First of all we have to know what is tax and how taxes are an important factor for any country's economy and how the major portion of the income earned by the government.
The government fix a certain amount of income which is essential to provide certain basic necessities to the citizens than an Individual who earn more than that certain amount which is fix by the government are taxable or an individual has to pay tax on his annual income over and above of the fixed certain amount. There are certain tax slabs. Means more the income more the tax.
The individuals who are paying tax are called taxpayer. For the purpose of tax calculation the interest earned on individual's bank balance are also includes as a income of a taxpayer. It is the tax structure of our country.
But our tax structure also provides certain provisions where in an individual can save tax or an individual reduce their taxable income or lowering their overall tax liability. The benefit of deduction is eligible for an individual depends on a number of factors, with different limits fixed for different purposes.
Now the question arise what is the meaning of Tax Deduction?
So tax deduction is a component which helps in reducing the taxable income. It decreases the overall tax liabilities or helps to save tax. The amount of deduction varies due to type of investment made by an individual. An individual can claim tax deduction on amounts spent in tuition fees, medical expenses and charitable contributions or invest in various schemes such as life insurance plans, retirement savings schemes, national savings schemes etc. Our government also encourage individuals and commercial Institutes by offering tax exemptions on various expenses incurred in different activities and to take part in activities having social benefits.
Tax Deductions under Section 80C:
Section 80C of the Income Tax Act is very popular section which provides provisions for tax deductions on a number of payments. Both individuals and (HUF) Hindu Undivided Families are eligible to get the benefit under these deductions. The taxpayers can claim deductions upto Rs 1.5 lakh per year under Section 80C. The limit of Rs 1.5 lakh is the overall limit for the combination of deductions available under Sections 80 C, 80 CCC and 80 CCD.
I am listing below some of the popular investments which are eligible for this tax deduction.
1 Payment made towards life insurance policies (for self, spouse or children)
2 Payment made towards a superannuation/provident fund
3 Tuition fees paid to educate a maximum of two children
4 Payments made towards construction or purchase of a residential property
5 Payments issued towards a fixed deposit with a minimum tenure of 5 years
6 Investment in mutual funds,
7 Senior citizens saving schemes,
8 Purchase of NABARD bonds, etc.
Subsections under Section 80C:
Section 80 CCC of the Income Tax Act provides scope for tax deductions on investment in pension funds. These pension funds could be from any insurer and a maximum deduction of Rs 1.5 lakh can be claimed under it. This deduction can be claimed only by individual taxpayers.
Section 80 CCD aims to encourage the habit of savings among individuals only providing to invest in pension schemes which are notified by the Central Government such as NPS. This deduction is valid for individual taxpayer only means deduction for HUF not allowed. The individual claiming this deduction may be resident or non-resident.
Section 80 CCF contains the provisions for tax deduction on subscription of long-term infrastructure bonds which has been notified by the government. Maximum deduction of Rs 20000/- allowed under this section. Both HUF or Individuals can avail this benefit.
Section 80 CCG The maximum investment allowed for claiming deduction under RGESS (Rajiv Gandhi Equity Saving Scheme) is Rs. 50,000. The investor will be eligible to get a 50% deduction of the amount invested from the taxable income of that year.
This benefit is over and above the deduction available u/s Sec 80C. or the deduction was 50 % of amount invested in such equity shares or ₹ 25,000, whichever is lower.
To claim this deduction the taxpayer has to satisfy certain conditions.
Tax Deductions under Section 80D:
Section 80D of the Income Tax Act permits deductions on amounts spent by an individual towards the premium of a health insurance policy. This includes payment made on behalf of a spouse, children, parents or self to a Central Government health plan. An amount of Rs 15,000 can be claimed as deduction but a individual over the age of 60 and paid towards the insurance for spouse, dependent children or self, amount is Rs 20,000 allowed.
Both individuals and HUF are eligible for this deduction, subject to the payment being made in modes other than cash.
