Question 1

✔️What are tax benefits?

Accepted Answer

Tax laws that help in reducing the tax liability of eligible entities are known as tax benefits. Tax exemptions and deductions are some of the examples of tax saving investment benefits. The quantum of tax savings depends on the type of tax benefit sought as there are various forms of tax savings. Some of the tax-saving investment benefits are: Income Tax Exemption and Income Tax Deduction.  Some of the Tax benefits include: The premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act, 1961, subject to certain conditions and limits. The benefits received from a life insurance policy are exempted from income tax under Section 10(10D) of the Income Tax Act, 1961, subject to conditions and limits specified under the law. If the benefit paid to the policyholder is not exempt under Section 10(10D), the amount will be subject to tax deducted at source under section 194DA of the tax laws. Changes in tax laws are announced periodically, hence, it is advisable to consult a tax consultant to ascertain exact tax benefits.

Question 2

✔️What are the tax benefits on life insurance?

Accepted Answer

Life insurance provides financial protection to the family along with a host of tax benefits. The premiums paid for a life insurance policy are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. The available tax deductions lower your taxable income, boosting your overall savings. Tax benefits under Section 80C Investing in life insurance can help you receive a host of tax benefits under Section 80C: A tax deduction of up to Rs 1.5 lakhs is allowed for the premiums paid. For policies bought after April 1 2012, deduction of the premium of up to 10% of the sum assured is allowed For policies purchased before April 1 2012, the deduction is allowed for premiums of up to 20% of the sum assured. The tax benefits will be reversed if the policy is discontinued within two years of purchase. Tax Benefits Under Section 10 (10D) Any amount received at the maturity of a life insurance policy is exempted from tax under Section 10(10D). However, the exemption is not applicable to Amount received under Section 80DDA (3) or 80DD (3); Maturity benefits received under a Key Man Insurance Policy; Sum received under any insurance policy (other than as death benefit) issued on or after April 1, 2003, during the term of which the premium paid is more than 20% of the sum assured.

Question 3

✔️What are the tax benefits available on health insurance?

Accepted Answer

Health insurance has become a necessity and the government gives a variety of tax benefits to promote its adoption. The premiums paid for medical insurance are eligible for tax benefits under Section 80C and 10(10D) as applicable. Section 80C: A deduction of Rs 1.5 lakh can be claimed from your total income for health insurance premiums. Section 10D: Under Section 10D, any benefit received through an insurance policy will be exempted from tax (* subject to fulfillment of certain conditions)

Question 4

✔️What is a Tax Saving Calculator?

Accepted Answer

With the wave of digitization sweeping the country, the process of tax calculation has undergone a drastic change. Now you don’t need reams of paper to compute your annual tax outgo. Tax saving calculator is a simple, user-friendly digital tool meant to compute tax liability. The tool uses investment details to project your annual tax details.

Question 5

✔️What are the benefits of using a Tax Saving Calculator?

Accepted Answer

A tax saving calculator helps you make tax-efficient investments. Tax saving calculators have a simple interface and can be accessed by anyone. A tax saving calculator is an ideal tool for long-term financial planning as it utilizes factors like age and potential income growth.

Question 6

✔️How can I save tax?

Accepted Answer

The primary tool for tax saving is Section 80C of the Income Tax Act, 1961. You can claim a deduction of up to Rs 1.5 lakh per year under section 80C for certain investments. A variety of investments are eligible for tax benefits, but fixed deposits, PPF, ULIP and ELSS are some of the popular options. One should, however, not make an investment based solely on tax savings, but keep the financial goal in mind. For instance, if the aim is to ensure a regular income with low investment risk, you should choose FD or PPF. On the flip side, if you seek high returns and have a slightly high-risk tolerance, ELSS is an ideal choice for you.

Question 7

✔️Can I claim the 80C deductions at the time of filing return in case I have not submitted proof to my employer?

Accepted Answer

Employers take into account the proof of investments submitted by employees to compute their taxable income. It is advisable to submit the proof on time, but if you fail to submit, you can always make the deduction claim at the time of filing the tax return. To claim deductions during filing of the return, the investment should have been made during the relevant financial year.

Question 8

✔️I have made an 80C investment on 30 April 2019. For which year can I claim this investment as a deduction?

Accepted Answer

All the deductions available under Section 80C are valid only in the year the investments are made in. If you have made the investment on April 30 2019, you will be eligible to claim the deduction in the financial year 2019-20.

Question 9

✔️I have availed a loan from my employer for pursuing higher education. Can I claim the interest paid on such loan as a deduction under Section 80E?

