Deductions under Indian Income Tax Act for Individuals and HUFs (FY 2023-2024)

Individuals and HUFs

Deductions under Indian Income Tax Act for Individuals and HUFs.

Individuals and HUFs

Individuals and Hindu Undivided Families (HUFs) have the opportunity to lower their tax burdens by leveraging various deductions offered under the Indian Income Tax Act. These deductions aim to promote savings, investments, and specified expenditures. Mastering and applying these deductions can result in significant tax savings. This article will delve into the deductions tailored for Individuals and HUFs applicable for the financial year 2023-2024.

Section 80D Deductions

Your health is invaluable, but that doesn’t mean you need to spend excessively to safeguard it. Utilizing Section 80D allows you to feel secure knowing that your health insurance premiums not only support your well-being but also offer tax benefits. Ultimately, a healthy body and financial wellness are interconnected!

Deduction Limits
  • You can claim up to Rs 25,000 for health insurance premiums paid for yourself, your spouse, and dependent children (Rs 50,000 for senior citizens).
  • An additional Rs 25,000 deduction is available for premiums paid towards your parents’ health insurance (Rs 50,000 if parents are senior citizens).
Individuals and HUFs
Eligible Health Insurance
  • This includes mediclaim policies, critical illness policies, and expenses for preventive health check-ups.

Note: The total deduction allowed under Section 80D should not exceed the specified limits.

Section 80C Deductions

Imagine securing your family’s future while simultaneously reducing your tax burden – that’s the strength of Section 80C! Whether you’re investing in your child’s education or planning for retirement, Section 80C offers a diverse array of options to help you save tax while accomplishing your financial objectives.

  1. Deduction Limit: Up to Rs 1.5 lakh

  2. Eligible Investments/Expenses:

    • Contributions to Public Provident Fund (PPF)
    • Payment of life insurance premiums
    • Investments in Equity Linked Saving Schemes (ELSS)
    • Contributions to the Employees’ Provident Fund (EPF)
    • Investments in National Savings Certificate (NSC)
    • Deposits in Sukanya Samriddhi Yojana (SSY)
    • Tuition fees for children’s education
    • Repayment of the principal amount on a home loan

Note: The total deduction allowable under Section 80C, 80CCC, and 80CCD(1) cannot exceed Rs 1.5 lakh.

Section 80E Deduction

Individuals and HUFs

Investing in education opens doors to a brighter future, and Section 80E ensures that the journey of learning also comes with tax advantages.

Whether you’re financing your own education or supporting your child’s academic goals, the interest paid on education loans not only nurtures minds but also offers enduring tax benefits. Deduction for Interest on Education Loan:

  • This deduction is applicable for interest paid on loans taken for higher education of oneself, spouse, children, or a student for whom the taxpayer is a legal guardian.
  • There is no upper limit on the deduction amount.
  • The deduction is available for a maximum of 8 assessment years or until the interest is fully repaid, whichever comes earlier.

Section 80G Deductions

Contributing to society isn’t just a commendable deed—it’s also a savvy tax move! With Section 80G, every donation you make to charitable institutions not only impacts lives positively but also reduces your tax liability.

It’s a win-win situation that warms the heart while lightening the burden on your wallet. Deduction for Donations to Charitable Institutions:

  • Deductions are available for donations made to specified charitable institutions and funds.
  • The percentage of deduction varies based on the type of institution and the donation amount.
  • Donations made in cash exceeding Rs 2,000 are not eligible for deduction.

Section 24 Deduction

Dreaming of owning your own home? Section 24 can make that dream a reality while also reducing your tax burden. Whether you’re making monthly mortgage payments or repaying a housing loan, every penny of interest paid brings you closer to tax savings and the joy of homeownership.

Deduction for Interest on Home Loan:

  • This deduction is available for interest paid on a housing loan used for purchasing or constructing a residential property.
  • The maximum deduction allowed is Rs 2 lakh for a self-occupied property.
  • There is no upper limit for rented or deemed-to-be-rented properties.

