You are on page 1of 6

Ready reckoner on tax deduction or exemptions in Indian income

tax act 1961


Us 80C, 80D, 80DD, 80E, 80G, 80GG, SC 24,80CCF for 2009-10.

Prepared by,
P.BHASKAR DEEKSHIT,
MBA (fin), MA (eco), AMFI, cfp,
09490470505.
Indian Income Tax deductions, Tax exemption limits

Financial year 2009/2010 .

Income Tax Deductions Maximum deduction allowed


Explaination Remarks

Income Tax deduction - Section 80C Maximum tax deduction


Provident Funds, Life Insurance premia, or tax exemption limit:
ELSS, Bank deposits (>5 yr.), tution Rs. 1,00,000
fees, principal part of EMI on housing
loan, etc.

Maximum tax deduction or


Income Tax deduction - Section 80D tax exemption limit:
Premium in health insurance of you, Rs. 15000
your spouse, children or dependent (tax exemption limit
for senior citizen is
parents
Rs. 20000)
Maximum tax deduction
Income Tax deduction - Section 80DD or tax exemption limit:
Medical treatment (including insurance) Rs. 50000.
of disabled dependent (Rs. 75000 if disability is severe,
e.g. >80%)

Income Tax deduction - Section 80E Maximum tax deduction


Interest paid on educational loan taken or tax exemption limit:
for higher education of you, your spouse no limit !
or children.

Maximum tax deduction


Income Tax deduction - Section 80GG or tax exemption limit:
House rent in excess of 10% of income, Rs. 2000 per month or 25% of your
if no HRA is received. gross salary, whichever less.

Maximum tax deduction


Income Tax deduction - Section 24 or tax exemption limit:
Interest paid on housing loan. Rs. 1,50,000

Maximum tax deduction


or tax exemption limit:
Income Tax deduction - Section 80G 100% of donation amount for special
Donations funds(see below), 50% of donation amount
for all other donations.
Maximum tax deduction
or tax exemption limit:
Income Tax deduction - Section 80CCF Rs. 20,000
Donations Invested in specified infrastructure bonds.

 Industrial Finance Corporation of India; 2. Life Insurance Corporation of India;


 Infrastructure Development Finance Company Limited;
 A Non-Banking Finance Company classified as an infrastructure finance company by the Reserve Bank of India; as
“Long-term Infrastructure Bond” for the purpose of section 80CCF of the Income Tax Act, 1961.
Indian Income Tax deduction - Section 80C

Section 80C of Indian Income Tax Act is the most popular because it is directly related to tax

deductions for your monthly savings or life insurance. In financial years 2008/2009 and also

in 2009/2010 the maximum income tax deduction allowed under section 80C is 1,00,000.

The following is a list of important ways in which a taxpayer can get benefit of section 80C of

Indian Income Tax Act.


1. Provident Fund (PF): Any contributions to Provident Fund, Voluntary provident
Fund (VPF) or savings made in Public Provident Fund (PPF Account) are eligible for income
tax deduction under section 80C of Indian Income Tax Act.
2. Life Insurance Premiums: Any Life Insurance premiums (for one or more insurance
policies) paid by you for yourself, your spouse or your children is eligible under income tax
deduction under section 80C of Indian Income Tax Act.
3. ELSS Equity Linked Saving Schemes: Any investment made in certain Mutual
Funds called equity linked saving schemes qualifies for section 80C deduction. Please note
that not all mutual fund investments are eligible for this deduction. Some examples of ELSS
funds are
: SBI Magnum Tax Gain, HDFC Tax Saver, HDFC Long term advantage, etc.
4. ULIP (Unit Linked Insurance Plan): Investments made in certain ULIPs of Unit
Trust of India and LIC of India are eligible for 80C deduction.
5. Bank Fixed deposits or Term deposits of >5 years: According to a relatively new
provision amount saved in fixed deposits of term at least five years is eligible for income tax
deduction under section 80C of Indian Income Tax Act.
6. Principal part of EMI on Housing Loan: If you are paying EMI on a housing loan,
note that the EMI (equated monthly installments) consists of two parts - principal part and
interest part. The principal part of the EMI on your housing loan is eligible for income tax
deduction under section 80C. Note that the interest part is also eligible for tax deduction,
however not under section 80C but section 24. (read below). If you do not own a house but
pay rent for it, see section 80GG of Indian Income Tax Act below.
7. Tuition Fees: Amount paid as tuition fee for the education of two children of the
assessee is eligible for deduction under section 80C of Indian Income Tax Act.
8. Other 80C deductions: Amount saved in National Saving Certificate (NSC),
Infrastructure Bonds or Infra Bonds, amount paid as stamp duty and registration charges
while buying a new home are eligible for income tax deductions under section 80C of Indian
Income Tax Act.
Indian Income Tax deduction - Section 80D:

Section 80D of Indian Income Tax Act is especially useful if your employer does not cover

your health or medical expenses. It is a good idea to get medical insurance or health

insurance for you, your spouse, dependent children or dependent parents, as you can

claim a deduction of up to Rs. 15000/- per annum for the premium paid on this insurance.

