Filing income tax returns (ITR) helps in documenting your income from various sources such as salary, business/profession, capital gains, rental income, and more. It ensures transparency and helps the tax authorities keep track of your income. By filing your ITR, you comply with the tax laws. It demonstrates your willingness to abide by the tax regulations and fulfil your civic responsibility as a taxpayer.
ITR filing is often required for various financial transactions such as applying for loans, obtaining visas, purchasing high-value assets, and more. Having a record of filed ITRs establishes your financial credibility and serves as proof of income.
It is not mandatory to claim deductions while filing your ITR. However, it is highly recommended to claim deductions if you are eligible for them. Deductions are specific expenses or investments allowed by the Income Tax Act that can be subtracted from your total income, thereby reducing your taxable income. Claiming deductions can significantly lower your tax liability and increase your tax savings.
Also Read: Income Tax FY 2022-23: Top Things You Should Keep In Mind While Filing ITR
There are various deductions available under different sections of the Income Tax Act, such as deductions for investments in specified financial instruments (e.g., Section 80C), deductions for medical insurance premiums (e.g., Section 80D), and more. It is important to carefully review the available deductions and claim those that apply to you, as it can result in substantial tax savings.
- Section 80C is one of the most popular and favourite sections amongst taxpayers. It allows a maximum deduction of Rs 1.5 lakh every year from the taxpayer’s total income. This deduction is available for investments made in a variety of schemes and products, including, Life insurance premiums, Public Provident Fund (PPF), Employees’ Provident Fund (EPF) and more.
- Standard Deduction: Section 16 i : Rs. 50,000 or the amount of salary, whichever is lower
- Section 80TTA – Interest on Savings Accounts: If you are an individual or a HUF, you may claim a deduction of a maximum Rs 10,000 against interest income from your savings account with a bank, co-operative society, or post office.
- Section 80D – Deduction on Medical Insurance Premium: Claim a deduction of Rs.25,000 under insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs 50,000. In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section is up to Rs.1 lakh. From FY 2015-16 a cumulative additional deduction of Rs. 5,000 is allowed for preventive health check.
- Section 80CCD (1B) Investments of up to Rs.50,000 in NPS.
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