Popular Income Tax Exemptions for 2016-17

In order to promote certain types of investments and expenses, the Government of India provides tax deductions under section 80C of the Income Tax Act. There are many investments and expenses under the terms of section 80C, 80CCC and 80CCD. Nevertheless, the total deductions under this section are considered limited to Rs 1.5 lakh. In this article, we look at the Income Tax Exemptions for 2016-17.

Section 80CCC: Deduction for Annuity Plan

You can also avail a deduction for the annuity plan related to insurance companies. There are certain limitations on this deduction. You cannot take a deduction greater than 10% of your salary or gross income and/or greater than Rs. 1 lakh in a year.

Section 80CCD (1): Contribution for Pension Plan

Similar to annuities, contribution in pension plans is also qualified for tax deduction. For instance contribution to National Pension Scheme (NPS) will obtain deduction benefit under this rule. Deduction under Section 80CCD is limited to 10% of salary or 10% gross income (if not salaried).

Section 80CCD (2): Contribution To Pension Plan By Employer

Section 80CCD provides extra tax saving opportunity if an employer makes a contribution into your pension plan, it will be also tax-free. This contribution does not come under the general limit of 1.5 lakh. Further, employers can be requested to credit 10% of your salary into your pension plan. It will not have an effect on your employer financially or increase cost to company, but will result in additional tax savings for the tax payer.

Section 80CCG: Rajiv Gandhi Equity Saving Scheme (RGESS)

Rajiv Gandhi Equity Saving Scheme can benefit the first-time investor in the share market. Your annual income must not be more than Rs 10 lakh. You can invest up to Rs 50,000 under the terms of the scheme. Nevertheless, the tax deduction will be available for the 50% of your investment. So, if you plan to invest Rs 50,000, you will get the tax deduction of only Rs 25,000. There is some mutual fund scheme that is designed for RGESS. However, owing to the complex rules, it has become unpopular.

Section 80D: Medical Insurance Deduction

This scheme provides a chance to save tax over and above the 1.5 lakh. Under Section 80D, a tax deduction of up to Rs 65,000 can be claimed. Medical insurance of self, family and parents are qualified for tax deduction under section 80D.

Section 80DD: Deduction for Maintenance of Disable Dependent

Under this section, one can avail a tax deduction of Rs 50,000, if they satisfy the following conditions:

A person with a disability should be dependent on the taxpayer. The disability can be physical or mental.
Doctors certificate must be provided.
Taxpayer must be incurring the expense of treatment, rehabilitation, nursing and training.

Further, if the dependent person has harsh disability, a deduction of upto Rs.1 lakh can be claimed. Finally, if you deposit any amount in any scheme for the disabled, it is also eligible for tax deduction.

Section 80DDB: Serious Illness Deduction

This deduction is considered for the treatment of serious illness. Taxpayers can get an income tax deduction of Rs 40,000 under the terms of this section, as below:

The deduction must be availed for the expense of illness of self or dependent.
The illness must be within the prescribed list.
Any reimbursements of insurance claims must be subtracted.
Certificate from a government doctor is required.
For senior citizens this deduction limit is considered Rs 80,000.

Section 80E: Deduction on Loan for Higher Studies

Like the home loan interest, one can also enjoy income tax deduction for education loan interest. To be eligible, educational loan must have been availed from a financial institution. Deduction under this section can be taken for a maximum of 7 years. Further, this deduction can be taken for the education of self, spouse or children or lawful guardian of a student.

Section 80G: Deduction for Donations

The donations specific in Section 80G are eligible for deduction. The deduction can be 100% of donation or 50% depending on the category of the recipient.

Section 80GG: Deduction on House Rent Paid

This deduction is for those, who do not get the house rent allowance from their employer. Taxpayers can benefit from this deduction in accordance with the specified rules. Deduction is the least of the following:

Rent paid less 10% of total income
Rs. 5000/ month, i.e. Maximum Deduction obtainable is 60,000.
25% of total income

There are also certain conditions related to this benefit:

Taxpayer or his spouse or minor child must not own residential accommodation located at the place of employment.
Taxpayer must not obtain a house rent allowance (HRA).
Taxpayer must not have self occupied residential premises in any other place.