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Permissible Deductions under Income Tax

Here are some pointers to documents required to claim possible deductions for tax benefit. These documents need to be submitted by an employee to employer for proper tax deduction and any other person be his/her tax consultant for proper filing

of income tax return.

Did you know about deductionsover and above Rs. 1,50,000
outside of Section 80C of Income TaxAct?

While large section of society is averse to pay taxes, people can always use
the rightful deductions to lower their taxes. To put it plainly, a tax
deduction lowers your taxable income, which therefore lowers your tax
liability. One should not misuse these deductions.
In our practical experience, taxpayers at large are well aware about the
deductions under section 80C available to them upto the amount of Rs.
1,50,000 and are investing in one or other mode as discussed in our
PERMISSIBLE DEDUCTIONS below

It may be important to know some of the following lesser known deductions
which are available over and above Rs. 1,50,000totaxpayers:

1. Principal Repayment on housing loan -Additional deduction up to
Rs.150,000*is allowed if the specified conditions are fulfilled.
2. Mediclaim Insurance, Preventive Health Checkup (including routine
medical tests conducted by assessee and his family members) and
amount of medical expenses actually incurred during the year – Rs. 25,000
for members less than 60 years of age and Rs. 50,000 for other members.

3. Interest on loan taken for purchase of Electric Vehicle up to Rs.1,50,000.
4. Investment in National Pension Scheme to the tune of Rs. 50,000 is
permissible as additional deduction.
5. In absence of HRA, rental accommodation is eligible for deduction of lower
of Rs. 5000 per month or 25% of Total Income or Rent Paid in excess of 10%
of Total Income, when assessee do not own any residential property,
subject to filing declaration in Form 10BA.
For more information and conditions of aforementioned deductions, please
refer ensuing paras of our knowledge.

Deductions under Chapter VI of the Income Tax Act, 1961

Life Insurance Premium
You can submit Life insurance Premium paid receipts. These receipts can
be in the name of self/spouse/children. Life cover should be at least 10
times of premium paid.

Contributions by an individual to EPF,PPF,RPF

Passbook copy of PPF (Public Provident Fund) or stamped Provident
Fund contribution receipts. This can be Self/Spouse/children

Deposit in Sukanya SamruddhiAccount Scheme

Sukanya Samruddhi Account passbook or Payment challan/slip
confirming the deposit.

Contribution to notified Unit-LinkedInsurance Plan (ULIP) of MutualFund

Statement of account of the units to the credit of his account or Receipt
of contribution made to ULIP during the financial year.

Stamp Duty and Registration Feespayments for purchase/construction
of residential house property

Receipt of Stamp duty, registration fees & other expenses, received while
purchasing of such residential house property.

Repayment of Principal amount of Housing Loan.

Loan Statement with the total interest and principal paid/due for current
financial year.

Purchase of electrical vehicle

From FY 2019-20, deduction up to 1,50,000 can be claimed on interest
portion of loan taken from financial institution for purchase of electrical
vehicle.

Contribution made to a Political Party

– Deduction under this section, is allowed to a taxpayer other than
company, local authority and an artificial juridical person wholly or
partly funded by the government, for any amount contributed to any
political party or an electoral trust.
– Deduction is allowed for contribution done by any way other than
cash.
– Receipt received from political party or electoral trust for contributions
made is required for claiming deduction.

Interest on loan taken for higher education:

Education loan certificate and interest certificate from Bank certifying
eligibility and amount for deduction

Donations to certain funds, charitable institutions, etc.

– Donation receipts are to be submitted. Confirm registration under
section 80Gmentioned on the donation receipt
– However, cash payments for more than Rs. 2,000 are not eligible for
such deductions.

Deduction for Rent paid

– Where no house property is owned by the assessee, deduction in respect
of Rent Paid for the rental accommodation can be claimed.
– Maximum deduction is lower of below:
• Rs.5000 permonth
• 25% of Total Income
• Rent Paid less 10% of Total Income
– Submit declaration in Form 10BA.

Documents required for claiming deduction for the allowances
received from your employer

• Leave Travel Allowance
The bills (travel tickets) for your travel against LTA can be claimed. LTA
can be claimed twice in a block of four years. The current block is 2018 to
2021.

