As the Finance Ministry, led by Finance Minsiter Nirmala Sitharaman, is all set to present the Budget, 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.
"The Budget 2021 is going to be quite exciting to watch this year. Due to the coronavirus pandemic, the GoI has spent a lot of money in reviving the economy by providing different reliefs over time, which it must somehow recover. At the same time, the common man also expects some relief from the budget such as tax cuts, increase in deduction limits from 80C, decreased interest rates on loans or say a continued moratorium on existing loan payments," shared Shashank Udupa, Co- founder and CFO, Avalon Meta.
"As India hopes to recover from the COVID-19-induced economic crisis, all eyes are now on the Union Budget for the upcoming financial year. One expectation from the 2021 Budget is that it should be favourable to common tax payers. This year they were the one most affected, they are the ones with maximum EMIs, maximum responsibility and expenses on recurring basis but because of the pandemic they have seen the lowest days. Providing some relief to the common man is the need of the hour," said Raj Shamani, Founder of Shamani Industries.
The 'Halwa Ceremony' was held on Saturday at Finance Ministry to mark the beginning of printing of documents relating to Union Budget 2021-22. Union Finance Minister Nirmala Sitharaman and Union Minister of State for Finance & Corporate Affairs Anurag Thakur were present.
On Tuesday, Lok Sabha Speaker Om Birla said the first part of the Budget Session will start on January 29 and continue till February 15, and the second part of the session will be from March 8 to April 8.
Birla said Rajya Sabha will function from 9 am to 2 pm and Lok Sabha from 4 pm to 9 pm with Zero Hour and Question Hour.
This time there will be no printing of the Budget due to COVID-19 pandemic. There will also be no printing of economic survey which is going to be tabled in the Parliament on January 29.
The Union Budget will be presented by FM Sitharaman on February 1 at 11 am.