Tax Savings & Deductions under Chapter VI A

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Nireka Dalwadi

HUF
Section 80C
Section 80CCE
Section 80D
Section 80TTA
Last updated on March 3rd, 2023

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: One can avail of the deduction only under the old tax regime.

Conditions for Availing Deductions Under Chapter VI A

Let us go through the major types of chapter VI A deductions of Income Tax Act:

Deductions Under Chapter VI A

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

Payments eligible for Income Tax Deductions u/s 80C

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.

Tax Benefits of NPS (National Pension Scheme)
Section Component Deduction
80CCD(1) Employee’s Contribution to Pension Fund INR 1,50,000
80CCD(2) Employer’s Contribution to Pension Fund

10% of the Basic Salary 

80CCD(1b) Voluntary Contribution to NPS INR 50,000
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:

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

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

An individual or HUF can claim a deduction of INR 25,000 and an additional deduction of INR 25,000 can be claimed if the parents are less than 60 years of age. if the parents are of 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:

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 – 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:

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
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Section 80U – Tax Deductions for Individuals with Disability

Deduction u/s 80U can only be claimed only 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:

The tax deduction limit u/s 80U 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 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. The deduction u/s 80E is not available for principal repayment of the education loan.
There is no monetary limit under this section. 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:

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

Section 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 IN 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:

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.
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:

Section 80EEB – Interest on Vehicle Loan

Section 80EEB allows a tax deduction to individual taxpayers for interest paid towards 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:

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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.

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

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

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. 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:

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.

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

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Section 80RRB – Royalty from Patents

Section 80 RRB 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:

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

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

FAQs

Can I claim Chapter VI A deductions under the New Tax Regime?

No, you cannot claim the deduction under chapter VI A if you opt for New Tax Regime. However, with the majority of income tax deductions slashed in the New Tax Regime, some Deductions are still claimable such as:
– Rebate u/s 87A
– Standard Deduction on Rent Received
– Life Insurance Income to Beneficiary
– Retrenchment Compensation
– Voluntary Retirement Scheme
– Leave Entrenchment on Retirement

How much deduction can I claim under Section 80C?

You can claim a maximum of INR 1.5 lakh under Section 80C. This is inclusive of 80CCC and 80CCD. Apart from this you can claim an additional deduction of INR 50,000 u/s 80CCD (1b) in lieu of NPS contribution.

Is it mandatory to submit proof to the employer for claiming chapter VI A deductions?

No, It is not mandatory to submit proofs of investments to claim chapter VI A deductions. Hence, if you have not declared the investments, you can still claim the same while filing your ITR.
But, it is advisable to declare the investments so that the employer can take the same into account and determine your taxable income before deducting TDS.

What is income tax deduction for salaried employees?

There is a standard deduction INR 50,000 for salaried employees. Apart from this, they can further claim Chapter VI A deductions to lower their taxable income.

Who is eligible for 80C deduction?

Section 80C allows a deduction of INR 1,50,000 to Individuals and HUFs. Hence, Company, Firm, Partnership Firms or LLPs cannot avail of tax deduction u/s 80C.

Got Questions? Ask Away!

  1. Person “x” is having cash income of Rs.2 lakhs every year . No other income .
    For 10 years every year same thing .

    Since , the income was less than 2.50 lakhs p.a. on all these 10 years .
    None of the years : tax returns was filed .

    So . At present . The total cash of these 10 years is accumulated to Rs . 20 lakhs in cash .

    Can that person “x” : deposit these Rs.20 lakhs cash in the bank account in the current year and not pay any tax ?

    Pls kindly enlighten the matter …

    @Muskan_Balar
    @Shrutika_Shah
    @Sakshi_Shah1

  2. Hi @HIREiN,

    Thinking practically, how is it possible all the income earned is saved without any expenses?

    However, if it is the actual situation, you can deposit the amount in your bank account in the current year. In case you receive any scrutiny from the Income Tax Department, you must be able to provide all the relevant documents and evidence.

    Hope it helps.

  3. Hi
    I quit my job in SBI 10 months ago, in June 2022. Since I resigned before the bond period of 3 years, I paid a bond amount of 2L+ GST18% = Rs. 236000. From Apr-Jun, I got gross salary of 260000. After resignation, PF and PLs encashed totalled to 200000. Tax on (260000+200000) has been paid till now.

    Since 236000 is deducted from my account by the organisation, can I show income from salary as 260000+200000-236000 = 224000? and therefore claim the tax paid by the employer till now?

    Thanks!

  4. Hi @M_Sridhar

    No, as per your stated situation, you cannot claim the tax paid by the employer till the date as it’s not the correct way to show income.

  5. Thanks for the reply.
    So, hypothetically if I get a 3lakh salary from the employer and the employer deducts 3 lakhs from my account towards this bond, does tax on 3 lakh needs to be paid even though my net income is zero?

    In general, we cannot reduce the bond amount deducted by employer while calculating taxable income?

  6. Hi @M_Sridhar

    As such there is no specification in Income Tax Law, you are required to file ITR and pay the eligible tax amount, you would not be liable to claim it as an expense under salary.

    Eventually, it’s a penalty you are paying to an employer, so, there is no such way to reduce taxable income.

    But the ITAT judgment says, that you can calculate taxable income after deducting your bond amount.

  7. these both the statements re contradicting to each other !

  8. so can I follow this ITAT judgement and calculate income after deducting my bond amount?

  9. Hi @M_Sridhar

    We can’t rely on ITAT or any other judgment because there can be differences of opinion and the judgment can also be challenged in different levels of courts.

    So following the Income Tax Act, breaking of bond is a kind of penalty amount you have paid so a deduction will not be allowed on the same from salary.

    Hence, you cannot claim the bond amount as a deduction while calculating your income.