See 80c deduction is available up to Rs 1,50,000 per tax payer while contributing to life insurance, provident fund and various other incentive schemes where investment schemes have been created by the government. So, under those schemes if you invest up to 1,50,000, you get a complete deduction. There is no restriction of whatsoever in the nature and therefore it is virtually like you have got an income of Rs 4,00,000 and you contribute Rs 1,50,000. So your taxable income remains 2,50,000 and there is an exemption of 2,50,000. Therefore, you do not pay any taxa. But next year onwards, this hike is increased, 80c deduction remains the same but your 2,50,000 also remains the same. The initial slab of up to Rs 5,00,000 has been subject matter of lower tax that has been done, nothing else.
ET Now: With Section 80d, which is medical insurance payments, all of us now have medical insurance for our entire families. Is it conditional though? Is there a cap for medical insurance which we can deduct our taxes with?
TP Ostwal: Medical insurance is subject to a deduction if you take a medical insurance on yourself or your dependents up to Rs 15,000. Now that has been increased in the case of senior citizens. There is a separate section for them and while earlier they were getting a deduction of 30,000, it has been increased to 50,000. No such significant change but yes, if medical insurance is available to the people, they can get a deduction.
ET Now: Tell us who can claim a deduction under section 80dd and what exactly would be the correct conditions under which one can avail this deduction?
TP Ostwal: See, 80dd is the medical benefit for the senior citizens so they get the deduction which has been increased this year. A senior citizen is anybody above 60 years of age. They can get a higher amount of deduction if they contribute on their life-- amount of medical expenses.
ET Now: A lot of people would be keen to understand 80 GG in greater detail with respect to rent. Let us talk a little bit about the IT exemptions here and who can avail the same?
TP Ostwal: 80GG is for rent. For those who are employees, they get deduction under section 23 itself because they pay rent and that deduction is available. But in case if you are self-employed and you are taking a house on rent, you get a deduction under section 80GG. and there is no change as far as this section is concerned.
ET Now: What are the other ways in which we can save taxes while planning for the next fiscal?
P Ostwal: You see, as far as planning is concerned, there is a very restricted elbow available for planning. All the deductions are given on the basis of savings so therefore saving oriented deductions are available. If you are an employee and you are paying rent to your parents, that deduction is available subject to your parents giving you the official receipt for it. In case your parents are not liable to tax and the house is owned in their name, then as an employee you can pay them the rent if you are staying with them and then you can claim the deduction of that amount from your eomployer. Therefore it will be a substantial saving and the employer is also obliged to give you the deduction and reduce the rate of withholding tax, keeping in mind this deduction that you have claimed.
So, that is another area concerning rent free accommodation or the rent which you are paying to your parents and can claim deduction for. And in case parents income is below 2,50,000, they will not pay any tax but if their income is above 2,50,000, then on the rental portion, they will pay only 20% virtually instead of 30% because from rental income, you get a standard deduction of 30%. So, your 70% income is only taxable and if you apply 30% rate of tax on 70%, it comes to 21%, plus if you add surcharge and education cess, it will be 23%. So this is one aspect of tax planning that you can do.