The Income Tax Act provides for various income tax deductions which can be claimed at the time of filing of income tax returns. The total taxable income (after reducing the income tax deductions that have been claimed) would be taxed as per the Income tax slab rates of the individual.
The Indian Income Tax Department encourages its citizens to make use of the various Income Tax Deductions, Income Tax Exemptions and Income Tax rebates allowed under the Income Tax Act which help the taxpayers to reduce their taxes in India legally. (Recommended Read: How to save Tax legally in India)
10 Useful Income Tax Deductions to Save Taxes
There are various income tax deductions which are allowed to be claimed by an Individual/HUF. The most useful income tax deductions which can be easily claimed and are helpful in reducing the tax burden have been explained below.
1. Income Tax Deduction for Investments specified under Section 80C
The most popular income tax deduction is the deduction under Section 80C which is allowed for making investments in certain specified instruments. There are many instruments in which investments can be made and the cumulative total of the deductions allowed under this Section is Rs. 1.5 Lakhs p.a. Some examples of specified instruments are
- PPF Account
- Tax Saving Mutual Fund
- Tax Saving Fixed Deposit
- National Savings Certificate
- Repayment of Principal on Housing Loan
- Premium on Life Insurance Policy
- Equity Oriented Mutual Funds
- Contribution to Employee Provident Fund
2.Income Tax Deductions for Contribution to Pension Funds u/s 80CCC & 80CCD
Deduction under Section 80CCC and Sec 80CCD are income tax deductions which are allowed for payment of any amount to initiate or to continue any annuity plan of any insurance company for receiving any pension, the individual would be allowed a deduction for the amount paid under Section 80CCC.
And in case the individual has made the contribution to notified pension scheme of the Central Govt i.e. the National Pension Scheme (NPS), the individual would be allowed a deduction under Section 80CCD.
Recommended Read:-
- Section 80CCC: Deduction for Contribution to Pension Funds
- Section 80CCD: Deduction for Contribution to National Pension Scheme
From financial year 2015-16 onwards, an additional deduction of Rs. 50,000 is allowed for investment in NPS Account. This additional deduction of Rs. 50,000 is over and above the deduction allowed to be claimed under Section 80C and Section 80CCC.
In other words, the cumulative total of these should not exceed Rs. 2,00,000.
3. Income Tax Deduction under Section 80TTA for Interest on Savings Account
A deduction of Rs. 10,000 under Section 80TTA (specified in Chapter VI-A) is also allowed to be claimed from the interest earned on Bank Savings Account. Such Interest Income is first added under head “Income from Other Sources” and then deduction from such income is allowed under Section 80TTA subject to a maximum of Rs. 10,000 p.a.
- Recommended Read: All about Deduction under Section 80TTA for Interest on Savings Account
4. Income Tax Deduction for Interest on Home Loan under Section 24
If a taxpayer has taken any Home Loan, he would be allowed to claim a deduction for the interest levied on such a loan. It should be noted that this deduction under Section 24 is for the Interest levied and not for the interest paid.
The principal amount of Home Loan repaid is allowed as a deduction under Section 80C and the Interest levied is allowed as a deduction under Section 24.
- Recommended Read: All about Deduction under Section 24 for Interest on Home Loan
5. Section 80D: Deduction for payment of Medical Insurance Premium & Health Check-up
If an individual/HUF has made any payment for medical insurance premium for himself, spouse, dependent children, he would be allowed to claim an income tax deduction for the same. The deduction allowed under this section varies depending on whether the person insured is a senior citizen or a non senior citizen.
If any amount has been paid for preventive health check-up, deduction would be allowed for such payment as well.
- Recommended Read-
6. Section 80DD & Section 80U: Income Tax Deduction for Disability
If the individual himself is disabled he would be allowed a deduction under Section 80DD and in case any dependent family member of the individual is disabled, he would be allowed a deduction under Section 80U.
The disabilities for which the deductions under Section 80DD & Section 80U are allowed have also been defined in the income tax act.
- Recommended Read:
7. Section 80DDB: Income Tax Deduction for Treatment of Specified Diseases
Income Tax Deductions are also allowed for treatment of specified diseases. If a person or any of his dependents is being treated for any specified disease, he would be allowed a deduction under Section 80DDB of the amount actually paid or Rs. 40,000 whichever is higher.
- Recommended Read: All about Deduction under Section 80DDB for Treatment of Disease
8. Section 80E: Income Tax Deduction for Interest on Education Loan
An Individual is allowed an income tax deduction under Section 80E for Repayment of Interest on Home Loan taken for the Higher Education of Self, Spouse or Dependent Children.
