There are many options available for tax saving. Of these, Section 80C and 80D of the Income Tax Act, 1961 are used the most.
Have you made tax saving investments? You can invest for tax savings till March 31. The new financial year will start from 1st April. So it would be a good idea to check your tax saving investments once. If there is some scope of tax savings left, then it has to be done before March 31.
There are many options available for tax saving. Of these, Section 80C and 80D of the Income Tax Act, 1961 are used the most. We will tell you in detail about both these sections as well as the other section of Tax Savings.
What is section 80C?
Under this section, you can claim deduction up to Rs 1.5 lakh in a financial year. Life Insurance, Tax Saving FD in Bank, National Pension Scheme, PPF, NSC, Sukanya Samriddhi Yojana, ELSS come under this section. Under this comes two more things. First, school or college fees for up to two children. Second, the principal’s share of the home loan. You can claim tax deduction by investing a maximum of Rs 1.5 lakh in a financial year in any one or more of the above instruments.
What is section 80D?
Tax exemption is also available on mediclaim policies. You can buy health insurance for yourself, spouse and children and claim tax deduction on the premium amount. For this, a limit of Rs 25,000 is fixed in a financial year. In case of senior citizens, this limit increases to Rs 50,000. You can claim a deduction of Rs 50,000 annually by purchasing a mediclaim policy for your elderly parents. Deduction can also be claimed on expenditure up to Rs 5,000 per annum on health check-up.
Section 80CCD (1)
Under this, tax deduction is available on investment in NPS. A person of 18 to 65 years can take advantage of this. Let us know about it in detail.
A. The maximum deduction limit is fixed under this section. This can be as much as 10 per cent of your basic salary or up to 10 per cent of your gross income.
B. From the financial year 2017-18, this limit has been increased for the self-employed person. The limit is 20% of the gross total income. The maximum limit for a financial year has been fixed at Rs 1.50 lakh.
80 ccd (1b)
Another amendment was made in the 80CCD in the Union Budget 2015. This is called sub-section (1B). Under this, a person can claim an additional deduction of Rs 50,000. It is for both the salaried and the self-employed.
This increases the maximum deduction available under 80CCD to Rs 2,00,000. You have to note that the deduction under 80CCD(1B) is in addition to the deduction available under section 80CCD(1).
Section 80CCD(2)
The benefit of this section of the Income Tax Act is available when the employer (company) contributes to the NPS of his employee. The amount contributed to the NPS of the employee under this section will be different from the contribution to EPF. This facility is only for the salaried person. This section allows a salaried person to claim deduction up to 10 per cent of his basic salary.
Let us know how section 80CCD helps you save tax
According to the Income Tax Rules, an individual has the right to claim deduction on the employer’s contribution to his NPS account. The maximum deduction will be 10% of the salary. Up to 14 per cent deduction is allowed if you are a Central Government employee. In this year’s budget, the limit has also been increased to 14 per cent for state government employees.
Let us now understand with an example how much deduction a person working in the private sector can claim by investing in NPS:
Suppose your annual basic salary is Rs 8 lakh and your company (employer) contributes Rs 80,000 to your Tier-1 NPS account. In such a situation, you can claim a deduction of 10 percent of your basic salary i.e. Rs 80,000.
