Deductions Under Section 80 of the Income Tax Act

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Introduction –

Taxes are a primary source of funds for the Government.

Besides the basic exemption limit, one can avail additional deductions. You need to invest in specified securities in order to take advantage of these additional deductions. In this article, we mention these specified securities, along with the relevant sections, their feature, their advantages and disadvantages.

Deduction Under Section 80C

The most widely known deductions fall under this section. You can get deductions in respect of Investments/Payments made towards

  1. Life Insurance Policies (LIC) for self, spouse or children
  2. Public Provident Fund (PPF)
  3. Employee’s Provident Fund (EPF)
  4. 5 Year Bank or Post Office Tax Savings Deposits
  5. Equity Linked Savings schemes (ELSS)
  6. National Savings Certificate
  7. Tuition Fees paid [for education of maximum 2 children]
  8. Sukanya Samriddhi Account Deposit Scheme
  9. Construction/ Purchase of new residential property [Principal Only]
  10. Stamp Duty charges for purchase of new house
  11. National Pension Schemes (NPS)

Only an individual and an HUF can opt for deductions under this section. Hence if you are an entity other than an  individual or an HUF, these deductions cannot be claimed. Also, note that the maximum deduction allowed under section 80C is Rs.1,50,000/-.

Additional Deduction under Section 80CCD

Avail Another Rs.50,000/- over the limit of Rs 1,50,000/- for payments made to the NPS scheme. Employees can contribute to the NPS scheme, where the maximum contribution can be up to 10% of the salary [basic + DA]. If the employer also contributes to the pension scheme, the entire contribution can be claimed as deduction [maximum up to 10% of salary]. For the self employed, upto 20% of the gross income [10% upto FY16-17]. Contributions to Atal Pension Yojana are also eligible for deduction. Note that only individuals can claim a deduction under section 80CCD.

Section 80CCC

Section 80 CCC of the Income Tax Act allows for tax deductions on investment in pension funds. To be more specific, the amounts paid or deposited in any annuity plan of LIC or any other insurer. These pension funds could be from any insurer. Only Individual can claim this deduction. If the annuity is surrendered before the date of its maturity, the surrender value is taxable in the year of receipt.

Section 80CCG

Section 80CCG of the Income Tax Act is commonly known as the Rajiv Gandhi Equity Savings Scheme. This section permits a maximum deduction of Rs 25,000 per year, with specified individual residents eligible for this deduction. Investments in equity savings schemes notified by the government are permitted for deductions, subject to the limit being 50% of the amount invested. THIS SCHEME IS NO LONGER ACTIVE AND NO DEDUCTIONS ARE AVAILABLE FROM FY17-18.

Section 80 D

Section 80D provides for deduction on accounts of payment of mediclaim premiums.

Section 80 G – Deductions in respect of certain funds, charitable institutes

Certain donations made are allowed as a deduction from the total income under section 80G. Either 100% or only 50% are allowed as deduction. No donation above Rs. 2,000/- made in cash will be allowed as a deduction [earlier Rs. 10,000/- upto FY 16-17]. See the list of funds where such deductions can be availed.

 

Section 80TTA

Under this section, a deduction of up to Rs. 10,000/- can be availed for interest income received from the bank. The interest income should be from a savings account from a bank [or a post office]. Only individuals and HUFs can claim any deductions under this section. Interest received from fixed deposits are not allowed as a deduction. Similarly, accounts held on behalf of firm, an AOP (association of persons), or a BOI (Body of Individuals), no deduction is available.

 

List of funds eligible for deduction  u/s 80G –

Where 100% deduction is available

  1. National Defence Fund set up by the Central Government
  2. Prime Minister’s National Relief Fund
  3. National Foundation for Communal Harmony
  4. An approved university/educational institution of National eminence
  5. Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
  6. Fund set up by a State Government for the medical relief to the poor
  7. National Illness Assistance Fund
  8. National Blood Transfusion Council or to any State Blood Transfusion Council
  9. National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
  10. National Sports Fund
  11. National Cultural Fund
  12. Fund for Technology Development and Application
  13. National Children’s Fund
  14. Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
  15. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh
  16. Chief Minister’s Cyclone Relief Fund, 1996
  17. The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6,1993
  18. Chief Minister’s Earthquake Relief Fund, Maharashtra
  19. Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
  20. Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001) or
  21. Prime Minister’s Armenia Earthquake Relief Fund
  22. Africa (Public Contributions — India) Fund
  23. Swachh Bharat Kosh (applicable from
  24. financial year 2014-15)
  25. Clean Ganga Fund (applicable from financial year 2014-15)
  26. National Fund for Control of Drug Abuse (applicable from financial year 2015-16)

Where 50% deduction is allowed –

  1. Jawaharlal Nehru Memorial Fund
  2. Prime Minister’s Drought Relief Fund
  3. Indira Gandhi Memorial Trust
  4. The Rajiv Gandhi Foundation

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