A Handy Guide to Income Tax Limits and Exemptions

Income tax is a critical aspect of financial planning for individuals and businesses alike. Understanding the current income tax limits and exemptions can help you manage your finances more effectively, ensuring you take full advantage of the available deductions and benefits. In this comprehensive guide, we will explore the various income tax limits, exemptions, and how they can impact your financial planning. Additionally, we will discuss how home loans can be beneficial in optimising your tax liabilities.

What is income tax limit?

The income tax limit refers to the threshold of income up to which an individual is exempt from paying taxes. This limit varies based on the taxpayer's age, income bracket, and the applicable financial year. Understanding these limits is crucial for efficient tax planning and ensuring compliance with tax laws.

Current income tax limits

As of the latest financial year, the income tax limits for individuals are categorised based on age groups and income brackets. Here are the details:

For individuals below 60 years:

1. Income up to Rs. 2.5 lakh: No tax
2. Income from Rs. 2.5 lakh to Rs. 5 lakh: 5%
3. Income from Rs. 5 lakh to Rs. 10 lakh: 20%
4. Income above Rs. 10 lakh: 30%

For senior citizens (60 to 80 years):

1. Income up to Rs. 3 lakh: No tax
2. Income from Rs. 3 lakh to Rs. 5 lakh: 5%
3. Income from Rs. 5 lakh to Rs. 10 lakh: 20%
4. Income above Rs. 10 lakh: 30%

For super senior citizens (above 80 years)

1. Income up to Rs. 5 lakh: No tax
2. Income from Rs. 5 lakh to Rs. 10 lakh: 20%
3. Income above Rs. 10 lakh: 30%
   

Exemptions and deductions

Various exemptions and deductions are available under the Income Tax Act to reduce the taxable income, thereby lowering the tax liability. Here are some key exemptions and deductions:

Section 80C:

Under Section 80C, individuals can claim a deduction of up to Rs. 1.5 lakh on specified investments and expenses. These include:

1. Public Provident Fund (PPF)
2. Employees’ Provident Fund (EPF)
3. National Savings Certificate (NSC)
4. Life Insurance Premiums
5. Principal repayment on home loans
6. Equity Linked Savings Scheme (ELSS)
7. Tuition fees for children

Section 80D:

Section 80D allows deductions for premiums paid on health insurance policies. The limits are as follows:

1. Self, spouse, and children: Up to Rs. 25,000
2. Senior citizen parents: Up to Rs. 50,000

Section 24(b)

Interest paid on home loans is deductible under Section 24(b). For self-occupied properties, the maximum deduction is Rs. 2 lakh per annum. For let-out properties, there is no upper limit, but the total loss from house property that can be set off against other income is capped at Rs. 2 lakh.

Section 80E

Interest paid on education loans is deductible under Section 80E. There is no upper limit on the amount of interest that can be claimed, and the deduction is available for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.

Section 80TTA

Interest earned on savings accounts is deductible under Section 80TTA up to Rs. 10,000 per annum.

Section 80G

Donations to specified charitable institutions and relief funds qualify for deductions under Section 80G. The deduction can be 50% or 100% of the donation amount, depending on the institution and subject to certain limits.

Leveraging home loans to optimise tax liability

Home loans offer significant tax benefits under various sections of the Income Tax Act. By strategically using a home loan, you can reduce your taxable income and save on taxes. Here’s how:

1. Principal repayment under Section 80C: The principal repayment of a home loan qualifies for a deduction of up to Rs. 1.5 lakh under Section 80C. This is part of the overall limit, which includes other eligible investments and expenses.
2. Interest payment under Section 24(b): The interest paid on a home loan can be claimed as a deduction up to Rs. 2 lakh per annum for self-occupied properties. This benefit is available for each financial year, making home loans an attractive option for tax planning.
3. Additional deduction under Section 80EEA: First-time homebuyers can claim an additional deduction of up to Rs. 1.5 lakh on interest payments under Section 80EEA, provided certain conditions are met, including the value of the property and the loan amount.

Bajaj Housing Finance Home Loan

When considering a home loan, Bajaj Housing Finance Home Loan stands out as an excellent choice. Bajaj Housing Finance offers competitive interest rates, flexible repayment options, and a seamless application process, making it easier for you to own your dream home while enjoying substantial tax benefits.

Here are some of the benefits of opting for a Bajaj Housing Finance Home Loan:

1. Attractive interest rates: Bajaj Housing Finance offers some of the most competitive interest rates in the market, ensuring affordable EMIs.
2. Long repayment tenure: Choose from a variety of repayment tenures to suit your financial planning and cash flow.
3. Easy application process: The application process is straightforward and hassle-free, with minimal documentation required.
4. Quick disbursal: Bajaj Housing Finance ensures quick loan approval and disbursal, helping you realise your dream of home ownership without delay.
5. Tax Benefits: By opting for a home loan from Bajaj Housing Finance, you can avail tax benefits on both principal repayment and interest payment, significantly reducing your tax liability.

Apply for a Bajaj Housing Finance Home Loan today!