Deductions in Income Tax

With a view to encourage savings and investments amongst the taxpayers, Income Tax Deparment of India provides with various deductions against taxable income under Chapter VI A.

Section 80C - Deductions on Investments

Section 80C is the most popular and favourite sections amongst the taxpayers as it allows direct investments or eligible expenses for reduction in taxable income. It allows a maximum deduction of ₹ 1.5 lakh every year from the taxpayers total income.

The benefit of this deduction can be availed by Individuals and HUFs. Companies, partnership firms, LLPs cannot avail the benefit of this deduction.

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 NPS - Employee’s contribution under section 80CCD (1) Maximum deduction allowed is least of the following
- 10% of salary (in case taxpayer is employee)
- 20% of gross total income (in case of self employed)
- ₹ 1.5 Lakh ( limit allowed u/s 80C)
80CCD (1b) Deduction for NPS - Additional deduction of ₹ 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.

Section 80C Deductions List

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 (partial withdrawal allowed when she reached 18 years)	Low

Section 80D – Medical Insurance

Deduction for the premium paid for Medical Insurance

An individual or HUF can claim a deduction of ₹ 25,000 under section 80D on insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to ₹ 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is ₹ 50,000, which has been increased in Budget 2018 from ₹ 30,000.

In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section is up to ₹ 1 lakh.

From FY 2015-16 a cumulative additional deduction of ₹ 5,000 is allowed for preventive health check.

Section 80DD – Disabled Dependent

Deduction for Rehabilitation of Handicapped Dependent Relative

Section 80DD deduction is available to a resident individual or a HUF and is available on:

Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative
Payment or deposit to specified scheme for maintenance of handicapped dependent relative.
1. Where disability is 40% or more but less than 80% – fixed deduction of ₹ 75,000.
2. Where there is severe disability (disability is 80% or more) – fixed deduction of ₹ 1,25,000.

To claim this deduction a certificate of disability is required from prescribed medical authority. From FY 2015-16 – the deduction limit of ₹ 50,000 has been raised to ₹ 75,000 and ₹ 1,00,000 has been raised to ₹ 1,25,000.

Section 80DDB – Medical Expenditure

Deduction for Medical Expenditure on Self or Dependent Relative

For individuals and HUFs below age 60 - A deduction up to ₹ 40,000 is available to a resident individual or a HUF. It is available with respect to 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 available with respect to medical expenses incurred towards these prescribed ailments for any of the HUF members.
For senior citizens and super senior citizens - In case the individual on behalf of whom such expenses are incurred is a senior citizen, the individual or HUF taxpayer can claim a deduction up to ₹ 1 lakh. Until FY 2017-18, the deduction that could be claimed for a senior citizen and a super senior citizen was ₹ 60,000 and ₹ 80,000 respectively. This has now become a common deduction available upto ₹ 1 lakh for all senior citizens (including super senior citizens) unlike earlier.
For reimbursement claims - 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 we need to get a prescription for such medical treatment from the concerned specialist in order to claim such deduction.

Section 80TTA – Interest on Savings Account

Deduction from Gross Total Income for Interest on Savings Bank Account

An individual or an HUF can claim a deduction of maximum ₹ 10,000 against interest income from savings account with a bank, co-operative society, or post office, provided the interest from savings bank account in other income in other income.

Section 80TTA deduction is not available on interest income from fixed deposits, recurring deposits, or interest income from corporate bonds.

Section 80GG – House Rent Paid

Deduction for House Rent Paid Where HRA is not Received

Section 80GG deduction is available for rent paid when HRA is not received. The taxpayer, spouse or minor child should not own residential accommodation at the place of employment
The taxpayer should not have self-occupied residential property in any other place
The taxpayer must be living on rent and paying rent
The deduction is available to all individuals

Deduction available is the least of the following:

Rent paid minus 10% of adjusted total income
₹ 5,000/- per month
25% of adjusted total income

Adjusted Gross Total Income is arrived at after adjusting the Gross Total Income for certain deductions, exempt income, long-term capital gains and income related to non-residents and foreign companies.

From FY 2016-17 available deduction has been raised to ₹ 5,000 a month from ₹ 2,000 per month.

Section 80E – Interest on Education Loan

Deduction for Interest on Education Loan for Higher Studies

A deduction is allowed to an individual for interest on loans taken for pursuing higher education. This loan may have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a legal guardian.

