Income tax Deduction Details description

Deductions under Chapter VIA

Should you pay income taxes? Well, if you earn more than INR 2,50,000 per fiscal year and are a resident of India, you are eligible to pay taxes. Fortunately, that is not how the tax laws work in the country. Though you are eligible to pay taxes, there are a lot of other calculations that might actually help you not pay any taxes legally. 

India follows a progressive tax system, which means that taxpayers will end up paying higher taxes as their income increases. Another way of seeing the same would be, taxpayers who are in the low to medium brackets can save a considerable amount of money as taxes.

The tax slabs in place aid you in arriving at the total amount of taxes that you might have to pay during a fiscal year. But before you can start calculating your taxes, it is important to know the final income on which income tax is calculated. And it is not the same amount that you earn.

You can seek Deduction under Chapter VI A, which will help you reduce your taxable income. There are a lot of deductions available under various sections to help you bring down the taxable income. For example, you can claim deductions under sections 80C, 80CCC, 80CCD, 80CCE and 80D.

Each of these sections caters to a specific type of investments or expenses. For instance, Section 80CCD is for pension scheme deductions. In other words, if you are investing any amount towards your future pension plans, you can claim deductions under this section.

Similarly, for any LIC Deduction, Section 80CCC is handy. For all investments related to LIC annuity plans that you buy during a fiscal year, you can claim deductions under this section. The final pension that you receive might be subject to income taxes at a later stage, but this is for the premium that you pay up front.

Section 80C is the most popular section that a vast majority of taxpayers utilize. This includes investment under various instruments such as Equity Linked Savings Scheme or ELSS, National Pension Scheme, tax saving Fixed deposits, Unit linked insurance plans (ULIP) or PPF Deduction.

Chapter VIA has various heads under which you can not only invest and save money but at the same time save money in the form of taxes. The following are all the details that you would need to know about Chapter VIA.

Deductions under chapter VIA are framed in order to give the benefit to the Assessee so that he can lower his total income thereby reducing the taxes.

The sections which gives benefit of lowering the taxes to Individual and HUF Assessees are listed below:

1. Section 80C - Deduction in respect of specified Investments.

Eligible Assessee	Individual and HUF.
Investments and Conditions	The Assessee can take the benefit of Section 80C by investing in the certain investments and making certain payments as follows: 1.   Investment in Equity Linked Saving Scheme (ELSS) 2.   Contribution to Public Provident Fund (PPF) 3.   Contribution to Recognised Employee Provident Fund (EPF) 4.   Contribution to Approved Superannuation Fund 5.   Investment Tax Saving Fixed Deposit 6.   Investment in National PEnsion Scheme (NPS) 7.   Investment in National Savings Certificate (NSC) 8.   Investment in Unit Linked INsurance Plan (ULIP) 9.   Sukanya Samriddhi Yojana 10.Senior Citizen Saving Scheme 11.Life Insurance Premium 12.Tuition Fees 13.Repayment of Housing Loan Each of the above investments and payments have their respective lock-in period, interest rates and other terms and conditions which are to fulfilled for availing deduction under section 80C.
Amount of Deduction	The maximum deduction allowable under section 80C is Rs. 1,50,000/- subject to section 80CCE.

Section 80CCC: Deduction for contribution to certain pension funds.

Eligible Assessee	Individual who has paid or deposited any amount in annuity plan of LIC or any other insurer.
Condition	If deduction is claimed under this section, then no deduction can be claimed under section 80C.
Amount of Deduction	The maximum deduction allowable under section 80CCC is Rs. 1,50,000/- subject to section 80CCE.
Other Points	The following amount received will be taxable in the year in which it is received: 1.   Pension received from annuity or 2.   Amount received upon surrender of Annuity including interest or bonus accrued.

Section 80CCD: Deduction for contribution to pension scheme notified by Central Government.

It can be divided into 3 parts:

Section	80CCD(1)	80CCD(1B)	80CCD(2)
Eligible Assessee / Deduction of	Individual either salaried or self employed who makes deposit to his/ her pension account	Additional deduction to Individual Assessee who has deposited the amount in National Pension Scheme	Employer’s contribution to Employee’s pension account. Entire amount of employer’s contribution will be first  included in the salary of the employee and then deduction u/s 80CCD(2) will be allowed.
Contribution of	Employee	Own	Employer
Amount of Deduction	Salaried Individual - 10% of salary (subject to section 80CCE) Self Employed Individual - 20% of Gross Total Income (subject to section 80CCE)	Rs. 50,000/-. irrespective whether deduction is allowed under 80CCD(1).	Maximum 10% of Salary

Section 80CCE: Ceiling limit for deductions under section 80C, 80CCC and 80CCD(1) with effect from A.Y. 2018-19.

