Ordinary Citizen (Below 60 years of Age):

Senior Citizen (60 years to 80 years of Age):

Super Senior Citizen (Above 80 years of Age):

Health And Education Cess

Tax relief under Section 89 is available on both old and new tax systems. As you know, the income tax is calculated on the total income earned during the financial year. Sometimes, you may receive the past dues (known as salary arrears) in the current financial year and it may increase the income tax you need to pay. For example, you may receive Rs. 1 lakh as salary arrears in the FY 2021-22 whereas those arrears should have been paid to you in the FY 2015-16.

This delay in receiving the payment may increase the tax you pay because of

• the income tax slab rates have increased over the years, OR
• the salary arrears may push you to the next slab of the income tax slab rates

So, to save from the burden of paying additional tax due to the delay in receiving the salary arrears, the Government allows an option called tax relief under Section 89. As per this section, any extra tax that has been paid due to the salary arrears, can be reduced subject to conditions.

Even though the new tax system doesn’t allow most of the exemptions and deductions, it still allows very few exemptions and deductions. They are given below.

Available Exemptions:

• Transport Allowance given to a divyang (disabled) employee to travel between home and workplace
• Conveyance Allowance given to meet the travel expenses to perform office duties
• Any Allowance given to meet the travel expenses on tour or on transfer
• Daily Allowance given to meet the ordinary daily expenses incurred by an employee because of absence from his normal place of duty

 Available Deductions:

• Employer contribution into NPS
• Retirement benefits, gratuity, etc.
• Commutation of pension
• Leave encashment on retirement
• Retrenchment Compensation
• VRS benefits
• Employer’s contribution
• NPS withdrawal benefits
• Education Scholarships
• Payments of awards instituted in public interest 

To calculate income tax, we need the following details.

• Income from Salary
• Income from Property
• Income from capital gains
• Income from Business or Profession
• Income from Agriculture
• Income from any other Sources
• Various Exemptions availed
• Deductions under various sections

Income from Salary should be considered for both old and new tax systems. Any amount that you receive from your Employer as a part of your salary or in addition to your salary will fall under this category. Various components of the Salary are given below:

• Basic Pay
• DA (Dearness Allowance)
• HRA (House Rent Allowance)
• LTA (Leave Travel Allowance)
• Medical Allowance
• Travel allowance
• Conveyance allowance
• Children Education Allowance
• Uniform Allowance
• Salary arrears
• Employer’s contribution to NPS (National Pension System)
• Any other allowances
• Perquisites

The income tax benefits of “income from property” will depend upon whether you choose the old tax system or new tax system. Before jumping into the benefits of old and new tax systems, first let us see some details related to income from property.

Any income that you receive by renting out your property will fall under this category. The income from the property can be positive (gain) or negative (loss).

Gain:If the rent received is more than the expenses you paid to maintain the property, then it is a gain. Example: In a financial year, if the rent received is Rs. 60,000 and the expenses you incurred is Rs. 50,000, then you get a gain of Rs. 10,000.

Loss:If the rent received is lesser than the expenses you paid to maintain the property, then it is a loss. Example: In a financial year, if the rent received is Rs. 60,000 and the expenses you incurred is Rs. 1 Lakh, then you incur a loss of Rs. 40,000.

To calculate the income from the rental property, we need the following details.

• rent received from the property
• Interest amount paid towards the property loan. Note that only Interest amount will be considered. The principal amount will not be considered
• municipal taxes paid for the property
• Standard deduction of 30%

There is no limit on the gain amount that can be shown under this category. You have to show the entire gain. But, there is a limit on the loss amount that can be shown under this category. The limit is Rs. 2 Lakhs for the financial year.

If you incur a loss from the property and the loss amount is more than Rs. 2 Lakhs, then any amount above Rs. 2 Lakhs will need to be carried forward for the next 8 financial years. Example: If you incur a loss of Rs. 4 Lakhs, then you can show only Rs. 2 Lakhs as “loss” under this category for the current financial year.

The remaining loss of Rs. 2 Lakh amount can be shown in the next financial year or during the next 8 financial years.

