent, depending on the choice of fund.
There is no restriction on the amount of charity. However, donations must be made only to specified trusts. Also, only donations of up to 10 per cent of your total income qualify for such a deduction.
Education – Sec 80 E
In case you have availed of a loan for higher education of your child or your spouse, then you can claim a deduction of the interest paid on such loan.
Tax Liability for A.Y 2009 - 2010
| Taxable income slab (Rs.) | Rate (%) |
| Up to 1,50,000
| Nil |
| 1,50,001 - 3,00,000 | 10% |
| 3,00,001 - 5,00,000 | 20% |
| 5,00,001 upwards | 30% |
*A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs. 10,00,000.
Education cess is applicable @ 3 per cent on income tax, inclusive of surcharge if there is any.
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Thanks for the prcise information.
ReplyDeleteYour always welcome Mr.Sujay.
ReplyDelete