The Income
Tax Act serves as a reference for estimating the value of income tax deductions
that can be realized at the time of filing returns. The income tax slab rates
for an individual are applied in case of the total taxable income which is
obtained after clipping off the income tax deductions validated for the person.
Tax Deductions
An individual
could make the most of various productive income tax deductions to alleviate
the tax obligations in a legal manner that can be described as follows.
1. Income tax reduction on investments noted in Section 80C
Section 80C
specifies certain investments that can be liable for tax deductions and
examples of the various investments specified under Section 80C include
references to PPF accounts, Employee Provident Fund and National Savings
Certificate. Other notable investments which are illustrated in Section 80C
include the premiums paid on Life Insurance Policy, Tax Saving Fixed Deposit
and Mutual Funds facilitating equity.
2. Income tax rebates on investments in pension funds according to Section 80CCC and 80CCD
Section 80CCC
specifies that investment for starting or continuing annuity plan of an
insurance firm in order to receive pension can be subject to deduction. Section
80CCD ensures deduction on investment in the National Pension Scheme (NPS)
which is a notified pension scheme instituted by the Central Government.
However, an individual could claim tax deductions on amounts only up to Rs.
1,50,000 in every financial year according to Section 80CCC and Section 80C.On
the other hand, taxpayers could also leverage the benefit of an additional tax
deduction of the amount of Rs. 50,000 on investments in NPS account. Hence, the
cumulative total amount that can be eligible for deduction according to Section
80C and Section 80CCC is pinpointed at Rs. 2, 00,000.
3. Income tax deduction on interest obtained from savings account
Section 80TTA
implies that a taxpayer could avail deduction on interest obtained from savings
account of a bank. The income obtained from interest is classified as ‘Income
from Other Sources’ and is eligible for a maximum tax rebates of Rs. 10,000 per annum.
4. Income tax deduction for income obtained from home loan interest
Section 24
allows an individual to claim tax deduction on interest that is levied for home
loan taken by the person and it is essential to observe that the deduction is
applied for levied interest rather than on the interest paid by the individual.
5. Deduction for investment in equity saving scheme
The Rajiv
Gandhi Equity Savings Scheme is supported by the Section 80CCG and is
implemented in case of investments in listed mutual funds and shares for a
particular financial year to a maximum of Rs. 25,000. It is also essential to
observe that the income tax rebates can be applied in the case of first
time investments alongside considering the lock-in period which is estimated at
3 years from acquisition.
6. Tax deduction on payments for health check-up and medical insurance premiums
Income tax
deduction according to Section 80D specifies that investments in medical
insurance premiums for children, spouse or person as well as payments for
health check-up are subject to taxation. Furthermore, it is mandatory to consider
the variations in amount of deduction according to the seniority of citizenship
of the insured person.
7. Deductions for disability
Section 80U
and Section 80DD serve as the basis for determining income tax rebates
for citizens with disability. Section 80DD specifies deduction for an
individual in case they are disabled themselves and Section 80U specifies
deduction for an individual who has a disabled person in their family. Tax
deductions according to Section 80DD and Section 80U have to be based on the
definitions of disability as provided in the Income Tax Act.
8. Deduction for treatment expenses for specified diseases
Section 80DDB
serves as the reference for determining deduction amount on the expenses for
treating specified disease which can be applied in case of person as well as
family member. The deduction amount for treatment of specified diseases is
either Rs. 40,000 or the actual amount of expenditure, taking the higher amount
into consideration.
9. Tax deduction for educational loan interest
If an
individual has taken a loan for the purpose of higher education for personal
use or for spouse and children, then they are liable to receive income tax
rebates according to Section 80E. The deduction is applicable to the repaid
interest amount on the loan and is devoid of any restrictions on the maximum
amount.
10. Tax deductions on donations
Donations to
approved institutions in a specific financial year are allowed for deductions
that are generally encompassed under Section 80G. Specific deductions are
implied according to Section 80GGA which is implemented for donations to the
objectives of rural development and scientific research while Section 80GGC and
Section 80GGB are considered for donations made to political institutions.
11. Deductions on rent
Section 80GG
specifies income tax deductions on paid house rent without any previous claims
of deductions. Any individual who has not utilized the HRA exemption on salary
or rent paid according to the Income Tax Act can be subject to tax
rebates with the
limit specified according to Section 80GG.
Taxpayers in India
could leverage the various Income tax rebates, Income tax deductions and
income tax exemptions that are validated according to the Income Tax Act and
are promoted by the Indian Income Tax Department. These exemptions are intended
to entitle taxpayers in India to reduce taxes according to the law.
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