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ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Exploring income tax deductions empowers individuals to make informed financial decisions, minimizing tax burdens while maximizing savings potential.
It is necessary to understand the tax deduction on salary to maximize the savings on tax. While many are familiar with Section 80C, numerous other allowances can significantly reduce your tax liability. This extensive blog post takes you through various deductions available under the Income Tax Act in a simple manner and makes it easy to do tax planning.
Tax deductions are specific expenses or investments that reduce an individual’s taxable income, thus lowering the amount of income tax they are required to pay. The government allows these deductions to encourage individuals to save and invest, purchase insurance policies, and contribute to specific funds and schemes.
Investment instruments offer tax-saving opportunities under the provisions of the Income Tax Act of 1961. Every financial year, taxpayers can potentially reduce their taxable income by up to ₹1.5 lakh through deductions available under Section 80C.
Section 80C deductions apply to individuals and Hindu Undivided Families (HUFs), allowing them to claim a maximum deduction of ₹1.5 lakh from their total income. As per the latest budget reforms, individuals adhering to the old tax regime can continue to benefit from deductions amounting to ₹1.5 lakhs under Section 80C.
It Is important to note that these deduction rules do not apply if taxpayers have opted for the new tax regime.
Understanding the various deductions available under the Income Tax Act is essential for taxpayers to optimize their tax planning strategies effectively. Here is the list of income tax deductions available in India:
Section 80C is one of the most popular tax-saving provisions in India. Under this section, taxpayers can claim deductions up to ₹1.5 lakhs in a financial year. Some eligible investments and expenditures under Section 80C include:
a. Employee Provident Fund (EPF)
b. Public Provident Fund (PPF)
c. Equity-Linked Savings Scheme (ELSS)
d. National Savings Certificate (NSC)
Under Section 80CCC of the Income Tax Act, individuals can claim annual deductions of up to ₹1.5 lakh for contributions to designated pension plans offered by term life insurance companies. However, this deduction is subject to the overall limit specified under Section 80C of the Act.
This section includes the contribution to the Atal Pension Yojana. It allows a contribution of up to 10% of the total salary of salaried employees and 20% of the gross income of non-salaried employees to the government-notified pension schemes. The contribution can be deducted from the taxable income under Section 80 CCD (1). If the employer also contributes to the scheme, the entire contribution amount can be claimed as a tax deduction under Section 80CCD (2).
It is important to remember that the complete deduction under Section 80C, Section 80CCC, and Section 80CCD (1) cannot exceed ₹15,00,000 in aggregate. However, the additional tax deduction amounting to ₹50,000 under Section 80CCD (1B) is above this limit.
A deduction of ₹75,000 in income tax may be claimed for spending on medical treatments for dependents with a 40% disability. This limit is ₹1,25,000 in case of severe disability.
A deduction of ₹75,000 in income tax may be claimed for spending on medical treatments for dependents with a 40% disability. This limit is ₹1,25,000 in case of severe disability.
Deduction for Medical Expenditure on Self or Dependent Relative:
This section, which offered the tax benefits of the Rajiv Gandhi Equity Savings Scheme, has been withdrawn. Still, if an individual has claimed a deduction in the previous financial year, you are eligible to continue with the same for the next two financial years.
Individuals buying a home for the first time may claim an additional deduction of ₹50,000 on the home loan interest paid. This includes a clause that the loan should be sanctioned in or after FY 2016-17, and the loan amount should be less than ₹35,00,000. Furthermore, the house’s value should not exceed ₹50,00,000, and the individual should not own any other residential house under his name.
The Indian Income Tax Act provides a tax deduction of up to ₹1.5 lakhs per financial year for interest paid on home loans taken for purchasing or constructing an affordable house. This deduction is available under Section 80EEA of the Income Tax Act and is in addition to the existing tax benefits available under Section 80C and Section 24.
Section 80EEB of the Income Tax Act enables taxpayers to claim tax savings on interest paid for loans to purchase electric vehicles, up to ₹1.5 lakh. Eligibility criteria, including conditions related to the loan issuer and the electric vehicle, must be met to avail of the deduction.
The deduction amount for this section is ₹60,000 per annum, which applies to only those who neither own a residential house nor receive a House Rent Allowance. Therefore, the amount of deduction will be the least of the following:
25% of the total income ₹5,000 per month amounts to 10% of the adjusted total income deducted from the rent paid.
Section 80GGC allows individuals to claim tax deductions for donations made to political parties or electoral trusts. It promotes transparency in electoral funding, encourages financial support to the political system, and helps individuals reduce their tax liability by claiming deductions against such contributions.
This section allows a deduction for individuals who are physically and mentally challenged. Individuals with at least 40% disability (as certified by a medical authority) can claim a deduction of up to ₹75,000. Individuals with a severe disability (at least 80% disability) can claim a deduction of up to ₹1,25,000.
