Tax-Saving Gems in Section 80
Here’s a detailed breakdown of the five lesser-known Tax-Saving Gems in Section 80, along with important points:
- Section 80GG:
- Eligibility: Individuals without HRA who pay rent for accommodation.
- Calculation: Exemption calculated as the least of three conditions:
- (i) Annual rent paid minus 10% of total income,
- (ii) ₹5,000 per month,
- (iii) 25% of total income.
- Example: If annual income is ₹5 lakhs and monthly rent is ₹10,000, the exemption amount would be ₹60,000.
- Conditions: Individuals, their spouse, or minor child shouldn’t own a house in the location of residence, and if they have a self-occupied property without declared rental income, they’re ineligible.
- Section 80D:
- Deductions: Up to ₹25,000 for self, spouse, and dependent children’s medical insurance premiums. An additional ₹25,000 can be claimed for parents’ premiums (increased to ₹50,000 for senior citizens).
- Preventive Health Check-ups: Deduction of up to ₹5,000.
- Verification: Premium payments should be via bank transfer, while health check-up expenses can be paid in cash. Deduction amounts can be verified on the income tax website.
- Section 80CCD(1B):
- Additional Deduction: ₹50,000 for contributions to NPS over and above the ₹1.5 lakh limit of Section 80C.
- Eligibility: Contributions must be to NPS Tier 1 accounts with a lock-in period.
- Exclusion: Contributions to NPS Tier 2 accounts do not qualify for this deduction.
- Optimizing Tax Planning:
- Utilization of Sections: Taxpayers can optimize tax planning by utilizing various sections like 80C, 80D, and 80CCD(1B).
- Encouragement for Savings and Investments: These provisions aim to reduce tax burdens while encouraging savings and investments.
- Long-term Benefits: Investments in avenues like PPF, ELSS, NPS, and medical insurance not only save taxes but also ensure long-term financial stability.
Understanding and leveraging these lesser-known tax-saving tips can significantly benefit individuals, helping them legally reduce tax liabilities and promote financial prudence and security.
