The majority of taxpayers in India are salaried individuals and they make a significant contribution to tax revenue, the number of returns filed for ITR 1 (salaried taxpayers) for FY 2021-22 is 2,94,45,418, which is almost 50% of the total filed return of approximately 6 crores. There’s a quite common question always running across their minds, how can they save on taxes at the time of filing ITR?
Since FY 2022-23 is coming to an end this is the best time to plan your investments and expenses which can in turn help in reducing your overall tax liability.
Let’s understand some allowances and income tax deduction options, all taxpayers can claim while filing ITR.
HRA (House Rent Allowance): If you’re employed and living at a rental flat or premises, you can claim HRA u/s 10(13A) to meet your accommodation expenses. HRA is a House Rent Allowance paid by the employer to employees for the rent payment as a part of the salary component. To claim such allowance you’re required to submit the rent receipt as proof to your employer.
Here’s an article that explains more about HRA exemption rules & calculations.
In case, you do not receive HRA from your employer, you can still avail of a deduction under section 80GG for the rent paid on your accommodation and for which you need to submit Form 10BA to the ITD. The deduction is only eligible for salaried who do not receive any HRA from their employer or an individual who is self-employed.
Leave Travel Allowance: Do you know that while filing ITR, you can also avail exemption if you’ve traveled within India?
Under leave travel allowance (LTA) booking expenses through air/ rail are tax-free in your hands. You can claim a such exemption for the trip taken either alone or with the family, subject to certain conditions.
Medical insurance: If you have taken any medical insurance premium for yourself and your family then you’re eligible to claim a deduction under section 80D of income tax, It includes all your medical expenditures and health check-up also.
You can claim Rs 25,000 against the insurance premium paid to cover yourself, your spouse, and your children. Additionally, Rs 25,000 can be claimed towards your parent’s life insurance premium or Rs. 50,000 in the case of senior citizen parents. To get such a benefit you need to submit proof of medical expenditures such as receipts for medical premiums and health check-ups, medical bills, doctor visits, etc. You can also claim tax deductions for some uncertain conditions like Expenses on treatment of Differently Abled dependent - under section 80DD, Expenses on treatment of specified disease - under section 80DDB, Individual suffering from disability - under section 80U.
Donation to charitable Organization: If you’ve made any donations to specific (government designated) relief funds and charitable organizations then you can add an applicable amount to your tax breaks under section 80G.
Interest on home loan: You’re eligible to claim tax deduction till INR 2 Lakhs on paying interest amount for a home loan under section 24(b) and if you’re a first-time home buyer then additional interest deduction can be claimed under section 80EE/ 80EEA, from a financial institution and housing loan company if required conditions are met.
Contribution to Pension Fund:
If you’re contributing towards NPS tier-I, it allows you to take some benefits under section 80CCD, which is divided into three parts subject to different conditions. Employee contribution to pension fund - deduction allowed INR 1,50,000 - under section 80CCD(1), Employer’s contribution to pension fund - deduction allowed 10% of basic salary - under section 80CCD(2), also applicable to the new tax regime, Voluntary contribution to NPS - additional deduction allowed INR 50,000 - under section 80CCD(1B).
What are the tax deductions you can claim on investments and expenses under section 80C?
The most widely used option for reducing taxes is section 80C. Those who make investments and expenses in the defined tax-saving avenues are eligible for a tax deduction of up to Rs. 1.5 lakh.
a. Contribution to Employee provident fund:Do you realize that the PF contribution you make as part of your salary is tax deductible?
You can claim a deduction on annual PF contributions till a maximum of INR 1.5 lakhs under section 80C.
b. Contribution to ELSS (Equity Linked Saving Scheme):
If you have made investments in ELSS then you’re liable to avail of tax benefits. For doing so you had to make an investment of up to INR 1.5 lakh to claim a deduction. They have a lock-in period of 3 years.
c. Children’s tuition fees: You can also save on expenses like tuition fees paying for your child’s school, college, or university in India.
d. Home loan principal component:
If you’ve taken a home loan and paying for the expenses like stamp duty, registration fees, and transfer expenses then you should know about such benefits which would help you to claim deductions on repayment of a home loan’s principal amount to construct or buy a residential property.
