Income Tax Deductions & Exemptions under Sections 80C, 80D & 80DDB for FY 2020-21 & 2021-22

• 1st Jun 2019
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Income tax filing is one of the most important task for every Indian citizen, be it a salaried individual or a businessman. In the light of this, every year, the Finance Ministry of India roles out a budget that explains the dos and don’ts of IT deductions. At the same time, every citizen is confused about making an investment that will help them to save some taxes.

Although, this might seem that everyone has to pay some amount of tax every year, there are a few ways by which you can save the taxes or get a rebate. There are tax saving investment options like PPF, EPF, and others which are commonly used and they give you tax exemption under section 80C. Similarly, there are other such sections that can help you save taxes, but you might have not have heard of.

In this article, we will help you understand the tax exemptions that you can claim under Section 80C, 80D and 80DDB.

Income tax is a percentage of income that is paid to the government by the taxpayers for the betterment of the public in general.

Income Tax Exemptions for Salaried Employees 2020 – 21

As per the new tax regime, the tax rates for all the categories are the same. This includes individuals and HUF below 60 years of age, senior citizens or those above 60 years of age and super senior citizens or those above 80 years of age. Therefore, there has been no increase in the basic exemption limit benefit for senior and super senior citizens.

Taxpayers now have two options – they can either take up the new tax regime and choose to pay income tax at lower rates without a few income tax exemptions and deductions. Or, they can choose to continue with the old tax regime, pay higher rates but avail certain deductions and exemptions.

However, there are a few deductions that are allowed under the new tax regime. They are as follows:

· Specially-abled individuals can avail transport allowance, which is considered as a deduction.
· The expenses incurred while travelling to work will be considered as conveyance allowance.
· Under Section 80CCD (2), investment in the NPS or Notified Pension Scheme will be a deduction.
· Under Section 80JJAA, there are deductions available for newly appointed employees.
· Depreciation of assets (machinery) under Section 32, excluding additional depreciation.
· Expenses incurred by employees being transferred or travelling for employment purposes.

There are a total of 70 exemptions and deductions that are not a part of the new tax regime. The most common exemptions under this list include –

· Professional tax
· House Rent Allowance (HRA)
· Children education allowance
· Leave Travel Allowance (LTA)
· Daily expenses incurred during employment
· Relocation allowance
· Conveyance allowance
· Interest on housing loan under Section 24
· Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD (2))
· Other special allowances [Section 10(14)]
· Helper allowance
· Standard deduction on salary

Income Tax rates for individuals below 60 years of age (Income Tax Exemption of 2.5 lakh)

Income Tax rates for individuals above 60 years but less than 80 years of age (Income Tax Exemption of 3 Lakh)

Income Tax rates for individuals above 80 years of age (Income Tax Exemption of 5 Lakh)

Income Tax deduction chart for individuals above 80 years of age (Income Tax Exemption of 5 Lakh)

Additionally, there is a surcharge of 10% in case the total income exceeds INR 50 lakh and a surcharge of 15% in case the total income is more than INR 1 crore. There is also an education cess of 3% applicable over and above the surcharge.

The income tax exemption limit for all individuals below 60 years is Rs 2.5 lakh, for individuals between 60 years and less 80 years than Rs 3 lakh and for individuals above 80 years is 5 lakh

Every individual is eligible for a deduction on the amount of income invested in specific securities. We have listed down all the deductions for FY 2019-20, which will help you prepare your income tax returns easily and make the most of the available tax deductions.

Here is a list of income tax deductions for FY 2019-20 and AY 2020-21 as per various sections of the Income Tax Act, 1961:

1. Income Tax Deduction under Section 80C

This is the most important section for deductions for every taxpayer. The maximum exemption limit in the section is INR 1.5 lakh. There are various avenues like PPF, EPF, term insurance, NPS, etc that could be claimed under section 80C. Below is the complete list:

• Public Provident Fund
• National Savings Certificate
• National Pension Scheme
• Employees’ Provident Fund
• Tuition fees
• Post Office tax saving deposits of five year
• Bank deposit
• Life Insurance Premium
• Equity Linked Saving Schemes
• Principal repayment of home loan
• Sukanya Samriddhi Account Deposit Scheme
• Post Office Senior Citizens Savings Scheme
  

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2. Income Tax Deduction under section 80CCC

This section allows a maximum deduction of ₹1.5 Lakh, and it includes the contribution made to the annuity plan of a life insurance provider for the purpose of obtaining a pension from the fund.

3. Income Tax Deduction under section 80CCD

This section includes the contribution to the Atal Pension Yojana and allows a deduction of a contribution up to 10% of the total salary of salaried employees and 20% of the gross income of non-salaried to the government-notified pension schemes. The contribution can be deducted from the taxable income under Section 80 CCD (1). In case the employer contributes to the scheme as well, the entire contribution amount can be claimed as a tax deduction under Section 80CCD (2).

It is important to remember that the complete deduction under Section 80C, Section 80CCC and Section 80CCD (1) cannot exceed ₹1.5 Lakh in aggregate. The additional tax deduction amounting to ₹50,000 under Section 80CCD (1B) is above this limit.

