Income Tax Deductions
Income is not only generated by salary, but you may be earning an income from several other sources. The various sources of income can be income from house property, capital gains, and income from business or profession. This will also include income from other resources like residual income, income from savings, family pensions, or gifts received.
As responsible citizens of the country, we all need to pay our taxes on the incomes we have earned in a financial year. These taxes are charged as per the prescribed tax slabs in the country if the taxpayer falls in the income category of those taxes. Regular taxpayers always lookout for ways to bring down the taxable income to pay fewer taxes within the prescribed norms.
The Income Tax department has provided the facility of claiming deductions and exemptions on your income. This can significantly reduce taxes if appropriately utilized. Deductions can reduce your Gross Income. Thus, these deductions are the amounts that the Income Tax Department allows you to reduce the income that helps you to bring down your tax liability.
Sum of all Income heads = Gross Income
Gross Income – Deductions = Taxable Income
What are Income Tax Deductions?
A Tax deduction, in simple terms, is a claim made to reduce the taxable income, that arises from various investments and expenses incurred by a taxpayer. Income tax deductions tend to reduce your overall tax liability. You can understand it as a kind of tax benefit which helps you save tax.
The purpose of income tax deductions is to bring about a reduction in the taxable income. This, in turn, decreases the amount of tax you need to pay to the government. A myriad of tax deductions is available to all sections and classes of taxpayers, whether lower, middle or high-income groups.
Various sections and their sub-sections of the Indian Income Tax Act deal with tax-saving investments and remedies. The most significant channel for tax-saving is section 80C of the Indian Income Tax Act. Under Section 80C, you can invest an amount in specified instruments or expenses, up to a maximum of Rs 1.5 Lakh in a financial year. This can reduce your total gross income (GTI) by the same amount.
Various sections of the Indian Income Tax Act treat different incomes differently, so the tax deduction varies in amount for everyone. An additional deduction of 1.5 Lakh for interest on a home loan is provided for the purchase of affordable houses. This limit is, however, fixed to a maximum of INR 45 Lakh applicable till March 2020 as of now.
Why should you Choose Income Tax Deductions?
The following are the reasons to choose Income Tax Deductions:
- A Standard deduction is that part of your gross income that is not taxable and can be used to reduce your tax bill
- Income Tax deductions or Standard deductions are the easiest way to reduce taxes as they are already calculated and set, and the amount to be claimed under these deductions is pre-determined
- Tax deductions when utilized efficiently, lower down the taxable income to a great extent and, subsequently lower your taxes on it as well
- Deductions are allowed under Section 80 of the Indian Income Tax Act through Section 80C to Section 80U. Many expenses that we take care of in our daily lives can be utilized for claiming tax deductions on our income. These expenses on activities like medical expenses, education expenses, retirement plans, insurance schemes, and contributions to charity
- Several Income Tax deductions set by government authorities are used to encourage taxpayers to participate in community service programs for the welfare of society. Taxpayers, who are aware of eligible income tax deductions, can greatly benefit through both tax deduction and service-oriented activities annually
Types of Income Tax Deductions
For Income tax purposes, the first gross total income is calculated by adding income from all sources. Deductions, tax breaks, and other allowances that are tax-exempted (LTA, HRA, etc.) that you can claim are subtracted from this figure of your Gross total income. The net result is taxable income. This resulting taxable income figure level decides whether you can avail of the 100% tax rebate given in the corresponding slab.
Sections 80 C to 80 U of the Indian Income Tax Act 1961, deal with the various income tax deductions that can be applied on your income to reduce the taxable income. Section 80C of Chapter VIA is the most popular one with several quoted deductions. Chapter VIA has other popular deductions under subsections 80D, 80E, 80G, 80DDB, and so on. You can avail of deductions only if you have invested in tax-saving or other eligible expenses. It is advisable to plan your financial goals well in advance and work on them throughout the year, rather than making last-minute investments to save taxes.
