Income tax act allows the taxpayers some deductions on the basis of some conditions and those deductions can be claimed by the assessee at the time of filing of income tax return.
To avail the proper benefit of these deductions one has to carefully design a program.
The deductions when approved or comply the instructions of the Income tax act itself shall be deducted from the Gross total income of the assessee and the tax calculation shall be done on the rest of income so called Total income with the help of tax slabs in force.
The most convenient ways to plan the tax liability are listed as follows:
1.Plan your tax through Home Loan
Taking home loan entitled the taxpayer to avail some amenities with respect to a tax deduction. Let’s bifurcate the Loan amount to understand the concept deeply
|1.Principal Amount to be paid||2. Interest thereon|
- Section 80C allows the deduction on the repayment of principal amount on the home loan taken. Under section 80C there are different policies and criteria according to which if you invest therein, you will get 150000 of deduction(max). Section 80C investment plans include PPF account, Tax saving Fixed deposits, National Saving certificate, Mutual funds etc. The deduction is available under this section on the completion of construction. This deduction will be allowed on payment basis.
Revocation of deduction – the section also clearly specifies that deduction so allowed will be deemed to be the income of the assessee if the property is transferred before the expiry of five years from the end of financial year in which possession has been obtained by him.
- Section 24 allows the deduction in respect of interest payable on the amount borrowed. The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs
- Section 80EE provides for additional deduction of Rs 50000 for interest on Home Loan.This incentive would be over and above the tax deduction of Rs. 2,00,000 under Section 24 and Rs. 1,50,000 under Section 80C.
|Particulars||Quantum of Deduction (Rs.)|
|Self Occupied Property||Non-Self Occupied Property|
|Section 24||2,00,000||No Limit|
2. Through investment in various funds, donations and charity set up by the government
To avail deduction under section 80G. The section allows deduction of the whole amount invested (in some cases). The funds include National illness assistance fund, National cultural fund, Fund for technology development and Application set up by the central govt, National foundation for communal Harmony, Indira Gandhi Memorial Fund, National Children’s fund.
3. Through educational Loan
If an assessee takes an educational loan for the higher education of himself or spouse or children or the student of whom he is a legal guardian, he can claim deduction under section 80E in respect of interest amount so repayable and not of the principal amount without having any maximum limit.
4. Claiming medical expenses
Income tax act through different provisions and sections allows for the deductions on the basis of expenditure incurred on medical expenses of the assessee, his spouse, relatives or as specified. The sections that include those deductions are 80D, 80DD, 80DDB.
Where 80D is in respect of medical insurance premium of self, spouse or children.
80DD is about the Medical treatment of handicapped dependants suffered from a disability or severe disability and 80DDB can be claimed on the treatment of specified diseases.
In order to encourage the general public to invest in the equity shares and mutual funds, the government has exempted the long term capital gain arising on the sale of equity shares.
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