Different Sections Under Tax Deductions

If you are one of the millions of taxpayers in India, you surely seek many ways to save money. The ones among us who draw a monthly paycheck save money by investing in various plans with tax benefits. One can reduce the amount of tax one pays by claiming deductions and exemptions. 

According to the Union Budget of 2020, the Indian Finance Minister had introduced a novel tax regime. This is to help people save more money on tax. However, what makes this tax regime unique is that it largely removes some deductions and exemptions, including the deductions under Section 80C of the Income Tax Act. However, one can certainly claim the old regime tax deductions since in the new regime they are optional.

The purpose of this article is to discuss the foremost tax deductions available to salaried individuals under the old tax regime.

What are Tax Deductions?

Tax deductions aid one to lower one’s taxable income. To put it simply, income tax deductions are actually tax-free expenses which are made in a year, and these are subtracted from one’s gross annual income while filing income tax returns. Your salary structure has some components that can help you to save on income tax by Deductions and Tax Exemptions. Some of these can be exempt fully, while others partially.

Section 80C

Section 80C is one of the most commonly known sections of the Income Tax Act. It is used to file income tax exemptions on life insurance, health insurance, investments in pension schemes, education fees, home loans and fixed deposits etc. The maximum deduction under section 80C is 1.5 lacs. The deductions that are eligible for exemption under section 80C are:

1. Home loan payments

2. Stamp duty and registration charges for house

3. Health insurance

4. Life insurance

5. Fixed deposits

6. Mutual Funds investments(ELSS)

7. Provident Funds

8. National Savings Certificate

9. Infrastructure bonds

10. Post office deposits

11. Education expenses

12. Pension Funds

13. Senior citizens’ savings scheme

Section 80C for NRIs

If an individual’s source of income is india, then they have to file their Income Tax on the due date irrespective of the residential address of the person. An individual is liable to file for IT returns if the business that he/she owns or his/her bank account is audited in India. An NRI is eligible for an equal amount of tax deductions under section 80C.

Section 80DD

It is difficult for an average salaried differently abled individual to bear their entire medical expenses. The Government of India has framed section 80DD under the Income Tax Act, to provide relief to people who are dependent-with-disabilities and people with severe disabilities. The only eligibility criteria for claiming income tax exemption under section 80 DD is that the individual must be a resident of India, i.e, no NRI can claim tax exemptions under section 80 DD.

The disabilities which are listed under Section (i) Clause 2 of Persons with Disabilities Act, 1995.

Eligibility criteria to claim tax deductions

1. Medical certificate generated from any government hospital with the details of the individual’s disabilities.

2. Individuals suffering from multiple disabilities require to submit the form 10-IA as well.

3. A self-declaration claiming the medical expenses accrued by them during the financial year

4. Original certificates need to be submitted with respect to payments made to an insurer such as LIC or UTI for enrolling in any plans/schemes to take care of the differently abled person

Tax deductions under Section 80DD

Individuals with disabilities are subject to tax exemptions under Section 80 DD of Income Tax Act. A person who is dependent-with-disabilities (individual experiencing 40% and above level of disability), can claim tax exemptions upto Rs.50,000 and  a person with severe disabilities can claim tax exemptions upto 1,25,000.

Section 80D

Section 80D allows the taxpayer to benefit from tax exemptions on the premiums made on medical insurance. Section 80D deductions apply to an individual over and above Section 80 C tax deductions.

The deductions allowed under Section 80D are:

1. For Self and family: A maximum deduction of 25000 is allowed for health insurance premiums for self and family under section 80 D but if you’re senior citizen then your tax exemption could e upto 50000

2. Additional deductions- An additional deduction of 5000 can be claimed by the taxpayer on the expenses related to health checkups. Such tax deduction prescribed by the government extends to a person’s kids, parents and spouse.

Overall tax deduction limits

Persons Covered	Exemption Limit	Health Check-Up Exemption	Total
Self and family	Rs.25,000	Rs.5,000	Rs.25,000
Self and family + parents	Rs.(25,000 + 25,000) = Rs.50,000	Rs.5,000	Rs.55,000
Self and family + senior citizen parents	Rs.(25,000 + 50,000) = Rs.75,000	Rs.5,000	Rs.80,000
Self (senior citizen) and family + senior citizen parents	Rs.(50,000 + 50,000) = Rs.1,00,000	Rs.5,000	Rs.1.05 lakh

Deduction of MediClaim

MediClaim policy is a type of health insurance policy which is meant for taking care of the medical expenses of a person. Deduction of MediClaim makes sure that a person’s health insurance policy stays active. The policy is applicable for the policyholder and his/her spouse.

