When the month of March is comes to end, the only thing that comes to the mind of a salaried person is Tax Liability and Returns. Tax Liability is a duty levied by the government on your income which aids it to conduct public welfare activities. Tax planning here becomes a necessity as there are a lot Individuals who often pay tax more than they were required. The only reasons are the lack of weakness and knowledge about various deductions and schemes issued by the government in order to help the individuals avoiding excess tax liability. In common parlance, the best time for tax planning is in the starting of the year but people tend to procrastinate till the year end and end up either making errors in filing statements, paying more tax or filing belated returns.
However the good news is that even if you have been careless towards planning tax the whole year you can still claim certain deductions on expenses that you have incurred in the normal course of your daily routine. Some of the deductions are-
Children’s Education & Hostel Allowance and Tuition Fees (Sec 80C & Sec 10(14))
The most common expense generally an individual incurs is the tuition fees of school, college or any other recognized institution for the purpose of full-time education of any two children of the employee is eligible for deduction. Please note that any sum in the name of donation, development fees or capitation fees or any other payment of similar nature shall not eligible for deduction. In certain cases where the Children’s Education & Hostel Allowance is provided by the employer, such sum shall be added to the gross income of the individual & deduction of Rs 100 & Rs 300 per month per child upto 2 children shall be eligible.
Medical & Life Insurance (Sec 80D & Sec 80CCC)
Keeping in mind the uncertainty of human life and importance of medical and life insurance, the government has incorporated sums expended in such regards as an eligible deduction. Tax deduction based on health insurance premiums paid for individual, spouse, and dependent children shall be eligible for deduction up to Rs 25,000 per budgetary year. Similarly, for investments made with respect to life insurance shall be eligible for deductions as per the related provisions.
House loan and interest (Sec 80E, Sec 80E, Sec 24)
Employer’s contribution to NPS
Every individual whose employer has made contribution under section 80CCD(2) to the notified pension scheme which is not covered within the overall cap of Rs 1.5 lakh for cumulative deductions under sections 80C, 80CCC and 80CCD(1) shall be eligible for the deduction in accordance to the said section. Such deduction under is in addition to the cumulative deduction available under section 80C, where the overall limit is Rs 1.5 lakh, and 80CCD(1B) which is Rs 50,000.
Contribution made towards PPF and other approved schemes
There are a lot of regular investments that a common person invests in for which deductions is allowed under the Income Tax Act. This includes any deposits made with National Savings Certificate, Sukanya Samriddhi Account, Senior Citizen Savings Scheme 2004 (SCSS), NABARD Rural Bonds,
Equity Linked Savings Schemes (ELSS)
ELSS is tax saving mutual fund that help the investors to save taxes up to Rs 1.5 lakh under Section 80C of the Income Tax Act. ELSS funds are considered ideal for new investors to start their investments in equity mutual funds. They, generally, have a mandatory lock-in period of three years and are among the shortest lock-in period among tax-saving investments permitted under Section 80C.
A standard deduction up to Rs 50,000 is allowed for all salaried employees. This deduction is is mandatorily available and is considered by the employer while computing tax liability of each employee. The respective deduction is available at the time of filing ITR. However, while planning your taxes for FY 2019-20, you must consider standard deduction as well to compute your total tax liability.
Apart from all the deductions mentioned above there are multiple other deductions under the Income Tax Act 1962 which are available to an Individual.