Income Tax Deduction In India

One of the most important subjects for our hard-working taxpayers in India is that what and how many deductions can they avail themselves in their income tax for the last financial year. Salaried people in India try to save as much as they can so that they may provide a better standard of living to their families. An income tax deduction is one of the best and foremost saving one can do as it is being provided by our government on taxpayers’ expenses on the various listed subject in the Income-tax act. A new tax regime has been introduced by our Finance Minister in the 2020 Budget and made it optional for taxpayers to choose any one of it (new or old tax regime). Salaried individuals under the old tax regime. In this article, we will discuss various tax deductions provided to a taxpayer in the Income-tax act.

What is Income tax?

According to Black’s Law Dictionary Income Tax is A tax on an individual’s or entity’s net income, defining it clearly, we can say that Income tax in India is a tax you pay to the government based on your income (Here income means income, revenue, or return from any other investment). The government then uses taxpayer’s tax money in the interest of this nation for various purposes including public services, infrastructure development, defense spending, and subsidies among other options. Income tax percentage is defined in different income slap for the convenience of the taxpayers. Though our government imposes a tax on the income it also offers different deductions for the aid of taxpayers.

What are Income Tax Deductions?

Income tax deductions are the deduction which aid taxpayer’s by lowering the total gross income on which the taxpayer has to pay the income tax.

The various deduction provided under Income Tax Act, 2011

Income tax departments provide aid for taxpayers to boost their savings and investments and for that various deductions have been provided. Let us understand these deductions in detail:

  • Section 80C, Deductions on Investments, provides taxpayers to reduce taxable income by making tax-saving investments or incurring eligible expenses. And this section allows a maximum deduction of Rs 1.5 lakh every year from the taxpayer’s total income.
  • Section 80CCC, Deduction for Premium Paid for Annuity Plan of LIC or Other Insurer, provides a deduction for an amount paid by an individual towards an annuity plan by a life insurance company by mentioning it in Section 10(23AAB).
  • Section 80CC, Deduction for Contribution to Pension Account, provides in two subsection deduction against amount spend to the pension account
    • Section 80CCD(1)- Employee Contribution, provides deposited in pension accounts. The maximum deduction that you can claim will be the lesser of 10% of salary (if you are an employee) or 20% of gross total income (if you are self-employed) or Rs. 1.5 Lakhs.
    • Section 80CCD(1B) – Self Contribution, meaning deposit made towards National Pension Scheme or your Atal Pension Yojana account.
    • Section 80CCD(2) – Employer’s Contribution, by virtue of this section you can claim an additional deduction on your employer’s contribution to your pension account for up to 10% of salary.
  • Section 80D (Deduction on premium paid for Medical Insurance), this section provides deduction to your health insurance policy, your husband/wife, and dependent children, you can claim deductions of Rs. 25,000.
    • For parents under 60 years of age: An additional deduction up to Rs. 25,000 is available
    • For parents above 60 years of age: In Budget 2018, the deduction limit was raised to Rs. 50,000 (from the earlier Rs. 30,000) For both taxpayers and parents aged above 60: The deduction limit is Rs.1 Lakhs.
  • Section 80DD, Deduction for Rehabilitation of Handicapped Dependent Relative, provides that if you are a resident individual or HUF, you can avail this on any Medical expenses including nursing, training, and rehabilitation of handicapped relative dependent on you.
  • Section 80DDB, Deduction for Medical Expenditure on Self or Dependent Relative, provides that if you are an individual below the age of 60, you can claim a deduction of up to Rs. 40,000 upon expenses paid for treatment of specified medical conditions for yourself or your dependents.
  • Section 80TTA, Deduction from Gross Total Income for Interest on Savings Bank Account, provides that you can avail benefit up to 10,000 on the total income from the interest.
  • Section 80GG, Deduction for House Rent Paid Where HRA is not Received, this a very commonly used section that says that if you, your spouse, or minor child does not own residential accommodation at your place of work, you can claim the deduction and provides the maximum deduction that is rent minus 10% of adjusted gross total income, 5,000 per month, 25% of adjusted total income.
  • Section 80E, Deduction for Interest on Education Loan for Higher Studies, says that if you have taken a higher education loan for yourself, your spouse, children, or legal ward, you can claim a deduction on interest paid for such a loan.
  • Section 80EE, Deductions on Home Loan Interest for First Time Home Owners, provides a deduction of up to Rs. 50, 000 can be claimed on home loan interest if you are a first-time homebuyer.
  • Section 80U, Deduction for Person suffering from Physical Disability, provides a deduction for any resident individual and suffers from a physical disability, which includes blindness or mental retardation, you can claim a deduction up to Rs. 75,000. For severe disability, the deduction limit is raised to Rs. 1.25 Lakhs.
  • Section 80G, Deduction for donations towards Social Causes, provides a deduction for donation in social cause up to 100% or 50%.
  • Section 80GGB, Deduction on contributions given by companies to Political Parties, provides a Deduction on contributions made to a political party registered under Section 29A of the Representation of People Act (REPA) or an electoral trust. Companies can claim 100% of their contributions as deductions.
  • Section 80GGC, Deduction on contributions given by any person to Political Parties, provides a deduction on the contribution made to Companies, artificial juridical persons or local authorities funded wholly or partly by the government are not eligible to avail this deduction.
  • Section 80RRB, Deduction with respect to any Income by way of Royalty of a Patent, provides any deduction on income that arises out of royalty of your patent.
  • Section 80TTB, Deduction of Interest on Deposits for Senior Citizens, provides a deduction of up to Rs. 50,000 can be claimed by senior citizens on income from deposits.

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