Session 25

TOPICS: DEDUCTIONS
1. SEC 80C
2. SEC 80CCC,CCD
3. SEC 80D
4. SEC 80DD-80U
5. SEC 24(B)
6. SEC 56(iia)

Deduction under section 80C to 80U and Tax Planning

1. Section 80C
The total limit under this section is Rs 1.50 lakh from Financial year 2017-18 / Assessment
Year 2018-19. Under this heading many small savings schemes like NSC, PPF and other
pension plans. Payment of life insurance premiums and investment in specified government
infrastructure bonds are also eligible for deduction under Section 80C

This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the
highest tax bracket of 30%, and you invest the full Rs. 1.50 Lakh, you save tax of Rs. 45,000.
Isnt this great? So, lets understand the qualifying investments first.

Qualifying Investments

1. Employee Provident Fund (EPF) & Voluntary Provident Fund (VPF) : PF is

automatically deducted from your salary. Both you and your employer contribute to it.
While employers contribution is exempt from tax, your contribution (i.e., employees
contribution) is counted towards section 80C investments. You also have the option to
contribute additional amounts through voluntary contributions (VPF). Current rate of
interest is 8.65% per annum (p.a.) and is tax-free.
2. Public Provident Fund (PPF): Among all the assured returns small saving schemes,
Public Provident Fund (PPF) is one of the best. Current rate of interest is 7.90% tax-
free (Compounded Yearly) and the normal maturity period is 15 years. Minimum
amount of contribution is Rs 500 and maximum is Rs 1,50,000. A point worth noting is
that interest rate is assured but not fixed.
3. Life Insurance Premiums: Any amount that you pay towards life insurance premium
for yourself, your spouse or your children can also be included in Section 80C
deduction. Please note that life insurance premium paid by you for your parents (father
/ mother / both) or your in-laws is not eligible for deduction under section 80C. If you
are paying premium for more than one insurance policy, all the premiums can be
included. It is not necessary to have the insurance policy from Life Insurance

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 Corporation (LIC) even insurance bought from private players can be considered
here.
4. Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes
specially created for offering you tax savings, and these are called Equity Linked
Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for
deduction under Sec 80C.
5. Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you
pay every month to repay your home loan consists of two components Principal and
Interest. The principal component of the EMI qualifies for deduction under Sec 80C.
6. Stamp Duty and Registration Charges for a home: The amount you pay as stamp
duty when you buy a house, and the amount you pay for the registration of the
documents of the house can be claimed as deduction under section 80C in the year of
purchase of the house.
7. Sukanya Samriddhi Account : Sukanya Samriddhi Account meaning Girl Child
Prosperity Scheme is a special deposit scheme launched by Prime Minister Narendra
Modi on 22 January 2015 for girl child. The scheme of Sukanya Samriddhi Account
came into effect via notification of Ministry of Finance. Scheme will be governed by
Sukanya Samriddhi Account Rules, 2014.

i. Per girl child only single account is allowed. Parents can open this account for
maximum two girl child. In case of twins this facility will be extended to third child
ii. Minimum deposit amount for this account is 1,000/- and maximum is 1,50,000/-
per year
iii. Money to be deposited for 14 years in this account.
iv. Interest rate for this account is 8.4 % per annum, calculated on yearly basis , Yearly
compounded.
v. Passbook facility is available with Sukanya Samriddhi account.
vi. From FY 2014-14 the interest earned on account will be tax exempted. As per
Finance Bill 2015-16.

8. National Savings Certificate (NSC) (VIII Issue):

NSC is a time-tested tax saving instrument with a maturity period of Five Years(Ten
Years discontinued now). Presently, the interest is paid @ 7,90% p.a. on 5 year NSC
and Interest is Compounded Half Yearly. While the minimum investment amount is
Rs 100, there is no maximum amount. Premature withdrawals are permitted only in
specific circumstances such as death of the holder. Investments in NSC are eligible for
a deduction of upto Rs 150,000 p.a. under Section 80C. Furthermore, the accrued
interest which is deemed to be reinvested qualifies for deduction under Section 80C.
However, the interest income is chargeable to tax in the year in which it accrues.

9. Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued
by infrastructure companies, and not the government. The amount that you invest in
these bonds can also be included in Sec 80C deductions.
10. 5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks
with tenure of 5 years are also entitled for section 80C deduction.

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 11. Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list,
Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the
small savings schemes but is meant only for senior citizens. Current rate of interest is
8.40% per annum payable quarterly. Please note that the interest is payable quarterly
instead of compounded quarterly. Thus, unclaimed interest on these deposits wont
earn any further interest. Interest income is chargeable to tax. The account may be
opened by an individual,

1. Who has attained age of 60 years or above on the date of opening of the account.
2. Who has attained the age 55 years or more but less than 60 years and has retired under a
Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of
opening of the account within three months from the date of retirement.
3. No age limit for the retired personnel of Defence services provided they fulfill other
specified conditions.

12. 5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed
deposits. Although available for varying time duration like one year, two year, three
year and five year, only 5-Yr post-office time deposit (POTD) which currently offers
7.70% rate of interest qualifies for tax saving under section 80C. Interest is
compounded quarterly but paid annually. The Interest is entirely taxable.
13. NABARD rural bonds: There are two types of Bonds issued by NABARD (National
Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya
Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under
section 80C.
14. Unit linked Insurance Plan : ULIP stands for Unit linked Saving Schemes. ULIPs
cover Life insurance with benefits of equity investments. They have attracted the
attention of investors and tax-savers not only because they help us save tax but they
also perform well to give decent returns in the long-term.
15. Kids Tuition Fees: You can claim the deduction for paying the tuition fee of your
two children. Here, you should note that tuition fees eligible paid to any university,
college, school or other educational institution situated in India. However, any
development fees or donation or payment of similar nature shall not be eligible for
deduction.

2.Section 80CCC
Pension Funds Section 80CCC: This section Sec 80CCC stipulates that an
investment in pension funds is eligible for deduction from your income. Section 80CCC
investment limit is clubbed with the limit of Section 80C it means that the total
deduction available for 80CCC and 80C is Rs. 1.50 Lakh.This also means that your
investment in pension funds upto Rs. 1.50 Lakh can be claimed as deduction u/s 80CCC.
However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed
Rs. 1.50 Lakh.

Section 80CCD

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Employee can contribute to Government notified Pension Schemes (like National Pension
Scheme NPS). The contributions can be upto 10% of the salary (salaried individuals) and Rs
50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.

As per Budget 2017-18, the self-employed (individual other than the salaried class) can now
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, as against current 10%.

To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like
NPS. The 10% of salary limit is applicable for salaried individuals only and Gross income is
applicable for non-salaried. The definition of Salary is only Dearness Allowance. If your
employer also contributes to Pension Scheme, the whole contribution amount (10% of salary)
can be claimed as tax deduction under Section 80CCD (2).

Total Deduction under section 80C, 80CCC and 80CCD(1) together cannot exceed Rs 1,50,000
for the financial year 2016-17. The additional tax deduction of Rs 50,000 u/s 80CCD (1b) is over
and above this Rs 1.5 Lakh limit.

3.Section 80D
Deduction u/s 80D on health insurance premium will be Rs 25,000.. For Senior Citizens it has
been increased to Rs 30,000 For very senior citizen above the age of 80 years who are not
eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.

4. Section 80DD
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 limit of deduction is Rs 1.25 lakh in case of severe
disability. To claim this deduction, you have to submit Form no 10-IA.

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 Section 80DDB

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 is proposed as Rs 60,000 and for very Senior Citizens
(above 80 years) the limit is Rs 80,000.(Dementia, Dystonia Musculorum Deformans, Motor
Neuron Disease, Ataxia, Chorea, Hemiballismus,Aphasia, Parkinsons Disease,Malignant
Cancers,Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;Chronic Renal
failure,Hematological disorders,Hemophilia Thalassaemia)

