Income Tax Deductions for Indian Residential Individual.

Under section 80C, a deduction of Rs 1,50,000 can be claimed from your total Income.

You can reduce up to Rs 1,50,000 from your total taxable income through section 80C.A maximum of Rs 1, 50,000 can be claimed for the financial year 2016-17. The limit for the financial year 2017-18 is also Rs 1, 50,000. If you have paid excess taxes, but have invested in LIC, PPF, Mediclaim etc., you can file your Income Tax Return and get a refund.

Investments eligible for deductions under Section 80C of Income Tax Act :

1. Employee Provident Fund (EPF) & Voluntary Provident Fund (VPF)
2. Public Provident Fund (PPF)
3. National Savings Certificate (NSC)
4. 5 Year Post Office Time Deposit
5. 5 year Tax Saving Bank Fixed Deposits (FD)
6. Equity Linked Savings Scheme (ELSS)
7. Unit Linked Insurance Plan (ULIP)
8. Senior Citizens Savings Scheme (SCSS)
9. Sukanya Samriddhi Scheme

Section 80CCC of the Income Tax Act 1961 provides tax deductions for contribution to certain pension funds. The section provides tax deduction up to a maximum of Rs.1.5 lakh per year on expenses incurred in buying a new policy or continuing an existing policy that pays pension or a periodical annuity. It works in conjunction with section 80C and 80CCD so that the maximum total deduction available under all three sections (80C, 80CCC & 80CCD) is Rs. 1,50,000(1.5 lakh).

This section provides a deduction to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer. The plan must be for receiving a pension from a fund referred to in Section 10(23AAB). If the annuity is surrendered before the date of its maturity, the surrender value is taxable in the year of receipt.

1. The plan must be for receiving pension from a fund referred to in Section 10(23AAB). Amount for policy must have been paid out of income chargeable to tax (deduction cannot exceed the taxable income).
2. Interests or bonuses accrued from the policy are not eligible to be claimed as tax deductions.
3. The proceeds from the policy as pension funds are liable for taxes as they will be treated as income of previous year. This includes accrued interests and bonuses, if any.
4. The amount received after the surrender of annuity plan whether in whole or in part is also chargeable to tax.
5. Pension received from the annuity plan is also chargeable to tax.

This section provides tax deductions for contribution to the pension schemes notified by Central Government, i.e., National Pension Scheme (NPS) & Atal Pension Yojana (APY). There are two parts or sub-sections of this section namely – section 80CCD(1) & section 80CCD(2).

Section 80CCD(1):

This part applies to all the individual tax payers who are employed by the Central Government/any other employer or any other individual assessee. All citizens of India between the ages of 18 and 60 years can contribute to NPS on a voluntary basis. An NRI can also contribute to NPS. This Scheme can be participated in addition to PPF and EPF.

1. Up to 10% of salary for salaried employee.
2. and 10% of gross income for other taxpayer who is not under salaried employment.

Part (1B) provides additional deduction of Rs. 50,000 for contribution made by an assessee under NPS.

Note : The maximum deduction as an aggregate of section 80C,80CCC & 80CCD(1) should not exceed Rs. 1,50,000 but after including section 80 CCD(1B), total deduction limit becomes Rs. 2,00,000.

Here salary means (basic pay + dearness allowance)

Section 80CCD(2):

Deduction is also allowed to an employee if his employer makes contribution to employee’s account in the pension scheme of Central Government.

The deduction allowed here for employer’s contribution is up to 10% of the salary of the individual.

Taxability of amount received back from the National Pension Scheme & Atal Pension Yojana

40% of the payment received from the National Pension System Trust to an employee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD shall be exempt u/s 10(12A).

Balance 60% will be taxable, but if the same is used for purchase an annuity plan, then it shall not be considered as income of individual at the time of closure of the account.

Further the periodic pension/annuity received from such annuity plan will be includible in the taxable income in the year of receipt and taxable accordingly. So in a sense by purchasing an annuity plan one can defer the tax liability or avoid/reduce the tax if he is not expected to have significant taxable income post retirement in future.

In case of death of account holder, the amount received by nominee of departed on closure of account is exempt from tax.

A deduction of maximum Rs 10,000 can be claimed against interest income from a savings bank account. Interest from savings bank account should be first included in other income and deduction can be claimed of the total interest earned or Rs 10,000, whichever is less. This deduction is allowed to an individual or an HUF. And it can be claimed for interest on deposits in savings account with a bank, co-operative society, or post office. Section 80TTA deduction is not available on interest income from fixed deposits, recurring deposits, or interest income from corporate bonds.

The interest you receive on your savings bank account is considered as your income and therefore it is taxable. However, you also get some tax deduction on the same income. Section 80TTA of the Income Tax Act offers tax deduction on interest income earned from deposits held in savings account of some financial institutions.