Income Tax Deductions under Section 80C and 80D
|Sections||Available Deduction Limit|
|80C||Up to INR 1.5 Lakh|
|80D||INR 25,000 to INR 50,000|
|Section 80EE||INR 50,000|
- A standard deduction of INR 50,000 is available for all salaried individuals
- Income tax deduction limit INR 1.5 lakhs is set under section 80C
Some of the important Income Tax deductions under chapter VIA that a taxpayer can claim are as follows:
Section 80C Deductions
Income Tax Section 80C has been the most popular Section for deductions since its introduction in April 2006. This is the most important section that deals with income tax deductions for every taxpayer. This section provides provisions on the number of expenses. Eligible taxpayers shall claim deductions on payments mentioned in the section for a maximum amount INR 1.5 lakhs annually, i.e., you can reduce your total taxable income by up to Rs 150,000 from these deductions. Income tax deductions under Sec 80C apply to both individuals and HUFs as a taxpayer
You can claim any of the 80 C subheads for deductions in income tax while filing your Income Tax Return. The IT Department will refund the excess money to your bank account.
EPF, PPF, NPS, term insurance, etc. can be claimed in Section 80C. Below is the complete list:
- Public Provident Fund or PPF
- National Savings Certificate or NSC
- National Pension Scheme or NPS
- Employees’ Provident Fund or EPF
- Tuition fees
- Equity Linked Saving Schemes or ELSS
- Post Office 5-year Tax Saving deposits
- Bank deposits
- Life Insurance Premium
- Sukanya Samriddhi Account Deposit Scheme
- Principal re-payment of home loan
- Post Office Senior Citizens Savings Scheme or SCSS
This section includes the following investments and expenses. You can compare options to find the best one for you:
Investment in Public Provident Fund or PPF
You are eligible for a tax deduction for the investment made in the PPF account. You can invest a maximum INR 1.5 Lakh annually in your PPF account, and you have the benefits of receiving tax-free receipts or payouts on withdrawal or maturity.
Investment in NSC or National Savings Certificate
National Savings Certificate is also eligible for deductions provided you apply for deductions in the year the schemes are purchased. Under Section 80 C interest on such certificates is eligible for tax deductions annually, but becomes taxable at the time of maturity.
Investment in Fixed Deposit (FDs)
Interest earned on fixed deposits with tenure five years and above is eligible for income tax deductions under Section 80C. For senior citizens, tax-exempted interest income on bank deposits is now INR 50,000 in contrast to the previous INR 10,000. Also, now TDS will not be deducted under section 194A. This has been applied to all Fixed Deposit and Recurring Deposit schemes as well.
Bank Savings Account
If you have a bank savings account, you can claim an Income tax deduction under Section 80TTA for interest earned on it. The deduction is a maximum of INR 10,000. However, the income earned will be first added under the head of Income from other sources, during the computation of taxable income. The deduction can be claimed after that.
Life Insurance Policy Premiums
You can claim a deduction under section 80C for the premium paid for a life insurance policy as per the Indian income tax act.
Contribution to EPF or Employee Provident Fund
Under this section, you are eligible for a tax deduction for the contribution made to your Employee Provident Fund. The Government will contribute 12% of EPF contribution for new employees in all segments. This applies to employees with less than 3 years of employment. The new women employees, with less than 3 years of employment, now only need to contribute 8% of salary as EPF. This has been a reduction in the earlier 12% contribution.
Equity oriented Mutual Funds or ELSS
Under subsection 80CCG, income tax deductions are available for the investment made under an Equity saving scheme. If you have made investments in listed shares or mutual funds, you can claim tax deductions. However, the maximum deduction allowed is INR 25,000.
Repayment of Principal on Housing Loan
If you have a home loan and are paying the principal amount, you can claim a tax deduction on it under Sec 80C of the IT Act.
Under Section 80C, you can claim a tax deduction for the tuition fees paid for two children for each individual. Thus, if a family has 2 working parents, they can claim a deduction for 2 children each i.e., for up to a maximum of 4 children of the same family.
Sukanya Samriddhi Account
Sukanya Samriddhi Account is a saving scheme targeted at the parents of girl children, backed by the Government of India. Under section 80C of the IT Act, 1961, the scheme has been granted triple exempt benefits i.e., there will be no tax on the invested amount, interest amount, and amount is withdrawn.
Post Office Tax Saving Deposits
The investments done in Post office Savings Deposits under the 5 years qualifies for the benefit of Section 80C of the Indian Income Tax Act, 1961.
