Through efficient tax management system, you save your taxable income under different sections of Income Tax Act. Here are details related to Section 80 of the Income Tax Act.
Paying tax on your earned income is necessary, but the Income Tax Act also allows you certain deductions and exemptions from your taxable income. These deductions and exemptions lower your taxable income and consequently your tax liability. These deductions can be found in Chapter VI of the Income Tax Act. Various sub-sections under Section 80 deal with the tax-free investments and incomes. Let’s unravel these sections.
Section 80C, 80CCC and 80CCD
This is the first and the most popular tax-saving section in the whole gamut of sections. Under this section, you can claim a deduction of up to INR 1.5 lakhs using various avenues. The popular exemptions under this section include the following:
- Public Provident Fund contributions
- Life insurance premiums
- Investment in an ELSS scheme
- Investment in 5-year fixed deposits or 5-year post office deposits
- National Saving Certificates
- Senior Citizen Saving Schemes (SCSS)
- Sukanya Samriddhi Scheme
- Tuition fees paid for two children
- Principal repayment of a home loan
- Stamp duty and registration charges paid for a house property
- Infrastructure bonds
- NABARD rural bonds and so on
Premiums you pay for a life insurance pension plan qualify for deduction under Section 80CCC. Employee’s contribution to EPF qualifies for tax exemption under Section 80CCD (1). The maximum contribution is limited to 10% of salary or 10% of total income, whichever is lower. If, however, you are self-employed, the maximum deduction that is allowed is 20% of your gross salary. The total contribution or investment under any one or more of these avenues (80C, 80CCC and 80CCD), which is tax-free, is limited to INR 1.5 lakhs.
Section 80CCD (1B) and 80CCD (2)
Under Section 80CCD (1B), if you invest in the National Pension Scheme (NPS), you get an additional deduction of INR 50, 000 from your taxable income. This deduction is over and above the INR 1.5 lakh deduction available under 80C, 80CCC and 80CCD. Furthermore, if your employer also contributes up to 10% of your salary towards the NPS scheme, you can claim an additional deduction for the employer’s contribution under Section 80CCD (2). Your employer’s contribution has no absolute monetary limit. It is limited to 10% of your salary.
Premiums paid for a health insurance plan qualify for tax-exemption under Section 80D. If you pay the premiums for yourself and your family (spouse and dependent children), you can avail a maximum exemption of up to INR 25, 000. If, however, you are a senior citizen, the limit increases to INR 30, 000. Furthermore, if you pay premiums for a separate plan for your parents, you get an additional exemption of INR 25, 000. This limit also increases to INR 30, 000 if your parents are senior citizens. So, in all, you can claim a maximum deduction of up to INR 60, 000 from your health insurance premiums.
If you have a saving account with a bank, co-operative society or a post-office, you can get tax exemption on the interest earned from the account. The maximum amount of exemption is limited to INR 10, 000 per year from all saving accounts put together.
If you avail an education loan for self, spouse or children, the interest payable for the loan is exempted from tax. There is no limit on the amount of interest paid, but the exemption is available for a maximum of 8 years from the date of loan repayment.
A deduction under Section 80GG is available for employees who are living in rented accommodations if their salary has no HRA component. The available deduction is lower of INR 5000 per month or 25% of total income or (rent paid: 10% of total income).
This section allows the deduction to individuals and HUFs for rehabilitation expenses of a handicapped-dependent relative. The expenses can be incurred for treatments, training and rehabilitation of handicaps. If the handicap is more than 40% but below 80%, a fixed deduction of INR 75,000 is allowed. For severe disabilities which are above 80%, the deduction is INR 1.25 lakhs and you have to avail a certificate from the prescribed medical authority certifying the disability.
There are specified diseases and ailments mentioned in Rule 11DD. If you or your dependent relatives suffer from these specified ailments, you get a tax exemption on the expenses incurred on treating them. The exemption allowed is the actual cost incurred up to a maximum of INR 40,000. If the patient’s age is 60 years and above, the limit is increased to INR 60,000. For senior citizens aged 80 years or more, the exemption limit is up to INR 80, 000. Some common diseases under Rule 11DD include cancer, AIDS, and so on.
If you are suffering from a physical disability as per Rule 11A, you can claim a deduction of INR 75,000. In case of severe disabilities, the deduction available is INR 1.25 lakhs. This is a fixed deduction which does not depend on the actual cost of treatments.
This section allows tax deductions for charitable donations. The donations are specified in the section, and when you donate towards the specified causes, you get a 50 or 100% tax exemption on the amount donated. Cash donations up to INR 2,000 are allowed as deductions. For higher amounts, the donation should be through a cheque to qualify for the deduction.
Section 80GGB and 80GGC
If a company contributes any amount through a cheque to a political party or an electoral trust, the contribution is tax-free under Section 80GGB. For individuals, Section 80GGC is applicable.
If you receive an income through a royalty or a patent, the income is tax-free under Section 80RRB. The tax-free limit is INR 3 lakhs or the income received, whichever is lower.
You can use these deductions for lowering your taxable income. From your gross total income, the various deductions are deducted to arrive at your net taxable income. From this income, thereafter, your tax liability is calculated. Thus, the different sections of Section 80 help in lowering your tax liability. Learn about these sections and claim tax exemptions.
Note: Insurance plans are subject to changes in taxation laws