Tax Deduction is the provision through which one can save the amount of tax payable to the Government. These deductions are based on several factors and are subject to various different investments and expenses are done by the taxpayer during a financial year. These deductions are provided to encourage the people to invest in different schemes and thereby contribute to the growth of the economy at a larger scale.
Section 80 deductions are one of the most popular income tax deductions available to the taxpayer. Chapter VI A of the Income Tax Act contains the different deductions under Section 80. These deductions are as follows:
Section 80C: Investments
Deductions on investments under section 80C are available for individuals and Hindu Undivided Family. All tax-paying individuals can claim a tax deduction under this section up to the amount of Rs.1.5 Lakhs annually. Tax deductions are available on various investments and expenses, some of which are listed below:
- Life Insurance Policies for spouses, children or for self
- Provident fund contributions
- Tuition fees for a maximum of two children
- Principal repayment of home loans
- Investments in Fixed Deposits for a minimum period of 5 years
- Investments in Senior Citizen Saving Schemes
- Investment in Equity Linked Saving Schemes, etc.
Section 80CCC: Insurance Premium
Section 80CCC of the Income Tax Act provides tax deductions to individuals for investments in annuity plans of LIC or any pension fund pertaining to Section10(23AAB). All pension received from the fund, interest or bonus received, however, is taxable.
Section 80 CCD(1): Contribution to Pension Account
Under this section, an employee can claim a maximum deduction of 10% of his salary (for employees) and 20% of the total income (for self-employed taxpayers) or the amount of Rs1.5 lakhs, whichever is less.
The total deduction available under Section 80C, 80CCC and 80 CCD (1) is limited to INR 1.5 lakhs.
This section entitles a taxpayer to a deduction up to the value of Rs.50, 000 for the amount invested in NPS account inclusive of the Atal Pension Yojana. This deduction is available over and above the deduction available under the above-mentioned sections.
All employers who contribute to the pension schemes for their employees are provided an additional deduction up to 10% of the salary amount with no cap set on the maximum amount for the salary.
Section 80 TTA: Interest on Savings Bank Account
Individuals, as well as HUF, are eligible for this tax deduction under section 80 TTA for a maximum of Rs.10,000 pertaining to income from interest from savings account of a bank, cooperative society or post office. This deduction is not valid for the income of interest from fixed deposits, recurring deposits or corporate bonds.
Section 80GG: Payment of House Rent
This deduction is available for individuals who do not receive any kind of HRA from their employers and are living in a rented property subject to 25% of the total adjusted income or Rs.5, 000 monthly whichever is less.
Section 80 E: Interest paid on Education Loan
This section provides deductions for loans taken by the taxpayer for self, spouse or children who are a student with the purpose of pursuing higher studies. This deduction is valid for a maximum period of 8 years or up till the time when the entire interest is paid, whichever is earlier. There is no limit on the deduction amount and the entire interest paid would be allowed as a deduction.
Section 80 EE: Interest on Home Loan
Individual taxpayers qualify for this deduction applicable for interest paid on home loans for property purchased for residential purposes. The following rules are applicable to avail tax rebate under this section:
- The taxpayer should have only this one house property.
- The value of the property should be less than Rs.50 lakhs.
- The loan taken for the property should be less than Rs.35 lakhs.
Section 80D: Medical Insurance
Individuals, as well as HUF, are eligible to a deduction of Rs.25,000 as per section 80D for investments on health insurance for self, spouse or dependent children. For parents less than 60 years of age, an additional rebate of Rs.25,000 is applicable whereas for parents above the age of 60 the applicable deduction is Rs.50,000.
In the event of the taxpayer and the parent both being above the age bracket of 60, the deduction amount applicable is Rs.1 lakh.
Section 80DD: Disabled Dependent
This section of the Income Tax Act provides for a deduction for all expenses incurred by an individual or a HUF for the medical assistance and rehabilitation of a disabled or handicapped dependent relative. A certificate of disability from a licensed medical authority is mandatory to claim tax deduction under this section. The rebate is applicable as follows:
- Rs.75,000 for a disability range of 40%-80%
- Rs.1,25,000 for a severe disability beyond 80%
The common disabilities which are considered for Disability deduction under this section are as follows:
- Low vision
- Loco-motor disability
- Mental retardation
Section 80DDB: Medical Expenditures
- For individuals or HUFs below the age of 60
A tax rebate of Rs.40,000 is applicable under this section for individuals as well as HUFs. An individual can avail of this deduction for all medical expenses incurred for specific diseases or ailments for himself or any of his dependants. HUFs can avail of this deduction for any of the HUF members who have incurred medical expenses for specific diseases.
- For Senior Citizens
If the assessee or the member of the HUF is a senior citizen the applicable deduction amount goes up to Rs.1 lakh
Section 80U: Physical Disability
All physical disabilities including blindness and mental retardation are considered for tax reduction under this section at Rs.75,000 for the respective individual. The amount of tax rebate is further raised to Rs.1,25,000 in the case of a severe disability.
Section 80G: Donations
Tax deductions of 50% and 100% are applicable for donations to various social causes under section 80G. However, cash donations of a maximum limit of Rs.2000 are only applicable for this rebate. Donations above Rs.2000 have to be done by other means to qualify for a tax deduction.
Some of the prominent donations which are considered for 100% tax deduction are as follows:
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti with the Collector of the District as the Chairperson
- State Government Fund for the medical relief to the poor
- National Illness Assistance Fund
- National 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
- Swachh Bharat Kosh
- Clean Ganga Fund
- National Fund for Control of Drug Abuse
Some prominent donations which qualify for 50% deduction are as follows:
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
- Indira Gandhi Memorial Trust
- The Rajiv Gandhi Foundation
So, if the tax-payer contributes to any of these charitable causes, the total contribution or 50% of the contribution would be allowed as a deduction from his/her taxable income.
Section 80GGB: Company Contribution
Any company contributing to a political party or to an electoral trust is eligible to this rebate but cash contributions are strictly non-permissible.
Thus, after going through all the deductions under section 80, one can easily choose the best way to save tax to suit his needs.