Deductions under Chapter VI A

Income tax deductions under Chapter VI A are a significant tax-saving opportunity where taxpayers can claim deductions on certain investments, expenses, and contributions made during the financial year. Deductions, therefore, play a crucial role in minimizing the amount of tax burden a taxpayer has to pay to the government.

What are Deductions Under Chapter VI A?

In an effort to motivate taxpayers to save and invest, the income tax department has provided various deductions under Chapter VI A. These deductions are deductible from a taxpayer’s taxable income.

Note: These deductions are only available under the old tax regime.

Conditions for Availing Deductions Under Chapter VI A

• Deductions under Chapter VI A are not eligible for special rate incomes such as short-term capital gains u/s 111A and long-term capital gains u/s 112A.
• Taxpayers cannot avail of deduction under Chapter VI A exceeding their gross total income.
  For example: Kamal’s gross total income is INR 4 lakh and his total deduction under Chapter VI A amounts to INR 4,50,000. Hence, the amount eligible for deduction is INR 4 lakh because the deduction (INR 4,50,0000) cannot exceed the gross total income (INR 4 lakh).
• Furthermore, you cannot carry forward the deduction.

Let us go through the major types of Chapter VI A Deductions of Income Tax Act:

Section 80C – Income Tax Saving on Investments & Payments

Section 80C allows deduction on certain investments and expenses mentioned under the Income Tax Act. The maximum limit for this deduction is INR 1,50,000.

Investments Eligible for Tax Deductions u/s 80C

• ELSS – Equity Linked Saving Scheme: It is an equity-based tax-saving mutual fund with a lock-in period of 3 years. Investments made up to INR 1,50,000 under ELSS qualify for tax benefits.
• PPF – Public Provident Fund: PPF, a government-backed scheme, offers a fixed interest rate of around 7.1% p.a. Investments range from INR 500 to a maximum of INR 1,50,000 annually, with tax exemption on deposit, interest, and withdrawal amounts.
• EPF – Employee Provident Fund: EPF, a savings scheme for employees, deducts a portion of their monthly salary. The fund, available upon retirement or job change, qualifies for tax deduction under section 80C.
• NSC – National Savings Certificate: It is a small savings scheme offered by the Indian Post Office earning an interest rate of 7% p.a.
• Tax Savings Fixed Deposits: These also known as term deposits are offered by different banks and financial institutions for tax saving investment u/s 80C.
• Sukanya Samriddhi Savings Scheme: It is aimed at the betterment of girl children in India. The deposits earn an interest of 7.6% p.a. with a maturity period of 21 years.
• ULIP – Unit Linked Insurance Plan: The amounts invested by an individual in a pension fund set up by a mutual fund or UTI is allowed as a deduction u/s 80C up to INR 1,50,000
• SCSS- Senior Citizen Savings Scheme: This scheme is available to any person above the age of 60 years, or 55 years who have opted for retirement. Savings under the SCSS scheme will earn interest at 8% p.a with a lock-in period of 5 years.
• Pension Fund by UTI: Investment amount under these funds up to INR 1,50,000 by an individual in a pension fund set up by a mutual fund or UTI is eligible for exemption.

Payments eligible for Income Tax deduction

• Life Insurance Premium: The amount paid as a life insurance premium for a self, spouse, or children is eligible for deduction. However, the amount paid should be less than 10% of the sum assured.
• Home Loan Repayment: This includes repayment of the principal amount towards a home loan taken for construction or purchase of residential house property. The stamp duty expenses, registration expenses, and transfer expenses paid are also eligible for deduction.
• Children Tuition Fees: Tuition fees paid for a full-time course to any school, college, university, or educational institute in India. The deduction is available for up to two children.

Section 80CCC – Deduction for Life Insurance Annuity Plan

Deduction u/s 80CCC allows a deduction to Individuals who have contributed towards specific pension funds of LIC or other insurance companies. The deduction limit is INR 1,50,000.

Further, pensions received from the annuities or amounts received upon surrendering annuities, including interest and bonuses accrued, are taxable during the year of receipt.

Section 80CCD – Tax Deductions for Contribution to Pension Fund

Any individual who contributes towards the National Pension Scheme (NPS) can claim a deduction under this section. There are 3 different parts of section 80CCD, that allow the deduction subject to different conditions.

Both Section 80C, 80CCC and 80CCD are covered under section 80CCE. The total deduction amount eligible for deduction u/s 80CCE is INR 1,50,000 in a financial year.

Tip

Both Section 80C, 80CCC and 80CCD are covered under section 80CCE. The total deduction amount eligible for deduction u/s 80CCE is INR 1,50,000 in a financial year.

