Tax Hacks - FAQ's on Taxation

Making India Tax Wise


  • 1

    What is Section 80C?

    Section 80C of the Income Tax Act provides provisions for tax deductions to an individual or HUF from the total income. Taxpayers can claim a maximum deduction up to Rs.1.5 lakhs per year. Some of the most popular investments that are eligible under this section are:

    • Equity Linked Saving Scheme
    • Public Provident Funds
    • Employee Provident Fund
    • Tax Saving Fixed Deposits
    • National Savings Certificate
    • Unit Linked Insurance Plans
    • Sukanya Samriddhi Yojana
    • Senior Citizen Savings Scheme
  • 2

    Can non-salaried individuals claim HRA?

    Eligible taxpayers can claim deduction for house rent paid even when HRA is not deducted from their salary. The deduction can be claimed for the rent paid by the taxpayer for his own accommodation in a financial year provided he does not own a residential property.

    The amount of deduction available will be the lowest of:

    • 25% of total adjusted income*
    • Actual rent less 10% of total adjusted income*
    • Rs.5,000 per month

    *Adjusted income = total income less long term capital gain, short term capital gain under Section 111A and income under Section 115A or 115D and deductions 80C to 80U. Also, income is before deduction made under Section 80GG.

  • 3

    How can I save tax on educational loan?

    Section 80E of the Income Tax act allows you to claim the interest amount being paid on education loan availed for self, children or spouse or the student for whom the individual is the legal guardian. There is no limit on the amount but the deductions are valid until 8 years from the year of the first interest paid.

  • 4

    Are recurring deposits in bank eligible for deduction?

    No. Recurring deposit does not come under the ambit of deduction under Section 80C. Even if a taxpayer deposits in a recurring deposit for more than 5 years it cannot be claimed as deduction under Section 80C. A taxpayer should invest in fixed deposit in order to claim deduction under Section 80C.

  • 5

    Does deduction under Section 80C include 80CCC and 80CCD?

    The aggregate amount of deduction under Section 80C, 80CCC and sub section (1) of Section 80CCD shall not exceed Rs.1,50,000.

  • 6

    Are all allowances taxable for salaried individuals?

    No. Not all allowances are taxable. Some allowances like City Compensatory Allowance, Special Allowance, and Overtime Allowance are taxable in the hands of employee.

    Following is a list of some allowances, which are often paid to employees as a part of their salary, which is partially tax exempt. These are:

    • Hostel Expenditure Allowance: Any Hostel Expenditure Allowance received by a taxpayer for their children from their employer is eligible for exemption up to Rs.300 per month or Rs.3,600 per annum for a maximum of 2 children.
    • Children Education Allowance: The maximum amount exempted is Rs.100 per month or Rs.1200 per annum for a maximum of 2 children.
    • Medical Allowance: The taxpayer can claim exemption of medical allowance up to Rs.15,000 without having to submit bills for the claim.
    • Leave Travel Allowance: Employees who receive LTA from their employers can claim exemption. Exemption is allowed only if actual expenditure has been incurred for travelling anywhere in India. The exemption is available for 2 journeys in one block of 4 years.
    • Conveyance Allowance: If the taxpayer is receiving conveyance allowance from employer then he can claim an exemption of Rs.19,200 p.a.
  • 7

    Even if no taxes have been deducted from salary, is there any need for the employer to issue Form 16?

    Ans:- Form 16 consists of 2 parts- Part A & Part B.

    Part A needs to be downloaded from the Traces website

    Part B is prepared by the organisation itself.

    Form 16 (Part A) is issued by the employer, if he deducts TDS. If the salary is under basic exemption, no TDS or Form 16 is applicable.

    Whereas, Part B is issued by the employer and the employer can issue Part B even if the salary of employee does not exceed the tax limit.

  • 8

    Will my family pension income be taxed as salary income?

    No. Family pension will not be taxed under salary income, as no employer-employee relationship exists. Family pension will be taxable under head of income from other sources.

  • 9

    Is leave encashment taxable as salary?

    Amount received in lieu of leaves is taxed under the head income from salary.
    If the taxpayer is a government employee, any amount received as leave encashment is exempt from tax.

    If the taxpayer is a non-government employee, the least of the following is exempt:

    • Leave encashment actually received
    • Amount equal to salary for the period of leave earned (maximum leaves earned will be 30 days for every year of actual service)
    • 10 months average salary. [Avg. salary = salary (basic + DA) of 10 months immediately preceding the retirement or resignation]
    • Maximum Rs.3,00,000
  • 10

    What should one do in case of discrepancies in actual TDS and TDS credit as per Form 26AS?

