Income Tax Exemptions and Deductions for Salaried Employee for Asstt. Year 2015-16

Recently 31st July, 2014 ended, it is deadline to submit Income Tax Return for Salaried Employee and non-audit-able accounts. Near about 90% Taxpayee (Salaried Employee) submit their Income Tax Return by 31st July and now they are in planing to save income Tax for Asstt. Year 2015-16.  The following information is most useful and important for salaried Taxpayee for Asstt. Year 2015-16 regarding Income Tax Exemptions and Deductions:

Exemptions under the head of Salary Income :
Section - 10 (5)
Details of Exemptions :
Exemption for Leave Travel Concession
Descriptions :
The amount actually incurred on performance of travel on leave to any place in India by the shortest route to that place is exempt. This is subject to a maximum of the air economy fare or AC 1st Class fare (if journey is performed by mode other than air) by such route.
Note - Provided that the exemption shall be available only in respect of two journeys performed in a block of 4 calendar years.

Section - 10(10)
Details of Exemptions :
Gratuity
Descriptions :
Least of the following will be exempt
1. Amount received
2. Rs. 10,00,000
3. 15*/26 x LS x (CYS + Fraction 6 months)
LS : Last Month Salary Drawn (Salary means Basic + DA (both))

Section - 10(10A)
Details of Exemptions :
Commuted Pension

Section - 10(10AA)
Details of Exemptions :
Leave Encashment upon Retirement
Descriptions :
Other Employee Least of the following will be exempted
1.Amount Received
2.Rs. 3, 00,000
3.10 x AS
(LE or 30 days) Received by Employee During the Employment (Fully TAXABLE)
Note - Govt. Employee {Fully Exempt} Received by Legal Heir (Fully exempt)

Section - 10(10B)
Details of Exemptions :
Retrenchment Compensation
Descriptions :
Least of the followings will be Exempt
1.Amount Received
2.Amount Calculated under “Industrial Dispute Act”
3.Rs.5,00,000
Note - Ref. Sec. 10(10B) of IT

Section - 10(10C)
Details of Exemptions :
VRS
Descriptions :
Least of the followings will be Exempt
1.Amount Received
2.Rs.5,00,000
Note - Ref. Sec. 10(10C) of IT

Section - 10(13A)
Details of Exemptions :
HRA
Descriptions :
The least of the following will be exempted
1.Amount received
2.50% or 40% of Salary
3.Rent paid less 10% of Salary
4.Salary means; Basic Salary+D.A

Section - 10(14)
Details of Exemptions :
Children Education Allowance.
Descriptions :
Rs.100 per month per child upto a maximum 2 children.

Details of Exemptions :
Hostel expenditure Allowance on employee’s child
Descriptions :
Rs.300 per month per child upto a maximum two children.
Note: Allowance granted to meet Hostel expenditure Allowance on employee’s child.

Details of Exemptions :
Uniform allowance
Descriptions :
It is exempted upto actual expenditure incurred for maintaining of the official uniform.
Note: Excess, if any, will be taxable.

Details of Exemptions :
Conveyance/Transport allowance
Descriptions :
upto Rs.800 per month
Note: Handicapped with the disability of lower extremities or a blind employee it shall be exempted upto Rs.1600 p.m.

Deductions under section 80 of Income Tax Act:
Section - 80C
Details of Deductions :
General deduction for investment in PPF, PF, Life Insurance, ULIP, Stamp duty on house, Fixed deposits for 5 years , bonds etc.
Descriptions :
Maximum Rs. 1,50,000 is allowed. Investment need not be from taxable income.
Note: Limit of eligible premium in case of insurance policy on life of disable person has been increased to 15 % instead of 10 % from FY 13-14.

Section - 80CCC
Details of Deductions :
Deduction in case of contribution to pension fund. However, it should be noted that surrender value or employer contribution is considered income.
Descriptions :
Maximum is Rs 1,50,000
Note: Aggregate of 80C & 80CCC & 80CCD is Rs 1,50,000.