Investment in National Pension Scheme or NPS
If you have invested in the NPS, a maximum limit of deduction of INR 1.5 lakh can be claimed under section 80C/80CCC/ 80CCD of the Indian Income Tax Act. Under Section 80CCD, for NPS subscribers, extra tax benefits are available for Tier 1 account holders. They get additional income tax deductions for investment below INR 50, 000 in NPS. This deduction is above and more than the regular deduction of INR 1.5 lakh available under Section 80C.
Under the NPS, if you have contributed to any pension scheme backed by the Central Government, then you are eligible for a tax deduction under section 80CCD. You can invest an additional amount of a minimum of INR 50,000 to your NPS Tier I account. You can claim a tax deduction on the same, up to a maximum of INR 50,000. NPS allows you this additional tax deduction under section 80CCD (1B).
Post Office Senior Citizens Savings Scheme or SCSS
You can claim a tax deduction under Section 80CCC and 80CCD for the contribution made to Pension Funds. If you have contributed any amount in any insurance scheme to receive a pension, then you can apply for a tax deduction under Section 80CCC. Senior citizens, who are 60 years or above, can invest in this scheme to earn regular interest income. Currently, the maximum that can be invested in this scheme by any individual is INR 15 Lakh.
Section 80 D Deductions
Section 80 of the Indian Income Tax Act, 1961 allows for Income tax deductions concerning medical insurance policies and money spent on maintaining your health. It becomes of great significance in your tax planning and personal finance. If you have medical insurance for yourself or members of your family, you are eligible to claim tax deductions under Section 80D for the payment of insurance premiums.
Here are the various types of Income Tax deductions on health insurance premiums that are covered under Section 80 D:
A premium on Health Insurance for Self/Family
If you have a health insurance policy and are paying premiums for yourself and/or family members, you are eligible to available a maximum deduction of Rs 25,000 per annum.
A premium on Health Insurance for Senior Citizens
Senior citizens can personally claim a deduction of Rs 50,000 under Section 80 D.
A premium on Health Insurance for parents
If you are paying the health insurance premium for a health insurance policy for your parents, you are eligible to claim a tax deduction of Rs 25,000 annually on such insurance premiums.
A premium on Health Insurance for Senior citizen Parents
The amount of deduction is INR 50,000 if your parents are senior citizens.
Health Check-up Expenses
If you incur expenses for health check-ups for yourself, parents, kids, and other members of your family, you can get certain deductions under Section 80D. The maximum amount of deduction in such cases will be Rs 5000 for the health check-ups of all the members of your family.
Deductions for Non-Residents
Even Non-Resident Indians are eligible to claim deduction under Section 80 D. For any premiums paid for themselves/members of the family, the limit is Rs 25,000, and it is Rs 25,000 for policies for parents.
Exclusions applicable for Income Tax deductions under Section 80D
- The tax benefit is only available for health insurance policy purchased for your parents. Tax deductions cannot be claimed for premiums paid for a policy for your in-laws
- If you are paying the premium in cash, you are not eligible to claim the deduction
- You cannot claim tax deductions if your children are financially independent
- If you are an employee and your company takes care of your group health insurance premium, you cannot claim that tax deduction
- If you are paying the health insurance premium towards a brother, sister, grandparents, aunts, uncles, or any other relative, the same cannot be claimed as a deduction for Section 80 D
Limit of deductions under Section 80 D of Income Tax Act
The following table covers the limit for deductions that can be claimed by you under Section 80D.
Deductions available Self Below 60 Years and Parents Below 60 Years Self Below 60 Years and Parents Above 60 Years Self Above 60 Years and Parents Above 60 Years Deduction for self, spouse and dependent children INR 25,000 INR 25,000 INR 50,000 Deduction for parents INR 25,000 INR 50,000 INR 50,000 Maximum Deduction available INR 75,000 INR 75,000 INR 100,000
Other deductions under Section 80 D
Section 80DD – Disabled Dependent
This section provides for Income Tax deductions for the rehabilitation if you have a disabled dependent relative. This applies to a resident individual or a HUF.
This deduction is available on the following expenses:
- Expenditure incurred on medical treatment, like nursing, training, and rehabilitation of disabled dependent relative
- Any payment or expenses made to a specified scheme for the maintenance of your disabled dependent relative. Here, the amount of deduction is determined by the extent of disability in the dependent relative
- If the disability is 40% or more but less than 80% – You can claim a fixed deduction of Rs 75,000
- If the disability is severe i.e., disability is 80% or more – You can claim a fixed deduction of Rs 1,25,000
You need to provide a certificate of disability from the prescribed medical authority in charge of your disabled dependent relative to claim this deduction.
