Income Tax

Certain less commonly known Deductions available under Income Tax Act

Certain less commonly known Deductions available under Income Tax Act

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  Posted on July 27, 2021

Certain less commonly known Deductions available under Income Tax Act

Many of us are aware of the various deductions available under the Income Tax Act, such as 80 C – Deductions for LIC premium, PF, PPF, etc.; 80 D – Deduction for medical insurance premium paid; 80 G – Deductions for donations made, and so on. However, there are several other deductions which have been provided in the Income Tax Act for the benefit of the taxpayers. In this article, let us have a look at the various deductions which are not so popular among the taxpayers.

80 CCD 1(B) – Deduction for contribution towards National Pension Scheme (NPS)

In case of an individual, he can invest any amount in the National Pension Scheme in order to claim deduction under this section. The maximum deduction allowed shall be Rs. 50,000/- (Fifty thousand only), which shall be over and above 80 C limit of Rs. 1,50,000/- . To file the income tax returns before the notified due date or face issues. 

{for further reference on this, view our article on NPS}

80 CCFDeduction for investing in Long- term Infrastructure bonds.

A person can invest any amount in any of the government approved long term infrastructure bonds (issued by LIC, Industrial financial corporation of India, other govt approved NBFC) and claim the same as deduction under this section. However, one should be aware that the maximum amount which is allowed to be claimed as deduction is Rs. 20,000/- (Twenty thousand only). Also, the bonds in which investment is made is subject to lock in for specific period.

80 CCGDeduction in respect of Investment made under equity shares/ equity- oriented funds

An investment in any of the listed equity shares or listed units of any equity-oriented scheme notified by the government shall be claimed. It is mandatory for every individual who gets income to file an Income Tax return. Before claiming any deduction, the taxpayer has to satisfy certain conditions as specified in the Act, which includes conditions such as:

  • Gross income of the person should not exceed Rs. 20 lakhs
  • The person claiming deduction should be a ‘New Retail Investor’.
  • The investment shall be subject to lock- in for a period of 3 years, etc.

The amount of deduction under this section shall be 50% of the amount invested by a person, subject to a maximum limit of Rs. 25,000/-

80 DD – Deduction for maintenance, medical treatment of dependant with disability

A taxpayer who has a dependant with disability is eligible to claim a deduction of Rs. 75,000/- per year for maintenance/ medical treatment of that person. In case where the disability is serious (80% or more), the amount of deduction which can be claimed is

Rs. 1,25, 000/-. It may be noted that any money deposited in any specified scheme of LIC or any other insurer. The taxpayer needs to provide a certificate of disability, from a medical authority, in the prescribed form and manner. 

80 DDBDeduction with respect to Expenditure on Medical treatment

In case of expenditure made by the taxpayer for himself or any of his dependant, for the medical treatment of any specified disease, the actual amount of expenditure or Rs. 40,000/- whichever is less. For reference to this section, the government has specified a list of diseases, which include Neurological diseases like Parkinson’s syndrome, ataxia, etc; Chronic Renal Failure; AIDS etc.

(for complete list of specified disease, refer Rule 11 DD of the Income Tax Act)

80 EDeduction of Interest paid for Higher Education loan

Where the taxpayer has taken loan for the purpose of higher education, for himself or for his relative, the interest paid on such higher education loan can be claimed as deduction from his total income. There is no limit with respect to the amount of deduction. The entire interest component paid during the previous year can be claimed as deduction. However, the number of years till which this facility can be utilised is limited to 8 years from the year win which repayment starts, or till settlement of loan, whichever is earlier. 

80 EEA – Deduction with respect to Interest paid on Home loan

Where a person has taken loan for acquisition of a house property, the deduction with respect to the interest paid on such housing loan taken can be claimed as deduction. The maximum amount of interest which can be claimed as deduction shall be restricted to Rs. 1,50,000/-. However, this facility is not available for all kinds of house property acquired by the taxpayer. There are certain conditions such as:

  • Stamp duty value of the property should be less than Rs. 45 lakhs
  • Assessee should not own any property as on date of sanction of loan.
  • Loan must have been taken between the period 1st April 2019 to 31st March 2021 (as amended by latest Budget 2021) from a financial institution.

