Deduction U/s 80C to 80U

Deductions under section 80C to 80 U of Income Tax Act 1961 AY 2019-20|FY 2018-19 |

Tax planning is an important part of a financial plan. Whether you are a salaried individual, a professional or a businessman, you can save taxes to certain extent through proper tax planning.

The Indian Income Tax act allows for certain Tax Deductions / Tax Exemptions which can be claimed to save tax. You can subtract tax deductions from your Gross Income and your taxable income gets reduced to that extent.

Let's discuss all the deduction in brief :

Section 80C provides for a deduction of savings in specified modes of Investments form gross total income. It is available only to an Individual or HUF. The Maximum permissible deduction is Rs.1.5 lakh along with deduction u/s 80CCC & 80CCD.

A. DEDUCTION IN RESPECT OF INVESTMENTS IN SPECIFIED ASSETS          (SECTION 80C) 

S.No.	Admissible Deductions
1.	Premium paid on insurance on life of the Individual or HUF.
2.	Sum paid under the contract for deferred on life of the Assessee or his/her spouse or children.
3.	Sum deducted by the government from the salary of an employee for securing a deferred annuity for self, spouse or children.The sum so deducted should not exceed one-fifth of the salary.
4.	Contribution to any Public Provident Fund governed by Provident Funds Act, 1925
5.	Contribution by an employee to Recognized Provident Fund.
6.	Contribution by an employee to an Approved Superannuation Fund.
7.	Contribution made to any Public Provident Fund set up by the Central Government.
8.	Subscription to any deposit scheme or contribution to any Pension fund set up by the National Housing Bank.
9.	Payment of Tuition fees by an Individual Assessee at the time of admission to any university, college, school or other educational institutions within India for the purpose of full time education of any two children.
10.	Subscription to deposit scheme of Public Sector, engaged in providing housing finance.
11.	Principle repayment of Housing Loan.
12.	Subscription to units of Mutual funds notified u/s 10(23D).
13.	Sum deposited in Fixed Deposits (FDs) with tenure of five years.
14.	Sum deposited in 5 yrs Post Office Time Deposit (POTD) scheme.

B. DEDUCTION IN RESPECT OF CONTRIBUTION TO CERTAIN PENSION FUNDS (SECTION 80CCC)

Deduction in respect of Payment of premium for annuity plan of LIC or any other Insurer is provided. The Premium must be deposited to keep in force a contract for annuity  plan of LIC or any other insurer for receiving pension from the fund. For this purpose, the Interest or Bonus accrued or credited to the Assessee’s Account shall not be reckoned as Contribution. The Maximum Deduction allowed is Rs.1.5 lakh.

C.DEDUCTION IN RESPECT OF CONTRIBUTION TO PENSION SCHEME OF CENTRAL GOVERNMENT (SECTION 80CCD)

There is so much confusion about NPS Tax Benefits after the 2016 Budget. Hence, in this post let us discuss about NPS Tax Benefits under sections 80CCD(1), 80CCD(2) and 80CCD(1B) and how to claim additional tax benefits.

Let us discuss the NPS Tax Benefits at the time of investment and also at the time of withdrawal.

Earlier NPS was treated as an EET (Exempt-Exempt-Taxed) status product. Now it turned to be EEE (Exempt-Exempt-Exempt) status product. EEE means you will get certain tax benefits at the time of investment. The returns or the growth during the period of investment is not taxable. Also, now the maturity amount is also tax free (with certain conditions).

Before this new rule came into picture, out of the final corpus, 40% has to be annuitized (you have to buy a pension or annuity plan from Life Insurance Companies), 40% was tax-free and 20% was taxable as per the applicable slab at that time.

Hence, whatever 60% you withdraw from the accumulated corpus will now be tax free. However, the rest 40% is go towards annuity (which is currently taxed as per your tax slab).