Total deduction under sections 80C, 80CCC and 80CCD(1) cannot exceed Rs. 1,50,000/-. The same is tabulated as below:

Section	Investment/ Contribution	Ceiling Limit
80C	Specified Investments	Rs. 1,50,000/-
80CCC	Contribution to certain pension funds	Rs. 1,50,000/-
80CCD(1)	Contribution to NPS of Government	10% of Salary  or 20% of GTI
80CCE	Aggregate Deduction under above sections	Rs. 1,50,000/-

Ceiling limits under other sections which are outside the limit of Rs. 1,50,000/- specified under section 80CCE is tabulated as below:

Section	Investment/ Contribution	Ceiling Limit
80CCD(1B)	Contribution to NPS of Central Government eg. Atal Pension Yojana.	Rs. 50,000/-
80CCD(2)	Contribution by employer to NPS of Central Government	10% of Salary

2.80D - Deduction in respect of medical insurance premium

Eligible Assessee	Individual or HUF
Expenditure	The following expenditure should be incurred: 1.   Mediclaim Premium 2.   Contribution to Central Government Health Scheme 3.   Preventive Health Check up 4.   Medical Expenditure (Only applicable in case of a Very Senior Citizen not having a medical insurance) The expenditure can be incurred by the assessee being: 1.   Individual: for self, spouse, dependent children & parents. 2.   HUF: for Karta & Co-parceners.
Mode of Payment	Any mode other than Cash. However, cash is allowed in case of Preventive Health Check up.

Amount of Deduction

A.	Medical insurance premium paid for yourself & your family.	Rs. 25,000 / Rs. 50,000(in case of senior citizen)
B.	Medical insurance premium paid for your parents.	Rs. 25,000 / Rs. 50,000(in case of senior citizen)
C.	Expenditure on preventive health check-up.	Rs.5,000
D.	Medical expenditure of senior citizens or super senior citizens.	Rs.50,000
E.	Contribution to CGHS/notified scheme.	Rs.25,000 Rs.50,000(in case of senior citizen)
	Maximum amount of deduction (A+ B+C+D+E) >Non-senior citizens(Self & family and Parents) >Senior Citizens (Self & family and Parents) >Self & family (Non-senior citizens)Parents(Senior Citizens)	>Rs.25000+Rs.25000= Rs.50,000 >Rs.50000+Rs.50000=Rs.1,00,000 >Rs.25000+Rs.50000=Rs.75,000

Section 80DD - Deduction for expenditure incurred on maintenance and medical treatment of dependant disabled.

Eligible Assessee	Resident Individual and Resident HUF.
Conditions	The expenditure should be made as follows: 1.   The expenditure should be incurred for medical treatment, nursing, training and rehabilitation of a dependant who is having disability or 2.   Amount should be deposited or paid in the appropriate scheme framed for this purpose. 3.   The person with disability should not claim deduction under section 80U while filing his Income Tax Return. 4.   The Assessee should furnish a copy of certificate issued by appropriate medical authority while filing the Income Tax Return.
Amount of Deduction	The amount of deduction is Rs. 75,000/-. In case of severe disability (person with 80% or more disability), the amount of deduction will be Rs. 1,25,000/-
Meaning of “Dependant”	Individual - Spouse, children, parents, brother or sister of Individual who is wholly or mainly dependant on such Individual. HUF - A member of HUFl who is wholly or mainly dependant on such HUF.
Meaning of “Disease”	Disease includes Autism, Cerebral Palsy and Multiple disability disorder.

Section 80DDB - Deduction for expenditure incurred on medical treatment etc.

Eligible Assessee	Resident Individual and Resident HUF.
Conditions	1.   The expenditure should be incurred for the medical treatment of the specified disease or ailment. 2.   The Assessee should furnish a prescription for such medical treatment from a neurologist, an oncologist, a urologist, a hematologist, an immunologist or any other specified specialist.
Amount of Deduction	The amount of deduction is: 1.   Very Senior Citizen - Rs. 1,00,000/- 2.   Senior Citizen - Rs. 1,00,000/- 3.   Other than above - Rs. 40,000/- The amount of deduction will be reduced by  the amount recovered through insurance or reimbursed by employer for the medical treatment of assessee or dependant.
Meaning of “Dependant”	Individual - Spouse, children, parents, brother or sister of Individual who is wholly or mainly dependant on such Individual. HUF - A member of HUF who is wholly or mainly dependant on such HUF.

