What are the sections under which a salaried employee can claim tax benefits?



What are the sections under which a salaried employee can claim tax benefits?

  • House Rent Allowance: If you are a salaried person and you live in a rented house, then you have the option to claim HRA exemption. The person should have the supporting documents for the rent paid. 
          HRA Exemption(Least of the mentioned below):
  1. Total HRA received from your employer
  2. Rent paid less 10% of (Basic salary +DA)
  3. 40% of salary (Basic+DA) for non-metros and 50% of salary (Basic+DA) for metros
  • Standard Deduction: In the union budget of 2018, the finance minister had announced a standard deduction of 40000 in replacement of the transport allowance and medical reimbursement. In the interim budget of 2019, the standard deduction has been increased to 50000. However, the standard deduction has actually not resulted in many benefits to highly salaried individuals. This is because of the cess being increased from 3% to 4%. The 1% increase in cess has resulted in higher tax payment for high salaried individuals. An analysis for the same has been carried out by EY.
  • Leave Travel Allowance: A salaried employee can claim LTA towards the travel expenses he might have occurred during a leave. The travel mode though must be among rail, air or public transport. LTA can be claimed twice in every block of 4 years. If you fail to do so, you can carry forward the same to the next block. An important thing to note is that LTA covers only domestic travels.
  • Section 80C, 80CCC and 80CCD(1): Under this section, a maximum of 1.5 lakhs can be claimed for deduction from taxable salary. This section motivates people to invest their money for future needs. The Indian government also provides with few tax saving instruments such as NPS and PPF. It is to be kept in mind that income which arises only because of capital gain cannot be claimed under this section. Some examples of investments which are eligible for tax exemption are:
  1. Life insurance premiums
  2. Investment in ELSS mutual funds
  3. Tax saving fixed deposits
  4. Senior Citizen's saving scheme
  5. Tuition Fee
  6. Stamp Duty for transfer of House Property to yourself
  7. Sukanya Samriddhi Account
  • Health Insurance Deduction (80D): Under this one can claim a deduction of up to 25000 towards the health insurance premiums(self, family, and dependent parents) and up to 50000 for senior citizens. This section also covers the cost for health checkups up to 5000 which is covered under the overall limit.
  • Home Loan Interest(80C and Section 24): The interest amount of up to 2 lakhs on a house loan can be claimed for deduction in case the property is self-occupied. If the property is rented, then the whole interest amount can be claimed for deduction. Even the principal component can be claimed up to a maximum limit of 1.5 lakh under 80C. The loss from house property that can be set off against other income sources is restricted to 2 lakhs.
  • Deduction for Loan for Higher Studies(80E): When you send your child for higher education, it is a costly affair and to give some relief this section allows you to claim the entire interest part of the EMI paid to be deducted from your taxable income. You can start claiming the deduction after the loan repayment has started and up to a maximum of 8 assessment years.
  • Deduction for Donations(80G): A person who makes donations to charitable organizations can claim a deduction for the same of a minimum 50% and a maximum of 100% of the amount. The percentage would depend on the charitable organization which will be responsible for deciding whether the person can avail 50% or 100% of the donated amount.
  • Deduction on Saving Account Interest(80TTA): This section is valid for both individuals and HUF's and offers a deduction of up to 10000 on the interest earned through the saving account balance. Anything above that will be taxable according to the tax slab you belong to.
  • Additional Deduction for Interest on Home Loan(80EE): Other than the above-mentioned home loan interest amount, this section allows a salaried individual to claim an additional deduction of 50,000 for the interest component on home loan EMI.
          However, you need to fulfill 3 conditions:
  1. Loan value < 3500000
  2. Value of Property < 5000000
  3. At the time of loan sanction, the individual doesn't have any other property registered under his name.
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