Disclaimer
The information provided is intended for general reference purposes only. Readers are advised to consult the exact provisions of the Income Tax Act and seek professional advice to understand the specific eligibility criteria and procedures for claiming exemptions.
Understanding the various income tax deductions and exemptions available under the Income Tax Act of India is crucial for taxpayers aiming to optimize their tax liabilities. Below is a detailed overview of these provisions:
1. Section 80C: Deduction for Investments in Specified Financial Instruments
Taxpayers can claim a deduction of up to ₹1.5 lakh for investments in the following instruments:
- Life Insurance Premiums
- Employee Provident Fund (EPF) Contributions
- Public Provident Fund (PPF) Investments
- National Savings Certificates (NSC)
- Tax-saving Fixed Deposits with Banks
- 5-Year Fixed Deposit with Banks
- Senior Citizens Savings Scheme (SCSS)
- Sukanya Samriddhi Account
- Tuition Fees for up to two children
- Home Loan Principal Repayment
2. Section 80CCC: Deduction for Contributions to Pension Funds
Contributions to pension funds of Life Insurance Corporation of India (LIC) or any other insurer qualify for a deduction under this section. The combined deduction under sections 80C, 80CCC, and 80CCD(1) is limited to ₹1.5 lakh.
3. Section 80CCD(1): Deduction for Contributions to National Pension Scheme (NPS)
Individuals can claim a deduction for contributions to NPS, subject to the following limits:
- For salaried individuals: Up to 10% of salary (Basic + Dearness Allowance)
- For self-employed individuals: Up to 20% of gross income
This deduction is included within the overall limit of ₹1.5 lakh under sections 80C, 80CCC, and 80CCD(1).
4. Section 80CCD(1B): Additional Deduction for NPS Contributions
An additional deduction of up to ₹50,000 is available for contributions to NPS under this section, over and above the ₹1.5 lakh limit.
5. Section 80CCD(2): Employer’s Contribution to NPS
Employer contributions to an employee’s NPS account are deductible under this section. The deduction is limited to:
- 14% of salary (Basic + Dearness Allowance) for government employees
- 10% of salary for other employees
This deduction is not subject to the ₹1.5 lakh limit.
6. Section 80D: Deduction for Premiums on Health Insurance
Deductions are available for premiums paid on health insurance policies:
- For self, spouse, and children: Up to ₹25,000
- For parents: Additional ₹25,000 (₹50,000 if parents are senior citizens)
The total deduction under section 80D cannot exceed ₹1 lakh.
7. Section 80DD: Deduction for Maintenance of Disabled Dependents
A deduction of ₹75,000 is available for expenses incurred on the medical treatment, training, and rehabilitation of a dependent with a disability. If the disability is severe, the deduction increases to ₹1.25 lakh.
8. Section 80DDB: Deduction for Medical Treatment of Specified Diseases
Deductions are available for expenses incurred on the medical treatment of specified diseases:
- For individuals below 60 years: Up to ₹40,000
- For senior citizens: Up to ₹1 lakh
The diseases covered include cancer, neurological diseases, and others.
9. Section 80E: Deduction for Interest on Education Loans
Interest paid on loans taken for higher education is deductible under this section. The deduction is available for a maximum of 8 years or until the interest is paid, whichever is earlier.
10. Section 80EE: Deduction for Interest on Home Loan
An additional deduction of up to ₹50,000 is available for interest paid on home loans, provided the loan amount does not exceed ₹35 lakh, and the property value does not exceed ₹50 lakh.
11. Section 80EEA: Deduction for Interest on Home Loan for Affordable Housing
An additional deduction of up to ₹1.5 lakh is available for interest paid on home loans for the purchase of affordable housing properties, subject to certain conditions.
12. Section 80EEB: Deduction for Interest on Loans for Electric Vehicles
A deduction of up to ₹1.5 lakh is available for interest paid on loans taken for the purchase of electric vehicles.
13. Section 80G: Deduction for Donations to Charitable Institutions
Donations to specified charitable institutions qualify for deductions under this section. The deduction amount depends on the institution and the nature of the donation.
14. Section 80GG: Deduction for Rent Paid
Individuals who do not receive HRA can claim a deduction for rent paid, subject to certain conditions. The maximum deduction is ₹5,000 per month or 25% of total income, whichever is less.
15. Section 80GGA: Deduction for Donations for Scientific Research or Rural Development
Donations made to specified institutions for scientific research or rural development are eligible for deductions under this section.
16. Section 80GGC: Deduction for Contributions to Political Parties
Individuals can claim a deduction for contributions made to political parties or electoral trusts under this section. The deduction is available only if the payment is made through modes other than cash. This deduction is not available to companies, local authorities, or any artificial juridical person wholly or partly funded by the government.
17. Section 80TTA: Deduction for Interest on Savings Accounts
Individuals can claim a deduction of up to ₹10,000 on interest income earned from savings accounts held with banks, co-operative societies, or post offices. This deduction is available only to individuals and Hindu Undivided Families (HUFs). Interest income exceeding ₹10,000 is taxable.
18. Section 80TTB: Deduction for Interest on Deposits for Senior Citizens
Senior citizens (aged 60 years or above) can claim a deduction of up to ₹50,000 on interest income earned from deposits with banks, co-operative societies, or post offices. This deduction is available only to senior citizens and is over and above the ₹10,000 limit under section 80TTA.
19. Section 80U: Deduction for Individuals with Disabilities
Individuals with a disability (as defined under the Persons with Disabilities Act) can claim a deduction of ₹75,000. If the disability is severe, the deduction increases to ₹1.25 lakh. The deduction is available to individuals with a disability certificate issued by a medical authority.
These deductions are designed to encourage savings, investments, and support for specific causes, thereby reducing the overall tax liability of taxpayers.