Section 80DDB – Medical Expenditure on Self/Dependent Relative
Deductions for Individuals and Hindu Undivided Families below age 60
A deduction up to Rs 40,000 is available to a resident individual/a HUF under this subsection. This is applicable for any expense towards the treatment of specified medical diseases/ailments for individual or any of his dependents.
For Senior Citizens and Very Senior Citizens
In case you are claiming deductions for an individual who is a senior citizen, you or HUF taxpayer can claim a deduction up to Rs 1 Lakh.
Note: If you are claiming this deduction, any reimbursement of medical expenses by your insurer or employer (if any) shall be reduced from the total deductions available
To claim such deduction, you also need to provide a prescription for any medical treatment
Tax Deductions under Section 80E
Interest on Educational Loan
Section 80 E of the Indian Income Tax Act 1961 deals specifically with educational loans. This section provides some relief to taxpayers who incur high education expenses and have availed of education loans for meeting such expenses.
- If you have taken an education loan on behalf of your spouse, children, adopted children, or a student for whom you are the legal guardian, you are eligible for a tax deduction under Section 80E
- You cannot avail of the Income Tax deductions under Section 80 E, if the interest payment is for a loan is taken for higher education for a relative or an employer
- The principal repayment on loan is not available for deductions. It is the interest on the loan amount that is available for deductions. There is no limit on the amount of interest that can be claimed as a deduction
- The loan should have been taken for yourself/ your children/spouse/an individual for whom you are a legal guardian
- The deduction under this section is allowed only if the education loan is taken for higher studies, i.e., after completing SSE or the Senior Secondary Examination. It includes the vocational/regular courses in India or abroad/ post-graduate courses in medicine, management, engineering, applied science, etc. as well
- This deduction is applicable only for individuals, and not for a HUF, company, or firm
- The tax deduction on the interest component of the loan can be availed only for 8 years. You are not eligible to claim income tax deductions on loan beyond 8 years
Other Deductions under Section 80E
Section 80EE – Deductions on Interest on Home Loan
Income Tax Deductions on Home Loan Interest for Home Owners (First Time)
The deduction under section 80EE is available only to home-owners, which are individuals with only one house property on the date the home loan is sanctioned. The value of the property must be below Rs 50 lakh, and the home loan must not be more than Rs 35 lakh. The loan must be taken from a financial institution, and not from some relative or person.
As an added benefit, there is an additional deduction of Rs 50,000 available on your home loan interest on top of the deduction of Rs 2 lakh (on the interest component of home loan EMI). This is available under Section 24.
80EE Deduction Features
- Eligibility criteria-The deduction under Section 80 EE is available only to individuals. You cannot claim any benefit under this section if you are a HUF, a company, or any other kind of taxpayer
- Amount limit-This deduction, up to INR 50,000, is over the Rs 2 lakh limit, which is prescribed under Section 24 of the Indian Income Tax Act
- The individual should take the loan between 1st April 2016 and 31st March 2017
- Also, to be eligible to claim this deduction, you should not own any other house property on the date of loan sanction from a financial institution only
- This Section does not specify if you need to be an Indian Resident to be able to claim this benefit. Therefore, both Resident and Non-Resident Indians can claim this deduction
- Borrowers living in rented houses can also claim this deduction, as this Section does not specify if the house should be self-occupied to claim the deduction
Section 80 EE and Section 24
- Under Section 24 of the Indian Income Tax Act, 1961, a discount can be declared for interest on a home loan up to INR 2,00,000
- This discount can only be claimed if the home-owner or his/ her family members live in the house property. The claim will not be applicable if the house is on rent
An individual taxpayer can compare options and take benefits from both the sections if he meets the requirements of both the segments under Section 80 EE and Section 24.
In such a case, the person will first need to exhaust the limit under Section 24 i.e., INR 200,000, and then declare the additional component under section 80 EE.
