Important Deduction

7 Apr    Tax Issue

Deduction is the amount, which is reduced from the gross total income before computing tax. There are various Tax Deductions or tax exemptions provided by the Indian Income Tax Act. The tax deductions help to deduct an amount from the taxable income and help to save tax. Each year, one can save thousands of rupees in income tax through income tax deductions.

Deduction under Section 80C

Investments up to 1 lac in PF, VFP, PPF, Insurance Premium, Housing loan principal repayment, NSC, ELSS, long term bank Fixed Deposit, Post Office Term Deposit, etc. are deductible from the taxable income under sec 80C.

There is no limit on individual items, so all 1 lac can be invested in NSC, for example.

The only exception is PPF where the maximum investment is limited to Rs.70,000/-.

Read More: Section 80C and Section 80CCF

Deduction under Section 80CCF

An additional Rs.20,000/- can be invested in long-term infrastructure bonds

Read More: Section 80C and Section 80CCF

Medical Insurance Premium for self (sec 80D)

Medical Insurance (such as Mediclaim) premium is exempt upto Rs.15,000/- per year for self, spouse & dependent children.

Read More: Deductions under Chapter VI-A (sec 80D)

Medical Insurance Premium for parents (sec 80D)

An additional Rs.15,000/- is exempt towards premium for parents (even if they are not dependent). If the parent(s) are above 65 years of age, an extra Rs.5,000/- can be claimed

Read More: Deductions under Chapter VI-A (sec 80D)

Medical for handicapped dependents (Sec 80DD)

Deduction in respect of medical treatment of handicapped dependents is limited to Rs.50,000/- per year if the disability is less than 80%. If the disability is more than 80% then Rs.1,00,000/- per year

Medical for specified diseases (Sec 80DDB)

Deduction in respect of medical treatment for specified ailments or diseases for the assesse or dependent can be claimed upto Rs.40,000/- per year.

If the person being treated is a senior citizen, the exemption can go up to Rs.60,000/-

Higher Education Loan Interest Repayment (Sec 80E)

Interest repayment on education loan (taken for higher education from a university for self, spouse & children) is tax exempt from the 1st year of repayment up to a maximum of 8 years.

There is no exemption for Principal payment

Donation to approved fund and charities (sec 80G)

Donations given for certain charities are tax exempt. Some are exempt to the tune of 50%, whereas others are 100%.

Donations for certain scientific research and rural development are exempt.

Now a day’s some innovative Mutual Funds are also available which can give you the benefit of Donation

Deduction under section 24(b), interest on housing loan

If the house is rented out there is no limit.
This exemption is available on accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether you’ve paid it or not.

Read More: Deductions on Housing Loan

Rent deduction (sec 80GG) only if HRA not received

Salaried people who pay rent and get a House Rent Allowance (HRA) can claim exemption. Read Important Exemption

If you do not get HRA, but have rented a house, an exemption is available.

This will be calculated as minimum of

25% of total income or

Rent paid – 10% of total income or

Rs.24,000/- per year

Here, Total Income means:

Your Gross Total Income

Less long term capital gain, and short term capital gain  (like STCG from sale of shares)

Less all deductions other than the deduction under Section 80GG

Deduction for permanent disability (80U)

You can take an deduction of up to Rs.75,000/- per year, if you have a permanent physical disability (including blindness).

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