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Tax Deductions You MUST Know

The income tax department has established a number of deductions from taxable income under chapter VI-A in an effort to promote saving and investment among taxpayers. Here are all the tax deductions you must know.

  • 3,492 Views | Updated on: Mar 20, 2024

The income tax department has established a number of deductions from taxable income under chapter VI-A in an effort to promote saving and investment among taxpayers. Here are all the tax deductions you must know.

Additionally, there is a gamut of ways for tax saving as per the Income Tax Act of 1961. Thanks to these deductions, you can substantially reduce the amount of tax you have to pay, although it all depends on the kind of claims you make. In this article, we will talk about some of these exemptions and deductions.

What is a tax deduction?

A tax deduction is a reduction in the amount of taxable income that an individual or business must pay. Essentially, a tax deduction acts as a way for the government to incentivize certain behaviors or expenses, such as charitable donations or mortgage interest payments. By reducing the amount of taxable income, the government is offering a financial reward for making these types of investments. Tax deductions are an important part of the tax code. They can help individuals and businesses lower their tax bills, leaving more money in their pockets for other investments or expenses.

Income tax deduction under 80C

As per section 80C of the income tax act, you can claim a deduction amounting to almost ₹1.5 lakhs annually. It also depends on the kind of investments you have made - for example - provident funds, life insurance, super annuity, etc. Additionally, there are certain subsections under section 80C deduction, namely - 80CCC, 80 CCD, 80 CCF, and 80CCG.

Section 80CCC

This section allows you to claim ₹1.5 lakhs on pension schemes. It is applicable to individual taxpayers only.

Section 80CCD

As per section 80CCD, if you invest in pension schemes, you are eligible for tax benefits over and beyond the section 80C exemption, which is an additional tax deduction of up to ₹50,000.

Section 80CCF

This section is applicable to Hindu undivided families and individuals. As per section 80CCF, you are eligible for tax deductions in India if you have invested in long-term infrastructure bonds. Claims under this section do not go beyond ₹20,000.

Section 80CCG

Depending on your investments in equity schemes, you have to be eligible for the deduction under this section. A maximum of ₹25000 can be deducted under section 80CCG.

Income tax exemption under 80D

As per section 10D of the Income Tax Act, the individual can avail of tax deductions on the accrued bonus amount and the lump sum received on maturity/death benefit.

Section 80TTA

You may deduct up to ₹10,000 from your interest income from savings accounts with banks, cooperative societies, or post offices if you are an individual or HUF. Do not forget to subtract interest from the savings account from other income.

Fixed deposit, recurring deposit, and corporate bond interest income are not eligible for the section 80TTA deduction.

Section 80GG

Deduction for House Rent Paid in Case of Non-HRA

  • When HRA is not received, a Section 80GG deduction is possible for rent paid. The taxpayer should not possess a residence near their place of employment, nor should their spouse or small kid.
  • The taxpayer should not own any other self-occupied residential properties.
  • The taxpayer must pay rent and live in an apartment.

The following are the minimum deductions that are available:Rent paid less than 10% of total income (adjusted)

  • ₹5,000 monthly
  • 25% of the total adjusted income

From FY 2016–17 onwards, the monthly deduction amount has increased from ₹2,000 to ₹5,000.

Did you know?

In accordance with section 80CCE, the aggregate maximum deduction allowed under sections 80C, 80CCC, and 80CCD (1) are ₹150,000.

Section 80E

Individuals can deduct the interest paid on loans received to pursue higher education. This loan may have been taken on behalf of the taxpayer, their spouse, their children, or a student over whom they have legal custody.

The 80E deduction is available for a maximum of 8 years (starting in the year when interest repayment begins) or until all interest has been paid, whichever comes first. The amount that may be claimed is not constrained.

Section 80D

Section 80D allows you (as a person or HUF) to deduct ₹25,000 for insurance for yourself, your spouse, and your dependant children. You can also deduct an additional ₹25,000 from your parents’ insurance if they are under 60. This amount was increased from ₹30,000 to ₹50,000 for parents who are over 60 in the 2018 Budget.

If both the taxpayer and the taxpayer’s parent(s) are 60 years of age or older, the maximum deduction allowed by this clause is ₹1 lakh.

Section 80DD

A resident individual or a HUF can take advantage of the Section 80DD deduction on the following:

  • Costs associated with the medical care, education, and rehabilitation of a dependent person who is disabled.
  • Making a payment or deposit to a designated plan for a dependant relative with a disability.
  • A fixed deduction of ₹75,000 is made when a disability is 40% or higher but less than 80%.
  • Fixed deduction of ₹1,25,000 in cases of severe disability (disability of 80% or more).
  • A certificate of disability from a recognized medical authority is needed in order to claim this deduction.

Section 80DDB

  • Individuals and HUFs under the age of 60
  • A resident individual or a HUF is eligible for a deduction of up to ₹40,000. It can be used to cover any costs associated with the treatment of specific medical conditions for the owner or any of his dependents. Any HUF member can claim this deduction concerning medical expenses related to these specified illnesses.

  • For the elderly and extremely elderly
  • The individual or HUF taxpayer may claim a deduction of up to ₹1 lakh if the elderly person for whose benefit the costs were incurred. Up till FY 2017–18, a senior citizen and a super senior citizen may each claim a deduction of ₹60,000 and ₹80,000. Unlike before, this is now a standard deduction that is available to all senior citizens, including super senior citizens, up to ₹1 lakh.

    The amount of the deduction that the taxpayer may claim under this section shall be reduced by any reimbursement of medical expenditures by an insurance or employer.

  • For claims of reimbursement
  • Also, keep in mind that in order to claim such a deduction, you must have a prescription for such medical treatment from the relevant physician. Take a look at our in-depth article on Section 80DDB.

    Section 80U

    A resident with a physical impairment (including blindness) or mental retardation is eligible for a deduction of ₹75,000. One can be eligible for a deduction of ₹1,25,000 in cases of extreme disability.

    Section 80U deduction limits for FY 2015–16 were increased from ₹50,000 to ₹75,000 and from ₹1,000,000 to ₹1,25,000.

    Conclusion

    To put things simply, no matter how much you earn, you can save a significant amount on your taxes by planning your investments in a streamlined and strategic manner. With the above-mentioned deductions, there are endless possibilities that you can explore to bring down your tax payments. So, double-check your provisions, know your facts, and make the most of your tax deduction benefits!

    Key takeaways

    Tax deductions you must know are:

    • Income Tax exemption under 80C
    • SECTION 80CCC
    • Section 80CCD
    • Section 80CCF
    • Section 80CCG
    • Income tax exemption 80D
    • Section 80TTA
    • Section 80GG
    • Section 80E
    • Section 80D
    • Section 80DD
    • Section 80DDB
    • Section 80U

- 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
Reviewed By :
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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