Section 80D – Tax Deductions for Medical Insurance Premium

Section 80D of the income tax allows individuals and HUFs (Hindu Undivided Family) to claim a deduction for the amount paid towards medical expenditures. The medical expenditure includes:

• Medical insurance premium
• Medical expenditure
• Preventive health checkup

An individual taxpayer can claim the deduction for medical expenses paid for the following:

• Self
• Spouse
• Children
• Parents

For the Hindu Undivided Family (HUF), it allows a deduction for medical insurance premiums paid for any member of the HUF.

An individual or HUF can claim a deduction of INR 25,000, and they can claim an additional deduction of INR 25,000 if the parents are less than 60 years of age. If the parents are more than 60 years of age, the deduction amount increases to INR 50,000.

In case, both the taxpayer and parents are senior citizens (60 years or more) the maximum deduction limit will be INR 1 lakh.

Tip

In case, both the taxpayer and parents are senior citizens (60 years or more) the maximum deduction limit will be INR 1 lakh.

Section 80DD – Tax Deductions for Differently Abled Dependant

A Resident Individual / HUF can claim a deduction for any expenses incurred on the treatment of a dependent family member.
The list of diseases covered u/s 80DD is:

• Autism
• Cerebral palsy
• Blindness
• Low vision
• Leprosy cured
• Hearing impairment
• Locomotor disability
• Mental retardation
• Mental illness

The deduction limit u/s 80DD is:

Section 80DDB – Tax Deductions for Treatment of Specified Diseases

Section 80DDB is for expenses incurred on the treatment of specified diseases. The list of diseases covered u/s 80DDB are:

• Neurological Diseases with a disability of at least 40%
• Malignant cancer
• AIDS
• Chronic Kidney failure
• Haemophilia
• Thalassemia

The deduction limit u/s 80DDB is:

Find the best plan

Find the best plan

Explore

GET EXPERT HELP

Find the best plan

Find the best plan

Explore

Section 80U – Tax Deductions for Individuals with Disability

Deduction u/s 80U can only be claimed by resident individuals with a disability. HUF cannot claim tax deduction u/s 80U if any of its members are suffering from a disability.

An individual suffering from any of the following disabilities is eligible to claim this deduction:

• Autism,
• Cerebral palsy,
• Blindness,
• Low vision,
• Leprosy cured,
• Hearing impairment,
• Locomotor disability,
• Mental retardation,
• Mental illness.

The tax deduction limit u/s 80U is:

Section 80E – Tax Deductions for Interest on Education Loan

Section 80E allows a deduction for interest paid on repayment of education loans taken for higher education. However, the deduction u/s 80E is not available for principal repayment of the education loan. Further, there is no monetary limit under this section. Hence, an individual can claim the total interest amount paid as a deduction. However, a deduction is available only for 8 consecutive years.

Only individuals are eligible to claim deduction u/s 80E if they fulfill the following conditions:

• The loan must be taken from a financial or charitable institution.
• The loan repayment must be done by the taxpayer.
• The purpose of the loan taken should be to pursue higher education for self or a relative. Relative includes spouse, children, and student for whom an individual is a legal guardian.

Section 80EE – Tax Deductions for First-Time Home Buyers

Section 80EE was first introduced in the Budget 2014 only for 2 years (FY2013-14 & 2014-15) with a maximum deduction limit of INR 1 lakh.

However, this section was re-introduced in the Budget 2017. With effect from FY 2016-17 (AY 2017-2018) an individual can claim a deduction of up to INR 50,000 till the loan is repaid. This limit of INR 50,000 is over and above the deduction of INR 2 lakh allowed for home loan interest u/s 24.

To claim this income tax deduction, the following conditions must be fulfilled:

• An individual is a first-time home buyer.
• The value of a residential house should not exceed INR 50,00,000.
• A loan has to be sanctioned between 1st April 2016 to 31st March 2017.
• A loan must be sanctioned by Financial institutions or Housing Finance Companies.
• The sanctioned loan amount should not exceed INR 35,00,000.
• A taxpayer should not own any other residential house on the date of sanction of a loan.
• The deduction is not available for the loan taken for the purchase of commercial property.

Section 80EEA – Deduction in Respect of Interest on Housing Loan

Section 80EEA allows individuals an additional tax deduction on home loan interest. The eligible deduction amount is INR 1,50,000. Further, this limit of INR 1,50,000 is over and above the deduction of INR 2 lakh allowed for home loan interest u/s 24.

To claim this income tax deduction, the following conditions must be fulfilled:

• The sanction date of the loan is between 01-04-2019 to 31-03-2022.
• The loan is taken from a financial institution or housing finance company.
• The stamp duty value of the house should not exceed INR 45 lakh.
• The taxpayer cannot claim a deduction u/s 80EE.
• A taxpayer should not own any other residential house on the date of sanction of a loan.

Section 80EEB – Interest on Vehicle Loan

Section 80EEB allows a tax deduction to individual taxpayers for interest paid toward purchasing electric vehicles. The eligible deduction is INR 1,50,000.