3.80E - Deduction in respect of interest loan taken for higher education

Eligible Assessee	Individual
Conditions	1.   Loan must have been taken for the purpose of higher education of self or relative. 2.   Loan must have been from any financial institution or approved charitable institution.
Period of Deduction	For total 8 years or entire repayment whichever is earlier.
Meaning	Higher Education: Any course after 12th standard. Relative: Spouse & Children

4.80EE - Deduction for interest on loan borrowed for acquisition of self-occupied house property by an individual

Eligible Assessee	Individual
Conditions	1.   Assessee has taken loan for his 1st house. I.e. He does not own any house when housing loan is sanctioned. 2.   Loan is sanctioned in FY 2016-17. 3.   The value of House does not exceed Rs. 50,00,000/- 4.   The sanctioned Loan amount does not exceed Rs. 35,00,000/- 5.   If deduction of housing loan interest is taken under this section than the same cannot be claimed under any other section.
Amount of Deduction	Interest paid on Housing Loan upto Rs. 50,000/-

Section 80EEA: Income Tax Deduction for first time home buyers

A new section has been proposed to be inserted in Chapter VI A deductions under Section 80. This section is Section 80EEA which allows an additional deduction to taxpayers for paying interest on a home loan availed by them. While Section 24 allowed for interest exemption on home loans up to INR 2 lakhs, this section allows an additional exemption of Rs 1.5 lakhs to home buyers who avail a home loan and pay interest on the loan.

Section 80EEB: Income Tax Deduction for repayment of Electronic Vehicle Loan

Another new section of deduction introduced by the new Union Budget was Section 80EEB. This section was introduced to promote the purchase of electric vehicles among individuals by giving them tax relief on the interest paid on the loan taken to purchase such vehicle. The limit of deduction is up to Rs 1.5 lakhs

5.80G - Deduction in respect of donations to certain funds, charitable institutions etc.

Eligible Assessee	Any assessee
Categories of Donations	The following are the categories of Donations: 1.   Donations to funds such as Prime Minister’s National Relief Fund, The National Children’s Fund, etc. Visit here for a complete list. 2.   Donations to the following: 1.   The Jawaharlal Nehru Memorial Fund, 2.   Prime Minister’s Drought Relief Fund, 3.   Indira Gandhi Memorial Trust, 4.   Rajiv Gandhi Foundation. 1.   Donation to Government or any approved local authority for the promotion of Family Planning. 2.   Donations to Charitable institutions who provide a certificate.
Amount of Deduction	Amount of Deduction is based on the Donee to whom the Donation is made. The following amount of Deduction is available based on categories of donation: 1.   100% of Category 1 donation 2.   50% of Category 2 donation 3.   100% of Category 3, Subject to qualifying limit 4.   50% of Category 4, Subject to qualifying limit
Other Points	1.   Donation should be made to approved donee’s. Along with receipt for such donation, a certificate is required to be collected in order to avail deduction. 2.   The donation made in kind is not eligible for deduction. 3.   The donation made in cash exceeding Rs. 2,000/- is not eligible for deduction. 4.   Qualifying Limit: Total Donations made to donee’s specified in Category 3 & 4, should not exceed 10% of Gross Total Income.

 List of Donee in Category 1:

1.     The National Defence Fund set up by the Central Government

2.     Prime Minister’s Relief Fund

3.     Prime Minister’s Armenia Relief Fund

4.     The Africa (Public Contributions - India) Fund

5.     The National Children’s Fund

6.     The National Foundation for Communal Harmony

7.     Approved University or educational institution of national eminence

8.     Maharashtra Chief Minister’s Earthquake Relief Fund

9.     Any Fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the Gujarat Earthquake

10. Any Zila Saksharta Samiti for primary education in villages and towns and for literacy and post-literacy activities

11. National Blood Transfusion Council or any State Blood Transfusion Council whose sole objective is the control, supervision, regulation or encouragement of operation and requirements of blood banks

12. Any State Government Fund set up to provide medical relief to the poor.

13. The Army Central Welfare Fund or Indian Naval Benevolent Fund or Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of past and present members of such forces or their dependants.

