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Income Tax  rules which offer tax rebate and deductions to individuals

Income Tax rules which offer tax rebate and deductions to individuals


[This post explains about tax rebates available to individuals under sections 80C, 80CCC,80CCD (1A), 80CCD(1B),80CCE,80D,80 DD,80DDB, 80E,80EE, 80EEE,80G,80U, 80TTA,80 TTB, 87A,10(13A) and section 24 of Income Tax  Act 1961 which offer tax rebate and deductions to individuals]

1). Section 80 C:      Individuals are eligible for the tax rebate on their investments u/s 80 (C) of IT act to the maximum limit of Rs. 150000.00 (Rupees one lakh and fifty thousand) in a financial year (applicable for FY 2015-2016). Contribution to EPF, NPS, PPF, Senior Citizen Savings Scheme,investments in NSC,/ Equity Linked Saving Schemes (ELSS), Unit Linked Insurance Policies (ULIPs), Sukanya Samriddhi Scheme, Tax Saving term deposits of banks, premium paid on Life Insurance policy, tuition fee for maximum two children (fees for private tuition/ coaching classes are not eligible) and repayment of Housing Loan,  are the investments eligible for tax rebate  under Sec.80 C of IT act.

2).Section 80CCC: Contribution to certain pension funds like Annuity plan of LIC and other insurers.

3).Section 80 CCD (1A): The deduction under section CCD (1A) is available to both salaried and non-salaried individuals who contribute NPS scheme to the extent of Rs.150000/- (Rupees one lakh and fifty thousand). However, the maximum amount allowed as deduction is 10% of salary in a financial year and in the case of non- salaried individuals 10% of Gross total income in a financial year.

4). Section 80 CCD (1B): Deduction towards contribution to New Pension Scheme by the employee. In the budget 2015, a contribution of Rs.50000/- to NPS qualifies for tax rebate in addition to Rs.150000/- u/s.80CCE.

5). Section 80CCE: Total limit of deduction eligible u/s -80C, u/s 80CCC   80 CCD (1) is Rs.150000/-(Rupees one lakh and fifty). In the budget 2015, an additional rebate of Rs.50000/- allowed for the contribution to NPS (u/s. 80CCD (1B) announced by the Finance Minister. Hence total limit under 80CCE for the FY 2015-16 is Rs.200000/-.

6). Section 80D:       Tax rebate under Medical Insurance for self and children: deduction up to 25000.00 (or 30000.00 in case the insurer or his/her spouse is above 60 years.) and additional deductions of Rs.25000/- on medical insurance of parents (or Rs.30000/- in case parent/s is above 60 years). The amount spent on preventive health check-up (maximum of Rs.5000/-.) is subsumed under this limit.

Now as per Budget 2018, from  FY 2018-’19 onwards Senior Citizens ( 60 years and above ) can also claim medical expenses incurred under sec 80 D with in overall ceiling of rs 50,000/- hence apart from claiming the exemption for medical insurance premium paid, Senior citizens can claim medical expenditure also up to the overall ceiling of Rs.50000/- (including expenditure on health insurance premium and preventive medical check up).

7).Section 80 DD: Disability related tax benefit in case of the dependent spouse, child, parent or sibling who is disabled. A deduction of Rs.75000/- for partial disability and Rs.125000/- for severe disability is allowed in the FY 2015-16.  The full amount of deduction will be allowed, without insisting bills/insurance premium paid by the income tax office.[For conditions for assesment of partial or full disability, read paragrph under  sec. 80 U]

8). Section 80DDB:  Tax rebate on medical treatment expenditure for treatment of specified diseases like malignant cancer, or AIDS for self and dependents, the deduction allowed up to Rs.40000/-(Rs.60000/- if the patient is above 60 years).

Now as per Budget 2018, from  FY 2018-’19 onwards increase in deduction limit for medical expenditure for certain critical illness increased to Rs.1 lakh to for all senior citizens  of above 60 years under section 80 DDB. (which is at present Rs.60000/- for senior citizen & Rs.80000/-for very senior citizen).

9). Section 80E: An individual can claim income tax deduction for interest paid on education loan availed for self, spouse or his/her children u/s 80E of IT Act. The guardian appointed by the Court for a minor student is also eligible for tax deduction under the same section. One more benefit is that no upper limit for claiming deduction either on the amount of interest paid or rate of interest paid. The deduction can be claimed up to 8 years or closure of the loan whichever is earlier.If the interest is paid during the moratorium period, the time limit of 8 years begins from the date of the first repayment of interest on the loan. It is important to note that the tax benefit is restricted for education loan availed from the bank, notified financial or charitable institutions. In the other words, the education loan availed from the employer, family and friends does not come u/s 80E. Education loan availed for studies abroad is also eligible for tax deduction u/s 80E.

