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Income tax deduction list.

 Note

This maximum limit of Rs. 1, 50,000 is the aggregate of the deduction that may be claimed under sections 80C, 80CCC and 80CCD.

 Detailed discussion is done below for above deduction list

1. HRA

A salaried individual having a rented accommodation can get the benefit of HRA (House Rent Allowance). However, if you aren’t living in any rented accommodation and still continue to receive HRA, it will be taxable.

Conditions

Least of the following is exempt:

1. Actual HRA Received
2. 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)
3. Rent paid minus 10% of salary*

* Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission

Note:

1. Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent
2. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1, 00,000 [Circular No. 08 /2013 dated 10th October, 2013].

Documents Required for HRA Exemption

Name, address and permanent account number of the landlord/landlords where the aggregate rent paid during the previous year exceeds rupees one lakh. It will be better to have registered rent agreement for HRA exemption.

2. Leave Travel Concession or Assistance (LTC/LTA)

It is an exemption for allowance/assistance received by the employee from his employer for travelling on leave.

Conditions

1. Actual journey is a must to claim the exemption
2. Maximum amount which can be claimed as deduction is Least of actual cost of travel or LTA provided by employer.
3. Only domestic travel is considered for exemption i.e., travel within India. No international travel is covered under LTA
4. The exemption for travel is available for the employee alone or with his family, where ‘family’ includes the employee’s spouse, children and wholly or mainly dependent parents, brothers, and sisters of the employee. Further, such an exemption is not available for more than two children of an employee born after 1 October 1998. Children born before 1 October 1998 do not have any restriction. Further, in cases of multiples births on second occasion after having one child is also not affected by this restriction.
5. LTA exemption is available for only two journeys performed in a block of four calendar years.

Documents Required for LTA Exemption

1. Evidence of expenditure e.g. Air tickets, train tickets, bus or taxi bills.

2. No expenses such as local conveyance, sightseeing, hotel accommodation, food, etc., are eligible for this exemption

3. Deduction of Interest on Housing Loan – Section 24b

Section 24b of income tax act allows deduction of interest on home loan from the taxable income. Such loan should be taken for purchase or construction or repair or reconstruction of house property.

Conditions

1. Deduction can be claimed for two or more housing loans. The deduction can also be claimed for two or more houses.
2. For claiming deduction under this section, person must be the owner of the house property and also loan should be in his name.
3. Interest includes service fees, brokerage, commission, prepayment charges etc. Interest/penalty on unpaid interest shall not be allowed as deduction.
4. MAXIMUM LIMIT OF DEDUCTION

These limits of deduction are applicable assessee wise and not property wise. Therefore if a person owns two or more house property then the total deduction for that person remains the same.

1) In Let Out Property/deemed to be Let Out – Rs. 2 lakh

2) Self Occupied House (SOP) – Rs. 2 Lakh

In the following cases, the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000

– Loan borrowed before 01-04-1999 for any purpose related to house property.

– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.

– If construction/acquisition is not completed within 5 years from the end of the financial year in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2019 then the deduction limit should be reduced to Rs 30,000 if the construction/acquisition completes after 31 March 2025.

If the home loan is taken on joint names then the deduction is allowed to each co-borrower in proportion to his share in the loan. For taking such deduction it is necessary that such co-borrower must also be co-owner of that property.

Difference between Section 24b and Section 80C

Interest on home loan is allowed under section 24b while principal on home loan is allowed under section 80C. A comparison between section 24 and 80C is given hereunder:-

 Documents Required for section 24b Exemption

1. Certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

4. Section 80C

The below mentioned investments are eligible for deductions u/s 80C. An investor can choose to either invest in all the available tax-saving instruments or in some of them.

Documents Required-

Deduction are mostly in nature if investment/payment. Proper document/proof shall be required like payment vouchers/bills, investment proof.

1. Employee Provident Fund (EPF) & Voluntary Provident Fund (VPF)

EPF is a retirement benefit scheme that is available to all salaried employees. Employer and employee both have to contribute equally (12% of basic salary) to the provident fund account of an employee. An employee can contribute a higher sum of money through voluntary contributions (VPF). Employee’s own contribution to provident fund qualifies for 80C deductions.

Eligibility: If the employee’s basic salary exceeds Rs 15,000 per month, he has an option to join the scheme, otherwise he/she has to compulsorily contribute towards provident fund.

Liquidity: A person cannot withdraw his/her PF balance for as long as he/she continues to work except in special circumstances (flat, construction, marriage/education of children etc.). In case, he/she quits the job and does not take up employment within two months with an employer covered by PF Act, then he/she can withdraw the entire balance.

