TDS Deduction Rules 2020: Every penny counts! No one can probably understand the significance of this phrase better than salaried individuals navigating their daily lives with hard-earned monthly salary payments. With little planning and awareness of the rules, salaried individuals can save a lot of the amount that would otherwise go for tax payment. Ankit Agarwal, Managing Director, Alankit Ltd, told FE Online, “Under Section 192 of the Income Tax Act, 1961, taxes deducted at source (TDS) are covered, making it compulsory for employers to retain taxes during salary payments.” He added that there is no tax payable on income not exceeding Rs 5 lakh as per Financial Year 2019-20. However, for those earning more, following pointers could help them avoid paying excess TDS:
Submit all investment proofs for deduction under Section 80C
Employers deduct the applicable tax in advance from salaries paid to employees. The latter can avoid salary cut by investing in eligible tax deduction instruments.
Agarwal suggested that the taxpayer should submit all authentic documents of investments done to claim tax deduction under Section 80C. These could be investment proofs of the amount paid towards PPF (Public Provident Fund), NPS (National Pension System), ULIP (Unit-linked Insurance Plans), Sukanya Samriddhi Yojana, Tax Saving FDs, ELSS Equity Funds and photocopies of the school receipt carrying the schools’ seal etc.
Section 80C also allows individuals to claim up to Rs. 1.5 lakh every year as a deduction amount for both self-occupied and let-out properties.
Housing loan repayment (principal)
The housing loan principal is a part of Section 80C according to the Income Tax Act. Individuals are eligible to claim tax deductions on the paid home loan principal up to Rs 1.50 lakh under Section 80C.
Agarwal said, “The principal portion of the EMI paid for the year is allowed as deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh. But to claim this deduction, the house property should not be sold within 5 years of possession.”
Leave Travel Allowance
Employees are allowed to claim tax exemption for expenses incurred for travelling when on leave anywhere in the nation. As per the Income Tax Act, LTA forms a part of an employee’s total CTC.
Public Provident Fund (PPF)
Public Provident Fund is a scheme that helps individuals to make small savings and provide returns on the savings and also claim deduction under Section 80C. This scheme offers an attractive rate of interest and no tax is necessary to be paid on the returns that are generated from the interest rates.
Sukanya Samriddhi account
Individuals are eligible for a tax deduction for investments made towards this scheme under Section 80C. The tax deduction can be claimed up to a maximum of Rs 1.5 lakh towards this scheme.
Benefits under Section 80EE for first-time homebuyers
Agarwal said that Section 80EE allows tax benefits to first-time homebuyers. They can claim tax benefit on home loan interest. This deduction is over and above the Rs 2 lakh limit under Section 24.
“Taxpayers can claim deduction up to Rs 2, 00,000 at the time of registering tax repayments. Under this scheme, the taxpayer must be a first-time home buyer and should not own any residential house property as on the date of approval of the loan,” said Agarwal.
House Rent Allowance Exemption ( if point 2 is not applicable )
Individuals earning a salary and living in rented houses can claim the House Rent Allowance (HRA). The HRA allows individuals to lower their taxes partially. The allowance is for expenses associated with rented housing only.
Under Section 80D, Individuals can claim a deduction of up to Rs 25,000 for the medical premium paid for self, dependent children, and spouse and avail tax exemption while filing a tax return.
National Pension System (NPS)
Agarwal said, “NPS is a great investment plan designed to furnish financial comfort after retirement. It is to be submitted while filing Income Tax Returns.”
“Individuals are allowed a deduction for donations made to political parties. No maximum limit on the deduction amount is specified but individuals can only claim if the donation is made using any mode other than cash. Some donations are eligible for either 50% or 100% tax deduction while others are eligible for the same deduction but up to a maximum limit of 10% of adjusted Gross Deduction Total Income of the taxpayer.”
“Donations made in cash exceeding value above Rs 2000 must be made with other any source of payment other than cash to become eligible as a deduction under section 80G. Under Section 80GGA, taxpayers are allowed deductions for donations to be made towards scientific research or rural development. All assessees are allowed this deduction except the ones having an income (or loss) from a business or potentially a profession,” he added.