The new financial year 2025-26 has already started. That is why in the given circumstances it is vital for taxpayers to clearly understand several key sections of the Income Tax Act 1961. The understanding of these sections can be immensely helpful and can significantly influence the tax planning and compliance of taxpayers.
Here are five important income tax provisions that every Indian taxpayer should acknowledge and be aware of:
1. Section 80C: Most popular tax-saving tool
The Section 80C provides for a deduction of up to ₹1.5 lakhs annually for individuals and HUFs who decide and invest in several notified financial instruments. Financial instruments such as PPF, EPF, ELSS, 5 year tax saving FDs (fixed deposits), Sukanya Samriddi Yojana and even life insurance premiums fall under this category.
Not only the above but even tuition fees of school going children and principal amount of repayment of home loans qualify for this deduction. It is crucial to note that this particular limit is inclusive of all the eligible investments not on every investment individually.
That is why proper strategic planning upon consultation with a certified tax planner can hence go a long way in helping taxpayers save tax and to get the maximum possible benefit out of this particular legal provision.
2. Section 24(b): Deduction on Home Loan Interest
Under this particular section, all home loan borrowers are allowed to claim up to ₹2 lakh in interest deductions annually for self occupied properties. In case the property has been let out, then the entire interest can be claimed.
Still, set-offs against other income is restricted to ₹2 lakhs only. Further, any loss post the same can be carried forward for up to the next 8 consecutive years.
Further, this deduction is permitted only if construction is completed within five years from the last day of the financial year in which the loan was applied for. Now, before moving ahead with claiming the benefits under this section it is prudent to discuss this section and its long term implications with a certified legal professional and a tax planner.
3. Section 80D: Deduction for health insurance premium
Now it is crucial to note that, under this particular provision, taxpayers are allowed to claim ₹25,000 for premiums paid towards health insurance for themselves, their spouses and children. Further, if parents are senior citizens (aged more than 60 years) then there is a separate deduction of ₹50,000 that can be claimed.
This helps in taking the total benefit to up to ₹75,000 or even ₹1,00,000 if both the tax payer and parents are senior citizens. Not only this, even preventive health check-ups of up to ₹5,000 are provided within this limit on an overall level.
4. Section 10(14): House rent allowance exemption
If you are someone who lives in a rented accommodation then you can seek partial exemption through your HRA. This particular figure i.e., HRA is the least of: actual HRA received, 50% of total salary payment (in specific metro cities) or about 40% (in non-metros), and rent paid subtracted with 10% of basic salary.
Now, to claim exemption under this provision, the employee must submit the rent receipts or landlord’s PAN along with other relevant documents if the total rent exceeds ₹1 lakhs annually. This section is a key provision and comes in handy for those professionals who are not having ownership status i.e., don’t own a house in the city they work in.
5. Section 234F: Penalty for late filing of ITR
This is another extremely significant section that all tax payers must always keep in mind before going ahead with filing their taxes. As according to this section, filing your income tax return after the due date i.e., the last date can result in a fine of ₹1,000 (for income below ₹5 lakh) or ₹5,000 (for income above ₹5 lakhs) under this section 234F.
Further, not only this, repeated delayed filings of income tax can result in interest payments and fines as well as elaborated in Section 234A and 234B. This behaviour might even result in the loss of benefits such as carry forward of capital gains or losses or even upcoming eligible refunds.
That is why to completely save yourself from such complications, you should ensure that you complete all the associated formalities and submit your tax before the due date. This should be kept in mind by all salaried tax payers.
Hence, these are some most important income tax provisions that all tax payers should clearly understand and know about before moving ahead with filing their taxes. This can also help all new salaried tax payers in keeping a tab on their tax returns and also help them build more confidence in so far as the overall tax filing process is concerned.
Disclaimer: The information provided above is for general informational purposes only and should not be construed as legal or financial advice. Please consult a qualified tax professional or financial advisor for personalised guidance based on your specific situation.
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