What is HRA? What is House Rent Allowance?

House Rent Allowance or HRA is given by the employer to the employee to meet the expenses of rent of the accommodation which the employee has taken for his residential purpose. Salaried individuals who live in a rented house can claim House Rent Allowance or HRA to lower taxes. This can be partially or completely exempt from taxes. The allowance is for expenses related to rented accommodation. If you don’t live in a rented accommodation, this allowance is fully taxable. House Rent Allowance (HRA) Exemption would be calculated by your employer and shown in Form 16 if rent receipt is submitted on time.

Self-employed professionals cannot be considered for HRA exemption under this act, as they do not earn a salary. However, they can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10 (13A) but is subject to certain conditions.

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Understanding 80GG

What is section 80GG?

Section 80GG provides for Deductions for House Rent paid, provided that a deduction for payment of House Rent has not been claimed under any other section of the income tax act. In other words, if a salaried employee is being given house rent allowance by his employer and he is claiming a deduction from the same, he won’t be eligible to claim deduction under Section 80GG for payment of Rent. All other taxpayers who are neither getting the benefit of House Rent Allowance and nor have they claimed the expense for rent paid under any other section of the income tax act, can claim deduction under Section 80GG. HRA limit under section 80GG has been proposed to be increased from 24,000 to Rs.60,000/- from the F.Y.2016-17

What is Form 10BA?

If the taxpayer is claiming deduction under Section 80GG, he would also be required to furnish a declaration in Form 10BA that he satisfies all the conditions stated above. An image below shows the Form 10BA . You can Download Form 10BA.

On December 05, 2016 by www.taxexcel.net

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List of Various Deductions Under Section 80C. deduction under section 80c. Deduction U/S 80C in respect of Life Insurance Premium, Contribution to PF, etc., (Only Individuals/HUF). Find List of Income Tax Deduction under section 80C. Hi, Friends here we are providing Complete List of available Deductions U/S 80C for AY 2016-17 or FY 2015-16. In this article, you can find a list of Available deduction in the hands of INDIVIDUALS Only, a list of Available deduction in the hands of INDIVIDUALS & HUF, Other Special Points for Sec. 80C. Now you can scroll down below and check complete List of Various Deductions Under Section 80C
List of Various Deductions Under Section 80C

Available deduction in the hands of INDIVIDUALS Only:                                       Subscription to  National Savings Scheme.                            Subscription  to NSC, even interest on that is qualified for deduction                             Subscription Units of Mutual Fund/UTI                         

Contribution to a Pension Fund set up by a Mutual Fund/ UTI/ National  Housing Bank                     Tuition Fees paid to University, College, School or other Education  Institution situated in India for full-time education of Children, other  Donation or Development Fees. (Maximum 2 Children)                             

Housing Loan Principal.                             

 Term Deposit for at least 5 years with a Scheduled Bank.                              Subscription to notified NABARD Bonds.                             

A deposit under the Senior Citizen Savings scheme                         5 year Time Deposit in an account under the Post Office Time Deposit  NSC.                          G.P.F./VPF/EPF

Available deduction in the hands of INDIVIDUALS & HUF:

·                                 Any sum paid by an Individual to  effect or to keep in force an Insurance on the life of an Individual, his/her  Spouse, any Child (whether  married/unmarried or dependent/not  dependent). In the case of the HUF, the  premium should be paid in the life of any  member of the family.

·                                 Contribution to a PPF .   Minimum  Rs. 500 & Maximum Rs. 1.5 Lakh

·                                 Contribution to ULIP of LIC/UTI and  continuous for a minimum period of 5  years.

·                                 Contribution to Annuity Plans of  Insurance Companies.

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Other Deduction of Sec. 80C

1.                              The total limit under this section is Rs 1.50 lakh from Financial year 2016-17 / Assessment Year 2017-18. Under this heading many small savings schemes like NSC, PPF, and other pension plans. Payment of life insurance premiums and investment in specified government infrastructure bonds are also eligible for deduction under Section 80C

2.                              If  the assessee transfers  the HP in  respect  of  which  deduction  has  been claimed, before the expiry of  5  years  from  the end  of  the  F.Y in  which  possession  of  such  properties  obtained  by  him.  No  deduction  shall  be  allowed  in  the  PY  in  which  house  is  transferred.   The deduction  allowed  in  the  earlier  years shall  be  deemed  to  be  income  of  the  assessee  of  the  PY,  in which the house is transferred.    

3. In  case a member  participating in  the  ULIP  terminates  before  making  the contribution  for  5  years,  then  the  same  treatment  shall be given as given in point 2.

4.                              DThe deduction is  available  only  if  amount  is  paid/contributed/  invested during  the  previous  year  i.e. on or before 31st of March.

5.                              Additional Deduction U/s 80CCD(2) :- Employer’s Contribution to the Employee’s Pension Fund.

6.                              Additional Exemption U/s 80CCD(1B) :- Max Rs. 50,000/- out of Max Limit 1.5 Lakh U/s 80C.

