July 31st - For the last couple of years, taxpaying Indians have been haunted by the date. The IT Dept is as strict as ever about filing our taxes within that deadline.
We hardly manage to file our taxes putting up with the complexities and very often broken website issues of the Income Tax Dept.
Through this blog, we aim to make the tax filing experience less daunting.
Table of contents
​Old Regime vs. New Regime |
​Can you switch between the new and old regimes every year? |
​Deductions under 80C, 80CCC and 80CCD (1) |
​Exemption of NPS contribution over and above Rs. 1.5 lakhs |
​Interest paid towards Education Loan - Section 80E |
​Interest and Principal paid on home loans |
​Medical insurance under section 80D |
​Interest income earned under sections 80TTA and 80TTB |
Exemption on the expense incurred for taking care of a dependant with disability under Section 80DD |
Exemption for people with disability under Section 80U |
Exemption for rent paid under Section 80GG |
Donations under 80 G, 80GGA and 80GGC |
Let us discuss the two tax regimes first.
Old Regime vs. New Regime
The new tax regime was introduced during Budget 2020 with the aim of making the tax structure more simple when compared to the old regime. The new tax regime has lower tax rates but excludes around 70 deductions and exemptions available in the old regime.
Can you switch between the new and old regimes every year?
Yes and No.
Individual taxpayers with salaried income and not business income can make the switch between the new and old regime every financial year.
The individuals and HUFs with income from either business or profession can make the switch only once in a lifetime. i.e.. If they have opted the new tax regime, they will have the option to switch to the old regime only once. After which, they cannot go back to the new regime.
Deductions under 80C, 80CCC and 80CCD (1)
The benefit under the above 3 sections can be claimed by individuals and HUFs and the maximum cumulative deduction allowed under the 3 sections is Rs. 1.5 lakhs.
The investment options which are eligible for deduction under 80C are:
Life Insurance Premium
Employee Provident Fund (EPF) Contributions
Public Provident Fund (PPF)
National Savings Certificates (NSC)
Tax-Saving Fixed Deposits
5-Year Post Office Time Deposit
Senior Citizens Savings Scheme (SCSS)
Tuition Fees for Children
Principal Repayment of Home Loan
Equity-Linked Saving Scheme (ELSS)
Unit Linked Insurance Plans (ULIPs)
National Pension System (NPS)
The sum paid to purchase a deferred annuity
Home Loan Account scheme of the National Housing Bank
Contribution to notified annuity Plan of LIC
Deposit scheme of a public sector or company engaged in providing housing finance
Equity shares/ debentures of an approved eligible issue
Notified bonds of NABARD
5-Year Fixed Deposit with Banks
Sukanya Samriddhi Yojana (SSY)
80CCC
This benefit is available only for individuals. The contributions made to LIC or any other insurer towards their pension funds are eligible.
80 CCD (1)
This benefit is available only to individuals. Contributions made towards pension schemes like the Atal Pension Yojana notified by the government are eligible. The cap is lower of (1.5 lakhs or for employed: 10% of basic salary + DA; for Self-employed: 20% of gross total income)
Exemption of NPS contribution over and above Rs. 1.5 lakhs
80CCD(1B)
The employee’s contributions towards NPS over the Rs. 1.5 lakhs cap is eligible for exemption up to a maximum of Rs. 50,000.
80CCD (2)
The employer’s contributions towards NPS over the Rs. 1.5 lakhs cap is eligible for exemption.
Central government employees - 14% of basic salary +DA
Others - 10% of basic salary +DA
Interest paid towards Education Loan - Section 80E
According to RBI, the education loan portfolio of Indian banks grew 17% ₹96,847 Cr during FY22-23 against ₹82,723 crore the previous year. This increase is attributed to higher demand for students aspiring to study abroad and the willingness of banks to disburse collateral loans.
Paying interest on your education loan is not a bad thing given you can claim exemption without any cap.
Here is everything you need to know about it.
The interest paid on the loan taken for higher education in India or overseas can be claimed under this section. This claim can be made only by an individual taxpayer and not by other taxpayers like HUFs.
