Taxes are part and parcel of adult life. Once you start earning, you must understand your tax liability, how much you have to pay, and how much you can save. It sounds a whole lot complicated, but it doesn’t have to be. The government has offered many exemptions under the various sections of the Income Tax Act that you can avail to your advantage. But to do that first, you need to understand what the multiple sections of the Income Tax Act have to offer. One of these is Section 80 of the Income Tax Act, 1961. Deduction under Section 80 includes various options like investments, premiums paid, loan repayment etc. These options can reduce your tax liability considerably if you optimise them.
If your annual income makes you liable to pay higher income taxes, then it’s time to consider Section 80. But what exactly are they and how can one make most of a deduction under section 80? Read on to find out.
Income Tax Deductions Under Section 80 C
Section 80 C, including Section 80 CCC and 80 CCD, of the Income Tax Act, offer a particular combination of activities that taxpayers can utilise to lower their taxable income. By investing your income in these activities, you can claim a tax deduction of up to Rs. 1.5 lakh when you file your Income Tax at the end of the financial year. Some of the most prominent investment options to claim Section 80 deductions are listed below.
- Tax Saving FDs: By investing in these, you get the dual benefit of tax exemption and high rate of returns. Tax Saving FDs are a perfect investment option for those who want to invest their money in low-risk instruments.
- PPF (Public Provident Fund): PPF is a popular option for many investors and taxpayers. Since it is a government established savings scheme with a maximum duration of 15 years, your money is not only secure but also gets a guaranteed return. The interest earned on PPF is tax-free.
- ELSS Funds: ELSS or Equity Linked Saving Schemes are another popular means to save on income tax deduction under section 80. By choosing ELSS, you are investing in the type of mutual funds that invest 80% of your money in equity shares. The lock-in period of ELSS funds is 3 years; however, these are great not just from a tax-paying perspective but also from the returns perspective.
- NSC (National Savings Certificates): NSC is yet another option to choose from under Section 80 deductions. These schemes have a tenure of 5 years and a fixed rate of interest. The interest you earn on your NSC investment falls under the limit of Rs 1.5 lakh deduction limit. If there’s still room for you to claim deductions, you can use this to fill in the gaps and save on your Income Tax.
- Life Insurance Premiums: If you have Life Insurance Policies, for yourself, your spouse or your children towards which you pay regular premiums, you can use tally up this amount to claim tax deductions
- Home Loan Repayment: Premiums paid towards the repayment of the principal amount on your home loan is eligible for tax deductions
- Payment of tuition fees: If you are paying a certain amount towards the tuition fees for yourself, your spouse or children, you can claim tax deductions on that sum
- EPF (Employee Provident Fund): As per the Employee Provident Fund Act, about 12% of the employee’s salary is contributed towards the Employees Provident Fund investment. The employee’s share of these contributions is eligible for tax deductions.
- Senior Citizens Savings Scheme: If you invest in SCSS, as investment or you’re your retirement planning, this amount can be claimed as deduction under section 80.
Section 80 CCC of the Income Tax Act offers a deduction of contribution to Pension Fund – If you invest in pension plans offered by public or private sector insurers, the premium you pay towards this fund can be used to claim deduction under section 80 CCC. This falls under the maximum limit of Rs. 1.5 Lakh
Section 80 CCD of the Income Tax Act offers a deduction of contribution to Pension plans by the Central Government – Under this scheme, both contributions made by the employer and the individual are eligible for a tax deduction of up to 10% of the individual’s salary.
Section 80 CCF of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim tax deductions on long-term infrastructure bonds issued by the government. You can claim as much as Rs. 20,000 under this section.
Section 80 CCG of the Income Tax Act offers tax deductions on investments made in Equity Saving Schemes issued by the government. The maximum amount you can claim under this section is Rs. 25,000.
Section 80 D of the Income Tax offers deduction on premium paid for medical insurance – You can claim up to Rs. 25,000 in any financial year. These insurance policies could be for yourself, your spouse or your children. In case, one of the insured members is 60 years or more, the tax deducted can be claimed up to Rs. 30,000. Additional tax deduction on medical insurance for parents is allowed to the extent of Rs. 25,000. In case, parents are over 60 years or more; you can claim up to Rs. 30,000. The maximum permissible deduction under Section 80D is Rs. 60,000.
