Income Tax Deductions Guide
Section 80 Deductions For FY 2020-21 (Including Budget 2021 Amendments)
Whether you work for the government or for a private company, you can easily enjoy the benefit of Income Tax Deductions under Section 80C. There are also some Income Tax Deductions that you can claim in order to reduce your income tax. Read below to gain knowledge about these benefits:
- People can save Rs 45, 000 who have 30% taxable income. They don’t need to opt for the new ‘simplified’ personal income tax regime, they can claim 1.5 lakh as deduction (Section 80C).
- Provident Fund (PF) contribution.
- Principal component of housing loan from prescribed institutions.
- Ever year you can you can invest Rs 500 to 1.5 lakh in a Public Provident Fund (PPF) account.
- Fee of tuition for two children.
- Life insurance premium for spouse, self and kids.
- Contribution to Unit – linked Insurance, Plan for spouse, self and children.
- Invest in National Saving Certificates (NSC) Scheme (through Post offices).
- A 5 year term deposit with a bank under post office or a notified scheme.
- Investment of upto Rs 1.5 lakh a year in Sukanya Samriddhi Account in the name of you daughter (maximum two children). Lats take a look on these Income Tax Savings Rules.
Income Tax Savings Rules
There are many Income Tax Savings Rules that you must be aware of. let’s have a look at these rules.
Section 80C – Deductions on Investments
Section 80C is one of the most well-known and popular sections among taxpayers since it allows them to lower their taxable income by making tax-saving investments or incurring eligible costs. Subsections 80CCC, 80CCD (1), 80CCD (1b), and 80CCD (1c) are all found in section 80C. (2). Individuals and HUFs can both take advantage of this deduction. This deduction is not available to corporations, partnership firms, or LLPs.
Section 80C provides a maximum Income Tax Deductions of Rs 1.5 lakh from the total income of the taxpayer each year.
Note: It’s worth noting that the overall limit for claiming deductions, including subsections, is Rs 1.5 lakh, with an extra deduction of Rs 50,000 allowed under section 80CCD(1b).
Section 80CCC – Insurance Premium /Section 80CCD – Pension Contribution
|Eligible Investments for Income Tax Deductions|
|80 C||80C permits deduction for the investment made in PPF, LIC premium, EPF, principal amount payment towards home loan, Equity-linked saving scheme, Sukanyasmriddhiyojana (SSY), stamp duty and registration charges for the purchase of property, Infrastructure bonds ULIP, National saving certificate (NSC), Senior citizen savings scheme (SCSS), tax-saving FD for 5 years, etc|
|80CCC Deduction for life insurance annuity plan.||80CCC permits Income Tax Deductions for payment towards annuity pension plans Pension received from the annuity or amount received upon surrender of the annuity, including bonus or interest accrued on the annuity, is taxable in the year of receipt.|
|80CCD (1) Deduction for NPS||Contribution by employees under section 80CCD (1). The following are the maximum deductions that can be made: 10% of your annual salary (in case taxpayer is employee)20% of total gross income (in case of self-employed)Rs 1.5 lakh (maximum permitted under section 80C)|
|80CCD (1b) Deduction for NPS||For money placed in an NPS account, an additional deduction of Rs 50,000 is allowed.|
For deduction, contributions to Atal Pension Yojana is also eligible
|80CCD (2) Deduction for NPS||Under this clause, employers can remove up to 10% of their basic wage plus dearness allowance as a contribution. Only salaried employees are eligible for this benefit; self-employed individuals are not.|
Here are some investment possibilities that qualify for an 80C deduction. The following is a short comparison of the options:
|Investment options||Lock in Period for||Average Interest||Risk factor|
|ELSS funds||3 years||12% – 15%||High|
|ULIP||5 years||8% – 10%||Medium|
|NPS Scheme||Till 60 years of age||8% – 10%||High|
|Tax saving FD||5 years||7% – 8%||Low|
|Senior citizen savings scheme||5years (can be extended for other 3 years)||7.4%||Low|
|SukanyaSamriddhiYojana||Till girl child attains the age of 21 years.|
(partial withdrawal allowed when she reached 18 years)
These options not only assist you in lowering your taxes but also in increasing the value of your assets.
Section 80 TTA – Interest on Savings Account
Deduction from Gross Total Income for Interest on Savings Bank Account
Interest income from fixed deposits, recurring deposits, or corporate bonds is not eligible for the Section 80TTA deduction. However, if you are an individual or a HUF, you can deduct up to Rs 10,000 from your interest income from a bank, co-operative society, or post office savings account.
