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What are Income Tax Deductions?

Income tax deductions help people bring down their tax liability in a financial year. In other words, investments done in a financial year that are offset against gross annual income while filing your ITR are known as IT deductions. The provision of tax deductions was done to inculcate a habit of saving in people and assist them in constructing a stable monetary future.

Some popular examples of income tax deductions are Public Provident Fund (PPF), National Pension Scheme (NPS), investments made under Section 80 of the IT Act, 1961, in ELSS funds, principal repayment of home loan, etc.

What are Income Tax Exemptions/Allowances?

Income tax exemptions/allowances are components of your gross income that, as the name suggests, are exempted from being calculated as part of your total taxable income. These exemptions allow individuals to preserve a significant amount of their income. The Income Tax Act, 1961 mandates income tax exemptions/allowances so that people can save more.

Some well-known examples of income tax exemptions are children’s education allowance, house rent allowance (HRA), leave travel allowance (LTA), and also the exemptions available under Section 24, etc.

Income Tax Deductions vs Income Tax Exemptions/Allowance

People often get confused between income tax deductions and income tax exemptions/allowances when filing their ITR. The table below gives a brief overview of the difference between the two.

Income Tax Deductions

Income Tax Exemptions/Allowances

Investments into certain instruments (as prescribed under the Income Tax Act) that are offset from an individual’s total tax liability are known as income tax deductions

A particular income that is exempt from tax and, thus, not included in one’s total tax liability is called an income tax exemption

Income tax deductions are mostly covered under the scope of Section 80 of the Income Tax Act

Income tax exemptions are covered under Sections 10, 11, 12, 13, and 24 of the Income Tax Act

Individuals have to meet certain predetermined criteria to be eligible for income tax deductions

All taxpayers in the country qualify for income tax exemptions

Some examples of income tax deductions are investments made in the Equity-Linked Savings Scheme (ELSS), tax-saving Fixed Deposits (FD), Public Provident Fund (PPF), and National Pension Scheme (NPS), among others

Some examples of income tax exemptions are HRA, LTA, entertainment allowance, long-term capital gains on equity funds (upto ₹1 lakh).

Exemption of Allowances

There are various allowances given to the taxpayers in India. Let’s have a look at them:

House Rent Allowance

If you are a salaried individual and live in rented accommodation, you can get House Rent Allowance or HRA. If you are not living in the rented accommodation but still receive the HRA, it will be liable to tax. To claim this allowance, make sure you keep the rent receipts and any evidence of payment done towards rent handy. You can claim the lowest amount of the following as your HRA exemption:

 

  • Total HRA received from employer

  • The salary’s 40% (Basic salary+DA) for non-metros and 50% for metros

  • Rent paid less than 10% of basic salary + DA

Standard Deduction

Standard deduction is the portion of your income that is not subject to tax and it can be used to reduce your income tax liability. The standard deduction limit is ₹50,000. This amount is deducted from your gross salary which further brings the overall taxable income amount down.

Leave Travel Allowance

If you are a salaried employee, you also get a Leave Travel Allowance. This allowance is restricted to the travel expense incurred during your leaves. You should note that this allowance does not cover any other expenses of the trip like shopping, accommodation, food expenses, leisure activities, etc. The LTA can be claimed twice in a block of four years. If you do not use this LTA within a block, you can still carry the same in the next block. LTA only covers domestic travel and not international travel. Also, you should have travelled either by railway, air travel, or public transport to claim this allowance.

Mobile Reimbursement

This reimbursement is for the expenses incurred on mobile and telephone usage at home. You can claim a tax-free reimbursement of the same. This reimbursement amount can be lower than the actual bill amount or the amount provided in your salary.

Books and Periodicals

The income tax law allows employees to claim a tax-free reimbursement on the expenses incurred on books, periodicals, newspapers, journals, etc. You can get the lower amount between the actual bill amount or the amount provided in the salary as the reimbursement.

