Do you need to file income taxes? You are liable for paying taxes if you live in India and make more than INR 2,50,000 per year. Thankfully, the country's tax regulations don't operate that way. Even if you are legally required to pay taxes, many additional computations could enable you to avoid doing so.
India follows a progressive tax system, which means that taxpayers will end up paying higher taxes as their income increases. Another way of seeing the same would be, that taxpayers in the low to medium brackets can save a considerable amount of money on taxes.
The tax slabs in place aid you in arriving at the total amount of taxes that you might have to pay during a fiscal year. But before you can start calculating your taxes, it is important to know the final income on which income tax is calculated. And it is not the same amount that you earn.
You can seek a deduction under Chapter VI A, which will help you reduce your taxable income. There are a lot of deductions available under various sections to help you bring down the taxable income. For example, you can claim deductions under sections 80C, 80CCC, 80CCD, 80CCE and 80D.
Each of these sections caters to a specific type of investment or expense. For instance, Section 80CCD is for pension scheme deductions. In other words, if you are investing any amount towards your future pension plans, you can claim deductions under this section.
Similarly, for any LIC Deduction, Section 80C is handy. For all investments related to LIC annuity plans that you buy during a fiscal year, you can claim deductions under this section.
Section 80C is the most popular section that a vast majority of taxpayers utilize. This includes investment under various instruments such as Equity equity-linked savings Scheme (ELSS), National Pension Scheme, tax-saving Fixed deposits, Unit linked insurance plans (ULIP) or PPF Deduction.
Chapter VIA has various heads under which you can not only invest and save money but at the same time save money in the form of taxes. The following are all the details that you would need to know about Chapter VIA.
Deductions under Chapter VIA are framed to give benefit to the assessee so that he can lower his total income thereby reducing the taxes.
There are certain conditions for availing deductions under Chapter VIA which are as follows:
- The total amount of deductions under Chapter VIA cannot exceed the Gross Total Income of the Assessee. For example, the Gross Total Income of the Assessee is Rs. 3,00,000/-. He has the total amount of deductions under Chapter VIA of Rs. 3,50,000/-. Now, the amount of deduction that will be allowed to the Assessee is Rs. 3,00,000/- because the deductions (Rs.3,50,000/-) cannot exceed the Gross Total Income Rs.(3,00,000/-).
- Deductions under Chapter VIA will not be allowed from exempted incomes.
- Deductions under Chapter VIA will not be allowed from long-term capital gains and short-term capital gains under Section 111A.
The sections that give the benefit of lowering the taxes to Individual and HUF Assessees are listed below:
Section 80C - Deduction in respect of specified Investments.
Eligible Assessee |
Individual and HUF. |
Investments and Conditions |
The Assessee can take benefit of Section 80C by investing in certain investments and making certain payments as follows:
Each of the above investments and payments has its respective lock-in period, interest rates and other terms and conditions which are to be fulfilled for availing deduction under section 80C. |
Amount of Deduction |
The maximum deduction allowable under section 80C is Rs. 1,50,000/- subject to section 80CCE. |
Section 80CCC: Deduction for contribution to certain pension funds.
Eligible Assessee |
An individual who has paid or deposited any amount in the annuity plan of LIC or any other insurer. |
Condition |
If the deduction is claimed under this section, then no deduction can be claimed under section 80C. |
Amount of Deduction |
The maximum deduction allowable under section 80CCC is Rs. 1,50,000/- subject to section 80CCE. |
Other Points |
The following amount received will be taxable in the year in which it is received:
including interest or bonus accrued. |
Section 80CCD: Deduction for contribution to pension scheme notified by Central Government.
It can be divided into 3 parts:
Section |
80CCD(1) |
80CCD(1B) |
80CCD(2) |
Eligible Assessee / Deduction of |
Individual either salaried or self-employed who makes a deposit to his/ her pension account |
Additional deduction to Individual Assessee who has deposited the amount in National Pension Scheme |
Employer’s contribution to Employee’s pension account. The entire amount of the employer’s contribution will be first included in the salary of the employee and then a deduction u/s 80CCD(2) will be allowed. |
Contribution of |
Employee |
Own |
Employer |
Amount of Deduction |
Salaried Individual - 10% of salary (subject to section 80CCE) Self-Employed Individual - 20% of Gross Total Income (subject to section 80CCE) |
Rs.50,000/-. irrespective of whether a deduction is allowed under 80CCD(1). |
In the case of the employer is the Central Government - A maximum of 14% of the Salary
In the case of other employers - A Maximum of 10% of the Salary |
Section 80CCE: Ceiling limit for deductions under sections 80C, 80CCC and 80CCD(1) with effect from A.Y. 2018-19.
