Saving income tax for salaried and professionals for FY 2019-20

How to save income tax – a question often asked by my friends, family and blog readers. The problem is that there are many clauses for people to know and if they have heard about whether it applies to their case or not? To help both salaried and professional plan their tax, we have come up with the “How to save tax for 2019-20” ebook. This is a short 43 slide PowerPoint presentation (in PDF) covering all tax-saving classes and investments applicable to taxpayers.

Budget 2019: Changes in Income Tax Rules

  1. Increased tax exemption U / S 87A: For persons with a taxable income of Rs 5 lakh or less, tax exemption will be reduced or Rs 12,500 whichever is less.
  2. The standard deduction for salaried and pensioners increased from Rs 40,000 to Rs 50,000
  3. Increased tax for the super-rich: surcharge increased by 25% for income between 2 to 5 crores and up to 37% for income above 5 crores
  4. Additional tax deduction of Rs 1.5 lakh on a home loan on the purchase of an affordable home
  5. Additional tax deduction of Rs 1.5 lakh on an auto loan for the purchase of electric vehicles
  6. No tax on National Rental Income from Second House
  7. Capital gains exemption on reinvestment in two house properties: Taxpayers can now buy two houses on the sale of 1 house if the capital gain is less than Rs 2 crore. This benefit can be availed only once in a lifetime
  8. TDS limit on bank interest income increased from Rs 10,000 to Rs 40,000

I am often asked, citing some points

1. There is no tax benefit on infrastructure bonds

2. There is no separate tax slab for men and women.

1. Section 80C / 80CCC / 80CCD
These 3 are the most popular section to save tax and there are many options to save tax. The maximum exemption including all the above classes is Rs 1.5 lakh. The 80CCC deals with pension products, while the 80CCD includes the Central Government Employees Pension Scheme.
You can choose from the following for tax saving investment:
Employee / Voluntary Provident Fund (EPF / VPF)
• PPF (Public Provident Fund)
• Sukanya Samriddhi Account
• National Savings Certificate (NSC)
• Senior Citizen Savings Scheme (SCSS)
• 5 years tax-saving fixed deposits in banks/post offices
• Life insurance premium
• Life insurance or mutual fund pension scheme
• NPS
• Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Fund)
• Central Government Employees Pension Scheme
• Major Payments on Home Loans
• Stamp duty and house registration
• The tuition fee for 2 children
• We have done a comprehensive analysis of all the above available options and you can choose which is best for you.
2. Section 80 CCD (1B) – Investment in NPS
Budget 2015 has allowed an additional exemption of Rs 50,000 for investment in NPS. This has also been continued this year. We have done a complete analysis that you can read by clicking on the link given below.
3. Payment of interest on home loan (Section 24)
Up to Rs 2 lakh interest is given on home loan for a self-occupied or rented house, which is exempted from U / S 24. Earlier there was no limit on interest deduction on rented property. Budget 2017 has changed this and now the tax exemption limit for interest paid on a home loan is Rs 2 lakh, despite it being self-occupied or rented. However, the loss of more than Rs 2 lakh for rented houses can be carried forward for up to 7 years.
4. Payment of interest on education loan (Section 80E)
Entire interest (without any upper limit) paid on an education loan in a financial year is eligible for deduction. However, no deduction in principal has been made for education loans.
The loan should be for the education of self, spouse or children only and should be taken for a full-time course only. The loan will have to be taken from an approved charitable trust or financial institution.
This deduction applies for the year you start paying your interest and seven more years immediately after the initial year. So in all, you can claim education loan deduction for a maximum period of eight years.
5. Medical Insurance for Self and Parent (Section 80D)
80D qualified for deduction of premium paid for medical / health insurance for self, spouse, children, and parents. If you are under 60 years of age and under 60 years of age above Rs 50,000 you can claim a maximum deduction of Rs 25,000.
An additional deduction of Rs 25,000 can be claimed to buy health insurance for your parents (Rs 50,000 in case the parents are senior citizens). This deduction can be claimed whether the parents are dependent on you. However, this benefit is not available for in-laws to purchase health insurance.
HUFs can claim this deduction for the premium paid to ensure the health of any member.
The premium must be paid in any mode other than cash to avail of the deduction. A deduction of Rs 5,000 was introduced in Budget 2013 (with a limit of Rs 25,000 / 30,000) Preventive health screening is also allowed for self, spouse, dependent children, and parents. The series continued this year also.
6. Treatment of critical illness (Section 80DDB)
Income tax is deducted on the expenses incurred for the treatment of some diseases for self and dependents. The deduction amount for senior citizens is up to Rs 1,00,000; While for all others Rs 40,000. Dependents may be parents, spouses, children or siblings. They should be completely dependent on you.
To claim tax exemption, you need a certificate from a specialist in a government hospital as proof of illness and treatment. If the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed. In the case of partial reimbursement, the remaining amount can be claimed as a deduction.
Diseases Covered:
·          Neurological disease
·          Parkinson’s disease
·          Incurable cancer
·          AIDS
·          Chronic renal failure
·          Hemophilia
·          Thalassemia
7. A physically handicapped taxpayer (Section 80U)
The taxpayer can claim a deduction if he is suffering from certain disabilities or diseases, he can deduct 80U. In case of general disability (40% or more disability) the deduction is Rs 75,000 and for severe disability (80% or more disability) Rs 1.25 lakh.
A certificate from a neurologist or civil surgeon or chief medical officer of a government hospital will be required as proof of illness.
Handicapped covered
1. Blindness and vision problems
2. Leprosy
3. Hearing Impairment
4. Locomotors Disability
5. Mental Retardation or Illness
6. Autism
7. Cerebral Palsy
8. Physically Handicapped Dependents (Section 80DD)
If you have a dependent that is different, you can claim a deduction for the expenses.

 

 

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