Phoenix Auditing

Income Tax Deductions for Individuals FY 2018-19

  1. Standard Deduction
  2. Leave Travel Allowance (LTA)
  3. Exemption of House Rent Allowance
  4. Section 80C, 80CCC and 80CCD(1)
  5. Medical Insurance Deduction (Section 80D)
  6. Interest on home loan
  7. Deduction for Loan for Higher Studies (Section 80E)
  8. Deduction for Donations (Section 80G)
  9. Deduction on Saving Account Interest (Section 80TTA)
  10. Additional Deduction for interest on home loan (Section 80EE) (Section 80TTA)

Some of the major deductions and allowances available to individuals, using which one can reduce their income tax liability are:

  1. Standard Deduction

Standard deduction amounting to Rs 40,000 is allowed for salaried employees. This has replaced the existing transport allowance of Rs 19,200, and medical reimbursement of Rs 15,000. As a result, salaried people can avail an additional income tax exemption of Rs 5800 with effect from FY 2018-19.

LTA is allowable for two travels in a block of four years. In case an individual doesn’t use this exemption within a block, he/she could carry the same to the next block. Below are the restrictions which are applicable to LTA:

  • LTA only covers domestic travel and it doesn’t cover the cost of international travel
  • The mode of such travel must be either railway, air travel, or public transport
  • Exemption of House Rent Allowance

The least of the following is allowed as the HRA exemption to a salaried employee:

  • Total HRA received from your employer
  • Rent paid less 10 percent of (Basic salary +DA)
  • 40 percent of salary (Basic+DA) for non-metros and 50 percent of salary (Basic+DA) for metros

Section 80C, 80CCC and 80CCD(1) upto a maximum of Rs 1.5 lakhs for investments in following avenues:

  • Life insurance premium
  • Equity Linked Savings Scheme (ELSS)
  • Employee Provident Fund (EPF)
  • Annuity/ Pension Schemes
  • Principal payment on home loans
  • Tuition fees for children
  • Contribution to PPF Account
  • SukanyaSamriddhi Account
  • NSC (National Saving  Certificate)
  • Fixed Deposit (Tax Savings)
  • Post office time deposits
  • National Pension Scheme
  • Medical Insurance Deduction (Section 80D)

The limit for Section 80D deduction is Rs 25,000 for premiums paid for self/family. For premiums paid for parents who are senior citizens, one can claim a deduction uptoRs 30,000. This limit has been raised in Budget 2018 from Rs 30,000 to Rs 50,000. i.e. effective 1 April 2018, one can claim upto RS 50,000 as a deduction for premium paid for senior citizen parents. Additionally, health checkups to the extent of Rs 5,000 are also allowed and are covered within the overall limit of Rs 25,000 and Rs 50,000 as the case may be.

Homeowners have the option to claim up to INR 2 lakhs as a deduction for interest on home loan for the self-occupied property. 

If the house property is let out, the deduction is allowed for the entire interest pertaining to such home loan.

The significant conditions attached to claiming such deduction are that the loan should have been taken from a bank or a financial institution for pursuing higher studies (in India or abroad) by the individual himself or spouse of his children. Further, one may begin claiming this deduction beginning from the year in which the loan starts getting repaid and up to the next seven years (i.e. total of 8 assessment years) or before repayment of the loan, whichever is earlier.

This deduction varies based on the receiving organization, which implies that one may avail deductions of 50% or 100% of the amount donated, with or without restriction. 

This exemption is allowed to Individuals and HUFs. The maximum limit of deduction under this section is INR 10,000.

  1. Additional Deduction for interest on home loan (Section 80EE) (Section 80TTA)

Section 80EE allows the home owners to claim an additional deduction of Rs.50,000 (Section 24) for interest paid towards a home loan. Provided, the loan must not be for more than Rs 35,00,000 and the value of the property must not be more than Rs 50,00,000.  Furthermore, the individual must not have any other property registered under his name at the time the loan is sanctioned.