Food Coupons

You might be aware of the food coupons that employers provide to employees. Such food coupons are taxable as a prerequisite at the hands of the employee. However, these coupons are tax-free up to ₹50 per meal. As per the monthly calculation of 22 working days with 2 meals per day, it gives a monthly benefit of ₹2,200 that accounts for ₹26,400 as a yearly exemption.

Relocation Allowance

These days, businesses operate in multiple locations. It is possible that you might be asked to move to a different city for business reasons. This relocation can cause shifting expenses like moving furniture, car transportation cost, car registration charges, etc. Such expenses are to be borne by the employer. These payments are sometimes done directly by the employer. The employer may reimburse expenses incurred towards car transportation, registration, packaging charges, accommodation for initial 15 days, etc. The travelling expenses for the employee and family from their current place to the new location are also exempt from tax.

Children Allowance

The employer might also give you children allowance as part of your salary. This allowance received towards children's education is tax-exempt. An employee can claim a maximum of ₹100 every month as an exemption, which is ₹1,200 per year. This exemption is allowed for a maximum of 2 children.

Taxable and Non-Taxable Components of Your Salary

Any earning individual’s income/salary structure has several components that help them save on tax with the available income tax deductions and exemptions/allowances. Some of these components can be fully or partially taxable, while some are fully tax-exempt. The following infographic will walk you through the different taxable and non-taxable components in the salary structure as well as the concept of TDS (tax deducted at source).

Taxable and non taxable income

Now, let us understand income tax deductions and exemptions in detail.

Income Tax Deductions Under Section 80

Taxpayers can claim several income tax deductions under subsections of Section 80 of the Income Tax Act. The following table will help you understand the tax deduction limits and your eligibility to claim them.

Income Tax Act Section

Income Tax Deduction Limit

Who Can Claim?

Section 80C

Maximum of upto ₹1.5 lakh (aggregate of 80C, 80CCC, and 80CCD)

Individuals, HUFs

Section 80CCC

Maximum of up to ₹1.5 lakh (aggregate of 80C, 80CCC, and 80CCD)

Individuals

Section 80CCD

  • Employee Contribution under Section 80CCD(1): Maximum of upto 10% of salary (for employees) or 20% of gross total income (for self-employed individuals). The limit is capped at ₹1.5 lakh (aggregate of 80C, 80CCC, and 80CCD)

  • Self Contribution under Section 80CCD(1B): Individuals can claim an additional deduction of ₹50,000 (available to both salaried and self-employed individuals) for contributions towards NPS. With this, the maximum deduction available under Section 80C increases to ₹2 lakh.

  • Employer’s Contribution under Section 80CCD(2): Additional deduction up to 10% of an employee’s salary for employer’s contributions towards NPS.

Individuals

Section 80CCG

Deductions under this section were specific to the Rajiv Gandhi Equity Savings Scheme (RGESS).

The deduction allowed under RGESS is 50% of the total amount invested and is capped at ₹50,000.

Note: Deduction under section 80CCG has been discontinued starting from April 1, 2017.

Was available to Individuals with income less than ₹12 lakh

Section 80D

Deduction for health insurance premium and medical expenses for senior citizens is allowed under this section.

Individuals below 60 years can claim up to ₹25,000; whereas senior citizens can claim up to ₹50,000.

Individuals, HUFs

Section 80DD

₹75,000 for those with 40%-80% disability;

₹1.25 lakh for severe disability (80% or more)

Individuals and HUFs with a handicapped dependent

Section 80DDB

Deduction can be claimed for medical treatment of a dependent who is suffering from a specific illness (explained in the article below).

The amount allowed as deduction is as follows:

  • A maximum of ₹40,000 or amount paid, whichever is less (for individuals under 60 years)

  • A maximum of ₹1 lakh or amount paid, whichever is less (for senior citizens and super senior citizens)

Individuals and HUFs

Section 80E

Deduction is provided only on the interest part of the education loan.

It is available only for eight years, starting from the year your loan repayment begins or until the interest is fully repaid, whichever is earlier.

