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How to Save Tax in the financial year 2013-14

Introduction

There are several provisions via which an assessee can plan their taxes and save them accordingly.
Deductions available under chapter VIA, exemptions under section 10 and deductions available under
each income head can help the assessee save their taxes and hence it will help to have a thorough
understanding of these provisions.

The first and foremost thing an assessee should know are the Income tax slabs and the rates
applicable and this has already been explained in the earlier article Income tax slabs in Budget 2013-
14.


Deductions under Section 80

1. Section 80C Deduction (Upto Rs. 1,00,000/-)
This section has been introduced by the Finance Act 2005. Broadly speaking, this section provides
deduction from the total income in respect of various investments/expenditures/payments in
respect of which the earlier tax rebate u/s 88 was available. The total deduction under this section
(along with section 80CCC and 80CCD) is limited to Rs. 1 lakh only.

Life Insurance Premium for individual - the policy must be in self/ spouse or any child's
name. For HUF, it may be on the life of any member of the HUF.
Sum paid under contract for deferred annuity for individual - on the life of self/spouse or
any child .
Sum deducted from salary payable to Govt Servant for securing deferred annuity for
self/spouse or child payment limited to 20% of salary.
Contribution made under Employee's Provident Fund Scheme.
Contribution to PPF For individual, can be in the name of self/spouse, any child & for
HUF, it can be in the name of any member of the family.
Contribution by employee to a Recognized Provident Fund.
Sum deposited in 10 year/15 year account of Post Office Saving Bank.
Subscription to any notified securities/notified deposits scheme. e.g. NSS Subscription
to any notified savings certificate, Unit Linked Savings certificates. e.g. NSC VIII issue.
Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanrakhsa 1989
Contribution to notified deposit scheme/Pension fund set up by the National Housing
Scheme.
Certain payment made by way of installment or part payment of loan taken for
purchase/construction of residential house property.
The condition is that, in case the property is transferred before the expiry of 5
years from the end of the financial year in which possession of such property is
obtained by him, the aggregate amount of deduction of income so allowed for
various years shall be taxable in that year.
Contribution to notified annuity Plan of LIC(e.g. Jeevan Dhara) or Units of UTI/notified
Mutual Fund. If in respect of such contribution, deduction u/s 80CCC has been availed,
then rebate u/s 88 will not be allowed.
Subscription to units of a Mutual Fund notified u/s 10(23D).



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Subscription to deposit scheme of a public sector company engaged in providing
housing finance.
Subscription to equity shares/ debentures forming part of any approved eligible issue of
capital made by a public company or public financial institutions.
Tuition fees paid at the time of admission or otherwise to any school, college, university
or other educational institution situated within India for the purpose of full time
education of any two children. Available in respect of any two children.

2. Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurer Section
80CCC
For payment of premium for annuity plan of LIC or any other insurer, deduction is available up to a
maximum of Rs. 100,000/-. (This limit has been increased from Rs. 10,000/- to Rs. 1,00,000/-
w.e.f. 01.04.2007).The premium must be deposited to keep in force a contract for an annuity plan
of the LIC or any other insurer for receiving pension from the fund.

Note: The limit for maximum deduction available under Sections 80C, 80CCC and 80CCD
(combined together) is Rs. 1,00,000/- (Rs. 1 Lakh only).

3. Deduction in respect of Contribution to Pension Account - Section 80CCD
Deposit made by a Central government servant in his pension account to the extent of 10% of his
salary. Where the Central Government makes any contribution to the pension account, deduction
of such contribution to the extent of 10% of salary shall be allowed. Furthermore, in any year where
any amount is received from the pension account, such amount shall be charged to tax as income
of that previous year.

4. Investment in Long Term Infrastructure Bonds - Section 80CCF
This deduction is not available for the assessment year 2014-15.

5. Rajiv Gandhi Equity Saving Scheme (RGESS) - Section 80CCG
As per the Budget 2012 announcements, a new scheme Rajiv Gandhi Equity Saving Scheme
(RGESS) was launched. Investors with an annual income less than Rs. 10 lakh (amended to 12
lakhs through budget, 2013) can invest in this scheme up to Rs. 50,000 and get a deduction of
50% of the investment. So if you invest Rs. 50,000 (maximum amount eligible for income tax
rebate is Rs. 50,000), you can claim a tax deduction of Rs. 25,000 (50% of Rs. 50,000).

6. Deduction in respect of Medical Insurance - Section 80D
Deduction of Rs. 15000/- is allowed if the same is paid as premium for Medical
Insurance taken for self / dependents or towards preventive health check-up (max Rs.
5000). In case is self / dependent is a senior citizen, the deduction allowed is Rs.
20000/-
An additional Rs. 15000/- is allowed as deduction if the same is paid as premium for
Medical Insurance taken for parents. In case the parent is a senior citizen, the
deduction allowed is Rs. 20000/-.

Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/-.
From AY 2013-14 and within the existing limit, a deduction of up to Rs. 5,000 for preventive health
check-up is available.






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7. Deduction in respect of Rehabilitation of Handicapped Dependent Relative - Section 80DD:

Exemption given for Expenditure made for a disabled dependant towards Medical
Treatment/Training/Rehabilitation. It also includes the LIC/Insurance premium paid
towards the maintenance of such dependant.
Maximum deduction allowed is Rs. 50,000/- in case of normal disability and Rs. 1 Lakh
in case of severe disability.