14. The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996

15. The National Illness Assistance Fund

16. The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund

17. The National Sports Fund set up by the Central Government

18. The National Cultural Fund set up by the Central Government

19. The Fund for Technology Development and Application set up by the Central Government

20. National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities

21. The Swachh Bharat Kosh, set up by the Central Government

22. The Clean Ganga Fund, set up by the Central Government (only Residents are eligible for deduction)

23. The National Fund for Control of Drug Abuse

Section 80GG - Deduction for Rent Paid

Eligible Assessee	Individual or HUF, self employed or salaried not receiving HRA at any time during the year.
Conditions	1.   The Assessee, his/ her spouse, minor child or HUF of which he is a member shall not own any residential accommodation at a place where he currently resides, is currently employed or carrying on business or profession. 2.   If the Assessee owns any residential property at any other place  then the same should not be assessed as self occupied residential property. 3.   The Assessee must be paying rent.
Amount of Deduction	The deduction will be lowest of: 1.   Rs. 5,000/- per month 2.   25% of Adjusted Total Income 3.   Rent Paid Less 10% of Adjusted Total Income
Meaning of Adjusted Total Income	Adjusted Total Income means Income excluding: 1.   Long Term Capital Gain 2.   Short Term Capital Gain under 111A or section 115D 3.   Deduction under section 80C to 80U Also deduction under section 80GG is to be excluded.
Other requirements	The Assessee needs to file Form 10BA containing details of payment of rent.
Example	Mr. A pays a rent of Rs. 10,000/- per month. His total income before deduction under section 80GG is Rs. 4,80,000/-. The deduction that will be allowed to him under section 80GG will be as follows: 1.   Amount calculated at Rs. 5,000/- per month = Rs. 60,000/- 2.   25% of Total Income (Rs. 4,80,000/- X 25%)   = Rs. 1,20,000/- 3.   Rent Paid Less 10% of Total Income [(Rs. 10,000/- X 12) - (10% X Rs. 4,80,000)]                                          = Rs. 72,000/- Lowest of above is Rs. 60,000/- which will be allowed as deduction under section 80GG.

Section 80GGC - Deduction for Contribution to Political Parties

Eligible Assessee	Any assessee except company, local authority and an artificial juridical person wholly or partly funded by the government.
Conditions	Contribution should be made by any mode other than cash. In other words, Cash Contribution is not allowed.
Amount of Contribution	Full Amount of Contribution made.
Contribution to whom?	Political Party or Electoral Trust. Political Party means any Political Party registered under section 29A of the Representation of the People Act.

6.80TTA - Deduction in respect of interest on deposits in savings accounts

Eligible Assessee	Individual or HUF
Conditions	Earn Interest from Savings Bank Account Upto Rs. 10,000/-
Amount of Deduction	Amount of Interest earned or Rs. 10,000/- whichever is less.
Other Points	Interest on bonds, partner’s capital, FD interest, Sweep TD interest, etc are not eligible for this deduction.

Section 80TTB: Deduction in respect of interest from deposits held by Senior Citizens

Section 80TTB allows a deduction upto Rs 50,000/- in respect of interest income from deposits held by resident senior citizens (age 60 years or more) Consequently, limit of tds deduction u/s 194A for senior citizens has been raised to Rs. 50,000. However, no deduction under section 80TTA shall be allowed in these cases.

Section 80U: Deduction for a person with disability.

Eligible Assessee	Resident Individual.
Conditions	1.   The Assessee should furnish a copy of certificate issued by appropriate medical authority while filing the Income Tax Return.
Amount of Deduction	The amount of deduction is Rs. 75,000/-. In case of severe disability (person with 80% or more disability), the amount of deduction will be Rs. 1,25,000/-
Meaning of “Disease”	Disease also includes Autism, Cerebral Palsy and Multiple disability disorder.

The deductions under Chapter VIA are both effective and efficient. A lot of these investments just don’t help you save money but also help it grow. At the end of the day, you would want to protect your corpus and add more amount to it. With certain Chapter VIA deductions, you can do both. 

If you haven’t already started, now might be the best time to start investing in various Chapter VIA instruments and make the most of your money.

FAQs

1.     Is there any limit for deductions under Section 80C?
Yes, the upper limit is set at INR 1,50,000 for a fiscal year. Though you can invest more than the limit, you can only claim deductions up to the prescribed limit.

2.     Is Section 80C limited only for individuals?
The section is primarily for individuals and Hindu Undivided Family (HUF). Thus, a company cannot seek deductions under this section.

3.     Is there any timeline involved for the investments?
Yes. To claim these deductions for a fiscal year, you need to complete the transaction before the 31st of March of the FY. For example, for the Financial year 2019-2020, you would have to complete the transaction before the 31st of March 2020.