On November 26, 2016 by www.taxexcel.net

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1- Public Provident Fund U/s 80C

Public Provident Fund is my topmost tax saving option. It gives you full tax saving with maximum safety. There is a lot of flexibility and ease also. Anyone can invest in this. Almost every big bank offers this facility.

Tax Saving	You can save tax on this investment as it comes under 80C.  Interest paid is also tax-free. Redemption amount is also not taxed such as insurance maturity amount.
Lock-In Period	PPF investment is for 15 years. Normally you can’t redeem it before that. You can take loan before 5 years and withdraw it partially after 5 years
Investment Limit	You have to invest minimum 500 annually. Maximum investment limit is 1,50,000 annually
Safety	This is one of the safest investment options. Banks process it and money remains with the government of India
Interest	rate varies with the market rate. 10 Year government Bond yield is the benchmark. hence it will never underperform .
Where to Invest	State bank of India and all big National and private Banks give this facility. Now you can open PPF account online also. Even Post office also gives this facility.
Recurring Investment	It is not mandatory to invest fixed amount every year, unlike insurance schemes. You can invest any amount. You can invest once a year or up to 12 times a year.

Employees get the benefit of EPF which gives them retirement saving with the tax benefit. For professional and self-employed PPF plays this role. Return and conditions of PPF withdrawal are same as EPF. But in PPF you get much more flexibility. You can invest in PPF up to the limit of 80C investments.

Note – PPF starts calculating 15 years from next April. It means that if you start investing since Dec 2013, your PPF account will mature in April 2029. But if you invest during 1 – 5 April your account would be considered from the same financial year. Also, put your money before 5 of every month to get the interest of that month.

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2- Employee Provident Fund U/s 80C

Organised sector employee must be aware of this tax saving investment. It is mandatory for employers to deduct 12% of the employee salary towards employee provident fund (EPF). The employer also contributes the same amount. This investment is qualified for a tax deduction. Fewer people know that you can invest more than the prescribed 12%. This excess amount also gets a tax benefit. The EPF can be transferred from one job to another easily. After leaving the job you can withdraw EPF.

Tax Saving	Money being invested in EPF get tax deduction under 80C. Interest paid is also tax-free. Redemption amount is also not taxed .
Lock-In Period	Money is locked till your retirement. If you remain unemployed for 2 months then you can withdraw your whole amount. Withdrawing money before 5 years would be taxable You can withdraw partially in special situations.
Investment Limit	You get tax benefit till 80C limit. You can invest more than the prescribed 12% of the salary. Excess amount will also get the tax benefit.
Safety	This is one of the safest investment options. Money remains with the government of India
Interest	EPFO determines Interest rate every year according to its return. EPFOinvest mainly in government bonds.
How to Invest	Your employer deducts it regularly. For excess deduction, you can say to your employer in the beginning of the financial year.
Recurring Investment	There is no flexibility. EPF portion always remains 12% of your salary. Also Once you decide for excess deduction it will remain there until the end of financial year.

3- Equity Linked Saving Scheme (ELSS) U/s 80C

Equity Linked Saving Scheme (ELSS) has a minimum lock-in period. Your money is locked only for three years. But you should not always exit from it after three years. Equity investments give good return in a longer period. You can even rotate your investment after three years. Because of  this, you will be spared of fresh investment for tax saving after the three years. Also, If you need some money before three years then choose the dividend option. It will give tax-free dividend as well. SIP would be the perfect way to invest in these funds. It averages the ups and downs of the market. You can invest more than the 80C limit in the ELSS.

Tax Saving	Money invested in ELSS get tax deduction under 80C. Dividend paid is also tax-free. Maturity amount is also not taxed.
Lock-In Period	This option has the smallest lock-in period. After 3 years you can redeem your money.
Investment Limit	You can invest any amount, but tax benefit is limited to 80C rules. (Upper limit for 80C tax rebate is 1 lakh total)
Safety	It is as risky as any diversified equity mutual fund. As all of your money is invested in share market yo can experience the roller coaster ride.
Return	Traditionally, long-term Equities give a better return than any other investment. But it may happen that after the completion of 3-year lock-in period your money gets depleted.
How to Invest	Many fund houses have the ELSS. You can Invest online directly through the Fund house’s own website or through the distributors such as FundsIndia.
Recurring Investment	There is no limitation for recurring investment. But fixed SIP would be suitable to overcome the market’s up and down.