Individuals

Section 80EE

Deduction is provided on the interest part of the residential house property loan availed from a financial institution.

A maximum of ₹50,000 can be claimed under this section.

Individuals

Section 80EEA

This section allows a deduction up to ₹1.5 lakh for interest paid by first-time homebuyers for a loan sanctioned from a financial institution.

Individuals

Section 80G

Deduction is provided on donations made towards charity.

Donations of up to 100% or 50% can be claimed as a tax deduction under this section.

Individuals, HUF's, Companies, Firms

Section 80GGB

Indian companies or enterprises can claim tax deductions under this section for contributions made to a political party or an electoral trust registered in India.

They can claim up to 100% tax deduction against the amount donated.

Indian companies

Section 80GGC

Individuals can claim deductions under this section for contributions made to political parties.

The tax deduction claimed can range from 50-100% of the amount contributed.

Individuals

Section 80GG

Those paying rent for residency can claim a tax deduction of:

  • ₹5,000 per month

  • 25% of total income

  • Rent minus 10% of adjusted gross total income, whichever is less.

Individuals not receiving HRA

Section 80RRB

Income of up to ₹3 lakh received from royalties is eligible for tax deduction under this section.

Resident Indian

Section 80TTA

Income of up to ₹10,000 earned from interest on savings accounts can be claimed as a tax deduction under this section.

Individuals and HUFs

Section 80TTB

This section allows senior citizens (aged 60 years and above) to claim up to ₹50,000 as a tax deduction from their gross total income.

Senior Citizens (above 60 years)

Section 80U

Deduction of up to ₹75,000 can be claimed for people suffering from a disability and up to ₹1.25 lakh for people with severe disability.

Individuals with disabilities

Features of Income Tax Deductions Under Section 80

Let’s take a detailed look at the features of each section we discussed in the table above.

 

1. Section 80C

 

Income tax deductions under Section 80C are quite popular among investors. The section allows for a maximum deduction of up to ₹1.5 lakh every year from the taxpayer’s total income. The benefit of this section can be availed by individuals and HUFs. However, companies, partnership firms, and limited liability partnerships (LLP) cannot avail said benefit.

The investments available for tax deductions under this section are as follows:

Public Provident Fund (PPF)

Equity-Linked Saving Scheme (ELSS)

Sukanya Samriddhi Yojana (SSY)

Unit Linked Insurance Plan (ULIP)

Employees’ Provident Fund (EPF)

Principal amount payment towards home loan

National Saving Certificate (NSC)

5-year, tax-saving FD

LIC premium

Stamp duty and registration charges for purchase of property

Senior Citizen Savings Scheme (SCSS)

Infrastructure bonds

Additionally, please note that people choosing to file their ITR using the new income tax regime will not be able to avail deductions under this section. We have discussed the income tax deductions and exemptions/allowances eliminated from the new regime in detail going ahead.

 

2. Section 80CCC

 

This section provides a tax deduction for an amount paid by taxpayers who have subscribed to an annuity plan offered by an approved insurance company. Also, the payment has to be to a fund mentioned in Section 10(23AAB). Please note that HUF is not eligible for availing tax deductions under Section 80CCC. This facility is available to both residents as well as non-residents.

Additionally, any bonuses received or interest accrued through the annuity plan is not eligible for tax deduction under Section 80CCC. Proceeds from the policy in the form of pension from annuity or surrender of annuity are taxed.

 

3. Section 80CCD

 

Tax deductions under Section 80CCD are categorised in three subsections:

  • Employee Contribution Under Section 80CCD(1): A maximum of upto 10% of salary (for employees) or 20% of gross total income (for self-employed individuals). The limit is capped at ₹1.5 lakh (aggregate of 80C, 80CCC, and 80CCD).

  • Self Contribution Under Section 80CCD(1B): Individuals can claim an additional tax deduction of ₹50,000 (available to both salaried and self-employed individuals) for contribution towards NPS. With this, the maximum tax deduction available under Section 80CCD increases to ₹2 lakh.