There is no limit on the gain amount that can be shown under this category. You have to show the entire gain. New tax system doesn’t allow any loss amount to be included. Also, it doesn’t allow the “loss” amount to be carried forward for the next financial year.

Income from Capital Gains should be considered for both old and new tax systems. Any income that you receive by selling your capital asset will fall under this category.

Examples of capital assets are given below.

• Listed Shares
• Unlisted Shares
• Equity Mutual Funds
• Debt Mutual Funds
• Real Estate
• Gold
• Listed Bonds
• Zero Coupon Bonds
• Other capital assets, if any

The income that you receive by selling the capital asset can be positive (gain) or negative (loss).  Depending upon the holding period of the capital asset, the gain or loss can be categorised as below.

1. Short term capital gain (STCG)
2. Short term capital loss (STCL)
3. Long term capital gain (LTCG)
4. Long term capital loss (LTCL)

Depending upon the capital asset, the tax charged on the capital gain will fall under one of the following categories.

1. Short term capital gain (STCG) is added to Income and taxed as per the Income tax Slab (under Section 111A)
2. Short term capital gain (STCG) charged at 15%
3. Long term capital gain (LTCG) charged at 10%
4. Long term capital gain (LTCG) charged at 20%

• Self employed, Freelancer,Contractor,LIC Agents CA etc.

• Interest earned from Savings Bank (SB) account
• Interest earned from Fixed Deposit (FD) or Recurring Deposit (RD) accounts
• Pension received from a Pension Fund
• Dividends received from Shares or Mutual Funds
• EPF account interest earned from employee’s contributions (both EPF & VPF) over Rs. 2.5 Lakhs
• Any winning from Lottery, Puzzle, Race, Game, Gambling, etc

• HRA (House Rent Allowance) exemption
• LTA (Leave Travel Allowance) exemption
• Transport Allowance Exemption
• Conveyance Allowance Exemption
• Children Education Allowance Exemption
• Children Hostel Expenditure Allowance Exemption

1. Actual HRA received
2. 40% of (Basic Pay + DA) if you live in Non-Metro cities. 50% of (Basic Pay + DA) if you live in Metro cities
3. Rent paid minus 10% of (Basic Pay + DA)

Children education allowance exemption is available only in the old tax system. It is not available in the new tax system. If you receive Children Education Allowance from your salary, then you can claim this exemption for a maximum of 2 children.

• Standard deduction
• Deductions under Section 80C
• National Pension System (NPS) deductions. This is in addition to Section 80C deductions
• Other Deductions (Deductions available under various other categories)

• Amount contributed by the Employer
• 10% of (Basic Pay + DA)
• Gross total income

The additional deduction benefits for investing Atal Pension Scheme are given below. This deduction is available only in the old tax system. It is not available in the new tax system. An additional tax deduction benefit of up to Rs. 50,000 is available every financial year under section 80CCD (1B) for APS investments.
This is in addition to Rs. 1.5 Lakhs deductions available under Section 80C.

The deductions available under various other sections are listed below.

• Section 80D – Medical insurance premium paid for family and parents
• Section 80U – Self disability
• Section 80DD – Dependents with disability
• Section 80DDB – Treatment for critical diseases
• Section 24B – Home loan related
• Section 80EE – First home buyer
• Section 80EEA – Affordable Housing
• Section 80EEB – Electric Vehicle Loan
• Section 80E – Higher Education Loan
• Section 80G – Donations paid to charities
• Section 80GGC – Donations paid to Political parties
• Section 80TTA – Interest from Savings Bank (SB) Account
• Section 80 TTB – Interest from FD and RD
• Section 80GG – Rent paid but no HRA
• Section 87A – Tax rebate
• Section 10 – Professional Tax

• Medical insurance premium paid for the family
• Medical insurance premium paid for parents
• Preventive health checkup cost for the family

The details of each deduction are given below

1) Medical Insurance Premium Paid for Family:

Medical insurance premium amount paid for the family can be deducted under this section. Family includes self, spouse and dependent children.

