Income Tax Act, 1961

Various Tax Deductions Under The Income Tax Act, 1961

What are tax deductions?

Tax deductions are not exempt incomes.  They are included in the computation of the gross total income and are used for the computation process.

Income tax deductions are contained in the Chapter VI-A of the Income Tax Act.  They are deducted from the gross total income.

In case there is no gross total income for income tax purposes, there will not be any deductions permissible by the Income Tax provisions.

This chapter contains various deductions in respect of certain payments, deductions in respect of certain incomes, deductions in respect of other income and other deductions.

Section 80C tax deductions

Deductions under section 80C are allowed in respect of investment in some specified assets.  It provides for a deduction from the Gross Total Income.

Deductions under this section are only available to an individual or a Hindu Undivided Family.

The maximum amount of tax deductions permissible under this section are Rs. 1,50,000.

The investments that are eligible for deduction under this section are:

  1. Contributions made in Unit-linked Insurance Plan 1971 made in the name of the individual, his spouse or her spouse, or any child of the individual. In the case of HUF, the contribution can be made in the name of any member.
  2. The contribution made in the Unit-linked Insurance Plan of LIC Mutual Fund in the name of the individual, his or her spouse, or any child of the individual for participation in the LIC Mutual Fund for any insurance plan.
  3. Premium paid in the respect of Life Insurance Policy taken on the life of the individual, spouse or any child and in the case of HUF, any member thereof.
  4. Premium paid in respect of a contract for the deferred annuity
  5. Any sum deducted from the salary payable of a Government employee for securing a deferred annuity
  6. Contribution to any provident fund to which the Provident Funds Act, 1925 is also applicable and recognized provident fund qualifies under section 80C
  7. Contribution to the approved superannuation fund
  8. Any sum paid or deposited in Sukanya Samridhi Account
  9. Subscription to National Savings Certificate VIII
  10. Contributions made to the approved annuity plan of LIC
  11. Subscription towards notified units of the mutual fund or Unit Trust of India
  12. Contribution to notified pension fund set up by mutual fund or the Unit Trust of India
  13. Contribution to National Housing Bank Term Deposit scheme, 2008 for Tax Saving
  14. Subscription to notified deposit scheme
  15. Payment of tuition fees to any university, college, school or other educational institution within India for full-time education for maximum 2 children
  16. Repayment of housing loan including stamp duty, registration fee and other expenses
  17. Subscription to certain equity shares or debentures
  18. Subscription to certain units of mutual fund
  19. Investment in the five-year term deposit
  20. Subscription to notified bonds issued by NABARD
  21. Investment in five years Post Office time deposit
  22. Deposit in Senior Citizens Savings Scheme Rules, 2004
  23. Contribution to additional account under NPS

Section 80D Tax Deductions

Deductions under this section are available in respect of the medical premium.

  1. In the case of an individual

If the deduction is in respect of the insurance premium paid for the family, the maximum allowable deduction is Rs. 25,000.

If the tax deduction is in respect of insurance premium paid for parents, an additional deduction up to Rs. 25,000 is allowable.

But, if any of the above-mentioned persons is a senior citizen, an increased tax deduction of Rs. 50,000 is allowable instead of 25,000.

A deduction to the extent of Rs. 5,000 is allowed in respect of payment made on account of preventive health checkups.

Tax deduction for medical expenditure incurred on senior citizens is also allowed for a maximum limit of Rs. 50,000.

  1. In the case of a HUF

Tax deduction under this section is allowable in respect of the premium paid to ensure the health of any member of the family.

The maximum amount of tax deduction available for a HUF is Rs. 25,000 and in case any member is a senior citizen, the maximum deduction available is Rs. 50,000.

Section 80E Tax Deductions

Tax deductions under section 80E are allowed in respect of interest on loans taken for higher education.  It is available to an individual assessee in respect of any interest on loan paid in the previous year out of his income chargeable to tax.

To avail of this deduction, the loan must have been taken to pursue higher education for the individual’s studies or his or her relative.

This loan must be taken from any approved charitable institution or any financial institution.

Relative for this purpose is the spouse and the children of the individual or the student for whom the individual is the legal guardian.

This tax deduction can be claimed for 8 years from the year in which the assessee starts repaying the interest on the loan amount.

Section 80G Tax Deductions

An assessee who pays any sum as a donation to eligible funds or institutions is entitled to a deduction, subject to certain limitations from the gross total income.

The types of tax deductions in the section fall under four categories.

Donations that qualify for a 100% deduction, without any qualifying limit –

  1. The National Defense Fund set up by the Central Government
  2. The Prime Minister’s National Relief Fund
  3. Prime Minister’s Armenia Earthquake Relief fund
  4. The Africa (Public Contributions – India) Fund
  5. The National Children’s Fund
  6. The National Foundation for Communal Harmony
  7. Approved University or educational institution of national eminence
  8. Chief Minister’s Earthquake Relief Fund, Maharashtra
  9. Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the Gujarat earthquake
  10. Any Zila Saksharta Samiti constituted in any district for improvement of primary education in villages and towns and literacy and post-literacy activities.
  11. National Blood Transfusion Council or any State Blood Transfusion Council whose sole objective is the control, supervision, regulation or encouragement in India of the services related to operation and requirements of blood banks
  12. Any State Government Fund set up to provide medical relief to the poor
  13. The Army Central Welfare Fund or Indian Naval Benevolent Fund or Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of past and present members of such forces or their departments
  14. The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
  15. The National Illness Assistance Fund
  16. The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund in respect of any State or the Union Territory
  17. The National Sports Fund set up by the Central Government
  18. The National Cultural Fund set up by the Central Government
  19. The Fund for Technology Development and Application set up by the Central Government
  20. National Trust for the welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
  21. The Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of CSR u/s 135(5) of the Companies Act, 2013
  22. The Clean Ganga Fund, set up by the Central Government, where such assessee is a resident, other than the sum spent in pursuance of CSR u/s 135(5) of the Companies Act, 2013.
  23. The National Fund for Control of Drug abuse.
  24. Prime Minister’s Citizen Assistance and Relief in emergencies Fund (PM Cares Fund)

Donation qualifying for 50% deduction, without any qualifying limit

  1. The Jawaharlal Nehru Memorial Fund
  2. Prime Minister’s Drought Relief Fund
  3. Indira Gandhi Memorial Trust
  4. Rajiv Gandhi Foundation

Donation qualifying for 100% deduction, subject to qualifying limit

  1. The Government or to any approved local authority, institution or association for the promotion of family planning
  2. The sum paid by a company as a donation to the Indian Olympic Association or any other association established in India

Donation qualifying for 50% deduction, subject to qualifying limit

  1. Any Institution or Fund established in India for charitable purposes fulfilling prescribed conditions
  2. The Government or any local authority for utilization for any charitable purpose other than the purpose of promoting family planning
  3. An authority constituted in India by or under any other law enacted either for dealing with and satisfying the need for housing accommodation or the purpose of planning, development or improvement
  4. Any Corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community
  5. For renovation or repair of Notified temple, mosque, gurudwara, church or another place of historic, archaeological or artistic importance or which is a place of public worship of renown throughout any State or States.