Income tax Deductions & Exemptions in Income Tax
Tax Free Income, Deductions, Exemptions
There are some popular Deductions available under Chapter VI of IT Act. Major one are
80C Investments in PF, PPF, Life Ins. NPS, 5 year FDs Rs.1,50,000/-
80CCD National Pension Scheme (NPS) Investments Rs. 50,000/-
80D Payment of Mediclaim Insurance Premium Rs.25,000/-Rs.50,000/
80EE Interest on loan borrowed for self-occupied house with house value up to Rs.50 lakh. Rs.50,000/-
80EEA Interest payable on loan taken by an individual, who is not eligible to claim deduction under 80EE , from any financial institution Rs.1,50,000/-
80EEB Interest payable on loan for buying Electric Vehicle Rs.1,50,000/-
80E Int. on Education Loan from financial institution/approved charitable institution for pursuing higher education (period 8 years) No Limit
80G Donations 50% above Rs.2,500/-
80GG Rent Paid in excess of 10% of total income
80TTA Interest on bank deposits Rs.10,000/-
80TTB Interest on bank deposits by Senior Citizens Rs.50,000/-
1. Section 80C
a) Bank fixed deposits with a lock-in of 5 years. Currently Banks offer very low rates of Interest (SBI 6.25 %,). As against that following Postal Schemes with 5 years maturity offers: 5Year Term Deposit 7.7%, NSC (5 years maturity) 7.9%, Senior Citizens Savings Scheme (5 years maturity) 8.6%, Sukanya Samriddhi Account Scheme (8.4% with a maximum tenure of 21 years). All the post office schemes are sovereign backed investments wherein the principal invested and the interest earned are guaranteed by the government.
b) Equity Linked Mutual Funds (ELSS): This investment is good for those investors looking for investing recurring amount (like SIP) of Rs.1.5 lakh in Equity. ELSS has lock in of 3 years & associated downside risk from volatility in Equity markets.
c) Sum paid under a contract for a deferred annuity: On life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity)
d) Contribution to notified unit-linked insurance plan of LIC Mutual Fund [Dhanaraksha 1989], in the name of the individual, his spouse or any child of such individual
e) Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]
f) Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children
g) Certain payments for purchase/construction of residential house property
h) Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/ (b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both
i) Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/Jeewan Akshay-III plan of LIC) or other insurer
j) Subscription to notified bonds issued by the NABARD.
2. 80CCC- Contributions to certain pension funds of LIC or any other insurer (up to Rs. 1, 50,000) (subject to certain conditions)
3. 80CCD-Contribution to pension scheme notified by Central Government up to 10% of salary (subject to certain conditions and limits): Contribution made by employer shall also be allowed as deduction under section 80CCD (2) while computing total income of the employee, however, amount of deduction could not exceed 10% of salary of the employee.
Note: This maximum limit of Rs. 1, 50,000 is the aggregate of the deduction that may be claimed under sections 80C, 80CCC and 80CCD.
4. 80D - Deduction in respect of medical insurance premium-Rs.25,000-55,000/-
For Individuals paying for Self, Spouse & Dependent Children: Rs. 25,000/-
An additional Deduction is allowed if paid for Parents: Rs. 25,000/- (If one of parents are senior citizens or very senior citizen than Rs. 30,000/-)
The deduction for Preventive Health check- up should not exceed Rs. 5000/- however, this limit is not in addition to the above limit of Rs. 25,000/- or Rs. 30,000/-.
Mediclaim Premium, Contribution to Central Government Health Scheme, Preventive Health Check –up (Limit Rs.5, 000/-), Medical Expenditure (Only applicable in case of a Senior Citizen, 60 plus). Under section 80D, it allows the policyholder to save tax by claiming medical insurance incurred on self, spouse, dependent parents as a deduction from income before paying the taxes. The person's age should be 60 years or above to be eligible to claim the medical expenses. Also, the person should not have any health insurance policy. One can claim a maximum deduction of INR 50,000 in a financial year. To claim the deduction, all the medical expenses need to be paid in any valid payment mode like net banking, digital channels, etc., except cash.
5. Section 80DD - Deduction for expenditure incurred on maintenance and medical treatment of dependent disabled.Rs.75,000/- to Rs.1,25,000/-
The expenditure should be incurred for the medical treatment of the specified disease or ailment
6. 80E - Deduction in respect of interest loan taken for higher education-there is no maximum limit for claiming this deduction
7. 80EE - Deduction for interest on loan borrowed for acquisition of self-occupied house property by an individual-Rs.50,000 (Value of house not to exceed Rs.50 lakh)
8. 80G - Deduction in respect of donations to certain funds, charitable institutions etc.-50%-100% of Donations. Individual Donation exceeding Rs.2, 000/-. Limited to 10% of Gross Total Income
9. Section 80GG - Deduction for Rent Paid-Rs.5,000/- (10% of Income)
10. 80TTA - Deduction in respect of interest on bank deposits -Rs. 10,000/-
11. 80TTB - Deduction in respect of interest on bank deposits -Rs. 50,000/-
For detailed list please visit:
Besides this other popular Deductions are:
1. Standard Deductions-Rs.50,000/- from Salary Income Section 16
2. HRA-Rent paid in excess of 10% of Basic Pay-Section 10 (13A)
3. Interest paid on Loan for Self Occupied Property-Rs. 2 lakh Section 24
Exempt Income list can be viewed from Income Tax Department website.
· Agricultural Income [Section 10(1)]
· Share of profit received by a partner from the firm [Section 10(2A)]
· Certain interest to non-residents [Section 10(4)]
· Interest on notified savings certificates [Section 10(4B)]
· Leave travel concession [Section 10(5)]-LTC or LTA
· Death-cum-retirement gratuity received by Government servants [Section 10(10) (i)]
· Leave salary or encashment/Vacation pay on quitting or retirement [Section 10(10AA)]
· Retrenchment compensation [Section 10(10B)]
· Amount paid on life insurance policy [Section 10(10D)]
· Income of religious/charitable trust [Section 10(23C) (v)]
· Capital gains in case of compulsory acquisition of urban agricultural land [Section 10(37)]