TAX REBATES

It is necessary to understand the tax deduction on salary to maximize the savings on tax. While many are familiar with Section 80C, numerous other allowances can significantly reduce your tax liability. This extensive blog post takes you through various deductions available under the Income Tax Act in a simple manner and makes it easy to do tax planning.

What are Tax Deductions?
Tax deductions are specific expenses or investments that reduce an individual’s taxable income, thus lowering the amount of income tax they are required to pay. The government allows these deductions to encourage individuals to save and invest, purchase insurance policies, and contribute to specific funds and schemes.

Income Tax Deductions on Investments Under Section 80C
Investment instruments offer tax-saving opportunities under the provisions of the Income Tax Act of 1961. Every financial year, taxpayers can potentially reduce their taxable income by up to ₹1.5 lakh through deductions available under Section 80C. Section 80C deductions apply to individuals and Hindu Undivided Families (HUFs), allowing them to claim a maximum deduction of ₹1.5 lakh from their total income. As per the latest budget reforms, individuals adhering to the old tax regime can continue to benefit from deductions amounting to ₹1.5 lakhs under Section 80C.
It Is important to note that these deduction rules do not apply if taxpayers have opted for the new tax regime.

Income Tax Deductions List in India:
Understanding the various deductions available under the Income Tax Act is essential for taxpayers to optimize their tax planning strategies effectively. Here is the list of income tax deductions available in India:

Income Tax Deduction Under Section 80C
Section 80C is one of the most popular tax-saving provisions in India. Under this section, taxpayers can claim deductions up to ₹1.5 lakhs in a financial year. Some eligible investments and expenditures under Section 80C include:
a. Employee Provident Fund (EPF)
b. Public Provident Fund (PPF)
c. Equity-Linked Savings Scheme (ELSS)
d. National Savings Certificate (NSC)

Income Tax Deduction Under Section 80CCC
Under Section 80CCC of the Income Tax Act, individuals can claim annual deductions of up to ₹1.5 lakh for contributions to designated pension plans offered by term life insurance companies. However, this deduction is subject to the overall limit specified under Section 80C of the Act.

Income Tax Deduction Under Section 80CCD
This section includes the contribution to the Atal Pension Yojana. It allows a contribution of up to 10% of the total salary of salaried employees and 20% of the gross income of non-salaried employees to the government-notified pension schemes. The contribution can be deducted from the taxable income under Section 80 CCD (1). If the employer also contributes to the scheme, the entire contribution amount can be claimed as a tax deduction under Section 80CCD (2). It is important to remember that the complete deduction under Section 80C, Section 80CCC, and Section 80CCD (1) cannot exceed ₹15,00,000 in aggregate. However, the additional tax deduction amounting to ₹50,000 under Section 80CCD (1B) is above this limit.

Income Tax Deduction Under Section 80DD
A deduction of ₹75,000 in income tax may be claimed for spending on medical treatments for dependents with a 40% disability. This limit is ₹1,25,000 in case of severe disability.

Income Tax Deduction Under Section 80DD
A deduction of ₹75,000 in income tax may be claimed for spending on medical treatments for dependents with a 40% disability. This limit is ₹1,25,000 in case of severe disability.

Income Tax Deduction Under Section 80DDB
Deduction for Medical Expenditure on Self or Dependent Relative: Deduction for Medical Expenditure for individuals and HUFs below age 60 Income Tax. Deduction under Section 80DDB, a deduction of up to ₹40,000 is available to an individual or a HUF below 60 years of age. It is for any expenses towards treating specified critical ailments for self and dependents. Deduction for Medical Expenditure for senior citizens and super senior citizens. Previously, for FY 2017-18, the limit was ₹60,000 for senior citizens and ₹80,000 for super senior citizens. It has been changed to ₹1,00,000 for all senior citizens, including super senior citizens.

Income Tax Deduction Under Section 80CCG
This section, which offered the tax benefits of the Rajiv Gandhi Equity Savings Scheme, has been withdrawn. Still, if an individual has claimed a deduction in the previous financial year, you are eligible to continue with the same for the next two financial years.

Income Tax Deduction Under Section 80EE
Individuals buying a home for the first time may claim an additional deduction of ₹50,000 on the home loan interest paid. This includes a clause that the loan should be sanctioned in or after FY 2016-17, and the loan amount should be less than ₹35,00,000. Furthermore, the house’s value should not exceed ₹50,00,000, and the individual should not own any other residential house under his name.

Income Tax Deduction Under Section 80EEA
The Indian Income Tax Act provides a tax deduction of up to ₹1.5 lakhs per financial year for interest paid on home loans taken for purchasing or constructing an affordable house. This deduction is available under Section 80EEA of the Income Tax Act and is in addition to the existing tax benefits available under Section 80C and Section 24.