Section 80D provides deductions on health insurance premiums individuals and HUFs (Hindu Undivided Families) pay. The eligible deduction amount varies based on the insured’s age and the number of family members covered under the policy. Additionally, deductions for preventive health check-ups are available.
Section 24(b) deals with deductions on the interest paid on home loans. Taxpayers can claim up to ₹2 lakhs per annum for self-occupied properties. In the case of let-out properties, there is no upper limit on claiming the interest paid on the home loan.
This section allows taxpayers to claim deductions on the interest paid on education loans. These loans must be taken for higher education, either for the taxpayer, spouse, children or a student the taxpayer is the legal guardian of.
Section 10(14) offers deductions on various allowances salaried individuals receive, such as House Rent Allowance (HRA), conveyance allowance, and medical allowance.
Donations made to specified funds and charitable institutions are eligible for deductions under Section 80G. The deduction varies from 50% to 100% of the donated amount, depending on the nature of the recipient organization.
Under Section 80TTA, individuals can claim deductions of up to ₹10,000 on interest earned from savings accounts. For senior citizens, Section 80TTB provides deductions of up to ₹50,000 on interest earned from savings accounts, fixed deposits, and recurring deposits.
Section 80RRB of the Income Tax Act allows individuals to claim deductions for royalty payments received. Royalty is compensation received for the use of intellectual property like books, art, or inventions. The deduction is either Rs. 3 lakh or the royalty received, whichever is lower.
Under Section 80QQB of the Income Tax Act, royalties earned from specific publications like journals, newspapers, or textbooks are ineligible for deductions. Additionally, any royalty income from abroad must be repatriated within a specified time frame to qualify for deductions. Authors can claim deductions under Section 80QQB, wherein they can avail the lower of Rs. 3 lakh or the actual royalty received as an income tax deduction.
While tax deductions may seem complex and overwhelming, understanding their benefits can lead to more strategic financial planning and responsible decision-making.
One of the most apparent benefits of tax deductions is that they help reduce an individual’s or business’s overall tax liability. Taxpayers can lower the portion of their income subject to taxation by deducting eligible expenses and investments from their taxable income. This results in more money staying in the hands of individuals and businesses, enabling them to reinvest in their ventures, purchase goods and services, or save for the future.
Tax deductions play a significant role in encouraging charitable giving. Many governments offer tax deductions to individuals who donate to registered charities or non-profit organizations. By providing this incentive, governments hope to promote philanthropy and support the vital work carried out by charitable entities. Not only does this benefit society as a whole, but it also allows individuals to contribute to causes they are passionate about while simultaneously reducing their tax burden.
Tax deductions targeted at businesses can be powerful tools for stimulating investment and economic growth. Governments often grant deductions for capital expenditures, research and development, and other business-related expenses. By doing so, they encourage businesses to reinvest their earnings into the economy, leading to job creation, innovation, and increased productivity.
Many countries offer tax deductions related to homeownership and real estate investments. Deductions for mortgage interest, property taxes, and certain home improvements aim to make homeownership more accessible and affordable. These incentives can motivate individuals to invest in real estate, fostering a stable housing market and supporting the construction industry. Moreover, homeownership often builds equity for individuals, helping them build wealth over time.
Tax deductions can also be advantageous in education and skill development. Various governments provide tax breaks for expenses related to higher education, including tuition fees and interest on student loans. Additionally, certain professional development expenses may be deductible for individuals seeking to enhance their skills and expertise. Tax deductions contribute to a more skilled and competitive workforce in the country by encouraging investment in education and continuous learning.
Here is the income tax exemption list for 2023-24:
It is advisable to plan the investment to avoid last-minute hassles. If you cannot invest in the right products, you must pay the entire tax, depending on your income. The above income tax deductions list will help you plan and achieve your financial goals.
1
Income tax deductions list, such as those under Sections 80C, 80D, 80G, and 80E, offer various benefits. Examples include deductions for investments like PPF and ELSS, medical insurance premiums, charitable donations, and interest on education loans. These options from the income tax deductions list reduce taxable income, lowering tax liabilities for individuals and businesses.
2
No, you cannot claim deductions under Section 80C when filing your income tax return if you have not submitted the necessary proof of investments or expenses to your employer. To avail of the deductions, you must provide the relevant proof to your employer during the income tax declaration submission period, usually at the beginning of the financial year. Your employer will consider these proofs and adjust your TDS (Tax Deducted at Source) accordingly.
3
Yes, you can claim the interest paid on a loan from your employer for pursuing higher education as a tax deduction under Section 80E. This deduction is available for a maximum of 8 years or until the interest is fully repaid, whichever is earlier. However, please note that this deduction is only applicable for loans taken for the individual’s own education or for the education of their spouse, children, or a student for whom they are a legal guardian.
