Page Contents
BRIEF INTRODUCTION
Section 80 Deductions For financial year 2019-20 (Including Budget 2020 amendments).
Income tax department, in order to encourage savings and investments amongst the taxpayers, introduced and provided various deductions under chapter VI A, in order to reduce their taxable income and would thereby reduce their tax payment. 80C being the foremost famous, there are other deductions which are beneficial for the taxpayers to scale back their liabilities. allow us to understand these deductions in detail:
Under the income tax Act of India, deductions under Section 80C are divided into certain sub-sections. These are –
TAX SAVING SECTIONS | ELIGIBLE INVESTMENTS FOR TAX EXEMPTIONS |
SECTION 80C | INVESTMENTS MADE IN PROVIDENT FUNDS, LIFE INSURANCE PREMIUMS, EQUITY LINKED SAVING SCHEMES, PAYMENT MADE TOWARDS THE PRINCIPAL SUM OF A HOME LOAN, SSY, NSC, SCSS, ETC. |
SECTION 80CCC | PAYMENT MADE TOWARDS PENSION PLANS, AS WELL AS MUTUAL FUNDS. |
SECTION 80CCD (1) | PAYMENT MADE TOWARDS CERTAIN GOVERNMENT-BACKED SCHEMES SUCH AS NATIONAL PENSION SYSTEM, ATAL PENSION YOJANA, ETC. |
SECTION 80CCD(1B) | INVESTMENTS OF UP TO RS.50,000 IN NPS IS CONSIDERED FOR EXEMPTION UNDER THIS SECTION. |
SECTION 80CCD (2) | EMPLOYER’S CONTRIBUTION TOWARDS NPS (UP TO 10%, COMPRISING BASIC SALARY AND DEARNESS ALLOWANCE, IF ANY) IS EXEMPTED UNDER THIS CATEGORY. |
INVESTMENT OPTIONS | INTEREST | MINIMUM LOCK-IN PERIOD | ASSURED RETURN | ASSOCIATED RISK |
ELSS | 12% TO 15% (DEPENDING ON MARKET FLUCTUATION) | 3 YEARS | NO | HIGH |
NPS | 8% TO 10% | TILL THE INVESTOR REACHES 60 YEARS OF AGE (RETIREMENT) | NO | HIGH |
SCSS | 8.60% | 5 YEARS | YES | LOW |
PPF | 7.90% | 15 YEARS | YES | LOW |
NSC | 7.9% | 5 YEARS | YES | LOW |
ULIP | 8% TO 10% (DEPENDING ON MARKET FLUCTUATION) | 5 YEARS | NO | MODERATE |
FIXED DEPOSIT | UP TO 8.40% | 5 YEARS | YES | LOW |
SUKANYA SAMRIDDHI YOJANA | 8.50% | 8 YEARS | YES | LOW |
Premiums paid towards insurance policies are eligible to receive tax benefits as per 80C limit. These exemptions are available against policies held by self, spouse, dependent children, etc. Hindu Undivided members of the family may also get pleasure from the identical exemptions.
Currently, an annual premium of up to 10% (of the insurance policy’s total sum assured) is tax exempted under this scheme. This clause has been revised on 1st April 2012, before which premiums of up to twenty (of the sum assured) was answerable for tax exemption under Section 80C deduction.
Any contribution towards Public Provident Fund (PPF) may be filed for write-down under Section 80C. Public Provident Funds include a maximum deposit limit of Rs.1,50,000, allowing an investor to say the complete deposited amount as an exemption under this taxation act.
Any voluntary contribution made by the worker towards the provided fund is additionally eligible for deduction under Section 80C of the taxation Act.
NABARD is the short form for National Bank for Agriculture and Rural Development. Rural Bonds offered by NABARD are eligible for tax exemption under the taxation Act of India. the utmost deductible amount is capped at Rs.1.5 lakh under Section 80C.
Unit Linked Insurance Plans offer more returns within the long run compared to standard insurance policies. they need become especially popular in recent years because of the tax benefits offered under Section 80C of the revenue enhancement Act, 1961. Investors can avail tax exemptions up to Rs. 1.5 lakh on the invested amount u/s 80C tax provisions.
