Tax Deductions – Section 80
Tax Rebate 87A of Income Tax Act
Rebate under section 87A of Income Tax Act is obtainable in the form of a deduction from the tax liability. It was first introduced in the Finance Bill of the year 2013 with a view to provide benefits to the people who are earning up to Rs 5,00,000. The purpose of this rebate is to lessen the tax burden of individuals in the lower income bracket. Earlier the rebate under Section 87A was Rs 5,000, provided the individual was an Indian resident, and his/her total annual income did not exceed Rs 5,00,000. However, with the introduction of the Finance Bill 2017, the amount was changed.
Section 87A of the Income Tax Act, 1961 has been in limelight since the announcement of the Interim Budget 2019-20 in which individuals earning a net taxable income upto Rs.5 lakh have been given full tax rebate.
Eligibility Criteria to Claim Full Tax Rebate Under Section 87A
- The individual must be a resident of India.
- The net taxable income (income after making eligible deductions under Section 80) should not be more than Rs. 5 lakhs for AY 2020-21 or Rs. 3.5 lakh AY 2019-20.
Revised Tax Rebate u/s 87A after Budget 2019
- You must be a Resident Individual
- Your Total Income, after Deductions, (like under Section 80C) is equal to or less than Rs.5,00,000 (Earlier it was Rs.3,50,000).
- The rebate is limited to Rs.12,500 (Earlier it was Rs.2,500).
It means if your total tax payable is lower than Rs.12,500, the amount will eligible for a rebate under Sec.87A. Do remember that the rebate should be applied to the total tax before adding the education cess (4%).
Individual meets the criteria mentioned above and have net income less than Rs.5 lakhs can claim for full tax rebate under section 87A from the upcoming assessment year onwards. However, it should be noted that only individuals can make the tax rebate claim under the section. Other taxpayer entities like HUF, firms, companies, NRIs cannot claim this benefit.
Conditions of Section 87A of the Income Tax Act, 1961
The following are some of the noteworthy points of Section 87A of the Income Tax Act, 1961:
- The amount of deduction that can be claimed under this section is either 100% of the income tax liability or Rs. 2,500 (whichever is lower).
- Rebate is restricted to ‘total tax payable’ if the total tax payable is less than Rs.2,000
- The rebate is applicable to total tax prior to adding the educational cess of 4%.
- Only individuals are eligible to avail rebate under this section. Companies, firms or Hindu Undivided Family cannot claim this rebate.
- Rebate benefit is available to senior citizens (individuals above the age of 60 years and below 80 years)
- Super senior citizens (individuals above the age of 80 years) are not eligible for a rebate under Section 87A.
- Only Indian residents are permitted to claim this rebate, NRIs are not allowed rebate under Section 87A.
It is noticed most of the accounting and return filing software have made amendments in their programming to give benefit of this rebate while calculating TDS from Salaries. This may result in short deduction of tax at source to the extent of rebate calculated. The provision of section 192 has to be amended to include rebate u/s 87A while calculating taxable salary to avoid unnecessary litigations.
As most of the employers all over country would have considered this rebate as mentioned above by default (due to TDS calculation of software), it may happen that CBDT amends the provisions with retrospective effect or issue instructions internally to avoid litigations on this base.
How to Claim Refund?
One can claim their refund under Section 87A of the Income Tax Act, 1961 only if their income is less than Rs.5 lakh and their tax liability is more than Rs.2000. The rebate can be claimed while filing the tax return just before adding education cess, secondary and higher education cess.
Section 80EE – Tax Deduction on Home Loan Interest
Section 80EE allows Income Tax benefits on the interest portion of the house property loan availed from any financial institution. The deduction allowed under this section is for the interest paid on a home loan for up to a maximum of Rs 50,000 per financial year. You can continue to claim this deduction until you have fully repaid the loan.
Features of the 80EE Deduction
The following are the feature of 80EE Deduction under Income Tax
- The deduction under this section is available only to individuals. This means, if you are a HUF, AOP, a company or any other kind of taxpayer, you cannot claim any benefit under this section.
- This deduction is over and above the Rs 2 lakh limit under section 24 of the income tax act. Read more about deduction of Rs 2 lakh on interest on home loan here.