Income Tax Deductions under Section 80

ITA Section	Limit for tax deduction	Type of investment, income of expense	Eligible claimants
80C	Minimum Rs. 1.5 lakh (an aggregate of sections 80C, 80CCC, and 80CCD.)	PPF, EPF, ULIP, NPS, ELSS and others	Individual HUFs
80CCC	Minimum Rs. 1.5 lakh (an aggregate of sections 80C, 80CCC, and 80CCD.)	Pension funds as defined in Section 10 (23 AAB)	Individuals
80CCD	80 CCD1- This covers employee contribution till a maximum of 1.5 lakh, or deductions till 10% of employee’s salary or 20% of total gross income in case one is self-employed   80CCD(1B)- Self contribution- The maximum amount is Rs. 50000 for deposits made to the NPS or to one’s Atal Pension Yojana account   80CCD(2)- Employee contribution- An additional deduction till 10% of one’s salary	Pension funds from the central government	Individuals
80CCG	The deducted amount shall be the lower of: -50% of equity share investment -Rs. 25000 for 3 consecutive years of tax assessment	Rajiv Gandhi Equity Savings Scheme (RGESS)	Individuals who have an income lower than Rs. 12 lakhs
80DD	Maximum is Rs. 75000 for those having 40% to 80% disability, and Rs. 1.25 lakh for those with severe disability	Medical expenses on the rehabilitation of handicapped dependent relative	Individuals and HUFs with handicapped relative
80DDB	Maximum is Rs. 40000 for individuals below 60 years and till Rs. 1 lakh for those above 60 years	Medical expenses on the rehabilitation of handicapped self or a dependent relative	Individuals
80E	Lesser of: 8 years from the year or beginning of loan repayment -Until the interest is paid off fully	Interest paid on education loan for self, spouse or child	Individuals
80EE	Maximum is Rs. 50000	Deductions on home loan for the first time home owners	Individuals
80G	Deductible till 100% or 50%	Donations to social causes	Individuals, HUFs
80GGB	100% donations are eligible	Non-cash donations by companies to political parties under Section 29A of REPA	Indian companies
80GGC	Depending on donation amount	Non-cash donations by people to trusts and political parties	Individuals
80GG	Rs. 5000/month, 25% of total income or rent less 10% of adjusted gross annual income, whichever is less	Deduction for house rent paid where HRA is not received	Individuals not getting HRA
80RRB	Maximum Rs. 3 lakhs	Income earned from royalty for patent registered on on after1st April, 2003 under Patent Act 1970	Resident Indian
80TTA	Maximum is Rs. 10000	Income earned on savings accounts	Individuals and HUFs
80TTB	Maximum is Rs. 50000	On income from deposits	Senior citizens above 60
80U	Rs. 75000 for severe disabilities till Rs. 1 lakh	Medical expenses	People with disabilities

A detailed overview of Income Tax deductions and their benefits

If you are a tax payer, you can apply for various deductions to decrease your taxable income. Thus, your tax payment is decreased. Here are some key deductions which you can claim under Section 80C.

Section 80C

 Under the Section 80C, HUFs and individuals can reduce their income tax by Rs. 1.5 lakh. To get this deduction, you have the option to invest in various instruments, which is not limited to ELSS, PPF, EPF, ULIPs and NPS. 

Section 80CCC – Deduction for premium paid for annuity plan of LIC and other insurers

This section caters to deductions for amounts paid by people towards annuity plans by an LIC company. The payment should be mentioned in Section 10(23AAB). Proceeds from the policy in the form of annuity, pension or annuity surrender is taxable. Also taxed are interest and bonus for the same.

Section 80CCD – Deduction for contribution to pension account

• Section 80CCD1- Employee contribution- These tax deductions can be taken on amounts in pension funds. The maximum deduction you can get shall be less than 10% of your salary in case you are an employee, or 20% of your gross total income if you are self-employed, or Rs. 1.5 lakh.

• Section 80CC1B- Self-contribution- This section gives you the chance to get deduction till Rs. 50000 for deposits you make to the NPS or Atal Pension Yojana account.

• Section 80CCD2- This allows you to claim additional deduction on contributions made by your employer towards your pension account till 10% of your salary.

Section 80D- Deduction on premium paid for Medical Insurance

Have you taken a health insurance policy for yourself, your spouse, your dependents or children? If so, you can get deductions till Rs. 25000.

• If your insured parents are under 60, there is an additional deduction of Rs. 25000 available

• If parents are above the age of 60- you can have deductions till Rs. 50000 as per the 2018 budget

• If both you and your parents are above 60- you can have a deduction of Rs. 1 lakh

• There is an additional deduction option you can get for health checkup till Rs. 5000 on health checkup for family members

Section 80DD – Deduction for the habilitation of handicapped dependent relative

You can get this deduction if you are a resident of India and a citizen. You can avail the deduction on

• Medical expenses arising from nursing, rehabilitation, and training for a dependent handicapped relative

• The amount paid is to a specific scheme made towards caretaking of a dependent handicapped relative

• Deductions- Rs. 75000 for 40% to 80% disability, Rs. 1,25,000 for severe or 80% disability

To apply, you need a disability certificate.

Section 80DDB- Deduction or medical expenses on self or dependents

 You can claim this deduction if you are under 60. Amount claimable is Rs. 40000 maximum on expenses paid treatment of certain medical condition of self or of dependents. This is applicable for members of HUF under 60 as well. Members of HUF can get a deduction of Rs. 1 lakh if expenses are for a senior citizen.  Medical expenses paid by an employer or an insurer shall be deducted before deductions are calculated.

