What is a deduction on an Income tax form?
Income Tax Deductions are available under sections 80C to 80U of the IT Act, 1961. These deductions help to reduce your taxable income. Deductions are considered while calculating ‘Total Taxable Income’. The amount of deduction varies, depending on the type of tax deduction you claim. You can claim deduction for amounts spent in medical expenses, tuition fees, and charitable contributions. To get tax deductions you can also invest in various schemes such as retirement savings schemes, life insurance plans, and national savings schemes etc.
Total Taxable Income = Gross Total Income – Deductions.
Gross Total Income: It means total income computed in accordance with the provisions of the Act before making any deduction. Deductions are available under sections 80C to 80U of the Income Tax Act, 1961.
Income Tax Deductions
income tax deductionDeductions under sections 80C to 80U are as follows,
Tax Deductions under Section 80C
Under section 80C, you can get tax deductions on Life Insurance premiums, contributions to PF, subscription to certain equity shares or debentures. Deduction is limited to the amount of maximum Rs. 1,50,000. Subsections available under Section 80C are,
- Section 80CCC: Deduction arising from contributions to certain pension funds of any insurer. Deduction under this section is allowed up to Rs. 1,00,000.
- Section 80CCD: Deduction in respect of contribution to pension scheme notified by Central Government. Deduction is allowed up to 10% of your salary.
- Section 80CCF: Tax deduction for subscription to notified long-term infrastructure bonds. You can get tax deduction up to Rs.20,000.
- Section 80CCG: Deduction is allowed up to Rs. 25,000 for investing in notified equity savings scheme. It is available for Individuals and members of HUF (Hindu undivided family).
Income Tax Deductions under Section 80D
Under Section 80D, you can get tax deductions on Medical Insurance premiums for self, spouse and children. Deduction is not allowed for cash mode. It is available for Individual and HUF. Deduction of upto Rs. 5,000 for Central Government / preventive health check-up is available.
- Section 80DD: Deduction is allowed up to Rs. 50,000 (Rs. 75,000 for next Assessment Year) for individual /HUF and resident of India for the expense incurred in medical treatment of handicapped dependent (who is the person with disability). For severe disability deduction is allowed up to Rs. 75,000 (Rs. 1,25,000 for next AY).
- Section 80DDB: Deduction is allowed up to Rs. 40,000 (Rs. 60,000 for Senior Citizens) for individual/HUF and Indian resident for the expenses incurred in medical treatment of diseases and ailments that are specified.
Deduction in Income Tax under Section 80E
Under Section 80E, you can get tax deductions on Interest or loan taken for higher education. It is applicable only for Individuals.
- Section 80EE: Deduction is allowed up to Rs. 3, 00,000 for Individual in respect of interest on loan taking for residential house property.
- Conditions: 1. Must be Individual. 2. Should take loan 3. Amount of loan should be up to Rs. 25, 00,000/-
Income Tax Deduction under Section 80G
Under Section 80G, you can get tax deduction in respect of donation to certain funds, charitable institutions etc. It is applicable for all assessees (i.e. Individual, company, firm, AOP, BOI, etc.)
- Section 80GG: Deduction is allowable for Rent paid. Amount of deduction is Rs 2000 per month or 25% of total income or excess of actual rent paid over 10% of total income.
- Section 80GGA: Deduction is allowable in respect of Donations for social, scientific, or rural development program or statistical research.
- Section 80GGB: Deduction is allowable on Amount contributed to any political party or electoral trust.
- Section 80GGC: Deduction is allowable on Sum contributed to any political party or electoral trust.
Deduction of Income Tax under Section 80 IA
Under Section 80G, tax deduction is allowable for profits and gains from enterprises engaged in infrastructure development or industrial undertakings.
- Section 80-IAB: Deduction is acceptable for the developers of SEZ in respect of profits and gains derived from the business of developing a SEZ (Special Economic Zone).
- Section 80-IB: Deduction is acceptable for all assesses for profits and gains from hotel,industrial undertakings, scientific research & development, cold storage plant,mineral oil concern, housing projects, convention centers,cold chain facility, multiplex theatres etc.
- Section 80-IC: Deduction is acceptable for all assesses for profits and gains derived by an enterprise in the special category states like Uttaranchal, Himachal Pradesh, Arunachal Pradesh, Manipur, Assam, Meghalaya, Nagaland, Mizoram, and Tripura.
- Section 80-ID: Deduction is acceptable for all assesses in respect of profits and gains from business of hotels and convention centers in certain areas.
- Section 80-IE: Deduction is acceptable for all assesses for taking up certain activities in Northeastern states.
Tax Deductions under Section 80J
The revised Section 80J includes the following sub sections
- Section 80JJA: Deduction is acceptable for all assesses in respect of profits and gains from the business of collecting and processing bio-degradable waste.
- Section 80JJAA: Deduction is allowable in respect of 30% additional wages paid to new regular workmen employed in the PY (previous year). Under section 80JJAA, tax deduction can be availed by Indian company having profits and gains derived from manufacturing of goods.
Income Tax Deductions under Section 80U
Under Section 80U, tax deduction is allowed in case of person with disability (who is certified by the medical authority in the previous year). Multiple disabilities include Autism, cerebral palsy etc. Only individuals can avail this tax deduction u/s 80U. A resident individual with a disability of 40% or more can claim for Rs. 50,000/- (Rs. 75,000 for next Assessment year) and with a disability of 80% or more can claim for Rs. 1,00,000/- (Rs. 1,25,000 for next Assessment year).