What are taxes?
Taxes are financial charges imposed by a government on individuals, businesses, and other legal entities. They are compulsory payments that are collected to fund public expenditures and provide public goods and services such as infrastructure, healthcare, education, and defense. The purpose of taxes is to generate revenue for the government, which uses the funds to operate and maintain the country’s infrastructure and provide services to its citizens.
Taxes are generally calculated as a percentage of a person’s income, the value of goods and services, or the property they own. The amount of tax owed depends on the type of tax, the tax rate, and the taxable base. Different jurisdictions have different tax systems and regulations, and the rules for tax collection and payment vary depending on the country or state.
The government levies taxes on citizens to promote economic growth, maintain social welfare, and finance public services. Taxes are also used to influence behavior, such as encouraging people to invest in certain industries or activities. In summary, taxes are a critical part of any modern government, providing the financial resources needed to maintain and improve the quality of life for its citizens.
Table of Contents
Section 80C
Section 80C is a provision under the Indian Income Tax Act that provides tax benefits to taxpayers who invest in specified instruments. The section allows individuals to claim deductions from their taxable income up to a maximum limit of Rs. 1.5 lakh per financial year for investments made in various eligible instruments.
Some of the eligible investments under Section 80C include:
- Public Provident Fund (PPF)
- Equity Linked Saving Scheme (ELSS)
- National Pension System (NPS)
- Tax-saving fixed deposits (FDs)
- Senior Citizen Savings Scheme (SCSS)
- Sukanya Samriddhi Yojana (SSY)
- Life insurance premium payments
- Repayment of principal on a home loan
- Tuition fees for children’s education
- Employee Provident Fund (EPF)
Investing in any of these instruments can provide a tax deduction of up to Rs. 1.5 lakh from the individual’s taxable income. This means that the individual’s taxable income will be reduced by the amount of investment made, and consequently, the tax liability will also reduce. It is important to note that the total amount of deduction claimed under Section 80C cannot exceed Rs. 1.5 lakh in a financial year.
Section 80C is a popular provision for tax savings, especially towards the end of the financial year when taxpayers look to make investments to save on taxes. However, it is important to choose the right investment options based on one’s financial goals and risk appetite.
section 24 (a) & (b)
Section 24 of the Indian Income Tax Act provides tax benefits to taxpayers who have taken a home loan for the purpose of purchasing or constructing a property. The section allows individuals to claim deductions on the interest paid on the home loan and the principal amount repaid during the financial year.
Section 24 has two sub-sections, (a) and (b), which provide different types of deductions. Here’s an overview of both:
(a) Deduction on interest paid on a home loan: Under Section 24(a), individuals can claim a deduction on the interest paid on the home loan during the financial year. The maximum deduction allowed is up to Rs. 2 lakh for self-occupied properties. For properties that are not self-occupied, there is no upper limit on the amount of deduction that can be claimed.
(b) Deduction on principal repayment of a home loan: Under Section 24(b), individuals can claim a deduction on the principal repayment of the home loan during the financial year. The maximum deduction allowed is up to Rs. 1.5 lakh under Section 80C, which also includes other eligible investments such as PPF, ELSS, and life insurance premiums.
It is important to note that the deductions under Section 24(a) and (b) are applicable only for properties that are completed within five years of taking the home loan. Additionally, individuals can claim these deductions only if they have possession of the property.
In summary, Section 24(a) and (b) provide significant tax benefits to individuals who have taken a home loan. These deductions can help reduce the tax liability and save money for the individual. It is essential to keep track of the interest and principal payments made on the home loan and claim the deductions appropriately while filing income tax returns.
Section 80CCC
Section 80CCC of the Indian Income Tax Act provides tax benefits to individuals who contribute towards a pension plan. The section allows individuals to claim deductions on the amount contributed towards a pension plan, which helps in reducing the tax liability.
Here’s an overview of the key features of Section 80CCC:
Eligibility: Section 80CCC is applicable to individuals who have contributed towards a pension plan from a recognized institution or a life insurance company.
Maximum deduction: The maximum deduction allowed under Section 80CCC is up to Rs. 1.5 lakh per financial year. The deduction is allowed on the amount contributed towards the pension plan during the year.
Combined limit: The deduction under Section 80CCC is part of the overall limit of Rs. 1.5 lakh available under Section 80C. This means that the total deduction claimed under Sections 80C, 80CCC, and 80CCD(1) (for contributions towards National Pension System) cannot exceed Rs. 1.5 lakh.
Tax treatment of pension received: The amount received as a pension from the pension plan is taxable in the year of receipt as income under the head “Salary”. However, a portion of the pension received is exempt from tax, depending on the nature of the plan.
It is important to note that the deduction under Section 80CCC is only applicable to contributions made towards a pension plan and not towards other investment instruments. The pension plan must also be offered by a recognized institution or a life insurance company.
In summary, Section 80CCC provides tax benefits to individuals who contribute towards a pension plan. The deduction helps in reducing the taxable income and saves tax for the individual. It is essential to keep track of the contributions made towards the pension plan and claim the deductions while filing income tax returns.