80E deduction is available for a maximum of 8 years (beginning the year in which the interest starts getting repaid) or till the entire interest is repaid, whichever is earlier. There is no restriction on the amount that can be claimed.

Section 80EE – Interest on Home Loan

Deductions on Home Loan Interest for First Time Home Owners

FY 2017-18 and FY 2016-17 - This deduction is available in FY 2017-18 if the loan has been taken in FY 2016-17. The deduction under section 80EE is available only to home-owners (individuals) having only one house property on the date of sanction of the loan. The value of the property must be less than ₹ 50 lakh and the home loan must be less than ₹ 35 lakh. The loan taken from a financial institution must have been sanctioned between 1 April 2016 and 31 March 2017. There is an additional deduction of ₹ 50,000 available on the home loan interest on top of deduction of ₹ 2 lakh (on interest component of home loan EMI) allowed under section 24.

FY 2013-14 and FY 2014-15 - During these financial years, the deduction available under this section was first-time house worth ₹ 40 lakh or less. You can avail this only when your loan amount during this period is ₹ 25 lakh or less. The loan must be sanctioned between 1 April 2013 and 31 March 2014. The aggregate deduction allowed under this section cannot exceed ₹ 1 lakh and is allowed for FY 2013-14 and FY 2014-15.

Section 80U – Physical Disability

Deduction for Person suffering from Physical Disability

A deduction of ₹.75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, one can claim a deduction of ₹ 1,25,000.

From FY 2015-16 – Section 80U deduction limit of ₹ 50,000 has been raised to ₹ 75,000 and ₹ 1,00,000 has been raised to ₹ 1,25,000.

Section 80G – Donations

The various donations specified 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 ₹ 2,000 will not be allowed as deduction. The donations above ₹ 2000 should be made in any mode other than cash to qualify for 80G deduction.

Donations with 100% deduction without any qualifying limit
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a State Government for the medical relief to the poor
- National Illness Assistance Fund
- National Blood Transfusion Council or to any State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children’s Fund
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
- The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6,1993
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
- Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001) or
- Prime Minister’s Armenia Earthquake Relief Fund
- Africa (Public Contributions — India) Fund
- Swachh Bharat Kosh (applicable from financial year 2014-15)
- Clean Ganga Fund (applicable from financial year 2014-15)
- National Fund for Control of Drug Abuse (applicable from financial year 2015-16)
Donations with 50% deduction without any qualifying limit
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
- Indira Gandhi Memorial Trust
- The Rajiv Gandhi Foundation
Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
- Government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning Donation by a Company to the Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India
Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
- Any other fund or any institution which satisfies conditions mentioned in Section 80G(5)
- Government or any local authority to be utilized for any charitable purpose other than the purpose of promoting family planning
- Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both
- Any corporation referred in Section 10(26BB) for promoting the interest of minority community
- For repairs or renovation of any notified temple, mosque, gurudwara, church or other places.

Section 80GGB – Company Contribution

Deduction on contributions given by companies to Political Parties

Section 80GGB deduction is allowed to an Indian company for the amount contributed by it to any political party or an electoral trust. Deduction is allowed for contribution done by any way other than cash.

Section 80GGC – Contribution to Political Parties

Deduction on contributions given by any person to Political Parties

Deduction under section 80GGC is allowed to an individual taxpayer for any amount contributed to a political party or an electoral trust. It is not available for companies, local authorities and an artificial juridical person wholly or partly funded by the government. You can avail this deduction only if you pay by any way other than cash.

Section 80RRB – Royalty of a Patent

Deduction with respect to any Income by way of Royalty of a Patent

80RRB Deduction for any income by way of royalty for a patent, registered on or after 1 April 2003 under the Patents Act 1970, shall be available for up to ₹ 3 lakh or the income received, whichever is less. The taxpayer must be an individual patentee and an Indian resident. The taxpayer must furnish a certificate in the prescribed form duly signed by the prescribed authority.

Section 80 TTB – Interest Income

Deduction of Interest on Deposits for Senior Citizens

A new section 80TTB has been inserted vide Budget 2018 in which deductions with respect to interest income from deposits held by senior citizens will be allowed. The limit for this deduction is ₹ 50,000.

No further deduction under section 80TTA shall be allowed. In addition to section 80 TTB, section 194A of the Act will also be amended so as to increase the threshold limit for TDS on interest income payable to senior citizens. The earlier limit was ₹ 10,000, which was increased to ₹ 50,000 as per the latest Budget.