“Unlock the secrets of Income Tax deductions! Explore commonly utilized deductions like Section 80C, 80D, and more. Understand eligibility criteria and maximize your rebates for efficient tax planning. Get insights into old and new tax regimes to make informed choices. Consult a tax professional or use reliable tax-filing software for accurate and efficient filing.”
Income tax filing is an essential task for all Indian citizens, whether they are salaried individuals or business owners. Each year, the finance minister outlines the dos and don’ts of claiming deductions and exemptions against taxable income. Individuals are always on the lookout for ways to save on taxes and maximize rebates. In this comprehensive guide, we will explore the various deductions available in the Income Tax Act and how taxpayers can utilize them to their advantage.
Understanding Income Tax Deductions: Income tax deductions are claimed at the time of filing the Income Tax Return. These deductions are subtracted from the gross total income to arrive at the total income liable to tax. Let’s delve into the most commonly utilized deductions and their eligibility criteria:
Most commonly utilized Income Tax deductions and their eligibility criteria
| Section | Nature of Deduction | Who can Claim | Maximum Deduction available |
| Section 80C | · Life insurance premium for policy
· Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary] · Contributions made under Employees’ Provident Fund Scheme/Public Provident Fund Account · Contribution by an employee to a recognised provident fund · Contribution by an employee to an approved superannuation fund · Subscription to any notified security or notified deposit scheme of the Central Government. For ex, Sukanya Samriddhi Account Scheme. · Subscription to notified savings certificates [National Savings Certificates (VIII Issue)] · Contribution for participation in unit-linked Insurance Plan of UTI · Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank · Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children · Certain payments for purchase/construction of residential house property · Sum paid towards notified annuity plan of LIC · Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI · Term deposits for a fixed period of not less than 5 years with a scheduled bank. · Subscription to notified bonds issued by the NABARD. · Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions) · 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 · Contribution to specified account of the pension scheme referred to in 80CCD, in case of central Government employee.
|
Individual/HUF |
Upto Rs. 1,50,000 |
| Section 80CCC | Investment in Pension Funds | ||
| Section 80CCD(1) | Contribution to pension scheme notified by Central Government up to 10% of salary | ||
| Section 80CCD(1B) | Additional Contribution to pension scheme notified by Central Government | Individual | Upto Rs. 50,000 |
| Section 80CCD(2) | Contribution made by employer under National Pension Scheme. | Individual | Amount contributed or 14% of Basic Salary +DA (If contribution made by Central/State Government): 10% of Basic + DA (in case of any other employee)
-whichever is lower |
| Section 80D | Medical Insurance Premium, preventive health checkup and Medical Expenditure | Individual/HUF | Individuals who are less than 60 years of age are eligible to claim up to Rs.25,000; while the senior citizens can claim up to Rs.50,000.
Preventive Health check up shall not exceed Rs. 5,000 |
| Section 80DD | Expenditure for medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability | Resident Individual/HUF | Rs. 75,000 for 40-80% disability, Rs. 1,25,000 in case of severe disability, more than 80% |
| Section 80DDB | Expenses actually paid for medical treatment of specified diseases and ailments | Resident Individual/HUF | Senior Citizens: Upto Rs 1,00,000 Others: Upto Rs 40,000 |
| Section 80E | Payment of interest on loan taken from financial institution/approved charitable institution for pursuing higher education (maximum period : 8 years) | Individual | No Limit. |
| Section 80EE | Interest payable on loan from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. | Individual | Maximum Rs. 50,000 |
| Section 80EEA | Interest payable on loan from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Not Eligible to Claim Deduction u/s 80EE) | Individual | Maximum Rs. 1,50,000 |
| Section 80EEB | Interest payable on loan from any financial institution for the purpose of purchase of an electric vehicle subject to certain condition. | Individual | Maximum Rs. 1,50,000 |
| Section 80G | Donations to certain approved funds, trusts, charitable institutions/donations for renovation or repairs of notified temples, etc. | All Assessee | 100% or 50% of the Donated amount or Qualifying limit, Donation allowed in cash upto Rs.2000/- |
| Section 80GG | Income Tax Deduction for House Rent Paid | Individuals not receiving any house rent allowance | Rent paid in excess of 10% of total income for furnished/unfurnished residential accommodation (subject to maximum of Rs. 5,000 p.m. or 25% of total income, whichever is lower) |
| Section 80GGA | Certain donations for scientific, social or statistical research or rural development programme or for carrying out an eligible project or scheme or National Urban Poverty Eradication Fund | All assessees not having any income chargeable under the head ‘Profits and gains of business or profession’ | 100% of the amount donated. Allowed donation in cash upto Rs.10,000/- |
| Section 80GGB | Sum contributed to any political party/electoral trust | Indian Company | 100% of the amount contributed No deduction available for the contribution made in cash |
| Section 80GGC | Sum contributed to any political party/electoral trust | All assessees, other than local authority and artificial juridical person wholly or partly funded by Government | 100% of the amount contributed. No deduction available for the contribution made in cash |
| Section 80QQB | Royalty income of author of certain specified category of books | Resident Individual – Author | Maximum Rs. 3,00,000 |
| Section 80RRB | Royalty on patents | Resident Individuals | Maximum Rs. 3,00,000 |
| Section 80TTA | Interest on deposits in savings bank accounts | Individuals/HUFs (except Senior Citizen) | Maximum Rs. 10,000 |
| Section 80TTB | Interest on deposit in saving account or fixed deposit | Senior Citizen | Maximum Rs. 50,000 |
| Section 80U | Disabled Individuals who are certified by the medical authority to be a person with disability | Resident Individuals |
Normal Disability: Rs. 75,000 Severe Disability: Rs. 1,25,000 |
Choosing between Old and New Tax Regimes: It’s important to note that the above deductions apply to the old tax regime. The new tax regime offers significantly limited tax benefits. Taxpayers should consider their deductible investments and choose the regime that suits them best. In case you have a lot of deductible investments, opting the old tax regime may be more suitable and in case you do not have much investments, opting a new tax regime with concessional tax rates shall be a good option to avail.
Conclusion: Understanding and utilizing income tax deductions can help individuals save taxes and maximize rebates. By carefully considering the various sections under which deductions can be claimed, taxpayers can effectively reduce their taxable income. It’s advisable to consult a tax professional or use reliable tax-filing software to ensure accurate filing and claim all eligible deductions.
I hope with the above, various tax saving investment decisions will be solved.
(The author can be reached at cashubhikhandelwal@gmail.com)
Author Bio
