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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Sir,
While submitting From 12BB, employee should include all his investments i.e. Salary Deduction & orher than Salary Deduction or only investments made by employee other than salary deduction should be included in Form 12BB
Dear Jayesh ..all the details (expenses / investments) that an employee would like to claim from his/her employer. For ex: HRA (rent receipts), Medical premium (80D), ELSS investments (80C) etc.,
Read:
All you need to know about Form 12BB.
Income tax declaration & investment proofs.
Sir,
I have a confusion that how an individual can avail rebate of 5000 u/s 87a please tell me in details with an example.
Dear Ramashankar,
Tax rebate of Rs 5,000 is applicable if your net income equals to or less than Rs 5 lakh (under section 87A ).
Only Individual Assesses earning net income up to Rs.5 lakhs are eligible to enjoy tax rebate u/s 87A.
For Example : Suppose your yearly pay comes to Rs.6,00,000 and you claim Rs.1,50,000 u/s 80C. The total net income in your case comes to Rs.4,50,000 which makes you eligible to claim tax rebate maximum of Rs.2,000.
* The amount of tax rebate u/s 87A is restricted to maximum of Rs.5,000. In case the computed tax payable is less than Rs.5,000, say Rs.2,500 the tax rebate shall be limited to that lower amount i.e. Rs.2,500 in our case.
* The Tax Assesse is first required to add all incomes i.e. salary, house income, capital gains, business or profession income and income from other sources and then deduct the eligible tax deduction amounts u/s 80C to 80U and under section 24(b) (Home Loan Interest) to come up with the net taxable income.
* If the above net taxable income happens to be less than Rs.5 lakhs than the tax rebate of Rs.5,000 comes in the picture and should be deducted from the calculated total income tax payable.
Click here to know more about Section 87A.
Hi Sreekanth,
Many Thanks for the article. Very informative. I've been searching for these infos since a while.
Got a qustion aboute NPS , after reading this. You mentioned NPS in 80C and 80ccc. Are the similar?
Prajith
Dear Prajith,
We can call it as Section 80C series..
Section 80CCD(1) - Employee's contribution
Section 80CCD(1B) - Employee's contribution.
Section 80CCD(2) - Employer's contribution.
I'm clear. Thanks for explaining.
Hi Sreekanth,
In form 16, amount paid/credited value calculation on what basis. And also amount of tax deducted calculation on what basis. Is tax deducted depends on amount paid/credited valve. If depends so then what is percentage of it???????
Dear PAVAN,
It depends on your salary structure, your investments, other sources of income declared (if any) etc.,
Sir
I am a divorce...raising a child as a single mother...and as per the courts order i am supposed to get Rs 20 lakhs as settlement from my ex husband. My ex husband is an NRI. I just want to know whether i need to pay tax on the above amount.
Thanking you
Dear Tehseen,
I believe that lump sum received as part of alimony (due to divorce) is not taxable. But monthly alimony is taxable.
hello Sreekanth just wanted to know that, if a man divorced then according to penal action of court he has to pay a settlement amount to his wife so my question is if he is getting more than 500000 annually and he has to pay equally to his ex-wife so his income is taxable or not and he can also applied in any section under 80c-80g?
Dear Pankaj,
I believe that Alimony paid is a purely personal expenditure of the payer. It is not an allowable deduction/expenditure. So, your income can be subject to taxes.
my father-in-law is an paralysis patient. i am salaried professional, can i avail 80dd deductions for my IT returns and if yes till what amount can i claim it?
Dear Rajkumar..One can not claim it is for Father in law.
Dear Sir,
I have savings under PPF, LIC and EPF, cumulating to over Rs. 1.5 L, thus covering the limit under sec. 80 C. If I join NPS and contribute Rs. 50 K now, will I get the overall exemption of Rs. 1.5 L + 0.5 L = Rs. 2.0 L?
Kindly send your clarifications by Email.
Regards,
S.K.Venkatachalam. 14-11-2016
Dear VENKATACHALAM,
Kindly read below articles;
Why you should think beyond TAX when investing!
National Pension Scheme (NPS) – Why it is not a good Investment Option?
Hi sir ,you are doing superb job .
1) Would like to know the difference between 80 ccd(1),80ccd(2) & 80ccd(1b) ,& also want to know which on to be included in the limits of 15,0000 & which one to be included in the additional limit of 50000.
2)Could I claim health preventive check up amount of Rs.5000/- apart from the limit of u/s 80D( is Rs.25000/-)
3) can we get the knowledge of exemption u/s 10.
Dear Pritam,
80CCD (1) & 80CCD (1b) are your contributions.
80CCD (2) are the ones contributed by the employer.
Additional Rs 50k tax deduction is u/s 80CCD(1b).
2 - No, it is inclusive. Kindly read: Mediclaim tax benefits ...
3 - HRA, Leave encashment, gratuity, Medical allowance etc come under section 10.
Kindly read:
Leave Encashment & Tax Implications
13 FAQs on Gratuity Benefit Amount & Tax Implications
Thanks Sir ...One more query how could I claim the loss of house property....any form is there & under which section.
Dear Pritam,
Kindly read: Understanding Tax Implications of Income from House / Property
Rebate under Section 87A is listed as effective only from 01.04.2017 in the Income-tax site. But in many online forums and articles, including yours, it is mentioned as w.e.f. the financial year 2016-17 (assessment year 2017-18).
Could you please shed some light on this.
Dear Nirmal,
Kindly note that 2016 - 17 is Financial Year and 2017-18 is Assessment Year.
Yes, it can be claimed from AY 2017-18 only.
It means we can deduct new Rebate amount rs. 5000 in Financial Year 2016-17???
Yes dear Sachin.
Dear Sreekanth,
Can I open an NPS account in the name of my wife (self-employed, with no taxable income) and claim deduction upto Rs,50,000/- u/s 80CCD (1b) . This facility is available for PPF, NSC, Sec-80D etc. but I am not sure about the same.
Dear Paddy ..No, not eligible.
Kindly read: Tax saving investments : in whose name can they be done?