Accepted Answer

A deduction can be claimed for interest on a loan for higher studies under Section 80E. However, the deduction is available only if the loan has been provided by a financial institution. Interest on the loan granted by your employer will not qualify for a tax deduction under the law.

Question 10

✔️Is there any restriction or maximum limit up to which I can claim a deduction under Section 80E?

Accepted Answer

Interest paid during the year for education loan is eligible for tax deduction under Section 80E. However, the section doesn’t specify any limit for the deduction. The actual interest paid can be claimed as a deduction under the section. Law has not prescribed any upper limit for making a claim of deduction under Section 80E. Hence, the actual interest paid during a year can be claimed as a deduction.

Question 11

✔️Can a company or a firm take the benefit of Section 80C?

Accepted Answer

A company cannot claim tax benefits under Section 80C as its provisions apply only to individuals and Hindu Undivided Family (HUF).

Question 12

✔️I have been paying a life insurance premium to a private insurance company. Can I claim 80C deduction for the premium paid?

Accepted Answer

Deduction under Section 80C applies to all insurers irrespective of the nature of ownership. The insurance company should be registered with the Insurance Regulatory and Development Authority of India. You can claim a deduction of up to Rs 1.5 lakh under Section 80C for a policy issued by a private insurer.

Question 13

✔️In which year can I claim a deduction of the stamp duty paid for the purchase of house property?

Accepted Answer

You can claim a deduction for stamp duty paid for the purchase of a house in the year in which the payment is made. The deduction is available under Section 80C.

Question 14

✔️Can a company claim a deduction for donations made under Section 80G?

Accepted Answer

Donations to specific institutions, funds, etc qualify for tax deduction under Section 80G and every taxpaying entity, including companies, are eligible for the tax benefit.

Question 15

✔️I am paying medical insurance premium for a medical policy taken in my name, my wife and children. I am also paying a premium on a medical policy taken in the name of my parents who are above 60 years. Can I claim a deduction for both premiums paid?

Accepted Answer

Tax deduction of medical insurance premiums is available separately for policies that cover you, spouse and children and your parents. You can claim a deduction of up to Rs 25,000 under Section 80D for health insurance policy taken in your name, wife and children. Additionally, you can claim a deduction of Rs 50,000 for a policy taken for your senior citizen parents. Both deductions can be claimed together under Section 80D of income tax laws. The deduction limit for senior citizen parents was Rs 30,000 till 2017-18 but has since been increased.

Question 16

✔️Is my FD interest exempt under Section 80TTB?

Accepted Answer

Interest income from a Fixed Deposit is exempt for people over the age of 60 years under Section 80TTB.

Question 17

✔️Are the tax exemptions available under section 80D available to corporates?

Accepted Answer

The premiums paid for medical insurance are tax-exempt under Section 80D of the tax laws. The tax benefit is available only to individuals and Hindu Undivided Family, but not to corporate entities. The section also mandates payment through DD, cheque or electronic means to claim tax benefits. Cash payments are not eligible for tax deduction under Section 80D.

Question 18

✔️What are the tax exemptions available under section 80DD?

Accepted Answer

Section 80DD allows a tax deduction of up to Rs 50,000 for the treatment cost of a dependent handicap. The deduction limit can be extended to Rs 1 lakh depending on the severity of the disability.

Question 19

✔️What are the tax exemptions available under section 80DDB?

Accepted Answer

You can claim tax deductions under Section 80DDB for the treatment cost of serious diseases such as hemophilia, neurological disorders, Parkinson’s disease, cancer (malignant), AIDS, thalassemia and chronic renal failure are tax-deductible. For those aged below 65 years, a deduction of Rs 40,000 is allowed, while those aged above 65 years can claim a deduction of Rs 60,000.

Question 20

✔️What are the tax benefits available under Section 80C?

Accepted Answer

Various types of investments are eligible for tax deduction under Section 80C, but ULIPs are one of the best investments to achieve financial goals along with saving taxes. The contributions to a ULIP plan qualify for a tax deduction of up to Rs 1.5 lakhs in a year. To claim the deduction the total premium should be less than 10% of the sum assured. For instance, if the sum assured is Rs 15 lakhs, and the total premium in a year is less than Rs 1.5 lakh, the entire amount can be claimed as a tax deduction under Section 80C. Even if the premium exceeds Rs 1.5 lakh, the deduction will be limited to Rs 1.5 lakh.

Question 21

✔️What are the tax benefits available under section 80CCC?