- A new section 80EEA has been introduced by the Union Budget 2019 to extend the tax benefits of the interest deduction on a home loan up to Rs 1,50,000
- This housing loan should be taken for affordable housing during the period 1 April 2019 to 31 March 2020
- It is applicable for the individual taxpayer, and not HUFs, companies, or firms
- He should be a first-home buyer and should not be entitled to deduction under section 80EE
Deductions under Section 80G
Section 80G of the Indian Income Tax Act lists the possible income tax deductions on donations made to specific funds or charitable organizations. Many taxpayers donate to charity, and it is a noble gesture to help society. To promote charity, the Government has laid down the provisions of Section 80 G, where a taxpayer's maximum 10% of Adjusted Gross Total Income can be allowed for tax deductions. This section provides a 50% exemption from paying tax on donations made to funds or organizations that are listed by the act.
Features of Deductions under Section 80G
- Contributions by the taxpayer should be made to specific relief funds and charitable institutions
- All donations DO NOT qualify for deductions under section 80G. Only donations made to prescribed funds can qualify for a deduction
- Income tax deductions can be claimed by any taxpayer, whether individuals, company, firm, AOP, or any other person
- The contribution should have been made via a cheque /draft or cash. Contributions made in kind do not qualify for deductions
- From Financial Year 2017-18 onwards, if any donation more than INR 2000 is made in cash, then it will not be allowed as a deduction
There are a large number of relief funds and charitable institutions listed under Section 80 G, where donations are eligible for a 100% deduction without any qualifying limit. Some of them are:
Donations eligible for 100% income tax deductions without qualifying limit
- Central Government’s National Defence Fund
- Prime Minister’s National Relief Fund
- An approved university/educational institution of National eminence
- State Govt. Fund for medical relief to poor
- National Illness Assistance Fund
- National Blood Transfusion Council
- Any State Blood Transfusion Council
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children’s Fund
- Lieutenant Governor’s Fund for State or Union Territory
- CM’s Relief Fund
- The Army Central Welfare Fund
- Air Force Central Welfare Fund,
- National Foundation for Communal Harmony
- Swachh Bharat Kosh (from FY 2014-15)
- Clean Ganga Fund (from FY 2014-15)
- National Fund for Control of Drug Abuse (from FY 2015-16)
Donations eligible for 50% income tax deductions without qualifying limit
- Prime Minister’s Drought Relief Fund
- Jawaharlal Nehru Memorial Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
A taxpayer can also make donations to funds listed under Section 80 G, which are eligible for 100% deduction /50% deductions, subject to a qualifying limit not exceeding 10% of adjusted gross total income. Various NGOs and Government organizations working on philanthropic activities come under this section.
Deductions under Section 80GGA
- Section 80GGA also allows deductions for donations, but these donations should be made towards scientific research or rural development
- This deduction is allowed to all taxpayers except those who have an income from a business and/or a profession
- Any donations can be made in the form of a cheque/ draft or cash
- Cash donations, which are more than Rs 10,000, will not be considered for deductions
- 100% of the amount that is donated or contributed will be considered eligible for deductions
Here is a list of prescribed donations that are eligible for Income tax deductions under Section 80GGA:
- Any sum paid to a research association involved in scientific research
- Sum paid to a college, university or any other institution to be used for scientific
- Sum paid to a research association/college/University involved in research in social science or statistical research
- Sum paid to an approved association/ institution that undertakes rural development programs and is approved under section 35CCA
- Sum paid to an approved association/ institution which undertakes personnel training for implementing rural development
- The sum paid to a public company/local authority / approved association /institution, which carries out projects and/or schemes, approved under section 35AC
- Sum paid to Rural Development Fund/Afforestation Fund
- Sum paid to National Poverty Eradication Fund
Note: If the taxpayer has claimed a deduction under Section 80GGA, such expenses will not be deductible under any other provision of the Indian Income Tax Act.
Deductions under Section 80GGB
- Any Indian company or enterprise that donates to a political party / electoral trust registered in India can claim a deduction for the amount contributed
- If the donation is made to a political party, it must be registered under Section 29A of the Representation of the People Act, 1951
- If the donation is made to an electoral trust, it should be a non-profit company created under Section 8 of the Companies Act, 2013
- Contributions or donations to political parties must be made through Cheque, Demand Draft or Electronic Transfer. Cash payments are not accepted
- The company donating must disclose the amount contributed, and the name of the political party in its Profit and Loss account for that financial year
- Any advertisement from a company on a platform owned by a political party (social media, magazines, newspapers) would be considered as a contribution under Section 80 GGB and will be eligible for an income tax deduction
- A Public Sector Enterprise or a recently formed company with an age of three years or less cannot make such contributions and claim deductions under Sec 80GGB
As a taxpayer, you can make any number of donations to political parties as per your choice and claim deductions in your income tax. However, you must keep a proper record of the amount being paid and comply with all the regulations specified in the Indian Income Tax Act, 1961. If the set procedure is not followed, the IT department can reject your claim for deduction under Section 80GGB.