Note: A person with 'severe disability' means a person with 80% or more of one or more disabilities
as outlined in section 56(4) of the 'Persons with disabilities (Equal opportunities, protection of rights
and full participation)' Act.
8. Deduction in respect of Medical Expenditure on Self or Dependent Relative - Section 80DDB
Exemption given for expenditure incurred on specified disease or ailments such as
cancer/aids.
Maximum deduction allowed is Rs. 40,000/-. In case of Senior Citizens, the maximum
deduction allowed is Rs. 60,000/-

List of ailments covered:
A. Neurological Diseases where the disability level has been certified to be of 40% and above,
Dementia ;
Dystonia Musculorum Deformans ;
Motor Neuron Disease ;
Ataxia ;
Chorea ;
Hemiballismus ;
Aphasia ;
Parkinsons Disease ;
B. Malignant Cancers ;
C. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
D. Chronic Renal failure ;
E. Hematological disorders :
Hemophilia ;
Thalassaemia.

9. Deduction in respect of Interest on Loan for Higher Studies - Section 80E
Deduction in respect of interest on loan taken for pursuing higher education. This deduction is also
available for the purpose of higher education of a relative w.e.f. A.Y. 2008-09.

10. Deduction in respect of Various Donations - Section 80G
The various donations specified in Sec. 80G are eligible for deduction up to either 100% or 50%
with or without restriction as provided in Sec. 80G

11. Deduction in respect of House Rent Paid - Section 80GG
Deduction available is the least of:
Rent paid less 10% of total income
Rs. 2000/- per month
25% of total income, provided



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An assessee or his spouse or minor child should not own residential accommodation at the place
of employment. He should not be in receipt of house rent allowance. He should not have self
occupied residential premises in any other place.

12. Deduction in respect of Person suffering from Physical Disability - Section 80U
Deduction of Rs. 50,000/- to an individual who suffers from a physical disability (including
blindness) or mental retardation. Furthermore, if the individual is a person with severe disability,
deduction of Rs. 100,000/- shall be available u/s 80U. The Certificate should be obtained from a
Govt. Doctor and the relevant rule is Rule 11D.

13. Deduction in respect of any Income by way of Royalty of a Patent - Section 80RRB
Deduction in respect of any income by way of royalty in respect of a patent registered on or after
01.04.2003 under the Patents Act 1970 shall be available up to Rs. 3 lakhs or the income received,
whichever is less. The assessee must be an individual resident of India who is a patentee. The
assessee must furnish a certificate in the prescribed form duly signed by the prescribed authority.

14. Deduction from gross total income in respect of any Income by way of Interest on Savings
account - Section 80 TTA
Deduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in
respect of interest on deposits in savings account ( not time deposits ) with a bank, co-operative
society or post office, is allowable w.e.f. 01.04.2012 (Assessment Year 2013-14).

15. Interest on housing loan Section 80EE
Additional deduction of Rs. 1 lakh will be applicable to persons taking first home loan of up to Rs.
25 lakhs for property worth up to Rs. 40 lac. For such persons, the total deduction will be Rs. 2.5
lakhs (Rs. 1.5 lakh available under section 24(1)(vi) and Rs. 1 lakh available under this new
section 80EE).

16. Deductions Allowable within the chapter Income from house property:
Where a housing property has been acquired / constructed / repaired / renewed with
borrowed capital, the amount of interest payable yearly on such capital is allowed as
deduction under Section 24 of Income Tax Act, subject to the limits stated below. Penal
interest on housing loan is not eligible for deduction. If a fresh loan has been raised to
repay the original loan and the new loan has been used only for the purpose of
repaying the original loan then, the interest accrued on such fresh loan is allowed for
deduction.
If the property is acquired or constructed with the capital borrowed on or after 01-04-
1999 and such acquisition or construction is completed within 3 years of the end of the
financial year in which capital was borrowed then the actual interest payable is allowed
as deduction subject to a maximum Rs. 1,50,000/-.
In other case interest up to maximum Rs.30,000/- is deductible.
Note : The ceiling of Rs.1,50,000/- or Rs. 30,000/- is only in case the property is self
occupied. There is no limit on deduction of interest if the property is let out.

17. For salaried employees
Superannuation
Any contribution made by a company to superannuation fund up to Rs. 1,00,000 is tax
free in the hands of the employee.
Conveyance/Transport Allowance



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Any Conveyance / Transport Allowance given to an employee is tax free up to Rs.
9,600/- (No Supporting Bills required).
Medical Allowance
Any Medical Allowance given to an employee is tax free up to Rs. 15,000 /- (Supporting
Bills required).
HRA
Any House Rent Allowance given to an employee is tax free up to the minimum value
of the following conditions (subject to when an employee can produce rent paid
receipts from landlord for the period and if the employee has not availed of tax
exemptions for home loan interest / principal repayment):
50% of Annual Basic (40% of Annual Basic in case of non-metros)
Actual HRA received
Rent Paid (10% of Annual Basic)
Professional Tax
Any Professional Tax deducted from an employees salary can be deducted from the
annual salary income to arrive at taxable salary.
Provident Fund
Provident Fund contributions (under section 80 C and subject to an overall investment
limit of Rs. 1,00,000 ) deducted from an employees salary are tax exempt.

There are other benefits available within the chapter, under heads like Capital gains, Income from
other sources which will be explained in the next write up. By taking the advantage of all these
benefits available, the assessee will be benefit firstly by saving taxes and secondly because all
these deductions are available on investments and necessary expenditure indirectly allowing the
assessee to save money for future use.