To claim this deduction, you should not own any other house property on the date of the sanction of a loan from a financial institution only.
Eligibility for Claiming Section 80EE Deductions
To become eligible for claiming 80EE deductions, a taxpayer has to make sure of the following:
- Only individual taxpayers can claim deduction under Section 80EE on properties purchased either singly or jointly. If an individual has bought a property jointly with his or her spouse and they are both paying the instalments of the loan, then the two can individually claim this deduction.
- E-tax benefits are not applicable for Hindu Unified Families (HUF), Association of Persons (AOP), companies, trusts, etc.
- Tax benefits under Section 80EE can only be claimed by first-time home buyers. In order to claim this deduction, the individual must have taken the loan from a financial institution for buying his/her first residential house property.
- Section 80EE is applicable on a per person basis rather than a per property basis.
- To claim this benefit, it is not necessary for the taxpayer to reside in the property for which he or she is claiming this deduction. Borrowers living in rented homes can also claim this deduction.
Tax Benefits on Interest Paid
Under section 24 of the Income Tax Act, one can avail the deduction on Home Loan for payment of Interest tax benefit. The self-occupied property allows the deduction with the maximum limit of Rs. 2 lakh if it takes the completion within 5 years from the end of the Financial Year, otherwise Rs. 30,000.
From Assessment year 2018-19, the loss from house property that will be allowed to be set off from other heads of income will be restricted to Rs 2,00,000 in particular assessment year and the rest amount shall be carried forward for set-off in subsequent years.
Conditions for claiming Deduction
The following are the conditions for claiming Deduction u/s 80EE
- Value of this house should be Rs 50 lakhs or less
- Loan taken for this house must be Rs 35 lakhs or less
- The loan must be sanctioned by a Financial Institution or a Housing Finance Company
- The loan must be sanctioned between 01.04.2016 to 31.03.2017
- As on the date of the sanction of loan, no other house property must be owned by you.
The deduction can only be claimed by individuals for the house purchases jointly or singly. If a person jointly owns the house with her wife and they both are paying the instalments of the loan, then both of them can claim this deduction.
Tax Benefits on Principal Re-paid
Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of home loan is Rs. 1.5 lakh. Deduction under section 80C also includes investments done in the PPF Account, Equity Oriented Mutual funds, Tax Saving Fixed Deposits, National Savings Certificate, etc. subject to the maximum of Rs. 1.5 lakhs.
Besides this, there are stamp duty and registration charges that one can claim under the aforementioned section. Though, the claim can only take place in the year in which the payment has been made.
There is a condition under which this repayment of the principal amount of housing loan is allowed. The deduction is only possible after the house gets entirely completed and there is a completion certificate for the same. Any under construction structure is not going to be a part of this section.
Section 80E – Income Tax Deduction for Education Loan
Section 80E deduction under the Income Tax Act 1961 provides tax deduction for educational loans. The income tax deduction can be claimed on educational loans availed for higher studies of the spouse or children of a taxpayer. Section 80E deduction is available on the interest component of an educational loan after an individual has started repaying the loan.
The following are the eligibility criteria for availing Section 80E deduction
- Only individuals are eligible for tax deductions under this section. Hindu undivided families and companies cannot avail deductions under this section.
- Deduction can be claimed only on the interest component of a particular educational loan.
- Only those loans availed from recognised financial institutions and charitable organisations are eligible for tax deduction. Loans obtained from friends or relatives are not eligible under this section.
- Loans can be taken by a taxpayer towards fulfilling the educational commitment of either himself/herself or his/her spouse or children.
- Deduction can be claimed only if the loan is availed for purpose of higher education.
- Deduction can be availed only for eight years, beginning from repayment from the first year.
- Deduction can be claimed only if the loan is taken under the name of taxpayer.
Who Can Claim The Deduction Under Section 80E?
Deduction under this section can be claimed only by an individual who has taken a loan for higher education and paying interest on the same. It cannot be claimed by an HUF, company or any other type of tax payer. Till FY 2006-07, the deduction under this section was limited to loan taken by the assessee himself. However it was then modified to also apply to loans taken:
- For self
- Children of the assessee, including adopted children.
