How an individual taxpayer can claim tax benefits upto Rs 4.44 Lakhs from FY2015-16
In recent budget speech, Finance Minister indicated that an individual taxpayer can claim tax benefits of Rs 4.44 Lakhs from Financial year 2015-16 beyond the income tax exemption limit. This includes all tax saving options like PPF, Housing loan interest, health insurance premium, life insurance premium etc., What are these tax benefits which are available for individuals. In this article I would provide more details about these Rs 4.44 Lakhs tax exemptions that are announced in recent budget and are applicable from financial year 2015-16 onwards.
How an individual taxpayer can claim tax benefits upto Rs 4.44 Lakhs from FY2015-16
This amount of Rs 4.44 Lakhs tax benefits is beyond the income tax exemption limit available for individuals.
Also Read: Top and Best ELSS Tax Saving Mutual funds to invest in 2015
1) Deductions u/s 80C – Rs 150,000
Following are the eligible deductions u/s 80C.
- Children tuition fees is allowed as deduction. No transport allowance / term fees is allowed as deduction.
- Amount deposited in Public Provident Fund. You can open PPF account with any post office / SBI / ICICI Bank etc.,
- Amount contributed towards the Employees Provident Fund (EPF)
- Post office term deposit for 5 years / 5 Year Tax Saving Bank FD Scheme
- National Saving Certifications (NSC) – 5 years and 10 years
- ELSS tax saving Mutual Funds.
- Senior Citizen Savings Scheme from post office / bank
- Principal repayment of Home Loan amount
- National Pension System / New Pension Scheme (NPS)
- Life Insurance Premium
2) Deductions under 80CCD for contribution to NPS Rs 50,000
Employees can contribute to New Pension Scheme / National Pension Scheme (NPS) up to 10% of their salary. In such case, an employee is eligible to claim additional Rs 50,000 tax benefits over and above 80C. Hence max limit 80C + 80CCD would be Rs 2 Lakhs.
3) Interest on house property loan Rs 200,000
If you have taken home loan, you are eligible to claim interest on home loan (which is termed as loss from house property in your tax computations) to the tune of Rs 2 Lakhs. This amount is only interest and any principal repayment would go in 80C only. You should note that this interest is only for first home loan. If you have taken second home loan, you can claim unlimited interest exemption as it would treated as let-out and you would show income from such rental property too.
4) Exemption of new transportation allowance being revised to Rs 19,200 per annum
Earlier, the exemption for transport allowance was Rs 800 per month / Rs 9,600 per month. Now from financial year 2015-16, it has been increased to Rs 1,600 per month / Rs 19,200 per annum. This is a straight deduction and no specific proofs required.
5) Exemption of allowable deduction for Health insurance premium – Rs 25,000
Health insurance is becoming a basic need now as we do not know when a medical emergency would come. Exemption limit has been increased from next financial year to Rs 25,000 per annum. Consider taking best health insurance plan and claim this amount as an exemption.
Also Read: What are the various ways where working couples can save income tax in India?
Rs 4.44 Lakhs tax exemptions explained with an example
Mr.Akhil Kumar, age 35, is working in an MNC company and gross income is Rs 7 Lakhs. Assuming that he is not claiming any HRA etc., the following would be deductions
a) Total Income – Rs 7 Lakhs
- Less: Amount deposited in PPF (80C) – Rs 1.5 Lakhs
- Less: Deductions under 80CCD for contribution to NPS Rs 50,000
- Less: Interest on house property loan Rs 200,000
- Less: Exemption of transportation allowance of Rs 19,200 per annum
- Less: Health insurance premium – Rs 25,000
b) Total deductions – Rs 4.44 Lakhs
c) Taxable income = Rs 2.56 Lakhs (Rs 7 Lakhs minus Rs 4.44 Lakhs)
- Tax upto Rs 2.5 Lakhs nil
- Tax from Rs 2.5 Lakhs to Rs 2.56 Lakhs – 10% (excl surcharge if any) i.e. Rs 6,000 x 10% = Rs 600.
d) Hence total tax applicable is Rs 600 per year.
If you like this article, please share this on your Facebook or Twitter. This would be a special gift which you would be giving to our blog.
Suresh
How an individual taxpayer can claim tax benefits upto Rs 4.44 Lakhs from FY2015-16
- 4.5 Million SIP Closures in Dec 2024 – Should Investors Be Concerned? - January 12, 2025
- 5 Worst Performing Mutual Funds in the last 1 Year [-24% to 0%] - January 11, 2025
- Laxmi Dental IPO Review – Should You Bet on This Growing Dental Giant? - January 10, 2025
First time I have seen such a nicely elaboration on tax rebate, I just want to have a clarity that I am regular employee of Private Power Company and I superannuated from PSU, then how should I get 80CCD benefit.
Sir,
If my CPS amount is Rs 75000per year can I claim this u/s 80CCD Rs50000 and u/s 80C Rs25000?
