Deduction for salaried employees - Goyal Mangal & Company

There is various deduction allowed to salaried person under chapter 80 of income tax Act 1961. The various deductions which are available to the salaried employees are as follows:

Section 80C

Life Insurance policy u/s 10(10D): Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy shall not be included in the total income of a person.

Employees provident fund : As per section 80C if an employer has opened the EPF account then he can save taxes and this is the best investing option for employees.

Contribution to approved superannuation fund : Contribution by an employee to an approved superannuation fund qualifies for deduction under section 80C

VPF : Under EPF employees can save 12% of salary as mandatory investment, if he wants to invest more up to 100% then he can make investments under VPF and can earn more rate of interest as well as can save tax.

Public provident fund: Any voluntary contribution made by the salaried employees towards the public provided fund is also eligible for tax deduction under Section 80C of the Income Tax Act up to maximum limit of deduction i.e. RS 1,50, 000. PPF is also a good investing option as person can earn interest on his contributions as well as can get maturity amount and can save the taxes under section 80C.

Sukanya samriddhi scheme : This scheme is only available to parents or guardians of a girl child. This is one of the best tax saving option in these days. Subscription to any such security of the Central Government or any such deposit scheme as the Central Government as may notify in the Official Gazette.

Subscription to National saving certificates VIII : Subscription to National saving certificates under government saving certificate Act, 1959 notified by the central government in the official gazette.

5 years post office time deposit account : Salaried employees can open a five year fixed deposit account with the post office. This offers the double benefit of return on investment and tax deduction. Investment in five-year time deposit in an account under post office time deposit rules, 1981 qualifies for deduction under section 80C.

Repayment of housing loan including stamp duty, registration fees and other expenses : Any payment made towards the cost of purchase or construction of new residential house property. Stamp duty, registration fees and other expenses for the purpose of transfer of such house property to the assessee

Tuition fees : Salaried employees can claim this deduction under section 80C of Income Tax Act to provide best education to their children. This provide an opportunity to reduce the taxes on tuition fees. This benefit is only for the amount of tuition fees for full time education and shall not include any payment towards development fees or donation or payment of similar nature and payment made for education to any institution situated outside India.

Donations to political parties : Any donation made to political parties is exempt from tax if it satisfies some conditions.

Unit Linked Insurance Plans (ULIPs) : ULIP acts as a life insurance product and also as an investment. It provides a life insurance cover to the policy holder along with the investment options benefits offered under Section 80C of the Income Tax Act, 1961.

Tax Saving FD : Tax Saving FDs are fixed deposit schemes offered by the both banks and post offices that allow tax deduction under Section 80C. These FDs have a lock-in period of 5 years and offer a maximum of Rs.1.5 lakh tax exemption (on the principal amount). However, the returns of such instruments are liable for taxation.

Section 80CCC

Pension fund : The best way to plan your retirement is to start investing in pension funds. Under Section 80CCC of Income Tax Act 1961, an individual can claim tax deduction made by him for contributions made under certain pension funds scheme. The tax benefit is only for those individuals who made payments in the form of premium for any annuity plan of LIC or any other insurer. The maximum deduction that can be claimed under section 80C/ 80CCC/ 80CCD (1)/ 80CCD(1B)/ 80CCD (2) inclusively is RS 150,000

Section 80CCD (1)

Contribution towards National Pension Scheme: Under section 80CCD (1), taxpayers can get tax benefits under this scheme by contributing their earnings. This is offered by postal department and is considered the most secured option having almost zero risk.

Quantum of deduction : Section 80CCD (1) provides a deduction for the amount paid or deposit by an employee in his pension account subject to maximum deduction of 10 of salary of the employees.

Section 80CCD (1B)

Additional deduction under National Pension scheme: Section 80CCD (1B) provides for an additional deduction of up to RS 50,000 in respect of the whole amount paid or deposited by an individual assessee under NPS in the previous year, whether or not any deduction is allowed under section 80CCD (1).

Section 80D

Medical insurance and health check-up : Section 80D provides for various types of deductions on health insurance premiums as summarized below:

You are eligible to avail a maximum deduction of RS 25000 per annum for premiums on a health insurance policy, where such premium is paid for yourself or members of your family. However, if you are senior citizen, the quantum of the deduction is RS 50000.

If you are paying the health insurance premium for a policy for your parents, you are eligible to avail a maximum deduction of RS 25000 per annum for premiums on a health insurance policy, in the event your parents are senior citizens the quantum of the deduction is RS 50000.

Section 80D also provides certain additional deductions if you incur expenses for health check-ups for yourself, parents and other members of your family, including your kids. The amount of deduction in such cases will be RS 5000.

Non- residents are also eligible to claim deduction under section 80D of amount RS 25000.

Section 80DD

Medical expenses of disabled independent: If a taxpayer has independent person in his family who is suffering from disability can claim the deduction of RS 125000 under section 80DD.

Section 80DDB

Treatment of specified diseases : Under section 80DDB taxpayer can claim the deduction for himself and family members who is suffering from specified diseases like AIDS and cancer whose treatment is very expensive.

Section 80G

Charitable donations : Under section 80G salaried employees can avail the tax benefit for charitable donations. Under this deduction is not allowed in cash exceeding RS 10000 and donation in kind is not qualify for deduction.

Section 80GG

Deduction on rent paid: Assessee who do not receive house rent allowance qualifying for exemption under section 10(13A) from employer and who pays rent for accommodation occupied by him for residential purpose can still get the tax benefit under section 80GG of Income Tax Act.

Quantum of deduction

Actual rent paid minus 10% of the total income of the assessee before allowing the deduction
25% of such total income, arrived at after making all deductions under Chapter-VI A but before making any deduction under this section
Amount calculated at RS 5000.

Section 80GGA

Donations for scientific research or rural development : Under section 80GGA, if a taxpayer made a donation for scientific research or rural development then he can save the taxes voluntarily.

Under this deduction is not allowed in cash exceeding Rs 10000 and donation in kind is not qualify for deduction.

Section 80GGC

Contribution made towards political party : This section provides deduction for any sum contributed by any individual towards political party or electoral trust. However, no deduction will be allowed if contribution made by way of cash.

Section 80E

Repayment of education loan : As the cost of education courses are rising taxpayer can save the tax on education loan EMIs under the section 80E.

The loan must have been taken for the purpose of higher education for himself or for his or her relative and must be taken from any financial institution or approved charitable institution.

Section 80EE

Repayment of home loan : If you have taken home loan then you can reduce the burden of taxes on both principal and interest under section 24, 80C and 80EE. Deduction of RS 50,000 will be allowed in respect of interest on loan taken from a financial institution.

Section 80U

Medical expenses of disabled individual : If an individual is suffering from disability himself then he can claim the deduction under section 80U of maximum RS 125000.