For senior citizen this limit is Rs. 20000. With effect from 1-4-2009, you can claim the total

of the following items for deduction under section 80D.


1. Total amount of premium paid for health insurance of family (meaning spouse +
children), or Rs. 15,000 , whichever less.
2. Total amount of premium paid for health insurance of your parents or Rs. 15,000,
whichever less.

Thus if you are paying premiums of medi claim policies for your spouse children and parents

you can get a total tax deduction of up to Rs. 30,000.

Indian Income Tax deduction - Section 80DD:

Section 80DD of Indian Income Tax Act provides provision for tax deduction if you incurred

medical expenditure for a dependent who are disabled. Here dependent means spouse,

children, brothers, sisters or any one of them. The maximum tax deduction provided by

section 80DD is Rs. 50000 in case of ordinary disability and Rs. 75000 if the disability is

severe. The definition of severe disability is as defined in the official page of Indian Income

tax Act.

Indian Income Tax deduction - Section 24:

Whenever you take a housing loan build or buy a new home, the interest payable on this

home loan is eligible for income tax deduction under section 24. Maximum deductible

amount, i.e. maximum interest you can claim for income tax deduction under section 24 is

Rs. 1, 50,000. In case you are paying interest on money borrowed for renovation of your

home, even this may qualify for tax deduction under section 24 of Indian Income Tax Act.

(see official page or ask in a comment).


Indian Income Tax deduction - Section 80GG:

If you pay rent for the house that you are staying in and do not get HRA, any rent you pay in

excess of 10 percent of your salary is eligible for income tax deduction under section 80GG of

Indian Income Tax Act. The income tax deduction you can claim is the minimum of the

following amounts.
1. Rent you pay minus 10% of your salary.
2. 25% of your gross total income.
3. Rs. 2000/- per month.

Indian Income Tax deduction - Section 80E:

Under section 80E of Indian Income Tax Act, any amount of interest paid on educational loan

taken for your higher education or higher education of your husband / wife or children is

deductible from your taxable income. Here higher education means - studies for any

graduate or post-graduate course in engineering, medicine, management or for post-

graduate course in applied sciences or pure sciences including mathematics and statistics.

Indian Income Tax deduction - Section 80G:

Donations made to funds like Prime Minister's Relief Fund, National Children Foundation, any

University or educational institution of 'national eminence', etc. (see official page for

complete list) are deductible from your taxable income according to section 80G of Indian

Income Tax Act. For any other donations you are eligible to take income tax deduction for

50% of the donation amount. See the official page of Indian Income Tax Act.

Bonds eligible for Tax Exemption under Section 80CCF:

Section 80CCF was introduced in Financial Budget 2010. The bonds covered under this section were
informed to be specified later. Central government has now issued a press release indicating the list
of bonds eligible for 80CCF exemption.

The Central Government has specified bonds to be issued by

 Industrial Finance Corporation of India;


 Life Insurance Corporation of India;
 Infrastructure Development Finance Company Limited; and
 A Non-Banking Finance Company classified as an infrastructure finance company by the Reserve
Bank of India; as “Long-term Infrastructure Bond” for the purpose of section 80CCF of the Income
Tax Act, 1961.
Investment in these bonds up to Rupees Twenty Thousand will be eligible for deduction from the
Total income of the assessee.

The tenure of the Bonds shall be a minimum of ten years with a lock-in period of five years for an
investor. It will be mandatory for the subscriber to furnish permanent account number to the issuer
for investment in the bonds.

Tax Benefits: - Under section 80CCF of the Income Tax Act, Rs 20,000 per annum paid or
deposited as subscription to long term infrastructure bonds shall be deducted in computing
the taxable income. This is over and above Rs 1,00,000 tax benefit available under section
80C, 80CCC and 80CCD.

Benefits as per Tax slabs :-


1. Slab 10.3% : Rs 2,060
2. Slab 20.6% : Rs 4,180
3. Slab 30.9% : Rs 6,180

Pros:- The limit of Rs 20,000 per annum is in addition to Sections 80C, 80CCC and 80CCD.
Hence, it is advisable to consider applying in this issue.
Cons:- The bonds are locked in for five years, so there is no exit in case you need the
money midway which restricts liquidity.

***************************

You might also like