Deductions under Chapter VI A of the Income-tax act can be availed by taxpayers for lowering their income tax liabilities. Chapter VI-A deduction is claimed by taxpayers liable to file ITR and have a taxable income during the previous year. The income tax deduction reduces your gross total income and after reduction, it becomes Total Income on which tax is calculated.
Income tax deduction needs to be claimed at the time of filing your Income Tax Return and there should be proper reporting of deductions in the correct column. These deductions are reduced from the gross total income to reach the taxable amount.
Deduction under Section 80C is the most popular deductions under chapter VI A that a vast majority of taxpayers utilize. This includes Life insurance and much other investment under various instruments such as Equity Linked Savings Scheme or ELSS, National Pension Scheme, tax-saving Fixed deposits, Unit linked insurance plans (ULIP), or PPF Deduction.
Income Tax Deduction under Chapter VI A covers the following Sections:
Section 80C, Section 80CCC, Section 80CCD, Section 80CCF, Section 80CCG, Section 80D, Section 80DD, Section 80DDB, Section 80E, Section 80EE, Section 80G, Section 80GG, Section 80GGA, Section 80GGB, Section 80GGC, Section 80 IA, Section 80IB, Section 80IC, Section 80ID, Section 80IE, Section 80JJA, Section 80JJAA, Section 80LA, Section 80P, Section 80QQB, Section 80RRB, Section 80TTA and Section 80U.
Eligible assessees are allowed to claim these deductions in their ITR. The eligible assessee has been described section-wise separately. In some cases, it is an individual in some company or HUF, etc.
Details of Deductions under Chapter VI A for AY 2020-21 (FY 2019-20):
1. Deduction under Section 80C
Who can claim section 80C deduction?
Eligible Assessees: Individuals and HUFs
Maximum Limit: Rs. 1,50,000 can be claimed as deduction under section 80C
The followings are investments, expenses, and payments which can be claimed as deduction under section 80C.
(I) Income Tax Deduction for Life insurance premium payment
The policy must be in the name of taxpayers, taxpayer’s spouse, or any child whether the child is dependent or independent, Whether the child is minor or major.
If insurance policies are purchased after 1st April 2012 deduction is allowable only if the premium is less than 10% of sum assured. In the case of govt employees deduction is allowed on payments made to Central Government Employees Insurance Scheme.
The claimed deduction will be withdrawn if the Insurance policy terminates within 2 years. It is the most popular and widely claimed deductions under chapter VI A.
(II) Deduction For Purchase of NSCs
National Savings Certificate or NSC can be bought from India post office and it is eligible for deduction under section 80C in the year they are purchased. Their term is for 5 years. Interest is compounded yearly and is taxable under income tax. Interest earned is also eligible for 80C deduction during the term of 5 years (except the last year).
(III) Deduction For Investment in ELSS
ELSS or Equity Linked Savings Scheme have 3 year lock-in period and it is a type of mutual fund investment. Investments made in ELSS funds are eligible for deduction under section 80C in the year in which investment is made.
(IV) Deduction For Unit Linked Insurance Plan (ULIP) of UTI or ULIP
Unit Linked Insurance Plans are also eligible for deduction under section 80C. It is a Unit Linked Insurance Plan of LIC Mutual Fund and contribution to Other Unit Linked Insurance Plan of Unit trust of India (UTI). ULIP policy premium should be paid at least for 5 years and if withdrawn before the 5 years, the deduction claimed under 80C shall be withdrawn.
ULIP proceeds after maturity is not subject to tax and exempt under income tax. For claiming deductions under section 80C ULIP should be in the name of taxpayer or spouse or child.
(V) Income Tax Deduction For 5 Year Post Office Time Deposit Scheme
It is similar to bank FD. Post office time deposit is available for the duration like 1 year, 2 years, 3 years, and 5 years, But under section 80C only 5-Yr post-office time deposit qualifies for tax saving. However, interest earned is entirely taxable.
(VI) Deduction For Contribution to PPF (Public Provident Fund)
It is also one of the most sought deductions under chapter VI A. Deposits made in the PPF account can be claimed for deduction under section 80C. The maximum limit of investment in PPF is Rs. 1,50,000 and the minimum investment is set at Rs. 500 each year.