Investment Limit: Both employer and employee have to contribute a minimum 12% of Basic Pay + D.A. Employee can voluntarily increase his own contribution up to 100% of Basic Pay + D.A.

Tax Treatment: The EPF falls under EEE (Exempt, Exempt, Exempt) category. It means investment to EPF, income on EPF, and withdrawal of EPF is exempt from tax. Employer’s contribution to the PF account up to 12% of salary is tax exempt. Employee’s own contribution qualifies for deduction under section 80C. Entire accumulated balance (including interest) of PF is tax exempt if withdrawn after continuous service of 5 years.

2. Public Provident Fund (PPF)

PPF scheme is a long term investment option backed by Government of India.

Eligibility: PPF account can be opened by Resident Indian individuals either in their own name or in the name of minor child. It can be opened by both salaried and non-salaried individuals. A HUF cannot open a PPF account.

Liquidity: Maturity period of a PPF account is 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years. Premature closure is allowed after 5 years

Investment Limit: Minimum and maximum investment limit is Rs 500 and Rs 1.5 lakh respectively.

Tax Treatment: PPF qualifies for EEE (Exempt, exempt, exempt) category.

3. Equity Linked Savings Scheme (ELSS)

ELSS is an open-ended Equity Mutual Fund that helps save tax, and also provides an opportunity to grow money at a comparatively faster rate. ELSS provides inflation-adjusted growth in the long-term.

Eligibility: Anyone with a Demat account can invest in ELSS.

Liquidity: Minimum lock-in period for this scheme is 3 years

Investment Limit: The minimum investment limit is Rs 500. There is no upper limit for investment in this scheme.

Tax Treatment: ELSS falls under EEE category

4. National Savings Certificate (NSC):

NSC is a postal department’s saving scheme ranked as ‘highly secured’ in the class of Investments.

Eligibility: Non-residents, Trust and HUF cannot invest in this scheme.

Liquidity: NSC comes with a lock-in period of 5 & 10 years

Tax Treatment: Interest accrued on the amount invested in NSC is taxable but it is counted as fresh investment and hence qualifies for 80C deduction. The investment is eligible for deduction under 80C and maturity amount is tax-free.

5. Sukanya Samriddhi Scheme

Sukanya Samriddhi Scheme is one of the best investment options available today.

Eligibility: Parents/guardians can open account in the name of a girl child till she attains the age of 10 years Maximum of two accounts can be opened by natural or legal guardian for 2 different girls. Account can be opened at public sector banks and post offices.

Liquidity: Deposit should be made every year till the end of 14 years from the year of opening the account. Partial withdrawal are allowed up to 50% of the balance in the account as per the end of the previous financial year, for the purposes of higher education or marriage after attaining the age of 18 years.  Maturity period is 21 years post opening of the account.

Investment Limit: Minimum & maximum investment limit is Rs 1,000 & Rs 1.5 lakh p.a. respectively.

Tax Treatment: Sukanya Samriddhi Scheme comes under EEE category.

6. Senior Citizens Savings Scheme (SCSS)

As the name suggests, this scheme is for senior citizens.

Eligibility: An individual aged 60 years or more is allowed to open the account. An individual of the age of 55 years or more but less than 60 years, who has retired under VRS (Voluntary Retirement Scheme), is also permitted to open account if he/she satisfies 2 conditions. First, the account is opened within 1 month of receipt of retirement benefits. Second, investment amount should not exceed the amount of retirement benefits.

Liquidity: Maturity period is 5 years the account can be extended for 3 more years after maturity. Premature withdrawal after 1 year is allowed on deduction of an amount equal to 1.5% of the deposit and after 2 years by deducting 1% of the deposit.

Investment Limit: Minimum and maximum investment limit is Rs 1,000 and Rs 15 lakh respectively.

Tax Treatment: Interest income is taxable and taxes will be deducted at source if it is more than Rs 10,000 p.a. Maturity amount is exempt from tax.

7. 5 Year Post Office Time Deposit

5 year fixed deposits can be opened with any branch of Indian Post Office.

Eligibility: Account may be opened by any individual.

Liquidity: Maturity period is 5 years

Tax Treatment: Interest earned under this scheme is fully taxable. The investment is eligible for deduction under 80C and maturity amount is exempt from tax.

8. 5 year Tax Saving Bank Fixed Deposits (FD)

As the name suggests, it is a type of fixed deposit investment.

Eligibility: All resident individuals can open account. Senior citizens above the age of 60 years are also eligible to open a tax saver fixed deposit account.

Liquidity: Maturity period is 5 years A person can’t break this FD.

