Tax Saving Above One Lakh Limit - Part II

In Part I of this article entitled How to Save Maximum Income Tax we explained available tax slabs and various tax saving schemes which comes under 1Lakh limit.

In part II of this article we are listing various tax saving options under income tax act which helps you to save tax above the 1Lakh limit.

Section 80EE - Declare Additional Rs. 1Lakh

Tax Saving Above One Lakh Limit

Section 80CCF(Infrastructure bonds) and Section 24 are there for your rescue, allows you to save tax above the 1 Lakh limit(under section 80C):

• Section 80D

  Premium paid for health insurance for you, your spouse, children and/or dependent parents is deductible from the taxable income. Any amount that you pay as a premium for a medical insurance plan / policy is deductible from your income upto a certain limit(currently 15000 for general category and 20000 for senior citizens). You need to mention the name of insured person and relationship of insured.

• Section 80DD
  
  Medical treatment of disabled dependent. If you have a disabled person as your dependent and you spend for the medical treatment of that person, you can claim certain deduction of up to 50000 and for severe disability(80% or more) up to 100000. You must furnish certificate of disability (Form 10IA) of government hospital clearly stating the name of patient, nature of disability, percentage of disability, temporary or permanent disability duly signed & stamped.

• Section 80DDB

  Deduction in respect of medical treatment. If you have spent on medical treatment of some specified diseases either for yourself or some of your relatives, you can claim the amount as deductible from your income. This is limited to 40000 for general users and 60000 for senior citizens.

• Section 80E

  Interest paid on educational loan taken for higher education. If you have taken an education loan for yourself or your relatives and are repaying it, the interest that you pay can be claimed as deductible from your income. You must submit a certificate from the banker in which interest amount paid during the year or part of the year must be specified.

• Section 80G

  Donations - Do you donate money to charitable institutions or certain government funds? The donations can be fully or partially deductible from your income.

• Section 80U

  If you have a disability or are handicapped, you can claim deduction under this section up to 50000(normal) or up to 75000(severe). You must furnish certificate of disability (Form 10IA) from government hospital clearly stating the name of patient, nature of disability, percentage of disability, temporary or permanent disability duly signed & stamped by the concerned authority.

• Section 80TTA

  Section 80TTA is introduced to provide the deduction to an individual in respect of interest received on deposits in a saving account with banks, cooperative banks and post office. The deduction is restricted to INR 10,000/- or actual interest whichever is lower.

• Section 80GG

  Deductions in respect of rents paid. You pay rent but do not get a house rent allowance(HRA) as part of your salary or you are a businessman, you can claim the amount as deduction, subject to certain conditions. You can save a maximum of rent paid less 10% of your total income or Rs.2000/month or 25000 of your total income whichever is lesser.

• Section 80CCG*new

  Rajiv Gandhi Equity Linked Saving Scheme: The maximum benefit available under this section is restricted to least of Rs. 25000 or 50% of the amount invested in this scheme. Also Employee should be resident individual with gross total income less than or equals to Rs. 10,00,000. Employee should be a new retail investor with a notified scheme and should have acquired listed shares as per the notified scheme. Also not ethat there is a minimum lock-in period of 3 years.

• Section 80CCF*

  Infrastructure bonds: You can declare up to Rs. 20,000 under this section. However, before investing, you should consider the tax slab you fall under, the inflation adjustment till the maturity date and your risk appetite. If you are in the 30 percentage tax bracket, you will save roughly Rs.6,000 on tax by investing into these bonds. They are launched by IFCI, LIC, IDFC and any non banking finance corporation such as IDBI and REC. The funds are long term, a minimum tenure of 10 years, and are offering approximately 8% per annum yield, but remember that interest earned is taxable.

  Deduction under section 80CCF is discontinued from financial year 2012-2013.

• Section 24

  Interest paid on housing loan. You can deduct up to a maximum of Rs. 1.5 Lakhs per annum. - You must submit the following documents:

  • In case of Self Occupied:- Provisional certificate from the Bank / financial institution / person where Interest and Principal amount has been specified separately.
  • In case of Let Out Property
    1. Provisional certificate from the Bank / financial institution / person showing Interest and Principal amount separately.
    2. Relevant computation considering the rental income
    3. In case the property is left vacant, Net Loss/Income has to be arrived considering notional rental value as per local Municipality valuation
  • If you are claiming pre-EMI interest, 1/5 of the pre-EMI amount will be considered for exemption in the current year. You are required to enclose the certificate of the financial year, even if you have submitted the same last year. 
  • Copy of Possession Letter must be submitted.
  • Address of the property against which loan has been taken.       
  • In case of joint owner, submit a declaration

Interest paid on second home loan: If you own more than one house, the interest paid on those home loans are non-taxable and the interesting fact is there is no limit defined by the income tax department!

• Section 10(5) Rule 2B

  Leave Travel Allowance (LTA) : The LTA/LTC that you get is fully exempt from income tax, provided it satisfies certain conditions. Here are the conditions:

  1. The amount is actually spent on travel
  2. It has to be for transportation
  3. Travel within India
  4. Shortest Distance and Cap on claim amount
  5. Proof of travel The LTA / LTC tax exemption can be claimed only twice in a block of 4 years. 2010 – 2013 2014 – 2017 2018 – 2021

  Note: Make sure you submit the IT Proofs on time, to avoid later penalty from the Income Tax Department. Also make sure you file your IT return and send a signed copy of the acknowledge form (ITR-V) to the income tax department. Failure to any of these will put you in to financial and legal issues at a later point of time.

Important Dates to Remember

Income Tax Proof Submission Date: January to March
Last date for IT Return: 31st of July
Last date for Acknowledgement form Submission: Within 120 days of filing the return

Also read Bank Service Charges, Fees and Interest Rates