MODULE II
DEDUCTIONS
The Income Tax Act, 1961 provides a wide array of deductions that allow taxpayers to reduce their gross total
income, thereby lowering their tax liability. The majority of these deductions are encapsulated in Chapter VI-A
(Sections 80C to 80U). Below is an elaboration of all major deductions, along with their relevant provisions and
conditions.
i. Section 80C: Investments and Payments: Section 80C is the most widely used deduction. It
allows individuals and Hindu Undivided Families (HUFs) to claim deductions for specified
investments and expenditures, up to a maximum of ₹1.5 lakh per financial year. Eligible items
include life insurance premiums, contributions to Employee Provident Fund (EPF),
Public Provident Fund (PPF), National Savings Certificate (NSC), 5-year tax-saving
fixed deposits, Equity Linked Savings Schemes (ELSS), principal repayment of home loan,
tuition fees for up to two children, Sukanya Samriddhi Yojana, Senior Citizen Savings Scheme,
Unit Linked Insurance Plans (ULIPs), and stamp duty and registration charges for home purchase.
ii. Section 80CCC: Pension Funds: This section allows individuals to claim deductions for
contributions to certain pension funds, such as annuity plans offered by insurance companies. The
deduction is subject to the same overall limit of ₹1.5 lakh, shared with Sections 80C and
80CCD(1)
iii. Section 80D: Medical Insurance Premium: Individuals and HUFs can claim deductions for
medical insurance premiums paid for self, spouse, dependent children, and parents. The limit is
₹25,000 for self/family, and an additional ₹25,000 for parents ( ₹50,000 if either is a senior
citizen). Preventive health check-ups are allowed within these limits, up to ₹5,000.
iv. Section 80DD: Maintenance and Medical Treatment of Disabled Dependent: Resident
individuals or HUFs can claim deductions for expenses incurred on the medical treatment,
training, and rehabilitation of a dependent with a disability. The deduction is ₹75,000 for disability
(≥40%) and ₹1,25,000 for severe disability (≥80%).
v. Section 80DDB: Medical Treatment for Specified Diseases: This section allows deduction for
expenses incurred on medical treatment of specified diseases for self or dependents. The maximum
deduction is ₹40,000 (₹1,00,000 for senior citizens).
vi. Section 80E: Interest on Education Loan: Individuals can claim deduction for interest paid on
loans taken for higher education for self, spouse, children, or a student for whom the individual is a
legal guardian. There is no upper limit, but the deduction is available for eight consecutive years
from the year repayment starts.
vii. Section 80EE: Interest on Home Loan for First-Time Buyers: Individuals can claim up to
₹50,000 per year as deduction for interest paid on home loans, subject to conditions such as loan
amount, property value, and date of sanction.
viii. Section 80EEA: Interest on Home Loan for Affordable Housing: This section allows an
additional deduction of up to ₹1.5 lakh per year for interest on loans taken for purchasing
affordable residential property, subject to conditions.
ix. Section 80G: Donations to Charitable Institutions: Deductions are available for donations made
to specified funds and charitable institutions. The deduction can be 100% or 50% of the donation
amount, with or without restriction, depending on the donee. Some donations are subject to a cap
of 10% of gross total income
x. Section 80GG: Rent Paid (No HRA Received): Individuals not receiving House Rent Allowance
(HRA) can claim deduction for rent paid, subject to the least of ₹5,000 per month, 25% of total
income, or excess of rent paid over 10% of total income
xi. Section 80GGA: Donations for Scientific Research or Rural Development: Taxpayers (other
than those with income from business/profession) can claim full deduction for donations made to
specified institutions for scientific research or rural development.
xii. Section 80GGC: Donations to Political Parties: Individuals (other than companies or local
authorities) can claim full deduction for donations made to registered political parties or electoral
trusts, provided the donation is not in cash.
xiii. Section 80TTA: Interest on Savings Account: Individuals and HUFs (other than senior citizens)
can claim deduction up to ₹10,000 per year for interest earned on savings bank accounts.
xiv. Section 80TTB: Interest on Deposits for Senior Citizens: Resident senior citizens (aged 60 or
above) can claim deduction up to ₹50,000 per year for interest earned on deposits with banks, post
office, or cooperative banks.
xv. Section 80U: Deduction for Persons with Disability: Resident individuals certified as disabled
can claim deduction of ₹75,000 (disability ≥40%) or ₹1,25,000 (severe disability ≥80%).
Conclusion: The Income Tax Act, 1961 provides many deductions to help taxpayers lower their taxable income.
These deductions encourage people to save, invest, buy insurance, pay for education, and support charitable
causes. By knowing about these deductions and using them correctly, taxpayers can save money on taxes and
plan their finances better.