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Income Tax Deductions & Exemptions under Sections 80C, 80D & 80DDB for FY 2023-24 & 2024-25

Income tax deductions and exemptions for FY 2023-24 include benefits under Sections 80C for investments, 80D for health insurance premiums, and 80DDB for medical treatment expenses.

  • 646,907 Views | Updated on: Apr 16, 2024

Sections 80C, 80D, and 80DDB of the Income Tax Act provide taxpayers with avenues to save on taxes while simultaneously promoting investments in crucial areas such as insurance, healthcare, and financial instruments.

Tax-saving investment options like PPF, EPF, and others are commonly used, and they give you tax exemption under section 80C. Similarly, other such sections can help you save taxes, but you might not have heard of them.

What are Tax Deductions?

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. These deductions are allowed by the government to encourage individuals to save and invest, purchase insurance policies, and contribute to specific funds and schemes.

Various Types of Tax Deductions in India

Understanding the nuances of tax deductions is crucial for taxpayers to make informed decisions about their financial choices and ensure compliance with tax regulations. This knowledge empowers individuals and businesses to explore legitimate ways to maximize tax benefits while contributing to the nation’s economic growth.

  • Income Tax Deduction under Section 80C
  • 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)

  • Income Tax Deduction under section 80CCD
  • 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 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.

  • Income Tax Deduction under Section 80DD
  • An amount of ₹75,000 may be claimed as a deduction for spending on medical treatments of dependents with a 40% disability. This limit is ₹1,25,000 in case of severe disability.

  • Income Tax Deduction under Section 80DDB
  • Deduction for Medical Expenditure on Self or Dependent Relative:

    • Deduction for Medical Expenditure for individuals and HUFs below age 60
    • Income Tax Deduction under Section 80DDB, a deduction of up to ₹40,000 is available to an individual or a HUF below 60 years of age. It is for any expenses towards treating specified critical ailments for self and dependents.
    • Deduction for Medical Expenditure for senior citizens and super senior citizens
    • Previously, for FY 2017-18, the limit was ₹60,000 for senior citizens and ₹80,000 for super senior citizens. It has been changed to ₹1,00,000 for all senior citizens, including super senior citizens.

  • Income Tax Deduction under Section 80CCG
  • 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.

  • Income Tax Deduction under Section 80EE
  • 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.

  • Income Tax Deduction under Section 80EEA
  • Section 80EEA allows a deduction for interest payments up to ₹15,00,000. This deduction is over and above the deduction of ₹2,00,000 available under section 24. An individual should not own any house on the date of a loan sanction to claim this deduction.

  • Income Tax Deduction under Section 80GG
  • The deduction amount for this section is ₹60,000 per annum, and the section 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 of 10% of the adjusted total income deducted from the rent paid

  • Income Tax Deduction under Section 80U
  • This section allows a deduction for individuals who are physically and mentally challenged.

  • Income Tax Deduction under Section 80D
  • Section 80D provides deductions on health insurance premiums paid by individuals and HUFs (Hindu Undivided Families). The eligible deduction amount varies based on the age of the insured and the number of family members covered under the policy. Additionally, deductions for preventive health check-ups are also available.

  • Income Tax Deduction under Section 24(b)
  • Section 24(b) deals with deductions on the interest paid on home loans. For self-occupied properties, taxpayers can claim up to ₹2 lakhs per annum. In the case of let-out properties, there is no upper limit on claiming the interest paid on the home loan.

  • Income Tax Deduction under Section 80E
  • This section allows taxpayers to claim deductions on the interest paid for education loans. These loans must be taken for higher education, either for the taxpayer, spouse, children or for a student the taxpayer is the legal guardian of.

  • Income Tax Deduction under Section 10(14)
  • Section 10(14) offers deductions on various allowances received by salaried individuals, such as House Rent Allowance (HRA), conveyance allowance, and medical allowance.

  • Income Tax Deduction under Section 80G
  • 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.

  • Income Tax Deduction under Section 80TTA and 80TTB
  • 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.

    Income Tax Exemptions for Salaried Employees 2023-24

    Here is the income tax exemption list for 2023-24:

    1. House Rent Allowance

    2. Leave Travel Allowance (LTA)

    3. Food coupons

    4. Salary component

    5. Reimbursements

    6. Proof

    7. House rent allowance (HRA)

    8. Rent amount for residential housing

    9. Rent receipts, PAN of the employer (mandatory for rent > ₹1 Lakh annually)

    10. Leave travel allowance (LTA)

    11. Traveling costs within India, such as air and rail fare

    12. Air and train tickets, bus or cab receipts/bills

    13. Telephone reimbursement

    14. Landline, inclusive of broadband, mobile phone

    15. Telephone bills

    16. Books and periodicals

    17. Cost of books and periodicals

    18. Bills or invoices for the books and periodicals

Benefits of Tax Deductions

While tax deductions may seem complex and overwhelming, understanding their benefits can lead to more strategic financial planning and responsible decision-making.

