Income Tax Deduction U/s 80 | Includes Automatic Income Tax Preparation Software all in one for Govt and Non-Govt Employees in Excel for F.Y.2021-22

Income Tax Deduction U/s  80 |Section 80 deduction for the fiscal year 2020-21, A.Y 2021-22 (with budget 2021 amendment)

The Income Tax Department has made various deductions from taxable income under Chapter VI A deduction to encourage savings and investment among the taxpayers. As 80C is the most famous, there are other deductions that help taxpayers reduce their tax liability. Let's understand these deductions in detail:

Section 80C - Deduction on investment

Section 80C is one of the most popular and preferred categories among taxpayers because it allows them to reduce taxable income by incurring tax-saving investments or incurring eligible expenses. It allows taxpayers to deduct a maximum of Rs 1.5 lakh per year from the total income.

The benefits of this deduction can be taken by individuals and HUFs. Companies, partners, LLPs will not be able to avail of this discount.

Under Section 80C includes deposition to , 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2).

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It is important to note that the total limit for sub-clause for claiming deduction without additional deduction of Rs. 50,000 allowed under 80CCD (1b) is Rs. 1.5 lakhs.

Eligible investment for a tax deduction

80C PPF, EPF, LIC Premium, Equity-Linked Savings Scheme, Basic Payment for Home Loan, Stamp Duty and Registration Charge for Property Purchase, Sukanya Siddhi Yojana (SSY), allows a deduction for investments made in National Savings Certificate ( NSC), ULIP, tax saving FD for 5 years, etc.

80CCC discount for life insurance annual plan.

80CCC allows a deduction for payments for annual pension plans. The amount received from the annual pension or the amount received after the annual surrender, including the interest or bonus earned on the annual, is taxable in the year of receipt.

80CCD (1) Deduction for the contribution of NPS employee under section 80CCD (1) Minimum approved maximum discount among the following

10 10% of salary (if the taxpayer is an employee)

• Total income 20 & (in case of self-employment)

• 1.5 Lakh (Limit allowed under 80C)

Deduction for 80CCD (1b) NPS is allowed to deduct additional Rs. 50,000 for deposit in NPS account

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Section 80 TTA - Interest on Savings Account

Excluded from total gross income for interest on the savings bank account

If you are an individual or HUF, you can claim a maximum deduction of Rs.10,000 against interest income from your savings account at a bank, co-operative society or post office.

Section 80GG - House rented

The deduction is payable for house rent where HRA is not received

If HRA is not available then a Section 80GG discount is available for the rent paid. Taxpayers, spouses or minors should not have a place of employment

B. The taxpayer should not have self-acquired residential property in any other place

C. The taxpayer must live in the rent and pay the rent

d Discount is available to all persons

The lowest deduction available is:

A consistent minus 10% of the total income is rented

B. 5,000 / - per month

C. 25% of Adjusted Total Income *

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Section 80E - Interest on education loan

Deduction for interest on education loans for higher education.

A person is allowed to deduct interest on a loan taken for higher education.

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Section 80EE - Home Loan Interest

Exemption  on home loan interest for first-time homeowners

If the loan has been taken in the financial year 2016-17, then this discount will be available from F.Y 2017-18. Deduction under section 80EE is available only to homeowners (individuals) who own only one home on the date of loan approval. The value of the property should be less than Rs 50 lakh and the home loan should be less than Rs 35 lakh. Loans taken from a financial institution must be approved between 1 April 2016 and 31 March 2017. An additional rebate of Rs. Loan EMI) approved under section 24 (B).

Section 80D - Medical Insurance

Deduction for premiums paid for medical insurance

You (as an individual or HUF) can claim a rebate of Rs 25,000 for insurance for yourself, your spouse and dependent children under section 80D. An additional deduction of up to Rs 25,000 is available for parental insurance if they are below 60 years of age. If the parents are over 60 years of age, the discount amount is Rs 50,000, which has been increased from Rs 30,000 in the 2018 budget.

In case, both the taxpayer and the parent are 60 years of age or above, a maximum exemption of up to Rs. 1 lakh will be available under this section.

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Section 80U - Physical Disability

Discount for a person suffering from a physical disability

A discount of Rs.75,000 is available for a resident who is suffering from a physical disability (including blindness) or mental retardation. In case of severe disability, one can claim a rebate of Rs. 1,25,000.

Section 80G - Grants

Cuts for donations to social causes

The various grants specified under 80G are eligible to be deducted with or without limitation up to 100% or 50%.

From FY 2017-18, any cash grant above Rs. 2,000 / - will not be allowed as a deduction. Grants above Rs.2000 / - other than cash to qualify for 80G deduction Should be done in any mode.

Section 80 TTB - Interest income

Exemption of interest on deposits Rs. Fifty Thousand for senior citizens to the Savings Bank or Post Office notes the Senior Citizen can not avail U/s 80TTA

Download Automated Income Tax Preparation Excel Based Software All in One for the Government & Non-Government (Private) Employees for the F.Y.2021-22 and A.Y.2022-23

Feature of this Excel Utility:-

1) This Excel utility prepares and calculates your income tax as per the New Section 115 BAC (New and Old Tax Regime)

2) This Excel Utility has an option where you can choose your option as New or Old

4) Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to F.Y.2021-22 (Update Version)

5) Automated Income Tax Revised Form 16 Part A&B for the F.Y.2021-22

6) Automated Income Tax Revised Form 16 Part B for the F.Y.2021-22

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How to get exemption and tax relief on leave encashment calculated U/s 10(10AA) With Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to F.Y.2020-2021 ( Updated Version)

Based on eligibility, employee can avail different types of leave. If the company has a policy to carry it forward, then unavailed leave remained for a year can be carried forwarded to the next financial year. Based on employer’s policy, an employee is allowed to encash accumulated unavailed leave either during the service or after retirement / resignation. It’s known as leave encasement.