Here are a few points to remember
A loan can be taken by self, spouse, children or a student to whom you are a legal guardian
There is no cap on the interest amount that can be claimed for tax exemption
The course can be vocational or regular
A loan has to be taken from an approved financial institution or charitable institution.
Provision for tax benefit is available for 8 years from the year one starts paying the interest
Please note, that the principal payment is not eligible for tax deduction.
Interest and Principal paid on home loans
Amid the huge argument between buying or renting, buying a home remains an aspiration for many Indians. Did you know buying a home through a home loan can benefit you by saving taxes?
There are many sections that can be used for claiming tax deductions. Let us go through them one by one.
Principal under Section 80C - The principal paid towards the home loan is tax deductible up to a maximum 80C exemption limit of Rs 1.5 lakhs. The loan can be taken for buying, constructing or renovating the house. The house can be bought alone or jointly. For claiming the deduction, the construction should be complete and should be under possession for 5 years. If the property is owned jointly, then both co-owners can claim these deductions separately.
The cost of stamp duty on registration can be claimed under 80 (C) during the year of the transaction.
Interest under section 80 EE - This deduction is available for a first-time home buyer up to a maximum of Rs. 50,000. This deduction is over and above the limit of Section 24 for loans sanctioned between April 1, 2016, and March 31, 2017. The value of the property should not exceed Rs. 50 lakhs and the loan taken should not be more than Rs. 35 lakhs. If the property is let out for rent, the claim cannot be used. If it is a joint property, then both owners can claim the benefit given both are first-time home buyers.
Interest under section 80 EEA - The deduction is available for loans sanctioned between April 1, 2019, and March 31, 2022. This is available to first-time home buyers with the stamp value of the property not exceeding Rs. 45 lakhs. Individual investors can claim up to a maximum amount of Rs. 1.5 lakhs and cannot make claims under 80EE. For joint property, both owners can claim the benefit given both are first-time home buyers.
Interest under section 24B - The loan must be for property purchase, renovation, or construction which needs to be completed in 5 years. One must be the sole/joint owner to make claims. The property can be self-occupied or let out. The maximum deduction is Rs. 2 lakh can be claimed for self-occupied properties.
In the case of let-out properties, income from house property is calculated by adding rent and making some deductions including interest. The net amount is added to the gross income of the taxpayer. If interest and other deductions exceed the rent, the gross income reduces and the taxable income reduces. Please find the calculation here.
The deductions under 80EE,80EEA and 24B are only available for individuals.
Medical insurance under section 80D
According to a survey conducted by the digital insurance platform, ACKO in 6 metro cities, about 68% of the surveyed population have inadequate health insurance.
To ensure the well-being of you and your loved ones, one should consider taking adequate coverage. It is always preferable to have an insurance policy in addition to the one offered by the employer. The income tax benefits of which are listed below.
The medical insurance premium paid for self and family can be claimed under Section 80 D.
A maximum of Rs. 25000 can be claimed for you and your family. If you are a senior citizen, then you can claim up to Rs. 50,000.
If you take a separate policy for parents, then an additional Rs. 25,000 can be claimed and this amount would be Rs. 50,000 if either of the parents is a senior citizen.
In both cases, the claim amount can include the cost of preventive medical checkups with a cap of Rs. 5000.
Interest income earned under sections 80TTA and 80TTB
Interest earned on savings accounts of banks, co-operative societies and post offices are eligible up to a maximum limit of Rs. 10,000 under Section 80TTA. Please note the interest earned on fixed deposits, recurring deposits or any other time deposits are not eligible.
Both individuals and HUFs can make the claim. NRIs can claim interest earned on NRO accounts.
This section is also not applicable to senior citizens. For senior citizens, it is Section 80 TTB.
The deduction under Section 80TTB is available for individuals who are 60 years old. Interest income both savings accounts and deposits held in banks, post offices and co-operative societies (including a co-operative land mortgage bank or a co-operative land development bank) are eligible for exemption. The maximum limit of exemption is Rs. 50,000.
