One needs to plan from the beginning of the next financial year to take maximum benefit of the income tax deductions available.
Here are the new income tax slabs for taxpayers:
|General category||Senior citizens||Super senior citizens|
|(Up to 60 years of age)||(60-80 years)||(Above 80 years)|
|Up to Rs. 2.5 lakh||Nil||Up to Rs. 3 lakh||Nil||Up to Rs. 5 lakh||Nil|
|Rs. 2,50,001-Rs. 5 lakh||5%||Rs. 3,00,001-Rs. 5 lakh||5%||Rs. 5,00,001-Rs. 10 lakh||20%|
|Rs. 500,001-Rs. 10 lakh||20%||Rs. 5,00,001-Rs. 10 lakh||20%||Above Rs. 10 lakh||30%|
|Above Rs. 10 lakh||30%||Above Rs. 10 lakh||30%|
|# Surcharge of 10% for income between Rs. 50 lakh and Rs. 1 crore|
|# Surcharge of 15% for income above Rs. 1 crore|
|# Rebate of up to Rs. 2,500 for taxable salary up to Rs. 3.5 lakh|
|# Education and higher education cess of 3%|
House Rent Allowance under Section 10 (13A) of the Income Tax ActHouse Rent Allowance, commonly known as HRA, makes up a major chunk of a salaried individual’s total pay. HRA is partly exempted from tax. If you are staying in your own house or not paying any rent, your HRA will be completely taxable. However, those who stay with their parents can also claim HRA benefits by paying rent to their parents.
The amount which is allowed for exemption under HRA is calculated as minimum of:
1) Rent paid annually minus 10 per cent of basic salary plus dearness allowance
2) Actual HRA received
3) 40 per cent of basic and dearness allowance (50 per cent in case of metro cities)
Deductions under Section 80CSection 80C of the Income Tax Act provides various provisions under which an individual can get deduction benefits up to Rs. 1.5 lakh. Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Sukanya Samriddhi Account, National Savings Certificate and tax-saving fixed deposits are some of the investment options that offer benefits under Section 80C. The premium paid for life insurance plans, National Pension Scheme (NPS) and tax-saving mutual funds (ELSS) also qualify for deduction under Section 80C.
Further, one can claim tuition fees paid for up to two children, principal repayment on home loan, stamp duty and registration cost on the house bought as deduction under Section 80C.
Deductions under Section 80CCD(1B)Introduced in Budget 2015-16, Section 80CCD (1B) provides deduction up to Rs. 50,000 for investment in NPS Tier 1 account. This deduction is over and above the deduction available in Section 80C. An individual in 30 per cent tax bracket can save up to Rs. 15,450 of tax by investing Rs. 50,000 in NPS.
Deduction of interest on housing loan (Section 24B)Buying a house is among several other things an individual wants to do during his or her lifetime. The income tax rules also incentivise the same. Under Section 24B of the Income Tax Act, interest paid up toRs. 2 lakh on housing loan and up to Rs. 30,000 on home improvement loan is allowable as deduction from your taxable income.
The government has however cut down tax benefits borrowers enjoyed on properties let out on rent. As per current tax laws, for properties rented out, a borrower could deduct the entire interest paid on home loan after adjusting for the rental income. On the other hand, borrowers of self-occupied properties get Rs. 2 lakh deduction on interest repayment on home loan.
However, according to the proposed change in Budget 2017, on rented properties, the borrower can only claim deduction of up to Rs. 2 lakh per year after adjusting for the rental income. And the amount above Rs. 2 lakh can be carried forward for eight assessment years.
Since the interest component of home loan repaid in initial years is higher, experts say that the borrower may not be able to fully adjust the interest paid as deduction even in subsequent years.