Guide to Tax Deductions and Exemptions in India

Posted on May 31, 2024 in Law & Jurisprudence

Tax Deductions under Chapter VI-A

Section 80C

  • Investment in PPF (Public Provident Fund)
  • Premiums paid for life insurance
  • NSC (National Savings Certificates)
  • ELSS (Equity Linked Savings Scheme)
  • Home loan principal repayment
  • Children’s tuition fees
  • Fixed deposits for 5 years or more with banks and post offices
  • Sukanya Samriddhi Yojana deposits
  • Senior Citizen Savings Scheme

Section 80CCC

  • Contributions to certain pension funds: Deduction for premium paid for annuity plans of LIC or other insurers.

Section 80CCD

  • 80CCD(1): Employee’s contribution to the NPS (National Pension System) up to 10% of their salary (for salaried individuals) or 20% of their gross total income (for self-employed individuals), subject to a maximum limit of Rs 1.5 lakh.
  • 80CCD(1B): An additional deduction of Rs 50,000 for contributions to NPS.
  • 80CCD(2): Employer’s contribution to NPS up to 10% of the employee’s salary.

Section 80D

  • Premiums for health insurance:
    • For self, spouse, and children: Up to Rs 25,000 (Rs 50,000 for senior citizens).
    • For parents: Up to Rs 25,000 (Rs 50,000 for senior citizens).

Section 80DD

  • Deduction for maintenance including medical treatment of a dependent who is a person with a disability:
    • Rs 75,000 for normal disability.
    • Rs 1.25 lakh for severe disability.

Section 80DDB

  • Deduction for medical treatment of specified diseases for self or dependent:
    • Up to Rs 40,000 (Rs 1 lakh for senior citizens).

Section 80E

  • Interest on education loans: Deduction for interest on loans taken for higher education without any limit on the amount.

Section 80EE

  • Interest on home loan: Additional deduction of up to Rs 50,000 for interest paid on home loan for first-time homebuyers.

Section 80EEA

  • Interest on home loan for affordable housing: Additional deduction of up to Rs 1.5 lakh.

Section 80G

  • Donations to certain funds, charitable institutions, etc.: The deduction amount varies between 50% to 100% of the donation amount.

Section 80GG

  • Rent paid: Deduction for rent paid by individuals who do not receive HRA, subject to conditions and limits.

Section 80GGA

  • Donations for scientific research or rural development.

Section 80GGB

  • Contributions to political parties: Deduction for donations made by companies to political parties.

Section 80GGC

  • Contributions to political parties: Deduction for donations made by any person (other than a company) to political parties.

Section 80TTA

  • Interest on savings accounts: Deduction of up to Rs 10,000 for interest earned on savings bank accounts.

Section 80TTB

  • Interest on deposits for senior citizens: Deduction of up to Rs 50,000 for interest on deposits.

Section 80U

  • Deduction for persons with disability:
    • Rs 75,000 for normal disability.
    • Rs 1.25 lakh for severe disability.

Income Tax Exemptions under Section 10

Section 10(1) Agricultural Income: Income from agricultural activities is exempt from tax

Section 10(2) Amount received by a member from the income of HUF (Hindu Undivided Family): Share of income received by a member of a HUF is exempt.

Section 10(2A) Share of profit from a firm: Share of profit received by a partner from a partnership firm that is separately assessed as such is exempt.

Section 10(4) Interest on NRE (Non-Resident External) account: Interest earned on deposits in NRE accounts is exempt for NRIs (Non-Resident Indians).

Section 10(5) Leave Travel Allowance (LTA): Leave travel concession received by an employee for travel within India is exempt, subject to certain conditions.

Section 10(6) Income of foreign citizens: Income of foreign citizens working in India under certain specific conditions (such as diplomatic missions) is exempt.

Section 10(7) Allowances or perquisites paid or allowed outside India by the Government to a citizen of India for rendering service outside India.

Section 10(10) Gratuity: Gratuity received on retirement or on becoming incapacitated, or on termination, etc., is exempt up to a certain limit.

Section 10(10A) Pension: Commuted value of pension received is exempt, subject to certain conditions.

Section 10(10B) Retrenchment compensation: Compensation received by a workman at the time of retrenchment is exempt, subject to certain limits.

Section 10(10C) Voluntary Retirement Scheme (VRS): Amount received on voluntary retirement or separation is exempt up to a maximum of Rs 5 lakh.

Section 10(10D) Life insurance: Sum received under a life insurance policy, including bonus, is exempt, subject to certain conditions.

Section 10(11) Statutory Provident Fund and Public Provident Fund (PPF): Accumulated balance payable to an employee from a provident fund is exempt.

Section 10(12) Recognized Provident Fund: Accumulated balance from a recognized provident fund is exempt, subject to certain conditions.

Section 10(13A) House Rent Allowance (HRA): HRA received by an employee is exempt to a certain extent, subject to conditions.

Section 10(14) Special Allowances: Various special allowances granted to employees to meet expenses wholly, necessarily, and exclusively for the performance of duties are exempt, subject to prescribed limits.

Section 10(15) Interest income: Specific types of interest income are exempt, such as:

  • Interest on certain notified bonds.
  • Interest from post office savings accounts (up to a limit).

Section 10(16) Scholarships: Any scholarship granted to meet the cost of education is exempt.

Section 10(17) Allowances to MPs and MLAs: Certain allowances received by Members of Parliament and State Legislatures are exempt.

Section 10(18) Pensions to gallantry award winners: Pension and family pension received by recipients of certain gallantry awards are exempt.

Section 10(19) Family pension received by family members of armed forces personnel: Exemption for family pension received by the family of a member of the armed forces (including paramilitary forces) who has died in the course of operational duties.

Section 10(23C) Income of certain charitable and educational institutions: Income received by certain funds, universities, and other educational institutions, hospitals, and other specified entities is exempt.

Section 10(34) Dividend income: Dividend received from domestic companies is exempt, but this is subject to certain conditions and limits as per recent amendments.

Section 10(35) Income from mutual funds: Income in respect of units of mutual funds specified under Section 10(23D) is exempt.

Section 10(38) Long-term capital gains: Long-term capital gains on the sale of equity shares and equity mutual funds are exempt, subject to Securities Transaction Tax (STT) and certain conditions. Note: This exemption has been partially withdrawn for gains exceeding Rs 1 lakh as per recent amendments.

Section 10(43) Reverse mortgage: Amount received under a reverse mortgage scheme is exempt.

Section 10(44) New Pension System (NPS): Exempt income from NPS trust.

Section 10(45) Exemptions to the Prime Minister and certain other constitutional dignitaries.