- For any student for whom the assessee is the legal guardian
Although, the loan can be availed for education of the individual or his relative, deduction can be claimed only by the individual who has availed the loan for this purpose and is responsible for repaying the same out of his income.
Tax Benefits of Education Loan under Section 80E
Any individual who has applied for a loan for higher education can avail the benefits of tax saving provided by Section 80E of the Income Tax Act, 1961. Even an individual who has availed the maximum deduction of INR. 1,50,000 available under section 80C, they can still avail deduction under Section 80E.
Amount of Deduction under Section 80E
The amount of interest paid is eligible for deduction and moreover there is no cap on the amount to be deducted. You can deduct the entire interest amount from your taxable income.
Deduction under Section 80E
Section 80E Deduction available if Interest is been paid during the previous year and was paid out of income chargeable to tax which means if repayment is made from income not chargeable to tax than deduction will not available. Deduction will be allowed only when actual interest is paid.
What expenses are allowed under Section 80E?
The deduction is allowed only in respect of interest paid on loan taken for higher education. No deduction is available in respect of repayment of principal portion of loan taken for higher education.
Document required to Claim Deduction under Section 80E
You need to obtain a certificate from your Bank / financial institution or approved charitable institution from whom such education loan is been taken. Such certificate should segregate the principal and interest portion of the education loan paid by you during the financial year. The total interest paid will be allowed as deduction. No Tax benefit is allowed for the principal repayment.
Where the loan can be taken?
To claim deduction under section 80E, the assessee needs to avail loan from any financial institution or a recognised charitable institution. Deduction Section 80E cannot be availed towards the interest paid to a relative or employer towards a loan taken for higher education.
- Financial Institutions
Any Financial Institution to which Banking Regulation Act 1949 is applicable. It would thus, include banks and other banking companies. Financial institutions would also include institutions notified by the Central Government in its official gazette.
- Charitable Institutions
Loans for higher education can also be availed from any approved charitable institution. Approved charitable institution would mean an institution that has been established for any charitable purpose and approved by the relevant authority under the clause of 23C of Section 10. It would also include institutions referred to under Section 80G.
Claiming 80E Tax Deductions
The deduction amount under Section 80E is only the interest paid on the loan taken for higher studies. This amount has no upper limit; you can get tax benefit on the entire amount of interest paid but not on the principal amount.
The deduction under section 80E is allowed only if the education loan was taken for higher studies. Higher studies refer to education after completing the Senior Secondary Examination (SSE). It includes both the vocational courses as well as the regular courses in India or abroad. Thus, loan taken for post graduate courses in medicine, management, engineering, applied science, etc. are covered under Section 80E.
The deduction under section 80E can be claimed from the year in which you start paying interest on loan for higher education. If you have started paying interest within the same year of borrowing, then you can claim deduction for the payment of interest on this loan. The maximum period allowed to claim deduction is up to 8 years starting the year in which you start repaying the interest on the loan or till the time interest is paid fully, whichever is less.
Tax Benefits on Tuition Fee
Tax Benefits for School Tuition Fee under section 80C
A part of money you spend on educating your kids can be claimed as tax deduction u/s 80C of I-T Act. The tuition fees paid in school for children are eligible for deduction. As this deduction u/s 80C, therefore the maximum limit allowed as deduction is Rs. 1, 50,000 (together with all other deductions u/s 80C & 80CCC). This deduction can be claimed by individual for maximum 2 children and is only allowed on actual amount paid as tuition fees to eligible educational institutions.
The government of India allows tax breaks & income tax exemption on the tuition fees paid by the individual for their children. To promote it must be noted that deduction is available only on the tuition feespart of the total fees paid. Higher literacy rate & education of the children within India, there is number of tax benefits which the person can take for reducing their taxable income.
the tax benefits available for payment of education or school tuition feesof children that are part of the salary structure of the salaried individual as well as taking an additional deduction under section 80C for making investments in children’s education.
What can you claim?
This deduction is available only for full-time courses and for fees paid to a recognized university, college, school or other educational institution in India. All tuition fees paid during pre-nursery, play school and nursery class are also included.