Section - 80CCD
Details of Deductions :
Deduction in respect to contribution to new pension scheme. Employees of central and others are eligible.
Descriptions :
Maximum is sum of employer’s and employee’s contribution to the maximum: 10 % of salary.
Note: Aggregate of 80C & 80CCC & 80CCD is Rs 1,50,000.

Section - 80CCE
Details of Deductions :
It should be noted that employer contribution is allowable as extra u/s 80CCD(2) of the Income Tax Act from Asst Yr 2012-13 and only employee's contribution is within limit of Rs 1 Lakh as stated in 80CCE
Descriptions :
It should be noted that as per section 80CCE, the maximum amount of deduction which can be claimed in aggregate of 80C ,80CCC & 80CCD(1) is Rs 1,50,0000.

Section - 80CCG
Details of Deductions :
Individual having gross total income up to Rs. 12 Lakh can claim this deduction for investing in IPOs of share or mutual fund units.
Descriptions :
50 % 0f the invested amount. Limit is Rs. 25,000 max.
Note: The deduction is allowed for three years only.

Section - 80D
Details of Deductions :
Medical insurance on self, spouse, children or parents. The deduction is also allowable for CGHS contribution to Central and State scheme. It is also for conducting health check up to Rs 6000.
Descriptions :
Rs 15,000 for self, spouse & children. Extra Rs. 15,000 for insurance on parents. IF parents are above 65 years, extra sum should be read as Rs 20,000. Thus maximum is RS 35,000 per annum to a person of age below 60 yrs.
Note: Cash payment not allowed. Watch the Video on Section D.

Section - 80DD
Details of Deductions :
For maintenance including treatment or insurance the lives of physical disable dependent relatives
Descriptions :
Rs 50,000. In case disability is severe, the amount is Rs 1,50,000. Watch video on 80DD Deduction

Section - 80DDB
Details of Deductions :
For medical treatment of self or relatives suffering from specified disease
Descriptions :
Actual amount paid to the extent of Rs 40,000. In case of patient being Sr Citizen, amount is Rs 60,000.

Section - 80E
Details of Deductions :
For interest payment on loan taken for higher studies for self or education of spouse or children.
Descriptions :
Actual amount paid as interest and start from the financial year in which he /she starts paying interest and runs till the interest is paid in full. Watch the video on 80E.
Note: Watch the video on 80E.

Section - 80EE
Details of Deductions :
Interest on home loan sanctioned during F. Y. 2013-14.
Descriptions :
Maximum Rs 1 lakh.
Note: Value of the property should be below Rs 50 Lakh and max loan sanctioned should be Rs 25 lakh. Further Assessee should not have any other residential house.

Section - 80G

Details of Deductions :
Donations to charitable institution.
Descriptions :
100% or 50% of amount of donation made to 19 entities (National defense fund, Prime minister relief fund etc). For Asst Yr 2014-15, National Children Fund will also get 100% deduction.

Section - 80GG
Details of Deductions :
For rent paid.
Descriptions :
This is only for people not getting any House Rent Allowance. Maximum is Rs 2000 per month.
Note: If you or your spouse or your HUF or minor son has any residential house, deduction is not available.

Section - 80GGA
Details of Deductions :
For donation to entities in scientific research or rural development Fund.
Descriptions :
Only those tax payers who have no business income can claim this deduction .Maximum is equivalent to 100 % of donation.
Note: Cash payment not allowed.

Section - 80GGB & 80GGC

Details of Deductions :
For contribution to political parties
Descriptions :
100 % of donations
Note: Cash payment not allowed.

Section - 80QQB

Details of Deductions :
Allowed only to resident authors for royalty income for books other than text book
Descriptions :
Royalty income or Rs 3,00,000 whichever is less.

Section - 80RRB
Details of Deductions :
For income receipt as royalty on patents of resident individuals
Descriptions :
Actual royalty or Rs 3,00,000 whichever is less.

Section - 80TTA

Details of Deductions :
Individual & HUF having interest in Savings Account
Descriptions :
Rs 10000 maximum
Note : Deduction not allowed if interest derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals.

