Most of us are aware of the concept of deductions from gross total income available to a taxpayer. These deductions are available under different sections of the Income Tax
Act, 1961. One can claim deductions from one's gross total income by investing in avenues specified by the government. The most popular deduction that comes to mind is section 80C
. There are other deductions as well which may be available to you, but you might miss out on them due to lack of awareness.
Here's a list of deductions that you can claim under different sections of Income Tax Act. Make the most of it and reduce your taxable income as much as possible.
- Section 80D: Payment of medical insurance premium
A mediclaim policy is a must nowadays because if you or your family fall sick or meet with an accident, your medical bills could wipe out your savings. The amount paid as medical insurance premium (mediclaim) is eligible for deduction under this section. You can take the policy in your or spouse's name, dependent parents or/and children. If you are a Hindu Undivided Family (HUF), then the policy can be taken in the name of any family member.
To claim deduction, you have to first pay the premium by any mode other than cash. Also, the insurer should be approved by either the central government or the Insurance Regulatory and Development Authority of India
The limits for claiming deduction under this section have increased substantially from FY 18-19 onwards. You can now avail a deduction of up to Rs 1 lakh which was Rs 60000 up till last financial year but there are many sub-limits that one has to take care of.
An individual can avail a maximum deduction of Rs 25,000 for the premium paid for oneself, spouse or dependent children. One can get an additional deduction of Rs 25000 for the premium paid for one's parents. In case of medical insurance premium paid for policies for senior citizens a maximum deduction of Rs 50,000 can be claimed from FY2018-19 onwards. Therefore, if a person takes policies for self, spouse and senior citizen parents then he/she can claim a total deduction of Rs 25,000 plus Rs 50,000 i.e. Rs 75,000.
Also Read:Your tax-saving guide for FY 2018-19
Also, from FY2018-19 onwards in case a senior citizen does not have a medical insurance policy in his/her name then a deduction of up to Rs 50,000 can be claimed for medical expenses incurred for treatment of that person. This claim can be made by the senior citizen or his/her children depending on who has incurred the expenditure.
As an HUF, you can get a maximum deduction of Rs 25,000 for the premium paid for any member. If the insured person is a senior citizen then the above maximum limit of Rs 25,000 will be increased to Rs 50000. One can claim a maximum deduction of Rs 5,000 for preventive health check-up and the same can be paid for in cash too. However, you would have to keep the bills of such a check up as proof for claiming this Rs 5,000 as deduction from your gross taxable income.
From FY 2018-19, in case of single premium health insurance policies which have cover of more than one year, the deduction will be allowed on proportionate basis for the number of years for which health insurance cover is provided.
How to save tax on health insurance premium
- Section 80DD: Expenditure on the health of disabled person
This deduction is available to a taxpayer for the expenditure incurred by him on the expenditure of caring for disabled persons - parents, spouse, children, brother and sister-who are dependent on him. In the case of an HUF, they can be any member of the HUF. The maximum deduction amount that can be claimed under this section is Rs 75,000 per annum. The same will be increased to Rs 1,25,000 in case the dependent is suffering from a severe disability. To claim this deduction, you need to attach a copy of the certificate issued by the medical authority (a neurologist or a civil surgeon) along with form 10-IA when you file your return.
Disability includes autism, cerebral palsy, and mental retardation. A person with severe disability would be one who has 80 per cent or more of any of these disabilities, i.e., a medical authority has certified that his level of disability is greater than 80 per cent.
- Section 80DDB: Expenditure on a specified disease
This deduction is available on the expenditure incurred by a taxpayer on the treatment of specified diseases for self or spouse, and dependent parents, children, brother and sister. In the case of an HUF, this deduction can be claimed for expenditure by any member. The deduction will be equal to the amount actually spent or Rs 40,000, whichever is less. If the person for whom the expenditure is made is 60 years or more, then the limit applicable will be Rs 1,00,000 in FY2018-19. If you have received any sum from an insurer as reimbursement for the expenditure incurred by you, then the amount received as reimbursement would be reduced from the amount of deduction under this section.
The list of specified diseases covered in the section is available in Rule 11-DD of Income-tax Rules. Some of them include neurological diseases, AIDS, malignant cancers, and hematological disorders.
- Section 80E: Payment of interest on education loan
If you have taken an education loan from any financial institution for self, spouse, children, or a student whose legal guardian you are, then you can claim this deduction for the interest paid by you on the loan amount. The amount paid as interest in a financial year is eligible for deduction without any limit. To claim this deduction, make sure that the loan is taken for higher education, i.e., any course pursued after completing 12th standard. This deduction is available for eight years, starting from the year in which the interest payment began.