No deduction is available for fees paid for private or home tuition, coaching courses for admission in professional courses, part-time courses and distance learning courses. Also, there is no rebate on the other charges paid to schools or colleges, such as: late fees, development fees, transport charges, hostel charges, mess charges, library fees, scooter/cycle/car stand charges incurred for education, term fees, building fund, and donation or capitation fee.
Deduction cannot be claimed for tuition fees paid to foreign universities situated outside India. Also, tuition fee paid for self or spouse or other dependents, other than children, is not deductable.
To claim the deduction, you should submit payment receipts to your employer. However, if you fail to submit the receipts, you can also claim the deduction while filing your income tax return.
Look for other tax-saving investment avenues, only if you are still left with scope to save taxes after taking into account all such expenses that help you bring down the taxable income.
Eligibility of Tuition fees for claiming deduction u/s 80C
Persons paying any sum/ fees towards the education of their children can claim tax deduction provided following conditions are satisfied:
- Who is eligible: Deduction is available only to an Individual.
- How many Children? Deduction is available to a maximum of 2 children for each individual. Therefore, a maximum of 4 children deduction can be claimed, i.e. 2 by each parent.
- Maximum Limit: Deduction is available maximum up to INR 1.50 Lakh for each financial year for each parent respectively. Please note that aggregate amount of deduction under section 80C, 80CCC and 80CCD shall not exceed INR 1, 50,000 for the individual parent.
- Tuition Fees Paid to affiliated Educational institution, University, College, School within India: Deduction are available irrespective of the class attended by the child. But, the university must be situated in India. It can be affiliated to any foreign university.
- The deduction is available only for full-time education courses that include Nursery School, Creches & play schools.
- Deduction is available only on actual payment and not on the payable basis: For example, if fees is paid by the parent in April 2017 for the quarter ending March 2017 then fee paid will be eligible for deduction in FY 2017-18.
- Fee can even be claimed by Unmarried person/ divorced parent.
- Adopted Child’s school fees are also eligible for deduction.
How to Apply?
To apply, you need to get a receipt of the tuition fees from the institution and submit it to your employer. Additionally, it should reflect on your IT declaration form before you submit the receipt as a proof of investment.
Tax benefit for how many children?
The benefit applies for the fees paid for up to two children. So if a couple has four children, both can claim tax benefit as both have a separate limit of two children each.
Tax Deduction on Tuition Fees under Section 80C:
Section 80C of the Income Tax Act has provisions for tax deductions on tuition/education fees paid by a parent towards educating his/her children. Taxpayers can avail deductions to a tune of Rs 1.5 lakh under Section 80C, with other investments also eligible for this rebate. Parents can claim the tuition fee paid by them towards their children’s education as deductions, ensuring that they save tax even if they don’t have other tax saving instruments. Parents can claim the actual fee paid by them in a particular financial year.
Tax Deduction on Tuition Fees under Section 10:
Section 10 of the Income Tax Act offers an additional tool for taxpayers to save some of their tax. Under this provision, salaried individual taxpayers are eligible to save tax to the tune of Rs 100 per month per child. This amount can be availed for a maximum of 2 children per taxpayer, which means that an individual taxpayer is eligible for tax exemptions of Rs 200 per month. This amount can be claimed as exemption only in the financial year in which the fee was paid. In addition to this exemption, one can also claim exemption on hostel costs on his/her children. This hostel allowance is capped at Rs 300 per month per child, subject to a maximum of 2 children.
How to claim the tax exemption for Children education allowance?
The person would need to submit receipt issued by the Schools for the payment made during the financial year to their employer & also show in form 12BB before submitting proofs of investments at the end of the financial year.
For an Individual other than salaried employee, you would have to claim the deduction under VI-A schedule by showing the amount of fees paid under section 80C on the income tax return.
It is important to mention here that Children education allowance i.e. part of salary structure & fees paid towards tuition fees of the Children are both different deductions & is, therefore, can be claimed respectively within the limit prescribed as per the India income tax Act.
Non-eligibility of payments towards Tuition fees
- Deduction is not available for payment made towards Development fees, donation or charity, Private Coaching center, other expenses such as hostel expenses, mess charges, library charges or similar payments.
- Deduction is not available for payment made towards part-time courses.
