16 Deductions not to miss for ITR of AY 21-22

Tax deduction is a part of tax planning for reduction in tax obligation from the gross taxable income. Tax deductions are deducted from taxable income which is also known as adjusted gross income. This article contains 16 deductions that can be claimed for Assessment Year 2021-22

 

1. Deductions on Investments -Section 80C

This deduction is allowed to an Individual or a HUF for amounts paid/contributed/ invested towards life insurance, contribution to Provident Fund set up by the Government, recognized Provident Fund, contribution by the assessee to an approved superannuation fund, subscription to National Savings Certificates, tuition fees, payment/ repayment for purposes of purchase or construction of a residential house and many other investments.

A deduction of Rs 1,50,000 can be claimed from your total income. The aggregate amount of deduction under section 80C, 80CCC, and 80CCD(1) shall not exceed Rs. 1,50,000/-

2. Deduction for Premium Paid for Annuity Plan of LIC or Other Insurer-Section 80CCC

This deduction is allowed to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer. The plan must be for receiving a pension from a fund referred to in Section 10(23AAB). Pension received from the annuity or amount received upon surrender of the annuity, including interest or bonus accrued on the annuity, is taxable in the year of receipt. Limit cannot exceed Rs 1,50,000.

3. Deduction for Contribution to Pension Account- Section 80CCD

• Employee’s contribution – Section 80CCD(1)

  This deduction is allowed to an individual who makes deposits to his/her pension account. Deduction for contribution in a pension scheme notified by the Government is to the extent of 10% of salary in case of employees and 20% of Gross total income in case of others.

A deduction of Rs 1,50,000 can be claimed from your total income. The aggregate amount of deduction under section 80C, 80CCC, and 80CCD(1) shall not exceed Rs. 1,50,000/-

• Deduction for self-contribution to NPS – Section 80CCD (1B)

  An additional deduction of up to Rs 50,000 is allowed for the amount deposited by a taxpayer to their NPS account.

• Employer’s contribution to NPS – Section 80CCD (2)

The additional deduction is allowed for an employer’s contribution to an employee’s pension account of up to 10% of the salary of the employee. Limit is 14% in case of Govt employee.

4. Deduction for the premium paid for Medical Insurance – Section 80D

Deduction under this section is available to an individual or a HUF towards Medical Insurance Premium for self and family members. Preventive Health Checkup limit is Rs 5000 and included in below specified limit.

• For self, spouse and children (age < 60 yrs ) – Rs. 25,000
• For Parents – Father or mother or both (age < 60 yrs) -Rs. 25,000
• For self, spouse and children (age > 60 yrs ) – Rs. 50,000
• For Parents – Father or mother or both (age > 60 yrs) – Rs. 50,000
• Maximum limit is Rs 1,00,000.

5. Deduction for Rehabilitation of Handicapped Dependent Relative- Section 80DD

The deduction is available to a resident individual or a HUF and is available on:

1. Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative
2. Payment or deposit to specified scheme for maintenance of dependent handicapped relative.
3. Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.
4. Where there is a severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000.

To claim this deduction a certificate of disability is required from a prescribed medical authority.

6. Deduction for Medical Expenditure on Self or Dependent Relative -Section 80DDB

This deduction can be claimed up to Rs 40,000. For senior citizens, limit is Rs 1 lakh.

For an Individual, such deduction is available in respect of any expenses incurred towards the treatment of certain specified medical diseases or ailments for himself or any of his dependents. The diseases are specified in Rule 11DD of the Income Tax Act.

For a HUF, such deduction is available in respect of medical expenses incurred towards the prescribed ailments, for any of the members of the HUF.

7. Deduction for Interest on Education Loan for Higher Studies -Section 80E

This deduction is allowed only to an individual for interest on loan taken for pursuing higher education. This loan may have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a legal guardian.

The loan should be taken from any Bank / financial institution or any approved charitable institutions. Section 80E deduction is available for a maximum of 8 years (beginning the year in which the interest starts getting repaid) or till the entire interest is repaid, whichever is earlier. There is no restriction on the amount that can be claimed.

