According to the budget proposed on Feb 29th, 2016, one can avail the Income Tax exemption on a home loan. Basically, the first time home buyer can get income tax benefits on housing loan by claiming a number of deductions. The latest Budget Update states that the first time home buyers are going to get an additional exemption of Rs. 50,000/- for interest on home loan under section 80EE.

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To understand the key tax benefit on a home loan, we are bifurcating the repayment techniques into four major elements- tax benefits on principal repaid, tax benefits on interest paid, deduction on pre-construction interest and section 80EE income tax benefits. The next section will let you know the concept of all in detail.

Tax Benefits on Principal Repaid

Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of home loan is Rs. 1.5 lakh. Deduction under section 80C also includes investments done in the PPF Account,  Equity Oriented Mutual funds, Tax Saving Fixed Deposits, National Savings Certificate, etc. subject to the maximum of Rs. 1.5 lakhs.

Besides this, there are stamp duty and registration charges that one can claim under the aforementioned section. Though, the claim can only take place in the year in which the payment has been made.

Nevertheless, there’s a condition under which this repayment of the principal amount of housing loan is allowed. The deduction is only possible after the house gets entirely completed and there is a completion certificate for the same. Any under construction structure is not going to be a part of this section.

Service Tax will be charged on any under-construction premise because it would be priced lower than the full-fledged property. Although, no such criteria is there on a fully completed house. So, make your plans accordingly.

The assessee should also note that there won’t be any tax benefit or deduction on home loan under Section 80C if he/she transfers the property before the expiration period of 5 years from the end of the Financial Year in which he obtains the possession.

Tax Benefits on Interest Paid

Under section 24 of the Income Tax Act, one can avail the deduction on Home Loan for payment of Interest tax benefit. The self-occupied property allows the deduction with the maximum limit of Rs. 2 lakh if it takes the completion within 3 years from the end of the Financial Year, otherwise Rs. 30,000.

Another case here is when the house is not self-occupied. In that scenario, there would be no maximum limit as the taxpayer is allowed to deduct tax on the whole interest amount.

Interest amount on a home loan is allowed as the deduction on an accrual basis under section 24. Here, the payment basis differentiates to that from the Section 80C in a way that the claim will be there even if the payment has not been made during the whole year while there’s no such thing in the latter.

Deduction on Pre-construction Interest

One can also get a pre-construction interest claim from the financial year just like availing the deduction for interest that can be claimed when the construction completes at the starting of the same year. In five uniform installments, you can deduct the claim, combining up the whole pre-construction interest. Nevertheless, the amount should not be deducted beyond Rs. 2 Lakh in the case when you use it for your own place.

Section 80EE Income Tax Benefit

As per announcement in last budget session, the limit has raised for the year 2016-17 (Under the section 80EE, there will be a tax benefit to the first time house owners who own the house of Rs. 50 lakh or less, and has acquired the loan amount of less than or equal to Rs. 35 lakh. The maximum limit is Rs. 1.5 lakh that can be claimed under this section. For this, the loan should be sanctioned between April 1, 2016, and March 31, 2017.) This deduction shall be in addition of Rs. 2 Lakhs allowed under section 24(b) of the Income Tax Act, 1961.

On January 26, 2017 by www.taxexcel.net

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Tax saving and Tax Planning are important aspects for the salaried person. As it allows you to save more money. If as a salaried person you are earning Rs 10 Lac per year, you have very little scope to avoid tax. At the most, you can invest in tax saving scheme and get a tax benefit of few thousand rupees.

In any case, you have to pay income taxes, but with little tax planning, you can optimize your tax outgo. So, here is Tax Saving Tips for a Salaried person to maximize tax saving.

Income Tax Exemption for Salaried Person

The first thing you should do as a salaried person is to take maximum advantage of available tax exempted allowance/reimbursements. In order to take this benefit, you must be aware of such allowances. So, here is a detail of all applicable tax exempted allowances.

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House Rent Allowance

Most of the employer gives a benefit of HRA to their employees. Under House Rent allowance a minimum of a following is exempted from the income tax.

·                                 Actual HRA

·                                 Actual Rent Paid minus 10% of salary

·                                 50% of Basic for Metro City or 40% of Basic for NonMetro City

Leave Travel Allowance

LTA or Leave Travel Allowance is given by the employer to their employee in order to reimburse the cost incurred on the vacation. This allowance is exempted from income of the salaried people provided employee actually goes on the vacation and produced the valid proof of travel. Two such trips in the block of four years are allowed under LTA. The amount payable should not exceed Economy Air Ticket or First class AC Rail Fare for the shortest distance to a single destination.