Total deduction under sections 80C, 80CCC and 80CCD(1) cannot exceed Rs.1,50,000/-. The same is tabulated below:
Section |
Investment/ Contribution |
Ceiling Limit |
80C |
Specified Investments |
Rs.1,50,000/- |
80CCC |
Contribution to certain pension funds |
Rs.1,50,000/- |
80CCD(1) |
Contribution to NPS of Government |
|
80CCE |
Aggregate Deduction under the above sections |
Rs.1,50,000/- |
Ceiling limits under other sections that are outside the limit of Rs. 1,50,000/- specified under section 80CCE is tabulated as below:
Section |
Investment/ Contribution |
Ceiling Limit |
80CCD(1B) |
Contribution to NPS of Central Government eg. Atal Pension Yojana. |
Rs. 50,000/- |
80CCD(2) |
Contribution by the employer to NPS of Central Government |
In the case of the employer is the Central Government - 14% of the Salary In case of other employers - Maximum 10% of Salary |
80D - Deduction in respect of medical insurance premium
Eligible Assessee |
Individual or HUF |
Expenditure |
The following expenditure should be incurred:
The expenditure can be incurred by the assessee being:
|
Amount of Deduction |
For Individuals paying for Self, Spouse & Dependent Children: Rs. 25,000/- An additional Deduction is allowed if paid for by Parents: Rs. 25,000/- (If one of the parents is a senior citizen or a very senior citizen then Rs. 50,000/-) The deduction for Preventive Health check-ups should not exceed Rs. 5000/- however, this limit is not in addition to the above limit of Rs. 25,000/- or Rs. 50,000/-. The deduction of medical expenditure should not exceed the limit of Rs. 50,000/- |
Mode of Payment |
Any mode is other than Cash. However, cash is allowed in the case of a Preventive Health Checkup. |
Section 80DD - Deduction for expenditure incurred on maintenance and medical treatment of dependant disabled.
Eligible Assessee |
Resident Individual and Resident HUF. |
Conditions |
The expenditure should be made as follows:
|
Amount of Deduction |
The amount of deduction is Rs. 75,000/-. In case of severe disability (person with 80% or more disability), the amount of deduction will be Rs. 1,25,000/- |
Meaning of “Dependant” |
Individual - Spouse, children, parents, brother or sister of Individual who is wholly or mainly dependant on such Individual. HUF - A member of HUFl who is wholly or mainly dependent on such HUF. |
Meaning of “Disease” |
The disease includes Autism, Cerebral Palsy and Multiple disability disorder. |
Section 80DDB - Deduction for expenditure incurred on medical treatment etc.
Eligible Assessee |
Resident Individual and Resident HUF. |
Conditions |
|
Amount of Deduction |
The amount of deduction is:
The amount of deduction will be reduced by the amount recovered through insurance or reimbursed by the employer for the medical treatment of the assessee or dependant. |
Meaning of “Dependant” |
Individual - Spouse, children, parents, brother or sister of Individual who is wholly or mainly dependant on such Individual. HUF - A member of HUF who is wholly or mainly dependent on such HUF. |
80E - Deduction in respect of interest loan taken for higher education
Eligible Assessee |
Individual |
Conditions |
|
Period of Deduction |
For a total 8 years or entire repayment whichever is earlier. |
Meaning |
Higher Education: Any course after the 12th standard. Relative: Spouse & Children |
80EE - Deduction for interest on loan borrowed for acquisition of self-occupied house property by an individual
Eligible Assessee |
Individual |
Conditions |
|
Amount of Deduction |
Interest paid on Housing Loans up to Rs.50,000/- |
80G - Deduction in respect of donations to certain funds, charitable institutions etc.