8. Deductions on Home Loan Interest for First Time Home Owners- Section 80EE

The deduction under this section 80EE is available only to an individual who is a first-time home-owner.

It can be claimed by the first time home buyer only if:

a) Loan is taken between April 1, 2016 and 31 March 2017
b) The amount of loan should not exceed Rs 35 lakh
c) The value of property does not exceed Rs 50 lakh
d) On the date of sanction of loan, individual should not own any other residential house.
e) Loan should be taken from bank or housing finance company

Through this section, an additional deduction of Rs 50,000 can be claimed on home loan interest. This is in addition to deduction of Rs 2,00,000 allowed under section 24 of the Income Tax Act for self-occupied house property.

9. Deduction for donations towards Social Causes -Section 80G

The various donations specified in u/s 80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in section 80G.

From FY 2017-18 any donations made in cash exceeding Rs 2,000 will not be allowed as deduction. Therefore the donations above Rs 2000 should be made in any mode other than cash to qualify as deduction u/s 80G.

10. Deduction for House Rent Paid Where HRA is not Received- Section 80GG

The deduction is available to all individuals for rent paid when HRA is not received. The taxpayer, spouse or minor child should not own residential accommodation at the place of employment. The taxpayer should not have a self-occupied residential property in any other place and must be living on rent and paying rent.

Deduction available is the least of the following:

1. Rent paid minus 10% of adjusted total income
2. Rs 5,000/- per month
3. 25% of the adjusted total income

11. Deduction on contributions given by companies to Political Parties -Section 80GGB

This deduction is allowed to an Indian company for the amount contributed by it to any political party or an electoral trust. The deduction is allowed for contribution done by any mode other than cash.

12. Deduction on contributions given by any person to Political Parties -Section 80GGC

Deduction under this section 80GGC is fully allowed to a taxpayer except for a company, local authority and an artificial juridical person wholly or partly funded by the government, for any amount contributed to any political party or an electoral trust. The deduction is allowed for contribution done by any mode other than cash.

13. Deduction with respect to any Income by way of Royalty of a Patent -Section 80RRB

One must satisfy the following conditions for claiming deductions against Section 80RRB:

(i) The individual claiming the deduction should be a resident of India.

(ii) Only those individuals that hold an original patent are eligible to apply for deduction under Section 80RRB. If any individual does not hold the original patent, he/she cannot apply for this deduction.

(iii) The patent against which the royalty has been received must be registered under the Patent Act, 1970.

A deduction of up to Rs. 3.00 Lakhs can be claimed against royalty payments. This amount is the maximum amount that can be claimed as a deduction. If the actual royalties received are less than Rs. 3 Lakhs, then only that much amount would be eligible for deduction.

14. Deduction from Gross Total Income for Interest on Savings Bank Account-Section 80 TTA

Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an Individual and HUF.

It is allowed on interest earned from a savings account with a bank, co-operative society carrying on the business of banking or post office.

This deduction is not allowed on interest earned on time deposits i.e, deposits repayable on expiry of fixed periods. It shall not be allowed for –

• Interest from fixed deposits
• Interest from recurring deposits
• Any other time deposits

15. Deduction of Interest on Deposits for Senior Citizens- Section 80 TTB

Section 80TTB has been inserted vide Budget 2018 whereby a taxpayer who is a resident senior citizen, aged 60 years and above at any time during a Financial Year (FY), can claim a specified amount as a deduction from his gross total income for that FY.

A deduction of lower than Rs 50,000 or an amount from a specified income is allowed from the gross total income. Specified income is any of the following income in aggregate:

• Interest on bank deposits (savings or fixed);
• Interest on deposits held in a co-operative society engaged in the business of banking, including a co-operative land mortgage bank or a co-operative land development bank; or
• Interest on post office deposits

16. Deduction for Person suffering from Physical Disability- Section 80U

A deduction of Rs. 75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, deduction of Rs. 1,25,000 can be claimed.

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