Section 80DD provides provisions for tax deductions in two cases,
1 Rs 75000 permitted as deduction for normal disability and
2 Rs 1.25 lakh if it is a severe disability.
This deduction can be claimed in case of the following expenditures. On payments made towards the treatment of dependants with disability or the amount paid as premium to purchase or maintain an insurance policy for such dependant.
The permitted deduction is Rs 75,000 for normal disability and Rs 1.25 lakh for a severe disability.
This benefit is available for both HUF or resident individuals. The dependant, in this case can be either a spouse, sibling, parents or children.
Section 80DDB provides provisions for deductions on the expense incurred by an individual/family towards medical treatment of certain diseases. The permitted deduction is limited to Rs 40,000, if the treatment is for senior citizens the amount can be increased to Rs 60,000.
This deduction benefit can be utilised by HUF or resident individuals
Tax Deductions under Section 80E:
Under Section 80E of the Income Tax Act has been designed to ensure that expences toward higher education doesn’t become an additional tax burden.
Under this section, taxpayers are eligible for tax deductions on the interest repayment of a loan taken to pursue higher education. This loan can be availed either by the taxpayer self or to sponsor the education of their ward/child.
Only individuals are eligible for this deduction, subject to, the loan is taken from approved charitable organisations and financial institutions permitted for tax benefits.
Subsections of Section 80E:
Section 80EE: Only individual taxpayers are eligible for deductions under Section 80EE, with the interest repayment of a loan taken by them to buy a residential property qualifying for deductions. The maximum deduction permitted under this section is Rs 3 lakhs.
Tax Deductions under Section 80G:
Section 80 G is made to encourage the taxpayers to donate funds to charitable institutions, offering tax benefits on monetary donations. All assessees are eligible for this deduction, subject to proof of payment, the limit of deductions decided based on a few clouse
- 100% deductions without any limit: Donations like National Defence Fund, Prime Minister’s Relief Fund, National Illness Assistance Fund, etc.
- 100% deduction with qualifying limits:
Donations to local authorities, associations or institutes to promote family planning and development of sports.
- 50% deduction without qualifying limits:
Donations to funds like the PMs Drought Relief fund, Rajiv Gandhi Foundation, etc.
- 50% deduction with qualifying limit:
Donations to religious organisations, local authorities for purposes apart from family planning and other charitable institutes.
Now the question is what is qualifying limit so the qualifying limit refers to 10% of the gross total income of a taxpayer.
Subsections of Section 80G:
Under Section 80G has been further subdivided into four sections
Section 80GG: Individual taxpayers who do not receive house rent allowance are eligible for this deduction on the rent paid by them, subject to a maximum deduction equivalent to 25% of their total income or Rs 2,000 a month which ever is lower can be claimed as deduction.
Tax deduction under Section 80GGA
of the Income Tax Act pertains to deductions who can claim in lieu of donations towards rural development or scientific research.
The following donations are eligible for tax rebates under Section 80GGA of the Income Tax Act
- Donations to research institutions/ associations/universities involved in scientific research.
- Any such institute/associations should adopt the rules prescribed under Section 35(1)
- Donations to institutions/associations/ colleges which are involved in research related to social science or statistics.
- Donations to associations/institutes which are involved in rural development programs, subject to meeting the criteria under Section 35CCA.
- Donations to institutions/associations which are involved in imparting rural development training to individuals or groups.
- Donations to associations/ institutions/public sector companies or local authorities who are involved in projects or schemes which are approved under Section 35AC.
- Donations towards the Rural Development towards forestation Fund.
- Donations made to the National Poverty Eradication Fund.
Tax deductions under this section can be availed by all assessees.
Donations made by any Indian company for enhance social/ scientific/ statistical research or towards the National Urban Poverty Eradication Fund are eligible for tax benefits under Section 80GGB.
The amount donated by the Indian company to a political party or electoral trust qualifying for deductions under Section 80GGC.
