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How to Save Income Tax in India- Steps & Ways

Updated on November 14, 2013
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Hello Friends. This Hub tells you about different deduction sections under Indian Income Tax Act, 1961 which you can use for the Tax saving purposes when you file your Income Tax Return.

SECTION
DETAILS
SEC 80C
Deduction for Life insurance Premium, PF etc
SEC 80CCA & SEC 80CCB
National savings scheme & Equity linked savings scheme (Withdrawn)
SEC 80CCC
Contribution to Pension Fund
SEC 80CCD
Contribution to Notified Pension Scheme
SEC 80CCF
Subscription to Long term Infrastructural Bonds.
SEC 80D
Deduction in respect of Medical Insurance Premium
SEC 80DD
Maintainence & Treatment of a dependent person with Disability.
SEC 80E
Interest of loan taken for higher education
SEC 80G
Donation to certain funds, charitable ins. etc
SEC 80GG
Deduction for Rent paid
SEC 80GGA
Deduction for donations for scientific research or rural development
SEC 80GGB & 80GGC
Contribution to Political Party or Electoral Trust
SEC 80HHB, 80HHBA, 80HHC, 80HHD, 80HHE, 80HHF
Deduction in respect of Convertible foreign exchange. (Withdrawn)
SEC 80-IA
Profits & Gains from Industrial Undertakings
SEC 80-IAB
Undertaking engaged in development of Special Economic Zone
SEC 80-IB
Profits & Gains from undertakings other than those in 80-IA.
SEC 80-IC
Deduction in case of undertakings set in areas of Sikkim, H.P, Uttaranchal & North-eastern States(Rest in Act)
SEC 80-IE
Undertakings set up in North-Eastern States
SEC 80JJAA
Deduction in respect of employment of new workmen
SEC 80L
Interest on certain securities & Investments. (Withdrawn)
SEC 80LA
Income of Offshore Banking Units & International Financial Services Centre.(Rest in Act)
SEC 80P
Income of Co-operative society
SEC 80QQB
Royalty Income of Authors
SEC 80RRB
Royalty on Patents
SEC 80U
Deduction when the Taxpayer himself is suffering disability.
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Important Deduction Sections Explained-

SEC 80C

  • Available only to Individual & HUF.
  • Maximum deduction available combinely u/s 80C, 80CCC, 80CCD(1) cannot exceed 100000.(Not 80CCD(2))
  • It is not necessary that cont. should be from income chargeable to tax.
  • Allowed only if claimed by the assesse.

Contributions for Deduction-

  • Life Insurance Premium-

a) Deduction available- 20% of amt. assured under policy or premium paid, whichever less.(subject to premia paid that year)

b) Policy can be with a Indian co. or even foreign co.

c) If premium is paid next year, then ded. will be available next year, not that year. Then in next year u can get double deduction (of P.Y & C.Y) if next year’s premium is paid in next year only.

d) This policy can also be taken for spouse or children to claim deduction & HUF can take it for its members.

  • Contribution to Public Provident fund-

Exemption can be only between 500 to 70000.

  • Contribution to Statutory provident fund, Recognized provident fund & approved superannuation fund.
  • Any sum paid as tution fees to any university, college, educational institution in India. (Tution fees here also means school fees).
  • Subscription to any notified bonds of NABARD & NSC Certificates.
  • Amount deposited under Senior Citizens Savings Scheme.
  • Amount deposited in five year time deposit scheme in post office.
  • Housing loan repaid, but only principal amount, not the interest.

SEC 80CCC

  • Taxpayer must be Individual (resident/non-resident).
  • 100% of contribution is deductible & becomes taxable when withdrawn.

SEC 80CCD

  • Can be claimed by Individual, including a self-employed person.
  • 80CCD (1)-Cnt. by assesse to notified pension scheme.
  • Deduction can’t exceed 10% of salary, overall 100000.(Inc. 80C & 80CCC)
  • 80CCD (2)- Cnt. by employer to fund, can be claimed by employee upto max. of 10% of salary.
  • Salary for this purpose- B.S+D.A(if terms of employment provide)

SEC 80CCF

  • For Individual & HUF.
  • Deduction of 20000, over & above limit of 1 lac.

SEC 80D

  • For Individual & HUF.
  • Premium should not be paid in Cash, any other mode.
  • Policy should be for Family Members or Members of HUF.
  • Deduction-
  1. 15000 p.a for family other than parents.
  2. 15000 p.a for parents.
  3. 5000 extra if there is a senior citizen.
  4. So max. deduction possible 40000.

