10 Income Tax rules you need to know

1. Tax saving on house rent allowance

House rent allowance, commonly known as HRA, is a major chunk of a salaried individual's total pay. Under Section 10 (13A) of the Income Tax Act, you can save tax on the rent you pay to your landlord. However, you get partial tax benefit on the rent you pay. The amount that is allowed for exemption under HRA is calculated as the minimum of:

i) Rent paid annually minus 10 per cent of basic salary plus dearness allowance

ii) Actual HRA received

iii) 40 per cent of basic and dearness allowance (50 per cent in case of metro cities).

Your HRA allowance will be taxable if you are not paying any rent or you stay in your own house. But those who stay with their parents can also claim HRA benefits by paying rent to their parents.

2. Deductions under Section 80C

One can claim tax benefit on investments up to Rs 1.5 lakh under Section 80C of the Income Tax Act. If you fall in the highest tax slab (30 per cent), by investing Rs 1.5 lakh you can save tax for up to Rs 46,350 (including cess charges.) per year. Investments that qualify for tax benefit under this section are Employees' Provident Fund (EPF), Public Provident Fund (PPF), Sukanya Samriddhi Account, National Savings Certificate and tax-saving fixed deposits. The premium paid for life insurance plans, National Pension Scheme (NPS) and tax-saving mutual funds (ELSS) also qualify for deduction under Section 80C.

One can also claim tuition fees paid for up to two children, principal repayment on home loan, stamp duty and registration cost on the house bought as a deduction under Section 80C.

Read: Save income tax through mutual fund investment. All you need to know

3. Deductions under Section 80CCD(1B)

This section was introduced in Budget 2015-16. Under this section, one can get tax benefits on investments up to Rs 50,000 in NPS tier 1 account. This is over and above the Rs 1.5 lakh limit under Section 80C. An individual in highest tax bracket can save Rs. 15,450 by investing Rs. 50,000 in NPS under Section 80CCD(1B).

4. Deduction under Section 80E

If you have taken an education loan for yourself, spouse or children, then the interest paid on the loan qualify for tax benefit under Section 80E. The best thing here is that there is no upper limit on the amount of deduction. But the criteria is that the loan must have been taken from a financial institution or approved charitable institution and for full-time higher education.

5. Deduction of interest on housing loan (Section 24B)

If you have taken a housing loan to buy a house, then the interest you pay on your housing loan qualify for tax benefit under Section 24B. Interest paid up to Rs 2 lakh in a financial year on housing loan is allowed as deduction from your income. If you have taken a home improvement loan, then interest up to Rs 30,000 will be allowed as deduction under this section.

6. Deduction under Section 80EE

Re-introduced in Union Budget 2016, an additional deduction of Rs. 50,000 is available under this section, which is over and above the limit of Section 24B on interest paid on home loans if a person is buying a house for the first time. But there is a condition to avail this benefit. The cost of the property must be below Rs 50 lakh and the loan amount must be less than equal to Rs 35 lakh.Also, the property must be bought after April 1, 2016.

7. Deduction under Section 80D

Premiums paid for health insurance for self, spouse, children, and parents qualify for deduction under Section 80D. One can claim deduction of Rs. 25,000, if he is below 60 years of age, and Rs. 30,000 if he is above 60 years of age, towards medical insurance premium paid for self, spouse and children. Under this section, additional deduction of Rs. 25,000 is available if one buys medical insurance for his parents. This deduction can go up to Rs. 30,000 per year if parents are above the age of 60 years. So the total deduction you get under Section 80D is up to Rs 60,000.

8. Deduction under Section 80DD

If a tax payer has dependent parents, spouse, children or siblings who are differently-abled, then he can claim deductions up to Rs. 75,000 for expenses on their maintenance and medical treatment under this section. If the disability is severe in nature, then the deduction can increase to Rs 1.25 lakh.

9. Deduction under Section 80DDB

Under this section, one can claim deduction of Rs. 40,000 for medical treatment of specified disease or ailment for self and dependents. The deduction can go up to Rs. 60,000 if the tax payer is above 60 years of age and if he is above 80 years of age, then the deduction amount is up to Rs. 80,000. The diseases have been specified in Rule 11DD. To claim this benefit a certificate in form 10 I is to be furnished by the taxpayer from any registered doctor.

Also Read: Mutual fund: Should you opt for regular plan or direct plan for wealth creation

10. Tax benefit under Section 80TTA

Under this section, interest income up to Rs 10,000 per annum from savings account is allowed as deduction from taxable income. However, interest earned from fixed deposits, term deposits does not qualify for deduction under this.