Deduction u/s 80D is available to an individual for his own health , spouse and dependent children. An individual can also claim deduction u/s 80D for his parents (whether dependent or not). deduction in respect of parents health of an individual is in addition to the above deduction.

PERMISSIBLE DEDUCTION U/S80D:

1. Amount paid for medical insurance or Rs. 15,000/- for his own health or his family(spouse & dependent children)
2.Amount paid for the health of his parents whether dependent or not OR Rs. 15,000(Maximum). but if the parents are senior citizens, the above amount of deduction increased to Rs. 20,000(maximum).

therefore , an individual can get maximum deduction u/s 80D either Rs. 30,000(Rs.15,000 for himself & family & Rs. 15,000 for parents) OR Rs. 35,000( if the parents are senior citizens)

Example:
An individual assessee pays (through any mode other than cash) for Medical insurance premium during the previous year out of his taxable income as under:

a) Rs. 12,000 on his own health & on the health of his wife & dependent children.
b) Rs. 17,000 on the health of his
parents.

total amount paid by the individual is Rs. 29,000. but he will get deduction only for Rs. 27,000 (Rs. 12,000 for himself & family & Rs. 15,000 for his parents).

But if the parents are senior citizens he will get benefit of Rs. 29,000 because in case of senior citizen deduction is allowed upto Rs. 20,000.

NOTE:

1.deduction in respect of dependent children in case of male is upto the age of 25 years is allowed & in case of female child upto her marriage.
2. dependent children includes legitimate of legally adopted childrens.

CONDITIONS TO AVAIL THE DEDUCTION U/S 80D:

1.Payment shall be made by any mode of payment other than cash. If the payment for the policy is made in cash than deduction under this section is not allowed.
2.Payment shall be made out of income chargeable to Tax.
3. payment shall be as per GIC scheme approved by the central government or any other insurer as approved by IRDA.

1. an individual, or
2. a Hindu undivided family

Maximum deduction u/s 80C is Rs. 1,00,000

Many types of investments are covered under section 80C but here I am discussing only those in which the assessee generally make investments.

1. Life insurance premium (for himself, spouse & any child of such individual whether married/unmarried, dependent/non dependent)
2. Provident Fund account (for individual only)
3. Public provident fund (PPF) – maximum Rs. 70,000
4. Unit linked insurance plan (ULIP)
5. National saving certificates (NSC) & national saving schemes.
6. Tution fees paid to any university, college, school or other educational institution situated in India for the purpose of full time education (dedution is available only for 2 childrens)
7. Term deposit for a fixed period not less than 5 years with a scheduled bank as notified
8. Five years term deposit with post office

Deduction u/s 80C is allowed upto Rs. 1,00,000. Hence a individual should invest in such a way to get maximum deduction u/s 80C. A person wanting to get deduction u/s 80C should plan early keeping in mind his/her PF deduction for the year & other regular investments. Invest more in those funds which gives benefit in present as well as future like provident fund , public provident fund etc.

“Provident fund is a fund which is composed of contributions made by the employee during the time he/she worked along with an equal contribution by his employer”

RATE : Provident fund is calculated as 12% of his/her basic salary & the same amount is contributed by the employer.however employee have a option to contribution more than 12%

DEPOSIT OF CONTRIBUTIONS:

Employers contribution of 12% of basic salary is totally deposited in provident fund account whereas out of employees contribution of 12% , 3.67% is contributed to provident fund & 8.33% is deposited in Pension scheme.

IS IT COMPULSORY FOR ALL EMPLOYEES TO CONTRIBUTE TO THE PROVIDENT FUND?

employees drawing basic salary upto Rs. 6,500/- have to compulsory contribute to the provident fund . however , employees drawing above Rs. 6,500/- say Rs. 6,501 have an option to become member of the provident fund.

ADVANTAGES:

1. Tax benefit u/s 80C
2. retirement benefit
3. withdrawal benefit

NOTES:
1.However if a person withdraw the amount of provident fund before the end of 5 years all the benefits he got u/s 80C against Provident fund will get reversed & added with the income in which withdrawal has been made & fully taxable . So be careful about the timing of withdrawal.
2.Benefits under the pension fund is available only after the continuous service of 10 years & after completing the age of 58 years . continuous service of ten year does not means to work with the same company but every time when a person change job ,the PF account must be transferred & continuous for ten years.

