Tax Savings & Deductions under Chapter VI A

Individuals and HUFs (Hindu Undivided Family) can claim income tax deductions on certain investments and expenses undertaken during the financial year.

Section 80C: Income Tax Saving 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 funds. Investments made up to INR 1,50,000 under ELSS qualify for tax benefits. It has a lock-in period of 3 years.
• PPF – Public Provident Fund: PPF is a government-backed provident fund with a fixed interest rate of approximately 8% p.a. You can invest a minimum of INR. 500 and maximum INR. 1,50,000 in a financial year. The PPF deposit, interest, and withdrawal amount are exempt from tax. The maturity period for a PPF is 15 years.
• EPF – Employee Provident Fund: is a savings scheme for employees.  Each month a portion of their salary is deducted towards EPF. This fund is made available to the employee when they retire or change jobs. Employee’s contributions to EPF was tax deductible u/s 80C. However, as per the recent announcement in Budget 2021,  Interest earned on annual PF contribution exceeding 2.5 lacs from April 2021 will now be taxable. While the employer’s contribution is completely tax-free Any withdrawal after the specified period (5 years) is exempt from income tax.
• NSC – National Savings Certificate: is a small savings scheme offered by the Indian Post office earning an interest rate of 8.0% p.a.
• Tax Savings Fixed Deposits: also known as term deposits are offered by different banks and financial institutions for tax saving investment u/s 80C.
• Sukankya Samriddhi Savings Scheme: is aimed at the betterment of girl children in India. The deposits earn an interest of 8.6% p.a. with a maturity period of 21 years.
• ULIP i.e. Unit Linked Insurance Plan: any amount 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 i.e. Senior Citizen Savings Scheme: is open 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 8.6% p.a with a lock-in period of 5 years.
• Pension Fund by UTI: investment amount 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 Deductions u/s 80C

• Life Insurance Premium: amount paid as a life insurance premium for self, spouse or children is eligible for deduction. However, the amount paid should be less than 10% of the sum assured.
• Home Loan Repayment: includes repayment of 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 80CCD – Tax Deductions for Contribution to Pension Fund

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

Both Section 80C 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.

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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 expenditure. 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

In the case of Hindu Undivided Family (HUF), a deduction is allowed for medical insurance premium paid for a member of HUF.

Section 80DD – Tax Deductions for Differently Abled Dependant

A resident Individual/ HUF can claim a deduction for any expenses incurred on the treatment of 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:

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 deduction u/s 80U:

• 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 loan taken for higher education. The deduction u/s 80E is not available for principal repayment of the education loan.
There is no monetary limit u/s 80E. 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 fulfil the following conditions:

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

Section 80EE – Tax Deductions for First Time Home Buyer

Sections 80EE allows individuals to claim the deduction for interest paid on the home loan taken for the first residential house. The eligible deduction amount for AY 2019-20 (FY 2018-19) is INR 50,000.
This limit of Rs. 50,000 is over and above the deduction of Rs. 2,00,000 allowed for home loan interest u/s 24.

To claim income tax deductions u/s 80EE following conditions must be fulfilled:

• An individual is a first time home buyer.
• Value of residential house should not exceed Rs. 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 Company.
• Sanctioned loan amount should not exceed Rs. 35,00,000.
• A taxpayer should not own any other residential house on the date of a sanction of a loan.

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 differ 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

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Section 80GG – Rent paid

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

Following conditions must be fulfilled to claim deduction u/s 80GG for Rent paid

• Only an individual can claim deduction u/s 80GG. The individual can be either salaried or self-employed.
• In the case of a salaried person, they should not be receiving House Rent Allowance from an employer.
• For claiming a deduction, Form-10BA needs to be submitted with the Income Tax Department.
• Assessee or spouse or minor child or HUF of which they are a member should not own be owning any residential accommodation at the place where he/she is 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.

The eligible deduction limit u/s 80GG is lower of the following amounts:

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

Section 80TTA – Savings Interest

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

Following interests are eligible for deduction u/s 80TTA:

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

Section 80TTB – Interest Deduction on deposits for Senior Citizens

Section 80TTB under the Income Tax Act which 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.

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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.

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