- Section 80EE: Payment of interest on home loan
This deduction is available to an individual for the amount paid as interest on loan taken for the purchase of a residential property. The maximum deduction that can be claimed under this section is Rs 50,000 per annum.
There are a few conditions one has to fulfil to avail this deduction:
- The loan must be taken between April 1, 2016 and March 31, 2017.
- The loan amount should be below Rs 35 lakh.
- The value of the house should be below Rs 50 lakh.
- The said house property should be the only one in the individual's name.
Chetan Chandak, Head of Tax Research, H&R Block India says, "If you satisfy the above mentioned conditions, then only you can claim additional deduction of Rs 50,000 if you have fully utilised the deductions available under section 24 of the Act."
As a first time home buyer, suppose the interest paid by you during the financial year was Rs 2.25 lakh. Thus, you can claim the tax deduction of Rs 2 lakh as interest paid under section 24 and an additional Rs 25,000 under section 80EE, Chandak adds.
- Section 80G: Donations made to certain funds, temples
If you have donated to a fund notified by the central government under this section, then you would be eligible for deduction of the amount donated, but it should not exceed 10 per cent of the adjusted gross total income. This deduction is also available for donations given for renovation of temples, mosques, and churches, which are approved by the central government.
Some of the funds notified by the government include National Defence Fund, Jawaharlal Nehru Memorial Fund, Prime Minister's Drought Relief Fund, National Children Fund, Prime Minister's National Relief Fund, Swachh Bharat Kosh, Clean Ganga Fund, etc. Here is how you can compute your adjusted gross total income
Starting from financial year 2017-18, you cannot avail the deduction of more than Rs 2,000 if the donation is made in cash. This amendment was announced in the Budget 2017 to curb its misuse.
Check how much tax benefit you will get before donating money
- Section 80GG: Rent paid for accommodation
If you do not receive house rent allowance (HRA) as part of your salary, or if you are not a salaried employee, only then can you claim this deduction. It is available for the rent paid by the taxpayer for his own accommodation in a financial year. A declaration in Form 10BA has to be submitted to avail this deduction. The deduction amount will be the lower one of the following:
- Rent paid over 10 per cent of total income, or
- 25 per cent of the total income, or
- Rs 5,000 per month.
Here, total income is taken as income less of deductions available under Section 80C to 80U, except 80GG.
If you (or your spouse or in the name of your minor child) own the house you are living in, then you cannot claim this deduction.
- Section 80GGA: Donation to specified institutions
If you have donated to an institution carrying on scientific research or to a university or college which is approved by the government (under sections 35(1)(ii), 35(1)(iii), 35CCA, 35CCB) for the time being, then the amount so contributed would be eligible for deduction under this section. Deductions over and above Rs 10,000 can be claimed only if the contribution has been made by any mode other than cash. This deduction is not available to the taxpayer who has income from business or profession. Any sum paid under this section using any mode other than cash can be claimed for deduction without any limit.
- Section 80GGC: Donations to political party
If you have donated to a political party, then you can claim deduction under this section equivalent to the amount actually donated. There is no ceiling on the deduction amount that can be claimed under this section. The only condition is that the payment should be made by any mode other than cash.
- Section 80QQB: Royalty income to author
If you are the author of a book (other than textbooks for schools and colleges) and have received payment in royalty, either in lump sum or otherwise, then you can claim that amount as deduction from your royalty income under this section. The maximum deduction that can be claimed when royalty is received in lump sum is Rs 3 lakh. When royalty is not received as lump sum then the amount of deduction will be restricted to 15 per cent of the book's revenue that year.
- Section 80RRB: Royalty income from patents
If you are a patentee and have registered any patent after April 1, 2003 and receive royalty income for it, then you can claim deduction under this section for the amount received as royalty. The maximum deduction that can be claimed under this section is Rs 3 lakh.
- Section 80TTA: Interest on savings account
Interest earned on savings bank account or/and post office savings account is allowed as deduction. The maximum amount that can be claimed as deduction under this section is Rs 10,000. This does not mean that interest of up to Rs 10,000 is exempted income; rather you should show this amount as 'Income from other sources' in your ITR
and then claim deduction under section 80TTA.This deduction is not meant for senior citizens from FY 2018-19 onwards. From FY2018-19 onwards senior citizens can avail this deduction under a newly introduced section which is mentioned below.
However, don't confuse this with the interest earned on the fixed deposits. Any interest earned on the fixed deposits is fully taxable and there is no deduction to claim exemption on that for general public.
- Section 80TTB: Interest on deposits with banks, post office
Interest earned on deposits made with banks and post offices or cooperative societies, (whether on savings account or term deposits or any other post office deposits or RD account deposits) will be allowed as deduction in the hands of a senior citizen. Further, the maximum amount of deduction available under this section is Rs 50000 in a financial year.