Section 80TTA – Deduction from Gross total income for interest on savings bank account

Your savings bank account interest can be tax-deductible as all. Individuals and HUFs can get deductions till Rs. 10000. Such a savings account can be maintained with banks, post offices or co-op banks. This section does not cater to deductions on interest from FDs, recurring deposits and corporate bonds.

Section 80GG- Deduction for house rent paid where the HRA is not received

You can get deductions under this on rent paid if HRA is not given by your employer. This is applicable to you, your spouse or minor child in case you don’t own your own home. The maximum deduction shall be the lesser of the following: rent less 10% of adjusted gross total income, Rs. 5000 a month, and 25% of adjusted total income.

Section 80E- Deduction for interest on education loan for higher studies

For higher education taken for yourself, spouse, legal ward or children, you can get deduction on the interest of such education plans. There is no upper limit on this deduction, but it shall be less than 8 years from the year or start of loan payment, or until the interest is completely paid off.

Section 80EE – Deduction on home loan interest for first time home owners

You can get a deduction till Rs. 50000 on home loan interest if you are a first time home buyer.

Section 80CCG- Deduction on Rajiv Gandhi Equity Saving Scheme

If you earn less than Rs. 12 lakh, you can get deduction if you are a new retail investor according to the notified scheme requirements and the investor needs to me made in a scheme that has a maximum lock-in time of 3 years from the date of acquisition according to the scheme. The deduction shall be the lower of 50% of equity share investments or Rs. 25000 for 3 successive assessment years

Section 80G- Deduction for person suffering from physical disability

If you have a physical disability like mental retardation or blindness, you can get a tax deduction till Rs. 75000. It is Rs. 1.25 lakhs for severe problems.

Section 80G – Deductions for donations on social causes

These are 50% or 100% deductible. To get this, you need to prove that donations were through non-cash means. Here are the causes and funds you can donate to.

a. Donations with 100% deduction and with no qualifying limit
 

• National Defense Fund by the Government of India

• Prime Minister’s National Relief Fund

• National Foundation for Communal Harmony

• A nationally eminent, approved university or educational institution

• Zila Saksharta Samiti formed under the chairmanship of district Collector

• State Government fund for the medical expenses of the poor

• National Illness Assistance Fund

• National Blood Transfusion Council

• Any State Blood Transfusion Council

• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities

• National Sports Fund

• National Cultural Fund

• Fund for Technology Development and Application

• National Children’s Fund

• Chief Minister’s Relief Fund (for a state)

• Lieutenant Governor’s Relief Fund (for a Union Territory)

• Army Central Welfare Fund

• Indian Naval Benevolent Fund

• Air Force Central Welfare Fund

• Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996

• The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6,1993

• Chief Minister’s Earthquake Relief Fund, Maharashtra

• Any Gujarat State Government fund formulated exclusively for relief to the Gujarat earthquake victims

• Any earthquake relief fund for the victims of Gujarat earthquake under Section 80G(5C). Contribution payment should be made from January 26, 2001 and September 30, 2001.

• Prime Minister’s Armenia Earthquake Relief Fund

• Africa (Public Contributions- India) Fund

• Swachh Bharat Kosh (valid from FY 2014-15)

• Clean Ganga Fund (valid from FY 2014-15)

• National Fund for Control of Drug Abuse (valid from FY 2015-16)
   

b. Donations with 50% deduction and with no qualifying limit
 

• Jawaharlal Nehru Memorial Fund

• Prime Minister’s Drought Relief Fund

• Indira Gandhi Memorial Trust

• The Rajiv Gandhi Foundation

c. Donations with 100% deduction subject to 10% of gross total income (adjusted)
 

• Those donations that are utilized for promotion of family planning by government, or by any approved local authority, association, or institution

• Company donation to the Indian Olympic Association, other notified Indian association, or to  institution for the development of sports infrastructure or sports and games sponsorship in India

d. Donations eligible for 50% deduction subject to 10% of gross total income (adjusted)
 

• Any other institution or fund that fulfils conditions as mentioned in Section 80G(5)

• Government or any local authority to be used for charitable purposes other than the promotion of family planning

• Any Indian authority constituted for housing accommodation or planning, improvement or development of cities, towns, villages or both

• Any corporation mentioned in Section 10(26BB) that towards the interests of minority communities

• Repairs or renovation for notified temple, mosque, gurudwara, church or other Places

Section 80GGB- Deduction on contribution to political parties by companies

Indian companies can claim deductions on contributions made by any non-cash mode to political parties which are registered under Section 29A of the REPA or Representation of People Act. Companies can get 100% deduction in such contributions.

Section 80GGC- Deduction on contribution to political parties by individuals

Individuals can claim deductions on contributions made by any non-cash mode to political parties or to electoral trusts.

Section 80RRB- Deduction from income from patent royalties

Section 80TTB- Deduction on interest on deposits for senior citizens

Senior citizens can get deductions till Rs. 50000 on income from deposits.