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Tax deduction is the reduction of income that is able to tax from tax payers gross income (Gross income is an individual’s income and receipts from nearly all sources include salary, wages, tips, capital gains, dividends, interest, rents, pensions and alimony). By reducing the total taxable income tax deductions can reduce the amount of income tax you would have otherwise owed. Most commonly, a tax deduction is a result of some business expense, as Government encourages people to participate in activities that have a greater societal benefit like making charitable donations, opting for more environmentally friendly purchases and even savings for retirement.
Tax deduction or tax – deductible is often mistaken as a tool used only by the rich and famous. But the matter of the fact is there are plenty of tax deductions available for the middle and lower income families. Some common tax deductible items are health insurance premiums, charitable gifts and donations, and repaid the mortgage or student loan interest.
Deductions on Section 80C, 80CCC & 80CCD for financial year 2016-17
|Section 80C||Section 80CCC||Section 80CCD||Section 80 TTA|
|Section 80GG||Section 80E||Section 80EE||Section 80CCG|
|Section 80D||Section 80DD||Section 80DDB||Section 80U|
|Section 80G||Section 80GGB||Section 80GGC||Section 80RRB|
Benefits of Tax Deduction
• Tax deduction can help reduce the amount from taxable income and save tax.
• Through tax deduction, one can save and invest in other areas.
• One can claim a deduction in vital platforms of expenditure such as house property, tuition fees, medical expenses, and charitable contributions.
• As paying tax is mandatory, one can plan and reduce the taxable income.
List of Some Tax Deductions to Save Taxes
1.Income Tax Deduction Under Section 80 C
Deduction under Section 80 C is the most popular income tax deduction, which is for certain specified instruments. Some examples of these specified instruments:
• Tax Saving Mutual Fund
• Tax Saving Fixed Deposit
• Repayment of Principal on Housing Loan
• Premium on Life Insurance Policy
• Equity Oriented Mutual Funds
• Contribution to Employee Provident Fund
2.Income Tax Deduction Under Section 80 CCC and 80 CCD
Section 80 CCC deals with a tax deduction on annuity plans from the insurance companies. Under this section, the overall tax deduction limit is Rs. 1.5 lakh per year. Any tax payer, who invested in an annuity plan offered by any insurance company, can claim this tax deduction of Section 80 CCC. Section 80 CCD provides a tax deduction to someone who has made contributions to the National Pension Scheme (NPS). Any individual tax payer, salaried or self – employed can claim deductions under this section.
3.Income Tax Deduction Under Section 80 TTA for Interest on Savings Account
Interest one receives on their savings account is actually taxable. However, Government is constantly encouraging its citizens to make small savings hence; there are tax benefits on the basic savings account as well.
• One can claim exemption up to Rs. 10,000 received as interest on the savings account deposits.
• A savings account can be in a bank, Cooperative society, Post office.
4.Income Tax Deduction Under Section 24
The Government recognizes Housing Property to be one of the most important assets and many investments towards the first home are exempted from tax payment.Any tax payer taken any home loan can claim a tax deduction for the interest levied on such loan.
5.Income Tax Deduction Under Section 80 CCG
There are Government schemes which help individuals save tax. One such tax deduction is Rajiv Gandhi Equity Savings Scheme. In this scheme deduction allowed would be 50% of the amount invested subject to a maximum of Rs. 25,000 only.
6.Income Tax Deduction Under Section 80 D
Section 80 D of Income Tax deals with a tax deduction on medical insurance. Health insurance paid for the following members are eligible for deductions:
• Also, Hindu Undivided Families can claim deductions under this section.
7.Income Tax Deduction Under Section 80 DD and Section 80
Under this section, People with a disability may now be provided some help through the income tax deductions. Section 80 DD serves an individual who himself is disabled. Section 80 U serves any dependent family member of the individual who is disabled.
8.Income Tax Deduction Under Section 80 DDB
Section 80 DDB is for individual or any of his dependents is being treated for any specified disease, would be allowed for deduction under section 80 DDB.
9.Income Tax Deduction Under Section 80 E
An individual is allowed under section 80 E for repayment of Interest on Home Loan took for the Higher Education of Self, Spouse or Dependent Children.
10.Income Tax Deduction Under Section 80 G, 80 GGA, 80 GGB, 80 GGC
If an individual has made a donation during the financial year to any approved body, he shall be allowed the deduction of the same.
11.Income Tax Deduction Under Section 80 GG
An individual who paid house rent and has not claimed income tax deductions for the rent paid under any other sections of the income tax act, he can claim a deduction under Section 80 GG.