Dr. Suresh Surana said the prevailing provisions of the Income Tax Act 1961, (‘IT Act’) provides taxpayer with several opportunities to legitimately save tax in various forms such as deductions, exemptions, allowances, etc. Many of the said benefits are subject to certain conditions such as threshold limits, lock-in periods, etc. Some of the widely used sections wherein taxpayers can reduce their tax liability are briefly provided below:
A. Availing Certain Deductions U/C VI-A (indicative list)
| Sr. no. | Section | Deduction | Quantum of Deduction |
| (i) | 80C | Individuals and HUF’s, subject to fulfilment of prescribed conditions, can avail deduction under this section on investing in certain instruments such as LIC premiums, ELSS Schemes, PPF contributions, Term Deposits, National Savings Certificates (NSC), etc. Apart from the said investments, expenditures such as tuition fees for fulltime education of children in India and principal repayment of housing loan can also be claimed under this section. | Rs. 1,50,000 |
| (ii) | 80CCD(1B) | Individuals are eligible to avail additional deduction under this section for contribution towards National Pension Scheme (NPS). Such deduction is over and above the threshold limit of Rs. 1,50,000 provided u/s 80C of the IT Act. | Rs. 50,000 |
| (iii) | 80D | Premium paid by an Individual in respect of medical insurance or contribution to Central Government Health Scheme / notified scheme for self, spouse, dependent children or parents |
Rs. 25,000 / Rs. 50,000* *The higher limit of Rs. 50,000 would be applicable where medical insurance is bought in respect of health of any person who is a senior citizen. Senior Citizens above the age of 60 years who are not covered by Health Insurance, to be allowed deduction of Rs. 50,000 towards actual medical expenditure. Further, deduction of ₹5,000 for any payments made towards preventive health check-ups shall be available within the aforementioned limits. |
| (iv) | 80G | Any assessee can claim deduction under this section for Donations made to approved charitable institutions. | 50% or 100% of the deduction (with or without qualifying limits) depending on the organisation/ institution to which such donation is made. |
| (v) | 80GG | Any individual who incurs rent expenditure and is neither in receipt of HRA from his employer nor does he owns a residential accommodation (either in his name or in the name of spouse or minor child) shall be eligible to claim deduction under this section. |
Lower of the following – a. Rs. 5000/month b. 25% of ATI* c. Actual Rent as reduced by 10% of ATI* *ATI = Gross Total Income as reduced by Deduction u/s Chapter VIA (except 80GG) |
| (vi) | 80TTA/80TTB |
Every individual and HUF who derives interest income from savings bank account can claim deduction u/s 80TTA. However, in order to benefit resident senior citizens, scope of deduction is being widened u/s 80TTB to include deduction for interest income on term deposits as well. |
Rs. 10,000 u/s 80TTA Rs. 50,000 u/s 80TTB |
B. Avail the eligible exemptions U/S 10 (indicative list relevant for salaried employees)
| Sr. no. | Section | Allowance | Quantum of Exemption |
| (i) | 10(13A) - House Rent Allowance (‘HRA’) | Every salaried employee who is in receipt of HRA and who resides in a rental accommodation may avail the benefit of exemption under this section provided he/she does not own any residential accommodation occupied by him. |
Least of the following: (a) Actual HRA Received (b) 40% of Salary* (50%, if house situated in Mumbai, Calcutta, Delhi or Madras) (c) Rent paid in excess of 10% of salary* * Salary = Basic + DA (if part of retirement benefit) + Turnover based Commission |
| (ii) | 10(14) - Special Allowances |
(i) Many individuals are in the receipt of Conveyance Allowance, Daily Allowance, Helper/Assistant Allowance, Uniform Allowance from their employer. (ii) Salaried individuals may also receive certain special allowances such as Children Education Allowance, Children Hostel Expenditure Allowance, etc. |
Lower of the following: (a) Allowance received, (b) Actual amount spent. Up to Rs. 100 per month (for education) /300 per month (for hostel) - per child up to a maximum of 2 children. |
| (iii) | 10(5) - Leave Travel Allowance (LTA) |
Every employee who is in receipt of LTA can claim deduction in connection with expenditure incurred (for self and family*) towards travelling in India * Family = spouse and children; parents, brothers and sisters who are wholly or mainly dependent on individual |
The exemption of LTA can be availed for two journeys performed in a block of 4 calendar years i.e. 2022-2025, as per the prescribed conditions. |
C. Reviewing the taxable income and opportunities for Tax optimisation (such as in case of any Capital Gains)
(i) In case if the taxpayer has Capital Gains Income during the year - The taxpayers can review their portfolio of stock holding and can look at opportunities to book capital losses by selling listed shares / units for the purpose of offsetting the capital gains in order to minimize the overall tax liability. Please note that Long Term Capital Loss can be set off against Long Term Capital Gains during the year, whereas Short Term Capital Loss can be set off against both Long Term Capital Gains as well as Short Term Capital Gains.
(ii) Utilization of the threshold limit of Rs. 1,00,000 u/s 112A of the IT Act - Long Term Capital Gains (on listed shares transferred on stock markets) is exempt upto the limit of Rs. 1,00,000 and excess is subjected to tax at a rate of 10%. As such, taxpayers who want to utilize this limit, may plan to liquidate such holding and optimise their tax, subject to other factors such as funding requirements, investment objective, risk appetite, market factors, evaluation of other investment options, etc.
(iii) Utilization of the Cost Inflation Index (CII) in case of sale of eligible long term capital asset – When a taxpayer sells any long term capital asset (such as say house property held for more than 2 years, unlisted shares held for more than 2 years, debt mutual funds held for more than 3 years, etc), they can inflate the cost by the indexation factor and may claim the benefit of indexed cost, thereby reducing the capital gains which would be chargeable to tax.
