This post, we would discuss how to save tax by planning and understanding of different income tax section. Tax Planning is important to get maximum benefit for your investments
HRA:
This is for individuals who stay in rented home. The exemption for HRA benefit is the minimum of:
i) Actual HRA received
ii) 50% of salary if living in metro cities, or 40% for non-metro cities; and
iii) Excess of rent paid annually over 10% of annual salary
Let’s say an individual, with a monthly basic salary of Rs 15,000, receives HRA of Rs 7,000 and pays Rs 8,400 rent for an accommodation in a metro city. The tax rate applicable to the individual is 20 percent of his income.
To avail HRA benefit, the least of the following amount (yearly) is exempted, rest is taxable:
i) Actual HRA received = Rs 84,000
ii) 50% of salary (metro city) = Rs 90,000 (50% of Rs 1,80,000)
iii) Excess of rent paid annually over 10% of annual salary = Rs 82,800 (Rs 1,00,800 – (10% of Rs 1,80,000))
Document required :
HRA exemptions can be availed only on submission of rent receipts or the rent agreement with the house owner. It is mandatory for the employee to report the PAN of the ‘landlord’ to the employer if the rent paid is more than Rs 1,00,000 annually to avail the benefit.
NPS/Atal Pension Yojana:
This offers an additional deduction of up to Rs. 50,000/-for contributions made by individual taxpayers towards the NPS or Atal Pension Yojana. The additional deduction of Rs. 50,000/- under Section 80CCD(1B) is available to assess over and above the benefit of Rs. 1.50 Lakhs available as a deduction under Sec 80CCD(1). Thereby, raising the maximum limit of exemption to Rs. 2.00 Lakhs with Section 80CCD(1) + Section 80CCD(1B).(i) The additional deduction of Rs. 50,000/- is available only for contributions made to NPS Tier 1 accounts or contribution towards Atal Pension Yojana.
Documents:
You need to produce documentary evidence of the transaction related to the contribution to NPS. You can invest NPS in HDFC Bank, ICICI Bank, SBI and Axis Bank. Document of Atal pension yojana.
80C investments 🙁 1.5 Lakhs)
PF, PPF, Life insurance, Children Tuition Fees, Sukanya samruddhi scheme, 5 years fixed deposit, Home loan principal repayment and ELSS mutual funds. The limit is 1.5 lakhs in 80C.
Documents required:
1. Receipt for Insurance Premium paid during the FY 2020-21
2. PPF Passbook
3. FD certificate
4. Copy of investment certificate
5. Fees receipt for FY2020-21 and Home loan principal repayment
6. Passbook/statement from Bank/post office where payment made for FY 2020-21
Tax benefit on Home Loan:
Section 80C Tax deductions on the principal repayment upto Rs. 1.5 Lakh
Section 24 Tax deductions on the interest amount payable upto Rs. 2 Lakh
Section 80EE Additional home loan interest tax benefit for first-time home buyers up to Rs. 50,000
Section 80EEA Additional home loan interest tax benefit for first time PMAY class home buyers upto Rs. 1.5 Lakh
- Section 80C: Claim a maximum home loan tax deduction of up to Rs. 1.5 Lakh from your taxable income on the principal repayment. This may include stamp duty and registration charges as well but can be claimed only once.
- Section 24:
Enjoy maximum deductions of up to Rs. 2 Lakh on the interest amount payable.
These deductions apply only on the property whose construction is finished within 5 years. If it doesn’t finish within this time frame, you can claim only up to Rs. 30,000. - Section 80EE
First-time home buyers can claim an additional Rs. 50,000 on the payable interest every financial year. The Home Loan amount must not be more than Rs. 35 Lakh. The property’s value must be within Rs. 50 Lakh. - Section 80EEA
Income tax benefits under Section 80EEA are available to those availing home loans under the PMAY CLSS scheme. Up to Rs.1.5 lakh u/s 80EEA for first-time home buyers in interest repayment. You can avil either 80EEA or 80EE. Not both.
You can save more than 50,000 by proper tax planning. Invest in ELSS mutual funds, NPS and claim HRA to get maximum tax benefits. Get home loan certificate from financial institute to get tax benefit in section 24, 80EE or 80EEA.
Tax Planning : Term Insurance would give 2 crores to family with 1200
Say”No” to Insurance. Get coverage of 1.35 crores instead of 27 lakhs.
Pay Zero(0) tax for income up-to 8,00,000 rupees by proper tax planning. Today is Deadline.
80C : Mix both Sukanya Samriddhi Scheme and ELSS mutual funds for better returns and flexibility
Tax Planning – EEE = 100; ETE = 96; EET = 80; What is E and T ?
No. HRA is not included in Section 80C(1.5 lakhs). PG receipt also works for HRA.
Freshers or first time taxpayers? Knowing 80C would save you 10000 rupees.
Last Minute Tax Planning – 80C 1.5 Lakhs for Mutual funds as well.
Realize Your contribution to the Nation, By Income Tax. Understand Income Tax and Your Contribution.
Term Insurance : Ensure Financial Security for your family by 1000 Rupees/Month.
Happy Tax Planning.