The Union Budget for 2019-20 will be presented on July 5, and the Modi government 2.0 is all set to make effective new income tax laws which will benefit many taxpayers in India.
There not many additional changes expected in taxation rules, as Modi government in the previous interim budget had introduced many tax measures that will help people get better tax rebates and limit their overall tax outgo. After the interim budget, the tax deduction limits were increased under income tax rules that will be effective from the financial year 2019-20. This will benefit the low and middle-income group the most.
Here is how one can claim deductions under the new income tax act rules:
Section 80(C): Taxpayers can claim up to Rs 1.50 lakh as deductions under Section 80C. Apart from various investment options eligible for availing Section 80C deduction, certain pay-outs and mandatory expenses are also covered under the same deduction. These include your child’s tuition fees, repayment of your home loan principal, your contribution to EPF or recognised provident fund, term insurance premiums and stamp duties and registration charges incurred on acquiring a home loan property. Your required investment amount would be the amount left after deducting the mandatory pay-outs from the Rs 1.50 lakh limit.
Section 80CCD(1b): The Finance Act 2015 inserted a new sub-section (1B) under Section 80CCD of the Income Tax Act to encourage investment in NPS by any individual by allowing an additional deduction of INR 50,000 over and above the INR 1.5 lakh available under Section 80CCE of the Act. However, the way this sub-section is drafted, there seems to be ambiguity as to under which scenario the additional INR 50,000 is eligible for deduction and experts appear divided on this. The existing Section 80CCE allows individuals to deduct up to INR 1.5 lakh from their gross total income (before calculating tax payable) if this INR 1.5 lakh is invested in specified avenues. Certain specified expenditures also qualify for deduction under this INR 1.5 lakh limit of section 80CCE. The additional deduction of INR 50,000 allowed for investment in NPS is over and above this limit of INR 1.5 lakh.
Section 80CCD(2): Under this section, a taxpayer can further claim deduction on the employers' contribution made to NPS account. According to rules, you can claim a maximum discount of 10 per cent of your basic salary plus dearness allowance.
Section 80(D): Section 80D provides for tax deduction from the total taxable income for the payment (by any mode other than cash) of medical insurance premium paid by an Individual or a HUF. This tax deduction is available over and above the deduction of Rs 1,50,000 under Sec. 80C.
Section 80(DD): Section 80DD deduction is available to a resident individual or a HUF and is available on: a. Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative
b. Payment or deposit to specified scheme for maintenance of handicapped dependent relative.
i. Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.
ii. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000.
To claim this deduction a certificate of disability is required from prescribed medical authority. From FY 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.
Section 80U: Under this section, an individual get a deduction in taxable income if he/she is suffering from certain specified diseases. A deduction of Rs.75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, one can claim a deduction of Rs 1,25,000.
Section 80DDB: Section 80DDB provides that if an individual or an HUF has incurred medical expenses for treatment of specified disease or ailment, such expense is allowed as deduction. Any expenditure incurred by an individual or HUF towards medical treatment or maintenance of a person with disability is allowed as a deduction to the extent of actual expenses but limited to Rs. 75,000.
Section 80E: Section 80E provides deduction in respect of interest on loan taken for higher education. The loan taken for higher education would include not only the expenses towards tuition fees for the course proposed to be undertaken but would also include expenses towards travel (applicable especially in case of courses outside India), expenses towards lodging and expenses towards study material and instruments like a laptop which may be mandatory for the course.
Section 80EE: Under this section, homebuyers can avail a deduction of Rs 50,000 on tax if they pay interest over and above the limit of Rs two lakh on an existing housing loan. The deduction under section 80EE is available only to home-owners (individuals) having only one house property on the date of sanction of the loan. The value of the property must be less than Rs 50 lakh and the home loan must be less than Rs 35 lakh. There is an additional deduction of Rs 50,000 available on your home loan interest on top of deduction of Rs 2 lakh (on interest component of home loan EMI) allowed under section 24.
Section 80G: Any kind of contributions made towards charity or welfare institutions also qualify for deduction under Section 80G of the Income Tax Act. The various donations specified in u/s 80G are eligible for deduction up to either 100% or 50% with or without restriction. From FY 2017-18 any donations made in cash exceeding Rs 2,000 will not be allowed as deduction. The donations above Rs 2000 should be made in any mode other than cash to qualify for 80G deduction.
Section 80TTA: Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an Individual and HUF. Under this section, a deduction up to Rs 10,000 is available to individuals below 60 years on interest earned from savings account held with the bank and/or post office. The maximum deduction is limited to Rs 10,000. If your interest income is less than Rs 10,000, the entire interest income will be your deduction. If your interest income is more than Rs 10,000, your deduction shall be limited to Rs 10,000.
Section 80TTB: This section only applies to senior citizens (above 60 years). Section 80TTB is a provision whereby a taxpayer who is a resident senior citizen, aged 60 years and above at any time during a Financial Year (FY), can claim a specified amount as a deduction from his gross total income for that FY. A deduction of lower than Rs 50,000 or an amount from a specified income is allowed from the gross total income.
New income tax rules from today, no escape just by paying penalty
Tightening the screw on tax evaders, the revised guidelines issued by the Income Tax (I-T) Department have made serious offences under black money and benami laws "generally" non-compoundable. This means that a person or entity would not be able to settle a case of tax evasion by just paying the tax demand, penalty and interest. The new guidelines will kick in from June 17, 2019 and apply to all cases for compounding received on or after this date.
Offences forming category 'A' include failure to pay tax deducted at source under Chapter XVII-B or tax payable under Section 115-0. Failure to pay the tax collected at source also falls under this category. The category 'B' offences include wilful attempt to evade tax, failure to produce accounts and documents, and false statement in verification. While the first category offences are open to compounding, offences such as wilful evasion of tax and removal or concealment or transfer or delivery of property to thwart tax recovery in a search operation are not to be compounded.
