Medical / Health Insurance Premium - Mediclaim deduction under Section 80D

Section 80D of the Income Tax Act provides for deduction of Health Insurance premium or Medical Insurance premium or Mediclaim premium from Gross Total Income. Just like Life Insurance premium payment can help you save tax under Section 80C, even Medical Insurance premium payment can also help you save tax under Section 80D.

Note that the Income Tax benefit available for Medical Insurance premium under Section 80D is separate and distinct from the tax benefits available under Section 80C. To know more about section 80C deductions.

Eligible Assessees

Individuals and Hindu Undivided Family (HUF) only.

Scope

Mediclaim premium paid under:

• Medical insurance scheme of General Insurance Corporation approved by the Central Government, or
• Any other insurer approved by the Insurance Regulatory & Development Authority (IRDA).

Coverage

• For an Individual: Premium paid for insuring the health of the Individual, Spouse, Parents and dependant Children. Note the criterion of being dependant on the assessee is applicable only for Children. Thus Mediclaim premium paid for covering health of spouse or parents would be available regardless of whether or not they are dependant on the assessee. (Note prior to 1st April 2009, deduction for Mediclaim premium paid for parents was allowed only if the parent was dependant on the assessee).

• For a HUF: Premium paid for insuring the health of any member of the family.

Payment from Taxable Income

Mediclaim premium has to be paid from taxable income of that year to claim deduction u/s 80D. Premium should not be paid from savings or gifts received.

Mode of Payment

The premium may be paid by any mode of payment other than cash. Note prior to 1st April 2009, premium payment was required to be done only by cheque. Credit card or other online payment mechanism where not allowed. Now all payment modes except cash payment are accepted.

Deduction

For Individual

• Basic deduction: Mediclaim premium paid for Self, Spouse or dependant children. Maximum deduction Rs 15,000. In case any of the persons specified above is a senior citizen (i.e. 65 years or more as of end of the year) and Mediclaim Insurance premium is paid for such senior citizen, deduction amount is enhanced to Rs. 20,000.
• Additional deduction: Mediclaim premium paid for parents. Maximum deduction Rs 15,000. In case any of the parents covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000.

For HUF

• Mediclaim premium paid for any member of the HUF. Maximum deduction Rs 15,000. In case any member of the HUF covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000.

Let us now understand the implications with the help of examples:

Example 1

Mr. Anil furnishes the following information relating to premium on Mediclaim policy paid by cheque:

• For self (age 40 years) - Rs. 12,000
• For spouse (age 36 years) - Rs. 10,000
• For father (age 68 years) - Rs. 17,000
• For dependent mother-in-law (age 66 years) - Rs. 15,000

What is amount of deduction allowed under Section 80 D of the Income Tax Act?

Mr. Anil paid total of Rs. 22,000 for self and spouse. Since neither of them are Senior citizen, basic deduction under Section 80D is Rs. 15,000 (premium paid Rs. 22,000 or Rs.15,000 whichever is less).

Mr. Anil also paid Rs. 17,000 for his father, which is eligible for additional deduction. Since his father is senior citizen, deduction under Section 80D is Rs. 17,000 (premium paid Rs. 17,000 or Rs.20,000 whichever is less).

Thus total deduction under Section 80D comes to Rs. 32,000.

Note that Section 80D does not cover relatives other than Spouse, Children and Parents, so the premium paid by Mr. Anil for his dependent mother-in-law isn’t eligible for deduction. However, his wife can, from her taxable income, pay the premium for her mother’s health plan and claim deduction under Section 80D for the same.

Example 2

An individual assessee pays through Credit Card during the previous year health insurance premium as under:

1. Rs. 12,000 to keep in force an insurance policy on his health and on the health of his wife and children
2. Rs. 17,000 to keep in force an insurance policy on the health of his parents.

Under the proposed new provisions, he will be allowed a deduction of Rs. 27,000 (Rs. 12,000 + Rs. 15,000) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs. 29,000 (Rs. 12,000 + Rs. 17,000). Whether the parents are dependent or not, is not a consideration for deciding the deduction under Section 80D.