SEC 80DD

  • For Individual & HUF.
  • The assessee can himself incur exp. or deposit money with insurance co. for it.
  • Exp. should be for Family members or Members of HUF.
  • Deduction u/s 80U should not have been taken.
  • Deduction-

If Disability 40% or more- 50000p.a

If Disability 80% or more- 100000p.a

SEC 80E

  • For Individual.
  • Loan taken for education after passing 12th for himself or for any relative.
  • No deduction for principal payment, only the interest.
  • Deduction available for 8 years only starting from when interest payment started

SEC 80GG

  • For Individual.
  • Taxpayer is a self-employed person or an employee who doesn’t takes H.R.A. & should not have any residential accommodation.(In detail in ACT)
  • Deduction-
  1. 2000 p.m
  2. 25% of gross total income
  3. Excess of rent paid over 10% of gti.
  • Gross Tot. Income= Income- LTCG-STCG U/S 111A- Income under 115A- Ded. under 80C to 80U(other than 80GG)

SEC 80G

  • Deduction under it is available to any person (co., individual etc.)
  • Donation in Kind is not accepted. Only cash or cheque.
  • The list of all donations possible is in Act.
  • Some donations have no limit & some others in toto cannot exceed 10% of G.T.I in P.Y.( Calculation of GTI is in Act)
  • Also in some donations only 50% is deductible & in some full 100%.

SEC 80GGA

  • This sec. is for the assesse who doesn’t has PGBP as his income, so he can’t take weighted deduction u/s 35.
  • 100% deduction is available.

SEC 80GGB & 80GGC

  • 80GGB is for Companies & 80GGC for Individuals.
  • Cont. to political party is deductible, exp. not being for advertisment.
  • Not in case Local Authority gives any donation.

SEC 80-IA

  • Deductions under this section is available for-
  1. Undertaking providing Infrastructural Facility.
  2. Telecommunication services.
  3. Industrial Parks.
  4. Power generation, transmission, distribution etc.
  5. Undertaking for Reconstruction of Power unit.
  6. Cross-country natural gas distribution network.

Rest in ACT in detail.

SEC 80-IAB

  • Such SEZ is notified on or after 1april, 2005.
  • Deduction in any 10 years out of 15 years starting from when SEZ has been notified.
  • If ded. is taken under this sec. in any of the A.Y, then ded. under 80 HH to 80RRB is not available.

SEC 80-IB

  • Deductions under this section is available for-
  1. Business of an Industrial undertaking.
  2. Operation of Ship.
  3. Hotels
  4. Industrial Research
  5. Production of Mineral Oil
  6. Developing & building Housing projects.
  7. Multiplex Theatres.
  8. Convention Centres.
  9. Operating & Maintaining a hospital in Rural Area.
  10. Hospital in other specified areas of India.
  11. Managing of Food Grain Units.

SEC 80-IE

  • Taxpayer has started production/manufacture of goods or started services of Hotels, Nursing homes, IT centres, Vocational training ins. In North-eastern States.
  • 100% deduction is available for 10 years, only if belated return is not filed.

SEC 80JJAA

  • Taxpayer is Indian Company engaged in manufacture or production of article or thing.
  • Deduction is 30% of additional wages to new regular workmen.
  • Meaning of above line is very wide explained in Act.

SEC 80P

  • Deduction is 50000, 100000 in case of consumer’s co-operative society.
  • No deduction for Co-operative banks & Regional Rural Banks.
  • Deduction is available for Rural Co-operative society & Development Bank.

SEC 80QQB

  • He must be an Individual, an author or a joint author.
  • His work should be of literary, artistic or scientific nature.
  • Income should be of Royalty or Copyright fees.
  • Deduction- 300000 or Income from Royalty, whichever lower, subject to royalty does not exceeds 15% of value of books.

SEC 80RRB

  • Taxpayer is an Individual & Owner or Co-owner of the Patent which has derived some Income.
  • Deduction- 300000 or Income from royalty, whichever lower.

SEC 80U

  • Taxpayer is an Individual & himself suffering from Disability.
  • His disability must be one of those mentioned in this section in Act.
  • Deduction- 50000 if disability is 40% or more, 100000 if 80% or more.

These sections contains a lot of things. As I am Indian Chartered Accountancy Student, I think i can help you a bit in your savings using these sections. So, In case you have any query, write it down in the Comment. Cheers!!!

7 Tax Saving Tips You Might Not Know

Congrats You save a lot of Money

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    • profile image

      NHRao 

      5 years ago

      ALL ABOUT SECTION 80U OF INCOME TAX

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