Is there an additional tax benefit being offered?

Arnav Pandya

There are many tax benefits that are available for the individual but it has to be seen whether these are actually in addition to some existing benefit or whether this is a part of some other area. This small point can make all the difference as far as the tax saving process is concerned and hence it needs to be considered carefully. This will enable the individual to understand the exact position and then manage to extract some gains out of it all. Here are some cases which show how different the situations will be.

Mixture of sections

There is a benefit that is available for specified investments made under Section 80C and the total benefit should not exceed the figure of Rs 1 lakh. Further there are also benefits that are available for the contribution to a pension fund that is made in the form of a premium payment (Section 80CCC) and also for the contribution to the New Pension Scheme (Section 80CCD). This is an example where the individual will need to look beyond at another section to get an overall picture.  This section highlights one very important point that needs to be taken into consideration. The total of all these sections together should not exceed a figure of Rs 1 lakh.  This means that the individual has to keep in mind the fact that apart from the section limit there is something else in the form of a total for the three sections and this is not something extra so there is no additional benefit that is actually available when all the areas are put together. Often there is a lot of extra effort where the total investment crosses the Rs 1 lakh mark but the benefit stops at Rs 1 lakh.

Limit for the benefit

There are some other areas like saving of long term capital gains tax if there is further investment of the gains into specified bonds (Section 54EC) with a lock in of three years. There is a potential that the long term capital gains can be avoided if the necessary investment is made and hence this might seem to be an extra benefit available to them.  However there is another angle whereby there is a sub limit present in the form of the maximum investment that can actually be made during one financial year which stands at Rs 50 lakh and hence there is a limit that automatically comes into the picture. This could result in a situation where the gains may be much larger but the savings would only constitute a part of the gains. Such things also need to be taken into consideration and hence would act as a limit for this purpose. 

Extra benefit

Sometimes it is clear that there is no restriction present for these kinds of situations and hence there can be extra benefits that can be available if this is permitted by the required section. This is possible when it comes to the question of payment of medical insurance premium. Here there is a coverage or benefit that is available when there is premium paid for the individual, the spouse and dependent children and this will be Rs 15,000 or Rs 20,000 if the person is a senior citizen. Further if there is additional premium paid to cover parents then a further deduction of Rs 15,000 or Rs 20,000 (if they are senior citizens) as the case may be  would also be available. Often this aspect is missed out and this would mean that the individual is actually restricting the benefits that they are getting. Such benefits should be taken because medical insurance is something that everyone requires and any kind of wastage of opportunities has to be avoided.

Disclaimer: Views expressed in this article are entirely personal.
arnavpandya@hotmail.com