Tax deductions decrease the general tax liabilities of taxpayers and help one save on taxes. The amount of deduction differs depending on the class of tax that one claims. A taxpayer can seek a tax deduction for expenses incurred in medical bills, tuition fees and contributions funded towards a charitable cause. Taxpayers can also benefit from tax exemption or deduction by investing in a variety of schemes such as in life insurance plans, retirement savings schemes and national savings schemes.
Under Section 80, a taxpayer will receive tax deduction for payment made towards:
These investments are applicable for a tax deduction if the taxpayer himself / herself is named as the claimant or either an immediate family member is mentioned as the claimant. The Provident Funds Act states that an NRI or non-resident Indian will not be eligible to invest in Public Provident Fund (PPF). An NRI can, however, invest in PPF under the name of his / her spouse or child if they happen to be residents of India.
Section 80C of the Income Tax Act offer the benefit of the deduction for taxes paid on a variety of things. Individual taxpayers and Hindu Undivided Families (HUF) are eligible for this benefit. Under Section 80C, any legit taxpayer can claim for deductions of up to Rupees 1.5 lakhs every year.
Investments that are eligible for tax deduction under Section 80C are:
Under Section 80D of the Income Tax Act, taxpayers can avail tax deductions for investments made towards Health Insurance Policy. The deduction is also applicable for investments towards Central Government Health Plan, made on behalf of immediate family members. A taxpayer can claim a deduction of up to Rupees 15,000 (premium towards the insurance for a spouse, dependent children or oneself) and up to Rupees 20,000 (for 60 years and above).
Subjected to the mode of payment other than in cash, individual taxpayers and Hindu Undivided Families are eligible for deduction under Section 80D.
Section 80E of the Income Tax Act has been structured by the Indian government to ensure that expenses incurred for one’s education do not become an extra liability in the future. Section 80E allows a taxpayer to avail deduction on taxes on the payable interest upon the educational loan. A taxpayer can avail this benefit either for himself / herself or for sponsoring education for his / her child. Individual taxpayers alone are eligible for the provision under Section 80E.
Taxpayers who donate funds to charitable institutions and organisations are eligible for tax return benefits under Section 80G. Every type of taxpayer can avail this benefit with proof of verification of the donation made.
The amount for tax benefits is decided upon a few factors:
Section 80J of the Income Tax Act has been modified by adding two subsections, 80JJA and 80 JJAA under it.
Income tax deductions as per Section 80LA is applicable to the following entities:
Entities falling under Section 80LA are eligible for tax deductions of up to 100% for the first 5 years and 50% deduction the following years after the first 5 years. To avail this benefit, the entity must have obtained relevant permission, either under the SEBI Act, Banking Regulation Act or are registered under any other relevant law.
Section 80P offers tax deduction benefits to cooperative societies. Under certain qualifying criteria, Section 80P provides 100% deduction to cooperative societies who earn their income through cottage industries, fishing, banking, the sale of agricultural harvest, supply of milk etc.
Under Section 80P, eligible claimants can avail tax deduction ranging from rupees 50,000 to Rupees 1 lakh.
Any cooperative society can claim the deduction if they fall into the following category;
Royalties earned through the sale of books are eligible for tax deduction under Section 80QQB. For resident Indian authors, the claim deduction is up to rupees 3 lakhs.
When an Indian resident receives income through a royalty on his / her patent, then Section 80RRB offers tax incentives to the patent holders, based on tax relief. A royalty of up to Rupees 3 lakhs can be claimed as a tax deduction by the taxpayer, subjected that the patent is registered after the 31st of March 2003. Individuals who earn royalty from foreign countries must first produce the royalty amount to the authoritative department of India within a specified time to avail tax deductions under Section 80RRB.
Under Section 80TTA, any Hindu Undivided Families (HUF) and individual taxpayers can claim for deductions on the interest earned upon money invested in savings accounts within India. This section provides tax deductions of up to Rupees 10,000 per year.
Only residents of India who are individual taxpayers with disabilities are eligible for deduction under Section 80U. Taxpayers who can produce certified proofs issued by a government authorised medical practitioner can claim deductions of up to Rupees 75,000 per year. Individuals with a case of severe disability are entitled to benefit from a deduction of Rupees 1.25 lakhs, after qualifying certain criteria.