10).Section 80 EE: An additional exemption of Rs.50000/- per annum towards interest paid by the first time house buyers with effect from April 1, 2016, available u/s.80EE. The Housing loans up to Rs.35 lakh sanctioned by a bank in the financial year 2016-17 and the value of the property purchased under the loan is below Rs.50 lakh is eligible for the deduction. (Announced by the Finance Minister in his budget speech on February 29, 2016).

11).Section 80EEE: First time home buyers (the person who does not already own a house property in his name),   who has availed a housing loan of Rs.25 lakhs or below on or after 01.04.2013, can claim additional tax deduction of Rs.100000.00 (Rupees one lakh) on interest paid on that loan under section 80EEE subject to condition that the value of residential property should not exceed Rs.40 lakh (Rupees forty lakh). If the interest paid is less than Rs.100000.00 (one lakh), in the first year, the unclaimed deduction can be utilised in the subsequent year.(It is important to note that a deduction up to Rs.200000.00 (Rupees two lakh) on taxable income separately allowed under section 24.

12). Section 80G: Tax rebate can be claimed on specific donations to make prescribed funds and institutions. Tax benefit u/s 80G is eligible for the amount of donation within 10% of gross income. Donation in excess of 10% gross income in a financial year is not eligible for tax exemption. It is essential to make cash or cheque payment towards the donation to be eligible for tax exemption.

13).Section 80GG: The individual tax assessees who do not get House Rent Allowance from their employers were eligible for the rent paid on their house up to a maximum limit of Rs.2000/- per month (Rs.24000/-per annum). With effect from April 1, 2016, the above limit of deduction allowed is increased from Rs.24000/- p.a to Rs.60000/- p.a.

14). Section 80 U:    Disability related tax benefit to an individual: A deduction of Rs.75000/- for partial disability and Rs.125000/- for severe disability is allowed in the FY 2015-16.  The full amount of deduction will be allowed irrespective of the amounts of expenses incurred or insurance premium paid. An individual suffering from disability himself gets tax benefit under Section 80U, while an individual gets tax benefits under Section 80DD if any dependent family member of the individual is suffering from a disability.

[Every individual claiming deduction u/s 80DD or 80U shall produce a copy of medical certificate issued by the appropriate authority in the form and manner as may be prescribed along with the return of income u/s.139 of IT act. Where the condition of disability requires the reassessment of its extent after a period is stipulated in the certificate, deductions are allowed after the expiry period mentioned in the certificate only after the new certificate is obtained. The disabled means above 40% of disabilities to a person ( above 80% is considered as severe disability)  due to diseases like blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness, Autism, cerebral palsy etc.]

15).Section 80 TTA: Savings Bank interest up to Rs.10000.00 (Rupees Ten Thousand) is exempted from tax under Section 80TTA. 14).

16) Section 80 TTB:   From Financial year 2018-19, Senior citizens who have received deposit interest (including SB and  Recurring Deposits interest)  up to Rs.50000/- in a finacial year are exempted from tax under Sec.80TTB. However, Senior Citizens  whose aggregate annual deposit interest income exceeds Rs 50,000/- need to pay Income tax only for deposit interest income over and above Rs 50,000/-. Further, aggregate annual deposit interest income upto Rs 50,000/- for Senior Citizens is also exempted from TDS and they need not submit form 15 H for the annual deposit interest income up to  Rs 50,000/-.With the introduction of Sec 80 TTB, Sec 80 TTA will not be applicable to Senior Citizens –ie SB interest exemption of Rs 10,000/-  is not separately available  to  senior citizens. Exemption under Section 80 TTA is available to others who are not Senior r Citizens.

A). Actual House Rent received from the employer

B). Actual House rent paid to the landlord minus 10% of basic salary*

C). 50% of employee’s basic salary if he/she leaves in Metro cities or 40%of basic salary* in non-metro areas.

 *Basic Salary is inclusive of DA (wherever commission received by the employee on the basis of fixed percentage of turnover achieved by the employee that income also to be included in basic salary).

The deduction will be available only for the period of occupying the rented house, not for the entire year.  At least two rent receipts to be produced as evidence of rent- paid, one rent receipt at the beginning of the financial year and another one receipt at the end of the financial year. The rent paid receipts should duly on the revenue stamp by the landlord. People who pay rent less than Rs.3000/-per month need not produce rent receipt.Section 87(A)

17). Section 87(A) :ITax Credit of 5% of taxable income. (Maximum of Rs. 2500/-) u/s.87A up to the taxable income of Rs.3.50 lakh.

Previously (for the FY 2016-17) an assessee whose taxable income is less than Rs.5 lakh was eligible for tax credit of 10% of taxable income. (Maximum of Rs. 5000/-) u/s.87A

18).Section 24:         In addition to the rebate on repayment of housing loan principal amount under section 80 C, the interest portion paid on housing loan offers a deduction up to Rs.200000.00 (Rupees two lakh) on taxable income separately under section 24.

If the house is not self-occupied:  The entire amount of interest paid on housing loan is eligible for deduction under section 24 for the FY 2016-17. For the year 2017-18, claim under this head is restricted to Rs.2 lakh.

