Deduction Under Income Tax

Deduction Under Income Tax On Payment Basis

In income tax there is deduction allowed to resident person on the basis of payment or investment made by the assesse during previous year out of saving of income earned during the year. The government to appreciation of investment or funding for the specified sector and launches various scheme for the resident which is exemption based under income tax. Under income tax the waste level of coverage in taken by the section 80 C under the chapter vi-A of the income tax act 1961 for deduction. However, a part from this section other investment or contribution is also eligible for deduction. There is a consecutive list of deduction under this act. Although we try to cover all the aspect in summarized form to give general knowledge about the aspect covered under the Act, Deduction Under Income Tax, Tax Saving Schemes at Lex N Tax Associates.

Deduction toward contribution to specified pension fund (Section 80CCCx)

  • In this scheme only resident individual is allowed to take benefit of making contribution towards scheme keep in force contract of annuity plan of LIC or fund set up by LIC.
  • Maximum amount of eligible deduction is Rs. 1,50,000

Note: Total deduction claim under section 80C, 80CCC and 80CCD (1) put together cannot be exceed Rs. 1,50,000 (Section 80CCE).

Deduction toward contribution to pension scheme notified by the Central Government (Section 80CCD)

This scheme is applicable to new entrance to Government service, it is mandatory for persons entering the services of the Central Government on or after 01.01.2004, to contribute 10% of their salary every month towards their pension account. A equal amount of contribution is required to be made by the Government to the said account. The benefit of this scheme is also available to individual employed by any other employer as well as to the self employed individual. Deduction Under Income Tax

Quantum of deduction 

  • According section 80CCD (1) provides a deduction for the amount paid or deposited by an employee in his pension account subject to a maximum of 10% of salary. The deduction in case of a self- employed individual would restricted to 20% of his gross total income in the previous year.
  • In this series of deduction an additional section inserted Section 80CCD(1B) to provide additional deduction to individual assesse who deposit under NPS whether or not any deduction is allowed under section 80CCD (1).
  • The part of payment made by employer or Central Government in NPS scheme is deductible from total income as per section 80CCD (2). In initial the contribution by them is included in total income of employee. However, deduction is allowed later which restricted to 14% of salary when contribution made by CG or 10% of salary in case of any other employer.

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Deduction in respect of medical insurance premium [Section 80 D]

In case of individual

Deduction in respect of insurance premium paid for family:

The maximum amount allowed under this section is Rs. 25,000 for the following payments-

  •  Premium paid for insurance of health of self, spouse, and dependent children or
  • Premium paid towards CG health scheme or
  • Any other health scheme notified by CG. Contributory Health Service scheme of Department of Atomic Energy has been notified by CG.

Deduction in respect of insurance premium for parents: For health insurance of parents a further amount of Rs. 25000 is allowed to assesse is given.

Note: In case of assesse is senior citizen the deduction for health insurance is Rs. 50,000.

Deduction toward payment of preventive health check-up    

As per section 80D deduction to the extent Rs. 5000 is allowed in respect of health prevention checkup for self, spouse, child or parents which is under overall limit of Rs. 25000 or Rs. 50000. The payment can be any mode including cash on account of preventive health checkup.

Deduction for medical expenditure incurred on senior citizens: For senior citizen who cannot avail health insurance. To provide welfare measure towards senior citizen deduction up to Rs. 50,000.

       In case of A HUF

Deduction under section 80D is allowed in respect of premium paid to insure the health of any member of the family. The deduction allowed to a HUF would be Rs. 25000 and in case any member is a senior citizen Rs. 50000.

Further the amount paid on account of medical expenditure incurred on the health of any member of a family who is senior member or age more than 60 years is Rs. 50000.

Deduction in respect of maintenance including medical treatment of a dependent disable [ Section 80DD]

Every individual and HUF being resident of India who incur any amount for medical treatment, training, and rehabilitation of a dependent, being a person with disability or, paid or deposit under scheme framed by LIC or any other insurer for the maintenance of a dependent, being p person with disability. Deduction allowed is Rs. 75,000 and in case of severe disability the amount is Rs. 1,25,000.

Deduction in respect of medical treatment [ Section 80DDB]

In this section the deduction is available to individual and HUF. This deduction is available to an individual for medical expenditure incurred on himself or a dependent. The amount actually paid for the medical treatment of such disease or ailment as maybe specified in the rule. The allowable deduction is equal to the amount actually paid or Rs. 40,000, whichever is less, in respect of previous year in which such amount was actually paid. In case the amount is paid in respect of a senior citizen, during the relevant previous year, then deduction would be amount actually paid or Rs. 1,00,000 whichever is less.             

Note: To claim that deduction assesse required to obtain prescription for such medical treatment from a neurologist, an oncologist, a urologist, a hematologist, an immunologist or such specialist.        

Deduction in respect of interest loan taken for higher education [Section 80E]

This deduction is available to resident assesse who paid any interest on loan for the purpose of pursuing his higher education or loan taken for higher education of relative. The loan must be granted from financial institution or charitable institution.

Deduction towards interest on loan taken by resident individual for acquisition of the house property [ Section 80 EE]

Section 80 EE provides additional deduction in respect of interest on loan taken by an individual for acquisition of residential house property from any financial institution. To avail this deduction, assesse must fulfill the following conditions:

  • The assesse should not own any residential house property on the date of sanction of loan.
  • The consideration of house should be less than 50 Lakh.
  • The amount of loan sanctioned for the said house is less than equal to 35 lakh.
  • Loan should be sanctioned during the previous year 2016-17.

If all the aforesaid condition is fulfilled by the assesse then he is eligible to take additional deduction of Rs. 50,000 which is over the deduction of Rs. 2,00,000 available under section 24 for interest paid for loan borrowed for acquisition of self-occupied property, Best tax saving schemes at Lex N Tax Associates

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~ By Shaista Siddiqui

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