Section - 80U
Details of Deductions :
Deduction in respect of permanent physical disability including blindness to taxpayer
Descriptions :
RS 50,000 which goes to Rs 1,00,000 in case taxpayer is suffering from severe disability.

Section - 87A

Details of Deductions :
Rebate to individual having low taxable income
Descriptions :
Amount of tax or Rs 2,000 which ever is less
Note : Only resident individual gets this rebate.

CPC (TDS) reminder for raising Flag "B" in TDS Quarterly Statements against 15G/H Forms for FY 2013-14

Dear Deductor (TAN XXXXXXXXXX),

As you may be aware that the depositors submit form 15G/H to the bank for no deduction of tax to be made on the interest payments made to them.

However , it has been observed in your case that you have not raised Flag 'B'(No deduction on account of 15G/H) even against a single transaction as reported in the TDS Statement(s)(Form 26Q) submitted for various quarters of Financial Year 2013-14.

It is highly improbable that not even a single depositor has submitted form 15G/H to you for non-deduction of tax on the interest payments. Accordingly, you are advised to take the following action:

Actions to be taken:
  • Check the details of 15G/H cases from your source data.
  • Download the Conso File from our portal. Please use the e-tutorial for necessary help.
  • Prepare the correction statement with appropriate changes. Please ensure that the TDS Deposited amount equals the TDS Deducted amount in your correction statement.
  • Submit the Correction Statement at TIN Facilitation Centre.
For any further assistance, you can also write to ContactUs@tdscpc.gov.in or call our toll-free number 1800 103 0344.

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

State Government employees are not covered within the terms of reference of the 7th central Pay Commission

While answering to a question in Parliament on 12th August 2014 regarding the employees working in State Government, Ministry of State for Finance Smt.Nirmala Sitharaman said that the State Government employees are not covered within the terms of reference of the 7th central Pay Commission.

She replied in written form to a question asked by a member that service conditions of State Government employees fall within the exclusive domain of respective State Governments. Therefore, State Government employees are not covered within the terms of reference of the 7th central Pay Commission.

Thus, the recommendations of Commission will not directly apply to State Government employees. Accordingly, it is not possible for the Central Government to indicate the financial burden on State Governments, if they decide to adopt the recommendation of the 7th Central Pay Commission in respect of their employees with or without modification.

She also added, the Central Government had sought the views of the State Governments and till the date of the constitution of the 7th Central Pay Commission on 28.2.2014, only 14 States had responded. These State Governments generally mentioned, inter-alia, that adoption of the recommendations of a Central Pay Commission by them in case of State Government employees adds to substantial financial burden

Since the decision to adopt the recommendations of the 7th Central Pay Commission in case of the State Government employees will exclusively concern respective State Government, the question of any assistance by the Central Government will not arise. However, the Terms of Reference of the 7th Central Pay Commission provide, inter-alia, that while making its recommendations, the Commission will also keep in view the likely impact of the recommendations on the finances of the State Governments, which usually adopt the recommendations with some modifications.

Source: www.cgstaffnews.in

Latest updates to submit Documents for PAN Application.

Documents to be submitted as Proof of Identity and Address by Individual who is Citizen of India located in India at the time of application for PAN.

Proof of Identity :
  1. School leaving certificate
  2. Matriculation certificate
  3. Degree of a recognized educational institution
  4. Depository account statement
  5. Credit card statement
  6. Bank account statement/ bank pass book
  7. Water bill
  8. Ration card
  9. Property tax assessment order
  10. Passport
  11. Voters Identity Card
  12. Driving License
  13. Certificate of identity signed by Member of Parliament or Member of Legislative Assembly or Municipal Councilor or Gazetted Officer
Proof of Address :
  1. Electricity bill *
  2. Telephone bill *
  3. Depository account statement *
  4. Credit card statement *
  5. Bank account statement/bank pass book *
  6. Rent receipt *
  7. Employer certificate *
  8. Passport
  9. Voters Identity card
  10. Property tax assessment order
  11. Driving License
  12. Ration card
  13. Certificate of address signed by Member of Parliament or Member of Legislative Assembly or Municipal Councilor or Gazetted Officer
* documents submitted as proof of address for serial numbers 1 to 7 and 13 should not be more than six months old from the date of application.