Also, include interest from a savings account in your other sources of income.
Section 80GG – House Rent Paid
Deduction for House Rent Paid Where HRA is not received
If you pay rent but don’t get HRA, you can deduct it under Section 80GG. The taxpayer, his or her spouse, or a minor kid should not possess a home near their place of employment. The taxpayer should not have any other self-occupied residential property. He must be a renter who pays rent. Anyone can take advantage of the deduction.
Deductions option available is the least of:
- Monthly remuneration of Rs 5,000/-
- Rent paid minus 10% of total income (adjusted)
- Approximately 25% of adjusted total income*
*Adjusted Gross Total Income is calculated after subtracting certain deductions, exempt income, long-term capital gains, and income from non-residents and foreign corporations from Gross Total Income. Also, you won’t have to worry about performing complicated computations because the limits are auto-calculated, and using an online e-filing software like ClearTaxit can be quite simple.
Note: From FY 2016-17, the monthly allowed deduction has been increased to Rs 5,000 from Rs 2,000.
Section 80D – Medical Insurance
Deduction for the Premium Paid for Medical Insurance
You (as a person or a HUF) can deduct Rs.25, 000 for insurance for yourself, your spouse, and your dependent children under section 80D. If your parents are under 60 years old, you can get an additional Income Tax Deductions for their insurance up to Rs 25,000. If both parents are above 60 years old, the deduction amount is Rs 50,000, up from Rs 30,000 in Budget 2018. The maximum deduction permitted under this clause is Rs.1 lakh if both the taxpayer and the parent(s) are 60 years old or older. A cumulative additional deduction of Rs. 5,000 is permitted for preventive health checks starting in FY 2015-16.
Let us consider one example. Ramesh is 65 years old, and his father is 90 years old. The maximum deduction Ramesh can claim under section 80D is Rs. 100,000.
Section 80DD – Disabled Dependent
Deduction for Rehabilitation of Handicapped Dependent Relative
A resident individual or a HUF can claim a deduction under Section 80DD for the following expenses:
- Payment or deposit to a designated program for the support of a disabled dependent relative.
- Where the impairment is 40% or more but less than 80%, a fixed Income Tax Deductions of Rs 75,000 is made.
- Fixed deduction of Rs 1, 25,000 in cases of severe disability (disability of 80% or more).
A certificate of incapacity from a prescribed medical authority is required to claim this deduction. From FY 2015-16, the deduction limit of Rs 50,000 has been increased to Rs 75,000, and the deduction limit of Rs 1,00,000 has been increased to Rs 1,25,000.
- Medical treatment (including nursing), training, and rehabilitation of a handicapped dependent relative.
Section 80DDB – Medical Expenditure
Deduction for Medical Expenditure on Self or Dependent Relative
- For individuals and HUFs below age 60: A resident individual or a HUF can claim a deduction of up to Rs.40, 000. It is accessible for any medical expenses paid for himself or any of his dependents for the treatment of designated medical disorders or ailments. For a HUF, such an Income Tax Deductions is permitted for medical expenses spent for any of the HUF members who suffer from these prescribed conditions.
- For senior citizens and super senior citizens: Individual or HUF taxpayers can claim a deduction of up to Rs 1 lakh if the individual on whose behalf such expenses are incurred is a senior citizen. A senior citizen and a super senior citizen could claim a deduction of Rs 60,000 and Rs 80,000, respectively, until FY 2017-18.Unlike before, all elderly citizens (including super senior citizens) are now eligible for a deduction of up to Rs 1 lakh.
- For reimbursement claims: Any reimbursement of medical expenditures by an insurance or employer is deducted from the amount of deduction the taxpayer is entitled to under this section.Remember that in order to claim such a deduction, you must obtain a prescription for such medical treatment from the concerned doctor.
Section 80E – Interest on Education Loan
Deduction for Interest on Education Loan for Higher Studies
If an individual person takes a loan to pursue higher education, then a deduction in interest is allowed to an individual. Also, this loan may have been taken for the spouse or children, taxpayer, or for a student for whom the taxpayer is a legal guardian. The 80E Income Tax Deductions is allowed for up to 8 years (starting with the year in which the interest begins to be returned) or until the total interest is repaid, whichever comes first. The maximum sum that can be claimed is unlimited.