SMI TAX PLANNING TIPS

• Make the premium payment from your taxable income. Mediclaim insurance premium should be out of income chargeable to income tax, meaning if payment is made from income exempted from income tax than deduction will not available. If payment is done from a Loan or Gift, then also deduction is not available.

• Mediclaim policy for Brother or Sister? In case you need to pay Mediclaim insurance premium for your brother or sister, do not make the premium payment from your account. Take Mediclaim policy for Brother or sister in your Hindu Undivided Family (HUF) Income Tax file. If you are taking a floater policy, then don’t add your brother or sister in the floater policy if you are making the premium payment. Include your brother and sister in the Mediclaim policy where the premium payment is done by the HUF. This will ensure that HUF would be eligible for the deduction under Section 80D.

• Floater Mediclaim policy. Unique policies have been devised today by various insurance companies to suit the requirements of families. The family floater plan is the best example of such plans. This helps you and your family enjoy coverage under one single policy. For example, if you purchase a 3 lakhs health insurance policy, every member of your family can avail of the entire sum insured during medical requirements. Pay the Mediclaim premium for floater policy for your family from the Income Tax file where the deduction would have maximum tax savings. Let me explain by way of an example. Suppose your taxable income is greater than Rs. 1,000,000 and your spouse has taxable income of Rs 200,000. Medical insurance premium for the floater policy is Rs 10,000. If the premium is paid by your spouse, deduction under Section 80D is Rs 10,000. Note applicable Income Tax rate for your spouse is 10% plus 3% Education Cess. Thus reduction in tax liability due to this deduction of Rs 10,000 is equal to 10,000 * 10.30% = Rs. 1,030. On the other hand applicable Income Tax Rate for you is 30% plus 10% Surcharge plus 3% Education Cess. Thus if the premium payment is made by you, deduction available is same at Rs 10,000 but the effective saving in tax liability is 10,000 * 33.99% = Rs. 3,399.

• Don’t make premium payment by cash. No deduction under Section 80D is allowed where the Mediclaim premium is paid in Cash. You can make the payment in any other mode like cheque, draft, credit card, online banking, etc.

• Let your spouse pay the Mediclaim premium for your in-laws. In case you are also taking care of healthcare need of your in-laws, make sure the premium payment for Mediclaim policy is done by your spouse. You will not get any deduction under Section 80D for Mediclaim premium for your in-laws. But if your spouse is making the payment, Section 80D deduction is available since your spouse would be making payment for his / her parents which is allowable under Section 80D. Please note your spouse has to make the payment from his / her taxable income.

• One policy, Two claimants. If part payment is done by you and part payment by the parent, both can claim deduction to the extent of their contribution, subject to maximum allowed. Thus for example, if cost of insurance on the health of the parents is Rs 30,000, out of which Rs 17,000 is paid (by any non-cash mode) by the son and Rs 13,000 by the father (who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs 17,000 and the father will get a deduction of Rs 13,000.

• Unit-linked Health Insurance Plans. Some of the insurance companies have launched unit linked health insurance plan which work akin to Unit Linked Life Insurance plans. Portion of the premium for unit linked health insurance plan would go for covering the health insurance cost and balance would be invested in funds chosen by the person insured. For example LIC, has launched “Health Plus” and Tata AIG has launched “Tata AIG Life InvestAssure Health”. As per the current tax rules, premiums paid in respect of morbidity are eligible for tax deduction under Section 80D of the Income Tax Act. The balance of premium is eligible to tax deduction under Section 80C, provided the annual premium during the year does not exceed 20% of the sum assured.

Appendix: Section 80D of the Income Tax Act

Deduction in respect of medical insurance premium.

80D. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified in sub-section (2) or sub-section (3), payment of which is made by any mode, other than cash, in the previous year out of his income chargeable to tax.

(2) Where the assessee is an individual, the sum referred to in sub-section (1) shall be the
aggregate of the following, namely:—

(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family as does not exceed in the aggregate fifteen thousand rupees; and

(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee as does not exceed in the aggregate fifteen thousand rupees.

Explanation.–For the purposes of clause (a), “family” means the spouse and dependant children of the assessee.

