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Income Tax Deductions

Income Tax Deductions are allowed by the Income Tax Act as an instrument for tax saving and reducing the liability to pay tax. Act provides a list of deductions.

Indian Income Tax Act, 1961 provides various income tax deductions. The income tax deductions can be reduced from the gross taxable income while filing the income tax return. These deductions help in tax saving and reducing the tax liability of a person. The income tax is imposed on the total income as per the income tax slab rates after claiming the income tax deductions.

The list of the income tax deductions is as under

Section 80C: Deduction, u/s 80C, is the most ordinary income tax deduction available for individuals and HUFs. One can claim deduction under this part by making an investment in some specified instruments like Provident Funds, National Saving Certificates, Life Insurance Policy, Mutual Funds, etc. The maximum limit for claiming deduction under Section 80C is Rs. 150000.

Section 80CCC: This deduction is available to Individuals for contributing to certain pension funds. The deduction is allowed for the amount paid as premium for annuity plan of any insurance company. The limit for this deduction is Rs. 150000 maximum.

Section 80CCD: The deduction is available for individuals contributing to the pension scheme of Central Government, i.e., depositing in a notified pension scheme. The limit u/s 80CCD for a salaried person is 10% of his salary. In other cases, the contribution is restricted to 10% of the total gross income.

Note: The maximum limit of Rs. 150000 is a cumulative limit for section 80C and section 80CCC for every Financial Year. Additionally, an amount of Rs. 50000 is allowed as a deduction over and above this limit of Rs. 150000, if invested in National Pension Scheme. Hence, it can be concluded that the maximum limit for the above three sections cumulatively is Rs. 200000.

Section 80CCG: A resident individual being a retail investor can claim a deduction for investments made in notified equity savings scheme. The total gross income of the individual must be less than or equal to Rs. 12lakhs for availing this exemption. The deduction is limited to lower of 50% of the amount invested in the scheme or Rs. 25000. The assessee can claim a deduction for three years consecutively starting with the assessment year in which acquisition took place.

Section 80DD: Any resident individual or HUF can claim a deduction for an amount spent on the medical treatment of a disabled dependent. It also includes rehabilitation expenses or amounts contributed in any scheme made for this. The person can claim a flat deduction of Rs. 75000. However, a person with a disability of 80% or more can claim a deduction of Rs. 125000.

Section 80D: Any individual or HUF is eligible for deduction u/s 80D for contributing toward medical health insurance and health check-up. The deduction can be claimed for himself along with spouse, children (dependent). A maximum of Rs. 25000 or Rs. 30000 (if an individual or its spouse is a senior citizen) can be claimed as a deduction.

Section 80DDB: Any amount contributed towards medical treatment of specified diseases by an individual or HUF is allowed as a deduction under this section. Individual also include dependent spouse, children, siblings or parents. The maximum amount is lower of the actual sum paid or Rs. 40000 minus the reimbursement of the insurance company. In the case of senior citizen the limit of Rs. 40000 is replaced by Rs. 60000 whereas, for super senior citizen it is amended by replacing Rs. 80000.

Section 80E: The interest on the loan is taken for higher education of an individual or its spouse or children, by the person from financial institutions is allowed for deduction. The deduction can be claimed for interest payment starting from the year of interest payment commencement and seven years immediately following it or until the full interest is paid, whichever is earlier.

Section 80G: All the assesses donating an amount in certain specified funds or charitable institutions or whatever named called, can claim deduction under this section. Firstly, qualifying amount is calculated and based on that category of deduction is identified. However, if any sum paid in cash is more than Rs. 10000, then no deduction is allowed.

Section 80GG: The individuals who don't receive house rent allowance can claim deduction for the rent paid, amount being least of the following:

  • 25% of the total income;
  • Rent paid minus 10% of the total income;
  • Rs. 2000 per month.

No deduction is allowed if any residential accommodation is owned in the city of work by the individual or his spouse or minor child or his HUF.

Section 80GGB: An Indian Company is allowed a deduction for the amount contributed otherwise to political parties, except if in cash.

Section 80GGC: Any person who contributes to the political parties is allowed deduction under this section for the actual amount provided (other than cash). The exception to this section is Government funded local authority and artificial juridical person.

Section 80TTA: Any individual or HUF receiving interest on the savings account deposits can claim a deduction for the amount received subject to a maximum of Rs. 10000. Interest earned on time deposits is excluded.

Section 80U: A resident individual is allowed a deduction if he is certified as disabling by the medical authority. A flat deduction of Rs. 75000 or Rs. 125000 (80% or more disability) can be claimed.