Section 80E

Deduction in respect of payment in the previous year of interest on loan taken from a financial
institution or approved charitable institution for higher studies. This provision has been
introduced to provide relief to students taking loans for higher studies. The payment of the
interest thereon will be allowed as deduction over a period of upto 8 years. Further,
by Finance Act, 2007 deduction under this section shall be available not only in respect of loan
for pursuing higher education by self but also by spouse or children of the assessee. W.e.f.
01.04.2010 higher education means any course of study pursued after passing the senior
secondary examination or its equivalent from any recognized school, board or university.
Section 80G
Donation to certain funds, charitable institutions etc. The various donations specified in Sec.
80G are eligible for deduction up to either 100% or 50% with or without restriction as
provided in Sec. 80G.Section 80 G (Donations)100% TAX DEDUCTION on contributions made
to SWACHH BHARAT & CLEAN GANGA

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 Section 80GG
Deduction available is the least of
(i) Rent paid less 10% of Total Adjusted Annual Income
ii. Rs.5000 per month
iii. 25% of Total Adjusted Annual Income
(1) Assessee or his spouse or minor child should not own residential accommodation at the
place of employment
(2) He should not be in receipt of house rent allowance.
(3) He should not have a self-occupied residential premises in any other place

Section 80GGC:
Deduction on contributions given by any person to Political Parties
Deduction is allowed to a taxpayer for any amount contributed to any political party or an
electoral trust. Deduction is allowed for contribution done by any way other than cash.

Political party means any political party registered under section 29A of the Representation of
the People Act.

Section 80TTA
Deduction in respect of interest on deposits in savings account Section 80TTA is introduced
wef A.Y. 2013-14 to provide deduction to an individual or a Hindu undivided family in respect of
interest received on deposits (not being time deposits) in a savings account held with banks,
cooperative banks and post office. The deduction is restricted to Rs 10,000 or actual interest
whichever is lower.

Section 80U
Deduction of Rs.75,000/- to an individual who suffers from a physical disability (including
blindness) or mental retardation. Further, if the individual is a person with severe disability,
deduction of Rs.1,25,000/- shall be available u/s 80U.Certificate should be obtained on
prescribed format from a notified Medical authority.

Section 80RRB
Deduction in respect of any income by way of royalty in respect of a patent registered on or
after 01.04.2003 under the Patents Act 1970 shall be available as :-Rs. 3 lacs or the income
received, whichever is less. The assessee who is a patentee must be an individual resident in
India. The assessee must furnish a certificate in the prescribed form duly signed by the
prescribed authority alongwith the return of income.
Section 80QQB
Deduction in respect of royalty or copyright income received in consideration for
authoring any book of literary, artistic or scientific nature other than text book shall be
available to the extent of Rs. 3 lacs or income received, whichever is less. The assessee must be
an individual resident in India who receives such income in exercise of his profession. To avail

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of this deduction, the assessee must furnish a certificate in the prescribed form along with the
return of income.

Section 87A
Rebate Of Rs 2500 For Individuals Having Total Income Upto Rs 3.5 Lakh. Finance Act 2017 has
provided relief in the form of rebate to individual taxpayers, resident in India, who are in lower
income bracket, i. e. having total income not exceeding Rs 3,50,000/-. The amount of rebate is
Rs 2500/- or the amount of tax payable, whichever is lower. WEF A.Y. 2018-19.

5.Section 24 (B)
Maximum interest exemption for tax benefit on home loan capped at Rs 2 lakhs including
that on rented property - Earlier, interest paid on capital borrowed to purchase a house or
any other property for investment purpose (property that was not self occupied but was let
out or lying vacant) was eligible to be set off from rental income without any limit. Further,
loss as a result of interest expense being more than the rental income was eligible to be set
off from income under any head such as salary, business or interest. From FY 2017-18 and AY
2018-19, the maximum allowable deduction for interest on house property has been capped
at Rs. 200,000 (Rupees two lakhs only).This limit of Rs. 2 lakhs is applicable to each tax payer
and is the maximum deduction available for interest paid on all properties owned by the tax
payer. However, this provision is not applicable for entities that are in the business of owning
real estate.

6.Section 57(iia): Family Pension

Deduction up to Rs15,000 allowed on family pension:family pension, a standard deduction to the

extent of 1/3rd of the family pension or Rs 15,000, whichever of the two is lower is allowable.
The deduction is allowable under Section 57(iia) of the Income-tax Act, 1961 (The Act). a)
Family pension is to be shown under the head income from other sources in the Income-tax
Return. b) No attachments are allowed along with the return as per the new rules.

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