(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1) shall be the whole of the amount paid to effect or to keep in force an insurance on the health of any member of that Hindu undivided family as does not exceed in the aggregate fifteen thousand rupees.

(4) Where the sum specified in clause (a) or clause (b) of sub-section (2) or in sub-section (3) is paid to effect or keep in force an insurance on the health of any person specified therein, and who is a senior citizen, the provisions of this section shall have effect as if for the words “fifteen thousand rupees”, the words “twenty thousand rupees” had been substituted.

Explanation.— For the purposes of this sub-section, “senior citizen” means an individual resident in India who is of the age of sixty-five years or more at any time during the relevant previous year.

(5) The insurance referred to in this section shall be in accordance with a scheme made in this behalf by—

(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 and approved by the Central Government in this behalf; or

(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999.

Interest on Education Loan - Tax Planning Guide to deduction under Section 80E

For an Individual tax payer, Income Tax Act provides for deduction of interest paid on tow types of loans – Home Loan and Education Loan. Section 80E of the Income Tax Act provides for deduction of interest paid on Education or Study loan taken for higher education (See the appendix for full text of Section 80E).

Note that the Income Tax benefit available for Education Loan under Section 80E is separate and distinct from the tax benefits available under section 80C. To know more about section 80C deductions, please read “Saving Income Tax through Smart Tax Planning – Guide to Section 80C Deductions”.

Following are the salient features of deduction on interest on Education Loan under Section 80E:

Deduction can be claimed only by Individuals

HUF and other assessee cannot claim Section 80E deduction. Moreover deduction can be claimed by an individual only if the loan has been taken in his name. Thus no deduction is available to an Individual if the loan is taken by any relative, say father, brother or spouse. In this case deduction will be available to the person who has taken the loan, provided that the Individual who is going for higher education is either a spouse or children of the Individual taking the Education Loan (more on this point below).

Loan from Banks

Education Loan should have been taken from a Bank in India (including Indian branches of foreign banks). Loans from notified financial institutions (currently only HDFC is notified) and approved charitable institution are also eligible for Section 80E deduction.

No deduction would be available if the loan is taken from a Bank outside India. For example if you take Education Loan from Bank of America, New York branch for MBA study in Harvard (or in any institution in India for that matter) – no deduction would be available under Section 80E. However if you take a loan from Citibank, New Delhi branch for MBA education in IIM Ahmedabad, deduction would be available under Section 80E.

No deduction under Section 80E would be available if the Education Loan taken from employer, family or friends.

Loan should be taken for Higher Education

Higher education means full-time studies for:

1. Graduate or Post-graduate course in Engineering, Medicine, or Management, or
2. Post-graduate course in Applied sciences or Pure sciences including Mathematics and Statistics.

Note tax benefit is not available for part-time courses.

There is no condition that higher education should be done in India. Thus deduction is available even when the loan is taken for full-time higher education in the above areas outside India.

The loan should be for pursuing higher studies means its includes loan taken not only for tuition or college fees only but other incidental expenses for pursuing such studies like hostel charges, transport charges, etc.

Higher education of Self or Relative

Loan should have been taken for full-time higher education of self or relative. Relative is defined to mean the spouse and childrenof the individual. Thus Education Loan taken for the higher education of brother or sister or father would not be eligible for deduction under Section 80E. Note prior to 1st April 2008, deduction was permissible only for the purpose of education of Self. Education Loan taken for the higher education of Spouse or Children has been added to the purview of Section 80E with effect from Assessment Year 2009-10 pertaining to Previous Year 2008-09.

If an individual takes Education Loan for higher education of spouse or children, the tax benefit in form of Section 80E deduction is available to the individual only – not spouse or the children.

Repayment from Taxable Income

The repayment should be out of income chargeable to income tax, meaning if repayment is made from income exempted from income tax than deduction will not available. If repayment is done from another Loan or Gift, then also deduction is not available.