NPS Tax Benefits under Sec.80CCD (1)

• The maximum benefit available is Rs.1.5 lakh (including Sec.80C limit).
• An individual’s maximum 20% of annual income (Earlier it was 10% but after Budget 2017, it increased to 20%) or an employee’s (10% of Basic+DA) contribution will be eligible for deduction.

NPS Tax Benefits under Sec.80CCD (1B)

• This is the additional tax benefit of up to Rs.50,000 eligible for income tax deduction and was introduced in the Budger 2015
• Introduced in Budget 2015. One can avail the benefit of this Sect.80CCD (1B) from FY 2015-16.
• Both self-employed and employees are eligible for availing this deduction.
• This is over and above Sec.80CCD (1).

NPS Tax Benefits under Sec.80CCD (2)

• There is a misconception among many that there is no upper limit for this section. However, the limit is least of 3 conditions., 
• 1) Amount contributed by an employer, 
• 2) 10% of Basic+DA (For Central Government Employees it is now 14% of Basic+DA effective from 1st April 2019) &
• 3) Gross Total Income.
• This is additional deduction which will not form the part of Sec.80C limit.
• The deduction under this section will not be eligible for self-employed.

The Limit for maximum deduction available u/s 80C, 80CCC, 80CCD (combined together) is Rs.1.5 Lakh only.

Assessee gets an additional deduction of 50,000 if he makes investment in NPS scheme notified by the Central Government. This means the Limit for maximum deduction available u/s 80C, 80CCC, 80CCD+80CCD(1B) is Rs. 2 Lakh.

D. DEDUCTION IN RESPECT OF INVESEMENT BY A RESIDENT INDIVIDUAL IN LISTED EQUITY SHARES (SECTION 80CCG)

Tax Benefits of Rajiv Gandhi Equity Savings Scheme (RGESS) under section 80CCG has been withdrawn. However, if you have claimed this deduction in current FY 2016-17, you can claim the deduction for the next two Financial Years too.

E. DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIUM (SECTION 80D)

This Section provides for a deduction of Rs. 25,000 in respect of premium paid towards a health insurance policy for the Assessee or his family (spouse and dependent children) or any contribution made to the Central Government Health Scheme in aggregate and a further deduction of Rs. 25000 is allowed of premium paid in respect of health insurance policy for parents. 

It has been proposed by finance bill 2018 that the upper limit of this increased deduction should be raised to Rs. 50,000. 

Further it is provided that for claiming such deduction u/s 80D the payment must be by any mode other than cash. 

Further Deduction of Rs. 5000 shall be allowed in respect of payment made on Account of preventive health check-up of self, spouse, children or parents made during the previous year. For claiming this deduction payment can be by any mode including cash.

Summary :

Insured	Exemption List
Self & family	25,000
Self & family + Parents	25,000 + 25,000 = 50,000
Self & family + Parents (senior citizens)	25,000 + 50,000 = 75,000
Self (senior citizen) & family + Parents (senior citizens)	50,000 + 50,000 = 1,00,000

F. DEDUCTION IN RESPECT OF REHABILITATION OF HANDICAPPED DEPENDENT RELATIVE (SECTION 80DD)

It provides for a deduction to an Assessee being an individual or HUF who is a resident in India. Deduction of Rs. 75,000 is available in respect of any Amount paid for the medical treatment (including nursing), training and rehabilitation of a dependent, or any amount paid or deposited under a scheme framed in this behalf. 

In case of severe disability (i.e. a person with 80% or more disability), the deduction of Rs. 1,25,000 shall be available.

To claim this deduction, you have to submit Form10-IA

G. DEDUCTION IN RESPECT OF MEDICAL TREATMENT (SECTION 80DDB)

*As amended by Finance Bill 2018 

The deduction of Rs. 40000 or Amount actually paid whichever is less shall be allowed to an Assessee who is resident in India being an Individual or HUF. 