Income Tax Deduction Under Section 80EEB
Section 80EEB of the Income Tax Act enables taxpayers to claim tax savings on interest paid for loans to purchase electric vehicles, up to ₹1.5 lakh. Eligibility criteria, including conditions related to the loan issuer and the electric vehicle, must be met to avail of the deduction.

Income Tax Deduction Under Section 80GG
The deduction amount for this section is ₹60,000 per annum, which applies to only those who neither own a residential house nor receive a House Rent Allowance. Therefore, the amount of deduction will be the least of the following: 25% of the total income ₹5,000 per month amounts to 10% of the adjusted total income deducted from the rent paid.

Income Tax Deduction Under Section 80GGC
Section 80GGC allows individuals to claim tax deductions for donations made to political parties or electoral trusts. It promotes transparency in electoral funding, encourages financial support to the political system, and helps individuals reduce their tax liability by claiming deductions against such contributions.

Income Tax Deduction Under Section 80U
This section allows a deduction for individuals who are physically and mentally challenged. Individuals with at least 40% disability (as certified by a medical authority) can claim a deduction of up to ₹75,000. Individuals with a severe disability (at least 80% disability) can claim a deduction of up to ₹1,25,000.

Income Tax Deduction Under Section 80D
Section 80D provides deductions on health insurance premiums individuals and HUFs (Hindu Undivided Families) pay. The eligible deduction amount varies based on the insured’s age and the number of family members covered under the policy. Additionally, deductions for preventive health check-ups are available.

Income Tax Deduction Under Section 24(B)
Section 24(b) deals with deductions on the interest paid on home loans. Taxpayers can claim up to ₹2 lakhs per annum for self-occupied properties. In the case of let-out properties, there is no upper limit on claiming the interest paid on the home loan.

Income Tax Deduction Under Section 80E
This section allows taxpayers to claim deductions on the interest paid on education loans. These loans must be taken for higher education, either for the taxpayer, spouse, children or a student the taxpayer is the legal guardian of.

Income Tax Deduction Under Section 10(14)
Section 10(14) offers deductions on various allowances salaried individuals receive, such as House Rent Allowance (HRA), conveyance allowance, and medical allowance.

Income Tax Deduction Under Section 80G
Donations made to specified funds and charitable institutions are eligible for deductions under Section 80G. The deduction varies from 50% to 100% of the donated amount, depending on the nature of the recipient organization.

Income Tax Deduction Under Section 80TTA And 80TTB
Under Section 80TTA, individuals can claim deductions of up to ₹10,000 on interest earned from savings accounts. For senior citizens, Section 80TTB provides deductions of up to ₹50,000 on interest earned from savings accounts, fixed deposits, and recurring deposits.

Income Tax Deduction Under Section 80RRB
Section 80RRB of the Income Tax Act allows individuals to claim deductions for royalty payments received. Royalty is compensation received for the use of intellectual property like books, art, or inventions. The deduction is either Rs. 3 lakh or the royalty received, whichever is lower.

Income Tax Deduction Under Section 80QQB
Under Section 80QQB of the Income Tax Act, royalties earned from specific publications like journals, newspapers, or textbooks are ineligible for deductions. Additionally, any royalty income from abroad must be repatriated within a specified time frame to qualify for deductions. Authors can claim deductions under Section 80QQB, wherein they can avail the lower of Rs. 3 lakh or the actual royalty received as an income tax deduction.

Benefits of Tax Deductions
While tax deductions may seem complex and overwhelming, understanding their benefits can lead to more strategic financial planning and responsible decision-making.

1 Reduced Tax Liability
One of the most apparent benefits of tax deductions is that they help reduce an individual’s or business’s overall tax liability. Taxpayers can lower the portion of their income subject to taxation by deducting eligible expenses and investments from their taxable income. This results in more money staying in the hands of individuals and businesses, enabling them to reinvest in their ventures, purchase goods and services, or save for the future.

Income Tax Exemptions for Salaried Employees 2023-24

Here is the income tax exemption list for 2023-24:

1. House Rent Allowance
2. Leave Travel Allowance (LTA)
3. Food coupons
4. Salary component
5. Reimbursements
6. House rent allowance (HRA)
7. Rent amount for residential housing
8. Rent receipts, PAN of the employer (mandatory for rent > ₹1 Lakh annually)
9. Leave travel allowance (LTA)
10. Traveling costs within India, such as air and rail fare
11. Air and train tickets, bus or cab receipts/bills
12. Telephone reimbursement
13. Landline, inclusive of broadband, mobile phone
14. Telephone bills
15. Books and periodicals
16. Cost of books and periodicals
17. Bills or invoices for the books and periodicals