Seeking income tax exemption for FY19? click here to know

A tax-payer who has taken benefit under Section 80TTB cannot take tax benefit under Section 80TTA, because benefits under Section 80TTB and Section 80TTA are exclusive.

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As Union Finance Ministry in Budget 2018 has introduced several changes in regards to income tax filing, we tell you in detail what you should remember to claim deductions during Income Tax Return (ITR) filing.

Only a few weeks are left for the completion of FY18, and after that you have to file income tax for the financial year 2018-19 (FY19), we tell you about many benefits offered by the government under different sections of IT Act where you can claim deductions during Income Tax Return (ITR) filing.

Here is a list of sections that you should know about Income Tax Act for FY19.

Section 80C

Although this section remains the same since last budget announcement, yet there is a list of 14 instruments through which you can claim tax deductions.

These instruments include Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), payment towards children’s tuition fees, ELSS, National Pension System (NPS), Life Insurance policy premiums, deposits in the Sukanya Samriddhi Yojana, etc.

Under this section, any individual or a Hindu Undivided Family (HUF) can claim deductions up to Rs 1,50,000 for FY19.

Section 80CCD

An individual can claim deduction under this section for contribution to pension account. They are:

Employees contribution: If an individual has made deposits in his/her pension account, then maximum deduction is 10% of salary (in case of an employee) or 10% of gross total income (in case of self-employed) or Rs 1,50,000 whichever is less.

Contribution to NPS: A new section 80CCD (1B) has been inked - which allows an additional deduction of up to Rs 50,000 for deposits made by a taxpayer in their National Pension Scheme (NPS) account. Also similar benefit is available for Atal Pension Yojana.

While in case of employer’s contribution to NPS account, section CCD (2) allows additional deduction of up to 10% of the salary of an employee. It may be noted that there are no monetary ceiling on this deduction.

Section 80CCG

Although deduction under this Section has been withdrawn due to discontinuation of the Rajiv Gandhi Equity Saving Scheme (RGESS), some investors can still claim benefit under it.

RGESS was eliminated from April 1, 2017, thus, no deduction under Section 80CCG will be allowed from AY 2018-19. However, if an investor has invested in the RGESS scheme in FY 2016-17 (AY 2017-18), they can claim deduction under this Section until AY 2019-20.

Deduction is lower of 50% of the amount invested in equity shares or Rs 25,000 for three consecutive Assessment Years.

Section 80D

The government has proposed to increase the tax deduction benefit to Rs 50,000 for senior citizens for a cover of Rs 10 lakh.

An individual having health policy of senior citizen for a cover of Rs 10 lakhs may cost around Rs 35,000 to R 40,000 (Age range 61-64 Years) and it may go higher with a higher age group.

So, Rs 50,000 deduction benefit will provide a big benefit to elderly taxpayers.

While in case, you pay a Health Insurance premium on behalf of your parents, this section provides an additional deduction benefit of up to Rs 20,000. While for uninsured, super senior citizens (over 80 years old) medical expenses, up to Rs. 30,000, are allowed as deduction.

Section 80DDB

Deduction under this one is available for rehabilitation of handicapped dependent relative.

It has been proposed in Budget to increase the limit for treatment of critical illness of a specified disease to Rs 1 lakh for all senior citizens. Earlier, tax exemption of Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens was available.

Also, tax exemption of Rs 40,000 can be claimed for medical treatment of special ailments like cancer, AIDS, thalassaemia, etc. However, this one is allowed only for individuals below 60 years.

Section 80TTA

Under IT Act, Section 80TTA is titled as ‘Deduction in respect of interest on deposits in savings account’.

You can claim exemption on up to Rs 10,000 received as interest on your savings account deposits.

The savings account can be held in any of the financial institution like Bank, Cooperative society and Post office.

You can claim exemption on any number of savings accounts as long as the total amount you are seeking exemption on is less than Rs 10,000.

It may be noted that section 80TTA can be applied only in case of savings accounts and not on term deposits, fixed deposits or recurring deposits.

Considering that tax benefit is not applicable on interest earned through Fixed Deposits, recurring deposits or interest income on corporate bond, the Budget proposed tax benefit on them to Rs 50,000 from previous Rs 10,000 in a financial year for senior citizen.

Section 80GG

Such section is applicable for rent paid during the time when House Rent Allowance is not received. Also, the taxpayer, spouse or minor child should not own residential accommodation at the place of employment.

Going ahead, a taxpayer should not have self-occupied residential property in any other place.

Section 80G

Under IT Act, Section 80G is available for contributions made to certain relief funds and charitable institutions.

One can enjoy 100% tax deduction and are not subject to any qualification limit being met.

Schemes that qualify for 100% deduction are - National Defence Fund, Prime Minister’s National Relief Fund, The National Foundation for Communal Harmony, and National/State Blood Transfusion Council.

50% tax deduction can be claimed if donations are made under trusts like Prime Minister’s Drought Relief Fund, National Children’s Fund and Indira Gandhi Memorial Fund.

Section 80GGB

This one is allowed to Indian firms for amount invested to any political party or an electoral trust.

Moreover, deduction is available only if the donation made to a political party registered under Section 29A of the Representation of the People Act. Contribution is defined as per Section 293A of the Companies Act, 1956.

Section 80E

An eligible person can get tax benefits under section 80 (E) of the IT Act if you have taken a loan for higher studies for self, spouse, children or your legal ward.

However, tax deduction benefit is only applicable for the interest paid on the Education Loan and eliminating the principle amount.

Deduction for the interest on loan starts from the year in which an individual has started repaying the loan. The deduction is available only for 8 years.

It may be noted that Education Loan must be taken from a scheduled commercial bank or an eligible financial institution.

Section 56(2)

This one applies to taxes on gifts received from anyone other than blood relation.

If a gift is valued more than Rs 50,000, then an individual will have to pay taxes on full amount. While gifts received from blood relation is 100% tax free.

If you have received any gifts in the form of cash, cheque, etc, having value of Rs 50,000 or less, from anyone then you are not liable to pay any taxes.

Section 24(b)

On every interest paid on your home loan, you can claim a tax deduction under this section.

In case of self-occupied properties, a taxpayer can claim up to Rs 2,00,000 benefit under this section.

Standard Deduction

This replaces medical reimbursement and travel/conveyance allowance.

At present, you can get medical benefits reimbursed from employer to the extent of Rs 15,000. Conveyance allowance can be Rs 1,600 per month, effectively Rs 19,200 per annum.

This standard deduction of Rs 40,000 will replace the aforementioned benefits. The maximum tax benefit goes up from Rs 34,200 to Rs 40,000 per annum.

Section (80TTB)

A new section (80TTB) has been proposed. Under this section, interest income up to Rs 50,000 is exempt from tax. This benefit is applicable only to senior citizens.

The interest income can be on savings accounts, fixed deposits or recurring deposits. Such income shall be on deposits with banks, co-operative banks and post office.

Tax-payers, who are not senior citizens, can avail tax benefit of Rs 10,000 for interest income on savings bank account under Section 80TTA. There is no change for taxpayers less than 60 years of age.

It is mentioned here that a tax-payer who has taken benefit under Section 80TTB cannot take tax benefit under Section 80TTA as the benefits under Section 80TTB and Section 80TTA are exclusive.