While filing I-T Return, the taxpayer first computes gross income from various sources. This gross income amount is arrived at by excluding the amount of incomes which are exempt from tax for instance an exempt portion of house rent allowance (HRA). The resultant amount is called as Gross Taxable Income (GTI). From this amount the tax-saving investments which are commonly called as deductions are deducted. The amount computed after reducing deductions from GTI is called as Total Income or Total Taxable Income (TTI).

A large number of taxpayers claim these deductions. There are numerous tax deductions, however, not every taxpayer is eligible to claim them. However, few of the deductions are so common that they are almost universally claimed by individual taxpayers since they are linked to common instruments of small savings or investments and mandatory expenses. The most popular tax deductions are known as ‘80C deductions’ since they are claimed under section 80C of the Income-tax Act. This section contains many deductions however most popular of them are discussed below. The deductions claimed u/s 80C of the Act combined with amounts claimed as deductions on account of pension contributions (80CCC) and New Pension Scheme (NPS u/s 80CCD (1)) cannot exceed the aggregate amount of ₹1,50,000/-

1. Life Insurance Premium

  • This is claimed on the amount of premium paid for life insurance
  • Such premium should be paid either for the person himself or his spouse or his minor children
  • This deduction can be claimed by individual or HUF
  • In case of HUF, any of the members of HUF can claim the deduction
  • The deduction claimed can not exceed 10% of the amount of sum assured which is 15% in case of persons with disability

2. Public Provident Fund (PPF) Deposits

  • This is claimed on the amount of deposits made in PPF account in the name of person himself
  • The deduction is available only in respect of the deposits made. The interest earned on such deposits is independently tax free.

3. Tax Saving Fixed Deposits

  • The deduction is available on fixed deposits with any bank
  • The term of deposits should not be less than 5 years
  • The deduction can be claimed by individual as well as HUF

4. Tax Saving Mutual Funds

  • These mutual funds are tilted towards equity and hold 65% of their corpus in shares, hence this scheme is also called as Equity Linked Saving Scheme (ELSS)
  • The lock-in period of these investments is 3 years
  • The ELSS investments made through SIP are also eligible for tax deductions
  • This can be claimed by Individual and HUF

5. Employee Provident Fund

  • The employers are mandated to deduct and pay 12% of the salary to EPF
  • However, the deduction is available for contribution to EPF made by the employee
  • This deduction is available to Individual
  • The withdrawal from EPF and interest income earned is separately tax-free

6. Principal Repayment of Home Loan

  • The EMI you pay on home loan consists of interest and principal components
  • Interest component is deductible from house property income
  • The principal component is deductible under this section
  • It can be claimed by individual and HUF

7. Tuition Fees Paid

  • The deduction can be claimed in respect of tuition fees paid at the time of admission or during the year
  • Fees paid for any school, college or university is eligible
  • Donation or development fund contributions are not eligible
  • Late fees paid is not to be included in the claim
  • Can be claimed in respect of only two children
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