Reduced Tax Liability

One of the most apparent benefits of tax deductions is that they help reduce an individual’s or business’s overall tax liability. By deducting eligible expenses and investments from their taxable income, taxpayers can lower the portion of their income that is subject to taxation. 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.

Encouragement of Charitable Contributions

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.

Stimulating Investment and Economic Growth

Tax deductions targeted at businesses can serve as 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 back into the economy, which can lead to job creation, innovation, and increased productivity.

Promoting Homeownership and Real Estate Investments

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.

Facilitating Education and Skill Development

Tax deductions can also be advantageous in the field of 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.

Tax Exemption vs. Tax Deduction

Now that you know what tax deduction is, it is time to shed light on the fundamental dissimilarities between tax exemption and tax deduction.

Aspect

Tax Exemption

Tax Deduction

Definition

Tax exemption is a total exclusion of income or transactions from taxable calculations.

Tax deduction allows a portion of eligible expenses to be subtracted from taxable income.

Applicability

Usually granted to specific entities, such as non-profit organizations or certain government bodies.

Available to individuals and businesses for qualifying expenses.

Types

Personal Exemption

Corporate Exemption

Standard Deduction

Itemized Deduction

Impact on Taxable Income

Directly reduces the total taxable income.

Indirectly reduces the taxable income after qualifying expenses are deducted.

Dependency on Income

Independent of income levels.

Deductible amount may vary depending on income, expenses, and filing status.

What is Tax Deducted at Source?

Tax Deducted at Source (TDS) is a mechanism employed by tax authorities to collect income tax directly from the source of income rather than waiting for taxpayers to pay their taxes at the end of the financial year. In this system, the person or entity making the payment deducts a certain percentage of the payment as tax before transferring the remaining amount to the payee. The deducted tax amount is then deposited with the government on behalf of the recipient.

The TDS system applies to various types of income, including salaries, interest on fixed deposits, rent, commission, professional fees, and various other payments. The tax laws of each country generally govern the provisions for TDS, and rates can vary depending on the nature of income and the overall tax structure.

Taxable and Non-taxable Components of Your Salary

Being knowledgeable about the taxable and non-taxable components of your salary allows you to optimize your tax planning and take advantage of legitimate tax-saving opportunities. By strategically structuring your salary package and availing the available tax exemptions, you can potentially maximize your take-home pay and save on taxes.

Understanding the nuances of each category will empower you to make well-informed financial decisions and manage your finances prudently while staying compliant with tax regulations.

Taxable Components

Basic Salary

The basic salary is the core component of your salary package and forms the foundation for various other allowances and benefits. It is fully taxable, and the income tax rate is applied to this amount based on the prevailing tax laws of your country.

House Rent Allowance (HRA)

HRA is given to employees who live in rented accommodation. The taxability of HRA depends on whether the employee is staying in a rented house, own house, or living with parents.

Conveyance Allowance

This allowance is given to meet expenses related to commuting between home and office. In some countries, a specific amount of conveyance allowance is exempted from tax.

Bonus

Bonuses received periodically or annually are also fully taxable unless a specific bonus is exempted under tax laws.

Non-Taxable Components

Provident Fund (PF) Contributions

The employer’s contribution to the Employee Provident Fund (EPF) is tax-exempt under most tax jurisdictions, subject to certain conditions. However, the interest earned on EPF is taxable if withdrawn before the completion of five years of continuous service.

Gratuity

Gratuity is a lump sum payment made by the employer to the employee upon retirement or resignation. It is partially or fully tax-exempt, depending on the country’s tax rules and the number of years of service completed.

Medical Allowance

Reimbursements for medical expenses incurred by the employee or their family may be tax-exempt up to a certain limit, as per the tax laws of the country.

Education Allowance

Certain countries provide tax exemptions for education allowances, helping employees manage the education expenses of their children.

For individuals (resident or non-resident) less than 60 years of age at any time during the previous year:

Old Tax Regime

New Tax Regime u/s 115BAC

Income Tax Slab

Income Tax Rate

Income Tax Slab

Income Tax Rate

Up to ₹2,50,000

Nil

Up to ₹2,50,000

Nil

₹2,50,001- ₹5,00,000

5% above ₹2,50,000

₹2,50,001- ₹5,00,000

5% above ₹2,50,000

₹5,00,001- ₹10,00,000

₹12,500 + 20% above ₹5,00,000

₹5,00,001- ₹7,50,000

₹12,500 + 10% above ₹5,00,000

Above ₹10,00,000

₹1,12,500 + 30% above ₹10,00,000

₹7,50,001- ₹10,00,000

₹ 37,500 + 15% above ₹ 7,50,000

₹10,00,001- ₹12,50,000

₹ 75,000 + 20% above ₹ 10,00,000

₹12,50,001- ₹15,00,000

₹1,25,000 + 25% above ₹ 12,50,000

Above ₹15,00,000

₹1,87,500 + 30% above ₹ 15,00,000

For individuals (resident or non-resident) 60 years or more but less than 80 years of age anytime during the previous year:

Old Tax Regime

New Tax Regime u/s 115BAC

Income Tax Slab

Income Tax Rate

Income Tax Slab

Income Tax Rate

Up to ₹ 3,00,000

Nil

Up to ₹2,50,000

Nil

₹3,00,001- ₹5,00,000

5% above ₹3,00,000

₹2,50,001- ₹ ,00,000

5% above ₹2,50,000

₹5,00,001- ₹10,00,000

₹10,000+20% above ₹5,00,000

₹5,00,001- ₹7,50,000

₹12,500 + 10% above ₹5,00,000

Above ₹10,00,000

₹1,10,000+30% above ₹10,00,000

₹7,50,001- ₹10,00,000

₹37,500 + 15% above ₹7,50,000

₹10,00,001- ₹12,50,000

₹75,000 + 20% above ₹10,00,000

₹12,50,001- ₹15,00,000

₹1,25,000 + 25% above ₹12,50,000

Above ₹15,00,000

₹1,87,500 + 30% above ₹15,00,000

For individuals (resident or non-resident) 80 years of age or more anytime during the previous year:

Old Tax Regime

New Tax Regime u/s 115BAC

Income Tax Slab

Income Tax Rate

Income Tax Slab

Income Tax Rate

Up to ₹5,00,000

Nil

Up to ₹2,50,000

Nil

₹5,00,001- ₹10,00,000

20% above ₹5,00,000

₹2,50,001- ₹5,00,000

5% above ₹2,50,000

Above ₹10,00,000

₹1,00,000+30% above ₹10,00,000

₹5,00,001- ₹7,50,000

₹ 12,500 + 10% above ₹5,00,000

₹7,50,001- ₹10,00,000

₹ 37,500 + 15% above ₹7,50,000

₹10,00,001- ₹12,50,000

₹75,000 + 20% above ₹10,00,000

₹12,50,001- ₹15,00,000

₹1,25,000 + 25% above ₹12,50,000

Above ₹15,00,000

₹1,87,500 + 30% above ₹15,00,000

Wrapping Up

It is advisable to plan the investment to avoid last-minute hassles. If you cannot invest in the right products, you will have to pay the entire tax, depending on your income. The above income tax deductions list will help you plan and achieve your financial goals.

Key takeaways

  • Salaried employees are eligible for a deduction. This deduction reduces the taxable income and, in turn, the overall tax liability.
  • The transport allowance and medical reimbursement components, which were previously tax-exempt, have been replaced with the new regime.
  • The tax exemption limit for employee contributions to the National Pension System (NPS) and Employee Provident Fund (EPF) has been increased.
  • Individuals buying a home for the first time may claim an additional deduction of ₹50,000 on the home loan interest paid.

FAQs


1

Can I claim the 80C deductions at the time of filing the income tax return in case I have not submitted proof to my employer?

No, you cannot claim deductions under Section 80C at the time of 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.



2

I have availed a loan from my employer to pursue higher education. Can I claim the interest paid on such a loan as a tax deduction under Section 80E?

Yes, you can claim the interest paid on a loan taken 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.



3

Is there any restriction or maximum limit up to which I can claim a tax deduction under Section 80E?

Yes, there is a restriction on the maximum amount you can claim as a tax deduction under Section 80E. The entire interest paid on the education loan is deductible without any upper limit. However, please note that the deduction is only applicable to the interest component of the loan and not the principal amount.



4

Can a company or firm reap the benefits of Section 80C?

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.



5

Can a company claim a deduction for donations made under Section 80G?

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 type of charitable organization and can be either 50% or 100% of the donated amount. However, it’s important to ensure that the charitable institution is registered under Section 80G to avail of this deduction.



6

Are the tax exemptions available under Section 80D available to corporates?

No, the tax exemptions available under Section 80D are not available to corporates. Section 80D provides deductions for medical insurance premiums paid by individual taxpayers for themselves, their spouses, children, and parents. It is a benefit exclusively for individual taxpayers and Hindu Undivided Families (HUFs) and does not apply to companies or firms.



7

What are the tax exemptions available under Section 80DD?

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% as certified by a competent medical authority.



8

Are bank recurring deposits eligible for tax deduction?

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.



9

Are all allowances taxable for salaried individuals?

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.

10

Can both earning members of a family claim tax deductions for a home loan taken as co-applicants?

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.

11

Can self-employed individuals claim the HRA benefit?

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, which is a prerequisite for claiming HRA deductions.

12

How can I save tax on an education loan?

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.

13

What are the examples of income tax exemptions?

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.

14

What are the examples of income tax deductions?

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.


- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
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Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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