Deduction only for Interest

There is no deduction allowed under Section 80E for principal repayment of Education Loan. Note prior to 1st April 2006, both interest and principal repayment were eligible for deduction (but with an overall limit of Rs. 40,000 per annum). Currently Section 80E deduction is available only for the interest payment. (In order to calculate Principal and Interest component of Education Loan repayment, please download excel based calculator – Loan Amortisation Schedule)

No ceiling on the amount of deduction

There is no ceiling for deduction under Section 80E. Note prior to 1st April 2006, there was a ceiling of Rs. 40,000 for deduction under Section 80E. Currently the entire amount of interest paid in the year is eligible for deduction.

Deduction for Eight years

Deduction under Section 80E is available for 8 years or until the loan is repaid fully, whichever is earlier. First year starts from the year in which interest payment starts. Thus if the loan repayment stretches beyond 8 years, no benefit is available from 9th year onwards. Note it is not compulsory to complete the higher education before deductions can be claimed under Section 80E.

SMI TAX PLANNING TIPS

• Should you avail Education Loan if you have surplus funds available? This is interesting consideration and the answer would depend on how the surplus funds are invested. As long as the tax adjusted return from surplus funds is greater than the tax adjusted cost of the loan, it is better to avail Education Loan. What do I mean? Okay, let me explain by way of an example.
  
  Suppose you need Rs. 100,000 for higher education and have two options to finance the same. You can avail Education Loan at 12% p.a. or you can are utilize your fixed deposit which is earning 9% p.a. Assuming you fall in the highest tax bracket (see the Income tax Rates) effective tax rate including surcharge and education cess is 33.99%. Since the interest on Education Loan is deductible under Section 80E and you save tax on the deduction, tax adjusted cost of Education Loan is 12% * (1 – 33.99%) = 7.92%. As long as you can generate tax adjusted return greater than 7.92%, it is advisable to go for Education Loan. In this example Fixed deposit interest is taxed at 33.99% and the tax adjusted return is 9% * (1 – 33.99%) = 5.94%. Thus if you intend to make a normal fixed deposit with the surplus funds, then taking Education Loan is not advisable since tax adjusted cost of 7.92% is greater than tax adjusted return of 5.94%. However if we assume that you make a 5-year Tax Saving fixed deposit under Section 80C (or for that matter any other investment allowed under Section 80C), then there is an additional deduction of Rs. 100,000 from the taxable income which means a tax savings of Rs 33,990. Thus to calculate effective return from the surplus funds, we have to consider tax adjusted interest income from fixed deposit plus the tax savings on the investment under Section 80C. After tax interest income is Rs 9,000 * (1 – 33.99%) = Rs 5,941. Tax saving under Section 80C is Rs. 33,990. Thus total return = Rs. 39,931, which translates to effective tax adjusted return from the surplus funds of 39.93%
  
  However if you read carefully, there is one flaw in the argument above. The above logic is valid only if the individual would not be able to make Section 80C investment, if the Rs. 100,000 surplus funds are utilized for higher education. But if you have enough surplus funds or income to make the Section 80C investment, regardless of how you finance higher education, then it would logically incorrect to consider the tax benefit of Section 80C investment while evaluating whether or not to avail Education Loan. In such a scenario, where Section 80C investment has already been made, we should compare only the after tax return from surplus funds with the tax adjusted cost of the loan. One option could be to invest the surplus in such a way that the returns are tax free. For example if we assume that the Rs. 100,000 is invested in Debt Mutual Fund or Liquid Mutual Fund with Dividend Reinvestment mode, returns would be tax free. If these investments are expected to deliver returns greater than tax adjusted cost of the Education Loan (i.e. 7.82% in our example), it is still advisable to avail Education Loan.

• Start interest payment only after you start earning. While Principal repayment is typically always deferred till completion of Education, most of the banks provide option to either pay interest starting immediately from disbursement or defer interest payment also till completion of Education. Logic is since the individual is not expected to have any income source prior to completion of education, moratorium is provided for both principal and interest till few months after completion of higher education. From tax planning perspective, it is recommended to defer both principal and interest payment till you start earning. The 8 year clock for claiming deduction under Section 80E starts ticking from the year in which interest payment starts, and not from the year in which education is completed. If you start making interest payment during the education period, in the initial years when your education is getting completed, you might not have any taxable income to claim Section 80E deduction. Note that interest on Education Loan paid in a particular year can be claimed as a deduction only that year, not later. Thus to maximize tax savings on deduction under Section 80E, it is always better to go for option to defer interest payment till completion of education.

