Employees’ Provident Fund (EPF)
contribution, school fees, principal
repayment of housing loan and
other tax-saving expenses made
to compute the total deduction
already available,” says Archit
Gupta, founder and CEO, Cleartax,
a tax returns filing portal. Simply
put, you might need to make little
or no tax-saving investments if
your EPF contribution, housing
loan principal repayment and
existing life insurance policies’
premium make up `1.5 lakh—the
annual deduction limit under
Section 80C.
2
the assessee can avail of deduction
only under 80C and for that
specific year in which payment
is made,” says Amit Maheshwari,
partner, Ashok Maheshwary &
Associates LLP.
3
Vaibhav Sankla
Managing Director, H&R Block
Pre-nursery, play school
and nursery class fees are
also eligible for deduction
under Section 80C
Section 80C: Prepay
housing loan
If you haven’t exhausted the
deductions under Section 80C, you
can consider prepaying a part of
your home loan after evaluating all
the alternatives at hand. “Before
making prepayment, compare
the opportunity cost of your
investment against your interest
cost,” advises Sankla. In other
words, carry out a cost-benefit
analysis taking into account the
interest paid on your loan and
returns the tax-saving investments
are likely to generate. “It is
important to plan the number of
installments in order to see how
much interest can be saved by
prepaying the loan. If principal
repayments are done in one go, it
can result in loss of tax benefits as
Tax-Saver Investments
Lock-in
Period Returns
*Public Provident Fund (PPF) 15 years 7.60%
*Sukanya Samriddhi Yojana 21 years^ 8.10%
*National Savings Certificate
(NSC) 5 years 7.60%
*Post Office Time Deposits 5 years 7.40%
Bank Tax-saver Deposits 5 years 6-7%
Till Retirement 8% to 10%
**Equity-linked Savings
Scheme (ELSS) 3 years 10-15%
##Ulips 5 years 9% -12%
Instruments
#National Pension System
(NPS)
* Returns for the January-March 2018 quarter. # Returns for the past three years. ^Till the girl turns 21.
**Returns for the past three years as per Morningstar. ## Returns for the past five years as per Morningstar
Section 80GG: Claim
HRA benefits without
allowance
Do not despair if your salary
structure does not feature house
rent allowance (HRA) or if you are
self-employed. “You can still claim
a deduction for rent paid under
section 80GG, subject to specified
limits. The maximum amount of
rent qualifying for deduction is
`5,000 per month,” says Amarpal
Chadha, tax partner and India
mobility leader, EY. The deduction
is allowed for individuals who
neither own residential property,
nor receive HRA, and yet have to
shell out rent to their landlords.
“The deduction allowed is the
least of rent paid minus 10 per
cent of the total income before
allowing the deduction or 25 per
cent of the total income before
allowing deduction, or `5,000 per
month,” explains Suresh Surana,
founder, RSM Astute Consulting.
4
Section 10: Pay rent
to parents
Tax benefits rel ated to HRA
form a key component of a
salaried individual’s remuneration
package. It is a huge source of
comfort for those living in rented
apartments. However, even those
who live with their parents can
avail of this benefit by paying
rent to them, particularly if the
latter fall in lower tax brackets.
“Your parents, in turn, can claim a
standard deduction of 30 per cent
of the rent amount, the deduction
for housing loan interest and
the deduction for proportionate
municipal taxes. As a result, the
entire family can save on taxes,”
explains Sankla.
www.outlookmoney.com February 2018 Outlook Money
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