Exemption on the expense incurred for taking care of a dependent with disability under Section 80DD
The exemption can be claimed by individuals and HUFs. For individuals, the person with a disability can be a spouse, children, parents or siblings. For HUFs, the dependent must be a member of HUF. However, the claim cannot be used for self.
The following are eligible for exemption:
Expenses on medical treatment, training and rehabilitation of a dependent
Any amount that has been paid or deposited under an approved scheme of LIC or any other insurer or the Administrator or the specified company for the maintenance of a dependent
For availing this claim, the dependent should have a disability of at least 40% as defined under section 2(i) of the Persons with Disabilities Act, 1995.
For disability of 40% to 80%, a deduction of Rs. 75000 can be availed and for disability above 80%, Rs. 1,25,000 can be availed. The deduction amount is fixed and doesn’t depend on the actual expenditure incurred.
Exemption for people with disability under Section 80U
While Section 80 DD was for taking care of dependents, under this section any person with a disability of 40% or more can claim income tax benefit.
For disability of 40% and less than 80%, the exemption limit is Rs. 75,000 whereas for people with more than 80% disability, it is Rs. 1,25,000. The deduction amount is fixed and doesn’t depend on the actual expenditure incurred.
Exemption for rent paid under Section 80GG
This is applicable to individuals who do not have an HRA component but pay rent. The taxpayer can be either salaried or self-employed. Anyone in the family including spouse or minor child or any other member of the HUF the individual belongs to should not own a residential property in the city of work or business.
If you claim a benefit for a house in any other location listed as ‘self-occupied’ property, then this claim cannot be made.
The claim can be the lowest of the following Rs. 60,000 annually or (Total Rent Paid - 10% of Total Income) or 25% of Annual Salary.
Donations under 80 G, 80GGA and 80GGC
The benefit under Section 80G can be claimed by all taxpayers and the deductions fall under 4 categories:
(i) 100% deductible without any qualifying limit
These are deductions to the National Defence Fund, Prime Minister's National Relief Fund, Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) Prime Minister's Armenia Earthquake Relief Fund, etc. The full list is available under 80G here.
(ii) 50% deductible without any qualifying limit
The donations made to Jawaharlal Nehru Memorial Fund, Prime Minister's Drought Relief Fund, Indira Gandhi Memorial Trust and Rajiv Gandhi Foundation qualify for this exemption. From April 01, 2023, the donations made only to PM’s Drought Relief Fund would qualify.
(iii) 100% deductible subject to qualifying limit
The donations to the Government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning, Family Planning Association of India/Red Cross Society of India and Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India are eligible.
(iv) 50% deductible subject to qualifying limit
The donations made towards approved funds, trusts, charitable institutions/donations for renovation or repairs of notified temples, etc. are eligible for deduction.
Calculation of Qualifying Limit
Qualifying Limit = 10% of AGTI
Where AGTI (Adjusted Gross Total Income) = Gross Total Income - 80C deductions - Short-term capital gains under section 111A
If the actual donation is Rs 75,000 and the qualifying limit is Rs.60,000 then the 80G exemption is applicable to Rs. 60,000 only. If it is 100% deductible, a tax claim can be made for 60K and for 50% deductible, a claim can be made for 30K.
80 GGA
Certain donations for scientific, social or statistical research or rural development programmers or for carrying out an eligible project or scheme or National Urban Poverty Eradication Fund (subject to certain conditions) can be claimed under this section. All taxpayers not having any income chargeable under the head 'Profits and gains of business or profession' are eligible. The donations of over Rs. 10,000 made by cash are not eligible for exemption.
80GGC
100% of the contributions made to political parties registered under Section 29A and electoral trusts are eligible for exemption. It should be noted that the donations cannot be made in cash. All taxpayers can claim this benefit except local authority and artificial juridical persons funded by Govt.
Indian companies can make claims for such donations under Section 80GGB instead of 80GGC.
Final thoughts
The tax system is commonly perceived as intricate, and individuals often encounter difficulties when filing their taxes. In this blog, we've made an effort to simplify the complexities of income taxation. Our goal is that your future tax filing experiences will be more straightforward and enjoyable.