Section 80EE – Interest on Home Loan
Deductions on Home Loan Interest for First Time Home Owners
2013-14 Fiscal year and 2014-15Fiscal years: The deduction provided under this section throughout these financial years was for a first-time home worth less than Rs 40 lakh. You can only get this if your loan amount at this time is less than Rs 25 lakh.
The loan must be approved between April 1st and March 31st, 2014. The total deduction open under this section is limited to Rs 1 lakh for the fiscal years 2013-14 and 2014-15.
2017-18 fiscal year and 2016-17 fiscal year: Only home-owners (individuals) with only one house property on the date of loan sanction are eligible for the deduction under section 80EE.The loan must have been approved by a financial institution between April 1, 2016, and March 31, 2017. If the loan was taken in FY 2016-17, then this deduction is available in FY 2017-18.
The property must be worth less than Rs 50 lakh, and the home loan must be for less than Rs 35 lakh.On top of the deduction of Rs 2 lakh (on the interest component of your house loan EMI) allowed under section 24, you can deduct an extra Rs 50,000 on your home loan interest.
Section 80G – Donations
Deduction for donations towards Social Causes
The various donations listed in section 80G are eligible for a deduction of up to 100% or 50%, with or without restrictions. Any financial donations over Rs 2,000 would not be accepted as a deduction starting in FY 2017-18. To qualify for the 80G deduction, donations over Rs 2000 should be given in any form other than cash.
- Donations with 100% deduction without any qualifying limit
Donations with 100% Deduction without any Qualifying Limit
- National Defence Fund set up by the Central Government
- National Foundation for Communal Harmony
- ZilaSakshartaSamiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a State Government for the medical relief to the poor
- National Illness Assistance Fund
- Prime Minister’s National Relief Fund
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
- An approved university/educational institution of National eminence
- National Cultural Fund
- Fund for Technology Development and Application
- National Blood Transfusion Council or to any State Blood Transfusion Council
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
- National Sports Fund
- National Children’s Fund
- The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6,1993
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
- The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- Prime Minister’s Armenia Earthquake Relief Fund
- Swachh Bharat Kosh (applicable from financial year 2014-15)
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001) or
- Africa (Public Contributions — India) Fund
- National Fund for Control of Drug Abuse (applicable from financial year 2015-16)
- Clean Ganga Fund (applicable from financial year 2014-15)
Donations with 50% Deduction without any Qualifying Limit
- The Rajiv Gandhi Foundation
- Jawaharlal Nehru Memorial Fund
- Indira Gandhi Memorial Trust
- Prime Minister’s Drought Relief Fund
- Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
- For the aim of encouraging family planning, the government or any approved local authority, institution, or group may be used.
- A company’s donation to the Indian Olympic Association or any other notified association or institution created in India for the development of sports and games infrastructure in India or for the sponsorship of sports and games in India.
- Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
- Any other fund or institution that meets the requirements of Section 80G (5) of the Government.
- Any local government to be used for any charitable purpose other than encouraging family planning.
- Indian authority established for the aim of dealing with and meeting the demand for housing, or for the planning, development, or enhancement of cities, towns, or villages, or both.
- Any corporation referred to in Section 10(26BB) for the purpose of promoting minority community interests.
- For any notified temple, mosque, gurudwara, church, or other location that requires repairs or renovation.
Section 80GGB – Company Contribution
Deduction on contributions given by companies to Political Parties
Section 80GGB: An Indian firm can deduct the amount it contributes to any political party or electoral trust. Contributions made in any form other than cash are eligible for a tax deduction.
Section 80GGC – Contribution to Political Parties
Deduction on contributions given by any individual to Political Parties
Individual taxpayers can deduct any amount they provide to a political party or electoral trust under section 80GGC. Companies, local governments, and artificial juridical persons who are entirely or partially supported by the government are not eligible. This deduction is only available if you pay by a method other than cash.
Section 80U – Physical Disability
Deduction for Person suffering from Physical Disability
A resident who suffers from a physical impairment (including blindness) or mental retardation is eligible for a Rs.75, 000 discount. A deduction of Rs 1, 25,000 can be claimed in the event of a serious handicap.
The Section 80U Income Tax Deductions limit of Rs 50,000 has been increased to Rs 75,000, and the limit of Rs 1, 00,000 has been increased to Rs 1, 25,000, effective in FY 2015-16.
Section 80RRB – Royalty of a Patent
Deduction with respect to any Income by way of Royalty of a Patent
The 80RRB Income Tax Deductions is allowed for any royalty revenue received for a patent registered on or after April 1, 2003, under the Patents Act 1970, up to Rs.3 lakh or the income received, whichever is less. The taxpayer must be an Indian single patentee. A certificate in the required form, duly signed by the prescribed authority, must be provided by the taxpayer.