• the allowed deduction amount is Rs. 25,000 for the whole family if all the members of the family are below 60 years of age
• the allowed deduction is Rs. 50,000 for the whole family if one of the family members is above 60 years of age

 2) Medical Insurance Premium Paid for Parents:

Medical insurance premium amount paid for parents can be deducted under this section. Note this includes parents only. Parent-in-laws are not included. Parents may or may not be dependent.

• Allowed deduction amount is Rs. 25,000 if both the parents are below 60 years of age
• Allowed deduction amount is Rs. 50,000 if one of the parents is above 60 years of age

3) Preventive Health Checkup Cost:

Preventive health checkup is carried out to identify any diseases and take appropriate measures to prevent it. Amount spent towards preventive health checkup of family members is allowed for deduction. A maximum deduction of  Rs. 5,000 for the whole family is allowed. Family includes self, spouse, dependent children and parents. Parents may or may not be dependent. Preventive health checkup cost is inclusive of the above mentioned limits (not over and above).

• If your dependent is disabled (40% disability), you can claim a deduction of Rs. 75,000
• If your dependent is severely disabled (80% disability), then you can claim a deduction of Rs. 1,25,000

One should produce the Medical Certificate provided by the concerned Medical Authority certifying the disability of your dependent.

Section 80DDB deduction is available only in the old tax system. It is not available in the new tax system. You can claim a deduction for the treatment of critical diseases. The treatment can be for either yourself or your dependents. Dependents include spouses, children, parents, brothers and sisters.

The deduction amount will be as per the following.

• if the person undergoing the treatment is below 60 years of age, then you can claim Rs. 40,000 or the actual amount spent, whichever is less
• if the person undergoing the treatment is a senior citizen, then you can claim Rs. 1 Lakh or the actual amount spent, whichever is less
• if the person undergoing the treatment is a super senior citizen, then you can claim Rs. 1 Lakh or the actual amount spent, whichever is less

 The list of critical diseases covered under this section is given below.

 1) Neurological Diseases where the disability level has been certified to be of 40% and above

• Dementia
• Dystonia Musculorum Deformans
• Motor Neuron Disease
• Ataxia
• Chorea
• Hemiballismus
• Aphasia
• Parkinson’s Disease

2) Malignant Cancers

3) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)

4) Chronic Renal failure

5) Hematological disorders

A.Hemophilia      B.. Thalassaemia

• if the property is self occupied , then you can’t claim any interest paid. So, the deduction allowed is Rs. zero
• if the property is rented out, then you can claim the entire interest paid as deduction. There is no upper limit for the interest amount

Section 80EE deduction is available only in the old tax system. It is not available in the new tax system. First home buyers can get an additional deduction of Rs. 50,000 paid towards the interest amount of the home loan if they meet all the conditions listed below.

1. hould be a first home buyer and you should live in that property
2. first home buyer and you should live in that property The purchase price of the house should be less than Rs. 50 Lakhs
3. he loan amount borrowed (if any) should be less than Rs. 35 Lakhs
4. The loan should have been taken during the financial year 2016-17. That is, between 01-Apr-2016 and 31-Mar-2017

This deduction of Rs. 50,000 is in addition to Rs. 2 Lakh deduction available under Section 24B. This additional deduction amount can be claimed every financial year until the loan amount is fully repaid.

Section 80EEA deduction is available only in the old tax system. It is not available in the new tax system. This is a new Section and it was introduced in the budget of 2019. It has been effective from 01-Apr-2019. This section provides tax deduction of up to Rs. 1.5 Lakhs for affordable housing subject to the following conditions:

• One should be a first home buyer. It means that you should not own any other house on the date of loan sanction
• he home loan should be sanctioned between 01-Apr-2019 and 31-Mar-2022
• The value of the property (stamp duty value) should not exceed Rs. 45 Lakhs

The interest amount of up to Rs. 1.5 Lakhs paid towards the home loan can be claimed under this section every financial year till the loan is fully repaid. This deduction of Rs. 1.5 Lakhs is in addition to Rs. 2 Lakhs deduction available under Section 24B. So, a total deduction of up to Rs. 3.5 Lakhs (that is Rs. 1.5 Lakhs plus Rs. 2 Lakhs) can be claimed by a first home buyer.