If the applicant is a minor (i.e. below 18 years of age at the time of application), any of the documents as per the lists specified below of any of the parents / guardian of such minor shall be deemed to be the proof of identity and address of the applicant.

Forgot Password for e-Filing login ? What Now ?

If you have forgotten your password and you have unsuccessfully tried other ways of resetting password, then you can use the new facility to get direct access to your Income Tax Department e-Filing account using the net-banking facility of your bank.

At this time the facility of direct e-Filing Login through Net banking is available through the following banks:
The detailed steps are as follows -
  • Taxpayer should be a registered user of Income Tax e-Filing Portal.
  • Taxpayer should have already submitted the PAN details to the Bank. PAN is required to identify the taxpayer’s e-Filing account with the Income Tax Department.
  • Taxpayer have to first go to the Internet/ Net / Online Banking website of the Bank which has already registered for this facility with the Department.
  • Taxpayer after logging into his Net Banking account should select “Income Tax e-Filing Login” tab/menu item
  • Taxpayer should Select the account number and enter the PAN for verification and click Submit
  • Taxpayer should Accept the Rules and Regulations details
  • Taxpayer should confirm that he may be redirected to his Income Tax Department e-Filing account - home page.
  • Taxpayer can now rest his password and also avail of all services provided by the e-Filing Website of the Income Tax Department, including, filing his Income Tax Return.
Advantages of using this new facility
  • Taxpayer gets direct access to his e-Filing account even if he has forgotten his password.
  • Taxpayer gets a secure and safe way to login into his e-Filing account.
  • Taxpayer can safeguard his e-Filing account by selecting/opting for “Password Resetting” only by using Digital Signature Certificate or through this new facility of direct login from his net-banking account, thereby preventing others from unauthorized access to his account. (coming soon….)
  • Other benefits (coming soon…..)
Detailed steps using example of Corporation Bank Net banking
  1. Go to https://www.corpretail.com/RetailBank/ or any other Bank website from list above.
  2. Login in to your Corporation Bank Net banking account using your Bank provided User ID and password
  3. In case of Corporation Bank -li Select Utility Payments > Select “Income Tax e-Filing Login”
  • Select Account Number (IFSC Code) from the drop down
  • Enter PAN
  • Accept the Terms & Conditions
  • Click on Submit

Click OK to get re-directed and automatically logged into Income tax Department e-Filing account (https://incometaxindiaefiling.gov.in)



You will get re-directed to Income Tax Department e-Filing website (https://incometaxindiaefiling.gov.in) and the home page showing the “Dashboard” after login will appear.

e-Filing Portal Taxpayer Dashboard



You may now reset your password using “Profile Settings” or avail of any service offered.

Remember: This facility is a safe and secure method for direct login to your Income Tax Department e-Filing account only and is available ONLY through your Bank website after you have logged in and not through any other organization or entity or website.

Note: Your net-banking User ID or password is NOT shared by the bank with the Department.

Now e-Filing of Income Tax Return facility through Banks - IT

Income Tax Department is happy to announce the facility of Direct Login from Corporation Bank, Union Bank of India and Oriental Bank of Commerce - Net banking account to the taxpayer's E-filing Account.   IT Department has provided facility of e-filing of Income Tax Return through Banks.  Customers using internet banking facility can avail benefit of this service.  Name, Address , Pan Number, Date of Birth , Bank Account Number, IFSC Codes etc may be automatically captured in filing of  income tax return from Bank Verified database.  In the first instance this facility has been started with Corporation Bank, Union Bank of India and  Oriental Bank of Commerce. Others banks are expected to follow.