Investment Limit: Minimum investment limit is Rs 1000. No upper limit for investment.

Tax Treatment: Interest income is taxable on maturity. The investment qualifies for deduction under 80C and maturity amount is exempt from tax.

9. Unit Linked Insurance Plan (ULIP)

Unit Linked Insurance Plan is a life insurance product that is a combination of investment and insurance. That means a portion of the money invested in ULIPs will be used to provide risk cover and the balance amount will be invested in the stock market.

Eligibility: An investor can buy ULIP for self or spouse or child. Child can be married or unmarried, dependent or independent and minor or major.

Liquidity: Partial withdrawals are allowed after 5 years

Investment Limit: An investor can invest an amount higher than Rs 1.5 lakh but deduction will be allowed only up to Rs 1.5 lakhs.

Tax Treatment: Investment and withdrawals & maturity amount are tax-free.

If an individual has exhausted the above mentioned tax-saving instruments and still, has not reached the Rs 1.5 lakh limit, then that individual can invest his/her money in the below mentioned tax-saving schemes:

10. Infrastructure Bonds

Infrastructure companies such as Infrastructure Development Finance Company and India Infrastructure Finance Company issue infrastructure bonds, also popularly called infra bonds that are approved by the government. The amount invested in these bonds can be claimed as a deduction.

11. NABARD Rural Bonds

NABARD (National Bank for Agriculture and Rural Development) issues two types of bonds. One is NABARD Rural Bonds and the other one is Bhavishya Nirman Bonds. Investments made in NABARD Rural Bonds are eligible for tax deductions.

EXPENSES ELIGIBLE FOR DEDUCTIONS UNDER 80C

1. Life Insurance Premium

Eligibility: All individuals and HUF can invest in insurance policy.

Liquidity: If you have invested for a minimum of 2 years then the withdrawals will be exempt from tax u/s 10 but, generally you will have to pay the premium for minimum 3 years before you can surrender it.

Tax Treatment: Investment is tax-free. Maturity amount is exempt from tax u/s 10(10D).

2. Children’s Tuition Fees

Tuition fee of full-time education of children is eligible for deduction.

Conditions for eligibility:

The tax deduction on tuition fee is available for two children only.

The development fee/capitation fee is not included under this section.

The education institute should be situated in India.

3. Repayment of Principal for Home Loan

The principal repayment of a home loan either to buy a home or to build a residential property qualifies for tax deduction.

4. Stamp Duty and Registration Charges for House Property

Apart from the principal repayment of home loan, expenses incurred on stamp duty and registration charges for purchase of house property also qualify for tax deduction.

5. Section 80D Medical Insurance Premium 

1. Under Section 80D an assessee, being an individual or a Hindu undivided family, can claim a deduction in respect of payments towards annual premium on health insurance policy, preventive health check-up or medical expenditure in respect of senior citizen (above 60 years of age).
2. As of FY 2017-18, only Very Senior Citizens (who are above 80 years of age), can claim a deduction of up to Rs 30,000 incurred towards medical expenditure, in case they don’t have health insurance. The Budget 2018 has increased this to Rs 50,000 and also allowed the same flexibility to senior citizens. Even individuals who pay premiums for their dependent senior citizens parents can claim the additional deduction on health insurance premium (or) medical expenditure.
3. Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, parents and dependent children).

6. Disabled Dependent Section 80DD

Section 80DD deduction is available to a resident individual or a HUF and is available on:

1. Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative
2. Payment or deposit to specified scheme for maintenance of handicapped dependent relative.
3. Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.
4. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000.

To claim this deduction, you have to submit Form no 10-IA.

7. Section 80DDB

An individual (less than 60 years of age) can claim upto Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens and very Senior Citizens (above 80 years) has been revised to Rs 1,00,000 w.e.f FY 2018-19.

To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt or Private hospital.

For the purposes of section 80DDB, the following shall be the eligible diseases or ailments:

Neurological Diseases where the disability level has been certified to be of 40% and above;

(a) Dementia

(b) Dystonia Musculorum Deformans

(c) Motor Neuron Disease

(d) Ataxia

(e) Chorea

(f) Hemiballismus

(g) Aphasia

(h) Parkinson’s Disease

Malignant Cancers

Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;

Chronic Renal failure

Hematological disorders

Hemophilia

Thalassaemia

NRIs are not eligible for certain tax deductions, including medical treatment of disabled dependent (under Sec 80DD), treatment of family member suffering from specified diseases (under Sec 80DDB), disability of self or dependent (under Sec 80U).