• Other allowances to be claimed as deduction based on submission of
actual bills:

– Books and periodicals
– Mobile, internet and telephone
– Uniform Expenses

Important Note for Employees:

• It is advisable to keep copies of all your original documents for your
future reference.
• If you join a new company during the middle of the Financial Year, do
inform them about your previous income details and submit fresh
Income Tax declaration to new employer. Don’t claim deduction at both
employments, it may lead to tax payment at the time of return filing.
• Documents are to be submitted before February. However, you may
provide a declaration for recurring investments/payments to be made
for February and March of the year.
• Any deviation from amount declared to
employer and amount actually invested/paid will be adjusted in tax
deduction by employer for February and March.
• The deviation can also be adjusted by paying tax or claiming refund in
your Income-Tax Return.
• Even if you miss the deadline for submitting the investment proofs, you
can still claim all the tax deductions while filing your Income Tax
Return.
• It is prudent to avoid last minute tax

Tuition fees paid by an individual

To any university, college, school or other educational institution situated
in India,
– For full time education of any 2of his/her children.
– Tuition fee receipts received for payment made need to be submitted.
(Kindly note that any payments made towards donation, uniform fee, van
fee, maintenance fees etc., will not be considered)

Subscription to any units of any Mutual Fund

Mutual Fund statement (Investments in should be in ELSS funds or tax
saving mutual fund schemes only, either inlump sum or SIPs)

Contribution to Term deposits for a fixed period

For 5 years or more with a scheduled bank or Post Office.
– Copy of Tax saving Bank deposit receipt is required.

Contribution to Term deposits for a fixed period

– For 5 years or more with a scheduled bank or Post Office.
– Copy of Tax saving Bank deposit receipt is required.

Contribution to Mutual Fund Pension fund

Receipts of Contribution to Pension Funds

ALL THE ABOVE DEDUCTIONS ARE SUBJECT TO THE
MAXIMUM CEILING POF RS. 1,50,000 IN AGGREGATE

Additional deduction on Interest on Housing Loan for first House
Property

For loan taken in FY 2016-17 deduction can be claimed upto Rs.50,000
provided below conditions are satisfied:
– Loan amount doesn’t exceed Rs.35 Lacs
– Value of residential house property does not exceed Rs.50 lacs.
For loan taken in FY 2019-20 to FY 2022-23, deduction can be claimed upto
Rs.150,000 provided below conditions are satisfied:
– Stamp Duty Value of the residential house property doesn’t exceed
Rs.45 Lacs.

Contribution to National Pension Scheme

– Deduction is available up to 10% of Salary of Employee but with
maximum deduction of Rs.50,000.
– Salary here includes Basic and Dearness allowance and excludes all
other allowances.

Expenditure on Medical Insurance Premium, regular health
checkup and medical expenditure incurred:

– Deduction of Rs. 25,000 can be claimed for individual or
spouse/children/parents (aged less than 60 years).
– Deduction of Rs. 50,000can be claimed for parents- aged 60years or more.
– Documents required for deduction are Receipts for payment of medical
insurance premium and Medical expenses bills. It is important to note
that such expenses should not be made in Cash (except in cash of
expenses for preventive health checkup).

Medical Expenditure by a disable Individual for himself or by
any Individual/HUF for their Handicapped Relative

– Where disability is 40% or more but less than 80% –fixed deduction of Rs.
75,000.
– Where there is severe disability (disability is 80% or more) – fixed
deduction of Rs. 1,25,000.
– the assessee shall furnish along with the return of income, a copy of the
certificate issued by the medical authority in Form No. 10-IA, certifying the
level of disability or severe disability

Payment for the medical treatment of critical illness for himself or
family members :-

Medical Bills / expenditure incurred by way of medical
treatment up to Rs. 40,000 and Rs.100,000 (for senior citizen) for a specified
disease along with a certificate from a specialist doctor in the form 10I.

• planning. Do not invest in unwanted life insurance policies 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.

 

MJS & Co. offers varied multi-disciplinary professional services including that of pre – incorporation advisory, business support services in initial set-up stages, licensing/registration and traditional accountancy, audit and compliance services in relation with various business and tax laws in India.

We are committed in providing quality and value enhancing services to our network of clients at high levels of integrity.

MJS & Co. is pleased to release “PERMISSIBLE DEDUCTIONS UNDER INCOME TAX LAWS”. This is to update our clients regarding various options available for Income Tax Deductions which can be claimed from Gross Total Income.

We request you to give us your valuable feedback/suggestions and to let us know the topics which you would like us to cover in future

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