Income Tax Exemptions
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Updated date : 30 April 2019
Income Tax Exemptions Available under Indian Income Tax Act
There are various ways to get exemptions on your taxable income. As a taxpayer, you can check and enjoy the income tax benefits under section 80 of the Income Tax Act. Here’s a look into few of the most important income tax exemptions a taxpayer can get:
U/s 80C, you are able to reduce Rs.1, 50,000 from your taxable income. This income tax exemption is allowed to HUF members as well as non-HUF members. The maximum of Rs.1,50,000 can be asserted for the financial year 2016-17, 2017-18 and 2018-19 each.
If by chance, you have paid taxes in excess and have invested in PPF, LIC and Mediclaim, you can claim deductions under section 80C.
Under this section of income tax, individuals can avail income tax exemptions on up to Rs 1,50,000, if he or she has invested or deposited in any annuity plan with LIC or another insurer. The annuity plan you have invested-in should be for receiving the pension from a fund being referred to in Section 10(23AAB). The pension which is got from receiving the amount or from the annuity on the surrender of the annuity including bonus and interest is taxable in the year of receipt.
Under this section, the older generation can now save additional money for leading a better life. The Central Government of India declared that the older citizens of India are now able to avail the benefits and enjoy the incentives on the policies that invest in pension plans.
Both the employers and the employees are eligible for income tax exemptions and are subjected to subtraction of below 10% of the salary of the concerned person.
Section 80 CCF
According to the Income Tax Act 1961 Section 80CCF, both the HUF (Hindu Undivided Families) and non-HUF members are now eligible to enjoy the tax benefits on subscribing of the infrastructure bonds for the long term. This initiative has been declared by the government. Under this section, the citizens can claim the deduction up to Rs. 20,000.
Section 80 CCG
Very few people get to enjoy the income tax exemptions under this section of the Income Tax Act. Citizens who belong to a specific community and have made an investment in equity savings schemes that are declared by the Government of India, get to enjoy income tax exemptions under Section 80CCG. The deductions allowed are 50% of the amount of the investment.
In general, this section offers income tax exemption to the individuals who have already invested in health insurance policies. The taxpayers can claim Rs 15,000 as a deduction at the time of making a payment towards health policy taken under the name of their wife or children or self. If the person is over the age of 20 years, he or she can claim income tax exemption of up to Rs. 20,000.
Both the individuals and the Hindu Undivided families are eligible to claim this benefit under section 80D of the Income Tax Act, 1961.
There are few sub-sections that are also present under Section 80D to offer several benefits for the taxpayers. Below enlisted are few highlights of the sub-sections of the Section 80D:
The provisions for income tax exemptions are offered under section 80DD in two situations. In case of severe disability, the citizen can claim income tax exemption of up to Rs. 1.5 lakh and in case of normal disability, one can claim exemption of up to Rs. 75,000.
The individuals who are buying a policy for someone with a disability in her/his family can also claim income tax exemptions under this section.
So, the deductions of Rs. 1.25 lakh for critical disability and Rs. 75,000 for normal disability persons. Both the Hindu Undivided families and the individual are eligible for this benefit.
The section 80DDB is one of the most important sub-sections of the Income Tax Act as it helps the individual to tide over their concerns against the treatment of the critical disease. The provisions for income tax exemptions are created to meet the need of the concerned people across the country. The deductions of Rs. 40,000 can be claimed by an individual for the normal treatment of a disease. However, Rs.40,000 can be enhanced to Rs. 60,000 in case of senior citizens.
Both the Hindu Undivided families and normal individuals are eligible to enjoy the benefits under this section of the IT Act.
According to Section 80E of the Income Tax Act, 1961, providing education to their kids or a dependent should not be a burden for anyone in the country. Hence, under this section, the IT Act has made it possible for the parents and guardians to claim income tax exemptions on the tuition fees paid by them.
This section is also helpful for individuals who have taken loans from approved charitable organisations or financial institutions.
Following are some other important sub-sections that are meant to offer more benefits to the people of the nation.
Under this section of income tax act, 1961 the individuals who are paying loans (with interest) that they have taken to purchase a property for the residential purpose are eligible to enjoy income tax exemptions. As per this section, an individual can get income tax exemptions of up to Rs. 3 lakhs.
As per the section 80G of the IT Act, the tax-payers get to enjoy income tax exemptions on the extra taxes paid on their income. If they contribute a certain amount to a charitable fund, they can get the benefit of enjoying the deductions on their tax payment. All the assessee would be able to enjoy the deductions by showing appropriate proof of donations. The limit of the deductions can only be availed depending on certain factors.
- 100% deductions can be availed if they donate their money to fund such as Prime Minister’s relief fund, National Defence fund, National illness assistance fund and so on.
- 100% deductions can be achieved if they decide to donate to the local authorities, local institutions, to enhance the growth of the sport and to initiate the family planning in the local area.
- 50% of deductions can be availed if there are donations made towards funds such as PM’s Draught relief fund, Rajiv Gandhi foundation etc.
