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Deductions from Gross Total Income (Chapter VI-A)

Deductions under Section 80C to 80U

PPF, Life Insurance Premiums, Tuition Fees (80C)

Section 80C provides deductions up to ₹1,50,000 for specific investments and expenditures made by an individual or HUF.

Eligible items include:

NPS Contributions (80CCD)

Section 80CCD(1): Deduction for employee's/self-employed contribution to National Pension Scheme (NPS) – up to 10% of salary or gross total income.

Section 80CCD(1B): Additional deduction of ₹50,000 (over and above ₹1,50,000 of 80C) exclusively for NPS contribution.

Section 80CCD(2): Employer’s contribution to NPS – up to 10% of salary (not part of 80C limit).

Medical Insurance (80D)

Available for payment of premium on health insurance for self, family, and parents.

Interest on Education Loan (80E)

Full deduction of interest paid on education loan taken for higher education (India or abroad) of self, spouse, children or a student for whom the assessee is legal guardian.

Available for maximum 8 consecutive years starting from the year interest repayment begins.

Deduction for disability (80U, 80DD)

Section 80U: For individuals with disability.

Section 80DD: For dependents of taxpayer with disability.

Donations to certain funds (80G)

Donations made to specified relief funds and charitable institutions are eligible for deduction under Section 80G.

Examples:

Interest on Housing Loan (80EEA, 80EEB)

Section 80EEA:

Deduction up to ₹1,50,000 on interest on housing loan for first-time home buyers (for affordable housing – stamp duty value ≤ ₹45 lakh).

Conditions: Loan must be sanctioned between 1 April 2019 to 31 March 2022.

Section 80EEB:

Deduction up to ₹1,50,000 for interest paid on loan taken to purchase electric vehicle.

Conditions: Loan must be sanctioned between 1 April 2019 to 31 March 2023.

Example 1. Mr. Ajay invests ₹1,50,000 in PPF and contributes ₹50,000 to NPS. What deduction can he claim?

Answer:

He can claim ₹1,50,000 under Section 80C and an additional ₹50,000 under Section 80CCD(1B).
Total deduction = ₹2,00,000

Example 2. Mrs. Sunita pays ₹27,000 as health insurance premium for her senior citizen parents and ₹23,000 for herself and spouse. What is the total deduction under 80D?

Answer:

She can claim ₹25,000 for self and spouse (since actual is ₹23,000) and ₹50,000 for senior citizen parents.
Total deduction = ₹75,000

Exemptions from Income Tax**

Exempt Income

Agricultural Income (Section 10(1))

Agricultural income is fully exempt from income tax under Section 10(1) of the Income Tax Act.

Examples:

Note: Though exempt, it is considered for rate calculation when the assessee has non-agricultural income exceeding the basic exemption limit (partial integration method).

Certain Allowances and Perquisites

Certain allowances and perquisites received by employees are either fully or partially exempt under Section 10.

Examples:

Income from Specified Sources (e.g., Scholarships, Awards)

The following types of income are also exempt from tax:


Capital Gains Exemptions

Section 54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB

Capital gains arising from the transfer of a capital asset are exempt under specific sections if reinvested in specified assets:

Example: Mr. Vinay sells a residential property and purchases another one within 1 year. Is he eligible for exemption?

Answer:

Yes, he can claim exemption under Section 54 provided the capital gain is invested in a new residential house within 1 year before or 2 years after (or constructed within 3 years).