Reducing Income Tax Liability for FY 2017-18 i.e AY 2018-19

Most of us are aware of deductions available to regular Income Tax Assessee's which include deductions under 80C for LIP,PF etc and Housing Rent allowance. However we miss out on two very good deductions that are available under Sec 80D and 80CCD(1).

Deductions U/s 80D are available for any premium paid for health insurance upto Rs 25000 for AY 2018-19 which can increase to Rs 50000 if your Parents health insurance is also paid by you. Thus net deduction that can be availed is Rs. 50000.

Deductions U/s 80CCD(1) are available against deposits made in the National Pension Scheme by you. Your employer already deposits money into your NPS Account which is already available to you as deduction U/s 80CCD(2). However you can make you own individual deposit into the National Pension Scheme of up to 10% of your Salary for which deduction shall be available above the existing limit of deduction of Rs 1.5lakh.

Both the above mentioned deductions are available above the regular deductions of Rs 1.5 lakhs, to understand better lets assume a simple salaried case.

Case 1(without 80D & 80CCD)
1.) Salary Rs 600000.00
Deductions U/s 80C Rs 150000.00
Total Taxable Income Rs 450000.00

Case 2(With 80D & 80CCD)
2.) Salary Rs 600000.00
Deductions U/s 80C Rs 150000.00
Deductions U/s 80D Rs 25000.00
Deductions U/s80CCD Rs 60000.00
Total Taxable Income Rs 365000.00

One may also include deductions on Housing Loan Interest and Education Loan Interest Paid if any as deductions under relevant heads.

Thus your Net tax liability would significantly decreased. So go ahead and purchase health insurance for you and your family and open an NPS account at the earliest to avail these to benefits.