Unlock the potential for maximum tax savings with these top 20 income tax deductions. Explore a wide range of deductions available per the Income Tax Act to reduce your taxable income and maximise tax savings effectively. Delve into the details and uncover the key deductions that can make a substantial difference to your financial bottom line. By reading ahead, learn how to maximise your tax benefits and safeguard a more significant portion of your well-deserved income.
Below is the list of the Top 20 Income Tax Deductions that can help you optimise your tax savings
1. Section 80C:
Enjoy the benefits of one of the most popular tax-saving sections, which allows a maximum deduction of Rs 1.5 lakh annually from your total income. Some eligible investments/expenditures include:
- ELSS funds
- Life insurance premiums
- National Savings Certificate
- NPS Scheme
- Payments for the purchase/construction of residential property
- PPF (Public Provident Fund) account
- Post Office Time Deposit Rules
- Senior citizen savings scheme
- Sukanya Samriddhi Yojana
- Tax-saving fixed deposits
- Tuition fees
- ULIP and more.
2. Section 80CCD (1B):
Maximise your tax savings by investing up to Rs. 50,000 in the National Pension Scheme (NPS) and harness the deductions under this section.
3. Section 80GG: Deduction for House Rent Paid
If you don’t receive House Rent Allowance (HRA), you can still claim a deduction under Section 80GG. This deduction is calculated as follows:
- Rent paid minus 10% of total income
- Rs 5,000/- per month or 60,000 per year
- 25% of your total income (excluding long-term capital gains, short-term capital gains under Section 111A, income under Section 115A or 115D, and deductions under sections 80C to 80U). Please note that this calculation is done before deducting under section 80GG.
4. Section 80E: Deduction on Interest Paid on Education Loan
Claim a deduction for the interest paid on education loans. There is no limit on the amount that can be claimed. The deduction is available for a maximum of 8 years or until the entire interest is repaid, whichever is earlier.
5. Section 80D: Deduction on Medical Insurance Premium
Claim deductions on medical insurance premiums paid for yourself, spouse, dependent children, and parents. The maximum deduction available can go up to Rs. 1 lakh, depending on the age of the insured individuals. A cumulative additional deduction of Rs. 5,000 is also allowed for preventive health checkups.
6. Section 80DD: Deduction for Medical Treatment of a Dependent with Disability
Deductions are available for expenditure on medical treatment, training, and rehabilitation of a disabled dependent relative. The deduction amount varies based on the degree of disability.
7. Section 80DDB: Deduction for Specified Diseases
Claim deductions for expenses incurred on treating specified medical diseases or ailments for yourself or your dependents. The deduction limit is Rs. 40,000 or the amount paid, whichever is less. For senior and super-senior citizens, Rs.1,00,000 or the amount paid, whichever is less.
8. Section 80U: Deduction for Disabled Individuals
Individuals suffering from physical disabilities or mental retardation can claim deductions under this section. The deduction amount varies based on the severity of the disability.
9. Section 80G: Tax Benefits on Donations for Social Causes
Tax benefits are available on donations made to charitable organisations. The deduction percentage (100% or 50%) depends on the trust, and donations above Rs. 2000 must be made through non-cash modes to qualify for the deduction.
10. Section 80GGC: Deduction on Donations to Political Parties
Claim deductions for contributions made to political parties or electoral trusts under this section.
11. Section 80RRB: Deduction on Income from Royalty of a Patent
You can claim a deduction under this section if you earn income through royalties from a registered patent.
12. Section 80TTB: Interest Income on Deposits for Senior Citizens
Senior citizens can avail of deductions on interest income from deposits. The maximum deduction allowed is Rs. 50,000.
13. Section 80TTA: Interest on Savings Accounts
Individuals and HUFs can claim a deduction of up to Rs. 10,000 on interest income earned from savings accounts with banks, cooperative societies, or post offices.
14. Section 80EEB: Loan Interest on Electric Vehicles
Interest paid on loans taken for purchasing electric vehicles can be claimed as a deduction, subject to certain conditions. The maximum deduction available is Rs. 1.5 lakh.
15. Section 80IA and 80JJAA: Deductions for Businesses and Assessees
Various deductions are available for businesses based on specific conditions.
16. Section 16(i): Standard Deduction
Claim a deduction of Rs. 50,000 or the amount of your salary, whichever is lower.
17. Section 16(ii): Entertainment Allowance
Claim a deduction for entertainment allowance, either the actual amount or 1/5th of your salary, whichever is less (limited to Rs. 5,000).
18. Section 23/24: Municipal Taxes and Interest on Borrowed Capital
Deduct municipal taxes paid on rented property and claim deductions on interest paid on borrowed capital, subject to specified conditions.
19. Section 57: Commission or Remuneration for Dividends and Interest
Deduct any reasonable sum paid as commission or remuneration for realising dividends or interest on securities.
20. Section 57(ii): Family Pension
Deduct one-third of the family pension or Rs. 15,000, whichever is less.
Remember to understand the rules and preserve the necessary evidence or proof for income tax deductions claimed. Start filing your taxes with confidence and enjoy potential tax savings. Happy filing, and may you save some tax!