Every taxpayer should know how tax deductions work. Here are the key details under Sections 80C to 80D what an income tax assessee can use to reduce tax liability. Further, it is essential to know the income tax deductions list under section 80C to 80D which an income tax assessee can take advantage of to reduce his tax burden In this article, each of these sections is discussed in detail, explaining its utility and the opportunities available in these categories.
What are Tax Deductions?
Exemptions are expenses or investments, which if allowed, are legally subtracted from the income to bring down the amount of income tax payable by an individual. This isn’t the same as tax credits, basically because they have specific criteria that must be met before they are allowed. These expenses are more let as per Income Tax Act to promote people for savings, investment, insurance policies, and to contribute towards the particular fund and schemes.
Income Tax Deduction On Saving For Investment Under Section 80C
The recommended Section 80C of the Indian Income Tax Act is one of the most used sections of the Income Tax Act of India with a maximum of 1,50,000 tax exemptions. Here are some eligible investments and expenditures under Section 80C:
1. Employee Provident Fund (EPF)
EPF is an excellent retirement saving scheme as it offers extra financial security once an individual decides to retire.
2. Public Provident Fund (PPF)
PPF is an investment tool for long-term holding with promising interest rate and the possibility of high returns. Other earnings, such as the interest earned and the maturity amount are excluded from taxation.
3. Equity-Linked Savings Scheme (ELSS)
ELSS funds qualify for tax deductions under Section 80C, if an investment portion is made. It has a lock-in period of three years in ELSS funds but it offers equity investment which makes it more attractive in terms of high returns.
4. National Savings Certificate (NSC)
The important aspect of NSC is that one can take a tax deduction in respect of investments made under section 80C. They have a term of five years and give a particular rate of interest which make them a safer instrument of investment.
5. Life Insurance Premiums
Premiums paid towards life insurance policies for self, spouse, or children are eligible for tax deductions under Section 80C.
6. Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana, a saving scheme for the girl child, depositors can save up to 1,50,000 under Section 80C. The interest paid during the investment period and the total amount of the bond when it comes due are also free of tax.
7. Principal Repayment of Home Loan
Whenever end-users take up home loans, they pay interest on the loan amount throughout the tenure of the loan. However, they make equal installments of both, interest and principal component, at regular intervals.
The biggest component of home loan repayment is allowed in terms of tax deductions under section 80c.
8. Tuition Fees
The fee for the education of at most two children becomes allowable expenditure under Section 80C.
Income Tax Deduction Under Section 80CCC
Section 80CCC relates to contributions made to pension funds. Contributions to specified pension funds are eligible for tax deductions under Section 80CCC. The maximum deduction allowed is Rs.1.5 lakhs, which is part of the overall limit of Rs.1.5 lakhs under Section 80C.
Income Tax Deduction Under Section 80CCD
In order to make a proper understanding of the Income Tax deduction under section 80CCD, let us examine its certain features.
The contributions made to NPS and Atal Pension Yojana are claimed through the Section 80CCD of the Income Tax Act. This section is further divided into three subsections:
1. Section 80CCD (1)
This subsection covers the contributions made by the individual towards NPS. The maximum deduction allowed is 10 % of the salary (for salaried individuals) or 20 % of the gross income (for self-employed individuals), subject to a limit of Rs.1.5 lakhs.
2. Section 80CCD (1B)
An additional deduction of Rs.50,000 is available under this subsection for contributions to NPS, over and above the limit of Rs.1.5 lakhs under Section 80C and 80CCD (1).
3. Section 80CCD (2)
This subsection covers the contributions made by the employer towards the NPS. The maximum deduction allowed is 10 % of the salary and is not subject to the overall limit of Rs.1.5 lakhs under Section 80C.
Income Tax Deduction Under Section 80D
Section 80D allows people and HUFs (Hindu Undivided Families) to deduct health insurance premiums. The total amount eligible for deduction depends upon the insured’s age and number of family members covered by the insurance. The details are:
1. Health insurance Premiums
Premiums paid out for health Insurance policies for yourself, spouse, parents and children are usually deductible under Section 80D. The maximum deduction is 25,000 (for people plus 50,000 for senior citizens).
2. Preventive health check ups
An extra deduction of 5,000 is permitted for preventive health check ups, that is included in the total limit of 25,000 or 50,000.
