Every Indian citizen is liable to pay income tax to the Government of India as direct tax from earnings and profits made during a financial year. The rate at which taxes are required to be paid is defined by the government when the budget for the year is passed by the Parliament. Income tax is recovered in three forms – TDS (Tax Deducted at Source), TCS (Tax Collected at Source) and tax paid voluntarily. Merely payment of tax due is not enough, as it is the legal duty of every citizen to file his tax return within the due date, regardless of whether the tax is to be paid.
The income tax law in our country is governed by the Income Tax Act, 1961 which needs to be amended from time to time for administration of tax rates. The relevant thresholds, applicable rates, deductions, exemptions, forms etc. are all defined in this act. ITR 1 is the return form applicable for individuals who have a regular income from salary, house or property and from other sources.
Filing of ITR1:
You must file your return for the previous year which is the financial year during which you have paid or are liable to pay your taxes. Failure to file your return within the stipulated date invites penalty. The most popular mode of fling ITR1 is online now, primarily because of its simplicity and comfort. For the Assessment Year 2019-20, once you enter all your income details in the ITR1 form in the portal, your gross income is automatically calculated. In the next step, you can invoke provisions under Section 80C to Section 80U of the Income Tax Act, 1961 to reduce your income appropriately, thereby also reduce your tax liability. Once you know the intricacies of Section 80C to Section 80U, you are in a position to judiciously work towards tax savings to your benefit.
Deduction Under 80C, 80CCC, 80CCD (1), 80CCD (1B) and 80CCD (2)
The maximum permissible deduction under these sections is Rs.1.5 lakhs. Additionally, Rs.50000 can also be claimed for investment in NPS. The first three rows of “Part C – Deductions and Taxable Total Income” in ITR1 are where you are needed to populate the relevant fields with your investments and expenditure under these sections.
- Section 80C:
- Contribution to PF, VPF, EPF, PPF etc.
- Premium paid towards Life Insurance.
- Repayment of the principal of Housing Loan.
- Investment in ELSS of Mutual Funds.
- Post Office investment schemes like National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), Senior Citizens Savings Scheme (SCSS) etc.
- Payment of tuition fees for two children pursuing regular courses.
- Tax saving Bank and Post Office Deposits.
- Section 80CCC: Contribution to life insurance and mutual unds pension schemes.
- Section 80CCD (1): National Pension Scheme and Atal Pension Yojana contributions.
- Section 80CCD (1B): Additional Rs.50000 paid in NPS.
- Section 80CCD (2): Your employer’s contribution to NPS, maximum 10% of your salary.
Deduction under Section 80D, 80DD and 80DDB:
Your investment in health insurance for self, your family, your parents and healthcare for your disabled dependants are eligible for deduction under these sections.
- Section 80D: The permissible limits are Rs.25000 each for yourself and your parents if they are below 60 years of age. For senior citizens the amount is Rs.50000.
- Section 80DD: Premium paid for insurance cover to dependent disabled individuals. The maximum amounts permissible are:
- Rs.75000 for 40% disability
- Rs.1.25 lakhs for 80% disability.
- Section 80DDB: The actual outgo of medical expenses for listed severe illnesses like cancer etc. The eligible amounts are:
- Rs.40000 for less than 60 years.
- Rs.1 lakh for senior citizens.
Deduction under Section 80E:
Under this section, you can claim a deduction for the interest paid against education loan for self and children.
Deduction under Section 80EE:
Rs.50000 additional exemption for interest against home loan sanctioned on or after 1st April 2013 and up to 31st March, 2014.
Deduction under Section 80G:
You can claim deductions for donations to permissible funds, charitable trusts etc. You will have to enter the name of the institutions where you have donated, to determine the amount of permissible deduction. You are eligible to claim exemption under this section for the amount of rent paid by you when not in receipt of HRA. The maximum amount allowed is Rs.60000.
Deduction under various Sections:
- Section 80GGA: Bequest to an institution of scientific research up to Rs.10000 in cash or without limit if paid otherwise.
- Section 80GGC: Payment made to political parties without any limit.
- Section 80QQB: A maximum amount of Rs.3 lakhs can be claimed for royalties received in lump-sum for writing books; else it is 15% of revenue in a year.
- Section 80RRB: A maximum amount of Rs.3 lakhs can be claimed for royalties received in lump-sum for patent registered after 1st April 2003.
Deduction under Section 80TTB:
Under this section, you can claim a deduction for interest earned on deposits, including your savings bank account. The maximum amount allowed is Rs.10000, which is Rs.50000 for senior citizens.
Deduction under Section 80U:
This section is applicable to persons with disabilities. The maximum eligible amounts for deductions are:
- Rs.75000 for persons with 40% or more disability.
- Rs.1.25 lakhs for persons with 80% or more disability.
Deduction under Section 24:
Rs.2 lakhs maximum for home loan interest subject to different applicable parameters.
Finalization of ITR1:
Once you have populated all the relevant cells with the eligible deductions under Section 80C to Section 80U, the online form will display the taxable income and additionally calculate your tax liability. In the next step, your online ITR1 form in the Tab4 “Taxes Paid” will download your 26AS which is your TDS details and fill the appropriate boxes. Checking the “Tax Details” allow you to tally and confirm the correctness of your filing activity, which in turn enables you to complete the process of filing your ITR1.
The various deductions under Section 80C to Section 80U allows you to plan and ensure that you avail of the maximum tax savings. There are some sections like Section 80D and Section 80U among others, that permits the deduction from your gross income giving you the benefit of reduction in the slab rate.