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 Uploading ....There are various Income tax deductions or tax exemptions as allowed by
the Indian Income tax Act. These tax deductions allow you to subtract an
amount from your taxable income and thus help you to save tax !
Understanding these income tax exemptions can help you save tens of thousands of rupees in income
tax every year. Below I have listed all important income tax deductions
in a table, and then after the table there is an explaination of each
section of Indian Income tax act in detail. I hope these deduction and
tax exemption limits will help you for your tax planning this year. I
have also included links to the official page of Indian Income Tax so
you can actually go there and verify the information yourself.
Indian Income Tax deductions, Tax exemption limits
Financial year 2008/2009 (will be updated later for 2009/2010)
Income Tax deduction - Section 80C
Provident Funds, Life Insurance premia, ELSS, Bank deposits (>5 yr.),
tution fees, principal part of EMI on housing loan, etc.
Maximum tax deduction or tax exemption limit:
Rs. 1,00,000
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Income Tax deduction - Section 80D
Premium in health insurance of you, your spouse, children or dependent
parents
Maximum tax deduction or tax exemption limit:
Rs. 15000
(tax exemption limit
for senior citizen is
Rs. 20000)
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Income Tax deduction - Section 80DD
Medical treatment (including insurance) of disabled dependent
Maximum tax deduction
or tax exemption limit:
Rs. 50000.
(Rs. 75000 if disability is
severe,
e.g. >80%)
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Income Tax deduction - Section 80E
Interest paid on educational loan taken for higher education of you,
your spouse or children.
Maximum tax deduction
or tax exemption limit:
no limit !
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Income Tax deduction - Section 80GG
House rent in excess of 10% of
income, if no HRA is received.
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Maximum tax deduction
or tax exemption limit:
Rs. 2000 per month or 25% of your gross
salary, whichever less.
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Income Tax deduction - Section 24
- Interest paid on housing loan.
Maximum tax deduction
or tax exemption limit:
Rs. 1,50,000
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Income Tax deduction - Section 80G
Donations
Maximum tax deduction
or tax exemption limit:
100% of donation amount for
special funds(see below), 50% of
donation amount for all other donations.
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Indian Income Tax deduction -
Section 80C (official page India Income Tax Act)
Section 80C of Indian Income Tax Act is the most popular because it is
directly related to tax deductions for your monthly savings or life
insurance. In financial years 2008/2009 and also in 2009/2010 the
maximum income tax deduction allowed under section 80C is 1,00,000. The
following is a list of important ways in which a taxpayer can get
benefit of section 80C of Indian Income Tax Act.
1.
Provident Fund (PF): Any contributions to Provident Fund,
Voluntary provident Fund (VPF) or savings made in Public Provident Fund
(PPF Account) are eligible for income tax deduction under section 80C of
Indian Income Tax Act.
2. Life Insurance Premiums: Any Life Insurance premiums (for one or
more insurance policies) paid by you for yourself, your spouse or your
children is eligible under income tax deduction under section 80C of
Indian Income Tax Act.
3. ELSS Equity Linked Saving Schemes: Any investment made in certain
Mutual Funds called equity linked saving schemes qualifies for section
80C deduction. Please note that not all mutual fund investments are
eligible for this deduction. Some examples of ELSS funds are
: SBI Magnum Tax Gain, HDFC Tax Saver, HDFC Long term advantage,
etc.
4. ULIP (Unit Linked Insurance Plan): Investments made in certain
ULIPs of Unit Trust of India and LIC of India are eligible for 80C
deduction.
5. Bank Fixed deposits or Term deposits of >5 years: According to a
relatively new provision amount saved in fixed deposits of term at
least five years is eligible for income tax deduction under section 80C
of Indian Income Tax Act.
6. Principal part of EMI on Housing Loan: If you are paying EMI on a
housing loan, note that the EMI (equated monthly installments) consists
of two parts - principal part and interest part. The principal part of
the EMI on your housing loan is eligible for income tax deduction under
section 80C. Note that the interest part is also eligible for tax
deduction, however not under section 80C but section 24. (read below).
If you do not own a house
but pay rent for it,
see section 80GG of Indian Income Tax Act below.
7. Tuition Fees: Amount paid as tution fee for the education of two
children of the assessee is eligible for deduction under section 80C of
Indian Income Tax Act.
8. Other 80C deductions: Amount saved in National Saving Certificate
(NSC), Infrastructure Bonds or Infra Bonds, amount paid as stamp duty
and registration charges while buying a new home are eligible for income
tax deductions under section 80C of Indian Income Tax Act.
Indian Income Tax deduction - Section
80D
: (official page Indian Income Tax Act)
Section 80D of Indian Income Tax Act is especially useful if your
employer does not cover your health or medical expenses. It is a good
idea to get medical insurance or health insurance for you, your spouse,
dependent children or dependent parents, as you can claim a deduction of
upto Rs. 15000/- per anum for the premia paid on this insurance. For
senior citizen this limit is Rs. 20000. With effect from 1-4-2009, you
can claim the total of the following items for deduction under section
80D.
1. Total amount of premium paid for health insurance of family
(meaning spouse + children), or Rs. 15,000 , whichever less.
2. Total amount of premium paid for health insurance of your parents
or Rs. 15,000, whichever less.
Thus if you are paying premiums of mediclaim policies for your spouse
children and parents you can get a total tax deduction of upto Rs.
30,000.
Indian Income Tax deduction - Section
80DD
: (official page India Income Tax Act)
Section 80DD of Indian Income Tax Act provides provision for tax
deduction if you incurred medical expenditure for a dependents who are
disabled. Here dependent means spouse, children, brothers, sisters or
any one of them. The maximum tax deduction provided by section 80DD is
Rs. 50000 in case of ordinary disability and Rs. 75000 if the disability
is severe. The definition of severe disability is as defined in the
official page of Indian Income tax Act.
Indian Income Tax deduction - Section
24
: (official page India Income Tax Act)
Whenever you take a housing loan build or buy a new home, the interest
payable on this home loan is eligible for income tax deduction under
section 24. Maximum deductible amount, i.e. maximum interest you can
claim for income tax deduction under section 24 is Rs. 1,50,000. In case
you are paying interest on money borrowed for renovation of your home,
even this may qualify for tax deduction under section 24 of Indian
Income Tax Act. (see official page or ask in a comment).
Indian Income Tax deduction - Section
80GG
: (official page - India Income Tax Act)
If you pay rent for
the house that you
are staying in and do not get HRA, any rent you pay in excess of 10 percent of your salary
is eligible for income tax deduction under section 80GG of Indian Income
Tax Act. The income tax deduction you can claim is the minimum of the
following amounts.
1.
Rent you pay
minus 10% of your salary.
2. 25% of your gross total income.
3. Rs. 2000/- per month.
Indian Income Tax deduction - Section
80E
: (official page India Income Tax Act)
Under section 80E of Indian Income Tax Act, any amount of interest paid
on educational loan taken for your higher education or higher education
of your husband / wife or children is deductible from your taxable
income. Here higher eduction means - studies for any graduate or
post-graduate course in engineering, medicine, management or for
post-graduate course in applied sciences or pure sciences including
mathematics and statistics.
Indian Income Tax deduction - Section
80G
: (official page India Income Tax Act)
Donations made to funds like Prime Minister's Relief Fund, National
Children Foundation, any University or educational institution of
'national eminence', etc. (see official page for complete list) are
deductible from your taxable income according to section 80G of Indian
Income Tax Act. For any other donations you are eligible to take income
tax deduction for 50% of the donation amount. See the offical page of
Indian Income Tax Act.
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