Accepted Answer

The regular premiums paid for a retirement/pension ULIP are eligible for a tax deduction of up to Rs 1.5 lakh in a year under Section 80CCC. The cumulative deduction limit under Section 80C and Section 80CCC is Rs 1.5 lakhs. You can invest in a higher amount in ULIP to fulfil your financial goals, but the deduction will be limited to Rs 1.5 lakhs.

Question 22

✔️What are the tax benefits available under section 10(10D)?

Accepted Answer

Under Section 10(10D) of the Income Tax Act, the amount received on partial withdrawal or maturity of a unit-linked plan is exempt from tax. To be eligible for exemption the annual premium of the policy should not be more than 10% of the sum assured. If the policy is bought before April 1, 2012, the premium should not be more than 20% of the sum assured. If the premiums exceed the prescribed limit, the benefits received in the future will be taxed. In the case of receiving death benefits, the amount will be taxed as per the income tax slab rate.

Question 23

✔️What are the tax benefits available under section 10(10A)?

Accepted Answer

Section 10(10A) of the Income Tax Act allows tax-free accumulation of pension if you have invested in a ULIP pension/retirement plan. However, the pension received is taxable as per income slabs. The amount received on the surrender of the policy is also taxable. One also has to pay the premiums without fail to receive complete tax benefits. If you discontinue the unit-linked plan within 2 years of starting, you will not be eligible for tax deduction under Section 80C.

Question 24

✔️Are recurring deposits in bank eligible for the deduction?

Accepted Answer

Section 80C is very specific about the investments eligible for deduction and recurring deposit does not qualify for a deduction. To claim deduction under the section, you will have to invest in specific tax-saving instruments. For instance, a five-year bank fixed deposit will be eligible for deduction but a recurring deposit even for five years will not qualify for a deduction.

Question 25

✔️Does deduction under Section 80C include 80CCC and 80CCD?

Accepted Answer

The deduction of Rs 1.5 lakh per year allowed under Section 80C includes the deductions allowed under sections like 80CCC and subsection (1) of Section 80CCD.

Question 26

✔️Are all allowances taxable for salaried individuals?

Accepted Answer

The nature of the allowance determines if it is taxable or not. Allowances like Hostel Expenditure Allowance, Children Education Allowance, Leave Travel Allowance and House Rent Allowance, which are often part of the salary are partially tax-exempt. On the flipside, allowances such as City Compensatory Allowance, Special Allowance, and Overtime Allowance are taxable in the hands of the employee.

Question 27

✔️Even if no taxes have been deducted from salary, is there any need for the employer to issue Form 16?

Accepted Answer

Form 16 has two parts—Part A and Part B. If the employer deducts TDS, he/she will issue Part A of Form 16. Form 16 (Part A) can be downloaded from the Traces website. If the employer does not deduct TDS, no Form 16 is required. However, Part B is issued by the employer and can be issued even if your salary does not exceed the annual exemption limit.

Question 28

✔️Will my family pension income be taxed as salary income?

Accepted Answer

Since no employer-employee relationship exists in the case of family pension, it is not taxed as salary income. Family pension is taxed as income from other sources.

Question 29

✔️Is leave encashment taxable as salary?

Accepted Answer

Yes, any amount received as leave encashment is taxed as under the income from salary head. Leave encashment is tax-exempt for government employees, but the lowest of the following is exempt for non-government employees. An amount equal to salary for the period of leave earned (maximum leaves earned will be 30 days for every year of actual service) 10 months average salary. [Avg. salary = salary (basic + DA) of 10 months immediately preceding the retirement or resignation] Maximum Rs.3,00,000.

Question 30

✔️What are the deductions available for a disabled person?

Accepted Answer

Under Section 80U, tax benefits can be availed by any individual certified as a person with a disability by a medical authority. A deduction of Rs 75,000 is allowed to anyone with at least 40% disability and Rs 1.25 lakh to people with over 80% disability.

Question 31

✔️Are there any deductions for medical insurance done for any family members?

Accepted Answer

Section 80D of the income tax act specifies in detail the tax deductions available for buying a health insurance policy. A deduction is available for policies covering self, spouse, children and parents under the section. If you buy a policy for yourself and your spouse and children, you can get a maximum deduction of Rs.25, 000. If you are a senior citizen, the deduction limit increases to Rs. 50,000. If you buy a policy for your parents, you can get a maximum deduction of Rs. 25,000. If your parents are senior citizens, the deduction limit increases to Rs. 50,000f you buy a policy for yourself, spouse and children and another policy for your parents, you get two deductions: up to Rs. 25,000 for your policy and up to Rs. 25,000 for your parents’ policy. If your parents are senior citizens and you also buy a plan for them, you get two deductions: up to Rs. 25,000 for your policy and up to Rs. 50,000 for your parents’ policy. If both you and your parents are senior citizens and you buy two policies, one covering your family and another for your parents, you get two deductions: up to Rs. 50,000 for your policy and up to Rs. 50,000 for your parents’ policy.