    Every person deducting tax at source has to furnish the details of tax deducted by him to the Income Tax department. Many times the actual amount of TDS and TDS credit as appearing in Form 26 AS may differ. The TDS credit appearing in Form 26 AS may be less than the actual TDS. This maybe because of non-furnishing of TDS details to the Income Tax Department by the deductor deducting the tax or incorrect Permanent Account Number, etc. In such a case, the deductee should approach the deductor and request him to take the necessary steps to rectify the discrepancy.

  • 11

    What are the deductions available for a disabled person?

    Any resident individual, certified as a person with disability by the medical authority can claim exemption u/s 80 U.

    If a person suffers from at least 40% of disability, then he is eligible for a deduction of Rs.75,000. If a person suffers from severe disability i.e. above 80% of disability, then he is eligible for a deduction of Rs.1,25,000.

  • 12

    Are there any deductions for medical insurance done for any family member?

    Deduction can be claimed for medical insurance under Section 80D by an individual for self, wife, dependent children or parents.

    Section 80D covers:

    If you buy a policy for yourself and your spouse and children You can get a maximum deduction of Rs.25, 000
    If you are a senior citizen The deduction limit increases to Rs.30,000
    If you buy a policy for your parents You can get a maximum deduction of Rs.25,000
    If your parents are senior citizens The deduction limit increases to Rs.30,000
    If you buy a policy for yourself, spouse and children and another policy for your parents You get two deductions:
    • Up to Rs.25,000 for your policy and
    • Up to Rs.25,000 for your parents’ policy
    If your parents are senior citizens and you also buy a plan for them You get two deductions:
    • Up to Rs.25,000 for your policy and
    • Up to Rs.25,000 for your parents’ policy
    If both you and your parents are senior citizens and you buy two policies, one covering your family and another for your parents You get two deductions:
    • Up to Rs.30,000 for your policy and
    • Up to Rs.30,000 for your parents’ policy
  • 13

    Can creating a Hindu Undivided Family (HUF) help save tax?

    Yes. According to Indian law, an HUF will be considered as a separate entity from the individual for tax purpose as it helps to save a substantial amount on taxes. HUF is a separate entity in itself and qualifies for all tax benefits under Section 80C (up to Rs.1.5 lakhs), Section 80D (health insurance premium), 80G (donation) of chapter VI of Income Tax Act, 1961.

  • 14

    Can both earning members of a family claim deduction for home loan taken in joint name?

    Under Section 24B of Income Tax Act, interest on housing loan is eligible for tax deduction.

    Joint home loan borrowers can claim the maximum tax benefits individually. It means each holder can get a tax rebate of Rs.1.5 lakhs for principal repayment under Section 80C and Rs.2 lakhs for interest payment.

  • 15

    How can we get additional benefit in NPS (National Pension System) other than that included in 80C?

    Under Section 80 CCD (1B) of Income Tax Act, a taxpayer can claim deduction for voluntary contribution up to Rs.50,000 which is over and above the limit of 80 C.

  • 16

    What is the interest penalty under Section 234A?

    If the assessee has an outstanding tax liability, and he does not file his income tax return on time, then he is penalized by charging interest (u/s 234A). Therefore, interest u/s 234A is charged on late filing of income tax return.

  • 17

    What is the benefit of taking indexation while calculating capital gain?

    Indexation is a process by which the cost of acquisition/improvement of a capital asset is adjusted against inflationary rise in the value of asset. The benefit of indexation is available only in case of long-term capital assets and is not available in case of short-term capital assets.

  • 18

    Are there any bonds in which I can invest my capital gains to claim tax relief?

    Yes. As per Section 54EC, a taxpayer can claim tax relief by investing the long-term capital gains in the bonds issued by the National Highway Authority of India or by the Rural Electrification Corporation Limited. The investment should be made within a period of 6 months from the date of transfer of capital asset and bonds should not be redeemed before 3 years. This benefit cannot be availed in respect of short-term capital gain. Maximum amount which qualifies for investment will be Rs.50,00,000. Thus, deduction under Section 54EC cannot be claimed for more than Rs.50,00,000.

  • 19

    What is Section 80TTA?

    Section 80TTA of Income Tax Act allows for a tax deduction on interest income from savings bank account. Interest earned above Rs.10,000 will be taxable.

  • 20

    How is tax levied for Indian residents and non-resident Indians?

    In case of resident individuals and companies, their global income is taxable in India. However, non-residents have to pay tax only on the income earned in India or from a source/activity in India.

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Tax benefits are as per Income Tax Act, 1961, and are subject to modifications made thereto from time to time. Insurance is the subject matter of the solicitation.

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Future Generali India Life Insurance Co. Ltd, Indiabulls Finance Centre, 6th Floor, Tower 3, Senapati Bapat Marg, Elphinstone West Mumbai, Maharashtra 400013 India IRDAI Registration No: 133. Validity of certificate of registration: Upto 31st March 2018. CIN:U66010MH2006PLC165288