Budget 2016-17 has been presented in Parliament. The Finance Minister has kept the Personal Income Tax slab rates unchanged for the Financial Year 2016-17 (Assessment Year 2017-2018).
Let us understand all the important sections and new proposals with respect to Income Tax Deductions FY 2016-17. This list can help you in planning your taxes.
Section 80c
The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues or expenses that can be claimed as tax deductions under section 80c are as below;
Section 80CCC
Contribution to annuity plan of LIC (Life Insurance Corporation of India) or any other Life Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.
Section 80CCD
Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.
To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS. The 10% of salary limit is applicable for salaried individuals and Gross income is applicable for non-salaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to Pension Scheme, the whole contribution amount (10% of salary) can be claimed as tax deduction under Section 80CCD (2).
Kindly note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.
Section 80D
Deduction u/s 80D on health insurance premium is Rs 25,000. For Senior Citizens it is Rs 30,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.
Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, dependent children and parents).
Section 80DD
You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. The tax deduction limit of upto Rs 1.25 lakh in case of severe disability can be availed.
To claim this deduction, you have to submit Form no 10-IA.
Section 80DDB
An individual (less than 60 years of age) can claim upto Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens is Rs 60,000 and for very Senior Citizens (above 80 years) the limit is Rs 80,000.
To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt or Private hospital.
For the purposes of section 80DDB, the following shall be the eligible diseases or ailments:
(a) Dementia
(b) Dystonia Musculorum Deformans
(c) Motor Neuron Disease
(d) Ataxia
(e) Chorea
(f) Hemiballismus
(g) Aphasia
(h) Parkinson’s Disease
Section 24 (B)
The interest component of home loans is allowed as deduction under Section 24B for up to Rs 2 lakh in case of a self-occupied house. If your property is a let-out one then the entire interest amount can be claimed as tax deduction. (Read: Understanding Tax Implications of Income from house property)
Section 80EE
This is a new proposal which has been made in Budget 2016-17. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.
Section 80U
This is similar to Section 80DD. Tax deduction is allowed for the tax assessee who is physically and mentally challenged.
Section 80GG
As per the budget 2016 proposal, the Tax Deduction amount under 80GG has been increased from Rs 24,000 per annum to Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).
The extent of tax deduction will be limited to the least amount of the following;
Section 80G
Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. This deduction can only be claimed when the contribution has been made via cheque or draft or in cash. But deduction is not allowed for donations made in cash exceeding Rs 10,000. In-kind contributions such as food material, clothes, medicines etc do not qualify for deduction under section 80G.
Section 80E
If you take any loan for higher studies (after completing Senior Secondary Exam), tax deduction can be claimed under Section 80E for interest that you pay towards your Education Loan. This loan should have been taken for higher education for you, your spouse or your children or for a student for whom you are a legal guardian. Principal Repayment on educational loan cannot be claimed as tax deduction.
There is no limit on the amount of interest you can claim as deduction under section 80E. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.
Section 87A Rebate
If you are earning below Rs 5 lakh, you can save an additional Rs 3,000 in taxes. Tax rebate under Section 87A has been raised from Rs 2,000 to Rs 5,000 for FY 2016-17 (AY 2017-18).
In case if your tax liability is less than Rs 5,000 for FY 2016-17, the rebate u/s 87A will be restricted up to income tax liability only.
Section 80 TTA
Deduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account with a bank, co-operative society or post office can be claimed under this section. Section 80TTA deduction is not available on interest income from fixed deposits.
Conclusion
It is prudent to avoid last minute tax planning. Do not invest in unwanted life insurance polices or in any other financial products just to save taxes. It is better you plan your taxes based on your financial goals at the beginning of the Financial Year itself. Plan your taxes from April 2016 itself, instead of waiting until late December 2016 (or) January 2017.
It is OK to pay some taxes when you can not save or cannot invest in right financial products. But, do not invest just to save TAXES. The cost of buying wrong financial products may outweigh the cost of taxes. Tax Planning is not a goal but a tool. Remember “Tax Planning alone is not Financial Planning.”
Also, kindly understand the tax treatment of the selected investment products across the different investment stages (i.e., investment, accrual & withdrawal) and then invest.
I believe that the above list is useful for your Tax Planning purposes. The above ‘Income Tax Deductions 2016-17’ are applicable for financial year 2016-2017 (Assessment Year 2017-2018).
