A tax is a must pay fee or charge imposed by the government on an individual's income or a business's profit to collect gains for the expenditure of public programs and for the welfare of it's people.
The tax is also added to the cost of some goods, services and even on some transactions such as GST, IGST, CGST, SGST and VAT.
An individual who's profitable net income per annum exceeds 2.5 lakhs is liable to pay tax.
The Income Tax Department, after many considerations, willfully encourages saving schemes and investment plans among the tax payers, which paved way for various tax deductions from the taxable income.
"The purpose of a tax cut is to leave more money where it belongs: in the hands of the working men and working women who earned it in the first place."
Let's examine about the tax deductions in detail.
Sections eligible for Tax Deductions :
First let us see all the available sections under which the tax payable amount can be reduced.
The sections include Sections 80C, 80CCC, 80CCD(1), 80CCE, 80CCD(1B), 80CCD(2), 80TTA, 80TTB, 80GG, 80E, 80EEA, 80D, 80DD, 80DDB, 80U, 80G, 80GGB, 80GGC and Section 80RRB.
Equity Saving Schemes, PPF/SPF/RPF, Life Insurance Premiums, home loan, SSY, NSC, SCSS
Pension schemes for senior citizens
Atal Pension Yojana or other pension schemes by government
20% of total income
National Pension System
Employer’s contribution towards NPS
10% of basic salary +DA
Section 80C :
This section includes investments made in Equity Saving Schemes, PPF / SPF, RPF, payments for Life Insurance Premiums, home loan, SSY, NSC, SCSS, etc.
Under these mentioned categories a minimum deduction of Rs. 1.5 lakhs can be done.
Savings under Pension Plans :
A total of Rs.1.5 lakhs can be deducted from the payable tax amount for the investments made towards the pension schemes in the name of senior citizens. It comes under the Section 80CCC.
Interest Income on Savings Account :
The deduction of tax for interest income on savings account falls under the Section 80TTA. If you have invested in any schemes in banks or post office, etc., that produces interest as an income, then you can apply under this section.
However, only those who are under 60 years are applicable to this section.
The senior citizens can claim this deduction under the Section 80TTB.
The maximum deduction for Section 80TTA is up to Rs. 10,000 and for Section 80TTB it is up to Rs. 50,000.
Section 80GG :
Do you pay your taxes living on a rental house ?
You can save up to 25% of your total income by claiming deduction.
For this, the tax payer must be living on a rental house and paying rent by themselves. They should not receive House Rental Allowance in their salary structure from their employer. And it is necessary that they should not have any residential property in any other place.
Deduction on Education Loan :
The deduction of interest on education loan comes under the Section 80E. This section can be claimed up to for about 8 years from the start of the interest amount paid.
The education loan taken for the higher studies can be for the tax payer, their spouse or their children or even for a student for whom the tax payer acts as a legal guardian.
Section 80EEA :
This section is for the tax payers who are first time home owners and are paying interest on a house loan.
The payor should not own any residential house on the day of loan sanction. The Stamp Duty Value of the house should be less than or equal to Rs. 45 lakhs. The payors who claim under this section are not eligible to claim under the Section 80EE.
Deduction on Medical Insurance Premium :
Deduction for Payor and Family
Deduction for Parents
Additional deduction for health check up
Maximum Deductable Amount
Self & Family
(below 60 years)
Self & Family + Parents
(all of them below 60 years)
Self & Family (below 60 years)
+ Parents (above 60 years)
Self & Family + Parents
(above 60 years)
If you are paying medical insurance, then you are eligible to claim under this section in accordance with the below mentioned information.
If the payor and his family are below 60 years, then the maximum deduction can be made up to Rs. 25,000.
If the payor, his family and his parents are all below 60 years, then the deduction amount is up to Rs. 50,000.
If the payor and his family are below 60 years but his parents are above 60 years, the amount goes up to Rs. 75,000.
If the payor, his family and his parents all are above 60 years, then the deduction amount can be extended up to Rs. 1,00,000.
In addition to this, Rs. 5000 can be deducted separately which is allotted for the preventive health check up, and this is common to all irrespective of age.
Section 80DD :
This section is for the dependent relative of the payor, who is disabled or handicapped.
If the dependent relative of the payor receives a medical treatment, training or rehabilitation, the payor is eligible under the Section 80DD for the deduction of medical treatment for the dependent disabled person.
If the disability is normal, the deduction amount will be up to Rs. 75,000.
If the disability is severe, then the amount will be up to Rs. 1,25,000 lakhs.
To claim this deduction, a disability certificate is needed from any medical authority.
Donations for Communal Causes :
Section 80G covers the tax deduction benefits on account of donations given for the communal causes.
Either the deduction can be up to 100% or 50% with or without restrictions.
Winding Up :
It is very important to pay taxes as a citizen, as taxes contribute 17.7% on the country's total GDP. This revenue helps the government to implement many public welfare matters of the State or Country.
"A person doesn't know how much he has to be thankful for until he has to pay taxes on it."
So, one must pay taxes regularly without failure despite focusing on how to save their income.
"Better Planning for Better Future."