4. Income Tax Deduction under Section 80D

Income Tax Deduction under section 80D is for the premium paid for Medical Insurance. This section allows deductions on the health insurance premium paid by an individual or HUF. You can claim a deduction of ₹25,000 for self, spouse and dependent children and an additional deduction for insurance of parents of less than 60 years of age, is up to ₹25,000. If parents are above the age of 60 can seek a deduction of ₹50,000, which was increased in Budget 2018 from ₹30,000.

And if both the taxpayer and parent(s) are above 60 years of age, then the maximum deduction under section 80D is up to ₹1 Lakh. .

5. Income Tax Deduction under Section 80DD

An amount of ₹75,000 may be claimed as a deduction for spending on medical treatments of dependents with a 40% disability. This limit is ₹1.25 Lakh in case of severe disability. .

6. Income Tax Deduction under Section 80DDB

Deduction for Medical Expenditure on Self or Dependent Relative.

• Deduction for Medical Expenditure for individuals and HUFs below age 60:
• Income Tax Deduction under Section 80DDB a deduction up to INR 40,000 is available an individual or a HUF who are below 60 years of age. It is for any expenses towards treatment of specified critical ailments for self and dependents.
• Deduction for Medical Expenditure for senior citizens and super senior citizens:
  
• Previously for FY 2017-18, the limit was INR 60,000 for senior citizens and INR 80,000 for super senior citizens. Now it has been changed to INR 1 Lakh for all the senior citizens including super senior citizens.
  

7. Income Tax Deduction under Section 80CCG

This section which offered the tax benefits of the Rajiv Gandhi Equity Savings Scheme has been withdrawn, but if an individual has claimed a deduction in FY 2016-17, you are eligible to continue with the same for the next two financial years.

8. Income Tax Deduction under Section 24B

This section allows individuals to claim a deduction for the loss under the head ‘Income from House Property. It allows a tax benefit on the repayment of the loan of a second house up to ₹2 Lakh. The unclaimed amount of loss may be carried forward for eight years and set off against house property income. Additionally, any interest paid on the housing loan is eligible for a tax benefit. Municipal taxes, interest paid on loans taken for the house, and 30% of the net annual income are allowed as a deduction .

9. Income Tax Deduction under Section 80E

Interest on loan paid for education is eligible for Section 80E. Please note that principal repayment on a loan cannot be claimed as a deduction. The loan should have been taken for yourself, your children, and your spouse or for an individual for whom you are a legal guardian. There is no limit on the amount of interest that can be claimed as a deduction.

10. Income Tax Deduction under Section 80EE

Individuals buying a home for the first time may claim an additional deduction of ₹50,000 on the home loan interest paid. This includes a clause that the loan should be sanctioned in or after FY 2016-17, and the loan amount should be less than ₹35 Lakh. Furthermore, the value of the house should not exceed ₹50 Lakh, and the individual should not own any other residential house under his name.

11. Income Tax Deduction under Section 80EEA

Section 80EEA allows a deduction for interest payments up to ₹1.5L. This deduction is over and above the deduction of ₹2 Lakhs available under section 24. An individual should not own any house on the date of the sanction of a loan to claim this deduction.

12. Income Tax Deduction under Section 80G

Section 80G includes all the contributions made to charitable institutions and relief funds. The contribution should be made through cheque, cash or via draft. The amount of deduction eligible is ₹2,000. Moreover, for donations made to political parties, the same deduction could be claimed under 80GGC.

13. Income Tax Deduction under Section 80GG

The deduction amount for this section is ₹60,000 per annum, and the section is applicable to only those who neither have the ownership of a residential house nor receive a house rent allowance. The amount of deduction will be the least of the following:

• 25% of the total income
• 5,000 per month
• An amount of 10% of the adjusted total income deducted from the rent paid

14. Income Tax Deduction under Section 80TTA

This section allows a deduction of ₹10,000 from the total gross income of individuals or Hindu Undivided families. The deduction is allowed for the interest earned on the deposits made in a savings account in a bank, cooperative society or a post office. However, the deduction will not be applicable for the interest earned from fixed deposits in the bank. .

15. Income Tax Deduction under Section 80U

This section allows a deduction to individuals who are physically and mentally challenged.

Income Tax Exemptions for Salaried Employees 2021-22

Here is the income tax exemption list 2021-22:

1.House Rent Allowance

2.Standard Deductions

3.Leave Travel Allowance (LTA)

4.Mobile reimbursement

5.Books and Periodicals

6.Food coupons

7.Relocation allowance

8.Children Allowances

9.Allowable Deductions as per Section 80C, 80CCC and 80CCD(1)

It is advisable to plan the investment in advance in order to avoid the last-minute hassles. In case you are unable to invest in the right products, you would have to pay the entire tax depending on your income. The above list of income tax deductions will help you in tax planning and achieving your financial goals.

- A Consumer Education Initiative series by Kotak Life