You are on page 1of 4

Indian Income Tax deductions, Tax exemption limits

Financial year 2008/2009 (will be updated later for 2009/2010)

Income Tax Deductions Maximum deduction allowed


Explaination Remarks

Income Tax deduction - Section 80C Maximum tax deduction


Provident Funds, Life Insurance premia, or tax exemption limit:
ELSS, Bank deposits (>5 yr.), tution fees, Rs. 1,00,000
principal part of EMI on housing loan, etc.

Maximum tax deduction or


tax exemption limit:
Income Tax deduction - Section 80D Rs. 15000
Premium in health insurance of you, your (tax exemption limit
spouse, children or dependent parents for senior citizen is
Rs. 20000)
Maximum tax deduction
Income Tax deduction - Section 80DD or tax exemption limit:
Medical treatment (including insurance) of Rs. 50000.
disabled dependent (Rs. 75000 if disability is severe,
e.g. >80%)

Income Tax deduction - Section 80E Maximum tax deduction


Interest paid on educational loan taken for or tax exemption limit:
higher education of you, your spouse or no limit !
children.

Maximum tax deduction


Income Tax deduction - Section 80GG or tax exemption limit:
House rent in excess of 10% of income, if no Rs. 2000 per month or 25% of your gross
HRA is received. salary, whichever less.

Maximum tax deduction


Income Tax deduction - Section 24 or tax exemption limit:
Interest paid on housing loan. Rs. 1,50,000

Maximum tax deduction


or tax exemption limit:
Income Tax deduction - Section 80G 100% of donation amount for special
Donations funds(see below), 50% of donation amount
for all other donations.

Indian Income Tax deduction - Section 80C


Section 80C of Indian Income Tax Act is the most popular because it is directly
related to tax deductions for your monthly savings or life insurance. In financial
years 2008/2009 and also in 2009/2010 the maximum income tax deduction
allowed under section 80C is 1,00,000. The following is a list of important ways in
which a taxpayer can get benefit of section 80C of Indian Income Tax Act.

1. Provident Fund (PF): Any contributions to Provident Fund, Voluntary


provident Fund (VPF) or savings made in Public Provident Fund (PPF
Account) are eligible for income tax deduction under section 80C of Indian
Income Tax Act.
2. Life Insurance Premiums: Any Life Insurance premiums (for one or more
insurance policies) paid by you for yourself, your spouse or your children
is eligible under income tax deduction under section 80C of Indian Income
Tax Act.
3. ELSS Equity Linked Saving Schemes: Any investment made in certain
Mutual Funds called equity linked saving schemes qualifies for section
80C deduction. Please note that not all mutual fund investments are
eligible for this deduction. Some examples of ELSS funds are
: SBI Magnum Tax Gain, HDFC Tax Saver, HDFC Long term advantage,
etc.
4. ULIP (Unit Linked Insurance Plan): Investments made in certain ULIPs
of Unit Trust of India and LIC of India are eligible for 80C deduction.
5. Bank Fixed deposits or Term deposits of >5 years: According to a
relatively new provision amount saved in fixed deposits of term at least
five years is eligible for income tax deduction under section 80C of Indian
Income Tax Act.
6. Principal part of EMI on Housing Loan: If you are paying EMI on a
housing loan, note that the EMI (equated monthly installments) consists of
two parts - principal part and interest part. The principal part of the EMI on
your housing loan is eligible for income tax deduction under section 80C.
Note that the interest part is also eligible for tax deduction, however not
under section 80C but section 24. (read below). If you do not own a house
but pay rent for it, see section 80GG of Indian Income Tax Act below.
7. Tuition Fees: Amount paid as tuition fee for the education of two children
of the assessee is eligible for deduction under section 80C of Indian
Income Tax Act.

8. Other 80C deductions: Amount saved in National Saving Certificate


(NSC), Infrastructure Bonds or Infra Bonds, amount paid as stamp duty
and registration charges while buying a new home are eligible for income
tax deductions under section 80C of Indian Income Tax Act.
Indian Income Tax deduction - Section 80D:
Section 80D of Indian Income Tax Act is especially useful if your employer does
not cover your health or medical expenses. It is a good idea to get medical
insurance or health insurance for you, your spouse, dependent children or
dependent parents, as you can claim a deduction of upto Rs. 15000/- per anum
for the premia paid on this insurance. For senior citizen this limit is Rs. 20000.
With effect from 1-4-2009, you can claim the total of the following items for
deduction under section 80D.
1. Total amount of premium paid for health insurance of family (meaning
spouse + children), or Rs. 15,000 , whichever less.
2. Total amount of premium paid for health insurance of your parents or Rs.
15,000, whichever less.
Thus if you are paying premiums of mediclaim policies for your spouse children
and parents you can get a total tax deduction of upto Rs. 30,000.

Indian Income Tax deduction - Section 80DD


Section 80DD of Indian Income Tax Act provides provision for tax deduction if
you incurred medical expenditure for a dependents who are disabled. Here
dependent means spouse, children, brothers, sisters or any one of them. The
maximum tax deduction provided by section 80DD is Rs. 50000 in case of
ordinary disability and Rs. 75000 if the disability is severe. The definition of
severe disability is as defined in the official page of Indian Income tax Act.

Indian Income Tax deduction - Section 24:


Whenever you take a housing loan build or buy a new home, the interest payable
on this home loan is eligible for income tax deduction under section 24.
Maximum deductible amount, i.e. maximum interest you can claim for income tax
deduction under section 24 is Rs. 1,50,000. In case you are paying interest on
money borrowed for renovation of your home, even this may qualify for tax
deduction under section 24 of Indian Income Tax Act.

Indian Income Tax deduction - Section 80GG:

If you pay rent for the house that you are staying in and do not get HRA, any rent
you pay in excess of 10 percent of your salary is eligible for income tax deduction
under section 80GG of Indian Income Tax Act. The income tax deduction you
can claim is the minimum of the following amounts.
1. Rent you pay minus 10% of your salary.
2. 25% of your gross total income.
3. Rs. 2000/- per month.

Indian Income Tax deduction - Section 80E


Under section 80E of Indian Income Tax Act, any amount of interest paid on
educational loan taken for your higher education or higher education of your
husband / wife or children is deductible from your taxable income. Here higher
education means - studies for any graduate or post-graduate course in
engineering, medicine, management or for post-graduate course in applied
sciences or pure sciences including mathematics and statistics.

Indian Income Tax deduction - Section 80G:


Donations made to funds like Prime Minister's Relief Fund, National Children
Foundation, any University or educational institution of 'national eminence', etc.
(see official page for complete list) are deductible from your taxable income
according to section 80G of Indian Income Tax Act. For any other donations you
are eligible to take income tax deduction for 50% of the donation amount.