Tax rebates available to you

With taxation anguish already upon you with the financial year about to end in a month, check out what income tax rebates are available to you.

1) Section 88 of the Income Tax Act, 1961:

Section 88 of the Income Tax Act allows tax rebate from the amount of tax payable in respect of sums paid or deposited towards the life insurance premium, contribution to provident fund, etc. up to a specified limit of Rs 70,000 which stands enhanced to Rs 100,000 in respect of investments in certain specified equity shares, debentures or units of mutual fund.

The amount of rebate available is as under:

Individual having salary income not exceeding Rs 100,000 and which is not less than 90 per cent of his gross total income will be eligible for a higher tax rebate of 30 per cent.

Who is eligible:

Only individuals and Hindu Undivided Families can claim this rebate.

The Finance Bill 2004 proposes to include within the aforesaid limit of Rs 70,000 payments made as tuition fees, at the time of admission or thereafter to any university, college, school or any other educational institution in India for the purpose of full time education for any two children up to Rs 12,000 per child.

The Finance Bill 2004 also proposes that any premium or other payment made for an insurance policy other than a contract for a deferred annuity, in excess of 20 per cent of the actual capital sum assured will not qualify for rebate.

An individual resident in India whose age is above 65 years (Senior citizen) is entitled to an additional rebate @ 100 per cent of the tax payable subject to a maximum limit of Rs 15,000 under section 88B.

The Finance Bill 2004 proposes to increase the monetary limit of rebate for senior citizens under section 88B from Rs 15,000 to Rs 20,000. This rebate is allowed before allowing any rebate under section 88 as stated above and can be availed of by a senior citizen without investing in any of the specified schemes.

A woman assessee resident in India below the age of 65 years is entitled to an additional rebate @ 100 per cent of the tax payable subject to a limit of Rs 5,000 under section 88C.

This rebate is allowed before allowing any rebate under section 88 as stated above and can be availed of by her without investing in any of the specified schemes.

Note: Restriction on Total Rebate under section 88, 88B and 88C:

The total amount of tax rebate allowable under section 88, 88B and 88C should not exceed the tax payable by the assessee. Thus an assessee cannot claim any refund of tax by claiming rebate under the said sections.

2) Section 80L of the Income Tax Act, 1961:

This section entitles an assessee a deduction in respect of income earned by him by way of dividends from any Indian company, dividend income received in respect of units of a mutual fund specified under clause (23D) of Section 10, interest on bank deposits and specified securities.

Who is eligible:

Only individuals and Hindu Undivided Families can claim this deduction.

Incomes eligible for the deduction:

• Interest on NSC VIII Issue.
• Dividend from any Indian company.
• Dividend income in respect of units of a mutual fund specified under section 10 (23D).
• Interest on Post Office Time Deposits, Post Office Recurring Deposits, National Savings Scheme.
• Interest on deposits with a bank.
• Interest on deposits with housing boards.
• Interest on deposits with IDBI.
• Interest on notified debentures of any public sector company.
• Interest on deposits with a public company formed with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.
• Interest on deposits with a financial corporation which is engaged in providing long term finance for industrial development in India.
• Provident Fund, Superannuation Fund, Recognised Provident Fund
• Public Provident Fund

The maximum deduction available under this section is Rs 12,000. An additional deduction of Rs 3,000 exclusively for central/state government securities is allowed.

This article forms a part of Money Simplified -- Asset Allocation for Tax Saving Instruments, a free-to-download online guide from Personalfn. To download the entire guide, click here.