Deduction limit :

1. Interest income earned from a savings account up to Rs. 10,000 is tax deductible from the gross income.
2. Any interest earned over and above Rs. 10,000 is considered “Income from Other Sources” and therefore taxable.
3. In other words, maximum deduction allowed u/s 80TTA is Rs. 10,000.

Eligible savings accounts :

1. Savings accounts in bank or banking companies.
2. Savings accounts in post offices.
3. Savings accounts in co-operative societies involved in banking business.

1. This deduction is available for rent paid when HRA is not received. The taxpayer, spouse or minor child should not own residential accommodation at the place of employment.
2. The taxpayer should not have self-occupied residential property in any other place.
3. The taxpayer must be living on rent and paying rent.

Deduction available is the minimum of :

1. Rent paid minus 10% of total Income.
2. Rs 5000/- per month
3. 25% of total Income.

For the financial year 2016-17 – Deduction calculation has been raised to Rs 5,000 a month from Rs 2,000 per month. Therefore a maximum of Rs 60,000 per annum can be claimed as a deduction.

A deduction is allowed for interest on loan taken for pursuing higher education. This loan may have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a legal guardian. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. There is no restriction on the amount that can be claimed.

Just like expenses incurred on school education bring you tax benefits, expenses on higher education also fetch you tax deductions. If higher education is supported by education loan, then interest paid on it can reduce your taxes. However, there are certain conditions that you must meet in order to get the benefit.

1. Only individuals who pay interest on education loan can claim the benefit. The tax benefit is not available to HUF.
2. The benefit can be claimed by the parent as well as the child, which means that the person who pays the education loan whether parent or child can start claiming this deduction.
3. Deduction is available on education loan taken for self, spouse and children or someone for whom the individual is a legal guardian.

1. In order to get tax deduction, loan must be taken from a financial institution or charitable institution recognized by central government.
2. Loan taken from family, friends and relatives does not qualify.
3. Tax benefit can be claimed on a loan taken for education anywhere in the world. It means that education loan taken to pursue higher education in India as well as abroad qualifies for deduction.
4. Loan should be taken for higher studies which means any full time graduate or post graduate course. Full time courses which can be pursued after 10+2 are eligible for it.

1. The deduction amount is only the interest paid on the loan taken for higher studies and there is no upper limit. You can get tax benefit on entire amount of interest paid but not the Principal amount.
2. Deduction is only available if interest is paid out of income chargeable to tax (i.e., deduction under this section cannot exceed the taxable income).

1. The maximum period allowed to claim deduction is up to 8 years starting the year in which you start repaying the interest on the loan or till the time interest is paid fully, whichever is less.

For Financial Year 2013-14 and Financial Year 2014-15 :

This section provides a deduction on the home loan interest paid. The education under this section is available only to individuals for the first house purchased where the value of the house is Rs 40 lakh or less. And the loan taken for the house is Rs 25 lakh or less. The loan has to be sanctioned between 01.04.2013 to 31.03.2014. The aggregate deduction allowed under this section cannot exceed Rs 1,00,000 and is allowed for financial years 2013-14 & 2014-15 (Assessment year 2014-15 and 2015-16).

This deduction is not available for the financial year 2015-16 (Assessment year 2016-17).

This section was revived in Budget 2016 and is applicable starting FY 2016-17. The deduction under this section is available only to an individual who is a first time home owner. The value of the property purchased must be less than Rs 50 lakh and the home loan must be less than Rs 35 lakh. The loan must be taken from a financial institution and must have been sanctioned between 01.04.2016 to 31.03.2017.

Under this section, an additional deduction of Rs 50,000 can be claimed on home loan interest. This is in addition to deduction of Rs 2,00,000 allowed under section 24 of the Income Tax Act for a self-occupied house property.

If you’re claiming this deduction in FY 2016-17, then you can continue to claim this deduction till the loan is repaid.

The Rajiv Gandhi Equity Saving Scheme (RGESS) was launched after the 2012 Budget. Investors whose gross total income is less than Rs. 12 lakhs can invest in this scheme. Upon fulfillment of conditions laid down in the section, the deduction is lower of, 50% of the amount invested in equity shares or Rs 25,000 for three consecutive Assessment Years.

Rajiv Gandhi Equity Scheme has been discontinued starting from April 1, 2017. Therefore, no deduction under section 80CCG will be allowed from AY 2018-19.

However, if you have invested in the RGESS scheme in FY 2016-17 (AY 2017-18), then you can claim deduction under Section 80CCG until AY 2019-20.

