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6. Tax Deductions explained in detail

Do you know you can reduce your taxable income by 1.5 Lakh just by using section 80C as a deduction method. This is just one method out of 15 ways I will be talking about in this article. I promise you, after reading this article, your view on taxes will be completely different.

Before we go further, its better you know a few terms like taxable income, deductions, exemption to understand what I will be talking about in the below article. If not, you can read the article through the playlist All about tax.

Section 80C, 80CC, 80CCD(1) and 80CCD(2)

Section 80C is the most extensively used and popular one for saving income tax. The Indian government supports a few as the tax saving instruments (PPF, NPS etc.) to encourage us to save and invest towards our retirement. If the income of an individual is from capital gains alone, then Section 80C cannot be used for saving tax. To know more about what is capital gain income, checkout the video in the I button. You can get a maximum of 1.5 lakh deduction under this section. Some of the examples which are eligible under this Section are:

  • Life insurance premium

  • Equity Linked Savings Scheme (ELSS)

  • Employee Provident Fund (EPF)

  • Annuity/ Pension Schemes

  • Principal component on home loans

  • Tuition fees for children

  • Contribution to PPF Account

  • Sukanya Samriddhi Account

  • NSC (National Saving Certificate)

  • Tax saving Fixed Deposit

  • Post office time deposits

  • National Pension Scheme

Under Section 80CCD(1b), an Additional deduction of Rs 50,000 is allowed for amount deposited to NPS account or contribution towards Atal Pension Yojana. Icing on the cake.

Section 24 - Home loan

Another key tax saving tool is the interest paid on home loans. Homeowners have the option to claim up to Rs. 2 lakh as a deduction for interest on home loan for self-occupied property. If the house property is let out, you can claim a deduction for the entire interest for that home loan.

Section 80D- Medical Insurance

You can claim a deduction of Rs.25,000 on insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs 25,000, if they are aged less than 60 years. If the parents are aged above 60, the deduction amount is Rs 50,000.

Also, an additional deduction of Rs. 5,000 is allowed for preventive health check.

Section 80DD - Disabled Dependent

Under this section, deduction for Rehabilitation of Handicapped Dependent Relative is available for the following,

a. Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative

b. Payment or deposit to specified scheme for maintenance of handicapped dependent relative.

  1. Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.

  2. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000.

Keep in mind, to claim this deduction a certificate of disability is required from prescribed medical authority.

Section 80DDB - Medical Expenditure

A deduction up to Rs.40,000 is available for any expense incurred towards treatment of specified medical diseases or ailments for the individual or any of his dependents aged below 60.

In case the expenses incurred is a senior citizen, the individual can claim a deduction up to Rs 1 lakh.

Any reimbursement of medical expenses by an employer shall also be claimed under this section.

Section 80E - Loan for higher studies

You can claim a deduction on the interest on the loan amount. Criteria is that the loan should have been taken from a bank or a financial institution for pursuing higher studies by the individual himself or his spouse or children. One can claim the deduction amount up to 8 assessment years. Even a legal guardian could avail this income tax deduction.

Section 80EE - Home loan

Homeowners can claim an additional deduction of Rs.50,000 for interest component of the home loan EMI. The conditions are:

  • The loan must not be for more than Rs 35,00,000

  • The value of the property must not be more than Rs 50,00,000.

  • The individual must not have any other property registered under his name at the time when the loan is sanctioned.

Section 80G - Donation towards charity

This section offers tax deduction to an individual, who makes donations to charitable organisations. This deduction varies based on the receiving organisation, and can avail deduction of 50% or 100% of the amount donated.

Section 80GGA - Donation Towards scientific research

These are deductions for donations made for scientific research or rural development. It provides tax benefits to donors as well as helps in supporting the scientific and rural development of the country. These donations are eligible for 100% tax deduction. An amount higher than 10,000 should be paid in mean other than cash to avail this deduction and there is no upper limit.

Section 80GGB - contribution to political parties by a company

The deduction is allowed from an Indian company to any political party or an electoral trust where the contribution is done by any way other than cash.

Section 80GGC - Contribution to political parties by an individual

The deduction is allowed from individual to any political party or an electoral trust where the contribution is done by any way other than cash.

Section 80RRB - Royalty of a Patent

This is the deduction for an individual for any income he received by way of royalty for a patent, registered on or after 1 April 2003 under the Patents Act 1970. He shall be avail up to Rs.3 lakh or the income received, whichever is less. The individual must furnish a certificate in the prescribed form duly signed by the prescribed authority in order to get this deduction.

Section 80TTA - Deduction on interest on deposits in savings account

You can avail a deduction of up to INR 10,000 on income earned from savings account interest. However, in case the income from bank interest exceeds INR 10,000, the amount after that would be taxable.

Section 80TTB - Interest on Deposits for Senior Citizens

As per the budget 2018, interest income from deposits held by senior citizens is tax exempt up to a limit of 50,000. After this limit, according to section 194A, TDS tax deduced at source on interest income will also be amended. To know more about TDS, you can check out the I button here.

Section 80U - Physical Disability

A deduction of Rs.75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, one can claim a deduction of Rs 1,25,000.


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