Tax deductions help you save your tax liabilities. Deductions can be claimed on certain expenses like investments made in government schemes, fees for education, charitable contributions, insurance schemes, retirement plans, etc. The government of India has provided such deductions to inculcate the habit of saving and investing in the individual and institutional tax payers. Most of these tax saving provisions are covered from section 80C to section 80U of the Income Tax Act 1961.
Tax deductions under section 80C allow you to claim a deduction of maximum Rs 1.5 lakhs. This amount is a combination of deductions available under Section 80C, 80CCC, 80CCD(1). These deductions are available for individuals and Hindu Undivided Families. Investments eligible under this section 80C are
[ Read: Deductions under Section 80C ]
Section 80CCC provides deductions for contributions in certain pension schemes. Only individuals are eligible under this section. It works in concurrence with section 80C and 80CCD(1) so that the maximum deduction amount available under all the three sections is Rs 1.5 Lakhs.
Section 80CCD provides deductions for investment in pension schemes notified by the Central Government. The schemes are divided into three parts 80CCD(1), 80CCD(1B) and 80CCD(2).
Section 80CCD(1) applies to all the employees who voluntarily make contributions to NPS. The deduction is restricted to maximum 10% of the Salary (Basic + DA)
Section 80CCD(1B) Under this section all the employees who are voluntarily contributing to NPS can claim additional deduction up to Rs 50,000 subject to 10% of salary (Basic+DA). But if any deduction is allowed under section 80CCD(1), then no deduction will be allowable under this section for the same contribution.
Section 80CCD(2) applies to all the employees whose employer contributes to employees’ NPS account. The deduction is again restricted to maximum 10% of the Salary (Basic + DA). The schemes eligible are National Pension Scheme and Atal Pension Yojana.
Section 80CCF was available for Individuals and Hindu Undivided Family and provides tax deductions on subscription of long-term infrastructure bonds notified by the government. Maximum deduction under this section is Rs 20,000. This benefit has been discontinued From A.Y. 2013-14
This section provides a deduction for expenses incurred towards medical insurance, preventive health checkup, and other medical expenses. The maximum amount available under section 80D is Rs 1,00,000 (according to union budget 2018). The deduction is available for the taxpayer, spouse, dependent children, parent (dependent or independent).
Section 80DD provides a deduction for medical expenses are taken on to take care a differently abled family member dependent on the tax payer. The deduction amount varies with the severity of the disabled member. Disabilities like Blindness, Low Vision, Leprosy-cured, Mental Retardation, Autism, Cerebral Palsy, etc. The permitted deduction is Rs 75,000 under normal disability and Rs 1,25,000 under severe disability.
Section 80DDB is available for treatment of certain specified diseases with a limited amount of Rs 40,000, Rs 1,00,000, if the person treated, is a senior citizen.
If a tax payer has taken a loan for pursuing higher education of self or sponsoring the education of his or her child / ward then section 80E provides a deduction on the interest repayments of the loan. Loans that are taken from approved charitable organisations and financial institutions only are eligible under this section. The deduction can be claimed maxim for 8 years. The benefit can be availed only by individuals.
Individuals can avail section 80EE deduction for the interest repayments of a loan taken to buy a residential house property for the first time, i.e. the tax payer is a first-time home buyer. This section allows you a deduction of up to Rs. 50,000 per year till the time loan is repaid subject to the satisfaction of certain conditions. Section 80EE along with section 80C can help you minimise your tax liabilities.
Section 80G provides a deduction on contributions made towards an approved charitable institution. Mode of donation plays a role in deciding the deduction limit. The donations specified in section 80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in section 80G. For claiming the deduction three documents are required such as stamped receipt, the photocopy of the 80G certificate. The adjusted gross total income is to be calculated on which the qualifying limit is calculated at 10%.
Section 80GG is a provision which allows a deduction on the rent paid by an individual who is not receiving HRA from his employer in any form or who is a self-employed person. Documents like the rent receipt, rent agreement, form 10BA, and the landlord’s PAN details in case the rent paid annually is more than 1 lakh. Amount of deduction is lower of the following
Section 80GGA provides a deduction of 100% on the contributions made to scientific research or rural development only when the contributor is an individual without any profits or gains from business and profession. Individuals with income from business and professions can claim the same under section 35. Contributions are to be made in the form of cash, cheque or draft. However, cash donations made more than Rs 10,000 are not eligible.
