Bank on tax savers and count money

Bank on tax savers and count money
The saying goes, ‘A rupee saved is a rupee earned’. Every rupee saved which otherwise would have been an out go adds-up to one’s kitty without earning. One can bank on innumerable tax savers to save and avoid tax to count money. Avoidance of tax is not an offence under the Income Tax Act but evasion is. One can avoid tax by taking to routes of investments in tax savers.

There are umpteen number of tax saver investments to avoid incidence of tax. Many among them are as under sans changes in the ensuing Budget:

Under Section 80 (C): One can invest in any one or in aggregate to an extent of Rs 1.5 lakh in Public Provident Fund account, Life Insurance Premium, National Savings Certificates (NSCs), National Savings Scheme, Tax Saver five years fixed deposit bonds of banks, equity linked savings schemes (ELSS)-tax saving MFs, Senior Citizen Scheme and Sukanya Samriddhi account and get tax rebate to that extent.

While the above are investment avenues for claiming tax rebate, repayment of principal to housing loan and payment of tuition fees up to two children are also eligible for tax rebate within the aggregate of Rs 1.5 lakh under the section. The above apart, tax rebate up to of Rs 2 lakh is available U/s 24 (B) for interest paid on housing loan for a self occupied property.

Additionally, tax rebate U/s 80 (EE) to an extent of Rs 50,000 for interest component is available for the first-time home buyers in case the home loan availed is less than Rs 35 lakh, the value of the house is not more than Rs 50 lakh and the buyer is not owning any other residential property in his name.

Thus a total of Rs 2.5 lakh can be deducted straight away out of taxable income under U/s 24(B) and 80(EE) bringing down one’s tax liability enormously. Avail home loan and ride on tax rebate while owning a sweet home.

U/s 80 CCC: One can contribute to annuity plans of LIC or any other insurance companies to receive pension to an extent of Rs 1.5 lakh and earn tax rebate under this section.    
                                                                
U/s 80 CCD: One can contribute to the government recognised NPS (national pension scheme) to an extent of Rs 1,50,000 and get tax rebate U/s 80 CCD (1). Additional tax rebate of Rs 50,000 is available under Sec 80 CCD (1e) subject to the amount so contributed being within 10% of salary (Basic Pay plus DA) in case of an employee or gross income in case of others.

However, total tax rebate available for investments U/s 80 (C), 80 (CCC) and 80 (CCD1) is restricted to Rs 1.5 lakh/maximum to an extent of Rs 2 lakh including U/s 80 CCD (1e).

One can secure his/her life during twilight years with regular monthly income by way pension even while enjoying tax rebate.

U/s 80 (D): One can buy a medical insurance policy and get tax rebate of Rs 25,000/ Rs 30,000 in case of senior citizens under the section.  In case the policies are purchased for senior citizen parents and self and family, if the purchaser himself is a senior citizen, total tax rebate available under this section is Rs 60,000.

A rebate of Rs 5,000 backed by original medical bills can be claimed under this section for family and parents for medical expenses incurred. Buy a medical insurance policy and secure yourself and your family even while saving on tax.

80 (DD): The above apart, one can claim tax rebate for medical expenses incurred for dependents up to 40% disability to an extent of Rs 75,000 and up to Rs 1.25 lakh in case of severe disability.

80 (G): One can contribute to certain charitable institutions and relief funds by way of cash (not over Rs 10,000), cheque or DD and claim such contributions as rebate under this section. Contribute generously and earn tax rebates while having satisfaction of having served the needy/society at large.  
   
U/s 80 (TTA): Interest earned on Savings Bank deposits in the banks, post offices or co-operative societies up to a maximum of Rs 10,000 is exempt under this section. Keep handsome money in Savings Bank accounts to meet exigencies of family even while enjoying tax rebate on the interest earned.

Other rebates: One can claim tax rebate for interest paid on an education loan availed for pursing higher education of their wards U/s 80(E).

Under Sec 80 (GG), those who do not receive HRA and also do not own a house can claim exemption to an extent of Rs 60,000 per annum subject to the least of (a) rent paid less 10% of adjusted total income (b) Rs 5,000 per month, (c) 25% of the total income.

In case the HRA is received from an employer, exemption is restricted to least of (a) actual HRA received (b) Rent paid in excess of 10% of BP +DA (c) 40% of Pay+ DA   
87 (A): The above apart, if the taxable income of a tax payer is less than Rs 5 lakh in the financial year, tax rebate to an extent of Rs 5,000 or to the extent of actual tax liability is available under the section.

Thus, by choosing investment avenues in tax savers coupled with availing home and education loans, by incurring (un-avoidable) medical expenses and by donating for charity generously one can avoid tax and have windfall tax savings.

(The writer is Chief Manager, State Bank of Mysore (Retd.))

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