Government TDS Deductors must quot AIN details in the TDS Statements - CPC(TDS)

CPC (TDS) asks government deductors to quote AIN details in TDS Statements. The letter issued by CPC (TDS) is as follows:

Dear Deductor,

As per the records of the Centralized Processing Cell (TDS), it has been observed that the Accounts Office Identification Number (AIN) has not been mentioned in the TDS statements submitted by you.

What is AIN and its relevance:
  • AIN is a unique seven digit number allotted by NSDL, to the Pay and Accounts Office (PAO), District Treasury Office (DTO) or Cheque Drawing and Disbursing Office (CDDO). It is mandatory  for the PAO / CDDO / DTO to have an AIN.

Why is AIN important to be quoted in TDS Statement:
  • Quoting of AIN in TDS Statement facilitates complete reporting and results into correct mapping of the TAN with the AIN.
  • The AIN details in Form 24G, filed by the PAO / CDDO / DTO forms part of G-OLTAS database. CPC (TDS) processes TDS statements on the basis of information contained in G-OLTAS.
In view of the above, you are requested to provide AIN details in point 2(b) of the Forms 24Q and 26Q of the TDS Statements.

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

How to Recover e-filing ITR password ?

This is genuine demand that how to recover e-filing ITR Password.  In this matter someone has recently asked that  if Income Tax Return filer has lost his previous ITR-V, email ID with password and e-filing password in that case how can tax return filer submit his ITR-1 as in individual or others.   When Tax Filer has also tried to register as new register with new email id etc. though this, while new registration it shows on screen that "PAN IS ALREADY REGISTERED",   so new registration is not possible.

The same problem has also been informed by another assessee, he had filed his ITR through legal adviser using email address and mobile number of adviser.   Now, he is not familiar with adviser and want to submit his ITR without consultation with adviser. 

e-filing ITR Password Solution :
Use "Forget Password" link available at https://incometaxindiaefiling.gov.in.  Enter your user ID and number as shown in  image .  


After that new screen will be displayed and you may select use OTP (PIN's) with new email address and mobile number.  The following screen will be displayed for your further inputs.


We hope in this way e-filing ITR forget password  problem can be easily removed.

Salaried Employee, Individuals how to compute Income Tax for Asstt. Year 2015-16 ?

Efficient tax planning enables you to reduce tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions & rebates. Tax Planning is NOT tax evasion which is illegal under laws. It involves planning of income & investments. Tax Planning can be practiced easily. Often staff gives estimated declaration at Fin.Year starting to minimize tax liabilities but could not save till Fin. Year end; and faces burden in last months. Better start investing from the beginning of Fin. Year to get interest & appreciation from April.

Tax deduction on monthly basis (employer's corner): Normally employer estimates total income of employee & calculates I-Tax, estimated tax is to be divided by 12 months & avg tax from monthly salary is to be deducted. Hence raise saving plans in advance considering the pay hike & send the correct proofs to payroll. Ensure the document delivery within the pay roll's time frame.

If employee resigns: An employee resigns or otherwise leaves the service, only the salary due and payable up to the date on which he leaves service shall be considered and tax shall not be deducted from the future salary.

 Notes on tax exemptions:
HRA-House Rent Allowance: exempt u/s 10 (13A):If you are occupying a rented residential accommodation, the amount of HRA exempted to the lowest of:
  1. Actual HRA 
  2. Rent paid minus 10% of basic salary 
  3. 40 % of basic salary (50 % for Mumbai, Kolkata, Delhi & Chennai)
Normally employer considers exemptions on original rent receipts. Receipts should be signed by the owner with name & address of the property. Receipt should be of the current FY. Generally receipts should be for the current employer & exemptions for the period not with current employer may not be considered. Rent agreement alone does not constitute proof of payment. Cir No.8/2013/10.10.2013 issued by CBDT says that it is mandatory for the employee to report PAN of the landlord to the employer if rent payment exceeds Rs One lakh per year.

Paying rent to parents or relatives: If you want to pay rent to parents or any relatives whom you are staying with. You will need to treat them as landlords. Request the owner (which will be your parent/relative) to declare it in their tax return.

