Tax saving information: How to save lots of earnings tax by bills and never any funding?

Dr. Suresh Surana, Founder, RSM India

The provisions of the Income Tax Act, 1961 (hereinafter known as ‘the IT Act’) w.r.t. the outdated tax regime present the taxpayers with a chance to say deductions and/or exemptions by the use of incurring sure bills or ensuring investments. However, there are particular deductions/ exemptions which could be simply claimed by the taxpayer which don’t require any extra funding or with respect to such expenditure or contribution which is mostly incurred by the taxpayers. Few of such deductions/ exemptions are as follows:

(i) Standard Deduction u/s 16(ia)

Every salaried worker who’s in receipt of wage earnings is allowed deduction u/s 16(ia) of Rs. 50,000 or the quantity of wage whichever is much less.

(ii) Deduction of Interest u/s 80TTA and 80TTB

Most of the people park their extra funds with the banks within the type of deposits on which curiosity earnings accrues. A most deduction beneath part 80TTA of Rs. 10,000 could be claimed by any particular person taxpayers and HUFs with respect to curiosity from financial savings account. Further, in case of resident senior residents aged 60 years and above, not solely such deduction is enhanced to Rs. 50,000 u/s 80TTB however they will additionally declare curiosity on deposits (along with financial savings deposits) comparable to Fixed deposits.

(iii) Life Insurance Premium Paid u/s 80C

Life Insurance is an inevitable social safety profit incurred by people for self in addition to for his or her household. Individual taxpayers making life insurance coverage contributions for self, partner and kids can declare deduction u/s 80C with respect to such contributions topic to the general threshold restrict of Rs. 1,50,000. Further, it’s to be famous that for the aim of claiming such deduction, the life insurance coverage premium can’t exceed the next talked about limits:

ParticularsThreshold LimitPolicy acquired earlier than 1st April 201220% of precise capital sum assuredPolicy acquired between 1st April 2012 to thirty first March 201310% of precise capital sum assuredPolicy issued on or after 1st April 201310% of sum assured (In case of individuals with incapacity as per S. 80U or individuals affected by illness as per S. 80DDB, 15% of precise capital sum assured would apply)

(iv) Children’s Tuition Fees u/s 80C

Individual taxpayers paying any tuition charges to al to any college, faculty, faculty or different instructional establishment located inside India can declare deduction u/s 80C (topic to the general threshold restrict of Rs. 1,50,000) with respect to such charges paid for max 2 youngsters for his or her full time training goal.

(v) Mediclaim Premium Paid u/s 80D

The medical inflation and the pandemic has made folks realise the significance of Medical Insurance. Accordingly, mediclaim premium paid by a person in respect of medical insurance coverage or contribution to Central Government Health Scheme / notified scheme for self, partner, dependent youngsters or dad and mom could be claimed as deduction of upto Rs. 25,000 (Rs. 50,000 in case of senior citizen) u/s 80D of the IT Act.

The larger restrict of Rs. 50,000 can be relevant the place medical insurance coverage is purchased in respect of well being of any one that is a senior citizen. Also, such senior residents above the age of 60 years who are usually not lined by Health Insurance, can be allowed deduction of Rs. 50,000 in the direction of precise medical expenditure.

Further, deduction of ₹5,000 for any funds made in the direction of preventive well being check-ups shall be accessible throughout the aforementioned limits. It is pertinent to notice that funds for such bills shouldn’t be incurred in money. However, fee for preventive well being checkup could be incurred in money.

(vi) Deduction with respect to hire paid u/s 80GG

Generally, many people staying away from their residence cities for work associated or different functions find yourself paying hire. Those people receiving House hire allowance might declare exemption u/s 10(13A) of the IT Act (as mentioned intimately in response to Q2). However, these people who are usually not in receipt of home hire allowance however nonetheless making hire funds might avail deduction u/s 80GG of the IT for the least of the next quantities:

Ø Rs. 5000 per 30 days

Ø 25% of the adjusted whole earnings

Ø Actual hire in extra of 10% of Adjusted whole earnings

For the aim of computing such deduction, Adjusted whole earnings can be computed as Gross Total Income much less deduction u/c VIA (besides 80GG).

Deduction beneath this part would solely be accessible if the person taxpayer doesn’t personal residential lodging both in his title or within the title of partner or minor baby.

(vii) Leave journey Concession u/s 10(5)

Vacation is a typical phenomenon for many of the people. Every worker who’s in receipt of LTA can declare deduction in reference to expenditure incurred (for self and household constituting partner and kids, dad and mom, brothers and sisters who’re wholly or primarily depending on such particular person taxpayer) in the direction of travelling in India. The exemption of LTA could be availed for 2 journeys carried out in a block of 4 calendar years i.e. 2022-2025, as per the prescribed situations.

(viii) Repayment of Housing Loan

Owning a home is each indivdual’s dream and choosing housing loans is a typical possibility for buy of property. Individual taxpayers may declare curiosity on housing mortgage u/s 24(b). Such curiosity deduction is restricted to Rs. 2,00,000 based mostly on specified situations in case of Self occupied home property whereas the taxpayers might declare all the curiosity in case of a set free/ deemed to be set free property. Further, the taxpayers might declare deduction of the principal element of the compensation u/s 80C of the IT Act.

It is pertinent to notice that taxpayers choosing the proposed new tax regime might not be capable of declare any of the above deductions/ exemptions (besides the deduction with respect to Standard Salary deduction u/s 16(ia) of the IT Act.

Archit Gupta, Founder and CEO, Clear

If the individual is choosing the brand new tax regime within the FY 2023-24, in that case there won’t be any tax implication until the gross wage of ₹7.5 L, as the usual deduction has been launched within the new tax regime.

If nevertheless the individual is choosing the outdated tax regime then as an alternative of creating funding the individual can declare sure bills which would cut back the tax legal responsibility.

1. HRA : If the individual is staying in hire for employment functions and his employer is giving him allowance to satisfy the rental expenditure, then he can declare HRA based mostly on the figures offered as per the Income Tax Rules.

2. Interest on residence mortgage : If the individual has taken residence mortgage for a self occupied flat/ home then upto ₹2L he can declare as deduction type his whole earnings. This might be thought of as loss type the home property

3. Principal on the house mortgage : The principal element on the house mortgage could be claimed as deduction beneath part 80C as much as ₹1.5L

4. Registration charges paid for home : The registration prices for buying the home property could be claimed as deduction beneath part 80C

5. Interest on mortgage taken to buy EVs : In case the individual has bought a EV, the curiosity on the mortgage taken until 31/03/2023 could be deducted type whole earnings upto ₹1.5L.

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