In this article we will be discussing tax on leave encasement. You will also get answers to following questions generally asked by many taxpayers:

·               How is exemption on leave encasement calculated?

·               What is 10 months average salary?

·               How do you claim leave encasement?

Leave encasement during the tenure of service with the same employer is fully taxable in the hands of an employee under the head income from salaries. However, in this case, the employee can claim relief under section 10(10AA) of income tax act, 1961.

Accumulated leave can be encased at the time of retirement. If employee has encased it at the time of retirement, then exemption is available under section 10(10AA) based on the type of employment.

Exemption on Leave encasement to government employees

For government employees entire leave encasement received at the time of retirement, whether in superannuation or otherwise, is fully exempted from tax. Government employees, in this case, mean only state and central government employees.

This means employees of local authority and public sector undertaking will not be getting full exemption.

Due to full exemption, for government employees, leave encasement will not be included in the calculation of gross salary.

Leave encasement exemption for all other employees

In case of all other employees including employees of local authorities and public sector undertakings, least of the following will be exempted;

·               Actual leave encasement received;

·               Last 10 month’s average salary

·               Rs 3,00,000

·               Cash equivalent of unavailed leave

Cash equivalent of unavailed leave has to be calculated on the basis of maximum 30 days leave for every year of actual service rendered to the employer / completed year of service. It has to be calculated on the basis of average of last 10 months salary. The example given below will help you understand the provision better.

In case of voluntary retirement, exemption on leave encasement can also be availed under section 10(10AA)

What is average salary

Average salary = Total salary drawn by the employee during the period of 10 months immediately preceding his retirement / 10

Salary for above exemption calculation = basic salary + dearness allowance to the extent the terms of employment so provide + commission based upon fixed perception of turnover achieved by the employee

If Mr X as an employee of ABC limited retires on 31.12.2018, then average salary for the period of 10 months started from 1.3.2018 to 31.12.2018 = (total of basic salary + DA to the extent the terms of employment so provide + fixed commission as a percentage of turnover) for the period starting from 1.3.2018 to 31.12.2018 / 10

In case the employee has already claimed exemption on leave encasement for the amount received from one or more previous years then the limit of Rs 3,00,000 shall be reduced accordingly by the amount of exemption already availed. This means your exemption for the current year may be reduced based on other limits by the amount already claimed as an exemption in earlier years.

As per circular number 309 dated 3.7.1981, leave salary received by the family of a government servant, who dies in harness, is not taxable in the hands of the recipient.

The employee can claim relief under section 89 of income tax act, 1961 in respect of leave encasement.

Example

Mr X is an employee of a private company from which he receives Rs 56,000 as leave salary at the time of retirement on 31st December 2018. Here are other details of Mr X;

·               Basic Salary – Rs 5000 since 2010

·               Duration of service – 20 years and 7 months

·               Leave to his credit at the time of retirement – 12 months on the basis of 45 days entitlement of leave for each completed year of service.

Computation:-

	Particulars	Amount in Rupees	Amount in Rupees
A	Actual leave salary		56,000
B	Less: Exemption under section10(10AA) to the extent of least of following
1	10 months salary (5,000*10)	50,000
2	Maximum limit not taxable	3,00,000
3	Actual leave salary received	56,000
4	Cash equivalent of unavailed leave (An example given below)	10,000	(10,000)
C	Taxable leave salary (A-B) to be included in gross salary		46,000

Example 1:-

·               Total eligibility of leave = 20*1 month = 20 months

·               Leave taken by employee = {(45 days*20)/30}-12 = 18 months

·               Leave to the credit of employee = 2 months

·               Cash equivalent for unavailed leave = 2 months * average of last 10 months salary = 2 * Rs 5,000 = Rs 10,000

Tax deductions for an individual

Employees are eligible for deduction under section 16 before calculating taxable salary. Following deductions from gross salary are available under section 16;

·               Standard deduction of Rs 40,000/Rs 50,000.

·               Deduction for entertainment allowance.

·               Professional tax.

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Apart from deduction under section 16, employees can also claim following deductions under chapter VI-A of the income tax act,1961 from their gross total income. But as per the Budget 2020 this exemption can entitled to those who are Opt in Old Tax Regime. New Tax Regime is not entitled this exemption as below:-

·          Section 80C – in respect of life insurance, contributions to PPF, Employee Provident Fund, Tuition fees etc Max Limit Rs.1,50,000/-

·               80CCC – Pension fund

·               80CCD – Contribution to national pension system

·         80CCD(2) – Employer’s Contribution to the Employee’s Pension Fund (NPS)

·               80CCD(1B) :- Max Rs. 50 thousand , this exemption can only entitled by the Sr.Citizen above 60 Years

·               80D – in respect of medical insurance premium, Max Rs.25,000/- for below 60 Years and Rs. 50,000/- for above 60 years of age.

·       80DD – maintenance of a dependent being a person with disability including medical treatment

·               80DDB – in respect of medical treatment

·               80E – interest on loan taken for higher studies

·               80EE – interest on loan taken for residential house property

·               80G – donation to certain funds, charitable institutions etc.50% or 100%

·           80GG – Deduction in respect of rent paid Max Rs. 60,000/- P.A. who have not get any House Rent Allowance from the Employer.

·          80TTA – in respect of interest on deposits in savings accounts Maximum Amount Rs. 10,000/-

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