Your Income Tax Exemption Guide For The Financial Year 2016-17

By BankBazaar | June 9, 2017

Your Income Tax Exemption Guide For The Financial Year 2016-17

If you don’t have a clue about the Income Tax laws in our country and you’re worried about your taxes,  then this is just the article for you. We’re going to demystify the tax exemption options that were introduced or extended in FY 2016-17 (AY 2017-18), so you can plan your taxes better this year.

(Just in case you were wondering, FY stands for Financial Year and AY stands for Assessment Year)

Here are some important sections of the Income Tax Act you should know about.

Section 80C – Investments

If you have invested in avenues such as ELSS Mutual Funds, National Savings Certificates, Life Insurance Premiums, MF-Pension Plans, National Pension System, you can claim tax deductions under Section 80C. The maximum tax exemption under Section 80C is Rs. 1,50,000 for FY 2016-17.

Section 80CCD – Government Pension Schemes

This applies to anyone who has contributed to any pension scheme operated by the Government of India (like the National Pension System). You can claim tax benefits equal to the contributed amount (not more than 10% of your salary) and an additional Rs. 50,000 under Section 80CCD.

Section 80CCG – Equity Investments

The Section 80CCG or Rajiv Gandhi Equity Savings Scheme deduction was introduced to encourage investments in equity shares. Under this section, you can get tax deductions up to 50% of the amount you have invested in equity shares or Rs. 25,000, whichever is lower.

Section 80D – Health Insurance

Have you invested in Health Insurance for yourself and your family (this includes your spouse, parents and dependent children)? If you answered yes to that question, then you can get a tax deduction of Rs. 25,000 on your Health Insurance premium under Section 80D. If the insured is a senior citizen (above 60 years of age), he or she will be entitled to a tax exemption of Rs. 30,000.

Furthermore, you can claim medical reimbursements up to Rs. 15,000 (under Section 17(2) of the IT Act) from your employer, by submitting the medical bills. This amount is not taxable.

Section 80DDB – Critical Illness

Under this section, a tax deduction of Rs. 40,000 (for individuals below 60 years of age) can be claimed on the grounds of medical treatment for specified ailments such as cancer, AIDS, chronic renal failure, thalassaemia, etc. You can claim this deduction for yourself or on behalf of your dependents. However, you have to submit a prescription from a specialist doctor to claim it.

Section 80TTA – Savings Account

The interest you earn on your Savings Account in a bank, post office or a co-operative society is exempt from tax for up to Rs. 10,000. This tax exemption is not applicable on interest earned via Fixed Deposits.

Section 56(2) – Gift Tax

This section applies to taxes on gifts. If you receive gifts (in the form of cash, cheque, etc.) with a value of Rs. 50, 000 (or less) from anyone other than your blood relations, then you don’t have to pay tax for the same. If the value of the gift is more than Rs. 50,000, then the full amount is taxable. Gifts from blood relations are 100% tax-free.

Section 10(14) – Transport Allowance and Children Education Allowance (CEA)

Under Section 10(14), the Budget FY 2016-17 lets you claim Rs. 19,200 tax exemption as transport allowance and Rs. 2,400 tax exemption as Children Education Allowance (CEA) in a financial year.

Section 80GG – House Rent Allowance

For salaried individuals living in rented houses, the House Rent Allowance (HRA) is a great tax-saving option. The tax benefits that you get depend on your basic salary, HRA provided by your employer, your place of residence and the rent you pay/declare.

Section 24(b) – Home Loan

If you have taken a Home Loan, then you can claim a tax deduction on the interest component of the loan under Section 24(b). For self-occupied properties, you can benefit from deductions of up to Rs. 2,00,000.

Section 80G – Charity and Relief Funds

Have you made contributions to charitable organizations and relief funds? You can claim tax exemptions up to 50% of the amount, if you have paid via cheque, draft or cash (not exceeding Rs. 10,000). Contributions made to a few select organizations can get you 100% tax exemption.

Section 80GGB – Political Party Contributions

A tax exemption option for Indian companies, Section 80GGB provides 100% exemption on any amount contributed by a company to political parties or an electoral trust.

Section 80EE – First-time Home Buyers

Newly incorporated within the Income Tax Act, Section 80EE comes as a great option for first-time home buyers. If you’re buying a house for the first time and have taken a Home Loan to pay for it, then you can claim an additional Rs. 50,000 tax deduction on your Home Loan interest. You’re eligible for this tax deduction claim if:

  • Your home loan was sanctioned in the financial year 2016-17.
  • The loan amount does not exceed Rs. 35 lakh.
  • The value of your house is within Rs. 50 lakh.
  • You should not have any other residential property in your name.

Section 80E – Education Loan

If you have taken a loan for higher education after the completion of your Senior Secondary Exam, then you can claim a tax deduction under Section 80E on the interest paid towards the loan. The loan should have been taken for higher education for yourself, your spouse, your children or any student for whom you are the local guardian. This deduction can be claimed for up to 8 years or till the interest is paid, whichever is earlier. There is no limit on the amount of interest you can claim for tax exemption.

The bottom line is to plan your taxes well in advance, instead of hurrying at the last minute. Also, never invest in unwanted financial products just to save taxes. Always remember that it’s okay to pay some taxes, but it isn’t okay to make wrong financial decisions.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

6 thoughts on “Your Income Tax Exemption Guide For The Financial Year 2016-17

  1. VP Sarathy

    National Pension System by Govt. of India is shown both under 80C and 80 CCD. Clarification needed as to which is correct.

    Reply
    1. Team BankBazaar

      Dear Sarathy,

      Thanks for your valuable feedback. We have clarified the point you made. Regarding your query about NPS, NPS comes under Section 80C but if you have exhausted the Rs.1.5 lakh under Section 80C, you can use the Rs. 50,000 available under Section 80CCD to claim a deduction on your tax.

      Cheers,
      Team BankBazaar

      Reply
    1. Team BankBazaar

      Hi Krishnan,

      While we do offer general advice to our readers through our articles, specific advice will need to be referred either to the IT department or a chartered accountant.

      Cheers,
      Team BankBazaar

      Reply
  2. Sanjib kumar

    My son taking pvt turion having yearly fee more than 2 lack include government tax15%. How much rebate & in which section please give suggestion.

    Reply
    1. Team BankBazaar

      Hi Sanjib Kumar,
      According to the Income Tax Act of 1961, you can claim a rebate on tuition fees only up to Rs. 1 lakh. You will find this under Section 80C.
      Cheers,
      Team BankBazaar

      Reply

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