Under this section, funds donated /contributed by an assessee to a political party or electoral trust are eligible for deduction. But Local authorities and artificial juridical persons are not entitled to the tax deductions available under Section 80GGC.
Tax Deductions under Section 80 IA:
Section 80 IA provides a provision for all the assessees to claim tax deduction on the profits generated through industrial activities subject to the industrial undertakings is being related to telecommunication, power generation, industrial parks, SEZs, etc.
The subsections are related to Section 80-IA
Section 80 IAB can be used by SEZ developers, who can claim tax deductions on their profits through development of Special Economic Zones.
Section 80-IB: Provisions of section 80-IB for all assessees who have profits from hotels, ships, multiplex theatres, cold storage plants, housing projects, scientific research and development, convention centres, etc.
Section 80-IC for all assessees who have profits from special categorisef states include Assam, Manipur, Meghalaya, Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Mizoram, Tripura and Nagaland.
Section 80-ID for assessees who have profits or gain from hotels and convention centres subject to their establishments being located in certain specified areas.
Section 80-IE for assessees who have in North-East India are eligible for deductions, subject to certain conditions.
Tax Deductions under Section 80J:
Section 80J of the Income Tax Act was amended to include two subsections, 80JJA and 80 JJAA
Section 80 JJA relates on profits and gains from assessees who are in the business of processing/treating and collecting bio-degradable waste to produce biological products like bio-fertilizers, bio-pesticides, bio-gas, etc.
The assessees can claim 100% deduction of their profits for 5 successive assessment years since the time their business started.
Section 80 JJAA: Deductions under can be claimed by Indian companies which have profits from the manufacture of goods in factories.
- Deductions equivalent to 30% of the salary of new full time employees for a period of 3 assessment years can be claimed subject to a chartered accountant should audit the accounts of such companies.
Tax Deduction under Section 80LA:
Deductions under Section 80LA can be availed by
- Scheduled Banks which have offshore banking units in Special Economic Zones, - International Financial Services Centres and banks which have been established outside India, in accordance to the laws of a foreign nation.
These assessees are eligible for deductions equivalent to 100% of the income for the first 5 years, and 50% of income generated for the next 5 years, subject to the rules of the land subject to the entities should have relevant permission, either from SEBI Act, Banking Regulation Act or registration under any other relevant law.
Tax Deduction under Section 80P:
Section 80P relates to cooperative societies on their income, subject to certain conditions.
- 100% deduction is permitted to cooperative societies whose income come through cottage industries, fishing, banking, sale of agricultural harvest grown by members and milk supplied by members to milk cooperative societies.
Cooperative societies which are involved in other forms of business are eligible for deductions ranging between Rs 50,000 and Rs 1 lakh, depending on the type of work they are involved in.
Following are the deductions which can be claimed by all cooperative societies,
- Income of the cooperative society come from by renting out warehouses
- Income generate through interest on money lent to other societies
- Income earned through interest from securities or properties
Tax Deduction under Section 80QQB:
Section 80QQB permits tax deductions on royalty earned from sale of books.
Only resident Indian authors are eligible to claim deductions under this section,
The maximum limit is Rs 3 lakhs.
Tax Deduction under Section 80RRB:
Section 80RRB offers tax incentives to patent holders, subject to resident individuals who receive an income by the means of royalty on their patent.
Royalty upto the Rs 3 lakhs can be claimed as deductions, subject to the patent being registered after 31/3/2003. If an individuals who receive royalty from foreign country need to bring that amount to the country within a specific time period to eligible for tax deductions on such royalty.
Tax Deduction under Section 80TTA:
Deductions under Section 80TTA can be claimed by HUF and Individual taxpayers. This section permits deductions of Rs 10,000 every year on the interest earned on money invested in bank savings accounts in the country.
Tax Deduction under Section 80U:
Tax deductions under Section 80U can be claimed only by resident individual who have disabilities but a certified by relevant medical authorities must be obtain. The person with disability can claim a maximum deduction of Rs 75,000 per year. Individuals who have severe disabilities are entitled to a maximum deduction of Rs 1.25 lakh.