[for reference on Budget 2021’s impact on individual, refer our article]

80 EEB – Deduction for purchase of Electric Vehicle

Where a person has taken loan for purchase of Electric Vehicle, he is eligible to claim deduction for the interest paid on such loan. The maximum amount of interest which can be claimed as deduction under this section is restricted to Rs. 1,50,000/–. However, it should be noted that the loan must have been taken only between the period of 1st April 2019 to 31st March 2023 from a financial institution. 

80 GGDeduction for House Rent paid.

This deduction is available for those people who are either self-employed or is working as a salaried employee with no HRA component in their salary. The total deduction under this section shall be:

  • Rs. 5000/- per month (or)
  • 25% of ‘adjusted total income’ (or)
  • Actual rent paid [minus] 10% of ‘adjusted total income
Whichever is less

 

However, certain conditions shall need to be satisfied by the taxpayer in order to avail the deduction under this section. These include:

  • You or your spouse or your minor child should not own any residential property at the place where you currently reside, perform office duty, or employment or carry- on business or profession, and
  • You should not own any house property at any place.
NOTE: Adjusted Total Income means:

Total income [minus] long- term capital gain & short- term capital gain (if any) [minus] deduction under other sections except 80 GG

80 GGC – Deduction for Donation given to Political parties

A taxpayer who has contributed any amount as donation for any political party can claim the amount so donated as deduction from his total income. There is no limit on the amount of deduction which can be claimed. The whole amount donated by the person can be deducted.

80 QQB – Deduction with respect to Royalty Income on Books

Resident individual taxpayers, being authors of books other than text- books & who are earing Royalty under Income tax return filing, as a lump sum shall be eligible to claim deduction for such royalty income. The amount of deduction shall be subject to maximum of Rs. 3 lakhs. 

The individual is also allowed deduction on royalty income earned outside India when the income is brought to India in convertible foreign exchange within specified time (usually 6 months from the end of the year). In order to claim deduction under this section, the individual must obtain a certificate in prescribed form and manner from the person making payment.

80 RRB – Deduction with respect to Royalty Income from Patent

Resident individual taxpayer earning royalty income from patent registered under the Patents Act and held in his name shall be eligible to claim deduction for such royalty income. The amount of deduction shall be subject to maximum of Rs. 3 lakhs. The individual is also allowed deduction on royalty income earned outside India when the income is brought to India in convertible foreign exchange within specified time (usually 6 months from the end of the year). In order to claim deduction under this section, the individual must obtain a certificate in prescribed form and manner from the person making payment.80 RRB – Deduction with respect to Royalty Income from Patent

80 TTB – Deduction for Interest Income earned

A taxpayer, being senior citizen (60 years and above) who are earning income by way of interest from bank/ post office shall be eligible to claim such interest as deduction from their total income. However, the maximum deduction which can be availed is restricted to Rs. 50,000/- only.

80 UDeduction in case of a Person with Disability 

Deduction under this section is similar to that in section 80 DD given above. The only difference is that section 80 U shall be applicable in case where the taxpayer himself is disabled. The amount of deduction is Rs. 75,000/- and in case of severe disability (80% or more), the deduction amount is Rs. 1,25,000/-. The taxpayer needs to provide a certificate of disability, from a medical authority in prescribed form and manner.

Apart from the above sections, there are various other provisions which facilitates the taxpayers to claim deduction from their total income. These are income specific deduction, region specific deductions and so on. A brief list of such deductions are as follows:

  • 80 IBA: Deductions in respect of Profits & Gains from Housing Projects – For taxpayers having any profits and gains derived from the business of developing and building housing projects.
  • 80 IE: Deduction for certain businesses in North- Eastern states
  • 80 JJA: Deductions with respect to respect of Profits & gains from businesses engaged in Collecting & Processing of Bio- Degradable waste.
  • 80 JJAA: Deductions for business organizations providing employment to new employees.
  • 80 P: Deductions with respect to Income earned by Co- Operative Societies

 

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