All about income tax deductions in India 2022-2023
All salaried individuals in India are liable to pay a certain amount of tax to the government in India. The income tax of each individual is determined on the basis of his/her income. Thus, every Indian citizen who qualifies for paying tax is liable to pay income tax every financial year. In order to reduce tax liability, there are certain deductions allowed that help in saving taxes. Read on to know all about income tax deductions in India.
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What is Income Tax Deduction?
As per the Income Tax Act of 1961, there are certain deductions allowed that allow individuals to save taxes. These deductions are termed income tax deductions and help a lot in reducing tax liabilities. These deductions can be claimed if you purchased any investment plan, sought medical treatment, contributed towards PPF, charitable income, or something similar. Such deductions are also allowed to encourage individuals to invest as well as contribute to a social cause. However, the limit of tax deductions varies from individual to individual and depends on several factors like income, age, filling status, and a few more.
Different ways of income tax deductions in India
Here is a list of the different ways for income tax deductions:
- Public Provident Fund: The interest and returns earned if an individual invests in a Public Provident Fund or PPF are applicable for tax deductions.
- Life Insurance: The premiums paid toward different life insurance premiums is applicable for tax deductions. Even the amount earned on maturity lets you save taxes.
- Bank Fixed Deposits: Another great way of enjoying the benefits of income tax deductions is to invest in bank fixed deposits. Investing in FDs will not just help you in tax savings but also be instrumental in creating an investment corpus for the future.
- Senior Citizen Savings Scheme: The Senior Citizen Savings Scheme or SCSS helps senior citizens to enjoy tax savings upon investing in this scheme.
- Unit Linked Insurance Plans: Unit Linked Insurance Plans or ULIPs also provide the benefits of tax savings.
- Charitable contributions: If you are making any charitable contributions, then make sure to maintain proof of it as the same is applicable for tax deduction purposes.
- Treatment for disabled people: If you have a disabled dependent who needs medical treatment, then the medical expenses incurred are applicable for tax deductions.
- Interest paid on education loans: If you have taken an education loan for yourself, your spouse, or children, then the interest paid towards it, is applicable for tax deductions.
- Retirement Savings Plans: Retirement savings plans such as the National Pension Scheme or NPS are also applicable for tax deductions.
- Health Insurance Plans: The premium you need to pay towards health insurance premiums is also allowed for tax deductions. For senior citizens, the deductions on health insurance premiums go up to Rs. 50,000.
Different Sections Under Income Tax Deductions
Listed below are the different sections that are covered under the Income Tax deductions in India:
Section 80 C
Under section 80C, individuals can get tax deductions on investment plans. The available investment plans that allow tax deductions are ELSS, Bank fixed deposits, ULIP, PPF, Life insurance plans, and more. According to the Income Tax Act of 1961, individuals can get a maximum deduction of Rs. 1,50,000 under section 80C.
This section allows deductions on premiums paid toward annuity pension plans. However, the annuity earned out of these annuity plans is taxable and the maximum deductions applicable is Rs. 1,50,000 lakhs.
Any contribution made towards pension schemes such as National Pension Scheme or NPS, Atal Pension Scheme, qualifies for tax deductions under this section.
If you are putting your money into long term infrastructure bonds, then a maximum tax deduction of Rs. 20,000 can be claimed.
Another sub-section of section 80C, section 80CCG allows deductions if contributions are made towards Rajiv Gandhi Equity Savings Scheme or RGESS. The maximum deductions allowed is Rs. 50,000.
Section 80D allows tax deductions on health insurance premiums in case an individual has bought a health insurance plan for his/her family or dependents. Depending on whom you are buying the health insurance plan for, the maximum deduction will vary. For instance, if you are buying a health insurance plan for your spouse, then the deduction allowed is up to Rs. 15,000. On the other hand for senior citizens, it is up to Rs. 20,000.
This allows deductions on health insurance plans for senior citizens. In case the disability is severe, then the maximum deduction applicable is Rs. 1,50,000 and for moderate disability, there is a deduction of up to Rs. 75,000.
Section 80 DDB
This allows deductions if any individual is seeking medical treatment for self or family. A maximum deduction on medical expenses goes up to Rs. 60,000.
The benefits offered under this section are extremely beneficial for those spending a certain amount of money on the education of their dependents or themselves. So, if you have taken educational loans, then you can enjoy tax benefits under this section.
The contributions made towards social welfare benefits allow tax deductions under section 80G, provided that proper receipts are submitted for the same. Please note that there are 100% deductions if contributions are made towards the Prime Minister’s Relief Fund, National Illness Assistance Fund, and more. Section 80G is further classified into 80GGC, 80GGB, 88GG, and 80GG, based on the eligibility of individuals.
Section 80GGB allows tax deductions if contributions are made by any company towards political parties or even electoral trusts. However, the political party must be a registered one, otherwise, there are eligible tax deductions.
The section 80GGC is almost similar to section 80GGB, however, the only difference is that the contributions, in this case, are made by an individual towards a registered political party.
Under the section 80GG, both salaried and self-employed individuals can get tax deductions in case they have paid any amount as rent towards any furnished or unfurnished residence. This can be claimed by those who do not receive a house rent allowance from their employer.
Section 80 TTB
Section 80 TTB allows deductions on interests earned on bank deposits, post offices, etc, however, this is applicable only to senior citizens.
Under section 80U, disabled individuals can get tax deductions. However, you need to have a valid certificate that specifies your medical condition, only then will you get tax deductions under this section.
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What are the investment options available in section 80C?
Investment options available under section 80C include life insurance plans, ULIPs, bank fixed deposits, etc.
What are the different ways of getting tax deductions?
The different ways of getting tax deductions are investing in National Pension Scheme, making contributions for social welfare, seeking medical treatment for self or dependants, and others.
Which act of income tax talks about income tax deductions?
The Income Tax Act of 1961 talks about income tax deductions.
What is the maximum tax deduction allowed under section 80C?
Section 80C allows a maximum tax deduction of Rs. 1,50,000.
Which section allows tax deductions on health insurance premiums?
Under section 80D, individuals can get tax deductions on health insurance premiums.