(Chapter VI-A deductions list)
Income Tax Deductions List | IT Exemptions List | FY 2019-20 / AY 2020-21
The maximum tax exemption limit under Section 80C has been retained at Rs 1.5 Lakh only. The various investment avenues or expenses that can be claimed as tax deductions under section 80c are as below;
- PPF (Public Provident Fund)
- EPF (Employees’ Provident Fund)
- Five year Bank or Post office Tax Saving Deposits
- NSC (National Savings Certificates)
- ELSS Mutual Funds (Equity Linked Saving Schemes)
- Kid’s Tuition Fees
- SCSS (Post office Senior Citizen Savings Scheme)
- Principal repayment of Home Loan
- NPS (National Pension System)
- Income Tax benefits are currently available on Tier-1 deposits only (FY 2018-19). The contributions by the government employees (only) under Tier-II of NPS will also be covered under Section 80C for deduction up to Rs 1.5 lakh for the purpose of income tax, with a three-year lock-in period. This is w.e.f April 2019.
- Life Insurance Premium
- Sukanya Samriddhi Account Deposit Scheme
Contribution to the annuity plan of LIC (Life Insurance Corporation of India) or any other Life Insurance Company for receiving a pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.
The employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be up to 10% of the salary (salaried individuals) and Rs 50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.
As per the Budget 2017-18, the self-employed (individual other than the salaried class) can contribute up to 20% of their gross income and the same can be deducted from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961.
To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS. The 10% of the salary limit is applicable for salaried individuals only and the Gross income is applicable for non-salaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to the Pension Scheme, the whole contribution amount (10% of salary) can be claimed as tax deduction under Section 80CCD (2).
The Centre will now contribute 14% of basic salary to Govt employees’ pension corpus, up from 10%. This is w.e.f April 2019.
Kindly note that the Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000 for the financial year 2019-20. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over and above this Rs 1.5 Lakh limit.
Contributions to ‘Atal Pension Yojana‘ are eligible for Tax Deduction under section 80CCD.
In the union budget 2018, the government of India has proposed the below changes with respect to deductions available on Health Insurance and/or towards Medical treatment. The same provisions are applicable for FY 2019-20 as well;
Health Insurance & Senior Citizens :
In Budget 2018, it has been proposed to raise the maximum tax deduction limit for senior citizens under Section 80D of the Indian Income Tax Act 1961. The limit of tax deduction allowed for FY 2017-18 for senior citizens was Rs. 30,000 which was increased to Rs 50,000, from FY 2018-19 (AY 2019-20) onwards.
- Under Section 80D an assessee, being an individual or a Hindu undivided family, can claim a deduction in respect of payments towards annual premium on the health insurance policy, preventive health check-up or medical expenditure in respect of senior citizen (above 60 years of age).
- As of FY 2017-18, only Very Senior Citizens (who are above 80 years of age), can claim a deduction of up to Rs 30,000 incurred towards the medical expenditure, in case they don’t have health insurance. Budget 2018 has increased this to Rs 50,000 and also allowed the same flexibility to senior citizens. Even individuals who pay premiums for their dependent senior citizen’s parents can claim the additional deduction on health insurance premium (or) medical expenditure.
- Single premium Health Insurance policy / Multi-year Mediclaim policy :
- In case of single premium health insurance policies having cover of more than one year, it is proposed that the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit.
The below limits are applicable for Financial Year 2019-2020 (or) Assessment Year (2020-2021) u/s 80D.
Health Insurance Premium & Section 80D Tax benefits AY 2020-21
Preventive health checkup (Medical checkups) expenses to the extent of Rs 5,000/- per family can be claimed as tax deductions. Remember, this is not over and above the individual limits as explained above. (Family includes: Self, spouse, parents and dependent children).
You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. The tax deduction limit of up to Rs 1.25 lakh in case of severe disability can be availed.
To claim this deduction, you have to submit Form no 10-IA.
This is similar to Section 80DD. The tax deduction is allowed for the tax assessee who is physically and mentally challenged.
An individual (less than 60 years of age) can claim upto Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens and very Senior Citizens (above 80 years) has been revised to Rs 1,00,000 w.e.f FY 2018-19.
To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt or Private hospital.
For the purposes of section 80DDB, the following shall be the eligible diseases or ailments:
Neurological Diseases where the disability level has been certified to be of 40% and above;
(b) Dystonia Musculorum Deformans
(c) Motor Neuron Disease
(h) Parkinson’s Disease
- Malignant Cancers
- Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
- Chronic Renal failure
- Hematological disorders
Tax Benefits of Rajiv Gandhi Equity Savings Scheme (RGESS) under section 80CCG has been withdrawn. However, if an investor has invested in the RGESS scheme in FY 2016-17 (AY 2017-18), they can claim deduction under this Section until AY 2019-20.