What are the other deductions allowed under section 80C?
Some other deduction you can claim under 80C includes the PPF National saving certificate (NSC), Tax savings Fixed Deposits, Sukanya Samriddhi Savings Scheme, Senior Citizen Savings Scheme (SCSS), Pension Fund by UTI, etc.
There’s one more way to reduce your tax liability by optimizing the salary structure, by doing so you can add such allowances as a part of your salary and claim all the applicable deductions.
Planning and filing your taxes on Quicko will allow you to easily claim such deductions and will also show you the eligibility and qualified amount of tax breaks to be allowed in your ITR.
Point to be noted that all these deductions are not applicable to New Tax Regime. From all these saving options, you can figure out how to reduce tax liability and reduce the burden while filing returns.
Thinking practically, how is it possible all the income earned is saved without any expenses?
However, if it is the actual situation, you can deposit the amount in your bank account in the current year. In case you receive any scrutiny from the Income Tax Department, you must be able to provide all the relevant documents and evidence.
I quit my job in SBI 10 months ago, in June 2022. Since I resigned before the bond period of 3 years, I paid a bond amount of 2L+ GST18% = Rs. 236000. From Apr-Jun, I got gross salary of 260000. After resignation, PF and PLs encashed totalled to 200000. Tax on (260000+200000) has been paid till now.
Since 236000 is deducted from my account by the organisation, can I show income from salary as 260000+200000-236000 = 224000? and therefore claim the tax paid by the employer till now?
Thanks for the reply.
So, hypothetically if I get a 3lakh salary from the employer and the employer deducts 3 lakhs from my account towards this bond, does tax on 3 lakh needs to be paid even though my net income is zero?
In general, we cannot reduce the bond amount deducted by employer while calculating taxable income?
How to claim 80DDB deduction -
I’ve read that a prescription certified by relevant doctor needs to be provided - is there a specific format (as Form 10-I was done away with).
Do we need to file a separate income tax form for it? or upload a document somewhere while filing ITR? and where is the amount spent mentioned? or docs for it required? proofs of bills, etc?
There is no such need to file a separate income tax form or upload any document for claiming deduction u/s 80DDB.
However, it is advisable to keep all the proofs ready if incase there is a notice received from the ITD.
Here’s a read on Does 80DDB cover Cancer/AIDs/Dementia? - Learn by Quicko for your reference.
I pay an interest of 3.5 lakhs towards my House loan and I have utilized the section 24b where 2 Lakhs were exempted from my salary. Can someone please give a clarity if I am eligible for section 80 EEA as there is a lot of confusion all over the internet. My details are as follows:
Date of acquisition: January 2022
Area of house : 170 Sq Yards
First house of purchase
Total cost of the house being purchased: 96 Lakhs
Deficit Stamp duty charges: 1,40,000Rs
I have the following queries:
Is “Deficit Stamp Duty” and “Stamp duty” mean the same?
Does area of my house come under consideration for this section to be applicable?
If this section is applicable will I be able to claim it till the interest component is over i.e. every year?
Section 80EEA allows individuals an additional tax deduction on home loan interest. The eligible deduction amount is INR 1,50,000.
This limit of INR 1,50,000 is over and above the deduction of INR 2 lakh allowed for home loan interest u/s 24.
To claim this income tax deduction, the following conditions must be fulfilled:
The sanction date of the loan is between 01-04-2019 to 31-03-2022.
The loan is taken from a financial institution or housing finance company.
The stamp duty value of the house should not exceed INR 45 lakh.
The taxpayer cannot claim a deduction u/s 80EE.
A taxpayer should not own any other residential house on the date of sanction of a loan.
With respect to your questions,
No, they are different.
Area of the house is considered for deduction u/s 80EEA.
Deduction under this section can be claimed until full repayment of the loan.
I had paid interest towards education loan in FY 22-23. However I did not claim it under 80 E as I didnt have taxable income that year as I was still studying.
While I plan my taxes for FY 23-24, Can I consider the interest amount paid in FY 22-23 as a deduction in addition to the interest amount I am paying in FY 23-24?