4
Yes, under Section 80E, there is a restriction on the maximum amount you can claim as a tax deduction. However, the entire interest paid on the education loan is deductible without any upper limit. Please note that the deduction only applies to the loan’s interest component, not the principal amount.
5
No, Section 80C deductions are not available to companies or firms. Section 80C provides tax-saving benefits on various investments and expenses for individual taxpayers only. Some of the eligible deductions under Section 80C include investments in Public Provident Fund (PPF), Employee Provident Fund (EPF), Equity-Linked Saving Scheme (ELSS), National Savings Certificate (NSC), and payment of life insurance premiums, among others.
6
Yes, companies can claim a deduction for donations made to eligible charitable institutions under Section 80G of the Income Tax Act. The deduction amount varies based on the charitable organization type and can be 50% or 100% of the donated amount. However, it is important to ensure that the charitable institution is registered under Section 80G to avail of this deduction.
7
No, the tax exemptions available under Section 80D are not available to corporations. Section 80D provides deductions for medical insurance premiums paid by individual taxpayers for themselves, their spouses, children, and parents. It benefits individual taxpayers and Hindu Undivided Families (HUFs) and does not apply to companies or firms.
8
Section 80DD provides tax exemptions to individual taxpayers and HUFs who incur expenses for the maintenance, medical treatment, and rehabilitation of a dependent with a disability. The deduction amount is up to ₹75,000 and can go up to ₹1,25,000 in case of severe disabilities. The disability must be at least 40% certified by a competent medical authority.
9
No, bank recurring deposits (RDs) are not eligible for tax deduction under Section 80C. The only term deposits that qualify for tax deduction under Section 80C are Fixed Deposits (FDs) with a minimum lock-in period of 5 years in a scheduled bank.
10
No, all allowances are not taxable for salaried individuals. Some allowances are fully taxable, while others are partially or fully exempt from tax. For example, the House Rent Allowance (HRA) can be partially exempt if certain conditions are met. Similarly, the Leave Travel Allowance (LTA) and certain allowances for specific purposes may also be exempted up to prescribed limits.
11
Yes, both earning members of a family who are co-applicants of a home loan can claim tax deductions individually. Each co-applicant can claim deductions on the principal amount under Section 80C and on the interest paid under Section 24(b) of the Income Tax Act, subject to specified limits.
12
No, the House Rent Allowance (HRA) benefit is available only to salaried individuals and not to self-employed individuals. Self-employed individuals cannot claim HRA as they do not receive a fixed salary from an employer, a prerequisite for claiming HRA deductions.
13
You can save tax on an education loan by claiming deductions on the interest paid under Section 80E of the Income Tax Act. Ensure that the loan is taken for higher education for yourself, your spouse, children, or a student for whom you are a legal guardian. There is no upper limit on the deduction, and you can claim it for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.
14
Examples of income tax exemptions include the House Rent Allowance (HRA) received by salaried individuals, Leave Travel Allowance (LTA), certain agricultural income, interest earned on tax-saving bonds, income from dividends on certain mutual funds, and exemptions provided for certain allowances for specific purposes.
15
Examples of income tax deductions include deductions under Section 80C for investments in PPF, EPF, ELSS, NSC, and payment of life insurance premiums, deductions under Section 80D for medical insurance premiums, deductions under Section 80G for donations to charitable institutions, and deductions under Section 80E for interest paid on education loans, among others.
16
In India, the total income tax deduction allowed depends on various factors such as investments, expenses, and contributions made during the financial year. Common deductions include those under Section 80C (up to ₹1.5 lakhs), Section 80D (health insurance premiums), Section 80E (education loan interest), and others. Taxpayers can avail of deductions based on their eligibility and compliance with the Income Tax Act.
17
Deduction from salary in income tax refers to the amount subtracted from an individual’s gross salary to arrive at the taxable income. This deduction includes components like provident fund contributions, professional tax, standard deduction (if applicable), and any other eligible allowance or exemption in income tax as per the Income Tax Act.
18
The standard deduction for income tax, set at ₹50,000, applies for the assessment year 2023-24. This fixed amount, deducted from gross salary to calculate taxable income, remains consistent under the old and new tax regimes.
19
First, determine the taxable income by subtracting allowable deductions (such as standard deduction, HRA exemption, etc.) from the gross salary to calculate tax on salary. Then, apply the applicable income tax slab rates to the taxable income to calculate the total tax liability. Finally, deduct any applicable rebates and claim tax credits to arrive at the final tax payable amount.
20
Taxpayers can claim various deductions on tax based on investments, expenses, and contributions made during the financial year. Common deductions include those under Section 80C (for investments like PPF, ELSS, etc.), Section 80D (for health insurance premiums), Section 80E (for education loan interest), Section 80G (for donations to charitable institutions), and more. It is essential to review the eligibility criteria and compliance requirements outlined in the Income Tax Act to claim deductions accurately.
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.