Deduction Exemption and Reimbursement of Expenses For FY 2016 – 2017 Amount
Basic Exemption ₹250000
PPF, Insurance, ELSS, FD, NSC, etc (Section 80 C Deduction) ₹150000
Investment in NPS (Section 80 CCD 1B ) ₹50000
Contribution of NPS by Employer (Section 80 CCCD 2) ₹150000
Home Loan Interest or House Rent Allowance (First Time Buyer ) ₹250000
Tax Free Medical Allowance ₹15000
Tax Free Transport Allowance ₹19200
Medical Expenses for Self and Parents (80D) ₹50000
Leave Travel Allowance (Section 10(13)) ₹25000
Travel and Fuel Reimbursement — Office Travel ₹120000
Phone and Communication (Tele and Internet Expenses) ₹36000
News Paper and Periodicals ₹24000
Meal Coupons (up to ₹50 Per Meal is Tax Free) ₹12000
Relief under Section 87 of ₹ 5000/- (i.e 10% of Income) ₹50000

The 2016-17 Budget has made no significant change for Tax Rates for Individuals. The Individuals who earn income of Less than 5 Lakhs rupees will get ₹ 5000/- as Tax rebate under section 87A. There is increase in surcharge on income tax levied on individuals earning income of ₹ 1 crore or more from 12 per cent at present to 15 per cent. This move is aimed at taxing the rich. The Middle Class always pay effective more tax including indirect taxes and have to plan their retirement and savings at the same time save on overall tax outgo. The Article gives you brief idea on how to save tax and at the same time make proper investment and cover insurance and Medical expenses risk.

  1. Investment in 80C for Purpose of taking full benefit of ₹ 1.5 Lakhs

Deduction under 80C is related to deduction that an individual can deduct from his gross taxable income in order to reduce his tax liability by investing in specified investment. It is applicable to individuals and HUF. An assesse can get deduction under section 80C up to a maximum of ₹150000.The qualifying investments and expenditure as deduction under 80C are investment in Insurance Policy, Post Office Time Deposit Account, Investment in Equity Linked Saving Scheme (Mutual Funds), Public Provident Fund, National Saving Certificate (Read Article Why to invest in National Saving Certificate ?), Tuition Fees Paid, Bank Fixed Time Deposit, Repayment of Principal of Housing Loan, Sukannya Samriddhi account.

  1. Investment in National Pension Scheme up to ₹ 2 Lakhs

Finance Minister Arun Jaitley in Budget 2015-16 introduced an additional income tax deduction of ₹ 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority. This extra deduction of ₹ 50,000 on NPS will increase the total deduction allowed under Section 80C and 80CCD of Income Tax Act to ₹ 2 lakh. In Budget 2016, the finance minister has made withdrawals from NPS on maturity tax free up to 40% of the total corpus accumulated. Currently, none of the withdrawals were tax-free unlike other competing instruments such as PPF and EPF where the total withdrawal was tax -free. This is a major step towards making the NPS scheme more attractive and bringing it on par with the other EEE pension schemes. The Budget 2016 proposes to provide a uniform tax treatment to the recognised provident fund, national pension system and superannuation fund.

It is proposed that 40% of the pension wealth received by an employee from the National Pension System Trust shall be exempt.

  1. Home Loan Interest and House Rent Allowance (up to ₹ 2.5 Lakhs or ₹ 60000/-)

Employees gets HRA as a part of Salary. If the Employee is living in rented accommodation they can Claim HRA benefit and save on taxes. If the Employee is staying with parents in that case too they can pay rent to parents and Claim HRA benefit. Click to read Article HRA House Rent Allowance Section 10(13A) – under the Income tax act 1961

For employees who don’t get HRA benefits, the FM raised the deduction against house rent from ₹ 2,000 per month to ₹ 5,000. This would result in tax savings in the range of ₹ 3,708 to ₹ 12,204, depending on the income slab.

Further in Budget 2016 First time home buyers to get additional deduction of ₹ 50,000 on interest for loan up to ₹ 35 lakh. This additional deduction has been given on interest for loan up to ₹ 35 lakh, provided the house value doesn’t exceed ₹ 50 lakh.  For, the 2016-17 Budget proposes tax relief on interest payment on home loan if the property bought, or under construction, is completed within 5 years from the end of the financial year in which the loan was availed instead of the current 3 years Assuming a loan of ₹ 35 lakh to be paid over 20 years, the annual deduction comes to around ₹ 2.5 lakh, including the ₹ 2 lakh currently available. At 9%, the interest outgo in the first year would be ₹ 3.12 lakh. So, the buyer will save ₹ 75,000 if he is in the 30% tax-bracket

  1. Tax Free Medical Allowance and Transport Allowance up to ₹ 40000/-

Medical reimbursement and Transport Reimbursement can be claimed by the employee and it will be taken care in form 16 itself. For Medical Bills Employee needs to submit proof of expenditure incurred.

  1. Medical insurance for Self, Parents and Dependents up to ₹ 50000/-

Payment of premium on life insurance policy and health insurance policy not only gives insurance cover to a taxpayer but also offers certain tax benefits. Medical insurance premium paid by assesse, being individual/HUF by any mode other than cash. Sum paid by assesse, being individual on account of preventive health check-up. Medical expenditure incurred by assesse, being individual/HUF on the health of a very senior citizen person provided that no amount has been paid to effect or to keep in force an insurance on the health of such person. Read More about Income Tax Benefit for taking Life Insurance Policy 80C, Health Insurance 80D, and Expenditure on Medical Treatment 80DD

  1. Leave Travel Allowance Up to ₹ 25000/-

An LTA is the remuneration paid by an employer for Employee’s travel in the country, when he is on leave with the family or alone. Amount from LTA is tax free. Section 10(5) of the Income-Tax Act, 1961, which provides for the exemption and outlines the conditions subject to which LTA is exempt. Read More about How to Claim exemption in Leave travel allowance section 10(5) under the Income tax act 1961

  1. Reimbursement of Expenses for Mobile, Travel, newspaper as actuals

Many employers provide reimbursement of Travel Expenses, Mobile and Phone Bill and for News Paper. Employee has to submit proof of expenditure.

  1. Meal Coupons up to ₹ 10000/-

Is Food Coupon like Sodexo coupons which are very famous given by employers to employee. Most of time employers and employee are not aware of taxability of food coupon and assume they are exempted. Read more of Food Coupon Meal Vouchers Income Tax Benefit under Salary Income

  1. Relief under Section 87A

Budget has increase the relief under section 87A from ₹ 2000/- at present to ₹ 5000/-. So effectively if taxable income is less then ₹ 5 Lakhs an individual can Claim relief of ₹ 5000/- in taxes paid. If we consider 10% slab rate it turnout to be ₹ 50000/- as additional benefit which can be claimed in this Section

Form the above Picture it is clear that if the Individual plan in proper manner for the year 2016 -17 financial year he can not only save taxes but can also plan an investment in Resident Property if he is not owing one. For Retirement benefit NPS seems to be better option considering current changes in Budget 2016.

Disclaimer: Author does not take any responsibility for misrepresentation or interpretation of act or rules. Neither the author nor the firm accepts any liability neither for the loss or damage of any kind arising out of information in this document nor for any action taken in reliance there on.

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