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
Dear Sreekanth,
I thank you for providing deductions ready reckoner for FY 16-17. It is quite handy and useful for my 2016-17 planning. I need an advice on an old matter. Can you help please.
My employers in 2013-14, deducted Tax from my salary for 6 months but deposited only 3 months tax to govt. Total amount deposited Rs.96924/-. In 2014-15 again they deposited Rs 94000/-.
We mentioned the same in my ITR for AY 2014-15 , however IT dept raised a tax demand of Rs.74000/- which I disputed.
My query are as below: 1) Can I take the benefit of tax credit of Rs. 198000/- in ITR of FY 2015-16? if not then
2) can this tax credit be adjusted against pending tax demand?
I look forward to your valuable advice.
Dear Deepak,
You may have to first check with your employer the reason for not depositing the TDS.
Kindly request them to rectify the TDS entries and make sure the correct details are reflected in your Form 26AS.
You may then file Rectified Return accordingly.
Hi Deepak,
Seeing your query, FY 15-16 credit can only be taken in ITR of FY 15-16 only. Assessee as himself/herself cannot set off multi year tax credit / demands, however if the same case is under Assessment by department then a request could be made to the respective ITO to do the set-off. Whereas if there is refund in one year and payable balance in 2nd year then refund is received separately and payment of balance tax for 2nd year is made separately.
Regards
Vijender Singh
Dear Sreekanth,
Just a quick query.
My employer has shared the Form 16 with me for last FY 2015 16.
Additionally do I need to mention the interest income (around 6 k) earned on my savings account while filing my returns for last FY?? Kindly confirm.
Thanks & Regards
Sujit
Dear Sujit,
Yes, you have to include Rs 6k under the head 'income from other sources' of your income tax return (ITR).
However, deduction of up to Rs 10,000 is allowed as tax deduction u/s 80TTA.
So you can show Rs 6k as other source of income and also claim tax deduction of Rs 6k u/s 80TTA.
Dear Sreekanth,
Thanks for providing information in a simple and lucid way.one can understand very easily the tax matters.very good effort.please keep it up.
Very useful infomation and well organized & quite helpful.. Thanks yo
Hi Sreekanth,
I would like to thank you for your efforts towards this blog. You are doing great.
I have an query in section 80EE - We have an land, planning to construct house. this is our first home and will be going for "house construction loan". Is that eligible for 80EE deduction?.
Regards,
Lavanya.
Yes dear Lavanya , you can claim tax deduction u/s 80EE.
Hi, sreekanth.
i wanted to know if tax deductions can be claimed upto 2.5 lakhs in the following fashion.
u/s 80C:- a) EPF (rs 78945) and b) ELSS mutual funds (rs 74000) with a maximum of Rs 1,50,000/-
u/s 80 CCD (2):- employers contribution to NPS:- rs 62,068
u/s 80 CCD (1b):- employee (individual contribution) to NPS:- rs 50,000/-
thus total deductions upto 2,62,068/- under section 80C and family.
the above are actuals from my salary. Please post a suitable reply to my query.
Dear Ashay,
80 c - fine.
80CCD - fine if it is subject to 10% of salary (DA).
80 CCD 1b - Fine.
Me (Software Engineer) & My Father (Govt. Employee) together took a home loan for a fully constructed house in which my parents are already staying in that house and myself & my father together repaying the loan.. Here main applicant is my father and I am applicant2.
I am staying in Hyderabad and my parents are 150kms far from Hyderabad where the actual house is located.
How can I declare my investments and how can my father can declare?
Are we allowed to share the amount 1 lakh each within the limit of 2 lakhs while declaring for investments?
If we take the loan for the FY2016-17, are we eligible for declaring the investments for the next FY as well?
Dear Suresh,
Yes, you can share the tax benefits. Ideally in 50:50 ratio if ownership share is not mentioned in the sale deed.
I did not understand your last sentence 'If we take the loan for the FY2016-17, are we eligible for declaring the investments for the next FY as well?'
my bad.. I mean to say that, we took the loan in this year and are we eligible for tax exemption for the next years also?
could you please let me know clearly more about "if ownership share is not mentioned in the sale deed".
The registration is done on my father name. and the bank processes are done on both of our names.
I think, since we took the loan in this year 2016, we are eligible for 2.5 lakhs of this FY. right?
Am I also eligible for submitting HRA as I am staying in a rented house in Hyderabad in this case?
Dear Suresh,
Are n't you the co-owner of the property? Is the property solely owned by your father?
i do not find any column to claim rebate u/s 24 (b) while i am filing my income tax return online in ITR1, what should i do?
Dear MOHD,
You have to calculate 'income from house property' and disclose it under Part-B section.
While calculating income from house property you can deduct LOSS ie interest payments towards home loan.
Read: Income from house property & income tax benefits on home loan.
I an a Govt salary person. MY GROSS INCOME IS 4.9 LACKS. Tution fee paid rs 40000 per annum for only one children (Residential school ) ,Can i rebate this amount in 80C or 80CC, Is RAJIB Gandhi Bond is applicable in F.Y-2016-2017.Please reply.
Dear N.K.CHOUDHART...Its 80c.
Read: IT declaration & Investment proofs...
there is not 80 ee section in the new form ..where should i put that item while filing tax?
Dear saurabh ..its applicable from FY 2016-17 / AY 2017-18.