Section 80TTA/80TTB Deduction

Building savings is straightforward when you can earn tax-free interest by stashing money in a savings account. Whether you’re comfortable with digital banking or prefer traditional methods, Sections 80TTA and 80TTB provide opportunities to earn interest on your savings without tax implications.

Read More: Understanding Form 10F: Purpose, Scope, and Mandatory Conditions

Deduction for Interest on Savings Account/Deposit:

  • Section 80TTA: Deduction of up to Rs 10,000 for interest earned on savings account deposits in banks, post offices, etc.
  • Section 80TTB: Deduction of up to Rs 50,000 for interest earned on deposits by senior citizens in banks, cooperative banks, or post offices.

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What Is Inheritance Tax

Inheritance Tax

What Is Inheritance Tax

An inheritance tax is levied on the assets received by heirs after someone’s death, calculated based on the net value of the deceased’s estate (assets minus debts).

Inheritance Tax

An inheritance tax is levied on the assets received by heirs after someone’s death, calculated based on the net value of the deceased’s estate (assets minus debts). Inheritance refers to the collection of assets and entitlements passed on to heirs upon a person’s death. When a tax is imposed on this transfer of assets and paid to the government, it is known as an inheritance tax. This tax applies when assets and/or rights are transferred from one individual to another, specifically upon the death of the transferor, known legally as “mortis causa,” or without charge.

The Inheritance and Gift Tax, as outlined in tax legislation, operates under several principles:

1. Progressive: The tax rate increases with the greater amount inherited.
2. Personal: The recipient of the inheritance is responsible for paying the tax.
3. Direct: The tax is levied on the taxpayer’s assets rather than their consumption.

The inheritance tax rate varies by country, with some nations imposing a maximum rate of up to 55%. This tax typically applies to legal heirs such as children, siblings, and spouses.

In India, inheritance tax is also referred to as estate tax or succession duty. However, there is no specific national-level inheritance tax in India. Inheritance tax is more commonly associated with foreign countries like the USA.

Inheritance Tax

Calculation of Inheritance Tax

Inheritance tax is determined by assessing the value of assets after deducting any applicable exemptions or deductions. Its primary aim is to generate revenue for the government while also supporting wealth redistribution.

What is the Inheritance Tax Rate in India?

India eliminated the inheritance Tax in 1985.

India did have an inheritance tax once in 1953, but later it was abolished in 1985 by Rajiv Gandhi.

Read More: Deadline for PAN-Aadhaar Linking – May 31, 2024

Recently, Sam Pitroda, Chief of the Indian Overseas Congress, emphasized the significance of wealth redistribution policies, illustrating his point with a reference to the inheritance tax system in the United States.

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Understanding Form 10F: Purpose, Scope, and Mandatory Conditions

Form 10F

Understanding Form 10F: Purpose, Scope, and Mandatory Conditions

Form 10F is a self-declaration tax form for non-resident (NR) taxpayers to claim DTAA benefits when their Tax Residency Certificate (TRC) is incomplete.

Form 10F

Earn income from India while living abroad? You might qualify for lower tax rates through a Double Taxation Avoidance Agreement (DTAA). Non-residents can benefit from DTAA, where income is taxed only once. India has these treaties with many countries, helping dual citizens avoid double taxation. But to claim these benefits, you need Form 10F.

Form 10F

Form 10F is a self-declaration tax form used by non-resident (NR) taxpayers to claim benefits under DTAA (Double Taxation Avoidance Agreement) when their Tax Residency Certificate (TRC) lacks essential details required for this purpose.

  • NR taxpayers: Individuals or entities whose main income source is not from India.
  • Double Taxation Avoidance Agreement (DTAA): Agreements between India and other countries to prevent double taxation on income earned in both jurisdictions.
  • Tax Residency Certificate (TRC): A document issued by the NR taxpayer’s home country confirming their tax residency status, which is essential for claiming DTAA benefits.