- Deduction is not available towards payment made for school fees of self, spouse, brother or sister, father or mother or any other relative.
- Late school fees paid is also not eligible for deduction.
- Fees paid to a foreign university situated outside India would also not be eligible for deduction.
Not allowable Expenses:-
- Development feesor donation not eligible.
- Transport charges, hostel charges, Mess charges, library fees, scooter/cycle/car stand charges incurred for education are not allowed.
- Late feesare not eligible for deduction.
- Term Fees is not eligible for deduction.
- No deduction for part time or distance learning courses.
- No rebate for private tuition.
- Building fund or any donation etc. not allowed.
Conditions to qualify for deduction
- Only tuition fees paid for full-time education to regular educational institutions like schools, colleges, universities, etc. qualifies for deduction.
- Fees like admission fees, development fees, uniform fees or any other fees do not qualify for deduction.
- Deduction can be claimed whether the child attended the class or not.
- Payment of tuition fees to play schools or day care is allowed as deduction.
- Adopted child’s tuition fees are also eligible for deduction.
Other Important Factors:
- The tax benefits on this can be claimed by divorcees and unmarried individuals sponsoring a child’s education as well.
- The Section covers claims on education allowance for adopted children.
- You can claim deductions only on tuition fees and not on any other charges an institution levies. This could be hostel expenses, mess charges, transportation charges, library expenses, private coaching centers, and other similar expenses.
- Deductions can be claimed only for the fee paid to Indian institutions.
- Similarly, deductions are not applicable for the payment of school fees of your spouse, sibling, or parents. For example, you cannot claim tax benefits on the payment of your brother’s school fees.
- You cannot claim deductions on late payment of school fees.
Section 80CCC Pension Plan Tax Deduction
Section 80CCC of the Income Tax Act 1961 provides tax deductions for contribution to certain pension funds. The section provides tax deduction up to a maximum of Rs.1.5 lakh per year on expenses incurred in buying a new policy or continuing an existing policy that pays pension or a periodical annuity. It works in conjunction with section 80C and 80CCD (1) so that the maximum total deduction available under all three sections (80C, 80CCC & 80CCD (1)) is Rs. 1.5 lakh.
Eligibility for Claiming Deductions u/s 80CCC
Any individual taxpayer who contributes toward any annuity plan offered by an insurance company are permitted to claim the deductions under this section. The individual taxpayer can be a resident or non-resident Indian. A HUF or Hindu Undivided Family (HUF) cannot claim tax benefits under this section.
- The plan must be related to receiving a pension from a fund that is stated in Section 10(23AAB). The amount for the policy must be paid out of the income chargeable to tax. It should be noted that deduction cannot exceed the taxable income.
- Bonuses or interests obtained from the policy are not eligible to be claimed as a tax deduction.
- The proceeds from this policy as a pension fund are liable for taxes they are considered as income of the previous year. This would also include any bonuses or interests if any are received.
- The amount obtained after the surrender of the annuity plan regardless of whether in whole or in parts is also chargeable to tax.
- The pension obtained from the annuity plan is also chargeable to tax.
Deduction in respect of contribution under 80CCC
- Where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as documents not exceed the amount of ten thousand rupees in the previous year.
- Where any amount standing to the credit of the assessee in a fund, referred to in sub-section(1) in respect of which a deduction has, been allowed under subsection (1), together with the interest or bonus accrued or credited to the assessee’s account, if any, is received by the assessee or his nominee:
- On account of the surrender of the annuity plan whether in whole or in part, in any previous year, or
- As pension received from the annuity plan,an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.
- Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a rebate with reference to such amount shall not be allowed under section 88″.
- The main difference between Section 80C and Section 80CCC of the Income Tax Act of 1961 is that under the Section 80C, the amount to be paid may come from income that is not chargeable to tax. While under Section 80CCC the funds must be paid out the income that is chargeable to tax.
- Individuals who have paid taxes in excess but have invested in policies from LIC, PPF, Mediclaim or other insurance companies may claim these deductions under the Section and receive a refund of excess taxes paid while filing Income Tax Returns.
- Residents and Non- Residents of India may claim the deductions available under the Section 80CCC. However, under no circumstances, a Hindu Undivided Family is eligible for deductions under this Section.