Deductions under Section 80GGC
- The deduction under Section 80GGC can be claimed by an individual assessee who can be any person
- The deduction should not be claimed by companies/ local authorities/firms and an artificial juridical person that is wholly/partly funded by Government
- If the individual makes any donations or contributions to a political party or an electoral trust, he will be eligible for deduction under Section 80GGC
- The political party mentioned above should be registered under Section 29A of the Representation of the People Act, 1951
- If the donation is made to any other political party, it will not qualify as a deduction under Section 80GGC
- Under Section 80GGC, the whole amount or 100% amount of contribution or donation will be available as a deduction
- The individual should donate to the political party or electoral trust via online net banking/demand draft/cheque/debit card, etc.
- If the individual makes any contribution/donations through cash to the concerned political party, it will not be eligible for deduction under Section 80 GGC
- Donations made in kind, like medicines, goods, etc., will also not qualify for deductions under Section 80GGC
- An individual can make donations to multiple political parties and can still claim a 100% deduction under Section 80 GGC
Deductions under Section 80 QQB
Section 80QQB of the Indian Income Tax Act, 1961, is a facility introduced for providing tax-incentives to Indian authors. As per this section, the taxpayers can claim deductions on tax on royalties earned by selling books.
- This is only applicable for Indian authors (residents), and only they can claim tax deduction under Section 80QQB
- Here, the sale of books does not include the sale of diaries, commentaries, brochures, guides, magazines, journals, magazines, pamphlets, and school textbooks; or any other similar publication of similar nature
- The author’s income here includes any income earned by an author through his profession that can be earned as a lump sum for the assignment or grant
- It can also be an income that is received as an advance payment of royalties (non-refundable) or copyright fees
- If the author makes an income outside India, the deduction under section 80QQB will be available only on the income which is brought back to India within 6 months, and convertible in foreign exchange
- The maximum deduction permitted under section 80QQB is either the total amount of royalty income; or Rs 3 Lakh, whichever is lower
Deductions under Section 80 RRB
Section 80 RRB of the Indian Income Tax Act allows provisions of income tax deductions for those individuals whose source of income is royalty on their works of art, inventions, patents, etc. A patent is a right that is given to the creator of the invention on his creation for a specific period. This Section provides tax deductions to these patent holders under the given provisions.
Features of deductions under Section80RRB
- A patent is an intellectual property that ensures that the patent holders’ rights are protected after an idea or product is developed
- Inventors or patent holders can give third parties the right to use their ideas. They do so in exchange for a royalty on their income earned by such parties
- To claim deductions under Section 80RRB, the individual should be an Indian Resident
- Only patent holders can claim this tax deduction
- The patent should be registered under the Patent Act of 1970, either on/after April 1, 2003
- Individuals who do not have the original patent are not eligible for tax benefits
- Individuals can claim deductions up to Rs 3 lakh on royalty income, provided they are the original patent holders
- If the patent holder makes an income outside India, the deduction under section 80RRB will be available only on the income which is brought back to India within 6 months, and convertible in foreign exchange
- Patent holders, who are claiming deductions under Section 80RRB, should be able to furnish proper proofs; otherwise, their deductions can get cancelled
Deductions under Section 80 TTA
- Section 80TTA provides a maximum deduction of Rs 10,000 on income earned from interest, available to an Individual and HUF. If your interest income is less than Rs 10,000, your deduction under Sec 80TTA will be the entire interest income. If your interest income is more than Rs 10,000, your deduction shall be a maximum Rs 10,000
- This deduction is allowed on interest income earned from a savings account with a bank/ a co-operative society carrying on the banking business/ post office
- This deduction is NOT allowed on interest earned on fixed time deposits or recurring deposits
- The banking company should include banks referred to in Section 51
- The co-operative society should include a co-operative land mortgage bank/land development bank
- Any interest income earned from the savings account held by the firm or Association of Persons (AOP) or Body of Individual (BOI), cannot be claimed for deductions under section 80TTA
Deductions under Section 80 TTB
- The section 80 TTB is an extension to the provisions of Section 80TTA concerning Senior Citizens. The provision of deduction under section 80TTB was introduced in Budget 2018. It provides a deduction on interest earned on deposits to senior citizens.