4- National Pension System (NPS) U/s 80C

• National Pension System (NPS) is not much popular tax saving investment. But it gives you a happy retirement life as well as tax saving. You can claim investment in the NPS for tax deduction under the 80C. But it has a big drawback also. The government did not make maturity proceedings tax free.
• You will get money only after the retirement.
• From the 60% of the maturity amount you have to take annuity policy.
• Rules are somewhat stiff but it is designed to give you happier retirement life. The government has added some flexibility, which has made it more attractive. You can read in details about it here

Pension Bill – Changes in National Pension System and Benefits to You

Tax Saving	Money invested in NPS get tax deduction under 80C. Maturity amount is taxable
Lock-In Period	Money is locked till your retirement. You can withdraw 25% in special circumstances with some conditions .
Investment Limit	Tax saving under 80C rule . You can claim the tax deduction up to 10% of your salary which should not be more than 80C limit . However, can invest more but it will not get tax saving. Your employer can contribute more on his behalf in your account. This contribution will be tax-free over and above the 80C limit.
Safety	Money is invested in fixed instrument as well as in shares. You have to choose where you want to invest. Equity investment can not be more than 50% of the fund. Also, there is life cycle fund which automatically changes your asset allocation with age. Now government also gives the minimum guarantee of the return. You can take that option also.
Return	You can expect the market return of fixed investment. If you are investing more in equity then you should be ready for ups and down. But don’t worry for a longer period it will certainly give a good return.
How to Invest	Government Employees now invest their money in this scheme by default. Private company employee and the unorganized worker can subscribe this scheme from the ‘point of presence’. These are the distributor of National Pension System. most of them are banks while some are financial companies.
Recurring Investment	You have to invest minimum 6000 in a year else you will be fined for 100 rupees per year. No contribution can be less than 500 rupees.

5- Tax Saving Fixed Deposit U/s 80C

The Tax saving Fixed Deposit are just like any other fixed deposit. You will get similar interest rate also. But your money will be locked for 5 years. You can’t withdraw your money before maturity. Also, Interest-earning would be taxable. Ease and peace of mind are the biggest plus point of this tax saving investment.

6- Term Insurance U/s 80C

Term Insurance does not give you ant maturity amount . You can save tax and have a big peace of mind. This gives  life cover so that our family would not suffer in distress if there is any eventuality with us. These days online term plans are cheaper and you can have 1 crore term plan in 10-15 thousand annually. HDFC Life, Birla SunLife gives these online term plans.

7- National Saving Certificate U/s 80C

National saving certificates (NSC) are similar to Tax Saving Fixed Deposit. But today it gives less return than Bank Fixed Deposit. Also now finding post office is difficult than banks. But NSC should be considered safer than FD since your money remains with the government of India.

• NSC also gives the benefit of tax saving under 80C. Unlike ELSS, PPF or EPF interest is taxable in case of NSC. There is one  extra tax benefit with NSC. As your interest is considered accrued every year. But it stays invested so you can claim this interest also for the tax deduction.
• There is no maximum limit of investment.
• Rate if Interest if 8.50% for 5 years and 8.80% for 10 years.
• You can take a loan from banks also using this certificate as collateral.

8- Senior Citizens Saving Scheme U/s 80C

Senior Citizen Saving Scheme is designed for elderly and it is one of the best tax saving scheme for them. Even the senior citizen who don’t need tax saving can also invest in this scheme. It gives them a regular income as interest is deposited regularly in their account.

• Tax Saving is under the 80C Scheme.
• Interest is taxable. But as many Senior citizens earn less than their limit of tax so this should not be any hindrance.
• This Scheme is for 5 years but one can withdraw the amount with some conditions.
• The maximum limit for this account is 15 Lakhs.
• The minimum limit is 1000.
• Interest Rate is 9.2% compounded quarterly. Interest is credited in an account on 31 March, 30 June, 30 September and 31 December irrespective of your date of deposit.
• It is very safe as your money remains with Government of India.

9- Unit Linked Insurance Products (ULIP)U/s 80C

Unit Linked Insurance Products give you insurance cover as well as investment. ULIPs invest some amount of your money in shares. You can decide which proportion of your fund should be invested in shares. ULIP has some positives but many negatives also.

Positives

• ULIPs are very tax efficient. You can save tax from investment under 80C. While maturity amount would not be taxed also.
• It forces you for regular saving.
• You are forced to have some insurance cover if you don’t have one.
• You can continuously change asset allocation

Negatives

• You can’t withdraw your money before 5 years.
• You remain under-insured because the cover is only 10-20 times of the premium.
• ULIPs are somewhat opaque. While Mutual funds are analysed and compared by many research agencies. less information is available about ULIPs.
• Initially, charges are higher than a normal Mutual fund.
• If there is an underperformance for a long period you can’t switch another funds house. The maximum you can do is allocate more fund to another category. Suppose you chose equity option for building the wealth. But equity fund is underperforming than the benchmark. Then you will not have the option to switch over to another equity fund. You can only switch to balanced or debt fund, Which might also give the lesser return.

10- Health  Insurance U/s 80D

 The best part is that it gives tax saving benefit also. The premium you pay for  health insurance is tax-deductible under Section 80(D). You can get tax saving up to 55,000 of expense in health insurance and health check up for below 60 years Rs.25 thousand and Parents who have above 60 Years can avail Rs.30 thousand.

• You can avail tax deduction on the expense of health insurance for you and family. The limit for tax deduction is 25,000.
• You can additionally avail tax deduction for your parent's health insurance. The limit is 30,000 for the senior citizen.
• Health checkup for you and family is also tax-free. The limit is 5,000 annually.

On September 27, 2016 by www.taxexcel.net

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