- An individual cannot claim further deductions after exhausting the limit of INR 1.5 Lakhs under Section 80C, Section 80CCC and 80CCD(1).
Terms of Section 80CCC
- Some of the conditions associated with claiming deduction under Section 80CCC are:
- Tax deduction can only be claimed by taxpayers who have deposited some amount towards buying or continuing an annuity plan from LIC or any other insurance company.
- The maximum deduction that can be claimed during a financial year is Rs. 1,50,000.
- The policy towards which payments are made has to pay out pension from the accumulated funds, which is as per the terms of Section 10 (23AAB).
- The taxpayer cannot claim deduction on the interests or bonuses accrued from the policy. Additionally, the proceeds from the policy are taxable.
- The contribution that is made, on which deduction is being claimed, should be from the income that is chargeable to tax of the concerned individual assessee.
- The annuity plan’s surrender value, whether in part or in whole, will be treated as income and accordingly taxed.
- Tax deductions can only be claimed on amounts paid for the preceding year only. In case contributions toward a pension fund are made at one-go, the individual can only claim deduction for the year in which the payment has been made.
NPS Tax Benefits under Section 80CCD
Section 80CCD of the Income Tax Act, 1961 refers to income tax deductions allowed to individual tax assessee on the contribution made towards notified pension schemes from central government i.e. New Pension Scheme (NPS) and Atal Pension Yojana (APY). NPS is a notified pension scheme offered by the Central Government. Employer’s contribution on the behalf of employee towards National Pension Scheme is also included in the same section as per the rules of Income Tax Act.
Income Tax implications of the NPS scheme
- Currently, the NPS falls in the exempt, exempt, tax (EET) mode of taxation — tax free on contribution, accumulation but partially taxable on maturity.
- In all, 40% of the corpus amount on attaining the age of retirement or 60 is tax free.
- Partial withdrawal is allowed in the NPS under specific situations. Up to 25% of one’s own contribution for specific expenses like children’s higher education or marriage, construction or purchase of the first house, and medical treatment can be withdrawn and this is tax-free.
- The NPS offers an exit option before the age of 60, but the subscriber must invest 80% of the corpus to buy an annuity. The 20% of the corpus withdrawn is taxed according to the subscriber’s income-tax slab.
Eligibility for Claiming Section 80CCD Deductions
The following are the eligibility criteria for claiming deductions under Section 80CCD of Income Tax Act, 1961:
- Eligible only for individual assesses, both salaried and self-employed.
- Citizens of India, including NRIs, can avail tax benefits under Section 80CCD
- HUF (Hindu Undivided Family) are not eligible for tax benefits under this section
- Deduction under 80CCD (1) is restricted to up to INR 1.5 lakh. An additional deduction of up to INR 50,000, as introduced by Union Budget 2015, can be claimed under 80CCD (1B), thereby taking the maximum deduction limit to INR 2 lakh.
- An income tax assesses employed on or after 1st January, 2004 by the Central Government can contribute up to 10% of the annual salary (basic and dearness allowance) towards NPS.
- Salaried employees who are not employed by the Central Government could contribute a maximum of 10% of annual salary (basic and dearness allowance), while self-employed tax assesses could claim deductions of up to 10% of gross income during the FY2016 – 17. The deduction limit has been increased to 20% from the FY 2017 – 18.
Categories of 80CCD
Section 80CCD has been further divided into two sub-sections to provide clarity regarding the available deductions for income tax assesses. While one sub-section deals with the rules about tax deductions available to salaried and self-employed professionals, the other pertains to contributions made by the employer towards the NPS.
Following is detailed information regarding the two sections for Section 80 CCD.
1. Section 80CCD (1)
This sub-section defines the rules related to income tax deduction available to individuals for contributions made to the NPS. It is irrespective of the fact whether the contribution has been made by a government employee, private employee or a self-employed individual. The provisions of this section apply to all Indian citizens who are contributing to the NPS and are between the ages 18 to 60 years. This also applies to NRIs.