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net)
You may like reading : How Income Tax Dept tracks High Value Financial Transactions?
This post was last modified on July 11, 2023 11:06 am
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View Comments
Srikanth sir i have heard about i can claim only 24000/- for tution fee for two children please clear i can take exceed for this
Dear Syed ..If you are referring to claiming of Tuition fee under section 80c, then the limit is up to Rs 1.5 Lakh..
What is the maximum permissible IT exemption under chapter VI A? Is it capped at 3,50,000 even if the home loan being repaid is for a flat that is not self occupied but has been let out?? Please clarify
Dear Ravi,
The principal repayments can be claimed under section 80c up to the limit of Rs 1.5. Lakh.
For FY 2016-17, there is no limit to claim interest payments u/s 24.
However, the new Budget 2017 has proposed to put the restriction to Rs 2 Lakh.
Thank you so much
Dear Sir,
Please explain Section 80 GG in the context of my problem.
I have received HRA for 4 months during 2017-18 FY.
I then joined a private job and did not get any HRA for the rest of the 8 months.
Can I claim deduction for these 8 months OR the deduction can only be claimed for a complete financial year.
Dear Vijay,
Tricky one;
The condition is : If individual is a salaried employee and receives House Rent Allowance (HRA) at any time during the Financial Year, he/she is not eligible for deduction.
A house property purchased in Feb 2015, in the names of spouse (first name) and self (second name) with contribution of about 15% and 85% respectively (without any specific mention thereof) , is being intended to give on rental.
(1) In whose hands the rental income is to be declared. Individually, spouse's income is very nominal and below the taxable limit and I am a tax payer.
(2)Whether expenditure/income can be shown in the respective hands if part of the flat is shown as rental in the hands of children
Dear Mr Marari,
1 - Rental income has to be declared by both the owners as per the share of owneship in the property, by default 50:50 can be considered.
2 - Is the property co-owned by children also???
Dear Sreekanth,
Thanks for your valuable suggestions.Can I know is there 80CCF infra bonds which qualifies for tax deduction in fy 16-17.one more question is deduction under 80ccc Contribution to annuity plan(1.5lacs) is above 80c(1.5 lacs).
Dear balnagesh,
1 - 80CCF is not available for FY 16-17.
2 - The overall limit is Rs 1.5 Lakh only.
I am a serviceman. My total income on fy 2016-17 rs 694188.00 .Deduction p .tax 2496.00 and other g pf ,gis ,on 80cc etc will 150000.00 . Calculate my income tax.
Dear sahabuddin ..You may kindly use this calculator ....
i am a salaried person during last fy 2015-16 i received the salary up to the month of November 2016 but till 31st march my total saving under section 80 c was 100000 so my total income taxa was nil.
now i have received the remaining part of my salary in this fy 2016-17
should i file the revised itr or salary of previous year received in fy 2016-17 would be commuted in this year income
Dear saninder,
It is arrears received now, in different FY. Suggest you to kindly consult a CA and take advice.
Sir
I am 43 years old, having salary income of around 6-7 lakhs. I have my own house regsitered in my name, but due to some reasons i have to stay with my father in law in the same city, and i am paying him rent of rs.15000/- pm. , Can i take benefit of HRA under the head income from salaries (HRA).
Dear Navdeep ..Are you going to claim the house owned by you, as Self-occupied property in your Income tax return?
Hi Sreekanth,
I used to pay rent to my father till 2013 when he expired.The house is in the name of nmy father tilldate.
Who should I pay my rent and show it for tax benefit(I am Salaried)--To my mother or to my mother(Who is the
first legal inheritor)? Kindly clarify it.
Thank you and best regards
Dear Kallol,
Both of you can have equal share in the property. So, are you relinquishing your share in the property?
Hi Sreekanth,
I want to have tax benefit by paying rent in this case to my mother.How can I do that?
Thanks for your reply
Dear Kallol ..If that's the case, then property should be solely owned by your mother only.
An employee received an amount of Rs. 200000 as medical reimbursement of his ailing father (above 60 years). How many amount will be exempted for income tax (A.Y.2017-18)
Dear Vinod,
If medical allowance is part of your salary, you can claim up to Rs 15,000 ..
Read : Section 80D & medical allowance.