3. Senior citizens
Another 50,000 deduction for healthcare expenses is allowed for senior Citizens without having a health insurance policy.
4. Super seniors
For super senior citizens (age 80 and up), the medical cost deduction is also 50,000.
Benefits of Tax Deductions
Comprehending the tax deduction advantages can inspire more strategic financial planning and responsible decision making. These are some of the benefits:
1. Reduced tax liability
Among the apparent advantages of tax deductions is they decrease an individual or business’s overall tax liability. Taxpayers can reduce the taxable portion of income by deductible costs and investments. This keeps more money in the hands of people and companies to reinvest in their ventures, buy services and goods or even invest for the future.
2. Encouragement Of charitable Contributions
Many charitable giving is encouraged by tax deductions. Several governments provide tax deductions for donations to recognized non-profit organizations or charities. By offering the incentive, governments wish to stimulate philanthropy and the work of the charitable entities. This helps society in general and lets people give back to causes they love while decreasing their tax burden.
3. Stimulating investment & economic growth
Tax deductions aimed at businesses could be effective tools for promoting Investment and economic growth. Governments at times permit deductions for capital expenditures, research & development, along with other business expenses. By this way, they encourage businesses to return earnings to the economy – which might produce productivity, innovation, and jobs.
4. Promoting homeownership & property investments
Some countries provide tax deductions for homeownership and real estate investments. Deductions for mortgage payments, property taxes and a few home improvements help make owning a home less expensive. Such incentives can induce individuals to buy property thus ensuring a healthy housing market along with a building business. Moreover, the equity that homeowners accumulate over time makes them richer.
5. Facilitating education & skill development
Tax deductions also are helpful in the field of education and skill development. Various governments offer tax breaks for higher education costs including tuition and student loan interest. Some professional development costs might also be deductible for individuals looking to enhance their abilities or expertise. Tax deductions promote a more qualified and competitive workforce in the nation through investment in education and continuing learning.
Maximising Your Tax Savings
Planning your investments and expenses can assist you in saving money on taxes. Here are some tips:
1. Begin Early Planning
Plan your investments early in the financial year to stay away from last minute jitters and maximise deductions.
2. Diversify Investments
Own a mix of options covered under Sections 80C, 80CCD, 80CCC, and 80D to improve your tax cost savings and safeguard your future.
3. Keep documentation
Keep correct documentation of all investments, premiums and expenditures to claim deductions promptly for tax filing.
4. Seek guidance from a financial advisor
Customised guidance on the most effective investments and tax-saving methods based on your Financial objectives and risk appetite can include consulting a financial advisor.
Conclusion
Knowing the income tax deductions list for FY 2023-24 (AY 2024-25) can affect your financial planning & tax liability. Sections 80C, 80CCC, 80CCD, and also 80D offer many possibilities for saving taxes by motivating insurance, healthcare, and retirement funds. With such deductions, taxpayers lower taxable income, offer long-term financial security and also help the nation’s economy develop. Plan early, diversify and also consult a financial adviser like StartupFino to make use of these tax savings.
FAQs
Can I make use of the 80C deductions when I submit the return in case I have no evidence of employment?
Indeed, you can get 80C deductions on your income tax return in case you haven’t supplied proof to the employer. Your employer might not think about these deductions in computing TDS, though you can claim them if you file your return in case you make the proper information.
I invested 80C on 30 April 2024. Which year can I deduct this particular investment?
An 80C investment made on 30 April 2024 is deductible for 2024-25 (assessment year 2025-26). Investments made under Section 80C accrue for the financial year where they’re made.
Is there a limit or maximum to how much I could deduct under Section 80E?
No, the amount you are able to get as a deduction in accordance with Section 80E has no ceiling. However the deduction is restricted to the interest paid on an education loan and is offered for as much as eight years and until the interest is paid in full, in case it happens first.
Can a company or a firm benefit from Section 80C?
No, no company or firm can benefit from Section 80C. This section is open to individual taxpayers and Hindu Undivided Families (HUFs). Companies and firms can not deduct under Section 80C.
Can a company deduct donations made under Section 80G?
Yes, a company may deduct donations under Section 80G. Donations to specified funds and philanthropic institutions are deductible in this particular section. The amount of the deduction depends on the institution type and is governed by specific conditions and limits provided by the Income Tax Act.
