Tax Savings & Deductions: Section 80C, 80CCE, 80D, 80TTA & others

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By Nireka Dalwadi on June 17, 2019
Income TaxTax Savings & Deductions

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

Index

Section 80C: for Tax Saving Investments & Payments

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

Investments eligible for deduction u/s 80C

  • ELSS i.e. 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 i.e. Public Provident Fund: PPF is a government-backed provident fund with a fixed interest rate approximately 8% p.a. You can invest minimum 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 i.e. 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 is tax deductible u/s 80C, while the employer’s contribution is completely tax-free Any withdrawal after the specified period (5 years) is exempt from income tax.
  • NSC i.e. 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 child 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 SCSS scheme will earn an interest @ 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 deduction 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: 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.

Tax Benefits of NPS (National Pension Scheme)
Section Component Deduction
80CCD (1) Employees Contribution to Pension Fund INR 1,50,000
80CCD (2) Employers Contribution to Pension Fund 10% of Basic Salary
80CCD (1b) Voluntary Contribution to NPS INR 50,000

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.

Section 80D: 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: 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:

Category Deduction Amount
Disabled Person (40% or more of the disability) INR. 75,000
Severely Disabled Person (80% or more of the disability) INR. 1,25,000

Section 80DDB: 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:

Age Deduction amount
Individual or a member of HUF, aged below 60 INR. 40,000
Individual or a member of HUF, aged 60 years or above  INR. 1,00,000

Section 80U: for Individuals with Disability

Deduction u/s 80U can only be claimed by Resident individuals with a disability. HUF cannot claim 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 deduction limit u/s 80U is

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Section 80E: for Interest on Education Loan

Category Deduction Amount
Disabled Person (40% or more of the disability) INR. 75,000
Severely Disabled Person (80% or more of the disability) INR. 1,25,000

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: 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 deduction 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: for Donation to Charitable Organisations

Section 80G allows Individuals, HUFs and businesses to claim 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 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

Section 80GG: for Rent paid

Section 80GG allows a deduction for rent paid for furnished or unfurnished accommodation. The deduction is allowed to taxpayers who do not receive any House Rent Allowance (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 (HRA) 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: for 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 deduction 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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