TAX PLANNING - Loan and Insurance
Tax planning is the analysis of a client’s overall financial situation and conditions in order to craft a financial plan that can be executed in the most tax-efficient manner. Tax planning is an essential component of a well-crafted financial plan. The purpose of tax planning is to ensure that, while a client is planning for retirement, college funds, investments, etc, they are also losing as little as possible to taxes. Loan and Insurance Tax planning brings together all the different components of a comprehensive financial plan and figures out how they will work together in the most tax efficient manner. Tax planning itself does not involve investments or accounts, but rather it refers to the direction of said investment and accounts in order to maximize tax savings.
You can claim tax deductions on the loan amount for home purchase or construction under the following sections of the Income Tax Act.
Loan and Insurance – Deepti Bhagtani & Associates
- Section 80C: Deduction on the principal amount, stamp duty, registration fee, or any other expenses up to Rs. 1.5 lakh per year.
- Section 24(b): Deduction on the interest paid on home loan up to Rs. 2 lakh per year for a self-occupied house, or 30% of the net annual value for a rented house.
Loan and Insurance – Deepti Bhagtani & Associates
- Section 80EE: Deduction on the interest paid on home loan up to Rs. 50,000 per year, if the loan is availed from a financial institution.
- Section 80EEA: Deduction on the interest paid on home loan up to Rs. 1.5 lakh per year, if the loan is availed for affordable housing.
- Section 80EEB: Deduction on the interest paid on loan for electric vehicle up to Rs. 1.5 lakh per year.
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Loan and Insurance – Deepti Bhagtani & Associates
Section 80C provides deduction in respect of various items like life insurance premium, investment in Public Provident Fund, investment in NSC, repayment of principal component of housing loan, investment in Post Office Time Deposit Scheme, Senior Citizens Saving Scheme, etc. We will focus on the provisions of section 80C relating to deduction on account of payment of life insurance premium.
Apart from several other items provided under section 80C, a taxpayer, being an individual or a Hindu Undivided Family (HUF), can claim deduction under section 80C in respect of premium on life insurance policy paid by him/it during the year
Different Types of Life Insurance Policies in India
Term insurance
Term insurance with return of premium
Unit Linked Insurance Plans
Endowment plans
Moneyback policy
Whole life insurance
Group life insurance
Child Insurance Plans
Retirement Plans
Research beyond the business plan
The aggregate amount of deductions under section 80C, section 80CCC and sub-section (1) of section 80CCD shall not, in any case, exceed one hundred and fifty thousand rupees.
- Up to Rs. 1.5 lakh on the amount paid as the repayment of the home loan principal.
- Up to Rs. 2 lakh on the interest paid on your house loan.
- Up to Rs. 50,000 if the assesse does not own any residential house on the date of sanction of loan.
- The home loan should have been taken for the purchase or construction of a new house.
Condition to claim the Deduction:-
- Individual/HUF
- No HRA to be received during the year
- Does not own any property
- All Owned Property to be declared as Deemed Let-out Property
Amount Eligible for Deduction Quantum of deduction shall be least of the following:-
- 5000 per month
- 25% of Adjusted Total Income*
- Actual rent less 10% of Adjusted Total Income*