Story outline
- From FY 2020-21, an individual can continue with the old tax regime by availing of existing deductions and tax exemptions or opt for the new, concessional tax regime without any deductions and tax exemptions.
- A rebate of up to Rs 12, 500 is available if your net taxable income does not exceed Rs 5 lakh during a financial year in both the tax regimes.
If your senior citizen parents are not covered under any health insurance policy, then the medical expenditure incurred for them can be claimed as deduction under section 80D.
Tax payers are generally aware of the common tax-saving deductions (such as section 80C of the Income-tax Act, 1961) that can be availed during a financial year. However, there are other deductions available under different sections of the Income-tax Act that can help an individual bring down their tax liability further.
Do keep in mind that from FY 2020-21, an individual can continue with the old tax regime by availing of existing deductions and tax exemptions. He/she also has the option to pay tax under the new, concessional tax regime which disallows most of the existing deductions and tax exemptions.
In both the tax regimes, a rebate is available if your net taxable income does not exceed Rs 5 lakh during a financial year. Effectively, this would mean that there will be no tax liability if your net taxable income does not exceed Rs 5 lakh.
Here is a quick look at how you can save tax by using various deductions allowed under the Income-tax Act.
Also Read: Investments to save tax under section 80C
Do keep in mind that effective from FY 2020-21, employer's contribution to retirement funds - EPF, superannuation funds, NPS - of more than Rs 7.5 lakh in a financial year will be taxable in the hands of the employee. Further, any interest earned on such contributions will also be taxable in the hands of the employee.
Thus, while availing the tax benefit under this section, do ensure that employer's contribution to your NPS account as well as EPF contribution does not exceed Rs 7.5 lakh in a financial year.
Also, do note that this is the only deduction available under both the old and new tax regime.
If your senior citizen parents are not covered under any health insurance policy, then the medical expenditure incurred for them can be claimed as deduction under section 80D. The maximum amount that can be claimed as deduction under section 80D for medical bills in this manner is currently Rs 50,000.
Also Read: Your parents' medical bills can help you save tax: Here's how
The deduction allowed depends on whether the dependent is disabled or severely disabled. If the dependent is at least 40% disabled, then the maximum deduction that can be claimed is Rs 75,000. On the other hand, if the disability is 80% or more, then it is considered as severe disability and the maximum deduction that can be claimed is Rs 1.25 lakh.
Section 80DDB offers a deduction for the medical expenses incurred for the treatment of specified illnesses such as cancers, chronic kidney diseases etc. This deduction can be claimed for the expenses incurred on self or the dependent. For individuals below 60 years of age, whether self or dependent, the maximum deduction allowed is Rs 40,000. For senior citizens aged 60 years and above, the maximum deduction that can be claimed is Rs 1 lakh. The list of diseases for which deduction can be claimed under this section is specified in the Income tax Act.
Also Read:Medical expenses that can save tax under section 80DDB
Also Read:Deductions available for disabled persons
Also Read: How much tax benefit you will get for donating money
Also Read: How senior citizens can save tax on interest income
Also Read: Your guide for tax savings for FY 2020-21
Do keep in mind that from FY 2020-21, an individual can continue with the old tax regime by availing of existing deductions and tax exemptions. He/she also has the option to pay tax under the new, concessional tax regime which disallows most of the existing deductions and tax exemptions.
In both the tax regimes, a rebate is available if your net taxable income does not exceed Rs 5 lakh during a financial year. Effectively, this would mean that there will be no tax liability if your net taxable income does not exceed Rs 5 lakh.
Here is a quick look at how you can save tax by using various deductions allowed under the Income-tax Act.
- Section 80C
Also Read: Investments to save tax under section 80C
- Section 80CCD (1b)
- Section 80CCD (2)
Do keep in mind that effective from FY 2020-21, employer's contribution to retirement funds - EPF, superannuation funds, NPS - of more than Rs 7.5 lakh in a financial year will be taxable in the hands of the employee. Further, any interest earned on such contributions will also be taxable in the hands of the employee.
Thus, while availing the tax benefit under this section, do ensure that employer's contribution to your NPS account as well as EPF contribution does not exceed Rs 7.5 lakh in a financial year.
Also, do note that this is the only deduction available under both the old and new tax regime.
- Section 80D
If your senior citizen parents are not covered under any health insurance policy, then the medical expenditure incurred for them can be claimed as deduction under section 80D. The maximum amount that can be claimed as deduction under section 80D for medical bills in this manner is currently Rs 50,000.
Also Read: Your parents' medical bills can help you save tax: Here's how
- Section 80DD and Section 80DDB
The deduction allowed depends on whether the dependent is disabled or severely disabled. If the dependent is at least 40% disabled, then the maximum deduction that can be claimed is Rs 75,000. On the other hand, if the disability is 80% or more, then it is considered as severe disability and the maximum deduction that can be claimed is Rs 1.25 lakh.
Section 80DDB offers a deduction for the medical expenses incurred for the treatment of specified illnesses such as cancers, chronic kidney diseases etc. This deduction can be claimed for the expenses incurred on self or the dependent. For individuals below 60 years of age, whether self or dependent, the maximum deduction allowed is Rs 40,000. For senior citizens aged 60 years and above, the maximum deduction that can be claimed is Rs 1 lakh. The list of diseases for which deduction can be claimed under this section is specified in the Income tax Act.
Also Read:Medical expenses that can save tax under section 80DDB
- Section 80U
Also Read:Deductions available for disabled persons
- Section 24
- Section 80EEA
- Section 80G
Also Read: How much tax benefit you will get for donating money
- Section 80TTA
- Section 80TTB
Also Read: How senior citizens can save tax on interest income
- Section 80E
Also Read: Your guide for tax savings for FY 2020-21
( Originally published on Feb 23, 2021 )
Read More News on
All you need to know about ITR filing for FY 2020-21.)
Download The Economic Times News App to get Daily Market Updates & Live Business News.