All about Tax Deductions

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You can reduce your tax liability by claiming deductions under different heads against different savings, investments and expenses

 

Deduction is the reduction that you can claim under different heads to cut your tax liability, thereby reducing the income tax you pay.

Section 80C
Section 80C offers a window of investment opportunities on up to Rs 1 lakh investment in each financial year. This benefit is available to everyone, irrespective of their income levels. For instance, if you are in the highest tax bracket of 30 per cent, the investment of Rs 1 lakh under this section will save you Rs 30,000 each year. The various financial products that qualify for Section 80C benefits are as follows:
* Life Insurance premium payment
* Home loan principal, wherein the principal portion of the home loan EMI qualifies for deduction under Section 80C
* Employees Provident Fund (EPF) where 12 per cent of your salary is deducted every month and an equal amount is contributed by your employer and put into a fund maintained by the government or your company's provident fund trust. Only your contribution towards the fund is eligible for deduction from taxable income of the basic salary towards EPF
* Tuition fees up to children can be claimed for. However, any payment towards any development fees or donation to institutions is excluded
* Contributions to the public provident fund
* Investments in the senior citizens savings scheme
* Savings in notified term deposits in scheduled banks with a minimum period of five years under the bank term deposit scheme, 2006. Savings in post office time deposits with 5-year lock-in
* National Savings Certificate, six-year government-backed security available at post offices
* Investments in tax planning mutual funds, popularly known as Equity-Linked Savings Scheme (ELSS)
* Investments in pension plans

Other Deductions

* Section 80D: Premium payments towards medical insurance for self, spouse, children and parents qualify for deduction. The limit is Rs 15,000 for self, spouse and dependent children up to Rs 15,000. Additional deduction up to Rs 15,000 for the parents going up Rs 20,000 if the parent, for whom the policy is bought is aged 60 years. Preventive health check-ups up to Rs 5,000 within limits qualify for tax deductions under section 80D.

* Section 24: Interest on home loan with a maximum deduction of Rs 1.5 lakh as interest payment on home loan for self-occupied property and unlimited for property that is let out.

* Section 80E: Interest on educational loan qualifies for deduction on full-time studies for any graduate or post graduate course. However, there is no benefit on principal repayments.

* Section 80G: Donations to funds and charities from 50 or 100 per cent of the donated amount, depending on the charity, is deductible from income. But this shouldn't exceed 10 per cent of your gross total income.

* Section 80DD: Deduction up to Rs 50,000 or Rs 1 lakh on the medical treatment of a dependent with a disability, certified by a medical authority.

* Section 80DDB: Deduction up to Rs 40,000 for assessee under 65 years and Rs 60,000 for senior citizens on costs incurred for treatment of specified illnesses such as malignant cancer, chronic renal failure, Parkinson's disease and other listed diseases.

* Section 80CCG: Investment in RGESS.

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