Section 80CCD
Section 80CCD provides tax benefits to individuals who contribute towards the National Pension System (NPS). The section allows individuals to claim deductions on the amount contributed towards the NPS, which helps in reducing the tax liability.
Here are the key features of Section 80CCD:
Eligibility: Section 80CCD is applicable to individuals who have contributed towards the National Pension System (NPS).
Maximum deduction: The maximum deduction allowed under Section 80CCD(1) is up to Rs. 1.5 lakh per financial year. The deduction is allowed on the amount contributed towards the NPS during the year.
Additional deduction: Section 80CCD(1B) allows for an additional deduction of up to Rs. 50,000 for contributions made towards the NPS. This is over and above the deduction allowed under Section 80C and 80CCD(1).
Employer contribution: Section 80CCD(2) allows for a deduction on the amount contributed by the employer towards the NPS on behalf of the employee. The deduction is equal to 10% of the employee’s salary (basic + DA).
It is important to note that the total deduction claimed under Sections 80C, 80CCC, and 80CCD(1) and (1B) cannot exceed Rs. 1.5 lakh. Additionally, the amount received as a pension from the NPS is taxable in the year of receipt as income under the head “Income from Other Sources”.
In summary, Section 80CCD provides tax benefits to individuals who contribute towards the National Pension System (NPS). The deductions help in reducing the taxable income and save tax for the individual. It is essential to keep track of the contributions made towards the NPS and claim the deductions while filing income tax returns.
Section 80D
Section 80D of the Indian Income Tax Act provides tax benefits to individuals who have incurred expenses towards medical insurance premium or medical expenditure. The section allows individuals to claim deductions on the amount spent towards medical insurance premiums or medical expenses, which helps in reducing the tax liability.
Here are the key features of Section 80D:
Eligibility: Section 80D is applicable to individuals who have incurred expenses towards medical insurance premium or medical expenditure for themselves or their family members.
Maximum deduction: The maximum deduction allowed under Section 80D is up to Rs. 50,000 per financial year. The deduction is allowed on the amount spent towards medical insurance premium or medical expenses.
Types of deductions: The deductions allowed under Section 80D are of two types:
a) Deduction for medical insurance premium: Individuals can claim deductions on the amount paid towards medical insurance premium for themselves or their family members. The maximum deduction allowed is up to Rs. 25,000 per financial year. This limit is increased to Rs. 50,000 for senior citizens.
b) Deduction for medical expenditure: Individuals can claim deductions on the amount spent towards medical expenditure for themselves or their family members. The maximum deduction allowed is up to Rs. 50,000 per financial year. This limit is increased to Rs. 1 lakh for senior citizens.
Definition of family: The term “family” includes the individual, spouse, children, and parents. In the case of Hindu Undivided Family (HUF), the term “family” includes all members of the HUF.
It is important to note that the deductions claimed under Section 80D cannot be claimed under any other section of the Income Tax Act. Additionally, the medical insurance premium should be paid through a banking channel to claim the deductions.
In summary, Section 80D provides tax benefits to individuals who have incurred expenses towards medical insurance premium or medical expenditure. The deductions help in reducing the taxable income and save tax for the individual. It is essential to keep track of the expenses incurred towards medical insurance premium or medical expenditure and claim the deductions while filing income tax returns.
Section 80E
Section 80E of the Indian Income Tax Act provides tax benefits to individuals who have taken an education loan for themselves, spouse, or children. The section allows individuals to claim deductions on the interest paid towards the education loan, which helps in reducing the tax liability.
Here are the key features of Section 80E:
Eligibility: Section 80E is applicable to individuals who have taken an education loan for higher education of themselves, spouse, or children. The loan must have been taken from a financial institution or an approved charitable institution.
Maximum deduction: The maximum deduction allowed under Section 80E is for the interest paid towards the education loan. There is no limit on the amount of deduction that can be claimed. The deduction is allowed for a maximum of 8 years or until the interest is paid in full, whichever is earlier.
Education loan: The education loan must have been taken for higher education, which includes any course pursued after passing the Senior Secondary Examination or its equivalent from a recognized board.
Repayment of the loan: The loan repayment must have been made by the individual who has taken the loan. The loan repayment made by parents or spouse of the individual is not eligible for deduction under Section 80E.
No deduction for the principal amount: Section 80E provides deductions only on the interest paid towards the education loan. The principal amount paid towards the loan is not eligible for deduction under this section.
It is important to note that the deduction claimed under Section 80E is available only to the individual who has taken the education loan and cannot be claimed by any other person. Additionally, the education loan must be taken from a financial institution or an approved charitable institution to claim the deductions.
In summary, Section 80E provides tax benefits to individuals who have taken an education loan for higher education of themselves, spouse, or children. The deductions help in reducing the taxable income and save tax for the individual. It is essential to keep track of the interest paid towards the education loan and claim the deductions while filing income tax returns.
Section 80G
Section 80G of the Indian Income Tax Act provides tax benefits to individuals who have made donations to charitable institutions or funds. The section allows individuals to claim deductions on the amount donated, which helps in reducing the tax liability.