NSC or National Savings Certificate is one amongst the foremost popular tax-saving instruments for risk-avert individuals. Interest earned on NSC is compounded semi-annually, and therefore the maximum maturity period ranges from 5 to 10 years.
Investors don’t need to follow any limitation on the entire sum invested towards NSC during a financial year; however, only a maximum of Rs.1.5 lakh is subject to exemption every year under Section 80C.
Tax Saving FDs are fixed deposit schemes offered by both banks and post offices that allow write-off under Section 80C. These FDs generally have a lock-in period of 5 years and the maximum amount of exemption under this is subject to Rs.1.5 lakh only (on the principal amount). However, the returns of such instruments are chargeable for taxation.
The return earned from Employee Provident Fund (EPF), including the interest, is eligible for tax exemption under Section 80C of the taxation Act, 1961. it’s only eligible for workers who have continued his or her service for a minimum of 5 years. If individuals make voluntary contributions to their EPF accounts, such amount is eligible for tax exemptions under Section 80C.
Section 80C of the revenue enhancement Act allows tax exemptions on infrastructure bonds, provided the investment is up to or on top of Rs.20,000. The limit of Rs.1.5 lakh stays applicable for these long-term secured bonds additionally.
Equity Linked Saving Schemes, or ELSS, falls under Section 80C’s exemption category for up to its maximum limit (Rs.1.5 lakh). These investment schemes include a compulsory 3-year lock-in period.
Any investments made towards Senior Citizens Saving Scheme, (or SCSS) is eligible for tax exemption up to the utmost allocated 80C limit, i.e., Rs. 1.5 lakh. Individuals above the age of 60 (people choosing voluntary retirement scheme is eligible to participate in SCSS after the age of 55 years) years are eligible to induce get pleasure from SCSS, which features a minimum lock-in tenure of 5 years.
Only the repayments made towards the principal component of equity credit line EMIs are eligible for deduction under Section 80C. However, the borrower has got to fulfil certain clauses to avail of this benefit; these are –
Stamp duty and registration charges is considered because the two largest expenses made towards taking ownership of a property. the govt of India allows a deduction of liabilities till the 80C limit on the taxation and registration charges paid towards house procurement. However, exemptions can only be claimed within the year that these duties are paid; otherwise, it’ll not be eligible for consideration under Section 80C deduction.
Sukanya Samriddhi Yojana could be a saving scheme specially designed to fulfill the financial requirements for a girl’s education and marriage. Parents or legal guardians of a woman child (not older than 10 years of age) can open this account and oldsters of two or more (only just in case of twins) girls may invest during this plan. Thus, the interest income on such investment scheme shall be eligible for exemption under Section 80C.
Thus, we have seen that Section 80C provides for multiple investments for exemption, a rough idea about which every investor should have. The advantages offered by this act can help save a considerable amount from one’s liabilities.
ELIGIBLE INVESTMENTS FOR TAX DEDUCTIONS | |
80 C | 80C ALLOWS DEDUCTION FOR INVESTMENT MADE IN PPF, EPF, LIC PREMIUM, EQUITY LINKED SAVING SCHEME, PRINCIPAL AMOUNT PAYMENT TOWARDS HOME LOAN, STAMP DUTY AND REGISTRATION CHARGES FOR PURCHASE OF PROPERTY, SUKANYA SMRIDDHI YOJANA (SSY), NATIONAL SAVING CERTIFICATE (NSC), SENIOR CITIZEN SAVINGS SCHEME (SCSS), ULIP, TAX SAVING FD FOR 5 YEARS, INFRASTRUCTURE BONDS ETC |
