Paying taxes is painful and so we always want to avail all the tax saving options available. And related to this I often get this question – what is the maximum tax I can save?
A few days ago we published an eBook on all Tax saving options available in India for FY 2015-16. The table below gives a summary of all the tax saving sections, investment options available along with the maximum tax benefit available for an individual tax payer.
If you are able to avail all these sections you can make close to Rs 10.75 Lakhs income tax free.
Though 10.5 Lakhs sounds big amount but most people would avail only few of the above. Here is the reason:
- Rs 2 Lakhs exemption for donation: Now people donate for a cause and their passion/empathy and not to save taxes. It’s just that tax exemption sweetens the deal!
- Rs 2.5 Lakhs exemption on account of tax payer or his dependent being physically disabled. This is a much needed exemption but applies to very few tax payers.
- Rs 80,000 deduction for treatment of serious illness is something that very few tax payers would take advantage of.
So out of Rs 10.5 lakhs, around 5.3 lakhs exemption would be claimed by very few tax payers and in special cases only.
Most tax payers even after using all the tax saving sections would be able to claim tax benefit up to Rs 5 to 5.5 Lakhs.
Tax Saving Sections Summary:
Below is the recap of all tax saving sections for FY 2015-16:
Section 80C/80CCC/80CCD: Investment in EPF, ELSS, PPF, FD, NPS, NSC, Pension Plans, Life Insurance, SCSS, SSA and NPS. Also includes Home Loan Principal repayment, Tuition Fees, Stamp Duty
Section 80CCD(1B): Investment in NPS
Section 24: Interest paid on Home Loan for Self occupied homes. No Limit for Rented house
Section 80E: Interest paid on Education Loan. No Limit – Rs 50,000 is just an assumed value
Section 80CCG: 50% of investment in RGESS approved stocks & mutual funds. Max investment limit is Rs 50,000
Section 80D: Premium payment for medical insurance for self and parents. Also includes Rs 5,000 limit for preventive health checkup
Section 80DDB: Treatment of Serious illness for self and dependents (Limit of Rs 80,000 for person above 80 years, Rs 60,000 for person above 60 years and Rs 40,000 for rest)
Section 80U: Physically Disabled Tax payer (Rs 75,000 for 40% to 80% disability and Rs 1,25,000 for more than 80%)
Section 80DD: Physically Disabled Dependent (Rs 75,000 for 40% to 80% disability and Rs 1,25,000 for more than 80%)
Section 80G: Donation to approved charitable funds like Prime Minister Relief fund, etc
Section 80GGA: Donations for scientific research or rural development
Section 80GGC: Donations to political parties
Section 80TTA: Interest received in Savings Account