Section 80GGB Here deductions are allowed to Indian companies on funds donated to political parties or an electoral trust qualifying for such deductions. Deductions can be claimed for amounts contributed in any way other than cash.
Section 80GGC is a deduction available for contributions made by individuals to political parties or electoral trust to the extent of 100% of the amount contributed. The individual should not be an artificial judicial person or a local authority.
Assessees can claim deductions on profit generated through industrial activities relating to telecommunication, power generation, industrial parks, SEZs, etc.
Section 80 IAB is for SEZ developers on profits made by them through the development of SEZs.
Section 80-IB Assessees who have earned profits from hotels, shops, multiplex theatres, cold storage plants, housing project, scientific research and development, etc. can claim this deduction.
Section 80-IC deduction is available for assessees who have earned profits from states qualified as special states. These include Assam, Meghalaya, Manipur, Himachal Pradesh, Mizoram, Arunachal Pradesh, Uttaranchal, Tripura and Nagaland.
Section 80-ID Assessees who have earned profits from hotels and convention centres provided their establishments located in certain specified areas, can claim deduction under this section.
Section 80-IE Assessees who have establishments in the North-East India area are eligible for this deduction.
Section 80 JJA provides deductions on profits and gains from businesses of processing/treating and collecting bio-degradable wastes to produce biological products like bio-fertilisers, bio-pesticides, biogas, etc. deduction can be claimed up to 100% of their profits for 5 successive years from the time their business started.
Section 80 JJAA Indian companies which have gained profits from the manufacture of goods in factories. Deduction up to 30% of the salary of new full-time employees can be claimed for 3 assessment years can be claimed. The Chartered Accountants should audit the accounts of these companies and produce a report reflecting the returns. Employees working on contract basis for a period less than 300 days in the preceding year or those working in managerial or administrative posts do not qualify.
[ Read: Deductions under Section 80J ]
This deduction can be availed by scheduled banks having offshore banking units in SEZs, entities of International Financial Services Centres and banks which have been established outside India. The deduction is available at 100% of income for first 5 years, 50% of income generated through such transactions for next 5 years.
Cooperative societies are eligible for this deduction up to 100% on their incomes from cottage industries, fishing, banking, the sale of agricultural harvest grown by members and milk supplied by milk members to cooperative societies. Those involved in other forms of business other than mentioned above are eligible for deduction ranging between Rs 50,000 and Rs 1,00,000 depending on the type of work they are involved in.
Resident Indian authors are eligible to claim deductions under section 80 QQB on royalty earned from the sale of books. The maximum limit being Rs 3 lakhs. The deduction can be claimed for royalty on literary, artistic and scientific books.
Deduction available for income earned by the way royalty for a patent registered on or after 01.04.2003 up to Rs 3 lakhs or income received whichever is less. The tax payer must produce a certificate in the prescribed form duly signed by the concerned authority.
[ Read: Deduction under Section 80RRB ]
Under section 80TTA offers a tax deduction on interest income earned from deposits held in savings accounts of some financial institutions. Individuals (less than 60 years) and HUFs are eligible for a deduction up to Rs 10,000 under this section. Saving accounts in banks or banking companies, post offices and co-operative societies involved in banking companies’ statements are required to be submitted.
Interest income of senior citizens up to Rs 50,000 on deposits with banks and post offices will be exempt, and no TDS will be calculated on such income under section 194A. The person claiming deduction under this section will not be allowed any deduction under section 80TTA.
An individual suffering from disabilities himself is eligible for tax deductions under section 80U. A person with disability meaning suffering from at least 40% of the disability is eligible for a deduction for Rs 75,000 and person with severe disability meaning suffering from at least 80% of the disability is eligible for Rs 1,25,000. A certain medical authority to certifies the level of disability in a person.
Hence, you can see that there are several tax deductions available for the taxpayers under various sections of the Income Tax Act mentioned above. If you plan your taxes carefully, you can easily maximise your tax savings. A good tax filing intermediary like H&R Block can also help you file your tax returns and save maximum amount of taxes legally.