Eligible Assessee |
Any assessee |
Categories of Donations |
The following are the categories of Donations:
|
Amount of Deduction |
The amount of Deduction is based on the Donee to whom the Donation is made. The following amount of Deduction is available based on categories of donation:
|
Other Points |
|
List of Donee in Category 1:
- The National Defence Fund set up by the Central Government
- Prime Minister’s Relief Fund
- Prime Minister’s Armenian Relief Fund
- The Africa (Public Contributions - India) Fund
- The National Children’s Fund
- The National Foundation for Communal Harmony
- Approved University or educational institution of national eminence
- Maharashtra Chief Minister’s Earthquake Relief Fund
- Any Fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the Gujarat Earthquake
- Any Zila Saksharta Samiti for primary education in villages and towns and for literacy and post-literacy activities
- National Blood Transfusion Council or any State Blood Transfusion Council whose sole objective is the control, supervision, regulation or encouragement of the operation and requirements of blood banks
- Any State Government Fund is set up to provide medical relief to the poor.
- The Army Central Welfare Fund Indian Naval Benevolent Fund or Air Force Central Welfare Fund was established by the armed forces of the Union for the welfare of past and present members of such forces or their dependants.
- The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- The National Illness Assistance Fund
- The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund
- The National Sports Fund set up by the Central Government
- The National Cultural Fund set up by the Central Government
- The Fund for Technology Development and Application set up by the Central Government
- National Trust for the welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
- The Swachh Bharat Kosh, set up by the Central Government
- The Clean Ganga Fund, set up by the Central Government (only Residents are eligible for deduction)
- The National Fund for Control of Drug Abuse
Section 80GG - Deduction for Rent Paid
Eligible Assessee |
Individual or HUF, self-employed or salaried not receiving HRA at any time during the year. |
Conditions |
|
Amount of Deduction |
The deduction will be the lowest of:
|
Meaning of Adjusted Total Income |
Adjusted Total Income means Income excluding:
Also, deduction under section 80GG is to be excluded. |
Other requirements |
The Assessee needs to file Form 10BA containing details of payment of rent. |
Example |
Mr A pays a rent of Rs. 10,000/- per month. His total income before deduction under section 80GG is Rs. 4,80,000/-. The deduction that will be allowed to him under section 80GG will be as follows:
The lowest of the above is Rs.60,000/- which will be allowed as a deduction under section 80GG. |
Section 80GGC - Deduction for Contribution to Political Parties
Eligible Assessee |
Any assessee except company, local authority and an artificial juridical person wholly or partly funded by the government. |
Conditions |
The contribution should be made in any mode other than cash. In other words, Cash Contribution is not allowed. |
Amount of Contribution |
Full Amount of Contribution made. |
Contribution to whom? |
Political Party or Electoral Trust. Political Party means any Political Party registered under section 29A of the Representation of the People Act. |
80TTA - Deduction in respect of interest on deposits in savings accounts
Eligible Assessee |
Individual or HUF |
Conditions |
Earn Interest from Savings Bank Account Upto Rs.10,000/- |
Amount of Deduction |
Amount of Interest earned or Rs.10,000/- whichever is less. |
Other Points |
Interest on bonds, partner’s capital, FD interest, Sweep TD interest, etc are not eligible for this deduction. |
Section 80U: Deduction for a person with a disability.
Eligible Assessee |
Resident Individual. |
Conditions |
|
Amount of Deduction |
The amount of deduction is Rs. 75,000/-. In case of severe disability (person with 80% or more disability), the amount of deduction will be Rs. 1,25,000/- |
Meaning of “Disease” |
The disease also includes Autism, Cerebral Palsy and Multiple disability disorder. |
The deductions under Chapter VIA are both effective and efficient. A lot of these investments just don’t help you save money but also help it grow. At the end of the day, you would want to protect your corpus and add more amount to it. With certain Chapter VIA deductions, you can do both.
If you haven’t already started, now might be the best time to start investing in various Chapter VIA instruments and make the most of your money.
FAQs
-
Is there any limit for deductions under Section 80C?
Yes, the upper limit is set at INR 1,50,000 for a fiscal year. Though you can invest more than the limit, you can only claim deductions up to the prescribed limit.
-
Is Section 80C limited only to individuals?
The section is primarily for individuals and Hindu Undivided Families (HUF). Thus, a company cannot seek deductions under this section.For further queries or support, you can raise a request at support@myITreturn.com
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