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Illustration of Income Tax rules which offer tax deduction/rebates to individuals

[This web page elucidates on sections 80C, 80CCC,80CCD (1A), 80CCD(1B),80CCE,80D,80 DD,80DDB, 80E,80EE, 80EEE,80G,80U, 80TTA, 87A,10(13A) and section 24 of Income Tax  Act 1961 which offer tax rebate and deductions to individuals]

1). Section 80 C:      Individuals are eligible for tax rebate on their investments u/s 80 (C) of IT act to the maximum limit of Rs. 150000.00 (Rupees one lakh and fifty thousand) in a financial year (applicable for FY 2015-2016). Contribution to EPF, NPS, PPF, investments in NSC,/ Equity Linked Saving Schemes (ELSS), Unit Linked Insurance Policies (ULIPs), Sukanya Samriddhi Scheme, Tax Saving term deposits of banks, premium paid on Life Insurance policy, tuition fee for maximum two children (fees for private tuition/ coaching classes are not eligible) and repayment of Housing Loan,  are the investments eligible for tax rebate  under Sec.80 C of IT act.

2).Section 80CCC: Contribution to certain pension funds like Annuity plan of LIC and other insurers.

3).Section 80 CCD (1A): The deduction under section CCD (1A) is available to both salaried and non-salaried individuals who contribute NPS scheme to the extent of Rs.150000/- (Rupees one lakh and fifty thousand). However, the maximum amount allowed as deduction is 10% of salary in a financial year and in case of non- salaried individuals 10% of Gross total income in a financial year.

4). Section 80 CCD (1B): Deduction towards contribution to New Pension Scheme by the employee. In the budget 2015 a contribution of Rs.50000/- to NPS qualifies for tax rebate in addition to Rs.150000/- u/s.80CCE.

5). Section 80CCE: Total limit of deduction eligible u/s -80C, u/s 80CCC   80 CCD (1) is Rs.150000/-(Rupees one lakh and fifty). In the budget 2015 additional rebate of Rs.50000/- allowed for contribution to NPS (u/s. 80CCD (1B) announced by the Finance Minister. Hence total limit under 80CCE for the FY 2015-16 is Rs.200000/-.

6). Section 80D:       Tax rebate under Medical Insurance for self and children: deduction up to 25000.00 (or 30000.00 in case the insurer or his/her spouse is above 60 years.) and additional deductions of Rs.25000/- on medical insurance of parents (or Rs.30000/- in case parent/s is above 60 years). The amount spent on preventive health check-up (maximum of Rs.5000/-.) is subsumed under this limit.

7).Section 80 DD: Disability related tax benefit in case of the dependent spouse, child, parent or sibling who is disabled. A deduction of Rs.75000/- for partial disability and Rs.125000/- for severe disability is allowed in the FY 2015-16.  The full amount of deduction will be allowed, without insisting  bills/insurance premium paid by the income tax office.

8). Section 80DDB:  Tax rebate on medical treatment expenditure for treatment of specified diseases like malignant cancer, or AIDS for self and dependents, the deduction allowed up to Rs.40000/-(Rs.60000/- if the patient is above 60 years).

9). Section 80E: An individual can claim income tax deduction for interest paid on education loan availed for self, spouse or his/her children u/s 80E of IT Act. The guardian appointed by the Court for a minor student is also eligible for tax deduction under the same section. One more benefit is that no upper limit for claiming deduction either on the amount of interest paid or rate of interest paid. The deduction can be claimed up to 8 years or closure of the loan whichever is earlier.If the interest is paid during the moratorium period, the time limit of 8 years begin from the date of the first repayment of interest on loan. It is important to note that the tax benefit is restricted for education loan availed from bank, notified financial or charitable institutions. In the other words, the education loan availed from the employer, family and friends does not come u/s 80E. Education loan availed for studies abroad is also eligible for tax deduction u/s 80E.

10).Section 80 EE: An additional exemption of Rs.50000/- per annum towards interest paid by the first time house buyers with effect from April 1, 2016, available u/s.80EE. The Housing loans up to Rs.35 lakh sanctioned by a bank in the financial year 2016-17 and the value of the property purchased under the loan is below Rs.50 lakh is  eligible for the deduction. (Announced by the Finance Minister in his budget speech on February 29, 2016).