Purpose of Form 10F

If the Tax Residency Certificate (TRC) lacks necessary information required by the Double Taxation Avoidance Agreement (DTAA), non-resident (NR) taxpayers must provide additional details using Form 10F.

Form 10F

To benefit from a tax treaty, NR taxpayers are required to submit both the TRC and Form 10F (if specific details are missing from the TRC) under Section 90(5) of the Income Tax Act. The TRC should include essential information such as the taxpayer’s name, foreign address, Tax Identification Number (TIN), and taxpayer status. If the TRC lacks these details, the taxpayer must electronically file Form 10F.

The requirement of Form 10F also enables Non-Resident Indians (NRIs) to claim tax exemptions and deductions on their income earned in India.

Requirements for Form 10F

To benefit from DTAA advantages, individuals must submit a self-declaration using Form 10F along with their Tax Residency Certificate (TRC) from their country of residence. Form 10F is mandatory for non-resident Indians (NRIs) who lack complete TRC details.

Submitting Form 10F enables NRIs to avoid Tax Deducted at Source (TDS) on their income earned in India, which is particularly beneficial since all their Indian income is subject to TDS. Furthermore, without a PAN (Permanent Account Number), TDS is deducted at a higher rate.

Previously, NRIs without a PAN had to file Form 10F online. This necessitated PAN registration for all taxpayers, as access to the income tax filing portal was unavailable without a PAN. However, for the fiscal year 2023, the Central Board of Direct Taxes (CBDT) granted one-time relief to taxpayers without a PAN. They were permitted to file the form manually by March 31, 2023.

Documents Needed for Submitting Form 10F

Below is a comprehensive list of documents required for filing Form 10F:

  • Permanent Account Number (PAN) card
  • Proof of residential address in your country of residence
  • Period of residential status as mentioned in the Tax Residency Certificate (TRC)
  • Taxpayer status (e.g., individual, company, firm, trust, etc.)
  • Proof of nationality (for individuals) or territory of incorporation/registration (for companies and firms)
  • Tax Identification Number (TIN) or any other unique tax identification number in your country of residence
  • Digital signature certificate to validate the information provided in Form 10F

Consequences of Non-Compliance

  • Failure to file Form 10F may result in the withdrawal of DTAA benefits.
  • Non-compliance leads to higher TDS rates.
  • Non-filing may categorise non-residents as ‘assessee in default’, complicating remittances.

Benefits of Filing Form 10F

  • Lower Tax Deduction at Source (TDS): Avoid higher tax rates on income like dividends, interest, and royalties.
  • Compliance with Indian Tax Regulations: Fulfills legal requirements to claim DTAA benefits.
  • Faster Processing of Tax Returns: Ensures accurate tax assessment and avoids delays.

How to File Form 10F Online?

Step 1: Log in to the official e-filing portal with with your PAN or the user ID. Register if you do not have an account. 

Step 2: On the dashboard, navigate to the ‘e-File’ menu and select ‘Income Tax Forms’. 

Step 3: Click on ‘File Income Tax Forms’.

Step 4: On the next page, select the 3rd tab ‘Person not dependent on any source of income’. 

Step 5: You will find the option to file Form 10F in the last column on this page. Click on ‘File Now’.

Read More: What is a mutual fund? Why invest in mutual funds?

Step 6: Enter your PAN and select the assessment year from a dropdown menu. Click on ‘Continue’.

Step 7: Go through the given instructions and click on ‘Lets get started’.

Step 8: Enter the required details, including your name, father’s name, Section 90/90A, country of registration/residence, TIN, etc.

Step 9: Next, select the period for which you obtained the TRC and your address outside India.

Step 10: After filing the other details, you need to attach a copy of your tax residency certificate. 

Step 11: Signing of the form can be done via digital signature or electronic verification code.

Step 12: Click on ‘Preview’ to review the details and submit the form. 

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