The government fix a certain amount of income which is essential to provide certain basic necessities to the citizens than an Individual who earn more than that certain amount which is fix by the government are taxable or an individual has to pay tax on his annual income over and above of the fixed certain amount. There are certain tax slabs. Means more the income more the tax.
The individuals who are paying tax are called taxpayer. For the purpose of tax calculation the interest earned on individual's bank balance are also includes as a income of a taxpayer. It is the tax structure of our country.
But our tax structure also provides certain provisions where in an individual can save tax or an individual reduce their taxable income or lowering their overall tax liability. The benefit of deduction is eligible for an individual depends on a number of factors, with different limits fixed for different purposes.
Now the question arise what is the meaning of Tax Deduction?
So tax deduction is a component which helps in reducing the taxable income. It decreases the overall tax liabilities or helps to save tax. The amount of deduction varies due to type of investment made by an individual. An individual can claim tax deduction on amounts spent in tuition fees, medical expenses and charitable contributions or invest in various schemes such as life insurance plans, retirement savings schemes, national savings schemes etc. Our government also encourage individuals and commercial Institutes by offering tax exemptions on various expenses incurred in different activities and to take part in activities having social benefits.
Tax Deductions under Section 80C:
Section 80C of the Income Tax Act is very popular section which provides provisions for tax deductions on a number of payments. Both individuals and (HUF) Hindu Undivided Families are eligible to get the benefit under these deductions. The taxpayers can claim deductions upto Rs 1.5 lakh per year under Section 80C. The limit of Rs 1.5 lakh is the overall limit for the combination of deductions available under Sections 80 C, 80 CCC and 80 CCD.
I am listing below some of the popular investments which are eligible for this tax deduction.
1 Payment made towards life insurance policies (for self, spouse or children)
2 Payment made towards a superannuation/provident fund
3 Tuition fees paid to educate a maximum of two children
4 Payments made towards construction or purchase of a residential property
5 Payments issued towards a fixed deposit with a minimum tenure of 5 years
6 Investment in mutual funds,
7 Senior citizens saving schemes,
8 Purchase of NABARD bonds, etc.
Subsections under Section 80C:
Section 80 CCC of the Income Tax Act provides scope for tax deductions on investment in pension funds. These pension funds could be from any insurer and a maximum deduction of Rs 1.5 lakh can be claimed under it. This deduction can be claimed only by individual taxpayers.
Section 80 CCD aims to encourage the habit of savings among individuals only providing to invest in pension schemes which are notified by the Central Government such as NPS. This deduction is valid for individual taxpayer only means deduction for HUF not allowed. The individual claiming this deduction may be resident or non-resident.
Section 80 CCF contains the provisions for tax deduction on subscription of long-term infrastructure bonds which has been notified by the government. Maximum deduction of Rs 20000/- allowed under this section. Both HUF or Individuals can avail this benefit.
Section 80 CCG The maximum investment allowed for claiming deduction under RGESS (Rajiv Gandhi Equity Saving Scheme) is Rs. 50,000. The investor will be eligible to get a 50% deduction of the amount invested from the taxable income of that year.
This benefit is over and above the deduction available u/s Sec 80C. or the deduction was 50 % of amount invested in such equity shares or ₹ 25,000, whichever is lower.
To claim this deduction the taxpayer has to satisfy certain conditions.
Tax Deductions under Section 80D:
Section 80D of the Income Tax Act permits deductions on amounts spent by an individual towards the premium of a health insurance policy. This includes payment made on behalf of a spouse, children, parents or self to a Central Government health plan. An amount of Rs 15,000 can be claimed as deduction but a individual over the age of 60 and paid towards the insurance for spouse, dependent children or self, amount is Rs 20,000 allowed.
Both individuals and HUF are eligible for this deduction, subject to the payment being made in modes other than cash.
