Income tax is a very important element for growth and betterment of the Indian Economy. By paying taxes on a regular basis, an individual becomes directly responsible for the growth of his country. The amount collected by the government as tax is used for the infrastructure development and other such uses as sought important by the government for the betterment of the nation. Hence, it’s the duty of each and every individual to pay legal taxes regularly.
However, keeping the various income strata of the Indian society, The GOI has levied certain rules and tax laws in order to make sure that the people belonging to the lower income groups are saved from the burden of paying taxes, while people lying in the middle or higher income groups are taxed as per their Income status. The tax rules are set in order to make sure that the economy runs in a balanced manner.
The rules as set by the GOI keeps in mind the income of an individual along with his saving requirements. Tax exemptions act as a savior to those who can’t afford to pay taxes or those who wish to save a little extra for the betterment of their family.
The Income Tax Act of India, 1961 lays down certain exemptions and limits on the taxable income of an individual. These exemptions help an individual save more on his income and also help him to pay a fair amount of tax to the Govt. depending upon his income status.
Income Tax Exemption Rules and laws helps the people to develop a sense of saving, along with providing financial aid to the country by ways of paying rightful tax to the government.
The tax exemption limit for the F.Y. 2016-2017 has been set at Rs.2,50,000. Individuals (Both men and women below the age of 60 years) earning an annual income of less than Rs.250000 are exempted from tax rules and need not pay any kind of taxes to the Govt.
For senior citizens (Both Men and women lying between the age group of 60-80 years) the tax limit is set at Rs.3,00,000 per year. It means that a senior citizen earning an income of less than Rs.3,00,000 per year is free from paying any kind of tax to the govt.
For super-senior citizens (Both men and women lying above the age of 80 years) the tax limit is set at Rs.5,00,000 per year. It means that any individual aged 80 years and above is exempted from tax laws and need not pay any kind of tax to the govt if he/she earns less than Rs 5,00,000 annually.Let us peruse through the various other exemptions available for the F.Y. 2016-17:
- Deductions as per Section 80 C are set at a limit of Rs.1,50,000. The list of investments as covered by this section is given below:
- Public Provident Fund Investments
- Contributions made by an employee towards his Provident Fund Account
- National Savings Certificates
- Premiums paid towards purchase of LIC policy
- Tuition Fees paid towards education of one’s child.
- Repayment of the principal amount of one’s home loan
- Investments made in Sukanya Samriddhi Account
- Investment done in Unit Linked Insurance plans (ULIPS)
- Investment done in Equity Linked Savings Plans (ELSS)
- Expenses incurred towards purchase of Deferred Annuity
- Deposit Schemes in Five Year Plans
- Savings Scheme for Senior Citizens
- For expenses incurred towards subscription of notified securities or deposit schemes.
- Notified Pension schemes under Mutual Fund or UTI.
- National Housing Bank’s Home Loan account subscription.
- Purchase of notified annuity plans by LIC.
- Purchase of notified bonds by NABARD.
- Deductions as per Section 80CCD(2) : It covers an exemption on the employers’ contribution made towards an NPS Account and is set at a maximum limit of 10% on the salary.
- Deductions as per Section 80CCD(1B): It covers an exemption on additional contributions made towards an NPS Account and is set to a maximum limit of Rs.50,000 per year.
- Deductions as per Section 80TTA(1): It covers an exemption on the interest earned on one’s savings account and is set at a maximum limit of Rs.10,000 per year.
- Deductions as per Section 80GG: It covers an exemption on the rent paid by an employee (if he has not been receiving HRA from his employee) and is fixed at the least of rent paid minus 10% of the total income or Rs.5,000 per month, or 25% of the total income earned, whichever applicable.
- Deductions as per Section 80E: It covers an exemption on interest paid on an education loan for a period of 8 years.
- Deductions as per Section 80EE: It covers an exemption on interest paid towards home loan (for first time home loan seekers) and is set at a maximum limit of Rs.50,000.
- Deductions as per Section 80CCG: It covers an exemption on investments made in equities under the Rajiv Gandhi Equity Scheme and is set at a limit subject to the lower amount of Rs.25,000 or 50% of the total amount invested in equity shares.
- Deductions as per Section 80D: It covers an exemption on insurance payments made towards medical expenses for self, spouse or children and insurance payments made for parents above the age of 60 years and uninsured parents above the age of 80 years. The limits are set at RS.25,000 and Rs.30,000 respectively.
- Deductions as per Section 80DD: It covers an exemption on payments done towards medical treatment of a handicapped dependant or payment made towards a specified scheme for the maintenance of the handicapped dependant. The limits are set at Rs.75,000 if the disability range lies between 40-80% and Rs.1,25,000 if the disability is more than 80%.
- Deductions as per Section 80DDB: It covers an exemption on medical expenses incurred towards treatment of self or a dependent for diseases defined in Rule11DD. The limits are set at lower of Rs.40,000 or the actual amount paid for individuals lying below the age of 60 years, lower of Rs.60,000 or the actual amount paid for individuals lying above the age of 60 years and lower of Rs.80,000 or the actual amount paid for individuals above the age of 80 years old.
- Deductions as per Section 80GGB: It covers an exemption on payments made by companies to political parties. The entire amount contributed to political parties is allowed as an exemption.
- Deductions as per Section 80GGC: It covers an exemption on payments made by individuals to political parties. The entire contributed amount to political parties is allowed as an exemption.