Many taxpayers adopting the existing tax regime may not be in the position of tax saving investment due to lack of liquidity. Such people do not need to be depressed. The reason is that tax deduction is available on some expenses as well.
This month is also important in terms of tax planning. Taxpayers need to assess their tax liability in this. This work can be done on the basis of income in the financial year. All the available deductions should be kept in mind while removing tax liability. Tax liability increases by not taking advantage of these deductions.
It is to be noted here that taxpayers can choose a new regime of low-rate income tax from the financial year 2020-21. If someone does this, then he will have to wash his hands mostly from deduction and examination. Many taxpayers adopting the existing tax regime may not be in the position of tax saving investment due to lack of liquidity. Such people do not need to be depressed. The reason is that tax deduction is available on some expenses as well.
Deductions for which taxpayer is entitled can be claimed with gross total income. This reduces taxable income. This also reduces tax liability.
Let us know the expenses / deductions that can be used to reduce the tax liability under the old tax regime.
1. Leave Travel Allowance
Deduction is available on leave travel account under section 10 (5) of Income Tax Act. It is subject to certain conditions. For this, proof of travel and related expenses has to be given. It can be availed for a maximum of two trips in the country in a block of four calendar years (2018-2021).
however, due to the corona epidemic, many taxpayers could not travel in the financial year 2020-21. Keeping this in mind, the government has launched the ‘STC Cash Voucher Scheme’. Under this scheme, employees can avail cash allowance in lieu of ATC. For this some conditions have to be fulfilled. Any employee can avail this scheme by purchasing services or goods with GST of 12% and above by 31 March 2021.
2. deduction on interest income
Under section 80 TTA of income tax, a taxpayer can claim deduction of up to Rs 10,000 in case of interest on the amount deposited in the saving bank account / post office. In this, the amount of deduction can be claimed on actual interest or Rs. 10,000, whichever is less. For Senior Citizens, this limit under section 80 TTB is Rs 50,000.
3. Children’s tuition fees, hostel allowance
The employee gets exemption under section 10 (14) on all allowances received from the company at the expense of the hostel along with the education of the children. There is a limit of Rs 1200 and Rs 3,600 for children’s education allowance and hostel allowance respectively. This rebate can be taken for two children. In addition deduction under section 80C is available on the tuition fees of a child in a recognized college, university, school or other educational institution. It is available for two children.
4. Discount on education loan interest payment
Under Section 80E of the Income Tax Act, income tax is exempted on the interest of education loan. There is no limit to the maximum amount. This benefit is available for a maximum of 8 years from loan repayment. This loan should be taken for the purpose of higher education. Education loan can be taken by the taxpayer, his / her spouse, children or students whose taxpayer is the legal guardian.
5. deduction in respect of medical expenses
The payment of the premium of a health insurance policy under section 80D can be claimed as a deduction. This policy can be taken for your spouse, children and yourself. This amount of deduction can be up to Rs 25,000. If the parents are less than 60 years of age, then a further Rs 25,000 can be claimed on the payment of the premium for medical insurance. Deductions are also available for health insurance policy of special Kovid like Corona Kavach.
If you buy health insurance for parents, you can get additional deduction up to Rs 50,000. The condition is that the parents should be senior whistleblowers i.e. their age is more than 60 years. At the same time, if the senior citizen’s parents are not covered by a health insurance policy, then the amount spent on their treatment can be claimed under section 80D. Right now, such an amount of Rs 50,000 can be claimed.
6. Deductions on the payment of loan interest of residential house property
If someone has bought a residential property by taking a home loan, he can claim two types of tax exemption. One, the tax benefit on the repayment of the principal amount of the home loan under section 80C and the deduction on the payment of interest under section 24. Under section 24, a person can claim exemption on interest payment of a maximum of Rs 2 lakh on the loan. This benefit is available only on self-occupied property loans. If you are paying interest on the home loan of the under construction property then it will be available after the benefit possession. The condition is that the possession of the house is received within five years.
Apart from this, if someone buys a house in Affordable segment, then he can get deduction of Rs 1.5 lakh in the financial year under section 80 EEA. This deduction is different from the deduction of Rs 2 lakh available on the payment of home loan interest.
7. Exemption under section 80 CCD (2)
Employees can claim tax benefit under section 80 CCD (2). This can be claimed on the amount deposited by the company in the NPS Tier-1 account of the employee. As per the rules, this deduction is available on contract from the company up to a maximum of 10% of the basic salary plus DA of the employee. In the case of central employees, this basic salary can be up to 14 percent of the Plus DA. This deduction available under section 80 CCD (2) is beyond the exemption available under section 80C.
8. Tax break on rental payment
House rent allowance (HRA) is part of the salary structure of most employees. Hired employees can claim deduction on HRA. It is available for real rental. A section of HRA is exempted from tax under Section 10 (13A) of Income Tax on fulfillment of certain conditions. Individuals whose salary does not include HRA can claim tax exemption under Section 80GG of the law.
9. Employees Provident Fund (EPF)
Section 80C exempts tax on investments up to Rs 1.5 lakh in Employees Provident Fund i.e. EPF. This contribution is deducted from salary on monthly basis.
10. Standard deduction on salary
Standard deduction up to Rs 50,000 is available for all salaried employees. Companies take this deduction into consideration while calculating employee’s tax liability. It needs to be claimed while filing ITR.
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