80CCC DEDUCTION FOR LIFE INSURANCE ANNUITY PLAN. | 80CCC ALLOWS DEDUCTION FOR PAYMENT TOWARDS ANNUITY PENSION PLANS PENSION RECEIVED FROM THE ANNUITY OR AMOUNT RECEIVED UPON SURRENDER OF THE ANNUITY, INCLUDING INTEREST OR BONUS ACCRUED ON THE ANNUITY, IS TAXABLE IN THE YEAR OF RECEIPT. |
80CCD (1) DEDUCTION FOR INVESTMENT IN NPS | EMPLOYEE’S CONTRIBUTION, SUBJECT TO MAXIMUM OF LEAST OF THE FOLLOWING –
|
80CCD (1B) DEDUCTION FOR NPS | ADDITIONAL DEDUCTION OF RS 50,000 IS ALLOWED FOR AMOUNT DEPOSITED TO NPS ACCOUNT CONTRIBUTIONS TO ATAL PENSION YOJANA IS ALSO ELIGIBLE FOR DEDUCTION. |
80CCD (2) DEDUCTION FOR NPS | EMPLOYERS CONTRIBUTION IS ALLOWED FOR DEDUCTION UPTO 10% OF BASIC SALARY PLUS DEARNESS ALLOWANCE UNDER THIS SECTION. BENEFIT IN THIS SECTION IS ALLOWED ONLY TO SALARIED INDIVIDUALS AND NOT SELF EMPLOYED. |
INVESTMENT OPTIONS | AVERAGE INTEREST | LOCK IN PERIOD FOR | RISK FACTOR |
ELSS FUNDS | 12% – 15% | 3 YEARS | HIGH |
NPS SCHEME | 8% – 10% | TILL 60 YEARS OF AGE | HIGH |
ULIP | 8% – 10% | 5 YEARS | MEDIUM |
TAX SAVING FD | 7% – 8% | 5 YEARS | LOW |
PPF | 7.10% | 5 YEARS | LOW |
SENIOR CITIZEN SAVINGS SCHEME | 7.4% | 5YEARS (CAN BE EXTENDED FOR OTHER 3 YEARS) | LOW |
NATIONAL | 6.8% | 5 YEARS | LOW |
SUKANYA SAMRIDDHI YOJANA | 8.4% | TILL GIRL CHILD REACHES 21 YEARS OF AGE. HOWEVER, PARTIAL WITHDRAWALS CAN BE MADE AFTER SHE REACHES 18 YEARS. | LOW |
Sometimes, you’ll have deductions or investments eligible for 80C, but haven’t submitted the proofs to your employer. this could cause to additional TDS deductions. you’ll be able to still claim these deductions while e-filing, as long as you’ve got the proofs with you.
Section 80 TTA – Interest on bank account
If you’re an individual or an HUF, you will claim a deduction of maximum Rs 10,000 against interest income from your bank account with a bank, co-operative society, or post office. Do include the interest from savings checking account in other income.
Section 80TTA deduction isn’t available on interest income from fixed deposits, recurring deposits, or interest income from corporate bonds.
Deduction for House Rent Paid Where HRA isn’t Received
Deduction available is that the least of the following:
*Adjusted Gross Total Income is fell upon after adjusting the Gross Total Income sure deductions, exempt income, long-term capital gains and income associated with non-residents and foreign companies.
An online e-filing software like that of Clear Tax will be extremely easy because the limits are auto-calculated. So, you are doing not must worry about making complex calculations. From FY 2016-17 available deduction has been raised to Rs 5,000 a month from Rs 2,000 per month.
Deduction for Interest on Education Loan for Higher Studies. A deduction is allowed to a personal for interest on loans taken for pursuing educational activity. This loan may be taken for the taxpayer, spouse or children or for a student for whom the taxpayer may be a trustee.
80E deduction is offered for a maximum of 8 years (beginning the year during which the interest starts getting repaid) or till the whole interest is repaid, whichever is earlier. there’s no restriction on the number that may be claimed.
Deductions on home equity credit Interest for First Time Home Owners. FY 2017-18 and FY 2016-17 This deduction is offered in FY 2017-18 if the loan has been taken in FY 2016-17. The deduction under section 80EE is accessible only to home-owners (individuals) having just one house property on the date of sanction of the loan. the worth of the property must be but Rs 50 lakh and therefore the equity credit line must be but Rs 35 lakh.
The loan taken from an establishment must are sanctioned between 1 April 2016 and 31 March 2017. there’s an extra deduction of Rs 50,000 available on your home equity credit interest on top of deduction of Rs 2 lakh (on interest component of equity credit line EMI) allowed under section 24.