• Take loan in your name for your spouse or children’s education and start paying interest immediately. This suggestion is exactly opposite of what I told you just in the last point. But note the difference. In the first case you have taken loan for your own Education. Thus you are not expected to have taxable income till you complete your education. However in this example we are talking about scenario where you have availed Education Loan for the higher education of your spouse or children. Thus better to start paying interest immediately and start availing deduction immediately since it will reduce your tax liability immediately. There is no sense in delaying the deduction benefit if you are in tax paying bracket.

• Take Education Loan for maximum possible amount. Education Loan is permissible for pursuing higher studies, means its includes loan can be taken not only for tuition or college fees only but other incidental expenses for pursuing such studies like hostel charges, transport charges, etc. Higher loan amount would mean higher interest amount which would be deductible from taxable income under Section 80E of the Income Tax Act. Remember, there is no upper limit on the amount of deduction allowed for interest payment on Education Loan under Section 80E.

• Take the Loan from a Bank in India - Not from Family, Friend or Employer. Deduction under Section 80E is available only when the Education Loan is availed from a Bank in India (Loan from approved charitable institution also allowed). So do not take a loan from your family, friend or employer, as the interest paid on such loan would not qualify for Section 80E deduction.

• Repay the Education Loan in 8 years. If possible, structure a ballooning repayment structure. Interest deduction under Section 80E is allowed over 8 years, beginning from the year in which interest payment starts. Thus repaying the loan in less than 8 years would mean you will forgo possible deduction from taxable income. A ballooning structure, where higher principal repayment happens in later years would ensure more interest payment and hence deduction. However, it is doubtful if the bank providing the loan would agree to a ballooning structure, since the average maturity of the loan under such a structure would be higher than a normal amortising loan for same tenor, which will make the loan more risky from debt-servicing perspective. However if an option to structure a ballooning repayment structure is available, it would be advisable to go for the same.

Appendix: Section 80E of the Income Tax Act

Deduction in respect of interest on loan taken for higher education.

(1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his relative.

(2) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest referred to in sub-section (1) is paid by the assessee in full, whichever is earlier.

(3) For the purposes of this section,

(a) approved charitable institution means an institution specified in, or, as the case may be, an institution established for charitable purposes and approved by the prescribed authority under clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G;

(b) financial institution means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf;

(c) higher education means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics;

(d) initial assessment year means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan.

(e) relative, in relation to an individual, means the spouse and children of that individual.

Benefit of Filing Income Tax Return Online

Yes, There are so many benefits to file income tax return online. Check this beautiful slide show by paisawaisa.com

decoration:underline;" href="http://www.slideshare.net/lakshayanand/benefits-of-filing-tax-returnsonline?type=powerpoint" title="Benefits of filing tax returnsonline">Benefits of filing tax returnsonline

Deduction u/s 80DDB of Medical Treatment

Deduction in respect of medical treatment etc. Sec. (80DDB)

Who can Claim
A resident individual or HUF (Hindu Undivided Family)

Which Period
Deduction is allowed in respect of amount actually paid during a year for the medical treatment of specified disease or ailment for himself or a dependent or a member of a HUF. The diseases an ailments specified under rule 11DD

(1) neurological diseases being dementia, dystopia musculorum deformans, motor neuron disease, ataxia, chorea, hemibilismus, aphasia and parkinsons disease (2) CANCER, (3) AIDS (4) chronic renal failure, (5) hemophilia and (6) thalassaemia.

Amount of deduction

- Amount actually paid or Rs. 40000 whichever is less.

- amount actually paid or Rs. 60000 whichever is less.(In case the amount is paid in respect of the assessee, or a person dependent on him, who is a senior citizen (exceeding 65 year of age).

Conditions:

The deduction allowable shall be reduced by the amount or insurance cover for medical treatment, if any received.

The assessee shall furnish a certificate in form 10-I (download) from neurologist, oncologist such other specialist, as may be prescribed, working in a Government hospital.

Deduction u/s 80D Mediclaim (Medical Insurance Premia)

Deduction in respect of Medical Insurance Premia [Sec. 80D]

Deduction is allowed for any medical insurance premium under an approved scheme of General Insurance. corporation of India, (popularly known as MEDICLAIM) or of any other insurance company, paid by any mode except cash, out of assessee's taxable income during the previous year, in respect of the following:

Feature

This is an additional deduction after deduction u/s 80C because overall limit on deductions u/s 80C, 80CCC and 80CCD is Rs. 1,00,000. (Sec.80CCE). See below example.

For Whom Deduction u/s 80D is available

(a) In case of an individual- Insurance on the health of the assessee, or wife or husband, or [dependent] parents or dependent children.

(b) In case of an H.U.F.- Insurance on the health of any member of the family.

Amount of Deduction

For A.Y. 2008-09: Maximum Rs.15,000 (Rs.20,000 in case any person insured is a senior citizen).

For A.Y. 2009-10:(1) In case of an individual assessee :

An additional deduction upto Rs. 15000 (Rs. 20,000 in case of the person insured is senior citizen) shall be allowable in respect of medical insurance premium for parent(s) whether or not dependent on the assessee.

Example of Mediclaim deduction

If 'A' has paid medical insurance premium (mediclaim) u/s 80D as follows

Deduction u/s 80C for PPF, NSC/LIC	1,20,000/-
Medical Insurance Premium
-For self, wife and dependent children	18,000/-
-For parents (both Senior Citizens)	22,000/-
Total Sum paid by 'A'	1,60,000/-
Solution: Allowable Deductions
Deduction u/s 80C for PPF, NSC/LIC	1,00,000/-
Medical Insurance Premium
-For self, wife and dependent children	15,000/-
-For parents (both Senior Citizens)	20,000/-
Total Allowable Deduction	1,35,000/-

2) In Case of an H.U.F, the maximum deduction is Rs. 15000 (Rs.20,000 in case any person insured is a senior citizen.)

Mode of Payment (Mediclaim)

Medical insurance premia may be paid by any mode (including by credit card, internet banking) except cash.

Tax Planning with Home Loan

Is Tax planning is legal?

• Yes, It is legal and it is your right to plan tax legally and i am here to plan your tax legally. Tax planning, a legitimate exercise, should not be confused with tax
  avoidance or tax evasion.

• Good tax planning comprises tax compliance and availing proper tax benefits, coupled with proper analysis of the financial implications of a decision.

• There are many situations that demand a proper understanding of, and approach to, tax matters.

One such situation is where an individual has acquired, constructed, repaired, renewed or reconstructed a residential house.

What tax benefits can one avail on a home loan?

Tax benefits can be claimed on both the principal and interest components of the home loan as per the Income Tax Act, 1961. These deductions are available to assessees, who have taken a loan to either buy or build a house, under Section 24(b).

1) Interest on borrowed capital is deductible as follows: If the following conditions are satisfied, interest on borrowed capital is deductible upto Rs 150,000. Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property.

• The acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed.
• The person, extending the loan, certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principle amount outstanding under an earlier loan taken for such acquisition or construction.

If the conditions stated above are not satisfied, then the interest on borrowed capital is deductible up to Rs 30,000. However, the following conditions have to be fulfilled:

• Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction repairs or renewal of a house property.
• Capital should be borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property.
• If the capital is borrowed on or after April 1, 1999, but construction is not completed within 3 years from the end of the year, in which capital is borrowed.

(2) In addition to the above, principal repayment of the loan/capital borrowed is eligible for a deduction of upto Rs 100,000 under Section 80C from assessment year 2006-07.

Important points for Tax Planning by Housing Loan

• Therefore, suggested that a property for self residence may be acquired with borrowed funds, so that the annual interest accrual on borrowing remains less than Rs. 1,50,000. The net loss on this account can be set off against income from other properties and even against other incomes.
• If buying a property for letting it out on rent, get loan from other family members or outsiders, the rental income can be safely passed off to the other family members by way of interest. If the interest claim exceeds the annual value, loss can be set off against other income too.
• At the time of purchase of new house properties, the same should ebe acquired in the names of different family members. You can also purchase property in joint names. This is direct benefit for rental income in different hands.