If property is self occupied, employee cannot claim both i.e. HRA exemption & loss from house property where the property is in same city."

Uniform Allowance: exempt u/s 10(14) ii: To meet the expenditure incurred on purchase or maintenance of uniform to be worn during performance of duty.

Transport Allowance: exempt u/s 10(14) ii:
  • Rs 800 monthly granted to an employee to meet his expenditure for commuting between the place of residence & duty.
  • Rs.1600 monthly granted to physically disabled employee for purpose of commuting between place of residence & duty."
Children Education Allowance: exempt u/s 10(14) ii:
  • Children education allowance: Rs.100 per month per child up to two children.
  • Allowance granted to meet hostel expenses on employee’s child: Rs.300 per month per child up to two children."
Reimbursement of Medical Bills u/s 17(2): Exempted for self & dependent family up to Rs 15000 per annum against original medical bills. Bills of cosmetics & toiletries not allowed. Receipt should be for the period with the current employer only & exemptions for the period not with current employer may not be considered. Authenticity of the bills will be employee's responsibility. If you are paid a medical allowance instead of reimbursement i.e. without bills, then same is taxable.

Leave Travel Allowance-LTA: exempt u/s 10(5):
Exempted economy class train/ air / recognized public transport fare of family to any destination in India, by shortest route. LTA can be claimed twice in block of 4 years. The current block is 1-1-2014 to 31-12-2017. For claim, it is must to provide originals tickets & boarding passes. Employee should be on paid leave during travel period. LTA can be carry forwarded if it has not used, it can be brought forward & claimed in 1st year of next block.

GRATUITY: exempt u/s 10(10):
  • Any Death-cum-Retirement gratuity to Govt. employees; wholly exempt.
  • Any gratuity received by the employees covered under Payment of Gratuity Act, 1972. Least of the following is exempt:- 
  • 15 days salary (7 days in case of seasonal employment) for each completed year of service or part in excess of 6 months. 
  • Rs. 10 Lakh Or iii) Amount of gratuity actually received.
  • Any other gratuity, (not covered under (a) or (b)) least of the followings is exempt:- 
  • Rs 10 Lakh 
  • Half month’s salary for each completed year of service Or iii) Amount of gratuity actually received."
Leave Encashment: u/s 10 (10AA) :Leave Encashment during service is fully taxable in all cases. Leave Encashment on Retirement is exempted from tax;
  • Govt. Employees; fully exempt
  • Non-government employees; the exemption is to be limited to a maximum of 10 months of leave encashment, based on last 10 months average salary subject to a limit of Rs 3 lakhs.
Retrenchment Compensation: u/s 10 (10B) : The retrenchment compensation received by a workman is exempted; provided that it does not exceed the sum calculated on the basis provided in Sec.25F(b) of Industrial Disputes Act, 1947 or any such amount as is specified by the Central Govt. by a Notification, whichever is less.
  • Compensation calculated @ 15 days average pay for every completed year of continuous service or part there of in excess of 6 months.
  • The maximum exemption is Rs 5 lakhs where retrenchment is on or after 1-1-97
Voluntary Retirement Scheme-VRS: u/s 10 (10C):
Any amount received at the time of voluntary retirement is exempt to the extent such amount does not exceed Rs. 5 lakhs, provided the scheme of such voluntary retirement is in accordance with the guidelines prescribed under rule 2BA of Income Tax Rules 1962. If an exemption has been allowed under this section for any assessment year, no exemption there under is allowable in relation to any other assessment year.

Saving Bank Interest: 
From the year 2012-2013 interest up to Rs 10,000 is allowed as deduction.

Taxable Perquisites:
Such as rent free accommodation, company provided car, concessional education, employee stock option plan, free club membership, company provided credit card, gift vouchers, meal coupons, hotel stay beyond 15days are taxable.

PF amount is withdrawn before five years of continuous service; it may be taxable in the hands of the individual.

Tax on employment:
Professional Tax deduction u/s 16iii - Professional tax paid by employee is to deducted from the income. Professional tax firstly include in gross salary then allowable as deduction limited to 2500/- u/s 16(iii) as deduction from salary.