Moreover, the sanction date of the loan should be between 1st April 2019 to 31st March 2023.

Section 80G – Donation to Charitable Organisations

Section 80G allows Individuals, HUFs, and businesses to claim income tax deductions for donations made to certain relief funds and charitable institutions. However, only donations made to funds prescribed by the government of India qualify as a deduction.

The qualifying limit eligible for deduction differs based on the charitable organization. Types of income tax deductions on donations u/s 80G are:

• 100% Income Tax Deduction without any qualifying limit
• 50% Income Tax Deduction without any qualifying limit
• 100% Income Tax Deduction subject to 10% of adjusted gross total income
• 50% Income Tax Deduction subject to 10% of adjusted gross total income

Income Tax Calculator

Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.

Explore

Income Tax Calculator

Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.

Explore

Section 80GG – Rent paid

Section 80GG allows a tax deduction for rent paid for furnished or unfurnished accommodation. However, the deduction is on;y allowed to the taxpayers who do not receive any HRA from their employer.

The following conditions must be fulfilled to claim a deduction u/s 80GG for Rent paid:

• Self-employed or salaried individuals paying house rent.
• In the case of a salaried person, they should not be receiving a House Rent Allowance from an employer.
• For claiming a deduction, Form-10BA needs to be submitted to the Income Tax Department.
• Assessee or spouse or minor child or HUF of which they are a member should not own any residential accommodation at the place where they are residing/performing office duties under-employment/carrying business or profession.
• The assessee should not own a house property at any place, for which income is calculated as income from self-occupied house property.

Deduction under this section will be the least of the following:

• Total rent paid less 10% of total income
• 25% of the annual salary
• INR 5000 per month i.e INR 60,000 annually

Section 80GGB – Deduction on Donation to Political Parties

Indian companies can avail of 100% of their contribution to the political party or electoral trust under section 80GGB. The term ‘political party’ refers to any political party that is registered under Section 29A of the Representation of the People Act.

However, the payment mode should not be in cash.

Section 80GGC – Deduction on Donation to Political Parties

Section 80GGC allows a tax deduction to all Persons (other than Indian Company) for their contribution to any political party or an electoral trust. 100% of their contribution are tax deductible subject to the mode of payment is not cash.

Section 80TTA – Savings Interest

Section 80TTA of the Income Tax Act allows a deduction on savings account interest. Hence, individuals (other than senior citizens) and HUFs can claim a deduction of up to INR 10,000 for a financial year. The bank account statements are required to calculate and claim deduction u/s 80TTA.

The following interests are eligible for deduction u/s 80TTA:

• Interest earned from a Saving Account with the Bank,
• Any interest earned from a Saving Account with the Co-operative Society,
• Interest earned from a savings account with the Post Office.

Section 80TTB – Interest Deduction on Deposits for Senior Citizens

Section 80TTB under the Income Tax Act allows resident senior citizens to claim a deduction on interest income up to INR 50,000 for a financial year. This section is applicable from FY 2018-19 (AY 2019-20) onwards.

Residential Status Calculator

Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)

Explore

Residential Status Calculator

Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)

Explore

The following interests are eligible for income tax deductions u/s 80TTB:

• Interest earned on Bank Deposits i.e., saving account interest, fixed deposits, recurring deposits.
• Any interest earned on deposits with Co-operative Society engaged in banking.
• Interest earned from Post Office Deposits i.e., Saving Account Interest, NSC, Senior Citizens Savings Scheme Accounts, Time Deposits, 5-year recurring deposits, and monthly income schemes.

File Your Tax Return

On Time , Online on Quicko.com

Open Your Account Today

Sign Up

Section 80RRB – Royalty from Patents

Section 80RRB allows a tax deduction on any income by way of royalty for a patent, registered on or after 1st April 2003 under the Patents Act 1970.

The deduction is lower of:

(i) Royalty Received

(ii) Maximum INR 3 lakh whichever is less.

A resident Individual can claim this deduction.

Section 80JJAA – Deduction for Recruitment of New Employees

Section 80JJAA allows a tax deduction in respect of the recruitment of new or additional employees. This deduction can be claimed for three consecutive years starting from the year in which the new employee is added. It can be claimed by all businesses including sole proprietorships, partnerships, or companies.

In case of existing business, additional employee cost shall be NIL if:

• There is no increase in the Total Number of Employees
• Emoluments are paid in Cash

In case of new business, additional employee cost shall be:

• Emoluments paid / payable to employees employed during that previous year.

Eligible Deduction: 30% of additional employee cost incurred during the previous year.

Section 80CCH – Agnipath Scheme

This exemption was introduced in the Budget 2023 which provides for a deduction on contribution made to the Agniveer Corpus fund. It provides tax benefits to the individuals enrolled in the Agnipath Scheme. This deduction is available under both old and new regime.

FAQs