Let’s first go through the Income-tax rules changes that happened this year.
- The tax rate for income between Rs 2.5 lakh to Rs 5 lakhs has been reduced to 5% from 10%.
- 10% Surcharge introduced for Income between Rs 50 Lakhs to Rs 1 crore
- Tax exemption under RGESS (Rajiv Gandhi Equity Scheme) has been discontinued from FY 2017-18.
- Tax Rebate under Section 87A reduced to Rs 2,500 for income up to Rs 3.5 Lakhs.
- Loss of House/Property capped at Rs 2 Lakh irrespective if the house is rented or self-occupied.
- NPS tax deduction for self-employed increased to 20% of gross income.
How one can save income tax for FY 2017-18 are as follows.
- Section 80C/80CCC/80CCD:
These 3 are popular sections for tax saving and includes multiple options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.
The options include in this section for tax saving are mentioned below. One can choose the following options and save the tax.
- Employee/ Voluntary Provident Fund (EPF/VPF)
- PPF (Public Provident fund)
- Sukanya Samriddhi Account
- National Saving Certificate (NSC)
- Senior Citizen’s Saving Scheme (SCSS)
- 5 years Tax Saving Fixed Deposit in banks/post offices
- Life Insurance Premium
- Pension Plans from Life Insurance or Mutual Funds NPS
- Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)
- Central Government Employee Pension Scheme
- Principal Payment on Home Loan
- Stamp Duty and registration of the House
- Tuition Fee for 2 children
- Medical Insurance for self and parents:
Premium paid for mediclaim Insurance for Self, Spouse, Children, and Parents qualify for tax deduction. One can claim the maximum deduction of Rs 25,000 in case an individual is below 60 years of age and Rs 30,000 above 60 years of age.
An additional deduction of Rs 25,000 can be claimed for buying health insurance for parents (Rs 30,000 in case of either parent being senior citizens). This benefit is not available for buying health insurance for in-laws.
- Treatment of Curious disease:
An expense incurred for treatment of curious disease for self & dependents are eligible to get deductions for income tax. Maximum limit for tax deductions depend on the individuals’ age
Age below 40 years – Rs 40000.
Age between 60-80 years – Rs 60000. And
Age above 80 years – Rs 80000.
Diseases covered under tax are as follows: Neurological Diseases, Parkinson ’s disease, Malignant Cancers, AIDS, Chronic Renal failure, Hemophilia and Thalassaemia.
- Donations to Charitable organizations:
The government encourages donating to Charitable Institutions by providing a tax deduction. Few donations are exempted for 100% of the amount donated while for others 50% of the donated amount. For most donations, the maximum exemption you can claim is limited to 10% of your gross annual income.
- House Rent:
If one does not receives HRA as a salary component on can claim house rent for the tax deduction? For eligibility, one needs to fulfill the following conditions.
- Rent paid should not be higher than 10% of the income.
- No family member such as a spouse, minor children or self should own another house in the city an individual is residing.
The Tax deductions for House rent are as under:
- Rs 5000 per month.
- Rent Paid is more than 10% of Annual Income.
- 25% of Annual Income.
- Physically Disabled:
An individual suffering from certain disabilities can claim for tax deductions. Maximum Tax deduction in case of normal disability (40% or more disability) is Rs 75000 and 1.25 Lakhs for severe disability (80% or more disability).
Diseases covered under tax are as follows:
- Blindness and Vision problems.
- Hearing impairment.
- Locomotor disability.
- Mental retardation or illness.
- Cerebral Palsy.
We hope you find it useful and would help you better in planning your tax for FY 2017-18.