Thanks for your valuable information.
Yah
Amount of Rs.50000/- U/S 80CCD will be admissible over and above Rs. 150000/-
Sir,
I’m govt employee, my savings is above 150000(including CPS, insurance, ppf). May I claim additional amount of CPS under 80CCD. I mean, if total CPS per year is 75000 can i claim under 80CCD rs 50000 and under 80C rs 25000?
Thanks for your valuable reply.
Yes you can claim upto Rs 50K under 80CCD additionally towards CPS (NPS) over and above Rs 1.5 Lakhs u/s80C
Interest on home loan upto Rs 200000 is exempt under section 24 but to claim the Income tax refund for this,which income tax form should be filed?In ITR-1,does it give provision for income tax refund claim under section 24?
Priyajit, Form-1 would have even exemption to be claimed for interest on home loan
much-useful info for tax payers
Great information. Thanks so much.
Thanks a lot for the information
An useful information for me. A small clarification in 80ccd is to deduce directly in deduction………
please give me a clear cut about the section 80ccd.. i want a detailed explanation for 80ccd.
thanks for your valuable information….
if you are investing any other eligible 80C investments for Rs 1.5 Lakhs and over and above if you are investing Rs 50K in NPS, this would be eligible to get exemption u/s 80CCD. The amount of eligibility depends on what you are investing in 80C.
thanks and it is very nice
Nice article. Master Health check up to parents can be included in 80-D other than Medi-claim policies. It is capped to Rs.5000.
Really very thought provoking… thanks a lotttttttttttt
Nice article.
Dear Suresh
Thanks for your immediate article in line of Income Tax. Very nice and useful.
Thanks Suresh, it really helps to plan..
There is another 2000 less for tax amount less than 5 lacks, which i think u missed in above example.
CN, All totals upto Rs 4.44 Lakhs and tax computation is correct. Am I missing ?
Hi Suresh,
This Transport allowance is not but conveyance allowance right? Also if it’s increased to 1600 from 800 means, in the CTC the 800 will be deducted from special allowance/personal allowance right to account for this increase?
Thats correct Ravi.
Hi suresh.. NPS amount comes under 80c savings upto 1,50,000.. If its included in 80CCD upto what amount we can claim through NPS?
Hi Suresh,
I guess you missed out mentioning “5 year Term Fixed Deposit” under deduction u/s section 80C
Hmmm, yes Akshay. I just updated 5 year tax saving bank fd scheme into this. Thanks for pointing out.
Nice article.
To avail benefit of housing loan interest of Rs 2 lacks, how much loan will be required to avail and how much EMI will be required to pay at interest rate of 10.50% ?
Kindly advise.
Kartavi, If one takes approx Rs 35 Lakhs home loan, interest payable would be Rs 2 Lakhs (approx) at 10.5% interest rates at teh beginning of the loan period. However year on year this would reduce as principal repayment would happen.
i was unaware of the fact that deduction under NPS fall over and above 80C. that’s good news
thank u for the information
If one is paying 2L as interest for home loan, how much he would have been paying for principal amount? He will not be left with anything.
Krishnan, Rs 2 Lakhs interest amount is for the year. If one takes approx Rs 35 Lakhs home loan, interest payable would be Rs 2 Lakhs (approx) at 10.5% interest rates at the beginning of the loan period. However year on year this would reduce as principal repayment would happen.
Mr Suresh, Kindly educate me about NPS and which among the schemes available are best suited for
me a PSU employee aged 53 years. I am not risk averse.
Hi Suresh,
Nice Article !!
just one doubt.. for claiming the additional 50,000 in NPS above 80C, How much one have to invest in NPS
50,000 or 1,50,000 ?
Thanks,
Shyam, if you are investing any other eligible 80C investments for Rs 1.5 Lakhs and over and above if you are investing Rs 50K in NPS, this would be eligible to get exemption. The amount of eligibility depends on what you are investing in 80C.
Thank you for good information about tax exemption. Can you explain more about second home loan unlimited interest claim under let out scheme
Hi Sharada, I would provide an article in coming week to explain this more in detail. For first home loan, you are eligible for Rs 2 Lakhs interest as exemption, however for second home loan, you are eligible to claim unlimited amount as interest claim. However you need to show even income generated from such loan.
Hi Sureshji,
Thanks for your input its was realy very helpful.
Hi Suresh,
I think the flaw in the NPS(for the 80CCD Rs 50,000 deduction thing) here is that you are just delaying the payment of tax. Ultimately, in the end, when you withdraw the NPS amount or when it matures (60 years of age), the whole amount is taxable. So it looks good now, but later at the end we still need to pay tax. Isnt that right?
Thomas, Yes you are right. However tell me, even any other investment option eligble u/s 80C like 5 year bank FD scheme or Post office NSC etc., all the returns are taxable.