List of Income Tax Deductions to save income tax from 2018-2019
There are several income tax deductions which a taxpayer can claim to save income tax. Some are applicable to salaried employees and some are applicable to business individuals. Many of us do not know some of the income tax saving options which we can claim every year. If you are looking for a comprehensive list of Income Tax Deductions to save income tax from financial year 2018-2019 onwards, this article is for you. This article also provides list of income tax deductions that be claimed in FY2018 along with the relevant IT section, eligibility and the maximum limits.
How the income earned are classified?
The income earned by an individual, HUF, firm or company can be classified into five categories:
1) Income from salary
2) Income from house property
3) Income from business and profession
4) Income from Capital gain
5) Other income
The sum total of income from these above heads is called as gross total income. From this gross total income, there are certain deductions that have been allowed by the law to be deducted from the gross total income. This article explains all these deductions in a simplified manner.
What are income tax deductions?
There are certain deductions that are specified under sections 80C to 80U. These deductions are claimed by an assessee to lower his taxable income and get some relief in tax. These deductions are subtracted from the gross total income.
List of Income Tax Deductions to save income tax from FY2018-2019
Here is the list of all the deductions which will be quite handy for the assessee and will help them with their tax-filing.
1) Section 80C – Tax exemption upto Rs 1.5 Lakhs
The maximum exemption that can availed u/s 80C, 80CCC together is Rs. 150,000. It can be availed only by individuals and HUFs. There are certain investments and expenditures which can be claimed in it:
Amount paid for Tuition fees for 2 children.
Amount contributed towards provident fund
The amount invested in NPS, Sukanya Samriddhi Account, Post Office Deposits, ELSS Mutual Funds.
5 years Senior Citizen Saving Scheme
Principal Repayment of home loan
5 years Tax saving Bank FDs
Premium paid towards Life insurance
Section 80CCC – any amount paid in any annuity of the LIC or any other insurance company for receiving pension from a fund.
The aggregate amount of all above investments can be claimed to a maximum of Rs 1.5 Lakhs. You can read complete details about 80C tax saving investment options and beyond here for more information.
2) Section 80CCD – Investment in Pension scheme – Tax exemption upto Rs 50,000
It includes contributions towards Government notified Pension schemes. The contribution can be maximum of 10% of the salary (for salaried individuals) and 20% of the gross income (for self-employed). The maximum amount that can be claimed is Rs 50,000. You can invest in National Pension Scheme, which is one of the most popular pension schemes.
3) Section 80D – Health Insurance Premium
This deduction is available to individual and HUF for the amount paid towards health insurance premium. The maximum deduction allowed is Rs. 25,000 for the premium paid for self, spouse or dependent children. One can even claim for the premium paid towards their parents also. The parents of spouse are not included in it. For senior citizens, this limit is Rs. 30,000. You should understand how to claim 80D – Health Insurance Premium from income tax.
4) Section 80DD – Medical expenses for disabled persons – up to Rs 1.25 Lakhs
This section deals with the medical expenses incurred on disabled persons which includes spouse, children, parents or siblings. You can claim up to Rs. 75,000 for 40% disability and Rs. 1,25,000 in case of severe disability.
5) Section 80DDB – Medical expenses for specific ailments upto Rs 40,000 (up to Rs 80,000 for Senior Citizens)
This deduction is allowed for the medical treatment of specific ailments. The amount of deduction is Rs. 40,000 or actual expenses incurred whichever is lower. In case of senior citizens, it is Rs. 60,000 and for super senior citizens, it is Rs. 80,000.
6) Section 80E – Interest on loan taken for higher education
This deduction pertains to the interest paid towards a loan obtained for pursuing higher education. There is no limit on the amount. There is no deduction for repayment of principal amount and it is allowed for maximum 8 years.
7) Section 24B – Loss from Self-Occupied House property / Let out property – Upto Rs 2 Lakhs
You can claim home loan interest on self occupied house property for tax exemption upto Rs 2 Lakhs. This limit is maximum of Rs 2 Lakhs and not per home. Unclaimed loss (if any) can carry forward and set-off in next 8 financial years.
7) Section 80EE – First time home buyers – Rs 50,000 additional exemption
This section has been recently introduced by the government for those who are first time home buyers and have obtained their home loan during or after F.Y. 2016-17. The value of the house should be less than Rs. 50 Lakh and home loan should be below Rs 35 Lakhs. Such home buyers can claim an additional deduction up to Rs. 50,000 on home loan interest payments. You can read more about section 24 and Section 80EE where you can claim tax exemption on home loans here.
8) Section 80G – Donations
Payments made to certain relief funds and certified charitable institutions are claimed under this section. Any donations made to registered institutions are exempted for 50% or 100% limit as per prescribed.
9) Section 80GGC – Donations to political parties
Any donations made to political parties can be claimed under this section. From the financial year 2017-18 onwards, it has been ruled out that donations made above Rs. 2,000 cannot be in cash mode.
10) Section 80GG – Claim in lieu of not having own house and do not receive HRA
This deduction pertains to those who do not possess a residence of their own and does not receive House Rent Allowance (HRA). It is in respect of expenditure made towards rent. The maximum amount claimed under this section is Rs. 60,000. The deduction will be least form the following-
a) Rent paid minus 10% of the adjusted total income
b) Rs 5,000 per month
c) 25% of the total income
11) Section 80QQB – Exemption to claim royalty income by authors
It is related to the income in respect of royalty income of authors.
12) Section 80RRB – Exemption to claim royalty of patents
It pertains to the deduction in respect of royalty of patents.
13) Section 80TTA – Deduction for SB Interest up to Rs 10,000
It provides a deduction up to Rs. 10,000 on aggregate to an assessee (being an individual or HUF) in respect of any income by way of interest on deposits in a saving A/c.
14) Section 80U – Exemption for specific disabilities
This deduction is availed by only those individuals who are suffering from some disability of some kind of not less than 40%.
15) Rebate under section 87A – Rs 2,500
Additional tax benefits of Rs 2,500 has been provided to those taxpayers whose net income is less than Rs. 350,000.
Conclusion: In the context of salaried individuals, all his exemptions and deductions are furnished by him to his employer. On the basis of this information, form 16 is prepared by his employee and he files his taxes. In case, he forgets to furnish any information to his employer, he can claim the deduction at the time of filing of income tax return under chapter 6A.
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List of Income Tax Deductions that can be claimed from FY2018-2019