As the Finance Ministry, led by Finance Minsiter Nirmala Sitharaman, is all set to present the Bugdet for the Financial Year 2020-21, the experts expect the Income Tax rates to be reduced.
While tax can be saved in various ways through investments, insurance or spending, not all of them are eligible for tax deductions. However, there are a bunch of sections under which you can save tax. While Section 80C and 80D are most popular to reduce your tax liability, one must also look at other sections of the Income Tax act to avail benefits of tax deduction.
Still wondering what are these tax deductions? Here's all you need to know as a taxpayer;
Section 80C allows a taxpayer to earn tax deduction benefits up to Rs. 1.5 lakh in a year. Under this section, you can invest in Employees Provident Fund, Public Provident Fund, Equity Linked Saving Schemes, Unit-Linked Insurance Plans, five-year fixed deposits, National Savings Certificates, to name a few. While the instruments are different from the eachother, one ought to invest depending on the requirement, risk appetite and returns expectation. You can also earn the benefits through your child's paid tution fees (only up to two children).
While Section 80C is popular for availing these benefits, Section 80D allows tax deduction benefits up to Rs. 25,000 and Rs 50,000 for senior citizens for health insurance premium paid for self or dependent family members that includes spouse and children. An additional deduction of Rs. 25,000 for health insurance premium paid for your non-senior citizen parents and up to Rs. 50,000 for senior citizen parents can also be availed.
Under Section 80TTA, a deduction up to Rs. 10,000 against interest received on your savings account can be availed. Under this, senior citizens can claim tax deduction benefits up to Rs. 50,000 against interest received on savings accounts and deposits in banks and post offices.
Section 80CCD (1B)
Under Section 80CCD (1B) includes Investment in the National Pension Scheme that allows you tax deductions up to Rs. 50,000. However, the deduction benefits under this section is over and the above tax deduction benefit allowed under Section 80C. Since NPS has low liquidity, taxpayers looking for a long-term commitment can invest in this.
As per the Finance Act 2019, first time homebuyers can claim additional tax exemptions of up to Rs.1.5 lakh as per Section 80EEA of the Income Tax Act.
Apart from the above mentioned sections, there are other sections which provide deductions under which you can claim these benefits. One can save tax under section 24 for the payment of home loan interest, under section 80G for donations to institutions (subject to a threshold limit) and section 80E for interest paid on educational loan.
As the clamour grows for more money into the pockets of consumers and households to boost consumption in the economy, the government has been discussing multiple options on cuts in personal income tax (PIT) in the forthcoming Union Budget.
The options being considered by the Finance Ministry include acting on suggestions of task force on direct tax simplification.
A tweaking of tax slabs is on also likely to be on the agenda and as part of the restructuring the government may raise the minimum exemption limit from the current Rs 2.5 lakh.
Among the measures being considered include increasing tax saving measures through various options. Sources say the government is also considering tax saving options through infrastructure bonds. Under this window, tax saving may be allowed via infra bonds of up to Rs 50,000 a year.