The Method of computation of Income/Loss from House property under Sec 24(If the house is not self-occupied):

In the case of non-self occupied property, the interest paid is reduced from the rent received for computation of Income from House Property. In some cases, it may happen that the Interest paid is more than the Rent earned which will result in Loss from House Property. This Loss is allowed to be set-off with Income from any other head.
Net Annual Value (Actual rent or expected rent whichever is higher) minus [Muncipal tax and local taxes paid + Statutory deduction @30% + Interest on borrowed capital]= Income chargeable under head house property.

Update on budget 2017:

 From the financial Year 2017-18 onwards, loss of a maximum of Rs. 2 Lakhs only is allowed to be set-off under section 24 even for the house which is not self-occupied.
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Disclaimer: The sections of income tax rules illustrated above are for general information based on current tax legislation in India. The author is an ex-banker and not a tax professional. It is possible that any mistake, errors, ambiguity, inconsistency, discrepancy or doubts might have inadvertently crept up in those illustrations. Such mistakes or errors noticed by anyone may please be brought to the notice of the system admin or the author for the rectification. For clarifications or interpretations, if any, the readers are suggested to cross-check all the facts with their tax consultants and be guided with the original circulars or notifications issued by the Income Tax Department.It is hereby notified that the author or anyone related to this website can be held responsible for any decision taken and/or decision made on account of above article. It is further notified that no one connected directly or indirectly to this website is responsible for any damage or loss or action of any kind, in any manner, therefrom.

(13) Comments

  1. DADLANI ASHOK

    Can you please guide me how to fill in individual ITR forms on line by practical lessons without any obligation.I am retired Bank Sr.Manager .I want to save C.A 's fees.

    1. Surendra NaikSurendra Naik - Post author

      You can take the help of Tax Return Preparer (TRPs). First 3 years of filing of IT-Returns, no fee to be charged to the Assesse. The charges will be paid by the Government to the TRP. After 3 years the maximum amount to be charged by TRP is INR 250 per Income Tax Return per A.Y. You may visit the website www.trpscheme.com. Once you visit this site you will get to know the approved list of Tax Return Preparers of your locality. In the meantime you can learn and file the return yourself as it is easy and simple. You can file tax returns yourself directly with the income-tax department. However, as per income tax rules, an individual assessee can file physical returns only if her annual income was less than Rs.5 lakh in the previous year and there is no refund claim. At the same time, “such a taxpayer should not have claimed any tax relief for taxes paid abroad, and should not have assets or income located abroad,” The taxpayer should take a stamped and numbered acknowledgment when the return is filed physically.

  2. Sushil Ojha

    Item no.17 Section 87(A) Is it correct that tax credit amount has been reduced to ₹2500 as well as prescribed income limit reduced to ₹350000

    1. Surendra NaikSurendra Naik - Post author

      In the last budget (2017)the Finance Minister has provided a maximum Rebate of Rs. 2,500 under Section 87A.Your Total Income Less Deductions (under Section 80) is equal to or less than Rs 3,50,000.

  3. Chandra Bhushan Tripathi

    Sir, I am getting disability pension as armed forces pensioner. Is this disability pension examited from income under Income tax Act. Please reply and clerify.

    1. Surendra NaikSurendra Naik - Post author

      Every individual claiming deduction u/s 80DD or 80U shall produce a copy of medical certificate issued by the appropriate authority in the form and manner as may be prescribed along with the return of income u/s.139 of IT act. Where the condition of disability requires the reassessment of its extent after a period is stipulated in the certificate, deductions are allowed after the expiry period mentioned in the certificate only after the new certificate is obtained. The disabled means above 40% of disabilities to a person ( above 80% is considered as severe disability) due to diseases like blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness, Autism, cerebral palsy etc. 1

  4. Ashish Sharma

    I have purchased a house in which i have paid 238000/- stamp duty & 20000/- registration fees. Should i eligible for tax rebate under 80 c?

  5. Manoj Kumar

    Sir i am govt employee I filled my itr of 17-18 on dt 25th July 17 and e-verified the same by net banking in which my refund is showing of amt approx 6200/- but till Dt it is in e-verified status and not processed nor the refund is credited and also no intimation received on my registered email. Sir what are the cause may be plz suggest

    1. Surendra NaikSurendra Naik - Post author

      In my case, they have directly credited the refund amount to my SB account. Please check your account, if not credited, contact ITO personally and ask for the reason for non payment.

    2. Gurbachan Singh Marwaha

      Unless you receive a notice for selective scruitiny of you ITR before the end of FY 2017-18 ITRProcessed status will be displayed in the status colum.wait till end of the year thereafter return is unlikely to be taken up for scruitiny.Goodluck

  6. Pradeep Yadav

    Sir. Good evening. I wish to know that quarterly interest paid on SBI 10 years Senior Citizen Saving Scheme is eligible under 80 TTB for IT rebate upto 50000 from FY 2017 - 2018. Thanks. pkyadav_56@yahoo.com

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