Changes in Income Tax Rules as per the Finance Budget 2017-18
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1. The tax rate for income between Rs 2.5 lakh to Rs 5 lakhs has been reduced to 5% from 10%
2. 10% Surcharge introduced for Income between Rs 50 Lakhs to Rs 1 crore
3. Tax Rebate under Section 87A reduced to Rs 2,500 for income up to Rs 3.5 Lakhs
4. Tax exemption under RGESS (Rajiv Gandhi Equity Scheme) has been discontinued from FY 2017-18
5. Loss of House/Property capped at Rs 2 Lakh irrespective if the house is rented or self-occupied
6. NPS tax deduction for self-employed increased to 20% of gross income
given a brief of all the tax saving sections below:
1. Section 80C/80CCC/80CCD
These 3 are the most popular sections for tax saving and have a lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.
You can choose from the following for tax saving investments:
1. Employee/ Voluntary Provident Fund (EPF/VPF)
2. PPF (Public Provident fund)
3. Sukanya Samriddhi Account
4. National Saving Certificate (NSC)
5. Senior Citizen’s Saving Scheme (SCSS)
6. 5 years Tax Saving Fixed Deposit in banks/post offices
7. Life Insurance Premium
8. Pension Plans from Life Insurance or Mutual Funds
10. Equity Linked Saving Scheme (ELSS – popularly known as Tax Saving Mutual Funds)
11. Central Government Employee Pension Scheme
12. Principal Payment on Home Loan
13. Stamp Duty and registration of the House
14. Tuition Fee for 2 children
We have done a comprehensive analysis of all the above available options and you can choose which is the best for you.
2. Section 80CCD(1B) – Investment in NPS
Budget 2015 has allowed additional exemption of Rs 50,000 for investment in NPS. This is continued this year too. We have done a complete analysis which you can read by clicking the link below.
3. Payment of interest on Home Loan (Section 24/80EE)
The interest paid up to Rs 2 lakhs on home loan for self-occupied or rented home is exempted 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 home loan is Rs 2 lakhs, irrespective of it being self-occupied or rented. However, for rented homes, any loss in excess of Rs 2 lakhs can be carried forward for up to 7 years.
Budget 2016 had provided additional exemption up to Rs 50,000 for payment of home loan interest for first time home buyers. To avail this benefit the value of a home should not exceed Rs 50 lakhs and loan should not be more than Rs 35 lakhs.
4. Payment of Interest on Education Loan (Section 80E)
The entire interest paid (without any upper limit) on education loan in a financial year is eligible for deduction u/s 80E. However, there is no deduction on principal paid for the Education Loan.
The loan should be for the education of self, spouse or children only and should be taken for pursuing full-time courses only. The loan has to be taken necessarily from approved charitable trust or a financial institution only.
The deduction is applicable 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 maximum eight years.
5. Medical insurance for Self and Parents (Section 80D)
Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children, and Parents qualify for deduction u/s 80D. You can claim a maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 30,000 above 60 years of age.
An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 30,000 in the case of either parent being senior citizens). This deduction can be claimed irrespective of parents being dependent on you or not. However, this benefit is not available for buying health insurance for in-laws.
HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF.
To avail deduction, the premium should be paid in any mode other than cash. Budget 2013 had introduced deduction of Rs 5,000 (within the Rs 25,000/30,000 limit) is also allowed for the preventive health check-up for Self, Spouse, dependent Children, and Parents. It continued to this year too
6. Treatment of Serious disease (Section 80DDB)
The cost incurred for treatment of certain disease for self and dependents gets the deduction for Income tax. For very senior citizens (more than 80 years of age) the deduction amount is up to Rs 80,000; while for senior citizens (between 60 to 80 years of age) it Rs 60,000 and for all others, it's Rs 40,000. Dependent can be parents, spouse, children or siblings. They should be wholly dependent on you.
To claim the tax exemption you need a certificate from a specialist from Government Hospital as proof for the ailment and the treatment. In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed.In case of partial reimbursement, the balance amount can be claimed as deduction
8. Physically Disabled Taxpayer (Section 80U)
Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases. The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability)
A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government Hospital would be required as proof for the ailment.
1. Blindness and Vision problems
5. Mental retardation or illness
9. Physically Disabled Dependent (Section 80DD)
In case you have dependent who is differently abled, you can claim the deduction for expenses on his maintenance and medical treatment up to Rs 75,000 or actual expenditure incurred, whichever is lesser. The limit is Rs 1.25 Lakh for severe disability conditions i.e. 80% or more of the disabilities. Dependent can be parents, spouse, children or siblings. Also, the dependent should not have claimed any deduction for self-disability u/s 80DDB.
To claim the tax benefit you would need disability certificate issued by the state or central government medical board.
You can also claim tax exemption on premiums paid for life insurance policy (in taxpayers’ name) where the disabled person is the beneficiary. In case the disabled dependent expires before the taxpayer, the policy amount is returned back and treated as income for the year and is fully taxable.
40% or more of the following Disability is considered for purpose of tax exemption
1. Blindness and Vision problems
5. Mental retardation or illness
10. Donations to Charitable Institutions (Section 80G)
The government encourages us to donate to Charitable Organizations by providing the tax deduction for the same u/s 80G. Some donations are exempted for 100% of the amount donated while for others it's 50% of the donated amount. Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income. Please note that only donations made by cash or cheque are eligible for deduction. Donations in kind like giving clothes, food, etc are not covered by tax exemption.
How to Claim Sec 80G Deduction?
1. A signed & stamped receipt issued by the Charitable Institution for your donation is must
2. The receipt should have the registration number issued by Income Tax Dept printed on it
3. Your name on the receipt should match with that on PAN Number
4. Also, the amount donated should be mentioned both in number and words
