Income Tax Deductions and Exemptions
Deductions under the Income Tax Act
Government allows taxpayers to claim an income tax deduction to reduce the tax burden on them. The amount eligible for tax deduction is reduced from the total taxable income of a taxpayer, also known as adjusted gross income. There are different kinds of income tax deductions available for taxpayers. Check the details below:
Income Tax Deductions and Exemptions for different income group
2) Senior Citizens: The section 80D of the I-T Act allows senior citizens to claim tax deductions up to Rs 50,000 for Health Insurance expenditure. Under the section 80DDB of Income Tax Act, senior taxpayers can claim up to Rs 1 lakh on expenditure occurred due to critical illness. For more details, check the table below.
Income Tax Deductions allowed under section 80C to 80U of Income Tax Act
Tax deductions available under Section 80C of Income Tax Act
Both individuals and HUFs (Hindu Undivided Families) can claim tax deductions of a maximum amount upto Rs 1.5 lakh per year under section 80C. The deductions are allowed on following investments and expenses:
1) PPF: Taxpayers can invest a maximum of Rs 1.5 lakh in a year on PPFs. The maturity and withdrawal amount are also tax-free.
2) NSC: Taxpayers can claim a deduction on National Savings Certificate only for the year they are purchased. Taxpayers can claim a deduction on interest gained each year, however, the maturity amount is fully taxable.
3) FD: Tax deductions can be claimed on interest earned on fixed deposits with tenure of five years or more. Senior citizens can claim a tax deduction of up to Rs. 50,000 on interest income on deposits with banks.
4) Life insurance policy: Taxpayers can claim a tax deduction for the premium paid for a life insurance policy
5) EPF: Govt allows taxpayers to claim a deduction for the contribution made in employee provident fund (EPF).
6) ELSS: Taxpayers are allowed to claim a tax deduction for the investment made in any unit of equity-linked mutual fund schemes.
7) Principal amount paid for a home loan: Govt allows taxpayers to claim a deduction on the principal amount paid for the home loan.
8) Tuition fees: Govt allows taxpayers to claim a deduction for the tuition fees paid, however, the fees should be paid by cheque only.
Income Tax Exemptions
The chapter III of the Income Tax Act allows taxpayers various types of income tax exemptions. At the time of calculating tax liability of taxpayers, these incomes will not be added:
1) House rent allowance (HRA): Chapter 10 of Income Tax Act allows salaried individuals to claim a tax exemption against house rent allowance (HRA). However, the exemption is allowed only if the employee is living in rented accommodation and pays rent to the owner. To claim HRA exemption, individuals need to submit proof of rent paid to the landlord at the time of filing ITR.
Government allows taxpayers to claim an income tax deduction to reduce the tax burden on them. The amount eligible for tax deduction is reduced from the total taxable income of a taxpayer, also known as adjusted gross income. There are different kinds of income tax deductions available for taxpayers. Check the details below:
Income Tax Deductions and Exemptions for different income group
1) Salaried Individuals: Salaried individuals can claim a standard tax deduction up to Rs 40,000. This limit was increased to Rs 50,000 in the Interim Budget Session 2019. The increased limit of deduction will be applicable from FY 2019-20. Details of other deductions available under section 80C to section 80U of the Income Tax Act are provided below.
2) Senior Citizens: The section 80D of the I-T Act allows senior citizens to claim tax deductions up to Rs 50,000 for Health Insurance expenditure. Under the section 80DDB of Income Tax Act, senior taxpayers can claim up to Rs 1 lakh on expenditure occurred due to critical illness. For more details, check the table below.
Income Tax Deductions allowed under section 80C to 80U of Income Tax Act
I-T Section | Tax deduction limit | Type of investment/expense/income | Can be claimed by |
80C | Maximum Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) | PPF, EPF, Bank FD's, NSC, LIC premium, tuition fees | Individuals, HUFs |
80CCC | Maximum Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) | Pension funds | Individuals |
80CCD | Maximum Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) | Govt pension funds | Individuals |
80TTA | Up to Rs. 10,000 per year | Interest on bank savings account | Individuals and HUFs |
80CCG | 50% of amount invested subject maximum of Rs. 25,000 | Equity saving schemes | Individuals |
80CCF | Up to Rs. 20, 000 | Long term infrastructure bonds | Individuals and HUFs |
80D | Premium up to Rs 25,000 in case of HUFs/individuals and up to Rs 30,000 for senior citizens | Medical insurance premium and Health check up | Individuals and HUFs |
80E | No limit defined | Interest on repayment of Education loan | Individuals |
80EE | Maximum Rs. 50,000 | Interest on the loan payable for acquiring a residential house property | Individuals |
80G | Differs with the amount of donation | General donations of any recognized society | Individuals, HUF's, Companies, Firms |
80GGA | Depends on quantum of donation | Donations to Scientific Research or Rural development | Those who do not have income from business or profession |
80GGB | Depends on quantum of donation | Donations to political parties | Indian companies |
80GG | Rs. 5000 per month or 25% of total income whichever is less | Rent paid if HRA is not received | Individuals not receiving HRA |
Tax deductions available under Section 80C of Income Tax Act
Both individuals and HUFs (Hindu Undivided Families) can claim tax deductions of a maximum amount upto Rs 1.5 lakh per year under section 80C. The deductions are allowed on following investments and expenses:
1) PPF: Taxpayers can invest a maximum of Rs 1.5 lakh in a year on PPFs. The maturity and withdrawal amount are also tax-free.
2) NSC: Taxpayers can claim a deduction on National Savings Certificate only for the year they are purchased. Taxpayers can claim a deduction on interest gained each year, however, the maturity amount is fully taxable.
3) FD: Tax deductions can be claimed on interest earned on fixed deposits with tenure of five years or more. Senior citizens can claim a tax deduction of up to Rs. 50,000 on interest income on deposits with banks.
4) Life insurance policy: Taxpayers can claim a tax deduction for the premium paid for a life insurance policy
5) EPF: Govt allows taxpayers to claim a deduction for the contribution made in employee provident fund (EPF).
6) ELSS: Taxpayers are allowed to claim a tax deduction for the investment made in any unit of equity-linked mutual fund schemes.
7) Principal amount paid for a home loan: Govt allows taxpayers to claim a deduction on the principal amount paid for the home loan.
8) Tuition fees: Govt allows taxpayers to claim a deduction for the tuition fees paid, however, the fees should be paid by cheque only.
Income Tax Exemptions
The chapter III of the Income Tax Act allows taxpayers various types of income tax exemptions. At the time of calculating tax liability of taxpayers, these incomes will not be added:
1) House rent allowance (HRA): Chapter 10 of Income Tax Act allows salaried individuals to claim a tax exemption against house rent allowance (HRA). However, the exemption is allowed only if the employee is living in rented accommodation and pays rent to the owner. To claim HRA exemption, individuals need to submit proof of rent paid to the landlord at the time of filing ITR.
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