Income Tax Deductions: There are many ways to save income tax, if you invest and claim expenses wisely, then you can save tax up to 8 lakhs in a year. This requires a little planning.
Income Tax Deductions: The last date for filing income tax returns for the financial year 2020-21 has been extended till September 30, 2021, which was earlier July 31.
You can use this moratorium of two months for better tax planning. We are going to tell you about some tax deductions, which you can claim on your investments, earnings and other types of payments. Remember that this tax deduction is not for the new tax system.
1. Tax Deduction on Home Loan Interest
If you have taken a home loan, you get tax exemption on the interest paid under section 24(b) of Income Tax. According to Income Tax rules, you can get tax exemption on interest payment up to 2 lakhs. This tax exemption will be available only if the property is ‘self-occupied’.
2. Claim Principal Amount of Home Loan
You can avail tax exemption under section 80C on the principal payment of the home loan. However, this limit cannot exceed 1.5 lakhs. So if your remaining deductions under 80C are less than 1.5 lakhs, you can claim tax deduction by meeting this limit from the principal amount of the home loan.
3. LIC premium, PF, PPF, Pension Scheme
You get all the tax exemptions under Section 80C of Income Tax. For example, if you have taken a policy of LIC, then you can claim its premium. You can get tax exemption under 80C on the principal of provident fund, PPF, children’s tuition fees, national savings certificate, home loan. If you have purchased an annuity plan (pension plan) of LIC or any other insurance company under section 80CCC, then you can claim tax exemption. If you have bought a pension scheme of the Central Government under section 80 CCD (1), then you can claim it. Remember that taking all these together the tax exemption cannot exceed Rs 1.5 lakh.
4. Central Government Pension Scheme
If you invest in the National Payment System (NPS) pension scheme of the central government, then you get an additional exemption of Rs 50,000 under section 80 CCD (1B). This exemption is
on top of the tax exemption of Rs 1.5 lakh availed under section 80 (C). The contribution made by the employer to the pension scheme of the Central Government can be claimed under section 80 CCD2. It has two conditions. First, whether the employer is a Public Sector Unit (PSU), state government or any other, the deduction limit is 10 percent of the salary. If the employer is the Central Government, then the deduction limit will be 14% of the salary.
5. Health Insurance Premium
If you have taken any health insurance or get regular health checkup, then you can claim the premium under section 80D. Although its limit is fixed.
If you have taken a health insurance policy for yourself, spouse, children and parents, you can claim a premium of up to Rs 25,000. In this case the age of the parents is less than 60 years. If your parents are senior citizens, then the tax exemption limit will be Rs 50,000. Health checkup of Rs 5000 is also available in this. However, the tax deduction cannot exceed the premium of health insurance.
6. Treatment and Maintenance of Disabled Dependents
Expenses incurred on the treatment and maintenance of disabled dependents can be claimed. You can claim up to Rs 75,000 in a year. If the dependent person has a disability of 80 percent or more, then tax deduction of Rs 1.25 lakh can be claimed on medical expenses.
7. Tax exemption on payment of medical treatment
Deduction up to Rs 40,000 paid for treatment of specific illness of self or a dependent can be claimed under Section 80 DD (1B) of Income Tax.
If the person is a senior citizen, then this limit becomes Rs 1 lakh.
8. Tax Exemption on Education Loan Interest
Unlimited benefit of tax deduction on interest on education loan. The tax claim starts from the same year in which the loan repayment starts. Its benefit is available for the next 7 years. That is, you can take tax exemption for a total of 8 years. Tax exemption is available on education loan of two children simultaneously. If a loan of 25-25 lakhs is taken at 10% interest rate for two children, then the interest of Rs 5 lakh will have to be paid annually on a total of Rs 50 lakh. Tax exemption will be available on this entire amount.
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