  • Employer’s Contribution Under Section 80CCD(2): Additional tax deduction up to 10% of an employee’s salary for contribution towards NPS.

Please note that the money received from NPS on a monthly basis or due to surrender of accounts is taxable. However, if this amount is reinvested in the annuity plan, then it is entirely exempt from tax.

 

4. Section 80D

 

Health insurance is one of the most powerful tax-planning tools. With the announcement of Budget 2021, you can avail several tax benefits along with other financial/medical benefits. Here’s a quick walkthrough of the same.

 

Health Insurance Premium Paid for

Self, Spouse, and dependent children

Parents

No one is above age 60 years

Up to ₹25,000

Up to ₹25,000

If you are a senior citizen

Up to ₹50,000

Up to ₹50,000

Note: The tax deduction for parents is over and above the maximum deduction allowed for an individual and his/her family.

Additional Deductions: You can claim an annual tax deduction of up to ₹5,000 on expenses incurred for health check-ups. This includes the check-up expenses of all family members, including self, spouse, children, and parents.

 

5. Section 80DD

 

The tax deduction under Section 80DD is available to individuals or HUFs for a dependent who is disabled and wholly dependent on the individual (or HUF) for support and maintenance. They can claim up to ₹75,000 for those with 40%-80% disability and ₹1.25 lakh for severe disability (80% or more). Please note that individuals or HUFs can claim tax deduction for a dependent only and not themselves.

 

6. Section 80DDB

 

Under Section 80DDB, taxpayers can claim a tax deduction for medical treatment of a dependent who is suffering from a specific illness. The amount allowed as deduction is as follows:

 

  • A maximum of ₹40,000 or amount paid, whichever is less (for individuals under 60 years)

  • A maximum of ₹1 lakh or amount paid, whichever is less (for senior citizens and super senior citizens)

The list of diseases for which one can claim tax deductions under this section is as follows:

 

  • Neurological diseases where the disability level has been certified to be of 40% and above:

     

1. Dementia

 

2. Dystonia Musculorum Deformans

 

3. Motor Neuron Disease

 

4. Ataxia

 

5. Chorea

 

6. Hemiballismus

 

7. Aphasia

 

8. Parkinson's Disease

 

  • Malignant cancers

  • Full-blown Acquired Immuno-Deficiency Syndrome (AIDS)

  • Chronic renal failure

  • Hematological disorders

 

1. Hemophilia

 

2. Thalassaemia

 

Please note that before making claims under Section 80DDB, you need to get a certificate from the concerned specialist. Patients who are seeking treatment at a private hospital do not need to submit any certificate. However, those receiving treatment at government hospitals have to take the certificate from any specialist working full-time at that hospital.

 

7. Section 80E

 

Education loan taken for higher studies also helps you save on tax. Those who have taken an education loan or are repaying it, the interest paid on that loan can be claimed as tax deduction under Section 80E.

However, please note that tax deduction is provided only on the interest component of the education loan. It is available only for eight years, starting from the year your loan repayment begins or until the interest is fully repaid, whichever is earlier.

 

8. Section 80EE

 

Tax deduction under Section 80EE is available to individuals only. It can be claimed on the interest part of the residential house property loan availed from a financial institution. A maximum of ₹50,000 can be claimed under this section. Additionally, to claim under Section 80EE, the value of the house should be ₹50 lakh or less and the loan taken for the house must be ₹35 lakh or less.

 

9. Section 80EEA

 

Section 80EEA allows first-time homebuyers to claim a tax deduction of up to ₹1.5 lakh for interest paid on the loan sanctioned from a financial institution. Please note that this deduction is over and above the ₹2 lakh deduction for interest payments available under Section 24 of the Income Tax Act. Hence, taxpayers can claim a total tax deduction of ₹3.5 lakh for interest on home loan, especially if they meet the conditions under Section 80EEA.

Additionally, to successfully claim a tax deduction under this section, note that the stamp duty value of the house property should be ₹45 lakh or less, and the individual taxpayer should not be eligible to claim a tax deduction under Section 80EE.