Section 80 EEB deduction is available only in the old tax system. It is not available in the new tax system. This is a new Section and it was introduced in the full budget of 2019. It has been effective since 01-Apr-2019. This section provides tax deduction of up to Rs. 1.5 Lakhs for the purchase of an electric vehicle subject to the following conditions.

• The electric vehicle should be purchased between 01-Apr-2019 and 31-Mar-2023
• The vehicle loan should be taken from a financial institution

he interest amount of up to Rs. 1.5 Lakhs paid towards the vehicle loan can be claimed under this section every financial year till the loan is fully repaid. This deduction benefit is available for both cars and bikes.

Section 80E deduction is available only in the old tax system. It is not available in the new tax system. The interest amount paid towards the education loan can be claimed as deduction under this section. Note that only interest amount can be claimed. The principal amount can’t be claimed. Any amount of interest payment can be claimed. There is no upper limit on the interest amount. The educational loan should be for a Graduate or Post Graduate course in India or Overseas. The education loan can be taken for yourself, spouse or children. This deduction facility is available for 8 financial years or till the time the loan is paid off, whichever is earlier. For example, you have taken an educational loan with a term of 7 years. If you choose to repay in 5 years, then you can claim deduction for 5 years only. The first financial year will be the year in which you started paying the loan.

Section 80G deduction is available only in the old tax system. It is not available in the new tax system. Donations made to approved Charities, Trusts and Funds can be claimed as deduction under this section. Donations can be made in the form of cash, cheque or demand draft. There is no limit on the donation amount made by cheque or demand draft. But, there is a limit of Rs. 2,000 if the donation is made by cash. That is, the maximum deduction allowed is Rs. 2,000 even if the amount is above Rs. 2,000.

Types of Deduction:

Depending upon the Charity and Trust Fund, the deduction allowed can be categorised in the following four types.

1. 100% of the donation is allowed for deduction
2. 50% of the donation is allowed for deduction
3. 100% of the donation subject to a maximum of 10% of the adjusted gross total income
4. 50% of the donation subject to a maximum of 10% of the adjusted gross total income

For the calculation purpose, the “Adjusted Gross Total Income” is calculated as under:

Before one donate, check the type of the Charity or Trust and then donate.

Section 80 TTB deduction is available only in the old tax system. It is not available in the new tax system. This section is exclusively for Senior citizens. This section was introduced in Budget 2018 and it has been effective since 01-Apr-2018. Senior citizens can use this section to claim deduction on the interest amount earned from Fixed Deposits (FD) and Recurring Deposits (RD) accounts. A maximum of Rs. 50,000 can be claimed as deduction.

For example, if the interest earned from FD and RD accounts in the financial year is Rs. 75,000, then Rs. 50,000 can be deducted and the remaining Rs. 25,000 will be the taxable amount. This section can’t be used to claim deduction for interest earned from Savings Banks (SB) accounts. Section 80 TTB and 80 TTA are mutually exclusive for senior citizens. It means that if a senior citizen is utilising Section 80 TTB, then they can’t utilise Section 80 TTA and vice versa

Section 80GG deduction is available only in the old tax system. It is not available in the new tax system. You can use this section to claim deduction if you are living in a rented house but you are not receiving HRA (House Rent Allowance) from your Employer. The deduction amount that you can claim is the lowest of the following 3 things.

1. Rs. 60,000 per financial year
2. Total rent paid (minus) 10% of total salary
3. 25% of total salary

To claim this deduction, you should meet the following conditions.

• One should not receive HRA (House Rent Allowance) from your Employer
• Ones spouse or your minor children should not own any property in the place where you are working
• If one owns a property in a different place than where you are working, then one should rent that property out. One should not claim tax benefits against that property as “self occupied”

Section 10 deduction is available only in the old tax system. It is not available in the new tax system. Professional tax is from the State Government of the state in which you are working. So, this amount will vary from one state to another state. One can use this section to claim deduction on the professional tax paid. Any amount paid as a professional tax can be claimed as deduction.

For example, if one is paying Rs. 200 per month as professional tax, then can claim Rs. 2,400 (200 x 12) as deduction.