Investments allowable as deduction under Income Tax Act
This time you all are waiting for submitting your investment declarations to your employer. Investments are one of the major aspects for minimizing your tax bill. The Income Tax Act provides that on determination of the gross total income of an assessee after considering income from all the heads, certain deductions therefrom may be allowed. Here an attempt is made to explain all types of investment like deduction under income tax act:
- Payment of premium for annuity plan of LIC or any other insurer: Deduction is available upto a maximum of Rs. 1,00,000/-. The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund. The Finance Act 2015 has enhanced the ceiling of deduction under Section 80CCC from Rs.100,000 to Rs. 1,50,000 with effect from A.Y. 2016-17.
- Deposit made by an employee in his pension account to the extent of 10% of his salary: Where the Central Government makes any contribution to the pension account, deduction of such contribution to the extent of 10% of salary shall be allowed. Further, in any year where any amount is received from the pension account such amount shall be charged to tax as income of that previous year. The Finance Act, 2009 has extended benefit to any individual assesse, not being a Central Government employee.
- Investment under Rajiv Gandhi Equity Savings Scheme, 2013: The deduction was 50 % of amount invested in such equity shares or Rs. 25,000, whichever is lower. The maximum Investment permissible for claiming deduction under RGESS is Rs. 50,000.
- Payment of medical insurance premium: Deduction is available upto Rs.15,000/ for self/ family and also upto Rs. 15,000/- for insurance in respect of parent/ parents of the assessee.In case of senior citizens, a deduction upto Rs.20,000/- shall be available under this Section. Insurance premium of senior citizen parent/ parents of the assessee also eligible for enhanced deduction of Rs. 20000/-The premium is to be paid by any mode of payment other than cash and the insurance scheme should be framed by the General Insurance Corporation of India & approved by the Central Govt. or Scheme framed by any other insurer and approved by the Insurance Regulatory & Development Authority. The premium should be paid in respect of health insurance of the assessee or his family members. w.e.f. 01.04.2011, contributions made to the Central Government Health Scheme is also covered under this section.
- Deduction of Rs.40,000/ — In respect of (a) expenditure incurred on medical treatment, (includingnursing), training and rehabilitation of handicapped dependent relative. (b) Payment or deposit to specified scheme for maintenance of dependent handicapped relative:W.e.f. 01 .04.2004 the deduction under this section has been enhanced to Rs.50,000/- Further, if the dependent is a person with severe disability a deduction of Rs.1,00,000/– shall be available under this section. Budget 2015 has Further Proposed to hike the limit from A.Y. 2016-17 to Rs. 75000 from existing Rs. 50,000/- and for person with severe disability to Rs. 1.25 lakh from existing Rs. 1 Lakh.
- Deduction of Rs.40,000/- in respect of medical expenditure incurred: W.e.f. 01.04.2004, deduction under this section shall be available to the extent of Rs.40,000/- or the amount actually paid, whichever is less.In case of senior citizens, a deduction upto Rs.60,000/- shall be available under this Section.Budget 2015 has proposed deduction of Rs. 80000/- for senior citizen aged 80 year or More from A.Y. 2016-17.
- Deduction in respect of payment in the previous year of interest on loan taken from a financial institution or approved charitable institution for higher studies: This provision has been introduced to provide relief to students taking loans for higher studies. The payment of the interest thereon will be allowed as deduction over a period of upto 8 years. Higher education means any course of study pursued after passing the senior secondary examination or its equivalent from any recognized school, board or university.
- Deduction in respect of interest on loan taken for residential house property: Vide Finance Act 2013, an individual is allowed a deduction upto a limit of Rs 1,00,000 being paid as interest on a loan taken from a Financial Institution, sanctioned during the period 01-04- 2013 to 31-03-2014 (loan not to exceed Rs 25 lakhs) for acquisition of a residential house whose value does not exceed Rs 40 lakhs.
- Deduction in respect of interest on deposits in savings account:Section 80TTA is introduced wef A.Y. 2013-14 to provide deduction to an individual or a Hindu undivided family in respect of interest received on deposits (not being time deposits) in a savings account held with banks, cooperative banks and post office. The deduction is restricted to Rs 10,000 or actual interest whichever is lower.
- Deduction of Rs.50,000/- to an individual who suffers from a physical disability (including blindness) or mental retardation: Further, if the individual is a person with severe disability, deduction of Rs.75,000/- shall be available u/s 80U.W.e.f. 01.04.2010 this limit has been raised to Rs. 1 lakh.Budget 2015 proposed to amend section 80U to raise limit of deduction in respect of a person with disability from Rs. 50,000/- to Rs. 75,000 and for person withsevere disability from one lakh rupees to one hundred and twenty five thousand rupees.
- Rebate Of Rs 2000 For Individuals Having Total Income Upto Rs 5 Lakh: Finance Act 2013 has provided relief in the form of rebate to individual taxpayers, resident in India, who are in lower income not exceeding Rs 5,00,000/-. The amount of rebate is Rs 2000/- or the amount of tax payable, whichever is lower.
- Deduction in respect of any income by way of royalty in respect of a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available as :-Rs. 3 lacs or the income received, whichever is less: The assessee who is a patentee must be an individual resident in India. The assessee must furnish a certificate in the prescribed form duly signed by the prescribed authority alongwith the return of income.
Now, while filling your investment declarations for FY 2015-16, keep in mind to make it part of your declarations. In case if you are investing in any of the above investments ensure you are getting the benefit while deducting TDS.