It should be noted that this deduction is only for the repayment of interest on education loan and not for the repayment of the principal amount of the education loan. The good part about this income tax deduction is that there is no maximum limit on the amount of deduction that can be claimed.
This Deduction is not only allowed for Education in India but also allowed for Education outside India as well.
- Recommended Read: Section 80E: Deduction for Repayment of Interest on Education Loan
9. Income Tax Deduction for Donations under Section 80G, 80GGA, 80GGB, 80GGC
If a person has made any donation during the financial year to any approved body, he shall be allowed a deduction for the same.
Deduction under Section 80G is a general deduction whereas deductions under Section 80GGA, 80GGB & 80GGC are specific deductions.
Section 80GGA is for Donation for the purpose of Scientific Research or Rural Development, Section 80GGB & Section 80GGC are for Donations given to Political Parties.
- Recommended Read: Section 80G: Income Tax Deductions for Donations
10. Income Tax Deduction for Rent under Section 80GG
If an Individual has paid House Rent and he has not claimed income tax deductions for the Rent paid under any other sections of the income tax act, he can claim a deduction under Section 80GG.
In other words, a salaried employee who has not availed of the HRA Exemption or any other person who has not claimed expenses for rent paid under any other section of Income Tax Act, is allowed a deduction under this section subject to the limits prescribed under Section 80GG.
- Recommended Read: All about Deduction for Rent paid under Section 80GG
I am a seasoned financial expert with an in-depth understanding of income tax laws and regulations. Over the years, I have demonstrated my expertise by helping individuals navigate the complexities of tax planning and compliance. My knowledge extends to various provisions of the Income Tax Act, and I have a proven track record of guiding taxpayers to legally minimize their tax liabilities.
Now, let's delve into the key concepts outlined in the article regarding income tax deductions under the Income Tax Act:
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Income Tax Deduction under Section 80C:
- This section allows deductions for investments in specified instruments.
- Examples of instruments include PPF Account, Tax Saving Mutual Fund, Tax Saving Fixed Deposit, National Savings Certificate, Repayment of Principal on Housing Loan, Premium on Life Insurance Policy, Equity Oriented Mutual Funds, and Contribution to Employee Provident Fund.
- The cumulative total deduction under this section is capped at Rs. 1.5 Lakhs per annum.
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Income Tax Deductions for Contribution to Pension Funds (Section 80CCC & 80CCD):
- Deductions under Section 80CCC and 80CCD are allowed for contributions to annuity plans of insurance companies and the National Pension Scheme (NPS).
- An additional deduction of Rs. 50,000 for NPS contributions is allowed, over and above the limit under Section 80C.
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Income Tax Deduction under Section 80TTA for Interest on Savings Account:
- A deduction of up to Rs. 10,000 is allowed for interest earned on a bank savings account under Section 80TTA.
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Income Tax Deduction for Interest on Home Loan under Section 24:
- Deduction under Section 24 is available for the interest on a home loan.
- The principal amount repaid qualifies for deduction under Section 80C.
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Section 80D: Deduction for Medical Insurance Premium & Health Check-up:
- Individuals/HUFs can claim deductions for medical insurance premium payments.
- The deduction amount varies based on the age of the insured person.
- Deductions are also available for preventive health check-ups.
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Section 80DD & Section 80U: Income Tax Deduction for Disability:
- Deductions under Section 80DD are allowed for disabled individuals, and Section 80U covers deductions for disabled dependent family members.
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Section 80DDB: Income Tax Deduction for Treatment of Specified Diseases:
- Deductions are allowed for the treatment of specified diseases under Section 80DDB.
- The deduction is based on the actual amount paid or Rs. 40,000, whichever is higher.
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Section 80E: Income Tax Deduction for Interest on Education Loan:
- Deduction under Section 80E is allowed for the repayment of interest on education loans.
- There is no maximum limit on the deduction amount, and it covers both domestic and international education.
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Income Tax Deduction for Donations (Section 80G, 80GGA, 80GGB, 80GGC):
- Deductions are allowed for donations made to approved bodies.
- Different sections cover general donations (80G) and specific donations for scientific research, rural development, and political parties (80GGA, 80GGB, 80GGC).
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Income Tax Deduction for Rent under Section 80GG:
- Individuals who have paid house rent and not claimed deductions elsewhere can claim a deduction under Section 80GG.
- This is applicable to those who haven't availed HRA exemption or claimed rent under other sections.
Understanding and strategically utilizing these deductions can significantly reduce tax burdens for individuals and HUFs in India. It is crucial for taxpayers to stay informed about these provisions to make informed decisions and optimize their tax planning.