Question 32

✔️Can both the earning members of a family claim deduction for home loan taken in a joint name?

Accepted Answer

Yes, both the earning members of a family can individually claim maximum tax benefits for home loan taken in joint names. The interest on a home loan is eligible for a tax deduction of up to Rs 2 lakhs in a year under Section 24B of the Income Tax Act. Additionally, the principal repayment qualifies for a deduction of up to Rs 1.5 lakhs under Section 80C.

Question 33

✔️How can we get additional benefit in NPS (National Pension System) other than that included in 80C?

Accepted Answer

The NPS being a retirement-focused instrument receives additional tax benefits under Section 80 CCD (1B) of the Income Tax Act. A taxpayer can claim an additional deduction of up to Rs 50,000 for contributions to NPS. The tax benefit is over and above the limit of 80 C.

Question 34

✔️What is the interest penalty under Section 234A?

Accepted Answer

Filing the income tax return on time is as important as honestly paying the tax. An assessee can be penalised for late filing of taxes under Section 234A. Interest is charged on the outstanding tax liability if the assessee is late in filing his/her tax returns.

Question 35

✔️What is Section 80TTA?

Accepted Answer

A savings bank account is a popular choice for millions of Indians. Section 80TTA of the Income Tax Act allows a tax deduction on the interest income from a savings bank account. However, the tax benefit is available only till Rs 10,000, and any income beyond that is taxable. Section 80TTA of Income Tax Act allows for a tax deduction on the interest income from a savings bank account. Interest earned above Rs. 10,000 will be taxable.

Question 36

✔️How is the tax levied for Indian residents and non-resident Indians?

Accepted Answer

The income generated by resident individuals and companies from foreign countries is taxable in India. Non-resident Indians, on the other hand, have to pay taxes only on the income earned in India or from a source/activity in India.

Question 37

✔️Will I get tax benefits if I purchase health insurance for my parents?

Accepted Answer

Buying a health insurance policy provides a variety of tax benefits. Besides a tax deduction allowed for a policy taken for self, children or spouse, a tax deduction is also available for a health insurance policy taken for parents under Section 80D of the Income Tax Act. You will get the tax benefit irrespective of the fact that your parents are dependent or not. Tax benefits can increase depending on the age of the parents. You can claim a tax deduction of up to Rs 50,000 per year if your parents are over 60 years of age.

Question 38

✔️Is the interest received on the tax-saving FD taxable?

Accepted Answer

The interest earned on tax-saving fixed deposit is always taxable.

Question 39

✔️Can self-employed individuals claim the HRA benefit?

Accepted Answer

No, the HRA benefit is only limited to salaried people, but self-employed people can avail deduction for house rent under Section 80GG of the income tax law.

Question 40

✔️Is it compulsory to receive House Rent Allowance to receive tax benefits on rent paid?

Accepted Answer

House rent allowance is not mandatory to receive tax benefits for rent paid. Self-employed individuals can claim a deduction under Section 80GG for the rent paid.

Question 41

✔️How can I save tax on an education loan?

Accepted Answer

An individual can easily get tax benefits for education loan taken for self, spouse or children. Under Section 80E of the income tax law, a tax deduction can be claimed for the interest paid on an education loan.

Question 42

✔️What is the maximum limit for availing deduction of interest paid on Home Loan?

Accepted Answer

A maximum deduction of Rs 2 lakhs can be claimed for the interest paid on home loan taken for a self-occupied or rented property under Section 24. Earlier, there was no limit for the interest paid on home loan for a rented property.

Question 43

✔️What is Income-tax?

Accepted Answer

The income tax is a form of direct tax levied by the government on the income of every person. Income tax in India is governed through the Income Tax Act, 1961.

Question 44

✔️What is the period for which a person’s income is considered for the purpose of Income-tax?

Accepted Answer

In India, the period between April 1 and March 31 is considered to be the financial year, which is used for all purposes of accounting and budgeting by the government. Taxes are an important source of government revenues and hence the financial years is used for purposes of Income Tax. The financial year is further classified into ‘Previous Year’ and ‘Assessment Year’. The year in which the income is earned is known as the previous year, while the year in which the tax is computed is known as the assessment year. For instance, the previous year 2019-20 will be the income earned between April 1, 2019, and March 31 2020. The tax on the income earned in the previous year 2019-20 will be computed in the assessment year 2020-21.