 

10. Section 80G

 

Those making contributions to relief funds and charitable institutes can claim tax deductions under Section 80G. However, only the donations made to prescribed funds can be claimed under this section. Note that any donation made in cash (exceeding ₹2,000) cannot be claimed and taxpayers should use another mode of payment for the same.

 

11. Section 80GGB

 

Under Section 80GGB, only companies or enterprises can claim the contributions made towards any political party or electoral trusts registered in India as tax deductions equal to the amount donated. The political party that receives the donation must be registered under Section 29A of the Representation of the People Act, 1951.

An electoral trust is a non-profit organisation created under Section 8 of the Companies Act, 2013, to enhance transparency in the donation process and reallocate donations to the registered political parties. Tax deduction of 100% can be claimed against donations made to a registered political party as per Section 80GGB. No cash donations or contributions are allowed under Section 80GGB.

 

12. Section 80GGC

 

Under Section 80GGC, individuals can avail tax deductions on any contributions made to an electoral trust or a political party registered under Section 29A of the Representation of the People Act, 1951. Individuals can claim tax deductions in the range of 50%-100% of the donation made towards an electoral trust or a political party.

Note that companies cannot avail tax deductions under Section 80GGC, only individuals can. No cash donations or contributions are allowed under Section 80GGC.

 

13. Section 80GG

 

Under Section 80GG, self-employed and salaried individuals can claim tax deductions towards rent for any furnished or unfurnished residence. It should be noted that only individuals who do not receive HRA from their employer are eligible for a tax deduction under 80GG. The lowest amount from the following will be considered as the eligible amount of deduction.

  • 25% of the total income

  • ₹5,000 per month

  • Rent less than 10% of income

 

14. Section 80RRB

 

Under Section 80RRB, individuals who receive royalty payments can avail a tax deduction of up to ₹3,00,000. If royalty payments received are less than ₹3,00,000, then only that amount will be considered for tax deduction. Only Indian residents who hold the original patent registered under the Patent Act, 1970, can claim tax deduction under Section 80RRB.

 

15. Section 80TTA

 

Under Section 80TTA, individuals and HUFs can claim a tax deduction on income earned as interest. A maximum of ₹10,000 can be availed as a tax deduction under this section.

Types of interest income allowed as tax deduction under Section 80TTA:

  • Savings account with a bank

  • Savings account with a cooperative society that functions as a bank

  • Savings account with a post office

Types of interest income not allowed as tax deduction under Section 80TTA:

  • Interest earned on fixed deposits

  • Interest earned on recurring deposits

  • Interest earned on any time deposits

 

16. Section 80TTB

 

Under Section 80TTB, senior citizens can claim a tax deduction of up to ₹50,000 from their gross total income in a given financial year. Senior citizens eligible for Section 80TTB cannot avail a tax deduction under 80TTA. Exemptions to Section 80TTB include deposits held by or on behalf of a partnership firm, an association of persons (AOP), or a body of individuals (BOI).

 

17. Section 80U

 

Section 80U offers a tax deduction to individuals suffering from a disability. Any individual who has been certified by a medical authority of being at least 40% disabled can claim a tax deduction under Section 80U. A tax deduction of up to ₹75,000 is applicable for individuals with disabilities, and a tax deduction of up to ₹1,25,000 is applicable for individuals with severe disabilities.

Tax Exemptions/Allowances

One good way to reduce your tax liability is by being aware of tax exemptions/allowances that are available under the Income Tax Act. Under Section 10 of the IT Act, you can avail tax exemptions on HRA, standard deduction, contributions towards EPF and pension, etc. Here is a list of the major tax exemptions applicable to salaried individuals:

 

  • House Rent Allowance: Exemption will be the minimum of:

i) Total HRA received;

ii) 50% of the income (basic + DA) for individuals living in metro cities, or 40% for those living in non-metro cities;

iii) Rent paid less than 10% of basic salary + DA

 

  • Standard Deduction: All salaried individuals can claim a flat deduction of ₹50,000 as Standard Deduction. This was increased from ₹40,000 per year to ₹50,000 during the Union Budget 2019.

