Investments which help you save more by reducing your tax liability

house money
Income Tax Deductions help to reduce your taxable income, which means for certain investments and expenditures, you do not need to pay any tax. It is as good as saying that your basic exemption limit of Rs.1,60,000.00 gets enhanced by carefully choosing your investments and expenditures. The Income Tax Deductions are explained in Section 80 A of the Income Tax Act. The deductions as well as the relevant sections are as follows:

Income Tax Section 80C

  1. Payment made to keep in force an insurance on the life of persons, which includes the individual, wife or husband of the individual and any child of the individual.
  2. Contribution by the individual to any Provident Fund to which the Provident Fund Act applies or to a Provident Fund set up by the Central Government or to any recognized. Provident Fund like the Public Provident Fund.
  3. Contribution by an employee to an approved superannuation fund.
  4. Subscription to specific security or deposit scheme of the Central Government
  5. Subscription to specific savings certificate
  6. Contribution to Unit Linked Insurance Plan (ULIP) of the Unit Trust of India or LIC Mutual Fund.
  7. Payment to annuity plan of LIC of India or of Central Government.
  8. Subscription to certain mutual funds
  9. Subscription to deposit scheme of, or contribution to any pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987.
  10. Subscription to such deposit scheme of a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or any authority constituted in India for satisfying the need for housing accommodation or for the planning, development or improvement of cities, towns and villages, or for both
  11. Payment of tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter to any university, college, school or other educational institution situated within India or for the purpose of full-time education of any two children of the individual
  12. Installment amount or part payment paid towards the principal portion of a loan taken for purchase of a residential house property. Amount paid towards stamp duty,registration fees and other expenses for transfer of house property to the individual is also deductible. But any cost towards any addition or alteration, renovation or repair, which is carried out after certificate of completion has been issued or after the house is occupied, is not deductible.
  13. Amount remitted as fixed deposit for a period not less than five years with a scheduled bank
  14. Subscription towards bonds issued by NABARD.
  15. Amount remitted in a senior citizen savings scheme.
  16. Amount remitted in a 5 year time deposit in a Post Office Savings Account

Income Tax Section 80 CCC

Payment towards any annuity plan of LIC of India or any other insurer for receiving pension from the fund is allowed as a deduction from computation of total income, subject to a limit of Rs.1,00,000.00 (one lakh)

Income Tax Section 80 CCD

Payment towards any pension scheme of the Central Government is allowed as a deduction from the taxable income. There is a limit to the amount allowed as deduction:In case of an employee(individual whose income is from salary) the maximum deduction allowed is ten percent of his salary in the respective year, and for any other person it is ten percent of his gross total income. The employer’s contribution is also allowed as deduction from the total income of the employee but should not exceed ten percent of the salary of the employee.
The maximum deduction allowed under the above three sections, i.e, Income Tax Section 80 C, Income Tax Section 80 CCC, Income Tax Section 80 CCD, is Rs.1,00,000.00(one lakh).

Income Tax Section 80 CCF

Subscription to long term infrastructure bonds qualify for deduction from taxable income. The maximum amount that is deductible is Rs.20,000.00 (twenty thousand). This is in addition to the deduction allowed under Income Tax Section 80 C, Income Tax Section 80 CCC and Income Tax Section 80 CCD.

Income Tax Section 80 D

LIC Insurance to save tax
Amount paid towards the health insurance premium of family members is allowed as deduction. In this case, the term family means the spouse and dependant children of the assessee. The maximum amount allowed is Rs.15,000.00. Further, amount paid towards health insurance premium of parent or parents is also allowed as deduction. In this case also, the maximum limit is Rs 15,000.00. Also, if any of the insured as defined under the term “family” or any of the parent or parents is a senior citizen, then the deductible amount gets enhanced by Rupees five thousand, thereby the deductible amount becomes Rupees twenty thousand. As per Income tax Act, “senior citizen” means an individual resident in India and who is of the age of sixty-five years or more at any time during the relevant previous year. Also, the premium is to be paid by any mode of payment other than cash

Income Tax Section 80 DD

A maximum of Rupees fifty thousand is allowed as deduction if a person has incurred any expenditure for the medical treatment including nursing, training and rehabilitation of a dependant, being a person with disability; or paid or deposited any amount under a scheme framed in this behalf by any insurer for the maintenance of a dependant, being a person with disability. If the dependant is a person with severe disability, then a maximum amount of Rupees one lakh is allowed as deduction

Income Tax Section 80 DDB

If a person has paid actually paid some amount for the medical treatment of certain disease for himself or his dependent then that amount or Rupees forty thousand whichever is less, can be claimed as a deduction from his gross total income. If the patient is a senior citizen then the amount gets enhanced to Rupees sixty thousand.
Critical illness covered under this section are:
  1. Neurological Diseases where the disability level has been certified to be of 40% and above,-
    1. Dementia ;
    2. Dystonia Musculorum Deformans ;
    3. Motor Neuron Disease ;
    4. Ataxia ;
    5. Chorea
    6. Hemiballismus ;
    7. Aphasia ;
    8. Parkinsons Disease ;
  2. Malignant Cancers ;
  3. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
  4. Chronic Renal failure ;
  5. Hematological disorders:
  6. Hemophilia ;
  7. Thalassaemia.

Income Tax Section 80 E

Amount paid towards interest on loan taken from any financial institution or approved charitable institution for higher education of the individual or his relative is allowed as deduction. The maximum amount allowed as deduction is Rupees Forty thousand.The deduction can be claimed from the initial year in which the interest is paid till immediately succeeding seven years or till the interest is paid in full, whichever is earlier. The term “relative”, in relation to an individual, means the spouse and children of that individual or the student for whom the individual is the legal guardian. The term“higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so;

Income Tax Section 80 G

Donations made to certain funds and charitable institutions are deductible from the taxable income

Income Tax Section 80 GG

Expenditure in excess of 10% of total income incurred by an assessee (not in receipt of house rent allowance) on payment of rent in respect of residential accomodation occupied by him for his own residence is allowed as deduction The maximum amount allowed is Rupees two thousand per month or 25% of the total income whichever is less.

Income Tax Section 80 GGC

Contributions made by a person to a political party or electoral trust is allowed as deduction from the total income.

Income Tax Section 80 U

For a person with disability, a flat amount of Rs.50,000.00 (fifty thousand) is allowed as deduction from gross total income. If the disability is severe, the limit gets enhanced to Rs.1,00,000.00 (one lakh).
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