Income Tax Deductions
The tax deduction is a reduction in tax obligation from your gross taxable income. Tax deductions are deducted from taxable income which is also known as adjusted gross income. Tax deduction varies in amount as different incomes are treated differently under various sections of the income tax act. Income Tax Deductions and Exemptions: Budget 2018-19 Highlights
All Salaried Individuals
· Standard Deduction of Rs. 40,000 has been allowed for salaried taxpayers. Medical Allowance and Transport Allowances has been discontinued.
· Government to contribute 12% EPF contribution for new employees (with less than 3 years of employment) in all sectors.
· New women employees (with less than 3 years of employment) to contribute only 8% of salary for EPF contribution as opposed to 12% earlier.
Senior Citizens
· Tax deduction under Section 80 D for Health Insurance expenditure has been increased to Rs. 50,000 from Rs. 30,000 earlier.
· Expense of up to Rs. 1 lakh incurred on critical illness has been exempted from tax under Section 80 DDB. Earlier the exemption was Rs. 60,000 for senior citizens and Rs. 80,000 for very senior citizens.
· Tax exempted interest income on deposits with banks has been increased from Rs. 10,000 to Rs. 50,000. Further, TDS will not be required to be deducted under section 194A and it has been extended to all FD and RD schemes.
Income Tax Deductions under section 80C to 80U
Section | Permissible limit | Type of investment, expense or income | Eligible claimants |
80C | Maximum Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) | PPF, EPF, Bank FD's, NSC, LIC premium, tuition fees | Individuals, HUFs |
80CCC | Maximum Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) | Pension funds | Individuals |
80CCD | Maximum Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) | Pension fund initiated by the central government | Individuals |
80TTA | Up to Rs. 10,000 per year | Interest on bank savings account | Individuals and HUFs |
80CCG | 50% of the amount invested a subject maximum of Rs. 25,000 | Equity saving schemes | Individuals |
80CCF | Up to Rs. 20, 000 | Long-term infrastructure bonds | Individuals and HUFs |
80D | For individual taxpayers- Premium up to Rs. 25,000 in the case of individuals and up to Rs. 30,000 for senior citizens
For HUFs- Premium up to Rs. 25,000 and up to Rs. 30,000 in case the member insured is a senior citizen or super senior, citizen | Medical insurance premium and Health check up | Individuals and HUFs |
80E | No limit defined | Interest on repayment of Education loan | Individuals |
80EE | Maximum Rs. 50,000 | Interest on the loan payable for acquiring a residential house property | Individuals |
80G | Differs from the amount of donation | General donations of any recognized society | Individuals, HUF's, Companies, Firms |
80GGA | Depends on a quantum of donation | Donations to Scientific Research or Rural development | Those who do not have income from business or profession |
80GGB | Depends on the quantum of donation | Donations to political parties | Indian companies |
80GG | Rs. 5000 per month or 25% of total income whichever is less | Rent paid if HRA is not received | Individuals not receiving HRA |
List of taxation deductions for FY 2018-19, AY 2019-20
Income tax deductions beneath Section 80C
Income tax section 80C replaced section eighty-eight and have become effective on the first Gregorian calendar month, 2006. This section provides provisions on a variety of payments. The eligible taxpayers will claim deductions of most quantity up to Rs. 1.5 large integer annually. each people and HUFs are eligible for taxation deductions beneath 80C.
This section includes the subsequent investments and expenses:
Investment in PPF: you'll be able to claim a deduction for investment created in PPF account. you'll be able to invest most of Rs. 1.5 large integer in a very year. Receipts on maturity and withdrawal are tax-free.
Investment in National savings certificate: National Savings Certificate is eligible for deductions within the year they're purchased. Interest increased on such certificates is eligible for tax deductions annually beneath section 80C, however, becomes taxable at the time of maturity.
Investment in fastened deposit: Interest earned on fastened deposits with tenure or not but 5 years are eligible for write-down beneath section 80C. For senior voters, tax exempted interest financial gain on deposits with banks has been raised from Rs. 10,000 to Rs. 50,000. Further, TDS won't be needed to be subtracted beneath section 194A and it's been extended to any or all FD and RD schemes
Premium on insurance policy: you'll be able to claim a deduction beneath section 80C for the premium procured an insurance policy as per the taxation act.
Contribution to worker provident fund: you'll be able to claim a write-down for the contribution created in worker provident fund beneath section 80C. Government to contribute twelve-tone system of EPF contribution for brand new workers (with but three years of employment) altogether sectors. New ladies workers (with but three years of employment) to contribute solely eightvo of earnings as EPF contribution as against twelve-tone system earlier.
Equity homeward mutual funds: you'll be able to claim a write-down for investment created in any unit of mutual funds whether or not it's listed on an exchange or not.