FAQ on Tax Benefit of Home loan

A person avails deductions allowed under Section 24 in respect of his self-occupied house property and he takes an additional loan for extension/addition to the same house; can he claim benefits from the interest deduction on the additional loan taken?

The maximum deduction permissible in a financial year for the original loan (if any) plus for any additional loans taken is Rs 150,000. Hence if the person's deductions on the existing loan are less than Rs 150,000, then he can claim further benefits from the additional loan taken, subject to the upper limit of Rs 150,000 for a financial year.

If a home loan is taken by the father and the loan has been sanctioned on the basis of the son's salary, can the son claim the tax rebate and deduction in respect of the interest payments?

According to the Income Tax Act, only the person who has taken the loan can claim tax rebates. Hence, in this case only the father will be eligible for the tax rebate.

If a fresh loan is taken to repay an existing loan, which was taken for constructing a house, can the interest on the fresh loan be claimed as a deduction?

Tax deductions can be claimed on home loan interest payments, subject to an upper limit of Rs 150,000 for a financial year. Interest on the fresh loan can be claimed as a deduction, subject to the stated upper limit.

Can a husband and wife, both of whom are tax-payers with independent income sources, get tax deduction benefits, with respect to the same housing loan?

Yes, in this case, the husband and wife (being tax-payers with independent sources of income) can get tax deduction benefits with respect to the same housing loan

In the above case, in what proportion will the tax benefits be shared?

To the extent of the amount of loan taken in their own respective name.

E-filing of Income Tax Return has Enabled for A.y. 2009-10

Income Tax Department website has enabled efiling of Income Tax return for the A.Y. 2009-10 today (02-06-2009) after a long time.

Now you can file income tax return online for the A.Y. 2009-10. But there is major change regarding ITR-V. (How to file income tax return online)

• Now you have to send ITR-V to the address below
• Income Tax Department , CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka
• within thirty days after the date of transmitting the data electronically.
• No form ITR-V shall be received in any other office of the Income-tax Department or in any other manner. 
• Upon receipt of the Form ITR-V, the CPC shall send an e-mail acknowledging the receipt of Form ITR-V. The e-mail shall be sent in due course to the e-mail address furnished by the tax-payers in his return. No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner.

Go to Official website of Income Tax Deparment for e-filing of income tax return for the A.Y. 2009-10

Download Software to prepare income Tax Return online provided by income tax department

How To file Income Tax Return Online ?

E-filing of income tax return very easy nowadays. No need to stand in long queues at the income tax office. You can file with the help of income tax return preparation software provided itself by income tax department. No fear of lost any document, one can print and download whenever he wants after log-in his account.

1. Select appropriate type of Return Form
2. Download Return Preparation Software for selected Return Form.
3. Fill your return offline and generate a XML file.
4. Go to Income Tax Department website.
   
5. Register and create a user id/password
6. Login and click on relevant form on left panel and select "Submit Return"
7. Browse to select XML file and click on "Upload" button
8. On successful upload acknowledgement details would be displayed. Click on "Print" to generate printout of acknowledgement/ITR-V Form.
9. ncase the return is digitally signed, on generation of "Acknowledgement" the Return Filing process gets completed. You may take a printout of the Acknowledgement for your record.
10. Incase the return is not digitally signed, on successful uploading of e-Return, the ITR-V Form would be generated which needs to be printed by the tax payers. This is an acknowledgement cum verification form. The tax payer has to fill-up the verification part and verify the same. A duly verified ITR-V form should be submitted with the local Income Tax Office withing 15 days of filing electronically. This completes the Return filing process for non-digitally signed Returns.
11. For any assistance in filing the paper copy of the return please contact by comment form given below.

If you still having problem in filing income tax return online then contact at ask@incometaxindia.gov.in.

