The Income Tax Act provides for various income tax deductions which can be claimed at the time of filing of income tax returns. The total taxable income (after reducing the income tax deductions that have been claimed) would be taxed as per the Income tax slab rates of the individual.
The Indian Income Tax Department encourages its citizens to make use of the various Income Tax Deductions, Income Tax Exemptions and Income Tax rebates allowed under the Income Tax Act which help the taxpayers to reduce their taxes in India legally. (Recommended Read: How to save Tax legally in India)
11 Useful Income Tax Deductions to Save Taxes
There are various income tax deductions which are allowed to be claimed by an Individual/HUF. The most useful income tax deductions which can be easily claimed and are helpful in reducing the tax burden have been explained below.
1. Income Tax Deduction for Investments specified under Section 80C
The most popular income tax deduction is the deduction under Section 80C which is allowed for making investments in certain specified instruments. There are many instruments in which investments can be made. Some examples of specified instruments are
- PPF Account
- Tax Saving Mutual Fund
- Tax Saving Fixed Deposit
- National Savings Certificate
- Repayment of Principal on Housing Loan
- Premium on Life Insurance Policy
- Equity Oriented Mutual Funds
- Contribution to Employee Provident Fund
2. Income Tax Deductions for Contribution to Pension Funds u/s 80CCC & 80CCD
Deduction under Section 80CCC and Sec 80CCD are income tax deductions which are allowed for payment of any amount to initiate or to continue any annuity plan of any insurance company for receiving any pension, the individual would be allowed a deduction for the amount paid under Section 80CCC.
And in case the individual has made the contribution to notified pension scheme of the Central Govt i.e. the National Pension Scheme (NPS), the individual would be allowed a deduction under Section 80CCD.
- Section 80CCC: Deduction for Contribution to Pension Funds
- Section 80CCD: Deduction for Contribution to National Pension Scheme
The maximum amount allowed to be claimed as a deduction under this section 80C and Section 80CCC is Rs. 1,50,000 for each financial year.
From financial year 2015-16 onwards, an additional deduction of Rs. 50,000 is allowed for investment in NPS Account. This additional deduction of Rs. 50,000 is over and above the deduction allowed to be claimed under Section 80C and Section 80CCC.
In other words, the cumulative total of these should not exceed Rs. 2,00,000.
3. Income Tax Deduction under Section 80TTA for Interest on Savings Account
A deduction of Rs. 10,000 under Section 80TTA (specified in Chapter VI-A) is also allowed to be claimed from the interest earned on Bank Savings Account. Such Interest Income is first added under head “Income from Other Sources” and then deduction from such income is allowed under Section 80TTA subject to a maximum of Rs. 10,000 p.a.
- Recommended Read: All about Deduction under Section 80TTA for Interest on Savings Account
4. Income Tax Deduction for Interest on Home Loan under Section 24
If a taxpayer has taken any Home Loan, he would be allowed to claim a deduction for the interest levied on such a loan. It should be noted that this deduction under Section 24 is for the Interest levied and not for the interest paid.
The principal amount of Home Loan repaid is allowed as a deduction under Section 80C and the Interest levied is allowed as a deduction under Section 24.
- Recommended Read: All about Deduction under Section 24 for Interest on Home Loan
5. Section 80CCG: Deduction for Investment made under an Equity Saving Scheme
This deduction is also known as the Rajiv Gandhi Equity Savings Scheme. This income tax deduction is allowed to an individual who has invested in listed shares or listed mutual funds in a given financial year. The deduction allowed for such an investment would be 50% of the amount invested subject to a maximum of Rs. 25,000 only.
This deduction however is only for first time investors and the investment also has a lock-in period of 3 years from the date of acquisition.
- Recommended Read: Deduction for Investment in Rajiv Gandhi Saving Scheme
6. Section 80D: Deduction for payment of Medical Insurance Premium & Health Check-up
If an individual/HUF has made any payment for medical insurance premium for himself, spouse, dependent children, he would be allowed to claim an income tax deduction for the same. The deduction allowed under this section varies depending on whether the person insured is a senior citizen or a non senior citizen.
If any amount has been paid for preventive health check-up, deduction would be allowed for such payment as well.
- Recommended Read- Section 80D: Deduction for Medical Insurance & Health Check-up
7. Section 80DD & Section 80U: Income Tax Deduction for Disability
If the individual himself is disabled he would be allowed a deduction under Section 80DD and in case any dependent family member of the individual is disabled, he would be allowed a deduction under Section 80U.
The disabilities for which the deductions under Section 80DD & Section 80U are allowed have also been defined in the income tax act.
- Recommended Read: All about Deduction for Disability under Section 80DD & Section 80U
8. Section 80DDB: Income Tax Deduction for Treatment of Specified Diseases
Income Tax Deductions are also allowed for treatment of specified diseases. If a person or any of his dependents is being treated for any specified disease, he would be allowed a deduction under Section 80DDB of the amount actually paid or Rs. 40,000 whichever is higher.
- Recommended Read: All about Deduction under Section 80DDB for Treatment of Disease
9. Section 80E: Income Tax Deduction for Interest on Education Loan
An Individual is allowed an income tax deduction under Section 80E for Repayment of Interest on Home Loan taken for the Higher Education of Self, Spouse or Dependent Children.
It should be noted that this deduction is only for the repayment of interest on education loan and not for the repayment of the principal amount of the education loan. The good part about this income tax deduction is that there is no maximum limit on the amount of deduction that can be claimed.
This Deduction is not only allowed for Education in India but also allowed for Education outside India as well.
- Recommended Read: Section 80E: Deduction for Repayment of Interest on Education Loan
10. Income Tax Deduction for Donations under Section 80G, 80GGA, 80GGB, 80GGC
If a person has made any donation during the financial year to any approved body, he shall be allowed a deduction for the same.
Deduction under Section 80G is a general deduction whereas deductions under Section 80GGA, 80GGB & 80GGC are specific deductions.
- Recommended Read: Section 80G: Income Tax Deductions for Donations
11. Income Tax Deduction for Rent under Section 80GG
If an Individual has paid House Rent and he has not claimed income tax deductions for the Rent paid under any other sections of the income tax act, he can claim a deduction under Section 80GG.
In other words, a salaried employee who has not availed of the HRA Exemption or any other person who has not claimed expenses for rent paid under any other section of Income Tax Act, is allowed a deduction under this section subject to the limits prescribed under Section 80GG.
- Recommended Read: All about Deduction for Rent paid under Section 80GG