Repayment of principal on housing loan: you'll be able to claim a write-down on the principal quantity procured equity credit line beneath section 80C.
Tuition Fees: you'll be able to claim a write-down for the schooling fees paid beneath section 80C. However, the deduction can solely be applicable just in case the fees in paid by cheque.
Tax deductions beneath Section 80CCC and 80CCD for contribution to pension funds
You can claim a write-down beneath Section 80CCC and 80CCD for the contribution created to Pension Funds. If you've got contributed any quantity in any insurance theme to receive a pension, then you'll be able to claim a write-down beneath 80CCC. However, if you've got contributed in any pension theme initiated by the central government, up to a tenth of your earnings like National Pension theme than you'll be able to claim a write-down beneath section 80CCD.
Note: As per taxation Act, the most limit of Rs. 1.5 large integer is Associate in a Nursing mixture of deduction that will be claimed beneath section 80C, 80CCC, and 80CCD. However, Associate in Nursing exclusive tax deduction is out there for NPS subscribers beneath section 80CCD. As per taxation act, Tier one account holder gets an extra deduction for investment up to Rs. 50, 000 in NPS. This deduction is over and higher than the deduction of Rs. 1.5 large integer on the market beneath section 80C of IT Act, 1961.
Section 80TTA: Deductions for interest on the bank account
You can claim a write-down beneath section 80TTA for interest earned on the bank account. The deduction is subject to the most quantity of Rs. 10,000. However, the financial gain earned are going to be 1st additional beneath the top of financial gain from alternative sources 1st and at that time the deduction will be claimed.
Tax deduction beneath section 80D for payment of medical premium and scrutiny up
You can claim a write-down beneath this section for the payment of medical premium for self, partner or any kid. additionally, any quantity procured scrutiny up may also be claimed for write-down that shall not exceed to Rs. 5,000.
Section 80E: taxation deduction for interest on Education Loan
You can claim a write-down beneath section 80E for interest paid on the compensation of Education loan. The deduction will solely be claimed on the interest paid on the compensation of loan and not on the principal quantity.
Section 80EE: Deduction for interest collectible on loan taken for acquisition of a residential house property
You can claim a write-down beneath section 80EE for Associate in Nursing interest collectible for loan taken for acquisition of a residential house property. the most deduction claimed is Rs. 50,000.
Tax deduction beneath section 80G, 80GGA, 80GGB, and 80GGC for donations
You can claim a write-down beneath section 80G for a general donation created throughout a yr. Deductions beneath section 80GGA will be claimed if the donation is formed for research or Rural development. Deductions beneath section 80GGB and 80GGC will be claimed if a donation is formed to any party.
Section 80GG: write-down for rent procured FY18
You can claim a write-down beneath section 80GG for the rent procured house. However, you'll be able to claim deduction beneath this section solely shut in once you haven't received house rent allowance. If you're receiving HRA then you're not entitled to deduction beneath this section. you'll be able to claim deduction beneath section 80GG once the rent paid by you is over a tenth of your total financial gain subject to most of Rs. 5000 per month or twenty-five of total financial gain whichever is a smaller amount.
Income tax exemption
As per chapter III of taxation act, 1961, there exists a provision of taxation exemption. There are few varieties of mere incomes on that you'll be able to get Associate in Nursing exemption from paying tax. this suggests at the time of hard taxation sure incomes won't be added. the foremost common incomes that are exempted from taxation are listed below:
House rent allowance - HRA tax exemption
Salaried people receive house rent allowance (HRA) from their leader. Associate in Nursing exemption against HRA beneath Chapter ten of taxation Act is feasible if the worker resides in a very rented accommodation and pays rent to the owner. The HRA exemption may also be claimed by submitting proof of rent paid to the leader or at the time of filing ITR. The payer simply must know what quantity exemption he will avail and so cipher the overall taxable financial gain once adjusting the exemption.
HRA exemption is subject to the worker really staying on rent. the number of HTA exemption is that the lower of:
• HRA received from the leader
• Actual rent paid less tenth of basic monthly earnings
• 40% of basic earnings for those staying in anywhere except the metros cities of Old Delhi, Mumbai, Kolkata, and Madras. just in case of individuals staying in these four cities, the exemption will be up to fiftieth of basic earnings
Leave Travel help - LTA tax exemption
Leave travel help (LTA) received from the leader towards the price of domestic travel town or for vacation once in 2 years by rail or by air for self and relations will be claimed as exempt financial gain.
This deduction will solely be claimed by an individual from the leader directly. LTA is allowed to assert double within the block of 4 years. this block is 2014-2018. However, workers are currently allowed to hold one unwanted LTA to next year also.
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