Interest is announced by govt quarterly and compounded annually. Contribution to PPF account is considered as deduction and Interest on PPF account is fully tax-free.
The maturity period of PPF account is 15 years and redemption proceeds on maturity are tax-free. The amount invested in PPF account is allowed to be withdrawn after 5 years.
(VII) Deduction For Employee’s share of PF Contribution
The employer deducts 12% of (Basic salary + DA) and deposits as employee’s contribution in Employee’s Provident Fund Scheme or Recognized Provident Fund. Employee contribution of PF contribution is eligible for deduction under section 80C.
(VIII) Income Tax Deduction For Tuition fees payment
The deduction under 80C can be claimed for payment of tuition fees paid to any college, schools, university, or other educational institution situated within India. It is available for any two children. Payments for play school, pre-nursery and nursery are also eligible for the deduction. It is also very popular deductions under chapter VI A).
(IX) Income Tax Deduction Repayment of housing loan
Deductions under section 80C is allowed for principal repayment of home loan taken for buying or constructing a residential house. The deduction is also allowed for stamp duty, registration fees, and other expenses of buying and registering the property. However, House property should be held by the taxpayer for at least 5 years from the end of the financial year in which its possession was taken otherwise the total deduction allowed for various years become taxable in the year of sale.
(X) Income Tax Deduction Superannuation Fund contribution
Employee’s contribution to the approved superannuation fund is allowed as deduction under Section 80C of income tax act, subject to maximum limit of Rs 150,000 in 80C. Interest earned from a superannuation fund is exempted from income tax.
(XI) Income Tax Deduction Senior Citizen Saving Scheme investment
The amount deposited under Senior Citizens Saving Scheme: A recent addition to the list, Senior Citizen Savings Scheme (SCSS) is a small savings schemes but is meant only for senior citizens. Interest is payable quarterly instead of compounded quarterly. Interest income is chargeable to tax. The account may be opened by an individual.
Eligibility for Senior Citizen Saving Scheme:
Age must be 60 years or above on the date of opening of the account
Age must be 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme.
For retired personnel of Defence services, there is no age limit subject to fulfillment of other conditions.
(XII) Income Tax Deduction for Tax Saving Fixed Deposit with Banks
Only Individuals and HUF are eligible for this investment. Tax saving FD account can be created in any public or private sector bank. However, co-operative and rural banks are not eligible to open tax FD account.
These tax saving FDs have a lock-in period of 5 years and premature withdrawals of these FDs are not allowed.
There is a drawback of Tax saving FD is you can not take loan against these tax saving FDs.
(XIII) Income Tax Deduction Sukanya Samridhi Yojna investment
Sukanya Samridhi Account can be open for a girl child. The upper limit for investment is Rs 1,50,000 and the interest rate is compounded annually. Interest accrued on the investment is fully exempt from income tax. The minimum limit for investment is Rs 1,000 in a year. The maturity period of these account is 14 years and entire proceeds on maturity from the account are exempt from tax.
(XIV) Subscription to any deposit scheme/pension fund of National Housing Bank (NHB)
(XV) Subscription to bonds issued by National Bank for Agriculture and Rural Development (NABARD)
(XVI) Subscription to notified deposit scheme of Public Sector Housing Finance Company and Housing Development Authority of cities, towns and villages
(XVII) Subscription to equity shares or debentures of Public Company or any Public financial institution forming part of an eligible issue of capital approved by Board where proceeds are utilized for infrastructure company.
(XVIII) Annuity plan of LIC or any other notified insurer (Jeevan Dhara, Jeevan Akshay etc.)
2. Deduction under Section 80CCC
Section 80CCC provides a deduction for the contributions made in specified pension plans. Deduction under this section can be claimed by the resident as well as non-resident individuals. These deductions in not in excess of 1.5 lakh threshold under 80C deduction. It is to be clubbed in the overall ceiling of Rs 1.5 lakhs under section 80C.
3. Deduction under Section 80CCD(1)
Deduction under Section 80CCD(1) deals with the contribution made by individuals to eligible NPS account. The maximum limit for deduction under this section is Rs 1.5 lakhs which is a part of overall ceiling limits of section 80C.