  • Child Education Allowance: Tax exemption/allowance of maximum ₹100 per month for up to two children only can be availed by employees.

  • Hostel Subsidy: Subsidies on hostel expenditure are also tax-exempt up to ₹300 per month for a maximum of 2 children.

  • Interest Paid on Housing Loans: One can avail income tax exemption of ₹2 lakh on interest paid on home loans, provided the house is currently occupied by the owner or is set to finish construction within 3 years.

  • Leave Travel Allowance: The Income Tax Act also allows for a tax exemption to salaried employees on travel expenses. However, LTA does not cover all expenses such as food, shopping, and entertainment. LTA exemption can be used twice in a period of four years and only covers domestic travel by railway, air travel, or public transport.

New Regime for Income Tax

Under the new income tax regime announced with Union Budget 2020, around 70 tax deductions and exemptions, including standard deduction, HRA, housing loan interest payments, education loan interest, expenses incurred on disability of self or dependent, cost of medical treatment of self or dependent, LTA, investments under Section 80C, savings bank interest under Section 80TTA, interest income for senior citizens under Section 80TTB, and donations under Section 80G have been removed.

The new regime, however, has not removed around 50 tax exemptions and deductions.

Note that the new tax regime is optional, and you can continue with the old tax slabs and rates if it is more beneficial to you. Some of the tax exemptions and deductions that can be claimed under the new tax regime are:

  • Employer’s contribution to the National Pension Scheme (NPS)

  • Standard deduction on rent up to a maximum of 30%

  • Income from life insurance provided the insurance coverage is 10x the annual premium

  • Agricultural income with zero specified limit

  • Retrenchment compensation up to a maximum of ₹5 lakh

  • Proceeds from Voluntary Retirement for Service (VRS) up to a limit of ₹5 lakh

  • Leave encashment on retirement: No limit for government employees; capped at ₹3 lakh for private employees

New Tax Regime vs Old Tax Regime: Which One to Choose?

The new tax regime offers lower income tax rates, especially for individuals that fall under the annual income slab of ₹15 lakh. However, to avail these lower tax rates, you must forego a wide array of tax exemptions and deductions available under the old income tax regime. There is no direct answer for the question: which tax regime is better? You can choose either of the tax regimes after calculating the tax-free components from your salary and assessing the total deductions that you are eligible to claim.

Once you calculate the total income tax exemptions and deductions, adjust them with your salary to arrive at your total taxable income. If your taxable income is higher despite subtracting the deductions and exemptions, you can opt for the new tax regime.

However, if you are saving more money under the old regime after all tax deductions and exemptions, then it may be the right choice for you. According to industry experts, while opting for a tax regime, along with a reduced tax burden, you should also consider factors like your investment goals and your family’s financial security. A robust insurance and investment portfolio should complement the selection of your tax regime.

To calculate your income tax liability under the old regime, you can make use of the income tax calculator available on Bajaj MARKETS. Moreover, if you wish to reduce your tax liability, check out our tax-saving instruments that can help achieve this objective.

Regardless of what your financial requirements are, Bajaj MARKETS has you covered. Invest today!

FAQs

  • ✔️Can I claim the 80C deductions at the time of filing the income tax return in case I have not submitted proof to my employer?

    Employers consider the proof of investments submitted by employees to compute their taxable income. It is advisable to submit the proof on time, but if you fail to do so, you can always make the tax deduction claim at the time of filing the tax return. To claim tax deductions while filing your income tax return, the investment should have been made during the relevant financial year.

  • ✔️I have availed a loan from my employer for pursuing higher education. Can I claim the interest paid on such a loan as a tax deduction under Section 80E?

    Tax deduction can be claimed for interest paid on a loan for higher studies under Section 80E. However, the deduction is available only if the loan has been provided by a financial institution. Interest on the loan granted by your employer will not qualify for a tax deduction under the law.