11).Section 80EEE: First time home buyers (the person who does not already own a house property in his name),   who has availed a housing loan of Rs.25 lakhs or below on or after 01.04.2013, can claim additional tax deduction of Rs.100000.00 (Rupees one lakh) on interest paid on that loan under section 80EEE subject to condition that the value of residential property should not exceed Rs.40 lakh (Rupees forty lakh). If the interest paid is less than Rs.100000.00 (one lakh), in the first year, the unclaimed deduction can be utilized in the subsequent year.(It is important to note that  a deduction up to Rs.200000.00 (Rupees two lakh) on taxable income separately allowed under section 24.

12). Section 80G: Tax rebate can be clamed on specific donations to make prescribed funds and instituions. Tax benefit u/s 80G is eligible for the amount of donation within 10% of gross income . Donation in excess of 10% gross income in a financial year is not eligible for tax exemption. It is essential to make cash or cheque payment towards the donation to be eligible for tax exemption.

13).Section 80GG: The individual tax assessees who do not get House Rent Allowance from their  employers were eligible for the rent paid on their house  up to a maximum limit of Rs.2000/- per month (Rs.24000/-per annum). With effect from the April 1,2016, the above limit of deduction  allowed  is increased from Rs.24000/- p.a to Rs.60000/- p.a. 

14). Section 80 U:    Disability related tax benefit to an individual: A deduction of Rs.75000/- for partial disability and Rs.125000/- for severe disability is allowed in the FY 2015-16.  Full amount of deduction will be allowed irrespective of the amount of expenses incurred or insurance premium paid.

[Every individual claiming deduction u/s 80DD or 80U shall produce a copy of medical certificate issued by the appropriate authority in the form and manner as may be prescribed along with the return of income u/s.139 of IT act. Where the condition of disability requires the reassessment of its extent after a period is stipulated in the certificate, deductions are allowed after the expiry period mentioned in the certificate only after new certificate is obtained. The disabled means above 40% of disabilities to a person ( above 80% is considered as severe disability)  due to diseases like blindness, low vision, leprosy-cured, hearing impairment, loco motor disability, mental retardation, mental illness, Autism, cerebral palsy etc.]

15).Section 80 TTA: Savings Bank interest up to Rs.10000.00 (Rupees Ten Thousand) is exempted from tax under Section 80TTA. 14).

16).Section 10(13A):  Salaried persons are exempted from House Rent paid by them to their land lords. The rebate is subject to the minimum of the following.

A). Actual House Rent received from the employer

B). Actual House rent paid to the land lord minus 10% of basic salary*

C). 50% of employee’s basic salary if he/she leaves in Metro cities or 40%of basic salary* in non-metro areas. 

 *Basic Salary is inclusive of DA (wherever commission received by the employee on the basis of fixed percentage of turnover achieved by the employee that income also to be included in basic salary).

The deduction will be available only for the period of occupying the rented house, not for the entire year.  At least two rent receipts to be produced as evidence of rent- paid,one rent receipt at the beginning of the financial year and another one receipt at the end of the financial year. The rent paid receipts should duly signed on the revenue stamp by the land lord. People who pay rent less than Rs.3000/-per month need not produce rent receipt.Section 87(A)

17). Section 87(A): For the financial year 2016-17 (AY-2017-18),  a resident individual tax- assessee whose  annual income is less than Rs.500000/- (Rupees Five lakh)  is  eligible for tax -rebate for an amount equal to 100% of Income tax or amount of Rs.5000/- (Rupees Five thousand)  whichever is less.  (The limit  is increased from Rs.2000/- in the previous assessment  to maximum Rs.5000/- in the FY 2016-17).

18).Section 24:         In addition to rebate on repayment of housing loan principle amount under section 80 C, the interest portion paid on housing loan offers a deduction up to Rs.200000.00 (Rupees two lakh) on taxable income separately under section 24.

If the house is not self- occupied, (a) the entire amount of interest paid is eligible for deduction under section 24. (b) Standard Deduction at 30% of annual value (income from house property) is allowed under section 24.

Disclaimer: The sections of income tax rules illustrated above are based on author’s understanding of current tax legislation in India.  It is possible that any mistake, errors, ambiguity, inconsistency, discrepancy or doubts might have inadvertently crept up in those illustrations. Such mistakes or errors noticed by anyone may please be brought to the notice of the system admin or the author for the rectification. For clarifications or interpretations, if any, the readers are suggested to cross check all the facts with their tax consultants and  be guided with the original circulars or notifications issued by the Income Tax Department.It is hereby notified that the author or any one related to this website can be held responsible for any decision taken and/or decision made on account of above article. It is further notified that no one connected directly or indirectly to this website is responsible for any damage or loss or action of any kind, in any manner, therefrom.

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