- Deduction under section 80TTB is available only to a senior citizen, i.e., to an individual, who is resident in India, and who is 60 years and above in age
- This deduction is allowed on interest income earned from a savings account with a bank/a co-operative society carrying on the banking business/ post office
- This deduction applies to interests that are earned on all kinds of bank deposits-fixed time deposits or recurring deposits or savings bank deposits
- The banking company should include banks referred to in Section 51
- The co-operative society should include a co-operative land mortgage bank/land development bank.
- Any interest income earned from the savings account held by the firm or Association of Persons (AOP) or Body of Individual (BOI), cannot be claimed for deductions under section 80TTA
- The maximum amount of deduction available under section 80TTB is either the whole of the interest income; or INR 50,000, whichever is lower
The following table will make the difference between Section 80TTA and Section 80TTB clear.
|Section 80TTA||Section 80TTB|
|An individual and a Hindu Undivided Family (other than senior citizens) can claim deduction u/s 80TTA.||Only a senior citizen can claim deduction u/s 80TTB.|
|Interest income earned on a savings account; does not include interests on fixed deposits or recurring deposits.||Income on interests earned on deposits of all types of, i.e., interest earned on a savings account, fixed, or recurring deposits.|
|The maximum deduction can be Rs.10,000||The maximum deduction can be Rs.50,000|
Deductions under Section 80 U
This section allows tax benefits in the form of certain deduction to individuals who are physically and/or mentally challenged.
- These deductions are allowed if the assessee or his family members have some kind of disability
- The individual claiming the deduction under Section 80U should be a resident Indian individual who has been certified as a person with a disability by the medical authority i.e., he should have least 40% disability, as certified by the medical authorities
- Disability, here, can be Blindness/ Low vision/Leprosy-cured/ Hearing impairment/locomotor disability/ Mental retardation or mental illness
- The section also provides tax relief in case of severe disability of the assessee where he is 80% or more disabled. Severe impairment includes multiple disabilities, autism and cerebral palsy, etc.
- A maximum deduction of INR 75,000 is allowed for people with disabilities
- For people with severe disabilities, INR 1,25,000 is the maximum deduction allowed for such people under Section 80U
- Any individual claiming under this section must submit the medical certificate indicating the disability along with the income tax returns as per Section 139
Documents Required to apply for Income Tax Deductions
You do not need to send or attach any documents or receipts with your Income Tax Return, whether you file the return manually or online on the portal. However, the following documents need to be handy when you are claiming deductions when filing your Income Tax Returns to provide the right information.
- Form-16 for TDS
- Salary slips for salaried individuals
- Interest certificates from banks and post office or bank account passbooks
- Form-16A/Form-16B/Form-16C for TDS on incomes other than salaries
- Form 26AS or consolidated tax statement
- Tax-saving investment proofs like documents for EPF, PPF, investments in ELSS schemes of mutual funds, Life insurance premium documents, NPS certificate, etc. to claim deductions. Documentary proofs to claim deductions under section 80D to 80U
- Home loan statement from bank/NBFC
- Capital gains statements
- For deduction under Section 80G, the following details have to be submitted in your Income Tax Return-Name/ Address/ PAN of the Donee and the amount of Contribution, along with a duly stamped receipt
- Form-58 to claim a 100% deduction on a donation, without which their donation will not be eligible for a 100% deduction
- For 80QQB deductions, it is mandatory to furnish a certificate in Form No. 10H. The assessee claiming the deduction is compulsorily required to furnish a certificate in Form No. 10CCD. Such a certificate in Form No. 10CCD should be verified by whoever is responsible for the payment of the income
- For 80RRB deductions, the assessee is mandatorily required to furnish a certificate in Form No. 10H
- For Section 80U deduction claims, you need to furnish a certificate certifying the disability from a recognized medical authority in Form 10-IA. There is no need to produce bills for disability treatment costs or such other expenses
These are the various significant income tax deductions covered by the Indian Income Tax Act, 1961. They are the lifeline of a responsible taxpayer. The main purpose of tax deductions is to reduce the taxable income, thereby decreasing the tax amount you paid to the government. There are several ways to use deductions to reduce your taxable income. As a responsible taxpayer, you need to compare options and know about them efficiently to make use of them appropriately and take advantage of them. Deductions tend to lower down your income tax liabilities by a specified amount by spending money in particular avenues. You get a chance to invest in various schemes and participate in programs carrying societal benefits as well.
