With the start of New Year, it is time to prepare for the income tax Liability for the assessment year (AY) 2019-20. To avoid last-minute investments in order to save taxes, it is advisable to plan your financial goals well in advance and work on them throughout the year.
The income tax is a percentage of income which is paid to the government by the taxpayers for the betterment of the public in general. The income tax slabs are decided by the Finance Ministry and the same is laid out in the budget every year. The income is categorized into different groups and the groups are known as tax slabs.
The income tax rates are declared in the Budget. Every individual has to adhere to the tax rates, which depend on the annual income of the individuals. The rates are mentioned in detail below:
Tax Rates for individuals below 60 years of age:
Taxable income | Tax Rate |
INR 0 to INR 2,50,000 | Nil |
INR 2,50,000 to INR 5,00,000 | 5% |
INR 5,00,000 to INR 10,00,000 | 20% |
Above INR 10,00,000 | 30% |
Additional Deduction as a Standard Deduction has introduced by the Finance Budget 2018-19 | Rs.40,000/- |
Tax rates for individuals above 60 years but less than 80 years of age:
Taxable income | Tax Rate |
INR 0 to INR 3,00,000 | Nil |
INR 3,00,000 to INR 5,00,000 | 5% |
INR 5,00,000 to INR 10,00,000 | 20% |
Above INR 10,00,000 | 30% |
Additional Deduction as a Standard Deduction has introduced by the Finance Budget 2018-19 | Rs.40,000/- |
Tax rates for individuals above 80 years of age:
Taxable income | Tax Rate |
INR 0 to INR 5,00,000 | Nil |
INR 5,00,000 to INR 10,00,000 | 20% |
Above INR 10,00,000 | 30% |
Additional Deduction as a Standard Deduction has introduced by the Finance Budget 2018-19 | Rs.40,000/- |
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Additionally, there is a surcharge of 10% in case the total income exceeds INR 50 lakh and a surcharge of 15% in case the total income is more than INR 1 crore. There is also an education cess of 3% applicable over and above the surcharge.
Every individual is eligible for a deduction on the amount of income invested in specific securities. We have listed down all the deductions for AY 2018-19, which will help you prepare your income tax returns easily and make the most of the available tax deductions.
A list of income tax deductions for AY 2019-20 as per various sections of the Income Tax Act, 1961
PICTURE OF TAX
Section 80C
This is the most important section for deductions for every taxpayer. The maximum exemption limit in the section is INR 1.5 lakh. There are various avenues like PPF, EPF, term insurance, NPS, etc that could be claimed under section 80C. Below is the complete list:
· Public Provident Fund
· National Savings Certificate
· National Pension Scheme
· Employees’ Provident Fund
· Tuition fees
· Post Office tax saving deposits of five year
· Bank deposit
· Life Insurance Premium
· Equity Linked Saving Schemes
· Principal repayment of home loan
· Sukanya Samriddhi Account Deposit Scheme
· Post Office Senior Citizens Savings Scheme
Section 80CCC
This section allows a maximum deduction of INR 1.5 lakh and it includes the contribution made to annuity plan of a life insurance provider for the purpose of obtaining the pension from the fund.
Section 80CCD
This section includes the contribution to the Atal Pension Yojana and allows a deduction of a contribution up to10% of the total salary of salaried employees and 20% of the gross income of non-salaried to the government-notified pension schemes. The contribution can be deducted from the taxable income under Section 80 CCD (1). In case the employer contributes to the scheme as well, the entire contribution amount can be claimed as a tax deduction under Section 80CCD (2).
It is important to remember that the complete deduction under Section 80C, Section 80CCC and Section 80CCD (1) cannot exceed INR 1.5 lakh in aggregate. The additional tax deduction amounting to INR 50,000 under the Section 80CCD (1B) is above this limit.
Section 80D
This section allows deductions on the health insurance premium paid by the taxpayer. The limit for the same is INR 25,000 for self, spouse, and children and an additional INR 25,000 for parents. The limit for senior citizens is INR 50,000. An amount of INR 5,000 per family can be claimed as preventive health check-up expenses. However, this is not over and above the individual limits specified.
Section 80DD
An amount of INR 75,000 may be claimed as a deduction for spending on medical treatments of dependents with a 40% disability. This limit is INR 1.25 lakh in case of severe disability.
Section 80DDB
Under this section, individuals who are below the age of 60 years may claim INR 40,000 for the treatment for specified critical ailments for self and dependents. The same limit is INR 60,000 for senior citizens and INR 80,000 for very senior citizens.
Section 24B
This section allows individuals to claim a deduction for the loss under the head ‘Income from House Property’. It allows a tax benefit on the repayment of the loan of a second house up to INR 2 lakh. The unclaimed amount of loss may be carried forward for 8 years and set off against house property income. Additionally, any interest paid on the housing loan is eligible for a tax benefit. Municipal taxes, interest paid on the loan taken for the house, and 30% of the net annual income is allowed as a deduction.
Section 80E
Interest on loan paid for education is eligible for deduction. Please note that principal repayment on the loan cannot be claimed as a deduction. The loan should have been taken for yourself, your children, and spouse or for an individual for whom you are a legal guardian. There is no limit on the amount of interest that can be claimed as a deduction.
Section 80EE
Individuals who are buying a home for the first time may claim an additional deduction of INR 50,000 on the home loan interest paid. This includes a clause that the loan should be sanctioned in or after FY 2016-17 and the amount of loan should be less than INR 35 lakh. Furthermore, the value of the house should not exceed INR 50 lakh and the individual should not own any other residential house under his name.
Section 80GG
The deduction amount for this section is INR 60,000 per annum and the section is applicable to only those who neither have the ownership of a residential house nor receive a house rent allowance. The amount of deduction will be the least of the following:
· 25% of the total income
· INR 5,000 per month
· An amount of 10% of the adjusted total income deducted from the rent paid
Section 80TTA
This section allows a deduction of INR 10,000 from the gross total income of individuals or Hindu Undivided Family. The deduction is allowed for the interest earned on the deposits made in a savings account in a bank, cooperative society or a post office. However, the deduction will not be an application for the interest earned from fixed deposits in the bank.
Section 80U
This section allows the deduction to individuals who are physically and mentally challenged. The deduction can be entitled to the below 60 years of age Rs. 40,000/-( up to 40% Disable) and Rs. 1,25,000/- ( above 80%)
It is advisable to plan the investment in advance in order to avoid the last-minute hassles. In case you are unable to invest in the right products, you would have to pay the entire tax depending on your income. The above list of income tax deductions will help you in tax planning and achieving your financial goals.
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