Deduction is available up to Rs. 25,000/- to a taxpayer for insurance of self, spouse and dependent children. If individual or spouse is more than 60 years old the deduction available is Rs 30,000. An additional deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 25,000/– if less than 60 years old and Rs 30,000 if parents are more than 60 years old. For uninsured super senior citizens (more than 80 years old) medical expenditure incurred up to Rs 30,000 shall be allowed as a deduction under section 80D. Therefore, the maximum deduction available under this section is to the extent of Rs. 60,000/-. (From AY 2016-17, within the existing limit a deduction of up to Rs. 5,000 for preventive health check-up is available).

If you have a dependent person in your family who is suffering from a disability, then you can avail tax benefit under section 80DD.

Following expenses are eligible in deduction under section 80DD :

1. Any expenditure made towards medical treatment, nursing, training, rehabilitation of a dependent person with disability.
2. Any amount paid as premium for a specific insurance policy designed for such cases. The policy must satisfy the conditions mentioned in the law.
3. If the disabled dependent predeceases the person claiming deduction under this section, then an amount equal to the amount of premium paid shall be considered to be the income of the claimer for previous year (i.e., the year in which such amount is received by the claimer / assessee) and shall be chargeable to tax.

Deduction amount : Deduction allowed varies depending on whether the dependent person has disability or severe disability :

Dependent person with disability :If the dependent person has at least 40% of any of the specified disability, then he is considered a person with disability. Hence, the individual taking care of the medical expenses of dependent person with disability can get tax deduction of Rs. 75,000.

Dependent person with severe disability :If the dependent person has at least 80% of any disability, then he is considered a person with severe disability. Hence, the individual taking care of the medical expenses of dependent person with severe disability can get tax deduction of Rs. 1,25,000.

Disabilities covered under section 80DD :

1. Blindness
2. Low vision
3. Leprosy-cured
4. Loco motor disability
5. Hearing impairment
6. Mental retardation
7. Mental illness
8. Autism
9. Cerebral palsy

A deduction Rs. 40,000/- or the amount actually paid, whichever is less is available for expenditure actually incurred by resident taxpayer 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 taxpayer from any Registered Doctor.

In case of senior citizen the deduction can be claimed up to Rs 60,000 or amount actually paid, whichever is less.
For very senior citizens Rs 80,000 is the maximum deduction that can be claimed.

Deduction of Rs. 75,000/- to an individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, deduction of Rs. 1,25,000 can be claimed. Certificate should be obtained from a Govt. Doctor. The relevant rule is Rule 11D. This is a fixed deduction and not based on bills or expenses.

For financial year 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.

The various donations specified in Sec. 80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in Section 80G. 80G deduction not applicable in case donation is done in form of cash for amount over Rs 10,000.

From Financial Year 2017-18 onwards – Any donations made in cash exceeding Rs 2000 will not be allowed as deduction. The donations above Rs 2000 should be made in any mode other than cash to qualify as deduction u/s 80G.

Donations with 100% deduction without any qualifying limit:

1. National Defence Fund set up by the Central Government
2. Prime Minister’s National Relief Fund
3. National Foundation for Communal Harmony
4. An approved university/educational institution of National eminence
5. Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
6. Fund set up by a State Government for the medical relief to the poor
7. National Illness Assistance Fund
8. National Blood Transfusion Council or to any State Blood Transfusion Council
9. National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
10. National Sports Fund
11. National Cultural Fund
12. Fund for Technology Development and Application
13. National Children’s Fund
14. Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
15. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
16. The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6,1993
17. Chief Minister’s Earthquake Relief Fund, Maharashtra
18. Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
19. Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001)
20. Prime Minister’s Armenia Earthquake Relief Fund
21. Africa (Public Contributions — India) Fund
22. Swachh Bharat Kosh (applicable from financial year 2014-15)
23. Clean Ganga Fund (applicable from financial year 2014-15)
24. National Fund for Control of Drug Abuse (applicable from financial year 2015-16)

Donations with 50% deduction without any qualifying limit :

1. Jawaharlal Nehru Memorial Fund
2. Prime Minister’s Drought Relief Fund
3. Indira Gandhi Memorial Trust
4. The Rajiv Gandhi Foundation

Deduction is allowed to an Indian company for amount contributed by it to any political party or an electoral trust. Deduction is allowed for contribution done by any way other than cash.

Political party means any political party registered under section 29A of the Representation of the People Act. Contribution is defined as per section 293A of the Companies Act, 1956.

Deduction is allowed to a taxpayer for any amount contributed to any political party or an electoral trust. Deduction is allowed for contribution done by any way other than cash.

Political party means any political party registered under section 29A of the Representation of the People Act.

Deduction for any income by way of royalty for a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available up to Rs. 3 lakhs or the income received, whichever is less. The taxpayer must be an individual resident of India who is a patentee. The taxpayer must furnish a certificate in the prescribed form duly signed by the prescribed authority.