Section 24 (B) (Loss under the head Income from House Property)
- From FY 2017-18, the Tax benefit on loan repayment of the second house is restricted to Rs 2 lakh per annum only (even if you have multiple houses the limit is still going to be Rs 2 Lakh only and the ceiling limit is not per house property).
- The unclaimed loss if any will be carried forward to be set off against house property income of subsequent 8 years. In most of the cases, this can be treated as ‘dead loss‘.
- I believe that this is a major blow to the investors who have bought multiple houses on home loan(s) with an intention to save taxes alone.
- Until FY 2016-17,
interest paid on your housing loan is eligible for the following tax benefits ;
- Municipal taxes paid, 30% of the net annual income (standard deduction) and interest paid on the loan taken for that house are allowed as deductions.
- After these deductions, your rental income can be NIL or NEGATIVE and is called ‘loss from house property’ in the latter case.
- Such loss is currently allowed to be set off against other heads of income like Income from Salary or Business etc. which helps you to lower your tax liability substantially.
Computation of Income from House property – Illustration
- Currently (FY 2018-19), income tax on notional rent is payable if one has more than one self-occupied house. No tax on notional rent on Second Self-occupied house has been proposed. So, you can now hold 2 Self-occupied properties and don’t have to show the rental income from the second SoP as notional rent. This is with effect from FY 2019-20.
If you take any loan for higher studies (after completing Senior Secondary Exam), tax deduction can be claimed under Section 80E for the interest that you pay towards your Education Loan. This loan should have been taken for higher education for you, your spouse or your children or for a student for whom you are a legal guardian. Principal Repayment on the educational loan cannot be claimed as a tax deduction.
There is no limit on the amount of interest you can claim as deduction under section 80E. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.
This was a new proposal which had been made in Budget 2016-17. The same will be continued in FY 2018-19 / AY 2019-20 too. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.
- The home loan should have been sanctioned during FY 2016-17.
- Loan amount should be less than Rs 35 Lakh.
- The value of the house should not be more than Rs 50 Lakh &
- The home buyer should not have any other existing resid
Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. This deduction can only be claimed when the contribution has been made via cheque or draft or in cash. In-kind contributions such as food material, clothes, medicines, etc do not qualify for deduction under section 80G.
The donations made to any Political party can be claimed under section 80GGC.
W.e.f FY 2017-18, the limit of deduction under section 80G / 80GGC for donations made in cash is reduced from current Rs 10,000 to Rs 2,000 only.
If you want to donate some fund to a political party of your choice, you can do so in cash of up to Rs 2,000. Beyond that, you cannot donate the amount in cash mode. It can be done through Electoral Bonds
The Tax Deduction amount under 80GG is Rs 60,000 per annum. Section 80GG is applicable for all those individuals who do not own a residential house & do not receive HRA (House Rent Allowance).
The extent of tax deduction will be limited to the least amount of the following;
- Rent paid minus 10 percent the adjusted total income.
- Rs 5,000 per month.
- 25 % of the total income.
(If you are claiming HRA (House Rent Allowance) of more than Rs 50,000 per month (or) paying rent which is more than Rs 50,000 then the tenant has to deduct TDS @ 5%. It has been proposed that the tax could be deducted at the time of credit of rent for the last month of the tax year or last month of tenancy, as applicable.)
Revised Rebate under Section 87A
Tax rebate of Rs 12,500 for individuals with a taxable income of up to Rs 5 Lakh has been proposed in Interim-Budget 2019-20-18 / AY 2020-21 as well.
- Only Individual Assesses earning net taxable income up to Rs 5 lakhs are eligible to enjoy tax rebate u/s 87A.
- For Example: Suppose your yearly pay comes to Rs 6,50,000 and you claim Rs 1,50,000 u/s 80C. The total net income in your case comes to Rs 5,00,000 which makes you eligible to claim tax rebate of Rs 12,500.
- The amount of tax rebate u/s 87A is restricted to maximum of Rs 12,500. In case the computed tax payable is less than Rs 12,500, say Rs 10,000 the tax rebate shall be limited to that lower amount i.e. Rs 10,000 only.
- The Tax Assesse is first required to add all incomes i.e. salary, house income, capital gains, business or profession income and income from other sources and then deduct the eligible tax deduction amounts u/s 80C to 80U and under section 24(b) (Home Loan Interest) to come up with the net taxable income.