4. Deduction under Section 80CCD(1B)
Deduction under section 80CCD(1B) provides additional deduction up to Rs 50,000 for contributions to NPS account. It is not counted in 80C deduction limit ie. It is given over and above limits of Rs. 1,50,000/- of section 80C. This is a very popular deductions under chapter VI A and has gained so much attention.
5. Deduction under Section 80CCD(2)
The amount contributed by the employer to the NPS account of an employee is also allowed as deductions under chapter VI A and tax-deductible under section 80CCD(2). The maximum threshold for deduction is Rs 1,50,000/-
6. Deduction under Section 80D: medical insurance premium
Section 80D is amongst the one of most popular income tax deduction under Chapter VI A. It is allowed over and above the deductions claimed under section 80C, section 80CCC and 80CCD. Under this section deduction is admissible for:
- Medical Insurance Premiums
- Expenditure on Preventive Health Check-up
- Other Medical Expenditure
Under section 80D deduction, an individual is allowed deduction of up to Rs 25,000 for medical insurance of self, spouse, and dependent children.
An additional deduction is available for the medical insurance of parents. The threshold limit for insurance of parents for aged less than 60 years are Rs. 25,000. If parents are more than 60 years of age, the Deduction threshold is Rs 50,000/-
Deduction of up to Rs 5,000, is available over and above the limit of 25000/50,000 in case of any payments made towards preventive health check-ups.
7. Deduction under Section 80DD
Under section 80DD an income tax deduction is allowed to the extent of Rs 75,000 for normal disability. Deduction in case of severe disability is Rs. 1,25,000. This deduction can be claimed for medical treatment expenditures on a disabled dependent relative.
8. Deduction under Section 80DDB: Deduction for Specified Diseases
Deduction under section 80DDB allowed to be claimed by taxpayers in case taxpayers or dependent family members are suffering from a severe disease/disabilities. Income tax deduction of Rs 40,000 is allowed under this section. However, in case of senior citizens aged 60 years or above, the deduction amount is Rs 1,00,000/-
9. Deduction under Section 80E: Deduction for Interest paid on Education Loan
Deduction for interest paid on education loans is allowed under section 80E. Loans should have been taken for the purpose of higher education. Persons covered under section 80E deductions are- Self, Spouse or Child of taxpayers. Deduction under this section is available on interest paid for a maximum of 8 Years. There are no maximum threshold limits for the deduction. This deduction under section 80E promotes education loan for higher studies.
10. Deduction under Section 80EE: Deduction for Home Loan
Deduction under section 80EE of income tax act allowed for home loan interest repayment. Home loans should have been taken for residential house property. You can claim a deduction of up to Rs. 50,000 per financial year until you have fully repaid the loan.
11. Deduction under Section 80EEA: Deduction for first time home buyers
This is a new section for deductions under Chapter VI A. Section 80EEA provides an additional deduction for paying interest on home loans for first-time buyers. This section allows for additional deductions of Rs. 1.5 lakh over and above deduction under Section 24 of Rs. 2 lakhs in respect of interest on the home loan.
12. Deduction Under Section 80EEB: Interest on Electronic Vehicle Loan
Deduction Under Section 80EEB is another new section for deduction under chapter VI-A. It was introduced to promoting the electric vehicles by providing them tax relief by way of deductions under chapter VI A. Deduction is allowed for interest paid on the vehicle loan taken to purchase an electric vehicle. The threshold limit of deduction under section 80EEB is up to Rs 1.5 lakhs
13. Deduction Under Section 80G: Deduction for donations
This is also one of the popular deductions under Chapter VI A of the income tax act. All types of taxpayers (Individual, HUF, Firm, Company, LLP etc) are eligible to claim deduction under 80G.
80G deduction is allowed for donations made to specified relief funds and charitable and religious institutions.
The deduction amount is based on the category in which the relief fund falls i.e. Deduction for donation in some funds are eligible with qualifying limit and some without any qualifying limit.
The donation should not be made in cash if it exceeds Rs 2000/-. There is no deduction allowed for donations made in kind.
14. Deduction Under Section 80GG: Deduction for House Rent
Section 80GG is a deductions under Chapter VI A of the Income Tax Act which can be claimed by individuals only. Deduction under 80GG can be claimed by only those taxpayers who do not receive any HRA (House Rent Allowance) or RFA (Rent Free Accommodation) but paying rent for their stay.
