Income from Salaries, Income Tax, Individuals

Common deductions available for salaried employees (FY 18-19)

  1. Section 80C – Rs. 150,000

The deduction comprises of payments for life insurance, equity mutual funds, provident fund contribution, repayment of principal on housing loan- Rs. 150,000. Investment in Equity linked Savings Schemes qualify for deduction under the section.

Don’t forget to claim tuition fees for children here – for college, university and school.

There is generally a view that the limit for deduction under this section is low and needs to be increased. This is one of the reasons, the Government has introduced Section 80 CCD (1b).

2. Section 80 CCD (1) and (2) – Limit – maximum 10% of salary.

Deduction available under National Pension Scheme (NPS) – this deduction can be availed only if your employer has provided the option.

3. Section 80 CCD (1b) – Upto Rs. 50,000 in addition to Rs. 150,000 under 80C

The Government has introduced additional deduction  for contribution to NPS. You can directly contribute this amount, however there is lock in till retirement so we advise you to carefully consider your monetary needs before investing – Rs. 50,000. Also, this amount should have been paid before the financial year to enable claim.

4. Section 80 D – Maximum Rs. 105,000 depending on age and nature of expenditure

 Rs. 25,000 as Medical/Health insurance premium (Rs. 50,000 for senior citizens).

The Government has introduced a deduction for senior citizens (if the tax payer is a senior citizen, he can claim deduction for medical expenditure upto Rs. 50,000 and if tax payers parents are senior citizens, deduction of expenditure for parents can also be claimed upto Rs. 50,000.

Note: The deduction for medical expenditure can be claimed ONLY if:

  • Medical insurance has not been taken for self or parent.
  • The actual expenditure incurred can be claimed. You will need to maintain bills for the expenditure for production if required by the tax authorities.

5. Section 80 E – no limit, actual eligible expenditure can be claimed

Interest on loan taken for higher education can be claimed under this section. There is no limit on the amount of deduction. The deduction can be claimed even if loan is on behalf of children. The loan should be taken from a financial institution (loans from relatives are not eligible for deduction).

Higher education refers to education after completing the Senior Secondary Examination (SSE). It includes both the vocational courses as well as the regular courses in India or abroad. Thus, loan taken for post graduate courses in medicine, management, engineering, applied science, etc. are covered under Section 80E.

6. Interest on Home Loan – Rs. 200,000

This deduction is available upto an amount of Rs. 200,000 for interest paid on Home loan. There are conditions attached mainly the home should be owned fully or partially by the tax payer and loan should also be in the name of the tax payer. There have been cases where because either of these reasons were not met and deduction was dis-allowed by the tax authorities.

This deduction has to be claimed from House Property income.

7. Leave Travel allowance under section 10

This is exempt allowance which can be claimed upon production of travel bills (Rail, Air tickets) to claim the allowance. The deduction can be claimed if it is included in Form 16.

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