Section 80 TTB – Interest Income
Deduction of Interest on Deposits for Senior Citizens
With the passage of Budget 2018, a new section 80TTB was added, allowing for interest income on senior citizen savings to be deducted. This deduction is limited to Rs.50, 000. There will be no more deductions under section 80TTA. In addition to section 80 TTB, section 194A of the Act will be changed to raise the TDS threshold limit on interest income paid to senior citizens. The previous limit was Rs 10,000, however, it was raised to Rs 50,000 in the most recent Budget.
Section 80 Deduction Table
|Section||Deduction on||Allowed Limit (maximum) FY 2018-19|
|80C||Investment in PPF Employee’s share of PF contribution Life Insurance Premium payment NSCs Investment in SukanyaSamridhi Account Children’s Tuition Fee Sum paid to purchase deferred annuity Principal Repayment of home loan ULIPS ELSS Subscription to notified securities/notified deposits scheme Five-year deposit scheme Subscription to Home Loan Account Scheme of the National Housing Bank Senior Citizens savings scheme Contribution to notified Pension Fund set up by Mutual Fund or UTI. Contribution to notified annuity Plan of LIC Subscription to deposit scheme of a public sector or company engaged in providing housing finance Subscription to equity shares/ debentures of an approved eligible issue Subscription to notified bonds of NABARD||Rs. 1,50,000|
|80CCC||For amount deposited in annuity plan of LIC or any other insurer for a pension from a fund referred to in Section 10(23AAB)||–|
|80CCD(1)||Employee’s contribution to NPS account (maximum up to Rs 1,50,000)||–|
|80CCD(2)||Employer’s contribution to NPS account||Maximum up to 10% of salary|
|80CCD(1B)||Additional contribution to NPS||Rs. 50,000|
|80TTA(1)||Interest Income from Savings account||Maximum up to 10,000|
|80TTB||Exemption of interest from banks, post offices, etc. Applicable only to senior citizens||Maximum up to 50,000|
|80GG||For rent paid when HRA is not received from an employer||Least of – Rent paid minus 10% of total income – Rs. 5000/- per month – 25% of total income|
|80D||Medical Insurance – Self, spouse, children Medical Insurance – Parents more than 60 years old or (from FY 2015-16) uninsured parents more than 80 years old||Rs. 25,000 Rs. 50,000|
|80DD||Medical treatment for handicapped dependent or payment to specified scheme for maintenance of handicapped dependent – Disability is 40% or more but less than 80% – Disability is 80% or more||Rs. 75,000 Rs. 1,25,000|
|80DDB||Medical Expenditure on Self or Dependent Relative for diseases specified in Rule 11DD – For less than 60 years old – For more than 60 years old||Lower of Rs 40,000 or the amount actually paid – Lower of Rs 1,00,000 or the amount actually paid|
|80E||Interest on education loan||Interest paid for a period of 8 years|
|80EE||Interest on home loan for first time homeowners||Rs 50,000|
|80GGB||Contribution by companies to political parties||Amount contributed (not allowed if paid in cash)|
|80GGC||Contribution by individuals to political parties||Amount contributed (not allowed if paid in cash)|
|80U||Self-suffering from disability: – An individual suffering from a physical disability (including blindness) or mental retardation. – An individual suffering from severe disability||Rs. 75,000 Rs. 1,25,000|
|80RRB||Deductions on Income by way of Royalty of a Patent||Lower of Rs 3,00,000 or income received|
Can I claim the 80C deductions if I haven’t presented documentation to my employer at the time of submitting my return?
Proofs for making investments are presented to the employer before the end of the Financial Year (FY) so that the employer can take these investments into account when calculating your taxable income and tax deduction.
Even if you forget to present these proofs to your employer, you can claim these investments when filing your tax return as long as they were made before the end of the relevant fiscal year.
My employer has given me a loan to help me continue my education. Is it possible to deduct the interest paid on such a loan under Section 80E?
Only if the loan was taken out from a financial institution for the purpose of pursuing higher education can the interest paid on the loan be deducted under Section 80E. As a result, taking out a loan from your employer does not entitle you to interest deductions under Section 80E.
In which year can I claim a discount for stamp duty paid on a house purchase?
You can claim stamp duty for the purchase of a dwelling in the year in which the stamp duty payment is made under Section 80C.