Deductions under Section 80: Section 80C, 80CCC, 80CCD & 80D Income Tax

The income tax deduction is a reduction in taxable income that reduces a person’s tax liability. Income tax is an important source of income for the government. It is also important to note that a significant portion of an individual’s earnings falls into a tax bracket. Section 80 deductions are divided into numerous categories according to the type of investment. 

Different Types of Deductions According to Sections

The 80C deduction is the most well-known way to save up on paying Income Tax. Additional tax deductions can also help decrease the tax bill. Let’s take a closer look at these deductions:

What are Section 80C Deductions?

We all expect a good return when we invest, but did you know that some of your investments provide you with more than just that and help you save on tax? 

One such investment is Section 80C. It is also considered one of the most favourite sections by the taxpayers because it reduces taxable income through tax-advantaged investments.

We all search for different ways to save money and lower our tax deductions as Indian taxpayers. A taxpayer who uses tax-saving investments and claims a deduction under Section 80C is entitled to a deduction of up to Rs 1,50,000 on their taxable income. The following are some of the different investing possibilities available:

1. Employee Provident Fund: Under this investment, both the employer and employee can make an equal contribution (12% of basic salary).

2. Premiums for Health Insurance: If you pay a premium for health insurance, you may be eligible for tax benefits.

3. Public Provident Fund (PPF): The Indian government offers a long-term investment in PPF. Any sum deposited in a PPF account in a year is eligible to be claimed for deductions, starting from Rs 500 to a maximum of Rs 1.5 lakhs. After 15 years, you can withdraw the invested money. A PPF account’s interest is likewise tax-free. In the PPF programme, premature closure is allowed after 5 years and partial withdrawal is permitted after 6 years of investment.

4. Premiums for life insurance: If you pay a life insurance premium, you are eligible for a tax benefit.

5. Unit linked insurance plan: ULIPs are another tax-advantaged investment that not only saves money for investors but also allows them to earn substantial returns on their money over a lengthy period. ULIPs, which are frequently sold in combination with life insurance, are also eligible for tax deductions. It has a 5-year lock-in period and provides investors with flexibility by investing in a wide choice of fund options.

6. Equity Linked Savings Scheme (ELSS): Investments up to Rs 1.5 lakhs are eligible for tax exemption under the equity-linked saving scheme, which has a three-year lock-in term. However, the returns in this programme are not guaranteed and fluctuate depending on the fund’s market performance. Investors can diversify their investments in multiple ELSS to reduce risk and increase long-term capital returns.

7. Sukanya Samridhi account investment: For a girl child in India, you can open a Sukanya Samriddhi Account with a minimum of Rs 1000 and a maximum of Rs 1.5 lakhs. This scheme currently has an interest rate of 8.1% and includes a tax exemption.

8. National savings certificate: It’s a safe way to save. In addition, even though NSCs have a 5-year duration, you can claim a deduction for interest in the same year you purchased them. Because it is a government-sponsored programme, it protects the safety of your money. This plan is primarily for middle-income participants who want to invest while still benefiting from income taxation.

9. Children’s Tuition Fee: It covers the cost of attending a  university in India. This is a good option for up to two children.

10. Housing loan: Repayment of the principal of a home loan, as well as the costs of registration, may be eligible for tax advantages under Section 80C.

11. Infrastructure Bonds: Companies like India Infrastructure Finance and Development issue government-approved bonds.

12. Post Office Fixed Deposit: Fixed Deposit at the Post Office is like a bank fixed deposit, however, only the 5-year deposit is eligible for tax deductions.

What is Section 80CCC?

Individual contributions to pension plans are eligible for an income tax credit under Section 80CCC. Payments to annuity pension schemes can be deducted under Section 80CCC. Tax benefits on expenses incurred for purchasing or continuing retirement plans are defined under Section 80CCC, allowing qualifying investors to reap additional benefits. The annual pension received upon submission of the annuity is taxable every year, including any interest or bonus accrued.

Individuals are the only ones who can claim deductions under Section 80CCC. Here are some things to remember:             

• This plan’s interest or bonuses will not be eligible for tax deductions.

• The sum received after the plan is surrendered is taxed.

• The amount of the pension you get is taxable.

• Section 80CCC allows for a maximum deduction of Rs 1,50,000.

Also Read: Understanding Income Tax Allowances and Allowed Deductions for Salaried Individuals

What is Section 80CCD?

It deals with the individual’s contributions to the following schemes:

• National Pension System (NPS)

• Atal Pension Yojana is a government-sponsored pension scheme.

Section 80CCD (1):  It is concerned with tax deductions for self-employed/ Central Government/ Other Employer. Salaried employees are entitled to a maximum deduction of 10% of their pay, whereas self-employed taxpayers can deduct 10% of their gross income.

Section 80CCD (2): This section discusses the employer’s NPS contribution. Individuals who make deposits to their pension account are eligible for a deduction under Section 80CCD. If an employer contributes to the employee’s NPS account, the employee can claim a tax deduction. The threshold is 10% of the employee’s pay. 

Section 80CCD (1B): For the capital invested in the NPS, the entire tax savings might be as high as Rs 2,00,000, with an additional tax benefit of Rs 50,000 attainable under Section 80CCD (1B).

What is 80D?

A tax deduction is available under Section 80D for the premium paid for health insurance coverage. A taxpayer can deduct up to Rs 25,000 for insurance for themselves, their spouse, and their dependent children under section 80D. If your parents are under 60 years old, you can get an additional deduction for their insurance up to Rs 25,000. However, if they are beyond the age of 60, they can deduct Rs 50,000 under this section. The maximum deduction permitted under this clause is Rs 1 lakh if both the taxpayer and the parent(s) are above 60 years old.

Summary of deductions

What is Section 80DD?

The Rehabilitation of Handicapped Dependent Relatives deduction is covered in Section 80DD. An individual or a HUF can take advantage of the Section 80DD deduction on:

• Expenses for medical care, training, and rehab of a disabled dependent relative.
• Payment or contribution to a designated plan for the support of a disabled dependent relative. There is a set deduction of Rs 75,000 if the disability is 40% or higher but less than 80%., There is a set deduction of Rs 1,25,000 in cases of severe disability of 80% or higher.

Note that a certificate of disability from an authorized medical authority is required to claim the deduction.

What is Section 80DDB?

80DDB allows deductions with respect to medical expenses for an individual or anyone dependent on the individual.

• An individual or a HUF can claim a deduction of up to Rs 40,000. It is accessible for any medical expenses paid for by self or any dependents to treat designated medical disorders or ailments.
• A deduction of up to Rs 1 lakh can be claimed by the Individual or HUF taxpayers or on whose behalf the expenses are made is a senior citizen.
• The reimbursement of medical expenditures by insurance will be subtracted from the deduction the taxpayer can claim under section 80DDB.

What is Section 80G?

Under section 80G, donations to social causes are eligible for a tax deduction. If you have made donations under section 80G, they are eligible for a tax deduction of up to 100% or 50%, depending on whether they are restricted or not.

Please find a list of donations and their eligibility below:

Also Read: Claiming Deduction on Interest under Section 80TTA of Income Tax Act

Conclusion

As an investor, having the correct information can help you save a lot of money on taxes. Now that you’re aware of all tax-saving options such as 80C, 80D, 80CCD and others, you make sure you use them correctly to save money while also earning returns.