Section 80D has subdivisions which if applicable to you, can be used to claim deductions. The subdivisions are as follows
- Section 80DD isfor tax deductions in two scenarios – If you pay for treatment of dependents with a disability, deduction of Rs. 1.5 Lakh can be claimed in case of severe disability and deduction of Rs. 75,000 in other disability cases.
- Section 80DDB of the Income Tax Act offers provisions for deductions on expenditures incurred on the treatment of a particular disease. The maximum deduction under this section is Rs. 40,000. In case the treatment is for senior citizens, a deduction can be claimed up to Rs. 60,000.
Section 80E of the Income Tax offers deduction on interest paid towards education loan taken for higher studies. So, if you are repaying the education loan taken for yourself, your spouse or your children’s higher education, then you can claim a tax deduction on the interest amount you’ve paid towards the repayment of this loan. This deduction is valid for 8 years from the time when the loan was taken or until the interest is paid – whichever is earlier. If you’ve taken a loan for foreign education, that can be claimed as deduction under Section 80E too.
Section 80GG of the Income Tax Act offers deductions on House Rent Paid. If HRA is not a part of your salary, you can claim deduction on house rent paid. However, you, your spouse or your children mustn’t own residential accommodation in the place of employment. The individual claiming the deduction should be the one living on rent and paying the rent. The deduction under this section is capped at Rs. 60,000.
Section 80GGA of the Income Tax Act offers deductions on donations towards National Poverty Eradication Fund or as a contribution to further social, scientific or education research. The amount paid towards this contribution can be claimed as a tax deduction
Section 80GGB of the Income Tax Act offers tax deductions to Indian Companies who make donations to electoral trusts or political parties.
Section 80GGC of the Income Tax Act offers tax deductions to tax-paying individuals who donate or contribute to electoral funds or political parties.
Section 80 IA of the Income Tax Act offers tax deductions on the gains received from various industrial activities related to power generation, telecommunication, SEZs, industrial parks etc. There are several subsections under this act that give you more clarity on what kind of tax deductions can be claimed under this section.
- Section 80 IAB of the Income Tax Act allows Special Economic Zone (SEZ) developers to claim deductions on the profits generated via the development of SEZs
- Section 80 IB of the Income Tax Act offers tax deductions on profits generated from theatres, cold storage plants, ships, convention centres, hotels, scientific research & development, etc.
- Section 80 IC of the Income Tax Act offers tax deductions to a resident of states falling under a select category. These states are Manipur, Himachal Pradesh, Tripura, Mizoram, Arunachal Pradesh, Nagaland, Uttarakhand, Assam and Meghalaya
- Section 80 ID of the Income Tax Act offers tax deductions on profits from hotels and convention centres, provided that the location of these businesses is in some specific regions.
- Section 80 IE of the Income Tax Act offers tax deductions to all individuals who have projects in North-eastern states in India, subject to several conditions
Section 80 JJA of Income Tax Act allows deductions on profits that have been generated from businesses related to processing or treatment on biodegradable waste to produce products like bio-pesticides, bio-fertilisers, biogas, etc.
Section 80 JJAA of the Income Tax Act offers deductions on profits generated on the sale of goods and products manufactured in factories. Under this section, companies can claim a deduction of up to 30% salary of new full-time employees for an assessment period pf 3 years. A Chartered Accountant must audit these accounts and present a report highlighting all the returns of the company be submitted.
Section 80 LA of the Income Tax Act allows Scheduled Banks that have offshore accounts in SEZs, Entities of International Finance Centres, and banks set up in foreign countries to claim tax deductions equal to 100% of the income for the first 5 years and 50% of the income earned by transactions for the next 5 years.
Section 80 P of the Income Tax Act offers tax deductions to cooperative societies under certain conditions. If these cooperative societies earn income from cottage industries, fishing, sale of agricultural harvest, production and sale of milk, etc., then these societies are eligible for tax deductions. It is important to note that all cooperative societies can claim the following tax deductions
- Income earned by renting the warehouses owned by the society
- Income earned in the form of interest on loans offered to other entities
- Income earned in the way of interest on properties or other securities
Section 80 QQB of the Income Tax Act allows Indian authors to claim tax deductions on royalties earned on the sale of books. Only Indian authors are eligible to claim this deduction, and the maximum amount that can be claimed is Rs. 3 Lakhs. Literary, artistic or scientific books are exempted from taxes whereas textbooks, journals, diaries, etc., are not considered eligible for tax exemption.