Deduction shall be allowed of any amount paid for the medical treatment of such disease or ailment as may be specified in the rules. 

It has been proposed that in case the amount is paid in respect of a senior citizen/very senior citizen then the deduction would be Rs.100,000 or the amount actually paid whichever is less.[Earlier the limit was Rs. 60,000 for Senior Citizen & Rs. 80,000 for very senior citizen.]

The assessee shall have to submit a doctor's prescription

H. 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 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.

I. CONTRIBUTIONS MADE TO CERTAIN RELIEF FUNDS AND CHARITABLE INSTITUTIONS:

• This deduction can be claimed by any taxpayer -individuals, company, firm or any other person.
• Any donations made in cash exceeding Rs 2,000 will not be allowed as deduction. The donations above Rs 2,000 should be made in any mode other than cash to qualify as a deduction under section 80G.
• The various donations specified in section 80G are eligible for a  deduction of up to either 100% or 50% with or without restriction, as provided in section 80G.

Donations Eligible for 100% Deduction Without Qualifying Limit

• National Defence Fund set up by the Central Government
• Prime Minister’s National Relief Fund
• National Foundation for Communal Harmony
• An approved university/educational institution of National eminence
• Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
• Fund set up by a State Government for the medical relief to the poor
• National Illness Assistance Fund
• National Blood Transfusion Council or to any State Blood Transfusion Council
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
• National Sports Fund
• National Cultural Fund
• Fund for Technology Development and Application
• National Children’s Fund
• Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
• The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6, 1993
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
• Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made during January 26, 2001, and September 30, 2001) or
• Prime Minister’s Armenia Earthquake Relief Fund
• Africa (Public Contributions – India) Fund
• Swachh Bharat Kosh (applicable from FY 2014-15)
• Clean Ganga Fund (applicable from FY 2014-15)
• National Fund for Control of Drug Abuse (applicable from FY 2015-16)

Donations Eligible for 50% Deduction Without Qualifying Limit

• Jawaharlal Nehru Memorial Fund
• Prime Minister’s Drought Relief Fund
• Indira Gandhi Memorial Trust
• Rajiv Gandhi Foundation

J. SECTION 80GG: APPLICABLE FOR ALL THOSE INDIVIDUALS WHO DO NOT OWN A RESIDENTIAL HOUSE & DO NOT RECEIVE HRA

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; 

1.  Rent paid minus 10 percent the adjusted total income.

2.     Rs 5,000 per month. 

3.     25 % of the total income.

K. DEDUCTION IN RESPECT OF CONTRIBUTIONS GIVEN BY COMPANIES TO POLITICAL PARTIES (SECTION 80GGB)

This provides of deduction of any sum contributed in the Previous Year by an Indian Company to any Political Party or an Electoral Trust. From assessment year 2014-15, no deduction shall be allowed in respect of any sum contributed by way of cash.

L. DEDUCTION IN RESPECT OF CONTRIBUTIONS GIVEN BY ANY PERSON TO POLITICAL PARTIES (SECTION 80GGC)

This provides for deduction of any sum contributed in the Previous Year by any Person to a Political Party or an Electoral Trust. It will not be available to a Local Authority and an Artificial Judicial Person. No deduction shall be allowed in respect of any sum contributed by way of cash.

M. SAVING INTEREST(80TTA / 80TTB)

Deduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account with a bank, co-operative society or post office can be claimed under this section. Section 80TTA deduction is not available on interest income from fixed deposits.

It has been proposed to insert a new provision(80TTB) to allow deduction of up to Rs. 50,000 to the senior citizen who has earned interest income from deposits with banks or post office or co-operative banks. Interest earned on saving deposits and fixed deposits both shall be eligible for deduction under this provision.

This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 

It is also proposed to amend section 194A so as to raise the threshold for deduction of tax at source on interest income for senior citizens from Rs 10,000/- to Rs 50,000/-. 

This amendment will take effect, from 1st April, 2018.