Amount of deduction Allowable under Section 80GG:
Lowest of the followings is allowed as deduction under section 80GG:
- (Rent paid during the year) Less (10% of basic salary).
- Rs 60,000 per year ie. (Rs 5,000 per month).
- 25% of the adjusted gross total income.
From the above limits, it can be concluded that maximum threshold for deduction u/s 80GG is Rs 5,000 per month or Rs. 60,000 yearly.
15. Deduction Under Section 80GGA
Under section 80GGA deduction is allowed for donation made towards Scientific Research or Rural Development. In section 80GGA there is no threshold limit for the deduction. It means deduction can be claimed without any upper limit Under this section the whole amount is allowed as deduction without any upper limit. However, cash donations of more than Rs. 10,000 are not allowed to be claimed under this section.
16. Deduction Under Section 80GGB: donation to Political Parties etc.
Section 80GGB of the Income Tax Act provides deductions for donations made to political parties by Indian companies. However, government organisations and new companies having existence for less than 3 years are not eligible for this deduction.
The political party must be registered under representation of the People Act. An electoral trust is a non-profit company and must be registered under Section 8 of the Companies Act.
For claiming deduction under section 80GGB, there is no upper limit under this section. It means any amount of donation made can be claimed as tax deductions under chapter VI A.
17. Deduction Under Section 80GGC
Section 80GGC provides deductions for donations made to political parties by INDIVIDUAL taxpayers. However, local authorities and artificial judicial person funded by the government are not eligible for this deduction.
For claiming the deduction for donation under this section, political party or electoral trust must be registered.
There is no upper limit of deduction under this section. It means any amount of donation made can be claimed as tax deductions under chapter VI A.
18. Deduction Under Section 80RRB: Deduction for Royalty on Patents
For claiming the deduction under 80RRB, the Individual must be a resident of India and a patentee (The first inventor and hold an original patent). Only resident individuals are eligible for this section.
Lower of the following amount is eligible for deduction under section 80RRB :
Actual Royalty Income received
It can be concluded that threshold limit of deduction under section 80RRB is Rs. 3,00,000. This is not flat deduction, if actual royalty received is less than 3,00,000, deductions under Chapter VI A can be claimed for actual royalty received.
19. Deduction Under Section 80QQB: Royalty Income of Authors
An author or joint author of a book who is the Resident of India can claim a deduction under Sec 80QQB.
Lower of the following amount is eligible for deduction under section 80QQB :
Lump-Sum consideration for assignment
Deduction under Section 80QQB is eligible for royalty on literary, artistic and scientific books.
20. Deduction Under Section 80U: Deduction for Disabled Individuals
An individual with a disability certified by the medical authority or a government doctor can claim a deduction of Rs. 75,000 in case of general disability under section 80U. Deduction increases to Rs. 1,25,000 for person suffering from severe disability i.e 80% disability. It is a flat deduction and is not based on actual expenses/payments.
21. Deduction Under Section 80TTA: Deduction for interest on Savings Account
Section 80TTA deduction is available for individual and HUF both. It is allowed in respect of interest income on deposits in Savings Bank Accounts. Savings account of individual/HUF eligible for deductions are Banks, Co-Operatives Banks and Post Office.
The amount of deduction under section 80TTA is lower of followings:
Rs. 10,000 or
Amount of actual interest earned
22. Deduction Under Section 80TTB: Deduction for interest on savings account- by Senior Citizens
Section 80TTB deductions under chapter VI A introduced in budget 2018 which allows a deduction in respect of interest income from deposits in savings bank account held by resident senior citizens (aged 60 years or more). Savings account of senior citizens must be held in banks, Co-Operatives Banks and Post Office.
The amount of deduction under section 80TTB is lower of followings:
Rs. 50,000 or
Amount of actual interest earned
Deductions under Chapter VI A will not be allowed from income which is not chargeable to tax ie. exempted incomes. For eg, Dividend income is exempted under section 10(34).
Moreover, Deductions under Chapter VI A is not allowed from long term capital gains and short term capital gains under section 111A.
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