Leave Encashment

You must be getting several leaves in the year. In case if you don’t claim these leaves employer gives the option to encash these leaves. The amount received by a salaried person as a leave encashment can be claimed for tax exemption up to certain extent.

Travel and Fuel Reimbursement

Travel and Fuel Reimbursement allowance is also exempted from the tax up to some extent. Let us say If an employer provides you a car for the official purpose and employer also gives you fuel reimbursement you can avail tax exemption. You need to maintain the record that car is used for official purpose only. The maximum amount that can be exempted from tax via this allowance is Rs 2400 per month. If the small car less than 1600 CC is used amount exempted would be Rs 1800 per month.

Uniform Allowance

Uniform allowance paid by your employer to you as a part of your salary is fully exempted from the tax. It should be uniform, not a civil dress.

Children Education Allowance

Allowance namely children education allowance given by an employer to the salaried person is exempted from the income tax. The amount of exemption is very low it is Rs 1200 per year for maximum two children.

Medical Reimbursement

Medical reimbursement is actual amount paid to an employee by an employer on producing bills of medical treatment availed. The maximum tax exemption limit for this medical bill reimbursement is Rs 15000 year.

Transport Allowance

If you are getting transport allowance in your salary you can avail tax exemption benefit of the same. Transport allowance is given to meet the expense of traveling between your house and office. A maximum exemption limit for this allowance is Rs 1600 per month & Rs. 3200/-P.M.for Phy.Disabled Persons.

Section 80 C

Under section 80 C you can make an investment up to 1.5 Lac and avail tax benefit. Some of the best tax saving investment options under 80 C are ELSS, PF, PPF, Sukanya Smariddhi Scheme etc. You can also claim home loan principal and children’s school fees under this section.

Home Loan Interest U/s 24B

If you have taken the home loan, you can avail additional benefit up to 2 Lac on the interest component of the home loan under section 24 B.

Home Loan Interest U/s 80EE

New amended section 80EE introduce as a Home Loan Interest Max Rs.1,50,000/-

Section 80 E

If you have taken education loan you can take benefit of income tax exemption on repayment of interest on the education loan. The entire amount paid for the interest on education loan can be claimed under this section.

Section 80 CCD

Investment under New pension scheme can bring additional tax saving for you. So if you are the salaried person and want to maximize tax outgo you can plan to invest in NPS. As per new rule, one can avail a deduction up to Rs 50,000/- under section 80 CCD (1B).

Section 80 D Health Insurance

Health Insurance premium can bring you additional tax saving of Rs. 25000 per year under section 80 D & Rs. 30,000/- for Sr.Citizen. it includes health insurance premium payment of self, family, and parents. Along with this payment made for the preventive health checkup up to Rs 5000 can also be claimed as a tax deduction.

On December 22, 2016 by www.taxexcel.net

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Section 87A Rebate Limit Increased to Rs. 5000, Changes in Section 87A by Finance bill 2016, The Finance Budget 2016, Section 87A Rebate Limit Raised to Rs. 5000. Rebate under Sec 87A: With the objective of providing relief to resident individuals in the lower income slab i.e. total income not exceeding Rs. 5,00,000, section 87A is proposed to be amended so as to increase the maximum amount of rebate available from existing limit of Rs.2,000 to Rs.5,000.  Earlier this limit is only available for Rs 2000 now this limit is increased by Rs 3000 and now the Total limit for Section 87A for AY 2017-18 is Rs 5000.  Check more details regarding “Section 87A Rebate Limit Increased to Rs. 5000 – Budget 2016” from below…..

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Section 87A Rebate Limit Increased to Rs. 5000

The existing provisions of section 87A of Income-tax Act, provide for a rebate of an amount equal to hundred per cent of such income-tax or an amount of two thousand rupees, whichever is less, from the amount of income-tax to an individual resident in India whose total income does not exceed five hundred thousand rupees.

With the objective to provide relief to resident individuals in the lower income slab, it is proposed to amend section 87A so as to increase the maximum amount of rebate available under this provision from existing Rs.2,000 to Rs.5,000.

This amendment will take effect from 1^st April 2017 and will accordingly apply in relation to the assessment year 2017-18 and subsequent assessment years.

On August 01, 2016 by www.taxexcel.net

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