Interest on housing loan for self occupied residence u/s 24:
If loan taken before Apr 1, 1999 exemption limited to Rs 30,000 per year. If the loan taken after Apr 1, 1999 exemption limit to Rs 200,000 per year ( If loan taken first time then interest exemption limit extended up to 2.5 lakh fin bill 2013 ). There is no limit if the house is rented out. This exemption is available on accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether paid it or not. In case of self occupied property, employee cannot claim both i.e. HRA exemption as well as loss from house property where the property is in the same city. Require provisional certificate from the bank with specifying the Interest, Principal & pre-EMI interest separately.

If you rented out your house, enter the income / loss from the house after deducting property tax & maintenance expenses.

More about deductions under chapter VI A: 

Max limit u/s 80C Rs 1.5 lakh 

Provident Fund (PF) & Voluntary Provident Fund (VPF): PF is deducted from your salary, employee’s contribution is covered as investment u/s 80C. Additional contributions can be made through VPF. Interest earned treated as tax free.

Life Insurance Premiums (LIC): Any amount paid towards LIC or any other Insurance company for yourself, spouse or children can also be included in section 80C deduction. Premium paid for ULIP will also be treated as premium paid for life insurance policies.

Public Provident Fund (PPF): Among all the assured returns small saving schemes, PPF is one of the best. Current rate of interest is 8.7% tax-free and the normal maturity period is 15 years. Minimum contribution is Rs 500 and maximum is Rs 1.5 Lakh.

National Savings Certificate (NSC): Is a 5 year small savings instrument. Interest is compounded half-yearly. Interest accrued every year is liable to tax hence to be included as income but the interest is also deemed to be reinvested & thus eligible u/s 80C deduction.

Home Loan Principal Repayment, Stamp Duty and Registration Charges for a home Loan: The Equated Monthly Installment (EMI) consists of two components i.e. Principal & Interest. The principal component is deductible u/s 80C. The interest component comes u/s 24. Amount of stamp duty & registration when buying a house can be claimed as deduction u/s 80C in the year of house purchase.

Tuition fees for 2 children: Children’s tuition fee can be claimed as deductions u/s 80C. Expenses, such as transport, library, hostel, development fees or donation, are not covered. The deduction can be claimed only for full-time courses including pre-nursery & playschool. Part-time, distance learning, private tuitions & coaching classes are not covered. Each parent can claim deduction for the tuition fees paid for up to 2 children each. This deduction can be availed of on the basis of actual payment, irrespective of the period fee may pertain.

Unit Linked Insurance Plan (ULIP): It covers life insurance with benefits of equity investments. Amount received at maturity, survival benefits, withdrawal in insurance policies are tax free and fully exempted u/s 10 (10D).

Equity Linked Savings Scheme (ELSS): There are some mutual fund schemes specially created for offering you tax savings, and these are ELSS. The investments that you make in ELSS are eligible for deduction u/s 80C.

5-Year bank fixed deposits (FDs): Declared Tax-saving fixed deposits of scheduled banks with tenure of 5 years eligible for deduction.

5-Year post office time deposit (POTD): Similar to bank fixed deposits. Available for various duration of 1 to 5 year, only 5year POTD qualifies for tax saving u/s 80C. The interest rate is compounded quarterly but paid annually. Interest is entirely taxable.

Pension Funds or Pension Policies u/s 80CCC: Investment in pension funds up to Rs 1.5 lakh can be claimed as deduction u/s 80CCC. However the total deduction u/s 80C and 80CCC can not exceed Rs 1.5 lakh.

Infrastructure Bonds: These are also called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in u/s 80C deductions.

NABARD bonds:  Investment in notified bonds issued by National Bank for Agriculture and Rural Development (NABARD)

Senior Citizen Savings Scheme 2004 (SCSS): Is the good scheme among all small savings schemes but only for Sr. citizens. Current interest rate is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on the deposits won’t earn any further interest. Interest is chargeable to tax.