  • ✔️Is there any restriction or maximum limit up to which I can claim a tax deduction under Section 80E?

    Interest paid on an education loan is eligible for tax deduction under Section 80E. However, the section doesn’t specify any limit for the tax deduction. As such, the actual interest paid can be claimed as a tax deduction.

  • ✔️Can a company or firm reap the benefits of Section 80C?

    A company/firm cannot claim tax benefits under Section 80C as its provisions apply only to individuals and Hindu Undivided Families (HUF).

  • ✔️Can a company claim a deduction for donations made under Section 80G?

    Donations to specific institutions, funds, etc., qualify for a tax deduction under Section 80G and every taxpaying entity, including companies, are eligible to claim the tax benefit.

  • ✔️Are the tax exemptions available under Section 80D available to corporates?

    The premiums paid for medical insurance are tax-exempt under Section 80D of the Income Tax Act. The tax benefit is available only to individuals and Hindu Undivided Families (HUF), but not to corporate entities. The section also mandates payment through demand draft (DD), cheque, or electronic means to claim tax benefits. Cash payments are not eligible for tax deduction under Section 80D.

  • ✔️What are the tax exemptions available under Section 80DD?

    Section 80DD allows for a tax deduction of up to ₹50,000 for the treatment cost of a handicapped dependent. The deduction limit can be extended to ₹1 lakh depending on the severity of the disability.

  • ✔️Are bank recurring deposits eligible for tax deduction?

    Section 80C is very specific about the investments eligible for tax deduction and recurring deposits do not qualify for the same. To claim a tax deduction under this section, you will have to invest in specific tax-saving instruments. For instance, a five-year, tax-saver bank fixed deposit will be eligible for tax deduction, but a recurring deposit will not.

  • ✔️Are all allowances taxable for salaried individuals?

    The nature of the allowance determines if it is taxable or not. Allowances like Hostel Expenditure Allowance, Children’s Education Allowance, Leave Travel Allowance (LTA), and House Rent Allowance (HRA), which are often part of the salary break-up, are partially tax-exempt. On the flipside, allowances such as City Compensatory Allowance, Special Allowance, and Overtime Allowance are taxable in the hands of the employee.

  • ✔️Can both earning members of a family claim tax deduction for a home loan taken as co-applicants?

    Yes, both earning members of a family can individually claim maximum tax benefits for home loans taken jointly (as co-applicants). The interest on a home loan is eligible for a tax deduction of up to ₹2 lakh in a year under Section 24 of the Income Tax Act. Additionally, the principal repayment qualifies for a deduction of up to ₹1.5 lakh under Section 80C.

  • ✔️Can self-employed individuals claim the HRA benefit?

    No, the HRA benefit is only limited to salaried people, but self-employed people can avail a tax deduction for house rent under Section 80GG of the Income Tax Act.

  • ✔️How can I save tax on an education loan?

    An individual can easily avail a tax deduction on education loans taken for self, spouse, or children. Under Section 80E of the Income Tax Act, a tax deduction can be claimed for the interest paid on an education loan.

  • ✔️What is the standard deduction limit?

    The limit of standard deduction is ₹50,000.

  • ✔️How much child education allowance can I claim?

    You can claim ₹100 per month, i.e. ₹1,200 a year for a maximum of two children.

  • ✔️What are the examples of income tax exemptions?

    House rent allowance (HRA), leave travel allowance (LTA), children’s education allowance, and exemptions under Section 24 are some of the examples of income tax exemptions.

  • ✔️What are the examples of income tax deductions?

    Investments done under Section 80 of the Income Tax Act, 1961, in ELSS funds, principal repayment of home loan, Public Provident Fund (PPF), National Pension Scheme (NPS), etc. are some of the examples of income tax deductions.

  • ✔️What is the income tax deduction limit under Section 80C?

    You can claim a deduction of up to ₹1.5 Lakh under Section 80C.

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