Navigating the complexities of tax deductions can be daunting for individual taxpayers and business owners alike. Understanding the available deductions is crucial to maximizing your tax savings. Here, we will explore 21 key deductions that you can claim while filing your income tax returns.
1. Section 80C – Popular Deductions
Section 80C is one of the most popular sections among taxpayers, allowing a maximum deduction of Rs 1.5 lakh from the total income. Here are some investments and expenditures that qualify:
- Life Insurance Premiums: Policies for self, spouse, and children.
- ELSS Funds: Equity-linked saving schemes.
- NPS Scheme: National Pension Scheme.
- ULIP: Unit-linked insurance plans.
- Tax Saving FD: Fixed deposits with a tenure of 5 years.
- PPF: Public Provident Fund accounts.
- Senior Citizen Savings Scheme.
- National Savings Certificate.
- Sukanya Samriddhi Yojana.
- Payments for House Property: Payments towards the purchase or construction of a residential house.
- Tuition Fees: For full-time education of children.
- Post Office Time Deposit Rules.
2. Section 80CCD (1B) – NPS Contribution
Investments up to Rs.50,000 in the National Pension Scheme (NPS) are eligible for deduction under Section 80CCD (1B).
3. Section 80CCD(2) – Employer’s Contribution to NPS
Employer contributions towards NPS qualify for deductions over and above the Rs 1.5 lakh limit under Section 80CCE:
- Central Government Employees: Up to 14% of basic salary + DA.
- Other Employees: Up to 10% of basic salary + DA.
4. Section 80GG – House Rent Paid
For rent payments where HRA is not received, deductions can be claimed under Section 80GG, subject to:
- Rent paid minus 10% of adjusted total income.
- Rs 5,000 per month.
- 25% of adjusted total income.
5. Section 80E – Interest on Education Loan
Interest on loans for higher education for self, spouse, children, or dependent students is deductible for up to 8 years or until the interest is repaid, whichever is earlier.
6. Section 80D – Medical Insurance
Deductions on medical insurance premiums:
- Rs.25,000 for insurance of self, spouse, and dependent children.
- Additional Rs 25,000 for insurance of parents (below 60 years).
- Rs 50,000 for parents aged 60 and above.
- Combined deduction of Rs 1 lakh if both taxpayer and parents are aged 60 or above.
- Additional Rs 5,000 for preventive health check-ups.
7. Section 80DD – Medical Treatment for Dependents with Disability
Deductions for expenses on medical treatment, training, and rehabilitation of disabled dependents:
- Rs 75,000 for 40% to 80% disability.
- Rs 1,25,000 for severe disability (80% or more).
8. Section 80DDB – Specified Diseases
Deductions for treatment of specified diseases:
- Up to Rs 40,000 for expenses incurred on self or dependents.
- Up to Rs 1 lakh for senior citizens.
9. Section 80U – Disabled Individuals
Deductions for individuals with disabilities:
- Rs 75,000 for physical or mental disabilities.
- Rs 1,25,000 for severe disabilities.
10. Section 80G – Donations
Donations qualify for 100% or 50% deduction depending on the trust, provided donations above Rs 2000 are made in modes other than cash.
11. Section 80GGC – Political Donations
Deductions for donations to political parties or electoral trusts.
12. Section 80RRB – Royalty Income
Deduction of up to Rs 3 lakh for income from royalty on patents registered after April 1, 2003.
13. Section 80TTB – Senior Citizens
Deductions of up to Rs 50,000 on interest income from deposits held by senior citizens.
14. Section 80TTA – Savings Account Interest
Deduction of up to Rs 10,000 on interest income from savings accounts in banks, cooperative societies, or post offices.
15. Sections 80IA – 80JJAA – Business Deductions
Various deductions for businesses under specified conditions.
16. Section 16 – Standard Deduction
Standard deduction of Rs 50,000 or the salary amount, whichever is lower.
17. Section 16 – Entertainment Allowance
Deduction of actual entertainment allowance or 1/5th of salary, limited to Rs 5,000.
18. Section 23/24 – Municipal Taxes on Property
Deduction for municipal taxes paid on rented property.
19. Section 24 – Interest on Borrowed Capital
Deduction of Rs 30,000 or Rs 2,00,000 for interest on borrowed capital, subject to conditions.
20. Section 57 – Commission or Remuneration
Deductions for reasonable sums paid as commission or remuneration for realizing interest or dividend income.
21. Section 57(ii) – Family Pension
Deduction of 1/3rd of family pension or Rs 15,000, whichever is less.
Conclusion
Understanding and utilizing these deductions can significantly reduce your tax liability. Always keep proper documentation and proof to claim these deductions. Be mindful of the differences between the old and new tax regimes, as not all deductions apply to both.
Happy Filing, and I hope you can save some tax!
| Section | Deduction | Details |
|---|---|---|
| 80C | Rs 1.5 lakh | Life insurance, ELSS, NPS, etc. |
| 80CCD(1B) | Rs 50,000 | Additional NPS contribution |
| 80CCD(2) | Varies | Employer NPS contribution |
| 80GG | Varies | Rent without HRA |
| 80E | No limit | Education loan interest |
| 80D | Rs 1 lakh | Medical insurance |
| 80DD | Rs 1.25 lakh | Dependent’s medical treatment |
| 80DDB | Rs 1 lakh | Specified diseases treatment |
| 80U | Rs 1.25 lakh | Disabled individuals |
| 80G | Varies | Donations |
| 80GGC | No limit | Political donations |
| 80RRB | Rs 3 lakh | Royalty income |
| 80TTB | Rs 50,000 | Senior citizens’ interest income |
| 80TTA | Rs 10,000 | Savings account interest |
| 80IA-80JJAA | Varies | Business deductions |
| 16 | Rs 50,000 | Standard deduction |
| 16 | Rs 5,000 | Entertainment allowance |
| 23/24 | No limit | Municipal taxes on property |
| 24 | Rs 2 lakh | Interest on borrowed capital |
| 57 | Varies | Commission or remuneration |
| 57(ii) | Rs 15,000 | Family pension |