Options for Salary Earners to Save on Taxes

Fact and issue of the case

Interest on borrowed capital 24(b)

Interest paid on the capital borrowed for the purpose of purchase, construction, renovation, repair, renewal or reconstruction of the property. In case of let out property, there is no limit on the quantum of interest which can be claimed as deduction under section 24(b). However in case of a self-occupied property, limit is Rs. 2, 00,000.

Section 80C

Following are the Investments eligible for deductions under this section:

Life Insurance Premium:

Life insurance policy should be taken on his own life, life of the spouse or any child. Child may be dependent/independent, male/female, minor/major or married/unmarried.

Public Provident Fund:

PPF account can open in his own name or in the name of minor of whom he is guardian. A HUF cannot open a PPF account.

Unit Linked Insurance Plans:

ULIP can be taken on his own life or spouse or any child. In case of HUF, ULIP can be taken on the life of any member of the family.

National Saving Certificates:

National Savings Certificate is a fixed income investment scheme that you can open with any post office.

Fixed Deposit:

Investment in fixed deposits are eligible for tax deduction under section 80C but here lock in period is 5 year.

Sukanya Samriddhi Yojana:

The Sukanya Samriddhi Yojana (SSY) is as girl child prosperity scheme. SSY account is to ensure a bright future for girl children in India. This yojana is to facilitate them proper education and care free marriage expenses. Legal guardian or parents of a girl child can open SSY Account under this scheme anytime at the time of birth of the child till she attains an age of ten years.

Repayment of Housing Loan:

The principal portion of the EMI paid for the year is allowed as a deduction. The maximum amount that can be claimed is up to Rs 1.5 lakh.

Tuition Fees:

Any sum paid as tuition fees whether at the time of admission or otherwise to any university/college/educational institution in India for full time education of any two children of an individual.

The maximum amount deductible under section 80C is Rs. 1, 50,000.

Section 80CCD(1B) : National Pension Scheme Section 80CCD (1B) provides additional deduction in respect of any amount paid up to Rs. 50,000 towards NPS.

Section 80D : Medical Insurance Individual can claim a deduction of Rs. 25,000 under section 80D for medical insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs. 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs. 50,000.

Payment of medical insurance should be made by any mode other than cash.

Medical expenditure on the health of a person who is a senior citizen and medical insurance premium is not paid on the health of such person.

Senior citizen is a resident individual who is at least 60 years of age at any time during the previous year.

Maximum amount of medical expenditure available for deduction under section 80D is Rs. 50,000. Overall maximum amount of deduction under section 80D is Rs. 1, 00,000.

Observation of the court

Section 80EEA: Interest On Loan Taken For Certain House Property Eligibility

Assessee is an individual

Assessee is not eligible to claim any deduction under section 80EE.

Assessee has taken loan for the purpose of acquisition of residential house property.

Loan is sanctioned during 01.04.2019 to 31.03.2022.

Stamp duty value of the residential house property on the date does not exceed Rs. 45 lakh.

Assessee does not own any residential house property on the date of sanction of loan.

Deduction: Interest payable on the loan or Rs. 1, 50,000 whichever is less.

Same Interest Is Not Deductible Twice: if any individual claims deduction of interest under section 80EEA then such amount of interest is not eligible for deduction under section 24 (b) or any other provision of the Income Tax Act for the same year or any other assessment year.

Section 80EEB: Interest On Loan Taken For Purchase Of Electric Vehicle Conditions

The assessee is an individual

The assessee has taken loan for the purpose of purchase of an electric vehicle.

Loan is sanctioned during 01.04.2019 to 31.03.2023.

Deduction: Interest payable on the loan or Rs. 1, 50,000 whichever is less.

Same Interest Is Not Deductible Twice: if any individual claims deduction of interest under section 80EEB then such amount of interest is not eligible for deduction under provision of the Income Tax Act for the same year or any other assessment year.

Section 80GGC: Contribution To Political Party

Any person can make any amount of contribution to the political party. The only condition is that the payment should be made other than cash.

Section 80G: Donations to certain funds, charitable institution etc.

Individual can make donation to any fund or institution or charitable Trust. All donations are not treated equally under Income Tax Act. Donations to certain funds and institutions qualify for 100% or 50% deduction without any qualifying limit. On the other hand, certain donations qualify for 100% or 50% deduction, subject to qualifying limit. No deduction is allowed for cash donation exceeding Rs. 2000.

Qualifying limit can be calculated as 10% of adjusted gross total income.

Adjusted Gross Total Income is equal to:

Gross total income	*********
Less: Long term Capital	*********
Less: Short term Capital gain on sale of shares u/s 111A	*********
Less: Deduction u/s 80C to 80U (except u/s 80G)	*********
Less: Exempt income	*********
Less: Income referred to in section 115A, 115AB,115AC or 115AD	*********
Adjusted Gross total income	*********

Section 80TTA: Interest on Saving Accounts

As per this section, any individual but not senior citizen can claim a deduction of Rs. 10,000 or the interest earned, whichever is lower.

Interest earned on deposits in a savings accounts with a banking company, a co-operative society engaged in carrying on the business of banking or in a post office.

First you have to show interest income in Other Income after that you can claim this deduction.

Section 80TTB: Interest On Deposits In Case Of Senior Citizens

Any senior citizen can claim a deduction of Rs. 50,000 or the interest earned, whichever is lower.

Interest on deposits with a bank/co-operative bank/post office. It may be interest on fixed deposits, interest on savings account or any other interest.

First you have to show interest income in Other Income after that you can claim this deduction.