A taxpayer can plan to maximize his tax savings and reduce income tax liability by availing the benefit of provisions relating to deductions/exemptions from taxable income under various sections of Income Tax Act. Let’s understand the five easy ways to save tax in Financial year 2017-18 .
Buying Home in Joint Name:
Income Tax Provision:
For a self-occupied property, interest on home loan is allowed as deduction upto Rs 2 lakh. But if the property is let out, the interest was fully allowed. This sometimes resulted in a loss under the head ‘Income from House Property’. The loss could be set off fully against Income under Other Heads like salary during that particular financial year. Now, there is a limit of Rs 2-lakh to set off of such loss from house property against other income heads. The unabsorbed loss can be carried forward and set off over an eight-year period.
Tax Saving Tip:
Joint Home Loan
If you have bought a new flat jointly and are also paying the home loan jointly then each int holder is entitled to a deduction of Rs 2 lakh. Section 80EE: First time Home Buyers First time Home Buyers can claim an additional Tax deduction of up to Rs.50,000 on home loan interest payments under this section. Below are the few conditions for this.
He must be an individual (Resident or Non-Resident).
- Loan must be taken for the acquisition of the property.
- Loan should be sanctioned in FY 2016-17.
- Loan amount should not exceed Rs. 35 Lakh.
- The value of the house should not be more than Rs 50 Lakh.
- The home buyer should not have any other existing residential house during the sanction of loan.
Do remember that if you claimed the interest under this section, then the same can’t be claimed under other sections for deductions.
Leave Travel Concession:Income Tax Provision: Leave Travel Concession (LTC) exemption is allowed to you as a salaried employee for 2 domestic journeys taken in a block of 4 calendar years.
Tax Saving Tip:
The current block of four years commenced on January 1, 2017. So if you haven't taken that much-needed break last year (2016), do it now. Proper records are to be maintained.
- Additional contribution to National Pension System (NPS):
You can claim additional tax benefit upto Rs 50,000/- towards contribution to NPS.
This benefit is over and above the limit of 1,50,000/- of section 80C and 80CCD.
- Non-salaried individual in par with salaried individual:
The deduction under NPS cannot exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals.
For employees, 10% additional deduction of salary is allowed with respect to employer’s contribution under section 80CCD(2). Thus, employees get overall deduction of up to 20% of the salary income.
Thus from A.Y 2018-19, deduction u/s 80CCD(1) to individual other than employees, will be 20% of gross total income.
- Section 54EC: Investments in Notified Bonds
The existing section 54EC allows exemptions up to 50 lakhs in respect of long-term capital gain invested in bonds issued by NHAI or RECL.
Now, investment in any notified bonds which are redeemable after three years shall also be eligible for this exemption.