Tax exemption is absolution on the taxable income which in turn reduces the total amount payable towards tax. An individual taxpayer can either get complete relief or deduction on certain portions of their tax amount. Tax exemption is offered by the government to promote upliftment in the economic and social spectrums of the society.
Tax exemption is attainable on the property tax or income tax if the assessee has children or other family members dependent on him/her.
Tax exemption is available under the following Sections:
There are several exemptions available under Section 10. For example:
The exemption can be claimed under certain conditions such as:
Non-government employees can avail benefits under the following:
Deduction is available on criteria such as:
An individual can claim a maximum deduction of Rs. 1.5 Lakhs under Section 80C, 80CCC and 80CCD.
Some of the investment schemes that are eligible for tax deduction are:
Additional deduction of the 50% of the investment can be claimed under this scheme. This scheme is only for first-time investors in share market with income less than Rs. 10 Lakhs.
Under this section tax deduction is available on the premium made towards the medical insurance taken by an individual for himself or his/her family.
A deduction of Rs. 50,000 and Rs. 75,000 can be claimed on the amount spent on the treatment and care of a disabled individual. If an individual is certified as either physically or mentally disabled, deduction of the medical expenses incurred in caring for the individual can be obtained (Rs. 50,000 for normally disabled and Rs. 75,000 for severely disabled).
A person can avail deduction of Rs. 40,000 on tax for the treatment of serious diseases. The deduction is available for the expenditure on the treatment of disease for self or for the family. The illness should be verified by a certified doctor and an amount of Rs. 80,000 is available for deduction in case of a senior citizen.
The deduction can be claimed on education loan (up to 7 years in the case of higher education). This benefit is only available for immediate family members such as the spouse, children etc.
Any taxpayer can get a deduction of 50 to 100 percent on taxes, depending on the entities where the donations are made towards.
People who do not receive HRA from their employer can claim a tax deduction on the rent they pay under this Section. A deduction of Rs. 60,000 annually (Rs. 5,000 per month) is available under specific circumstances if their rent is less than 10% of the salary or 25 % of the whole income.
If the tax payable at the end of financial year is less than Rs. 10,000, then the interest received on the savings account is not accounted for taxable income.
Any person suffering from a disability can be granted a deduction on his/her taxable income. An amount of Rs. 50,000 is usually available for deduction but in the cases of severely disabled the amount can increase up to Rs. 1 Lakh.
Any taxpayer can claim a deduction in case the donations are made towards rural development or scientific research.
In case an individual is contributing money to any political party, the deduction is available on it under this section.
If a person earns his/her income through royalties received from patent then maximum deduction of Rs. 3 Lakhs is available on it.
If a person receives royalty income from the sale of books, journals or any other literature, then he/she can avail a tax deduction of Rs. 3 Lakhs on it.
An individual can gain additional tax benefit under this head. A tax deduction is available on the interest paid towards the car loan. This benefit can be only enjoyed by individual taxpayers who are either self-employed or own a business. No salaried individual can avail this deduction. To avail this claim, one must declare the profit or capital gains earned and mention if the car will be used for business purposes. This deduction on the interest of the car loan is available under Section 80C.
The government has provided various schemes and policies for claiming tax exemptions for earning women.
The exemption can be availed under Section 80C, 80D and 80U:
Capital gain is the profit earned on the sale of an asset. Tax exemption can be claimed on capital gain under the following Sections:
Under this section exemption from the taxes can be claimed on capital gains if the gains are invested in either buying or constructing of a house property. The new property must be bought a year or two after the sale of original property or the house is constructed within three years. This is only available if the person does not have any other property except for the original one and the property is located within India. The capital gain deposit account scheme is also available for the benefit.
An assessee can avail exemption on the capital gains from the sale of agricultural land that he/she utilized for agricultural purposes. The assessee must buy new agriculture land within two years of the sale and then gain tax exemption on it. Investment of the gains in Capital gain deposit account scheme is also available.
Any individual can claim exemption under this section on the sale of assets. It is essential that the asset is a long-term capital asset and is sold after a period of three years from the time it was acquired. The gains from the sale can be invested in NHAI (National Highway Authority of India) and REC (Rural Electrification Corporation) bonds, which should be done within a period of six months. A maximum amount of Rs. 50 Lakhs and Rs. 45 Lakhs can be invested in the bonds respectively. The capital gain deposit account scheme is not available under this Section.
It is important to take into notice that the income from capital gains can be only invested in one scheme or asset. Even if an assessee sells two assets together, the capital gain earned from the sale is to be invested only once. If the earning is invested more than once then tax is liable on it.