- 50% of income tax exemptions can be achieved if the donations are made towards religious funds and local authorities (except the family planning). The deductions are availed depending on the qualifying limit.
There are the sub-sections under the section of 80G. Here’s a look into the highlights of the sub-sections of the section 80G.
Taxpayers who don’t have access to rent allowance are eligible for income tax exemptions u/s 80GG, subject to the highest deductions either 25% of the total income or Rs. 2,000 per month.
All taxpayers can avail of income tax exemptions under this section, contingent to all of them who don’t earn through gain or loss from a profession or business. Donations made by such members towards the National Poverty Eradication fund or to augment statistical/social/scientific experiments are eligible for tax benefits.
This section allows only Indian companies to avail tax deductions, using the amount they give to a political party or electoral organizations.
Under this section, income tax exemptions can be used by taxpayers for making contributions towards a political party or trust. Artificial juridical people & local authorities are not eligible for availing such deductions under this section.
Tax Deductions u/s 80 IA:
An avenue for all the taxpayers is given under section 80 IA for claiming income tax exemption on the industrial activity gains. These industrial organizations are subjected to telecommunication, power generation, industrial parks, SEZs, etc.
Different subsections available under Section 80 IA are:
Section 80 IAB:
This section can be used by the developers of Special Economic Zone(SEZ) for income tax exemptions on their profits earned through the development of SEZs. These need to be notified after 1st April 2005, to be eligible for the tax exemption.
All taxpayers can use the provisions of this section who gain profits from different businesses like hotels, shops, theatres, multiplex, cold storage plants, conventional centres, scientific research & development etc.
Taxpayers belonging states like Himachal Pradesh, Manipur, Tripura, Arunachal Pradesh, Nagaland, Mizoram, Assam, Meghalaya & Uttaranchal can avail income tax exemptions under this act.
This section of tax deductions can be availed by assesses gaining from centres & hotels, subjected to business centres located in certain specific areas.
Taxpayers who have projects in North-Eastern India can claim income ta exemptions under this Income Tax Act, subject to specific conditions.
Tax Deductions under Section 80 J:22
Section 80 JJA:
This section of Income Tax Act, 1961 is related to deductions on profits & gains earned from taxpayers’ businesses, related to collection & processing of bio-degradable wastes for the production of biological products such as biogas etc can avail income tax exemption of equal to 100% of the generated profit for 5 continuous years since the starting of the business.
Section 80 JJAA:
Indian companies that profit from the manufactured goods in factories can claim income tax exemption under this section. The claim can be the same as 30% of the new full-time employees salaries for 3 assessment years.
Such companies’ accounts should be audited by a chartered accountant and the employers need to submit a report on return. However, employees employed for less than 300 days on a contract basis in the previous years or designated individuals in administrative posts cannot avail this tax exemption.
Tax Deduction under Section 80LA:
International financial centres, Scheduled Banks that have offshore SEZs banking units & abroad banks can avail income tax exemptions in correspondence with the foreign countries laws equal to 100% of the first 5 years income & 50% of the incurred income for the 5 upcoming years based on the rules can be claimed by the assessee.
These bodies must have permission either under the Banking Regulation Act or registration under another relevant law or the SEBI act.
Income Tax Deductions under Section 80P:
- Under certain conditions, this section offers income tax exemptions to cooperative societies on their income equal to 100% & is given to societies which earn from fishing, agricultural harvesting, cottage industries & milk supplied to milk cooperative societies by the members.
- Cooperative societies involved in different businesses can claim income tax exemption varying from Rs. 50,000 to Rs. 1 lakh, subjected to their work.
- All cooperative societies can claim following income tax deductions:
- Cooperative societies income through renting the warehouses, interest on a loan to other societies & incurred from properties or securities.
Tax Deduction under Section 80 QQB:
Only local Indian authors can claim deductions up to 3lakhs on using this scheme of Income Tax Act, 1961 from the sale of books. Royalty on scientific, artistic, literary books & diaries, journals & textbooks cannot be claimed. Royalty received by authors from an abroad country, the amount must be brought into the nation within a certain time period to avail benefits.
Tax Deduction under Section 80RRB:
Patent holders who offer tax relief to local individuals receiving money through a royalty on the patent are provided with tax incentives under this section up to Rs. 3 lakhs depending on the registered patents after the date of 31st March 2003. Individuals must bring the royalty received from overseas shores into the nation within a period of time for being eligible for tax deductions.
Tax Deduction under Section 80TTA:
Under this section, the individual assesses & Hindu Undivided Families are allowed the deductions of up to Rs. 10,000 per year on the interest on the bank savings accounts invested in India.
Tax Deduction under Section 80 U:
Under this section, local disable assesses should have the right to claim tax deductions of up to Rs. 75,000 per annum on having a Person with Disability(PwD) certificate from a medical authority. People with severe disabilities can claim income tax exemption of up to Rs 1.25 lakhs based on the criteria met by them. Few examples include mental retardation, cerebral palsy, autism etc.
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