The deduction is restricted to a maximum of 10% of salary for salaried employees and 10% of gross income for self-employed taxpayers, i.e. taxpayers who are not salaried employees. Here, salary refers to the total of basic pay and dearness allowance. However, this was applicable only for the FY 2016-17 because the limit has been increased to 20% from the next financial year, i.e. FY 2017-18 onwards. The deduction amount cannot be more than INR 1.5 lakh in a particular fiscal year.
Part (1B) under Section 80CCD has been introduced through amendments made to the 2015 Union Budget. It offers an additional deduction of INR 50,000 for assesses, both salaried and self-employed, who have contributed to NPS. After including 80CCD (1B), the maximum deduction limit is restricted to no more than INR 2 lakh. Tax benefits under this sub-section can be claimed over and above deductions the limit of Section 80CCD (1).
2. Section 80CCD (2)
This sub-section of Section 80CCD of Income Tax Act, 1961 is applicable when an employer contributes towards an NPS fund on behalf of its employees. An employer can contribute towards an employee’s NPS, along with contributions towards PPF and EPF. The contribution of the employer can be equal or higher or lower than the employee’s contribution towards NPS. Deductions under this section can be availed only by salaried employees and not self-employed. The employed are eligible for deductions over and above the limit as per Section 80CCD (1).
In this case, employees can claim deductions under Section 80CCD (2) up to 10% of their salary, i.e. basic salary and dearness allowance taken together, or equivalent to the gross total income or equivalent to the contribution made towards NPS by the employer.
Terms and Conditions
- An assessee employed by the central government on or after 1st January 2004 can contribute a maximum of 10% of annual salary (basic + dearness allowance)
- Any other salaried employees (benefit offered post 1st April 2009) can contribute a maximum of 10% of annual salary ( basic + dearness allowance)
- For Self-employed individuals, the maximum limit is 10% of the gross annual income which is now increased to 20% (applicable from next assessment year)
- Employees are eligible to claim deductions for contributions made by the central government or employers which cannot be more than 10% of annual salary (basic + dearness allowance)
- Hence, the total tax deductions allowed for employees is Rs. 1.5 lakh (under section 80C, 80CCC, 80 CCD) + Rs. 50,000 under Section 80CCD (1B) = Rs. 2 lakh
80D – Tax Deductions for Medical Insurance Premium
Section 80D of the Income Tax Act, 1961 relates to the Tax deductions on Medical Insurance. This section lets you receive tax deductions on premiums made for medical insurance to secure yourself and your family members. Section 80D also offers deductions over and above the exemptions derived from the more popularly known Section 80C.
Deduction under this section 80D is available to an individual or a HUF. A deduction of Rs. 25,000 can be claimed for insurance of self, spouse and dependent children. An additional deduction for insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 (has been increased in Budget 2018 from Rs 30,000) if parents are more than 60 years old. In case, a taxpayers age and parents age is 60 years or above, the maximum deduction available under this section is to the extent of Rs. 100,000.
An individual taxpayer is eligible to claim deductions under section 80D. The health insurance premium paid for the family members listed below are eligible for deductions:
- Dependent Children
Section 80D Deductions
There are four different types of deductions that you can claim u/s 80D. They are:
- Tax deduction on health insurance premium paid for you & your family
- Tax deduction on health insurance premium paid for your parents
- Tax deduction on preventive health checkup expenses
- Tax deduction on medical expenses of super senior citizens
1. Tax Deduction on Health Insurance Premium Paid for Your Family:
- If you pay premium for health insurance taken for you and your family then you can claim tax deduction under section 80D
- You can claim deduction up to Rs. 25,000.
- Deductions for senior citizen u/s 80D are higher. If you are a senior citizen then you can claim deduction up to Rs. 50,000.
2. Tax Deduction on Health Insurance Premium Paid for Your Parents:
- In addition to the above mentioned deduction, you can also claim tax deduction if you pay premium for your parents’ medical insurance u/s 80D.
- You can claim deduction up to Rs. 25,000.
- However, if your parents are senior citizens (i.e. 60 years or above in age), you can claim deduction up to Rs. 50,000.
3. Tax Deduction on Preventive Health Check-up Expenses u/s 80D:
There is another tax benefit available u/s 80D which can be claimed up to Rs. 5,000 if you have incurred expenses on health check-up of your family, parents and yourself.
- The quantum of this deduction is up to Rs. 5,000.
- However, this deduction of Rs. 5,000 is not in addition to the maximum deduction of Rs. 60,000 / Rs. 40,000 stated above but is included in the above deduction.
- It is important to note that Rs. 5,000 is the maximum total deduction allowed for preventive health check-up.
4. Tax Deduction on Medical Expenses of Super Senior Citizens Having no Mediclaim Policy
If you or any member of your family or either of your parents is a super senior citizen (i.e. 80 years or above in age) but is not covered by any health insurance, you can still get a tax deduction.
- The condition is that you took care of their medical expenses.
- The amount that you can claim as tax deduction is up to Rs. 50,000.
The overall deduction limits are as follows:
The Provisions under Section 80D
- Premium paid through cash is not entitled to a deduction.
- Premium paid only for dependent children is included in the exemption limit, whereas premium paid for earning children is excluded in the section.
- In the case of spouse and parents, even though they are not dependent, one can claim benefits under this section.
- Tax exemptions are valid only on the health insurance premium and not on additional charges, such as GST, service charge, etc.
- Deductions on the health check-up expense includes all the dependents in the family and not individuals (it is an overall limit and not per individual).
Deduction on Disabled Dependant – Section 80DD
Deduction under section 80DD of the income tax act is allowed to Resident Individuals or HUFs for a dependant-who is differently abled and is wholly dependant on the individual (or HUF) for support & maintenance.
Eligibility Criteria for Deduction under Section 80DD
- Any individual or HUF (Hindu Undivided Family) who is a resident of India can claim this deduction.
- Non-Resident Individuals (NRIs) cannot claim deduction under Section 80DD of the Income Tax Act, 1961.
Conditions for availing Deduction
- Deduction is allowed for a dependant of the taxpayer and not the taxpayer himself.
- The taxpayer is not allowed this deduction if the dependant has claimed a deduction under section 80U for himself/herself.
- Dependant in case of an individual taxpayer means spouse, children, parents, brothers & sisters of the taxpayer. In case of a HUF means a member of the HUF.
- The taxpayer has incurred expenses for medical treatment (including nursing), training & rehabilitation of the differently abled dependant or the taxpayer may have deposited in a scheme of LIC or another insurer for maintenance of the dependant
- Disability of the dependant is not less than 40%.
- Disability is as defined under section 2(i) of the Persons of Disabilities Act, 1995
Amount of Deduction under Section 80DD
The amount of deduction allowed under Section 80DD of the Income Tax Act, 1961, will come down to whether the dependant suffers from disability or severe disability.
- Dependant person with disability – A dependant person with disability is one who has at least 40% of any of the specified disability. The family member who takes care of the medical charges of the dependant person with disability can claim tax deduction of up to Rs. 75,000.
- Dependant person with severe disability – A dependant person with severe disability is one who has at least 80% of any disability. The family member handling the medical expenses of dependant person with severe disability can claim tax deduction of up to Rs. 1,25,000.
The following documents will have to be submitted to claim tax benefits under Section 80DD of the Income Tax Act, 1961:
To claim tax deduction under Section 80DD, the taxpayer will have to submit a copy of the medical certificate, which authenticates the disability of the dependant.
If the disabled dependant is suffering from autism, cerebral palsy or multiple disabilities, then Form No. 10-IA has to be submitted.
Taxpayers have to produce a self-declaration certificate, mentioning the expenses incurred on the medical treatment (including nursing, rehabilitation and training) of the disabled dependant.
4.Receipts of Insurance Premium Paid
Since the self-declaration certificate will suffice for claiming most expenses, the individual is not required to preserve the actual receipts. However, if a claim is being made for the payment made towards insurance policies taken for the disabled dependant, then the actual receipts of the expenses need to be maintained.
What kind of Disability is considered under the Section 80DD?
Disability for Section DD is defined under clause (i) of section 2 by the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” as well as disabilities includes in clauses (a), (c) and (h) of section 2 of National Trust for welfare of Person with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.
Hence this includes the following disabilities:
- Cognitive or severe mental disabilities
- Low vision
- Hearing impairment
- Locomotor disability
- Mental illness
- Cerebral palsy
- Multiple disabilities