The income tax structure could prove to be an inaccessible maze for the common man. Many taxpayers harbour doubts about level of exemptions they could claim in a financial year.
Incomes in India are split into salaries, rents, capital gains, business/professional income and other incomes. Each of these categories are computed separately to assess the exemptions and other deductions a taxpayer is eligible for.
80C
If you spend or invest money in ways covered under section 80C of the Income Tax Act within a financial year, you can deduct that amount from your income. You could get up to Rs 1.5 lakh a year exempted from taxation in this way.
Investments such as Sukanya Samridhi, National Savings Certificate, life insurance, unit-linked insurance schemes and expenses such as repayment of home loans, stamp duty, registration fees and school fees for children come under section 80C.
80CCD
By investing in the National Pension Scheme, you can claim more exemptions other than the Rs 1.5 lakh covered under 80C. Investments in the National Pension Scheme, subject to a maximum limit of Rs 50,000, is not taxed, as per section 80CCD(1B) of the Income Tax Act.
80D
Taxpayers can claim deductions under section 80D of the Act on money they spent on medical insurance premium and health checkups for themselves or their families, subject to an upper limit of Rs 25,000. They can also claim deductions for up to Rs 25,000 for the money they spent on medical insurance premium and health checkups for their parents. If the parents are aged above 60 years, the upper limit moves up to Rs 50,000.
80G
Taxpayers can also claim deductions under section 80G of the Act on contributions made to funds and charitable organisations as specified under the Act. They could claim deductions on the entire amount or half of it, as the case may be.
Standard deductions
Even without any of these investments or expenditures listed above, all taxpayers can claim a standard deduction for income up to Rs 2.5 lakh per year. The standard deduction is up to Rs 3 lakh for senior citizens and Rs 5 lakh for people aged 80 and above.
These categories are deducted from the total income. There are more kinds of deductions available depending on the variety of income. Up to Rs 40,000 can be deduced from salaries a year and up to 30 per cent of rent income can be deduced to take into account the maintenance of the property. If you have availed of a loan to buy, build or refurbish a house, the repayment amount can be deduced from rent income.
Self-employed persons can deduct their expenditures from their income.