Ans: TDS or Tax Deduction at Source is a system of deduction of tax at the point of generation of income. The tax is deducted by the payer at the origin of the income under this system and is remitted to the Government on behalf of the payee. Generally, interest, salary, commission, professional fees, brokerage, contract payments, royalty, etc. have the provisions of deduction of tax at source.
Ans: You can ask the payer to furnish you with a TDS certificate showing the amount of tax deducted by him. You can also take information from your Form 26AS, which you can find from your e-filing account. Just log in with your credentials and use the “View Your Tax Credit” facility available at the portal.
Ans: Yes, such winnings are subjected to a flat rate of tax at 30% without any basic exemption limit. In such a case, the payer of prize money will generally deduct the tax at source (i.e., TDS) from the winnings. You will get the balance amount after TDS.
Ans: Yes, if you have taken the loan is taken for purchase, construction, repair, renewal or reconstruction of the house, you can claim the interest paid on loan for deduction by calculating house property income. However, if the loan is taken for personal or other purposes, then the interest on such a loan cannot be claimed as a deduction.
Ans: The amount received on account of arrears of rent, which has not been charged to tax earlier, will be charged to tax after deducting a sum equal to 30% of such arrears It is charged to tax in the year in which it is received, whether or not the taxpayer owns the property in the year of rent receipt.
Ans: If the sum of money is received without consideration, and the aggregate value of such sum of money received during the year exceeds INR 50,000, the monetary gifts received by the members of the HUF will be taxable. However, under certain circumstances, monetary gifts will not be charged to tax, if the same is received:
- From any relative /HUF from its members; or
- On account of the marriage of the individual; or
- By way of inheritance or due to a will; or
- Due to the death of the payer/donor or
- As a contribution from any fund, foundation, university, other educational institution, hospital or other medical institution,
- From a trust or institution registered under Section 12AA, etc.
Ans: Yes, premiums paid towards life insurance policies are eligible for tax benefits under Section 80C up to a maximum limit of INR 1,50,000. The taxpayer can claim these deductions for premiums paid for insuring self, dependent children, spouse, and members of the HUF.
A maximum annual premium of 20% of the assured sum is tax-deductible if the insurance is issued on/before March 31, 2012.
A maximum annual premium of 10% of the assured sum is deductible for policies issued either on/after April 1, 2012. Any maturity benefits or death benefits from a Life Insurance policy are tax-exempt under Section 10(10D) of the Indian Income Tax Act.
Ans: Any amount that goes into repayment of the principal on a home loan is eligible for deduction under Section 80C of the Indian Income Tax Act, 1961. Also, the construction of the property should be complete if you wish to claim this tax benefit. If also, no tax benefits will be awarded if you transfer the property within 5 years from the possession year. The amount claimed as a deduction in previously will be taxable in the year in which the transfer of property is made.
Ans: There are several income tax deductions allowed for a salaried individual under Section 80C, 80CCC, 80CC1, 80D, 80E, 80EE, etc. Some important one's are-HRA Exemption, LTA, Standard deduction, Medical insurance deduction, interest on a home loan, a deduction for a loan for higher education, deduction on relocation allowance, and deductions on various tax saver plans discussed under Sections 80C AND 80D. The salaried individual can make use of these deductions to lower his tax liability.
Ans: You can avail tax deduction under Section 80D of the Indian Income Tax Act by a medical insurance policy that covers any expenses made for preventive health check-ups. You can avail deductions up to a maximum of INR 5,000 for the expenses that you have incurred for preventive health check-ups. This includes check-up costs for self, children, spouse, or parents.
Ans: Yes, you can avail of the benefit of both of 80D and 80DDB deduction. But for 80DDB, you have to keep proof of prescription made my doctor handy. Only the amount which is not received by the insurance company is eligible to deduction under section 80DDB.