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Deductions & Exemptions under Income Tax Act for Salaried Individuals

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Deductions & Exemptions under Income Tax Act for Salaried Individuals

  1. House Rent Allowances (HRA)
For claiming HRA benefit following points needs to remember:
  • In case an Individual is receiving HRA from employer the allowances amount will be exempted as per limits specified u/s 10(13A) of the income tax act, 1961
  • In case Individual is not receiving HRA from Employer oris Self-Employed the rent paid by the individual is exempt as per the provisions u/s 80GG of the income tax act, 1961.
Max Exemption under Sec 80GG is Rs 60,000 per year (Rs 5,000 per month) or 25% of the adjusted gross total income whichever is lower.
  • All individuals or HUFs (except those liable to audit under clause a and b of section 44AB) paying monthly rent to a resident, in excess of Rs. 50,000 are liable to deduct TDS under Section 194-IB @ 5% of the Gross rent paid during the Financial Year. The TDS can be deposited by filling Form 26QC.
  • If the Landlord / Lessor/ Payee is a non-resident, liability to deduct TDS arises to the Tenant (irrespective of the rent) at the time of making payment of the rent periodically, under section 195 of the Income-tax Act, 1961.
  1. Deduction for Housing Loan Principle repayment and Interest payment
Following exemptions are allowed:
Section Nature of tax deduction Deduction amount(Rs.)
Section 24 Interest on housing Loan * Max. Rs. 2,00,000
Section 80C Housing loan Principle Max. upto Rs. 1,50,000
Section 80EE Additional Interest(1st Time buyers) * Rs. 50,000
Section 80EEA Additional Interest (Budget 2019) * Max. Upto 1,50,000
*Note: Available only if the Possession of the Property is received.  
  1. Sec 80C :
    Deduction of Rs 1,50,000/-is allowed as per provisions u/s 80C if the Investment is made in the following which Includes EPF / LIC / PPF / ELSS /Tution Fees /Housing Loan Principal / Stamp Duty of Property Purchase / SSY / SCSS / Fixed deposit with Banks (5YRs) / NSC etc
  1. NPS Section 80CCD(1)
    : As per Section 80CCD(1) deduction on employee’s contribution to pension account is allowed. You can avail maximum deduction upto 10% of salary (in case of salaried) or 20% of gross total income (in case of self employed) or rs. 1,50,000-whichever is lower.
Note: As per Section 80CCE aggregate deduction allowed u/s 80C, 80CCC &80CCD (1) is Rs. 1,50,000.
  1. NPS Additional deduction u/s 80CCD (1B):
    of Rs. 50,000 is allowed to taxpayer for the amount deposited by them in NPS account under section 80CCD (1B).
  2. NPS u/s 80CCD (2):
    The contribution made by employer’s to NPS account is allowed u/s 80CCD (2) upto 10% of salary.
  3. Medical Insurance premium (Section 80D):
    As per section 80D deduction for premium paid on medical insurance is allowed upto Rs. 25,000 if paid for self, spouse and dependent children. Additional deduction of Rs. 25,000 for insurance premium paid for parents aged less than 60 years and if parents are aged above 60 years the amount of deduction is Rs. 50,000.
  4. Deduction for medical expenditure (Section 80DDB)
    : A deduction of medical expenditure on specified medical diseases or ailments for self or dependent relative ranging from Rs. 40,000 to Rs. 1,00,000 as per the eligibility is allowed under the provisions of income tax act, 1961.
  5. Deduction for Donations (Section 80G):
    The deduction for Donations specified u/s 80G is allowed from gross total income of the assessee. The amount of deduction allowed is 50% or 100% as the case may be.
  6. Saving Bank Interest (Section 80TTA)
    : A deduction of Rs. 10,000 is allowed on interest received in saving bank account u/s 80TTA. The deduction is not allowed on interest on fixed deposit, recurring deposit etc.
  7. Deduction for Interest on deposits held by senior citizen u/s 80TTB:
    A deduction of Rs. 50,000 is allowed with respect to interest income on deposit held by senior citizens u/s 80TTB. No further deduction u/s 80TTA is allowed.
Capital Gain Exemption u/s 112A:
In case of sale/redemption of long term listed securities (Equity, units of business trust, units of equity oriented fund) long term capital gain (LTCG) is exempt upto Rs. 1,00,000 u/s 112A. LTCG over and above the limit of Rs. 1,00,000 is taxable as per the provisions of Income tax act.
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