Section 80DD provides provisions for tax deductions in two cases,
1 Rs 75000 permitted as deduction for normal disability and
2 Rs 1.25 lakh if it is a severe disability.
This deduction can be claimed in case of the following expenditures. On payments made towards the treatment of dependants with disability or the amount paid as premium to purchase or maintain an insurance policy for such dependant.
The permitted deduction is Rs 75,000 for normal disability and Rs 1.25 lakh for a severe disability.
This benefit is available for both HUF or resident individuals. The dependant, in this case can be either a spouse, sibling, parents or children.
Section 80DDB provides provisions for deductions on the expense incurred by an individual/family towards medical treatment of certain diseases. The permitted deduction is limited to Rs 40,000, if the treatment is for senior citizens the amount can be increased to Rs 60,000.
This deduction benefit can be utilised by HUF or resident individuals
Tax Deductions under Section 80E:
Under Section 80E of the Income Tax Act has been designed to ensure that expences toward higher education doesn’t become an additional tax burden.
Under this section, taxpayers are eligible for tax deductions on the interest repayment of a loan taken to pursue higher education. This loan can be availed either by the taxpayer self or to sponsor the education of their ward/child.
Only individuals are eligible for this deduction, subject to, the loan is taken from approved charitable organisations and financial institutions permitted for tax benefits.
Subsections of Section 80E:
Section 80EE: Only individual taxpayers are eligible for deductions under Section 80EE, with the interest repayment of a loan taken by them to buy a residential property qualifying for deductions. The maximum deduction permitted under this section is Rs 3 lakhs.
Tax Deductions under Section 80G:
Section 80 G is made to encourage the taxpayers to donate funds to charitable institutions, offering tax benefits on monetary donations. All assessees are eligible for this deduction, subject to proof of payment, the limit of deductions decided based on a few clouse
- 100% deductions without any limit: Donations like National Defence Fund, Prime Minister’s Relief Fund, National Illness Assistance Fund, etc.
- 100% deduction with qualifying limits:
Donations to local authorities, associations or institutes to promote family planning and development of sports.
- 50% deduction without qualifying limits:
Donations to funds like the PMs Drought Relief fund, Rajiv Gandhi Foundation, etc.
- 50% deduction with qualifying limit:
Donations to religious organisations, local authorities for purposes apart from family planning and other charitable institutes.
Now the question is what is qualifying limit so the qualifying limit refers to 10% of the gross total income of a taxpayer.
Subsections of Section 80G:
Under Section 80G has been further subdivided into four sections
Section 80GG: Individual taxpayers who do not receive house rent allowance are eligible for this deduction on the rent paid by them, subject to a maximum deduction equivalent to 25% of their total income or Rs 2,000 a month which ever is lower can be claimed as deduction.
Tax deduction under Section 80GGA
of the Income Tax Act pertains to deductions who can claim in lieu of donations towards rural development or scientific research.
The following donations are eligible for tax rebates under Section 80GGA of the Income Tax Act
- Donations to research institutions/ associations/universities involved in scientific research.
- Any such institute/associations should adopt the rules prescribed under Section 35(1)
- Donations to institutions/associations/ colleges which are involved in research related to social science or statistics.
- Donations to associations/institutes which are involved in rural development programs, subject to meeting the criteria under Section 35CCA.
- Donations to institutions/associations which are involved in imparting rural development training to individuals or groups.
- Donations to associations/ institutions/public sector companies or local authorities who are involved in projects or schemes which are approved under Section 35AC.
- Donations towards the Rural Development towards forestation Fund.
- Donations made to the National Poverty Eradication Fund.
Tax deductions under this section can be availed by all assessees.
Donations made by any Indian company for enhance social/ scientific/ statistical research or towards the National Urban Poverty Eradication Fund are eligible for tax benefits under Section 80GGB.
The amount donated by the Indian company to a political party or electoral trust qualifying for deductions under Section 80GGC.
Under this section, funds donated /contributed by an assessee to a political party or electoral trust are eligible for deduction. But Local authorities and artificial juridical persons are not entitled to the tax deductions available under Section 80GGC.