Deduction for the premium bought Medical Insurance. You (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80D on insurance for self, spouse and dependent children. an extra deduction for insurance of fogeys is out there up to Rs 25,000, if they’re but 60 years old. If the fogeys are aged above 60, the deduction amount is Rs 50,000, which has been increased in Budget 2018 from Rs 30,000.
In case, both taxpayer and parent(s) are 60 years or above, the utmost deduction available under this section is up to Rs.1 lakh.
EXAMPLE
Rohan’s age is 65 and his father’s age is 90. during this case, the most deduction Rohan can claim under section 80D is Rs. 100,000, however, with effect from FY 2015-16, an additional deduction of Rs. 5,000 shall be allowed for preventive checkup, but the same will be provided cumulatively.
Deduction for Rehabilitation of Handicapped Dependent Relative. Section 80DD deduction is offered to a resident individual or a HUF and is obtainable on:
To claim this deduction a certificate of disability is required from prescribed medical authority. With effect from FY 2015-16, the amount of deduction under this section has been raised from Rs 50,000 to Rs 75,000 and the amount of Rs 1,00,000 has been raised to Rs 1,25,000.
Deduction for Medical Expenditure on Self or Dependent Relative
A deduction up to Rs.40,000 is offered to a resident individual or a HUF. it’s available with relevance any expense incurred towards treatment of specified medical diseases or ailments for himself or any of his dependents. For an HUF, such a deduction is offered with regard to medical expenses incurred towards these prescribed ailments for any of the HUF members.
In case the individual on behalf of whom such expenses are incurred could be an adult, the individual or HUF taxpayer can claim a deduction up to Rs 1 lakh. Until FY 2017-18, the deduction that might be claimed for an adult and an excellent grownup was Rs 60,000 and Rs 80,000 respectively. This has now become a typical deduction available up to Rs 1 lakh for all senior citizens (including super senior citizens) unlike earlier.
Any reimbursement of medical expenses by an insurer or employer shall be reduced from the quantum of deduction the taxpayer can claim under this section.
Also remember that you just have to get a prescription for such medical treatment from the concerned specialist so as to assert such deduction. Read our detailed article on Section 80DDB.
Deduction for Person laid low with Physical Disability. A deduction of Rs.75,000 is accessible to a resident individual who suffers from a physical disability (including blindness) or sub normality. just in case of severe disability, one can claim a deduction of Rs 1,25,000.
From FY 2015-16 – Section 80U deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.
Deduction for donations towards Social Causes. The various donations laid out in u/s 80G are eligible for deduction up to either 100% or 50% with or without restriction.
From FY 2017-18 any donations made in cash exceeding Rs 2,000 won’t be allowed as deduction. The donations above Rs 2000 should be made in any mode aside from cash to qualify for 80G deduction.
Deduction on contributions given by a person to Political Parties. Deduction under section 80GGC is allowed to an individual taxpayer for any amount contributed to a party or an electoral trust. it’s not available for companies, local authorities and a man-made juridical person wholly or partly funded by the govt. you’ll be able to avail this deduction given that you pay by any way apart from cash.
Deduction with relation to any Income by way of Royalty of a Patent. This section provides deduction in respect of income received in the form of royalty for a patent, registered on or after 1 April 2003 under the Patents Act 1970, and the same shall be subject to a maximum of Rs.3 lakh or the income received, whichever is a less. The taxpayer must be a personal patentee and an Indian resident. The taxpayer must furnish a certificate within the prescribed form duly signed by the prescribed authority.
Deduction of Interest on Deposits for Senior Citizens. A new section 80TTB has been inserted vide Budget 2018 within which deductions with reference to interest income from deposits held by senior citizens are allowed. The limit for this deduction is Rs.50,000.
No further deduction under section 80TTA shall be allowed. additionally, to section 80 TTB, section 194A of the Act also will be amended so on increase the brink limit for TDS on interest income payable to senior citizens. the sooner limit was Rs 10,000, which was increased to Rs 50,000 as per the newest Budget.
Term of Capital gains exemption is referred to as benefit provided by the government to taxpayers, easing the burden of paying tax on capital gains, The requirement to pay capital gains tax arises when a taxpayer sells an asset (other than stock used in the business & personal property) for a profit.
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