The Government of India has given its citizens the benefit of reducing their income tax. This is by claiming Income Tax deductions for certain expenses and investments. Income tax is levied on individuals based on the income tax slab for the financial year. Taxpayers must keep a tab on the IT slabs rolled out every year.
The income tax deduction has to be filled at the Income tax department either online or offline while filing income tax returns. In this blog, we’ll discuss essential deductions that you can claim under Section 80 of the Income Tax Act, 1961.
Section 80C of the Income Tax Act
Section 80C is the favourite part of every Indian taxpayer as it allows for saving money on the expenses incurred and investments made. The taxable income can save a maximum amount of Rs.1.5 lakh in a financial year.
Only individuals and Hindu Undivided families (HUFs) can reduce the taxable income under this section. It is not applicable for partnership firms, companies and Limited Liability Partnerships (LLPs).
List of qualified investments for deductions under Section 80C
Individuals make investments to secure wealth for their future. To encourage the citizens to make investments regularly, the government exempts a portion of their income tax. Individuals and HUFs can utilize the investments listed below to reduce their taxable income.
· Employee Provident Fund (EPF)
· Public Provident Fund (PPF)
· Equity Linked Savings Scheme
· Unit Linked Insurance Plan (ULIP)
· Fixed Deposit (FD) in a bank for five years
· Fixed Deposit (FD) in Indian Post Office for five years
· National Savings Certificate
· Sukanya Samriddhi Yojana (SSY)
· Equity Linked Savings Scheme
· Infrastructure bonds
· Rural bonds from NABARD
· Home loan – the principal amount paid to the lender during the financial year
· Premium paid to Life Insurance Corporation
Expenses that qualify for deductions under SEC 80C of the Income Tax Act
Individuals and HUFs can claim deductions on their taxable income for the financial year for the expenses mentioned below. Proof of payment in the taxpayer’s name has to be submitted to the IT authorities for filing. So, ensure you retain all the documents safely throughout the financial year to get deductions under SEC 80.
- Home loan repayment – Principal amount repaid to the lender in instalments throughout the financial year
- Life Insurance Policy Premium paid throughout the financial year
- Tuition fee paid for the education of children (up to 2 biological children)
- Money paid towards stamp duty and registration fee for residential property
Sub-sections of Sec 80 of Income Tax Act
Sec 80 of the Income Tax Act is extensive, comprising various lists of investments and expenses. It includes details of maximum amounts that can be claimed, the slabs and other eligibility details. It is divided into multiple sub-sections for ease of readability, understanding and reference.
Some of the essential subsections of Section 80C are detailed below, which will be helpful for you in reducing taxable income.
Under Section 80CCC, investments in pension funds are qualified investments for deductions. Only individuals can claim this deduction. A maximum of Rs.1.5 lakh p.a. can be claimed. Pension funds from all registered insurers are accepted.
Individuals who invest in the pension schemes offered by the Central Government can use it for income tax deductions. It includes investments made by the individual and their employer in the pension scheme. Please note that the investment amount must be less than 10% of the individual’s take-home salary.
Interest received on your savings account from a bank, post office, or cooperative society can be used for deductions under Sec 80. Individuals and HUFs are eligible to claim income from interest. A maximum amount of Rs.10,000 can be claimed in one financial year.
Please note that interest only on a savings account is taken into consideration. Interest received from the recurring deposit (RD), fixed deposit (FD) and corporate bonds are not included.
If an individual pays house rent from their income, it can be claimed under income tax deductions. Please note that the individual should not have received a house rent allowance from their employer. The following conditions must be satisfied
- The individual must not own a self-occupied residential property in another country.
- The individual must not own residential property at the place of their employment.
- The individual must reside at the residence for which rent is being paid and submitted for claim.
Now that you know the four necessary deductions you can claim to save money, it is time to take the first step. Safely keep all the payment receipts and income proofs. All the documents must be submitted to the income tax department to claim an Income tax deduction. Happy saving!