Worried about paying huge taxes every year? Know about these deductions which could reduce your tax payable.

Section 80C - Deductions of investment from taxable income

Some investments you do can give you more than just expected returns, you can also save on tax. 80C investments are an important example of such investments. This deduction is eligible for an individual and an HUF. The deductions are available in some of the major investments, such as:

  • Investment in PPF
  • Unit Linked Investment Plans (ULIPs)
  • Equity Linked Savings Schemes (ELSS)
  • Employee’s share of PF contribution
  • National Saving Certificates
  • Life Insurance Premium payment
  • Children’s Tuition Fee
  • Principal Repayment of home loan
  • Senior Citizens savings scheme

Maximum Deduction: `1,50,000*

*The maximum deduction provided here is for the particular section only. Please also note that, cumulatively, the maximum deduction that can be claimed under section 80C, section 80CC and 80CCD(1) is `1,50,000. Above this, an additional `50,000 can be claimed as a tax deduction for investment in NPS account under section 80CCD(1B)

Section 80CCC - Deduction of contribution to Pension Fund

It is designed to reduce the income tax liability on the pension plans offered by various public and private sector insurers. It provides a deduction to an individual who has paid or deposited amount in any annuity plan of insurer for receiving a pension (income) from a fund set up by an insurer. Deduction of premium paid during the year can be claimed as deduction from taxable income.

Maximum Deduction: `1,50,000*

*The maximum deduction provided here is for the particular section only. Please also note that, cumulatively, the maximum deduction that can be claimed under section 80C, section 80CC and 80CCD(1) is `1,50,000. Above this, an additional `50,000 can be claimed as a tax deduction for investment in NPS account under section 80CCD(1B)

Section 80CCD - Deduction of Contribution to Pension Scheme of Central Government

Deduction under section 80CCD is allowed to an individual who makes deposits to his/her pension account. Maximum deduction is allowed to 10% of the salary (in case of salaried individuals) and 20% of Gross Total Income (in case of self-employed individuals) or `1,50,000- whichever is less. Under sub-section1B, an additional deduction of upto `50,0000 is available for contributions towards NPS by individuals.

Maximum Deduction: `2,00,000*

*The maximum deduction provided here is for the particular section only. Please also note that, cumulatively, the maximum deduction that can be claimed under section 80C, section 80CC and 80CCD(1) is `1,50,000. Above this, an additional `50,000 can be claimed as a tax deduction for investment in NPS account under section 80CCD(1B)

Both the above mentioned sections are tied with pension plans and annuity plans. But there is a difference between the two. While Section 80CCC covers the deduction for amount paid towards the annuity plan of any insurer, section 80CCD provides deduction for the amount contributed to pension schemes : National Pension Scheme (NPS) and Atal Pension Yojana.

Section 80D - Deduction of Premium Paid for Medical Insurance

Under section 80D, deduction of up to `25,000 is allowed to a tax payer for insurance of self, spouse and dependent children. In case the age of Insured is 60 years or more, then the deduction is available up to `30,000. An additional deduction of insurance for parents (father or mother, or for both) is allowed to the extent of `25,000 (`30,000 if parents are of age 60 years or more). One can also avail a deduction for preventive health check-up of up to `5,000 under the prescribed limit as above.

Maximum Deduction: `60,000

Section 80E - Deduction of Interest paid on Education Loan Taken for Higher Studies

If you have taken an education loan for pursuing higher studies, then you can claim tax deduction under section 80E. It is applicable even when the loan may have been taken for the spouse, children or for a student for whom the taxpayer is a legal guardian. The deduction is allowed on the interest amount of the loan and is available for a maximum of 8 years or till the interest is paid- whichever is earlier. You can even claim the deduction under this if the loan is taken for financing foreign studies.

Maximum Deduction: No restriction. Deduction allowed for 8 years.

Section 80GG - Tax Deductions on House Rent Paid

Under section 80GG, you can claim deduction for the house rent paid when HRA is not received in salary. It’s important that the taxpayer, spouse or the minor child should not own residential accommodation at the place of the employment. The taxpayer should be living on rent and paying the rent. Also, the taxpayer should not have any self-occupied residential property in any other place.

The deduction under this section is available to the minimum of:

  • Rent paid minus 10% of total income
  • `5,000 per month
  • 25% of total income

Maximum Deduction: `60,000

Deduction of Interest on Savings Account - Section 80TTA

Under section 80TTA, deduction can be claimed against interest income gained from a savings bank account. Interest from savings bank account should be first included under the head ‘other income’ while computing it and deduction can availed of the total interest earned or `10,000- whichever is less. The interest income from fixed deposits, recurring deposits, or interest income from corporate bonds, cannot be claimed under this section.

Maximum Deduction: `10,000

 

End Note:

*The maximum deduction that can be claimed under section 80C, section 80CC and 80CCD(1) is `1,50,000. Above this, an additional `50,000 can be claimed as a tax deduction for investment in NPS account under section 80CCD(1B).

Tax benefits are subject to conditions of section 80C, 80CCC, 80CCD, 80CCE, 80D, 80E, 80GG, 80TTA and other provisions of Income Tax Act 1961. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.

Before getting into tax-saving investments, read and understand the long term benefits and align them with your own future goals.

Planning ahead for tax is always advisable, so as to avoid last-minute errors and be tension-free.

Sources:

https://cleartax.in/s/80c-80-deductions

https://www.hrblock.in/guides/income-tax-deductions-80c.aspx

http://www.businesstoday.in/moneytoday/tax/income-tax-deductions/story/21137.html

 

Comp/doc/Oct/2017/0463

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