The intricacies of income tax can be overwhelming, particularly for salaried individuals. However, employers can assist their employees in saving money and attaining financial stability.
During our Parichay‒Ask the Expert session, CA Ruchika Bhagat, Managing Director of Brooks Consulting Pvt Ltd, shared her expertise on tax exemptions and deductions.
In this blog, we've summarised our takeaways from the session and our own research. Read on to discover how you can help employees control their finances better.
Standard deduction of INR 52,500 is available for a salary above INR 15.5 lakh
Salaried employees can avail of various deductions under different sections such as Section 80, Section 24 and Section 10. Section 80C is the most important section that covers a wide range of investments for deductions up to INR 1.5 lakh.
Other sections include 80CCD1B, 80D, 80DD, 80DDB, 80E, 80EEA, 80EEB, 80G, 80TTA, 80TTB and 80U. Deductions for interest paid on loans for a self-occupied property are limited to INR 2 lakh under Section 24. A physically challenged person can get a deduction of INR 75,000 to 1.5 lakh.
Sukanya Samriddhi Yojana is a government scheme started in 2015 under the "Beti Bachao Beti Padhao" campaign. It allows investment in the name of a girl child under 10 years, with a minimum amount of INR 250 and a maximum of INR 1.5 lakh per annum. The scheme offers around 7-8% interest rates and tax benefits under Section 80C. The maturity amount and interest earned are fully tax-exempt.
Under Section 80E, individuals can claim a deduction on interest paid on higher education loans, taken for themselves, their spouse, children or legal guardians, from banks, financial institutions or charitable organisations. There is no limit on the deduction, and it is available for eight years starting from the year of loan repayment. It is different from the deduction available under Section 80C for tuition fees.
Section 10 of the income tax covers various allowances and exemptions, including:
Section 80D allows individuals to claim a deduction on health insurance premiums paid for themselves, their spouse, children, and parents. The deduction cap is INR 25,000 for non-senior citizens and INR 50,000 for senior citizens. If the individual and their parents are both senior citizens, they can claim a deduction of up to INR 1 lakh. Additionally, individuals can claim a deduction of up to INR 50,000 on medical expenses incurred for themselves or their family members if they cannot get health insurance for some reason.
Note: Talk to your auditor or visit the official government portals before making any financial decision