FORMS REQUIRED:

1. Form NO. 2 is required to be filled to become the member of the provident fund.it is called a Nomination Form .
2.Form no. 13 is required for transfer of Provident fund.
3.Form no. 19 is required for withdrawal of provident fund
4. Form no. 10C is required for withdrawal of pension fund.

All the forms are available with the HR department of the company .

provident fund plays a very important role because at the time of retirement a person get a healthy sum & pension amount subject to the conditions fulfilled as per provident fund Act.

You can use the new Saral-II(ITR 1) form if :-

• You have salary income
• You have pension income
• You have income from one house property excluding losses brought forward from previous year
• You have income from other sources

You cannot use the new Saral-II(ITR 1) form if :-

• You are a H.U.F.
• You are a partnership firm
• You are a company
• You have income from business or profession
• You have income from capital gains
• You have income from two houses
• You have income from house property including brought forward losses from previous year
• You have income from winning a lottery or income from race horses.

Download the new Saral-II(ITR 1) form in excel format – Saral-II form.

If you can use the Saral-II(ITR 1), the filing of your income tax return next year should be much easier.

To calculate HRA exemption, use the least of the following amounts:

• Actual house Rent allowance received
• Rent paid in excess of 10% of salary
• 50% or 40% of salary (50% in case of Delhi, Mumbai, Kolkata & Chennai, 40% for other cities)

Salary for this purpose means :

basic salary + Dearness allowance + commission based on percentage (in any)

Here is an example of calculating HRA exemption :-

Basic Salary – Rs. 8,000 p.m.
Dearness allowance – Rs. 2,000p.m.
HRA received (actual) – Rs. 4,000p.m.
Actual rent paid – Rs. 5,000p.m

Adding it up for a year we get :-

Actual amount of HRA received (Rs.4,000*12) = Rs. 48,000
Rent paid in excess of 10% of salary (Rs. 5.000 * 12 – 10% of 10,000 * 12) = Rs. 48,000
50% of Rs. 1,20,000 = Rs.60,000

The least amount here is Rs. 48,000, so all of Rs. 48,000 is exempt from Income Tax.

* salary includes basic salary + dearness allowance
* Assuming that Delhi is the city for the purpose of this calculation

1. Income from Salary
2. Income from house property
3. Income from business & profession
4. Income from capital gains
5. Income from other sources

In this article, we will talk about how to calculate income tax on salary, and what tax exemptions you can avail to minimize the tax paid.

By taking full advantage of exemptions & deductions available under the income tax act, 1961, a person can reduce their tax liability upto the certain limits.

Exemptions available for salaried employees

There are many exemptions available for salaried employees. Some of the common exemption are:-

House rent allowance (HRA)

Under section 10 (13A)
The least of the following is exempt:-

• Actual HRA Received
• Rent Paid in excess of 10% of salary
• 50% or 40% of Salary

Salary here means Basic salary plus Dearness Allowance(D.A.) plus Commission, if any.

Transport allowance (TA)

Rs 800 p.m. max 9,600 p.a.

Medical reimbursement

Up to Rs. 15,000. Remember if the employee is getting medical allowance from his employer, it is fully taxable.

Leave Travel Concession (LTC)

Generally LTC is fully taxable, but in the year when LTC is availed the employee can get the exemption for travel anywhere in India for fair only for the shortest route

Deductions on investment

Under section 80C, 80CCC, 80 CCD

For individuals & HUF only – Up to Rs. 100000.
Some of the investments you can claim are -

• LIC
• ULIP
• Tuition fee of up to 2 children
• Provident fund (PF)
• Public Provident Fund (PPF)
• Fixed deposit (FD) with a nationalized bank for 5 years

Mediclaim

Under section 80D
Up to Rs. 15000 for self, children & spouse & also upto 15000 for parents. If parents are senior citizens then you can get deduction upto Rs. 20000.

Total deduction available u/s 80D is Rs. 30000 or 35000.

Education loan for higher education

Under section 80E

This deduction can be made only on interest payment. From Assesment year 2010 – 2011 this deduction can also be claimed by the guardian or parent of the child.

A qualified CA can help you get more details on the exemptions you can get when calculating your income tax.

For Individuals & HUF Other than women & senior citizens

For Resident Women

For Senior Citizens

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