Section 80 RRB of the Income Tax Act allows Indian residents to claim tax deductions on income earned via royalty on their patent. They can claim up to Rs. 3 Lakhs as deductions. If you’re receiving a fee on patent from foreign countries, then that amount needs to be brought to the country within a specific time to be eligible for tax deductions.
Section 80 TTA of the Income Tax Act allows individuals taxpayers and Hindu Undivided Families (HUFs) to claim deductions of up to Rs. 10,000 every year on the interest earned on their investment in savings bank accounts within the country.
Section 80 U of the Income Tax Act allows individual local taxpayers with disabilities to claim tax deductions of up to Rs. 75,000 per year. These individuals will need to have a certificate of Person with Disability (PwD) issued by a medical authority as proof. In case of severe disabilities, you can claim deductions up to Rs. 1.25 Lakhs, subject to several conditions as set by the government.
Summary of Section 80 Deductions
|Section of Income Tax Act||Who can claim?||Maximum limit|
|80 C||Individuals & HUFs||Rs. 1.5 Lakh (80C + 80CCC + 80 CCD)|
|80 CCC||Individuals||Rs. 1.5 Lakh (80C + 80CCC + 80 CCD)|
|80 CCD||Individuals||Rs. 1.5 Lakh (80C + 80CCC + 80 CCD)|
|80 CCF||Resident Individuals & HUFs||Rs. 20,000|
|80 CCG||Resident Individuals||Rs. 25,000|
|80 D||Resident Individuals & HUFs||Rs. 20,000|
|80 DD||Resident Individuals & HUFs||Rs. 75,000 for general disability & Rs. 1.25 Lakhs for severe disability|
|80 DDB||Resident Individuals & HUFs||Rs. 60,000 for senior citizens & Rs. 40,000 for everyone else|
|80 E||Individuals||No specific limit|
|80 EE||Individuals||Rs. 3 Lakhs|
|80 G||All taxpayers||The limit depends on donation|
|80 GG||Individuals who don’t get HRA||Rs. 2000 every month|
|80 GGA||All taxpayers||The limit depends on donation|
|80 GGB||Indian companies||The limit depends on donation|
|80 GGC||All taxpayers||The limit depends on donation|
|80 IA||All taxpayers||No limit defined|
|80 IAB||All taxpayers||No limit defined|
|80 IB||All taxpayers||No limit defined|
|80 IC||All taxpayers||No limit defined|
|80 ID||All taxpayers||No limit defined|
|80 IE||All taxpayers||No limit defined|
|80 JJA||All taxpayers||All profits from the first 5 years|
|80 JJAA||Indian companies||30% of augmented income|
|80 LA||IFSCs, Scheduled Banks, Banks set up in foreign countries||A fraction of their income|
|80 P||Cooperative societies||A fraction of their income|
|80 QQB||Authors who are Indian residents||Rs. 3 Lakhs|
|80 RRB||Resident Individuals||Rs. 3 Lakhs|
|80 TTA||Individuals & HUFs||Rs. 10,000 per year|
|80 U||Resident Individuals||Rs. 75,000 for people with disabilities, Rs. 1.25 Lakhs for people with severe disabilities|
With a comprehensive understanding of all the tax deductions available to taxpayers under the Income Tax Act, reducing your taxable income is much easier. The key is to plan and start investing early. Understand the various sections and how they can affect your overall taxable income. By investing smartly and making the most of the exemptions available to taxpayers, you can ensure that you don’t end up paying more Income Tax than you have to. While filing for your Income Tax Returns, submit proof for all of the above sections that apply to you. All investments, premiums, expenditures, etc. if eligible, can be used to claim tax deductions. Many of our day to day expenses also qualify for tax exemptions. A lot of time, we miss out on claiming deductions on these due to a lack of knowledge. With the above list, you can quickly identify all the avenues where your income is spent, calculate the amount, and whatever fits in the categories mentioned above can be used to claim deductions.