Here are the key features of Section 80G:
Eligibility: Section 80G is applicable to individuals who have made donations to charitable institutions or funds. The institution or fund must be registered under the Income Tax Act.
Maximum deduction: The maximum deduction allowed under Section 80G is 50% or 100% of the donated amount, depending on the type of institution or fund. The maximum deduction allowed is subject to a ceiling limit of 10% of the individual’s gross total income.
Types of institutions or funds: The deductions allowed under Section 80G are of two types:
a) 50% deduction: Donations made to institutions or funds that are eligible for a 50% deduction include Prime Minister’s National Relief Fund, National Foundation for Communal Harmony, and various government-approved funds.
b) 100% deduction: Donations made to institutions or funds that are eligible for a 100% deduction include Prime Minister’s Drought Relief Fund, National Illness Assistance Fund, National Children’s Fund, and various government-approved funds.
Tax receipts: To claim the deductions under Section 80G, the individual must have a tax receipt from the charitable institution or fund. The receipt must contain the name and address of the institution or fund, the registration number, the date of the donation, and the amount donated.
It is important to note that the deduction claimed under Section 80G cannot exceed the donated amount. Additionally, the donation must be made through a banking channel to claim the deductions.
In summary, Section 80G provides tax benefits to individuals who have made donations to charitable institutions or funds. The deductions help in reducing the taxable income and save tax for the individual. It is essential to keep track of the donations made and obtain a tax receipt from the institution or fund to claim the deductions while filing income tax returns.
Section 87A
Section 87A of the Indian Income Tax Act provides tax relief to individual taxpayers by reducing the amount of tax payable. This section is applicable to individuals whose total income does not exceed a certain threshold limit.
Here are the key features of Section 87A:
Eligibility: Section 87A is applicable to individual taxpayers whose total income does not exceed Rs. 5 lakh for the financial year. The benefit is available to resident individuals, including senior citizens and super senior citizens.
Maximum deduction: The maximum amount of tax relief allowed under Section 87A is Rs. 12,500. This means that if the total tax payable by an individual is less than Rs. 12,500, then the entire amount will be allowed as relief under this section.
Calculation of relief: The relief under Section 87A is calculated as the lower of the following:
a) The amount of tax payable, or b) Rs. 12,500.
Applicability: The benefit under Section 87A is available only to individuals and not to Hindu Undivided Families (HUFs), companies, or other entities.
It is important to note that the relief under Section 87A is not available to individuals who have income above Rs. 5 lakh in a financial year. Additionally, the benefit cannot be carried forward to the next financial year.
In summary, Section 87A provides tax relief to individual taxpayers whose total income does not exceed Rs. 5 lakh for the financial year. The relief helps in reducing the tax liability and saving tax for the individual. It is essential to calculate the tax liability and claim the relief while filing income tax returns.
Section 80TTA & 80TTB
Section 80TTA and 80TTB are two different provisions of the Indian Income Tax Act that provide deductions to taxpayers for certain types of interest income.
Section 80TTA: This section provides a deduction of up to Rs. 10,000 on interest earned from savings accounts held with banks, co-operative societies, or post offices. This deduction is available to individuals and Hindu Undivided Families (HUFs).
Section 80TTB: This section provides a deduction of up to Rs. 50,000 on interest income earned by senior citizens (aged 60 years or above) from deposits held with banks, co-operative societies, or post offices. This deduction is available only to individuals.
It is important to note that these deductions are not mutually exclusive, and a taxpayer may claim both deductions if they meet the eligibility criteria for both provisions. However, the maximum total deduction that can be claimed under both sections combined is Rs. 50,000.
Section 80GG
Section 80GG is a provision of the Indian Income Tax Act that allows individuals who do not receive House Rent Allowance (HRA) from their employer to claim a deduction for rent paid towards their accommodation. The section applies to both salaried and self-employed individuals.
Under Section 80GG, the deduction allowed is the least of the following:
- Rent paid minus 10% of the total income
- Rs. 5,000 per month
- 25% of the total income
The deduction is available only to individuals who do not own a residential property and do not receive HRA. However, if the taxpayer or their spouse or minor child owns a residential property in any other place, then the taxpayer will not be eligible to claim the deduction under Section 80GG.
It is important to note that to claim this deduction, the individual must submit Form 10BA along with their income tax return, which certifies that they have paid the rent and do not receive HRA.
Section 80GG
Section 80GG is a provision of the Indian Income Tax Act that allows individuals who do not receive House Rent Allowance (HRA) from their employer to claim a deduction for rent paid towards their accommodation. The section applies to both salaried and self-employed individuals.
Under Section 80GG, the deduction allowed is the least of the following:
- Rent paid minus 10% of the total income
- Rs. 5,000 per month
- 25% of the total income
The deduction is available only to individuals who do not own a residential property and do not receive HRA. However, if the taxpayer or their spouse or minor child owns a residential property in any other place, then the taxpayer will not be eligible to claim the deduction under Section 80GG.
It is important to note that to claim this deduction, the individual must submit Form 10BA along with their income tax return, which certifies that they have paid the rent and do not receive HRA.