Tax Deductions: Income tax in India follows a tax slabs where taxpayer income has categorised slabs and certain tax rate are assigned to them. This is a progressive system of taxation. When people earning more income they are tax at more tax rate slabs and according to their income the tax rate will be applied. And Income tax Department has two slabs rate that is old regime and new regime.
The income tax slabs in new tax regime will remain unchanged for FY 2024-25 (AY 2025-26). No changes have been announced in the interim budget. The last year’s budget announced changes in the income tax slabs in the new tax regime. The changes were made to make the new tax regime more attractive for individual taxpayers.
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Income Tax rates as per old regime
|
Income |
Individual <60 years | ≥ 60years <80years | ≥ 80years |
|
2,50,000 |
– | – |
– |
|
2,50,001-3,00,000 |
5% | – | – |
| 3,00,001-5,00,000 | 5% |
– |
|
|
5,00,001-10,00,000 |
20% | 20% |
20% |
| >10,00,000 | 30% | 30% |
30% |
Income Tax rates as per New regime
| Income |
Income tax rates |
| 3,00,000 |
– |
| 3,00,001 – 6,00,000 |
5% (tax rebate u/sec87A) |
| 6,00,001 – 9,00,000 |
10% (tax rebate u/sec87A up to 7,00,000) |
|
9,00,001 – 12,00,000 |
15% |
|
12,00,001-15,00,000 |
20% |
|
>15,00,000 |
30% |
Read also: Old vs New: Which income tax regime to choose?
Tax planning in deductions
Section 80C:
One of the most commonly utilized sections, 80C, allows individuals to claim deductions of up to Rs 1.5 lakh on the entire income spent on repaying the principal amount of a loan. Additionally, Section 24(b) provides tax exemption of up to Rs 2 lakh per year on the interest component of a house loan, particularly beneficial for those who invest in housing schemes or purchase a house for rental income.
To further avail exemptions, individuals can invest in various financial instruments, including Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), National Pension Scheme (NPS), and Public Provident Fund (PPF).
Section 80TTA and 80TTB:
Under Section 80TTA, individuals and HUFs can claim a maximum deduction of Rs. 10,000 on interest earned. However, Resident Senior Citizens can benefit from Section 80TTB, allowing a deduction of up to Rs. 50,000.
Read Also: LIC under Income tax – Deduction, taxability & TDS on Maturity
Section 80CCD(1B):
Introduced to encourage contributions to the National Pension Scheme (NPS), Section 80CCD(1B) provides an additional deduction of INR 50,000, over and above the Section 80C limit of INR 1.5 lakhs.
Section 80D:
Individuals can claim deductions under Section 80D for medical insurance premiums. The maximum deduction is Rs. 25,000 for insurance on the assessee, spouse, and dependent children. Additional deductions of Rs. 25,000 or Rs. 50,000 can be claimed for insurance on parents, depending on their age.
Read Also: Mediclaim Deduction Tax benefit: Section 80D of Income Tax Act, 1961
Section 80G:
Contributions made towards specified donations under Section 80G are eligible for deductions of either 100% or 50%, with or without restrictions. Cash donations exceeding Rs 2,000 are not eligible for deduction.
1. Donations with 100% deduction without any qualifying limit.
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children’s Fund
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
2. Donation with 50% deduction without any qualifying limit.
- Prime minister’s draught fund
- Jawaharlal Nehru Memorial fund
- Indira Gandhi memorial fund
- The Rajiv Gandhi fund
Read Also: Section 80DD – Tax deductions for disabled persons
Section 80GG
This section provides deductions on house rent paid for individuals living in rented houses without receiving HRA.
- Conditions for claiming Section 80GG:
- Taxpayer must be an individual
- Taxpayer must be living on rent and paying rent
- The taxpayer should not have self-occupied residential property in any other place. Also, the taxpayer, their spouse or minor child or their HUF should not own any residential accommodation in the place where they currently reside.
- File Form 10BA
Read Also: Everything about Form 16 under Income Tax
Individual can claim least of the following:
- Rent paid- 10% adjusted total income
- 5,000 per month
- 25% of adjusted total income
*Adjusted Gross Total Income =
Gross Total Income
Less:
– LTCG, if any, included in total gross income
– STCG u/s 111A
– Deductions u/s 80C to 80U except deduction under section 80GG
– Incomes of NRIs and foreign companies are taxed at a special tax rate, such as incomes u/s 115A, 115AB, 115AC, or 115AD
Section 80E:
Interest on education loans for taxpayer, spouse, or children is eligible for deduction under Section 80E. The deduction is available for a maximum of 8 years or until the entire interest is paid, whichever is earlier.
Read Also: 5 Home Loan tax benefits u/s 24, 80C, 80EE, 80EEA of Income Tax Act
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