8. Section 80E

If you take any loan for higher studies (after completing Senior Secondary Exam), tax deduction can be claimed under Section 80E for interest that you pay towards your Education Loan. This loan should have been taken for higher education for you, your spouse or your children or for a student for whom you are a legal guardian.

Principal Repayment on educational loan cannot be claimed as tax deduction.

There is no limit on the amount of interest you can claim as deduction under section 80E. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.

Section 80E is available to NRIs as well.

9. Section 80EE

This was a new proposal which had been made in Budget 2016-17. The same will be continued in AY 2020-21 too. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.

• The home loan should have been sanctioned during FY 2016-17.
• Loan amount should be less than Rs 35 Lakh.
• The value of the house should not be more than Rs 50 Lakh &
• The home buyer should not have any other existing residential house in his name.
• Such eligible home buyers can claim exemption of Rs. 50,000/- for interest on home loan under section 80EE from assessment year beginning from 1 st April 2017 and subsequent years, till loan closure.

NRIs can claim tax deduction u/s 80EE.

10. 80EEA for FY 2019-20 or AY 2020-21

Besides the tax deductions under Section 80C and 24b, an individual can now claim up to Rs 1.5 lakh under Section 80EEA from FY 2019-20 or AY 2020-21 onwards, subject to below conditions;

• The home loan should have been sanctioned between 1st April, 2019 to 31st March 2020.
• The Stamp duty value of the property should not exceed 45 Lakhs.
• Taxpayer should not own any other residential property on the date of loan sanction.
• This tax benefit will be available from 1st April 2020 (AY 2020-21)and till the end of the home loan tenure (closure).
• The total interest deduction is now Rs. 3.5 lakh (Rs 2 Lakh + 
  Rs 1.5 Lakh).

Kindly note that the deduction under Section 80EEA is available for home loans from banks and approved financial institutions only. Under Section 24, even interest paid on home loans from friends and relatives is eligible for tax benefit.

To claim tax benefit under Section 24, you should have received possession of your house (interest paid before possession is eligible for deduction over the next 5 years in 5 equal installments). Section 80EE and 80EEA do not impose any requirement of possession or completion of construction. Therefore, Section 80EEA provides you immediate tax relief even if you have purchased an under-construction property.

Both resident Indians and non-resident Indians (NRIs) can claim the deduction u.s 80EEA.

11. Section 80G

Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. This deduction can only be claimed when the contribution has been made via cheque or draft or in cash. In-kind contributions such as food material, clothes, medicines etc do not qualify for deduction under section 80G.

The donations made to any Political party can be claimed under section 80GGC.

W.e.f  FY 2017-18, the limit of deduction under section 80G / 80GGC for donations made in cash is reduced from current Rs 10,000 to Rs 2,000 only.

12. Section 80GG

The Tax Deduction amount under 80GG is Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).

The extent of tax deduction will be limited to the least amount of the following;

• Rent paid minus 10 percent the adjusted total income.
• Rs 5,000 per month.
• 25 % of the total income.

(If you are claiming HRA (House Rent Allowance) of more than Rs 50,000 per month (or) paying rent which is more than Rs 50,000 then the tenant has to deduct TDS @ 5%. It has been proposed that the tax could be deducted at the time of credit of rent for the last month of the tax year or last month of tenancy, as applicable.)

13. Section 80U

It includes provisions for tax deduction benefit to individual taxpayers suffering from a disability. In order to claim tax deduction under section 80U, the individual must be certified as a person with a disability by appropriate medical authority.

Who is a person with a disability?

As per the Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1955, individuals suffering from any of the following ailments with minimum 40% impairment will be considered as disabled:

Blindness, Low Vision, Leprosy (cured), Hearing Impairment, Locomotor Disability, Mental Retardation, Mental Illness, Autism, Cerebral Palsy

The disability act also provides a definition of severe disability which refers to the condition where the disability is 80% or more. A person suffering from multiple disabilities will also be considered as severely disabled.

Deduction Limit Under Section 80U

Person with Disability: If a person is suffering from at least 40% disability, he/she can claim a tax deduction upto Rs.75,000 on the taxable income under section 80U.

Person with Severe Disability: If a person is suffering from severe disability i.e suffering 80% disability (either from one or multiple ailments) can claim a tax deduction upto Rs. 1.25 lakh under section 80U.

Documents Required for section 80U Exemption

Disability certificate issued by a medical authority where medical authority means A civil surgeon or Chief Medical Officer (CMO) of a government hospital, A neurologist with an MD in Neurology, A Paediatric Neurologist in case of children

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“The only thing that hurts more than paying an income tax is not having to pay an income tax.”