Tax deductions under different sections
Under the Income Tax Act 1961, a taxpayer can save taxes legally by claiming the deductions under various sections at the time of filing their income tax returns. It is available for all classes of taxpayers. Following are the sections under which the taxpayers can claim their deductions:
- Tax Saving Under Section 80C, Section 80CCC, and Section 80CCD
To promote the savings by people, government has allowed deductions under Sections 80C, Section 80CCC and Section 80CCD. The maximum amount of combined deduction that is allowed under these sections is Rs. 1, 50,000. There are various instruments that can be used can be used to claim deductions to save tax under this Section:
- Public Provident Fund (PPF)
- Life Insurance Corporation
- National Savings Certificate
- Employee Provident Fund (EPF)
An additional deduction of Rs. 50,000 under Section 80CCD is allowed for investment in National Pension Scheme (NPS). This has been introduced in the Finance Act, 2015 and is applicable from the financial year 2015-16 onwards.
- Tax Saving under Section 80D, Section 80DD, and Section 80DDB
Under these Sections, a taxpayer is allowed deductions for health insurance of self/relatives. Following are the various kinds of deductions which are allowed for deductions depending upon the type of Insurance Policy:
- Section 80D – Medical Insurance Premium for self/spouse/children
- Section 80DD – Medical treatment of Handicapped people
- Section 80DDB – Treatment of specific diseases
- Tax Saving under Section 80C and Section 24
Those who have taken home loans are allowed to claim the deductions under Section 80C. Section 24 allows for deduction of the interest paid on home loan. The maximum deduction allowed is Rs. 2,00,000. However, there is no maximum limit for claiming deduction in some cases.
- Tax Saving under Section 80E
Section 80E allows deduction for education loan which has been taken by any person for the higher education of self/spouse/children or any other student of who he is the legal guardian. It should be noted that this deduction is only allowed for the repayment of interest and not for the interest of the Principal amount of the education loan. This deduction is can be claimed only by the individual taxpayers and not by HUFs. There is no maximum limit on the amount that can be claimed for deduction under this Section.
- Tax Saving under Section 80CCG
A taxpayer whose annual income is less than Rs. 12 lakh per annum is allowed an additional deduction under Section 80CCG for investment in shares and mutual funds. This is known as ‘Rajiv Gandhi Equity Savings Scheme’. This deduction is only available to first time investors.
- Tax Saving on Long-Term Capital Gains
The amount received as long-term capital gain after selling long-term capital asset can be claimed as deduction if the amount is invested in any specific instruments.
- Tax Saving under Section 80G
The donations made for the purpose of charity/social cause can be claimed as a deduction under Section 80G of the Income Tax Act. The amount that can be claimed for deduction under this section ranges from 50% to 100%. It should be noted that the donations made in kind are not allowed as deduction. Only the donations made in cash or by cheque are allowed as deduction.
- Long-Term Capital Gains on the sale of Equity Shares
The deduction is allowed on the amount which is gained after selling of equity shares. But these equity shares should have been held for a period of more than 1 year. If the shares are held for less than 1 year, then the tax is charged @ 15%.