Question 45

✔️Who is supposed to pay Income-tax?

Accepted Answer

Sometimes income tax terms can be confusing. According to tax laws, every person has to pay income tax. ‘Person’ as per the law includes natural as well as artificial entities. For the purpose of charging Income-tax, the term 'person' includes Individuals, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, Companies, Local authority and any artificial juridical person not covered under any of the above.

Question 46

✔️What is exempt income and taxable income?

Accepted Answer

Tax exemptions are among the various tax benefits provided by the government. If an income is tax-exempt, it will not be considered for the computation of income tax. On the other hand, the incomes which have to be considered for taxation purposes are known as taxable income.

Question 47

✔️I am an agriculturist. Is my income taxable?

Accepted Answer

Tax is not levied on agricultural income in India. However, if an agriculturist has non-agricultural income, he/she will have to declare the agricultural income for the calculation of tax on his/her non-agricultural income. Section 2(IA) of the Income Tax Act, 1961 deals with the meaning of agricultural income.

Question 48

✔️Do I need to maintain any records or proof of earnings?

Accepted Answer

One has to maintain proof and records as per the income tax act for every source of income. If the act doesn’t specify or prescribe the type of records, you should maintain relevant records to prove your claim of income.

Question 49

✔️As an agriculturist, am I required to maintain any proof of earnings and expenditures incurred?

Accepted Answer

Records have to be maintained for every kind of source of income, including agricultural income. Even though agricultural income is exempt from taxes, it is advisable to maintain some proof of earnings and expenditures.

Question 50

✔️If I win a lottery or prize money in a competition, am I required to pay Income-tax on it?

Accepted Answer

Tax is deducted at a flat rate of 30% without any basic exemption limit in the case of lottery and prize money. Generally, the tax is deducted at source and the balance is paid to the winner

Question 51

✔️If my income is taxed in India as well as abroad, can I claim any sort of relief on account of double taxation?

Accepted Answer

The Government of India provides relief to people who have paid income tax in a foreign country. The relief can be granted as per the double taxation avoidance pact or Section 91 of the Income Tax Act.

For Males below the age of 60 Tax on income up to Rs. 2,50,000: Nil Tax on income from Rs. 2,50,001 to Rs. 5,00,000: 5% Tax on income from Rs. 5,00,001 to Rs. 10,00,000: 20% Tax on income above Above Rs. 10,00,000: 30%	For Females below the age of 60 Tax on income up to Rs. 2,50,000: Nil Tax on income from Rs. 2,50,001 to Rs. 5,00,000: 5% Tax on income from Rs. 5,00,001 to Rs. 10,00,000: 20% Tax on income above Above Rs. 10,00,000: 30%
For Senior Citizens (resident taxpayers aged 60 and above) Tax on income up to Rs.3,00,000: Nil Tax on income from Rs. 3,00,001 to Rs. 5,00,000: 5% Tax on income from Rs. 5,00,001 to Rs. 10,00,000: 20% Tax on income above Above Rs. 10,00,000	For very Senior Citizens (resident taxpayers aged 80 and above) Tax on income up to Rs.5,00,000: Nil Tax on income from Rs. 5,00,001 to Rs. 10,00,000: 20% Tax on income above Rs.10,00,000: 30%

Income Tax

Tax Saving Schemes and Options in India

Income Tax Saving

Are You Liable to Pay Income Tax?

Basics of Tax Saving

Which Tax Regime to Choose?

What Are the Different Types of Tax-Saving Tools?

Health Insurance

Home Loan

ULIP

Term Plan

Equity-Linked Savings Scheme (ELSS)

National Pension Scheme (NPS)

Fixed Deposit (FD)

Employees’ Provident Fund (EPF)

Tips on Income Tax Savings

Public Provident Fund (PPF)

Sukanya Samriddhi Yojana (SSY)

National Savings Certificate (NSC)

Senior Citizen Savings Scheme (SCSS)

How to Save Tax in 2020-21

Tax Slabs 2020-21

Rate of Income Tax for financial year 2020-21 under the old tax regime

Investment Declaration – A Short Guide

Declaring Investments: Three Possible Scenarios

Situation 1: Amount Declared is Greater Than Amount Invested

Situation 2: Amount Declared is the Same as Amount Invested

Situation 3: Amount Declared is Less Than Amount Invested

Tax Saving Investments FAQs