Income tax* deductions and exemptions provide financial advantages to the taxpayers. The Government of India introduced two types of tax regimes and left the right to choose between the regimes to the individual taxpayers. The two regimes differ based on the income tax rate and the income tax slab.

While the new tax regime offers reduced rates for the taxpayers, it disallows certain tax deductions and exemptions. And the old tax regime has a higher rate for the individual income tax slab in comparison but offers deductions and exemptions for taxpayers who have invested in different financial instruments to benefit from the advantage. Here is a detail about the tax return deductions and exemptions

Income Tax Deductions

There are different sections under the Income Tax Act, 1961 that provides tax deduction benefits based on the type of investment. Let us get into the complete list section wise.

Section 80C

Section 80C is the most commonly used tax saving option for the majority of taxpayers. It allows individuals and HUFs to claim a deduction of up to ₹1,50,000 from the total gross income when investing in certain financial instruments. Here is a list of the most common options.

• Life insurance
• Public Provident Fund
• Employee Provident Fund
• Equity Linked Savings Scheme
• Tuition fees
• Home loan repayment(Principal amount)
• National Savings Certificate
• National Pension Schemes
• Sukanya Samriddhi Yojana
• Tax saving bank deposits and post office deposits
• Post Office Senior Citizens Savings Scheme
  
  

Let us consider an example.

Suppose an individual purchases good life insurance to secure his family in his absence. The premium amount paid and the payouts from the life insurance plan qualify for a tax¹ deduction and exemption benefits under Section 80C of the Income Tax Act, 1961. Therefore, when the individual buys life insurance, he will ensure that his family benefits from the payout while saving on tax. And, our life insurance policy details such tax provisions for your advantage. Also, our customer service executive will help you with any queries in this regard at any time.

Subsections of Section 80C

• Section 80CCC - Tax deduction to investments made in annuity plans of life insurance companies.
• Section 80CCD - Tax deduction for investments made in government-based pension schemes such as the National Pension Scheme.
• Section 80CCF - Tax deduction for investments made in long-term government infrastructure bonds.
• Section 80CCG - Tax deduction for the investments made in equity savings schemes approved by the government.
  
  

Section 80CCD is further divided into Section 80CCD(1) and Section 80CCD(2).

 

• Under Section 80CCD(1), the allowable tax deduction is 10% of an individual's salary or gross income and 20% of the total gross income for self-employed individuals. A new amendment is made to this Section introducing Section 80CCD(1B), allowing for a further deduction of up to ₹50,000. Therefore, the total deduction applicable under Section 80C, Section 80CCD(1) is ₹1,50,000 and an additional deduction of upto ₹50,000 under Section 80CCD(1B).
• Under Section 80CCD(2), salaried individuals can additionally claim the amount contributed by the employer to the pension scheme or 10% of their salary. 
  
  

Section 80D

Section 80D provides a tax deduction for the amount paid as premiums for health insurance plans. It can be for the health insurance plans for self, spouse, children and dependent parents. The allowable tax deduction is

• ₹25,000 for self or family and ₹50,000 if you are a senior citizen
• ₹50,000 for senior citizen parents
  
  

An additional ₹5000 is available for medical checkups. And, the deduction of ₹50,000 is allowed only if the senior citizens are not covered in any other mediclaim policies.

Section 24

Interest on home loans up to ₹2 Lakh qualify for a tax deduction on self-occupied properties and the entire interest amount if the property is let out.

Section 80E

The interest paid towards education loans for higher studies will qualify for tax deduction under Section 80E. There is no upper limit for the deduction. However, the taxpayer can avail of the deduction benefit when the loan starts to get repaid and for the next seven years or before the repayment of the loan, whichever is earlier.

Section 80G

Section 80G of the Income Tax Act offers a tax deduction to the taxpayer for any donations made to charitable organisations. Based on the receiving organisation, the deduction can range between 50-100%.

Section 80TTA

Section 80TTA offers a deduction of up to ₹10,000 for the income earned from savings account interest.

Section 80EE

Section 80EE provides an additional tax deduction of ₹50,000 on interest paid for home loans. However, the loan should not exceed ₹35,00,000, and the property's value should not exceed ₹50,00,000. And, the individual should not have any other property in his name when the loan is accepted.

Standard Deduction

Apart from the deduction under different Sections, a standard deduction of ₹50,000 is applicable for salaried employees.

Income Tax Exemptions

The Income Tax Act also allows for several tax exemptions for the benefit of the taxpayers. Here is a detail about the income tax exemption list.

House Rent Allowance

A salaried individual staying in a rented accomodation receiving HRA from the employer will qualify for tax exemption. It will be the least of the following:

• Total HRA received from the employer
• 50% of salary in metro cities and 40% of the salary for non-metros.
• Rent paid less than 10% of basic salary and DA.
  
  

Leave Travel Allowance

Salaried individuals can claim an exemption on the travel expenses incurred during their leave schedule. However, it is restricted to the travel made to domestic destinations through roadways, railways or airways.

Mobile reimbursement

The taxpayer can claim for tax-free reimbursement of mobile expenses incurred. It can equal the actual bill amount or the amount provided in the salary package, whichever is lower. Likewise, the expenses incurred towards books, newspapers, periodicals, etc., qualify for tax exemption. Again, it is the bill amount or the amount provided by the employer, whichever is lower.

Food coupons

Food coupons provided by your employer are tax-exempt to the extent of Rs. 50 per meal. And, two meals for every working day is applicable.

Relocation

Relocating to a different place for business reasons will incur huge expenses for an individual. However, if the employee incurs such expenses and the employer reimburses it back, it will qualify for tax exemption. Some of the common expenses are car transportation costs, car registration charges, air or train tickets, etc.,

Child education

Employers provide education allowance for the employee's children. For two children, such allowances up to ₹100 per month qualify for the exemption.

Conclusion

The Government of India provides tax deduction and exemption provisions to encourage individuals to invest in financial instruments. Therefore, it is important to understand these provisions and use them for maximum benefits. Individuals gain financial security and peace while saving on tax when choosing to invest long-term!

L&C/Advt/2022/Jun/1194