- If the above net taxable income happens to be less than Rs 5 lakhs then the tax rebate of Rs 12,500 comes in to the picture and should be deducted from the calculated total income tax payable.
Revised Section 87A Limit for FY 2019-20 / AY 2020-21
Section 80 TTA & new Section 80TTB
For Senior Citizens, the Interest income earned on Fixed Deposits & Recurring Deposits (Banks / Post office schemes) will be exempt till Rs 50,000 (FY 2017-18 limit was up to Rs 10,000). This deduction can be claimed under new Section 80TTB. However, no deductions under existing 80TTA can be claimed if 80TTB tax benefit has been claimed (the limit for FY 2017-18 & FY 2018-19 u/s 80TTA is Rs 10,000).
Section 80TTA of Income Tax Act offers deductions on interest income earned from savings bank deposit of up to Rs 10,000. From FY 2018-19, this benefit will not be available for late Income Tax filers.
- The proposal has been made to not to deduct TDS of up to Rs 40,000 on the interest income from Bank / Post office deposits (the FY 2018-19 TDS threshold limit u/s 194A is Rs 10,000). Kindly note that no TDS means no tax liability. Interest income on Deposits (FDs/RDs) is still a taxable income.
Interest income from deposits held with companies will not benefit under this section. This means senior citizens will not get this benefit for interest income from corporate fixed deposits us/ 80TTB.
Standard Deduction of Rs 50,000 in-lieu of Medical Allowance – Budget 2018
Until FY 2017–18, the medical allowance of up to Rs 15,000 was exempted income from your Gross salary. To claim this, you had to submit medical bills to your employer and get the allowance benefit. The medical reimbursement allowance was exempted under Section 10 of the Income Tax Act.
From FY 2018-19, a standard deduction of Rs 40,000 in lieu of travel, medical expense reimbursement, and other allowances has been proposed for salaried employees and pensioners. To claim this standard deduction, there is no need to submit medical bills to your employer.
The current Standard Deduction of Rs 40,000 for FY 2018-19 is proposed to be increased to Rs 50,000 for FY 2019-20.
As per this new proposal, irrespective of the amount of taxable salary the assessee will be entitled to get a deduction of Rs.50,000 or taxable salary, whichever is less. Thus suppose if a person has worked for few days (or) months and his salary was just Rs 50,000 for a previous year, then he will be entitled to a deduction equal to the salary being the same amount. If his salary is less, say Rs 30,000 the deduction shall be restricted to Rs 30,000. If the salary exceeds the amount of Rs 50,000, the deduction shall be restricted to Rs 50,000.
Section 80 EEA
Additional Tax Deduction of Rs 1.5 Lakh on Home loans to buy Affordable Property under new Section 80EEA
An additional income tax deduction of up to Rs. 1.5 lakh for interest paid on home loans borrowed during 01-04-2019 to 31-3-2020 has been proposed. This will be available under Section 80EEA. That takes the total deduction to up to Rs 3.5 lakhs (existing Rs 2 lakh limit + Rs 1.5 lakh new proposal). This new Tax deduction is applicable on loan is taken to buy a self-occupied ‘affordable housing property’ only. Properties costing up to Rs 45 lakh are considered affordable.
Besides the tax deductions under Section 80C and 24b, an individual can now claim up to Rs 1.5 lakh under Section 80EEA from FY 2019-20 or AY 2020-21 onwards, subject to below conditions;
- The home loan should have been sanctioned between 1st April 2019 to 31st March 2020.
- The loan should have been sanctioned by a Financial Institution.
- The Stamp duty value of the property should not exceed 45 Lakhs.
- The taxpayer should not own any other residential property on the date of loan sanction.
- This tax benefit will be available from 1st April 2020 (AY 2020-21) and till the end of the home loan tenure (closure).
- The total interest deduction is now Rs. 3.5 lakh (Rs 2 Lakh + Rs 1.5 Lakh).
Section 80 EEB
Section 80EEB Income Tax Deduction of Rs 1.5 Lakh on Loan is taken to purchase Electronic Vehicle
A new Tax deduction of up to Rs 1.5 lakh has been proposed on Interest paid on Loans taken to purchase Electronic Vehicles.
Conditions for claiming the deduction
· The loan must be taken from a financial institution or a non-banking financial company for buying an electric vehicle.
· The loan must be sanctioned anytime during the period starting from 1 April 2019 till 31 March 2023.
·“Electric vehicle” has been defined to mean a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy.