Income Tax Deductions from Gross Total Income

The impact of Deductions available under various sections of Income Tax Act is not same for all. It depends upon applicable tax rates as per the total taxable income and status of assessees. An assessee, whose income is taxable at higher rates will have more tax savings i.e. more impact on his / her tax liability than the assessee whose income is taxable at lower rates. You may use Maximize Tax Savings tool to check the impact of various availabe deductions to you on your tax liability.

Deductions Allowable under various sections of Chapter VIA of Income Tax Act :

•  Section 80C (Various investments) •  Section 80CCC (Premium for annuity plans)

•  Section 80CCD(1) (Assessee's contribution to pension a/c) •  Section 80CCD(2) (Employer's contribution to pension a/c)

•  Section 80CCG (Rajiv Gandhi Equity Saving Scheme) •  Section 80D (Medical/health ensurance)

•  Section 80DD (Reh. of handicapped dependent relative) •  Section 80DDB (Medical exp. on self/dependent relative)

•  Section 80E (Intt. on loan for higher studies) •  Section 80G (Donations)

•  Section 80EE (Intt. on loan for residential house property) •  Section 80G (Donations)

•  Section 80GG (House rent) •  Section 80GGA (Donations)

•  Section 80GGC (Sci. Research/Rural Dev.) •  Section 80RRB (Royalty on patents)

•  Section 80QQB (Royalty on books) •  Section 80TTA (Saving bank intt.)

•  Section 80U (Physical disability) •  Section 24 (Home loan intt.)

Section 80C:

This section has been introduced by the Finance Act 2005. Broadly speaking, this section provides deduction from total income in respect of various investments/ expenditures/payments in respect of which tax rebate u/s 88 was earlier available. The total deduction under this section (alongwith section 80CCC and 80CCD) is limited to Rs. 1.50 lakh only (Increased from Rs. 1.00 lacs w.e.f. 01.04.2014).

Life Insurance Premium For individual, policy must be in self or spouse's or any child's name. For HUF, it may be on life of any member of HUF.

Sum paid under contract for deferred annuity for individual, on life of self, spouse or any child .

Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self-spouse or child Payment limited to 20% of salary.

Investment in Senior Citizens Savings Scheme 2004 for 5 year by resident individuals.

Contribution made under Employee's Provident Fund Scheme.

Contribution to PPF For resident individual, can be in the name of self/spouse, any child & for HUF, it can be in the name of any member of the family.

Contribution by employee to a Recognised Provident Fund.

Sum deposited in 10 year/15 year account of Post Office Saving Bank

Subscription to any notified securities/notified deposits scheme. e.g. NSS

Subscription to any notified savings certificate, Unit Linked Savings certificates. e.g. NSC VIII issue.

Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanrakhsa 1989

Contribution to notified deposit scheme/Pension fund set up by the National Housing Scheme.

Certain payment made by way of instalment or part payment of loan taken for purchase/construction of residential house property. 

Condition has been laid that in case the property is transferred before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year.

Contribution to notified annuity Plan of LIC(e.g. Jeevan Dhara) or Units of UTI/notified Mutual Fund. If in respect of such contribution, deduction u/s 80CCC has been availed of rebate u/s 88 would not be allowable.

Subscription to units of a Mutual Fund notified u/s 10(23D).

Subscription to deposit scheme of a public sector, company engaged in providing housing finance.

Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.

Tuition fees paid at the time of admission or otherwise to any school, college, university or other educational institution situated within India for the purpose of full time education of any two children. Available in respect of any two children

 

Section 80CCC: Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurer

Payment of premium for annuity plan of LIC or any other insurer Deduction is available upto a maximum of Rs. 100,000/-. (This limit has been increased from Rs. 10,000/- to Rs. 1,00,000/- w.e.f. 01.04.2007).

The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund.

Note: The limit for maximum deduction available under Sections 80C, 80CCC and 80CCD(1) (combined together) is Rs. 1,00,000/- (Rs. one lac only). An additional deduction upto a maximum of Rs. 20,000/- will be available from Assessment Year 2011-12 (FY 2010-11) for investment in Infrastructure Bonds.

Section 80CCD (1): Deduction in respect of Contribution to Pension Account (by Assessee}

Deduction available for the amount paid or deposited in a pension scheme notified or as may be notified by the Central Government subject to a maximum of :

(a) 10% of salary in the previous year in the case of an employee (b) 10% of gross total income in any other case.

Section 80CCD (2): Deduction in respect of Contribution to Pension Account (by Employer}

Deduction available for the amount paid or deposited by the employer of the assessee in a pension scheme notified or as may be notified by the Central Government subject to a maximum of 10% of salary in the financial year.

Section 80CCG:

Amount invested by resident individuals, whose gross total income does not exceed Rs. 12 lakhs, in listed shares or listed units in accordance with notified scheme for a lock-in period of 3 years (Subject to certain conditions).

Deduction of 50 % of total investment subject to maximum of Rs. 25,000 in 3 consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed shares or list units of equity oriented funds are first acquired.

Section 80D: Deduction in respect of Medical Insurance

Deduction is available upto Rs. 20,000/- for senior citizens and upto Rs. 15,000/ in other cases for insurance of self, spouse and dependent children. Additionally, a deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 20,000/- if parents are senior Citizen and Rs. 15,000/- in other cases. Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/-. From AY 2013-14, within the existing limit a deduction of upto Rs. 5,000 for preventive health check-up is available.

Section 80DD: Deduction available to resident Individual and HUF in respect of Rehabilitation of Handicapped Dependent Relative

Deduction of Rs. 50,000/- w.e.f. 01.04.2004 in respect of

Expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependent relative.

Payment or deposit to specified scheme for maintenance of dependent handicapped relative.

Further, if the defendant is a person with severe disability a deduction of Rs. 100,000/- shall be available under this section. The handicapped dependent should be a dependent relative suffering from a permanent disability (including blindness) or mentally retarded, as certified by a specified physician or psychiatrist. Note: A person with 'severe disability' means a person with 80% or more of one or more disabilities as outlined in section 56(4) of the 'Persons with disabilities (Equal opportunities, protection of rights and full participation)' Act.

Section 80DDB: Deduction allowed to resident Individual and HUF in respect of Medical Expenditure on Self or Dependent Relative

A deduction to the extent of Rs. 40,000/- (Rs. 60,000 in case of senior citizen) or the amount actually paid, whichever is less is available for expenditure actually incurred by resident assessee on himself or dependent relative for medical treatment of specified disease or ailment. The diseases have been specified in Rule 11DD. A certificate in form 10 I is to be furnished by the assessee from any Registered Doctor.

Section 80E: Deduction in respect of Interest on Loan for Higher Studies

Deduction in respect of interest on loan taken for pursuing higher education. The deduction is also available for the purpose of higher education of a relative w.e.f. A.Y. 2008-09.

Section 80EE: Deduction in respect of Interest on Residential House Property

The deduction under this sub-section is available w.e.f. AY 2014-15. The maximum deduction available is Rs. 1 lac. In a case where the interest payable for the financial year 2013-14 is less than Rs. 1 lac, the balance deduction amount shall be available in AY 2015-16.

The deduction under sub-section (1) shall be subject to the following conditions :

the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2013 and ending on the 31st day of March, 2014;

the amount of loan sanctioned for acquisition of the residential house property does not exceed twenty-five lakh rupees;

the value of the residential house property does not exceed forty lakh rupees;

the assessee does not own any residential house property on the date of sanction of the loan.

If deduction for Housing Loan Interest is availed under this section, no deduction can be availed for such interest under any other provisions of the Act for the same or any other assessment year.

Section 80G: Deduction in respect of Various Donations

The various donations specified in Sec. 80G are eligible for deduction upto either 100% or 50% with or without restriction as provided in Sec. 80G

Section 80GG: Deduction in respect of House Rent Paid

Deduction available is the least of

Rent paid less 10% of total income

Rs. 2000/- per month i.e. Maximum Deduction available is 24,000/-

25% of total income, provided

Assessee or his spouse or minor child should not own residential accommodation at the place of employment.

He should not be in receipt of house rent allowance.

He should not have self occupied residential premises in any other place.

Section 80GGA: Deduction in respect of certain donations for scientific research or rural development

Section 80GGC: Deduction in respect of contributions given by any person to political parties

Section 80QQB: Royalty Income of resident individuals on patents.

Maximum deduction Rs. 3,00,000/-

Section 80RRB: Royalty Income of resident individual authors of certain books other than text books.

Maximum deduction Rs. 3,00,000/-

Section 80 TTA: Deduction from gross total income in respect of any Income by way of Interest on Savings account

Deduction from gross total income of an individual or HUF, upto a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account ( not time deposits ) with a bank, co-operative society or post office, is allowable w.e.f. 01.04.2012 (Assessment Year 2013-14).

Section 80U: Deduction in respect of Person suffering from Physical Disability

Deduction of Rs. 50,000/- to a resident individual who suffers from a physical disability(including blindness) or mental retardation. Further, if the individual is a person with severe disability, deduction of Rs. 100,000/- shall be available u/s 80U. Certificate should be obtained from a Govt. Doctor. The relevant rule is Rule 11D.

Deductions Allowable under Section 24 of Income Tax Act :

Where a housing property has been acquired / constructed / repaired / renewed with borrowed capital, the amount of interest payable yearly on such capital is allowed as deduction under Section 24 of Income Tax Act, subject to the limits stated below. Penal interest on housing loan is not eligible for deduction. If a fresh loan has been raised to repay the original loan and the new loan has been used only for the purpose of repaying the original loan then, the interest accrued on such fresh loan is allowed for deduction.

If the property is acquired or constructed with the capital borrowed on or after 01-04-1999 and such acquisition or construction is completed within 3 years of the end of the financial year in which capital was borrowed then the actual interest payable is allowed as deduction subject to a maximum Rs. 2,00,000/- (Rs. 1,50,000/- upto 31.03.2015).

In other case interest up to maximum Rs. 30,000/- is deductible.

The ceiling of Rs.2,00,000/- (Rs. 1,50,000 upto 31.03.2015) or Rs. 30,000/- is only in case the property is self occupied. There is no limit on deduction of interest if the property is let out.

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