80CCD: Notified Pension Scheme (NPS): Contributing a part of your income towards the new pension scheme. From the AY 2012-13, the employer’s contribution are not included in overall limit of Rs 1.5 lakh provided contribution does not exceed 10 % of salary.

80CCE: Maximum exemption up to 1.5 lakh: Investments in PF, VPF, PPF, Employee contribution in NPS, Insurance premium, Housing loan principal repayment, NSC, ELSS, Long term bank fixed deposit, Post office term deposit, etc. are deductible from the taxable income. There is no limit on individual items, for example all 1.5 lakh can be invested either in NSC or PPF etc.

More about deductions under chapter VI-A  

80D: Medical insurance premium & health insurance plans: Premium is exempt up to Rs 15,000 for self, spouse and children and Rs 15,000 for parents. If the premium of a dependent who is Sr. citizen an extra Rs 5,000 can be claimed.

80DD: Deduction of medical treatment of handicapped dependents limited to Rs 50,000; if disability above 80% then Rs 1 lakh.

80DDB: Deduction of medical treatment for specified ailments or diseases for the assessee or dependent can be claimed up to Rs 40,000 per year. If the person being treated is a sr.citizen, the exemption up to Rs 60,000. But any amount received under Medical Insurance will be reduced from the amount of deduction allowed. The diseases & ailments specified under rule 11DD:- 
  1. Neurological diseases being Dementia, Dystonia, Musculorum deformans, Motor neuron disease, Ataxia, Chorea, Hemiballisumu, Aphasia & Parkinsons disease 
  2. Cancer
  3. AIDS 
  4. Chronic renal failure 
  5. Hematological disorders: i. Hemophilia & ii. Thalassaemia.
80E: Interest repayment on education loan taken for higher education for self & dependents is completely tax exempted. Deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit. To claim, certificate or proof from the bank specifying the said loan is an Educational Loan and interest paid in the current year by you, i.e. the loan borrower. Interest repayment is tax exempt from the 1st year of repayment up to a maximum of 8 years. There is no exemption for principal repayment.

80G: Donations to certain charities are tax exempted: Some NGO, trusts are exempt up to 50%, whereas govt funds are 100%.

80GG: If you are not receiving HRA but living in rented house, an exemption is available. This will be calculated as minimum of (25% of total income or rent paid less 10% of total income or Rs 24000 per year) provided you/your spouse/children do not own any residential property either at the place of your work or residence, or if your spouse/children own a residential property at any other place (but not the assessee), then you can claim deduction for the rent paid as per sec 80GG under Income Tax Act, 1961.

80U: Permanent Physical Disability: Including blindness, an exemption Rs 50000 per year, however, if the assessee suffers from severe disability, the deduction shall be Rs 1 Lakh. ‘Severe disability’ means disability of 80% or more.

80CCG: Rajiv Gandhi Equity Savings Scheme (RGESS): The exemption available for investment in stock markets i.e. direct equity. Available only to those with gross income less than 12 lakhs & only for first time investors in stock market. Exemption limited to 50% of investment subject to maximum of Rs 50,000 invested. Such investments are locked-in for 3 years.

87A: A person whose income is up to Rs 5 lakhs will get a tax credit of Rs 2000/-. The person will get a rebate of Rs 2000/- under newly inserted section 87A of the act. Means, tax payers in Rs 2 to 5 lakh slab will get the rebate and will claim this rebate while filling the returns & will reduce their tax liability from FY 2013-14.

Common incorrect practices during return filling:
  1. All the communication by the tax department is now done via email and mobile. Many individuals make a mistake of providing email IDs which are either not in use or discontinued due to inactivity or change of jobs. Hence make sure that a valid & functional email ID and mobile, which you regularly access is to be provided in the return.
  2. You must provide correct bank a/c number along with IFSC/MICR code on your return form. This helps tax department in processing the refund. Not providing the correct information may treated the return as defective."

GET FREE EMAIL UPDATES

Join us for free and get valuable content delivered right in your inbox.