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Common Tax Deductions in India

“Spend what is left after saving” – Warren Buffett

‘Saving’ is an extremely important part of ‘Earning’. The earlier individuals understand the advantages of saving the easier it becomes to achieve their financial goals. This saving comes from the ‘income’ generated by work or investments.

What is Income?

Income is money that an individual or business receives in exchange for providing labor, producing a good or service, or investing capital. Individuals most often earn income through wages or salary. Businesses earn income from selling goods or services above their cost of production

https://www.investopedia.com/terms/i/income.asp

What is Income Tax?

Income tax is a direct tax that a government levies on the income of its citizens. … Income does not only mean money earned in the form of salary. It also includes income from house property, profits from business, gains from the profession (such as a bonus), capital gains income, and ‘income from other sources. In the changing scenario, digital India is helping all taxpayers to file their returns in the comfort of virtual modes.

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https://www.business-standard.com/about/what-is-income-tax

What is Tax Deduction?

tax deduction is a deduction that lowers a person or organization’s tax liability by lowering their taxable income. Deductions are the expenses that the taxpayer incurs during the year that can be applied against or subtracted from their gross income in order to figure out how much tax is owed. Tax deductions are a form of tax incentives, along with exemptions and credits

All income taxpayers in India can avail the under-given Income Tax Deductions under different categories and heads.  Check these deduction limits to avail the tax benefit

SECTION 80C/80CCC/80CCD

This is the most largely used option to save tax.

Max Limit is up to Rs. 1, 50,000

This can be availed with contribution towards:

  • LIFE INSURANCE PREMIUM
  • CHILDREN’S TUITION FEE
  • TAX-SAVING FIXED DEPOSITS
  • HOME LOAN PRINCIPAL REPAYMENT
  • CONTRIBUTION TO PUBLIC PROVIDENT FUND(PPF) ACCOUNT
  • EMPLOYEE PROVIDENT FUND (EPF)
  • EQUITY LINKED SAVING SCHEME (ELSS)
  • UNIT LINKED INVESTMENT PLANS (ULIP)
  • NATIONAL PENSION SCHEME (NPS)
  • SUKANYA SAMRIDDHI YOJANA (SSY)
  • SENIOR CITIZEN SAVING SCHEME (SCSS) 
  • NATIONAL SAVING CERTIFICATES (NSC)

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https://www.sbi.co.in/web/personal-banking/investments-deposits/govt-schemes/senior-citizens-savings-scheme

Various Brands for Life & Health Insurance

ICICI Prudential Life Insurance Vector Logo - (.SVG + .PNG) -  SeekVectorLogo.Net
HDFC ERGO General Insurance Company - Wikipedia
Aditya Birla Sun Life open to consolidation due to Covid-19 disruptions: MD  | Business Standard News
Max Life Insurance - Wikipedia

SECTION 80D

Max Limit Rs. 25,000

Under Section 80D of the Income Tax, the annual premium paid for a health insurance policy is deductible from the taxable income. The upper limit for the deductible amount is Rs.  25,000 and can be extended for up to Rs. 50,000 for senior citizens (with effect from 1 April 2018). This means that an individual can enjoy a deduction of up to Rs. 75,000 from the taxable income. If the age of both the proposer and his parents is more than 60 years, the deductible amount can extend up to Rs. 1,00,000 (Rs. 50,000 + Rs. 50,000).

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SECTION 80DD

Max Limit: Rs.75, 000 for dependent with non-severe disability

A dependant person with a disability is one who is surviving with 40% of any specified disability. The family member who takes care of medical treatment charges, training, and rehabilitation of the dependant person can claim a tax deduction of up to Rs 75,000/-

Max Limit: Rs. 1, 25,000 for dependent with severe disability

A dependant person with severe disability is one who is surviving with 80% of any disability. The family member who takes care of medical expenses of the dependant person with severe disability can claim tax deduction of up to Rs 1,25,000/-

SECTION 80DDB

Max Limit: Rs. 1, 00,000 for senior citizens
Max Limit: Rs. 40,000 for non-senior citizens

Expenditure incurred on medical treatment of specified diseases for self or dependent.

An individual can claim for deduction for incurring medical expenditure either for self or for a family dependent. Under Section 80DDB, an individual can claim for deduction of up to Rs 40,000. If an individual on behalf of whom such medical expenditure is incurred is a senior citizen, then one can claim for deduction up to Rs 1,00,000 per annum.

 https://www.goodreturns.in/section-80ddb-of-income-tax-act-s9.html

SECTION 80E

No limit

Deduction on entire interest amount on education loan for self or dependents. An individual who has taken an education loan for higher education can avail the tax deduction under Section 80E of the Income Tax Act, 1961. The best part about this deduction is one can avail it even after availing the maximum provided deduction of Rs. 1,50, 000 under Section 80C.

SECTION 80EE

Max Limit: Rs. 50,000

Deduction of Interest paid on home loan availed from any financial institution for affordable housing. Interest up to Rs. 35 lakh paid on home loan to buy first house worth up to Rs. 50 lakh. As a boon for the first time home buyers, section 80EE has been reintroduced from FY 2016-17

Read more at : https://taxguru.in/tag/section-80ee/

SECTION 80EEA

Max Limit: Rs. 1,50,000

This is a Tax deduction for interest paid on a home loan for buying a first house worth up to Rs. 45 lakh. This is available to individuals only. The loan should be availed between 1 April 2019 and 31 March 2020.

SECTION 80G

Depending on the trusts/charities, the tax exemption could be 50-100%, with or without the qualifying limit. Donations made during the year to specified charitable institutions or specified relief funds. However, all donations do not qualify for tax deductions.

SECTION 80GG

Max Limit: Rs. 60,000

Amount paid during the year towards rent in respect to any furnished/unfurnished residential accommodation

SECTION 80TTA

Max Limit: Rs. 10,000

Interest income from deposits in savings account(s) with a bank or a co-operative bank or a post office

SECTION 80TTB

Max Limit: Rs. 50,000

Interest income of a senior citizen on deposits with a bank or a co-operative bank or a post office

SECTION 80U

Max Limit: Rs. 75,000 for self with disability
Max Limit: Rs. 1, 25,000 for self with severe disability

This deduction can be claimed by only by a disabled individual who is certified by a medical authority as a person with disability

SECTION 80EEB

Max Limit: Rs.1, 50,000

Available on interest amount on loan taken for purchase of electric vehicle from any financial institution between 1 April 2019 and 31 March 2023

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