Tax Deductions under Section 80 IA:
Section 80 IA provides a provision for all the assessees to claim tax deduction on the profits generated through industrial activities subject to the industrial undertakings is being related to telecommunication, power generation, industrial parks, SEZs, etc.
The subsections are related to Section 80-IA
Section 80 IAB can be used by SEZ developers, who can claim tax deductions on their profits through development of Special Economic Zones.
Section 80-IB: Provisions of section 80-IB for all assessees who have profits from hotels, ships, multiplex theatres, cold storage plants, housing projects, scientific research and development, convention centres, etc.
Section 80-IC for all assessees who have profits from special categorisef states include Assam, Manipur, Meghalaya, Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Mizoram, Tripura and Nagaland.
Section 80-ID for assessees who have profits or gain from hotels and convention centres subject to their establishments being located in certain specified areas.
Section 80-IE for assessees who have in North-East India are eligible for deductions, subject to certain conditions.
Tax Deductions under Section 80J:
Section 80J of the Income Tax Act was amended to include two subsections, 80JJA and 80 JJAA
Section 80 JJA relates on profits and gains from assessees who are in the business of processing/treating and collecting bio-degradable waste to produce biological products like bio-fertilizers, bio-pesticides, bio-gas, etc.
The assessees can claim 100% deduction of their profits for 5 successive assessment years since the time their business started.
Section 80 JJAA: Deductions under can be claimed by Indian companies which have profits from the manufacture of goods in factories.
- Deductions equivalent to 30% of the salary of new full time employees for a period of 3 assessment years can be claimed subject to a chartered accountant should audit the accounts of such companies.
Tax Deduction under Section 80LA:
Deductions under Section 80LA can be availed by
- Scheduled Banks which have offshore banking units in Special Economic Zones, - International Financial Services Centres and banks which have been established outside India, in accordance to the laws of a foreign nation.
These assessees are eligible for deductions equivalent to 100% of the income for the first 5 years, and 50% of income generated for the next 5 years, subject to the rules of the land subject to the entities should have relevant permission, either from SEBI Act, Banking Regulation Act or registration under any other relevant law.
Tax Deduction under Section 80P:
Section 80P relates to cooperative societies on their income, subject to certain conditions.
- 100% deduction is permitted to cooperative societies whose income come through cottage industries, fishing, banking, sale of agricultural harvest grown by members and milk supplied by members to milk cooperative societies.
Cooperative societies which are involved in other forms of business are eligible for deductions ranging between Rs 50,000 and Rs 1 lakh, depending on the type of work they are involved in.
Following are the deductions which can be claimed by all cooperative societies,
- Income of the cooperative society come from by renting out warehouses
- Income generate through interest on money lent to other societies
- Income earned through interest from securities or properties
Tax Deduction under Section 80QQB:
Section 80QQB permits tax deductions on royalty earned from sale of books.
Only resident Indian authors are eligible to claim deductions under this section,
The maximum limit is Rs 3 lakhs.
Tax Deduction under Section 80RRB:
Section 80RRB offers tax incentives to patent holders, subject to resident individuals who receive an income by the means of royalty on their patent.
Royalty upto the Rs 3 lakhs can be claimed as deductions, subject to the patent being registered after 31/3/2003. If an individuals who receive royalty from foreign country need to bring that amount to the country within a specific time period to eligible for tax deductions on such royalty.
Tax Deduction under Section 80TTA:
Deductions under Section 80TTA can be claimed by HUF and Individual taxpayers. This section permits deductions of Rs 10,000 every year on the interest earned on money invested in bank savings accounts in the country.
Tax Deduction under Section 80U:
Tax deductions under Section 80U can be claimed only by resident individual who have disabilities but a certified by relevant medical authorities must be obtain. The person with disability can claim a maximum deduction of Rs 75,000 per year. Individuals who have severe disabilities are entitled to a maximum deduction of Rs 1.25 lakh.
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