Contact Information

Office of the Director General of Income Tax (Systems) E-2 ARA Center, Ground Floor, Jhandewalan Extn New Delhi 110055 Call or email our call center     Aayakar Sampark Kendra (ASK)     124-2438000     ask@incometaxindia.gov.in

Documents Kept in Record in Support of the Income Tax Return

Document to be prepared/obtained by the assesse in support of the return

New return forms have dispensed with the requirement of enclosing any documents in support of the return. However, in the opinion of Board of Editors, even though not required to be submitted along with the return, it is advisable that the documents be prepared /obtained beforehand, since the Assessing Officer may as per section 139C require an assesses to furnish these documents at any time after the filing of return.

The following documents are very useful as a proof in support of your income or expenditures whenever demanded by A.O.

1.   Statement of computation of Income and Tax.

2.   TDS certificates in form 16 or 16A as applicable.

3.   Certificates/Receipts of payment of insurance premium, Provident fund, Purchase of NSCs, New equity shares, Mutual funds, NSS, Medical Insurance, Donation, etc. in support of deduction claimed.

4.  Audit Report, Balance Sheet, Trading, Profit and Loss Account, Personal Account of prop. or partners.

5.  Statement of Receipts and payment where no regular of books of accounts are maintained.

6.  Tax audit report u/s 44AB wherever required.

7.  Certificate of interest on housing loan from the lender, in support of deduction from house property income.

8.  Other documents/Statements in support of income and expenditure.

 

Income Tax Return ITRs Preparation Software A.Y. 2009-10 by Income Tax Department

ncome Tax Department has launched its new ITR Preparation Software for A.Y. 2009-10. Every new user has to register at this website in order to avail the e-Filing facility. After completing the registration process and logging in, the user may download the software tools from the download section. Based on all the relevant information the required ITR Form should be filled using the software provided. The software would generate the XML format of the return which should be uploaded on this website. On successful transmission of the return a receipt will be generated in the form of a provisional acknowledgement.

Which ITR form is applicable for my Income?

Click here to get Income Tax Return Software

Download PDF Format of all ITRs (Income Tax Return Forms)

Which ITR is applicable for my Income?

The most of the confusion about income tax forms after Saral (Old Form) is choosing income tax form / ITR for one's income. For example Suppose one has income from salary and interest income from banks. The form ITR1 will be used, but if having income from capital gain along with salary income then ITR2 will be used. So it is very important to learn how to choose appropriate ITRs / Income Tax Forms to file Income Tax Return. I have given instruction "which ITR form to use" one by one form starting from ITR1. 

Form ITR1

ITR 1 is the basically for those

Persons

Individuals

Income

1.  Income From Salary / Pension

2.  Income From Other Sources: Interest / Family Pension

So, ITR 1 is not for one who has 

1.  Having Income from Capital Gain.

2.  Having Income From House Property (e.g. Rented out the Property)

3.  Having Income From Business & Profession.

Form ITR2

   -  ITR-2 is for those

Persons:

1.  Individuals

2.  HUF (Hindu Undivided Family)

Having Income From

1.  Salary / Pension / Family Pension

2.  Interest

3.  House Property

4.  Capital Gains

So ITR-2 is for those who has salary income with Capital Gain or house Property Income or if only capital gain or house property income.

ITR2 is not for those if having income from 

1.  Business & Profession.

2.  if only salary/ Pension / Family income

Form ITR-3

   -  ITR3 is for those

Persons

1.  partner in a firm

2.  behalf of an HUF that is a partner in a firm

Form ITR-4

Form ITR-4 is for those

Persons:

1.  Individuals

2.  HUFs (Hindu Undivided Family)

Income: 

-  Income from proprietary business or profession.

The Below table is provided by income tax department for "which Form is applicable for one's income?"

Which Form is Applicable

S.No For Þ Individual Individual, HUF Source of Income ß ITR-1 ITR-2 ITR-3 ITR-4 1 Income from Salary/Pension • • • • 2 Income from Other Sources (only Interest Income or Family Pension) • • • • 3 Income/Loss from Other Sources • • • 4 Income/Loss from House Property • • • 5 Capital Gains/Loss on sale of investments/property • • • 6 Partner in a Partnership Firm • • 7 Income from Proprietary Business/Profession •