Deductions under Chapter VI A of Income Tax Act
Understanding Chapter VIA Deductions in the Indian Tax System: The tax system in India is progressive, meaning that higher income earners pay more taxes. Taxpayers in low to medium brackets can save a significant amount. Tax slabs determine taxable income, but not all earned income is taxable. Chapter VI A offers sections for deductions to reduce taxable income.
Summary of Chapter VIA of Income Tax Act
Chapter VIA of the Income Tax Act allows taxpayers to claim deductions from their income through various tax-saving investments, permitted expenditures, and donations. These deductions, such as those under Sections 80C, 80CCC, 80CCD, 80CCE, 80D, and 80U, aim to reduce the tax burden on the taxpayer. However, there are conditions to qualify for these deductions. The deductions cannot exceed the gross total income, and certain types of capital gains are not eligible for deductions under Chapter VIA. This chapter provides opportunities for taxpayers to save and invest money while reducing their tax liability.
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Deductions under Chapter VIA
The Sections which gives benefit of lowering the taxes to Individual and HUF taxpayers are listed below:
Deduction under Section 80C
| Eligible Taxpayer | Individual and HUF |
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| Investments and Conditions | To take advantage of Section 80C, the taxpayer must invest and make certain payments as follows:1. Life Insurance Premium2. Contribution to Public Provident Fund (PPF)3. Contribution to Recognized Employee Provident Fund (EPF)4. Investment in National Pension Scheme (NPS)5. Investment in National Savings Certificate (NSC)6. Investment in Equity Linked Saving Scheme (ELSS)7. Investment in Unit Linked Insurance Plan (ULIP)8. Investment Tax Saving Fixed Deposit (five-year fixed deposit (FD) of Scheduled Bank or Post Office)9. Contribution to Approved Superannuation Fund10. Senior Citizen Saving Scheme11. Sukanya Samriddhi Yojana12. Repayment of Housing Loan Principal amount13. Tuition Fees of any college, school, university or other educational institutions within India for full-time education for maximum 2 children. Each of the above investments and payments has its own lock-in period, interest rate, and other requirements to qualify for deduction under Section 80C. |
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| Amount of Deduction | The maximum deduction under Section 80C is Rs. 1,50,000, subject to Section 80CCE. |
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Deduction under Section 80CCC
| Eligible Taxpayer | Individuals who have paid or deposited any amount in a specified pension funds that are offered by a life insurance. HUF (Hindu Undivided Family) is not eligible for exemption under Section 80CCC. These provisions apply to both residents as well as non-residents individuals. |
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| Condition | No deductions can be claimed under Section 80C if a deduction is claimed under this section. |
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| Amount of Deduction | The Section 80CCC allows a deduction of Rs. 1,50,000 subject to section 80CCE. |
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| Other Points | The following amounts will be taxable during the year they are received:Income from an annuity or pension.The amount received when surrendering an annuity, including any accrued bonus or interest. |
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Deduction under Section 80CCD
The government of India has notified deductions for contributions to pension schemes. The deductions fall into three categories:
| Section | 80CCD(1) | 80CCD(1B) | 80CCD(2) |
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| Eligible Assessee | An individual who deposits into his or her pension account as per National Pension Scheme or the Atal Pension Yojana, whether he or she is salaried or self-employed. | Individual taxpayer who have deposited the money in the National Pension Scheme will have an additional deduction. | Contributions made by the employer to the pension account of the employee. A deduction u/s 80CCD(2) may be made after the employer’s contribution is included in the employee’s salary. |
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| Contribution of | Employee | Own | Employer |
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| Amount of Deduction | Salaried Individuals – 10% of salary (i.e. basic salary and dearness allowance) (subject to section 80CCE) |
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Deduction under Section 80CCE
There can be a maximum deduction of Rs. 1, 50,000 under section 80C, 80CCC, and 80CCD(1). The breakdown is as follows:
| Section | Investment/ Contribution | Ceiling Limit |
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| 80C | Specified Investments | Rs. 1,50,000 |
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| 80CCC | Contribution to Certain Pension Funds | Rs. 1,50,000 |
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| 80CCD(1) | Contribution to NPS of Government |  |
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| 80CCE | Aggregate Deduction under above Sections | Rs. 1,50,000/- |
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The following table lists the ceiling limits under other sections, which do not exceed the limit of Rs. 1,50,000 specified under section 80CCE:
| Section | Investment/ Contribution | Ceiling Limit |
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| 80CCD(1B) | Contribution to NPS of Central Government | Rs. 50,000 |
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| 80CCD(2) | Contribution by employer to NPS of Central Government | Maximum 14% of the salary (in case the employer is CG)/10% of Salary (in case of other employer) |
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Deduction under Section 80D
| Eligible Taxpayer | Individual or HUF |
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| Expenditure | The following expenditure should be incurred:Health insurance premium or Mediclaim premiumContribution to Central Government Health SchemePreventive health checkupMedical expenditure (only applicable in case of a Very Senior Citizen/ senior citizen (aged 60 years or above) not having a medical insurance)The expenditure can be incurred by the taxpayer being:Individual: for self, spouse, dependent children and parents.HUF: for Karta & Co-parceners. |
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| Amount of Deduction | For Individuals paying for Self, Spouse and Dependent Children below 60 years: Rs. 25,000.For Individuals paying for Self, Spouse and Dependent Children above 60 years: Rs. 50,000.An additional Deduction is allowed if paid for Parents:Rs. 25,000 (If one of the parents is a senior citizen or a very senior citizen, Rs. 50,000)Deductions for Preventive Health checkups should not exceed Rs. 5000, but this limit is not in addition to the limit of Rs. 25,000 or Rs. 50,000 mentioned above. |
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| Mode of Payment | Any payment mode is allowed other than cash. However, the payment of Preventive Health Checkups can be paid in cash. |
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Deduction under Section 80DD
| Eligible Taxpayer | Resident Individual and Resident HUF |
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| Conditions | Expenditures should be made as follows:Medical treatment, nursing care, training, and rehabilitation should be paid for a dependent with a disability orPayments should be made under the appropriate scheme framed for this purpose.If a person with a disability files his income tax return, he should not claim a deduction under Section 80U.If the taxpayer files an income tax return, he or she should include a copy of the certificate issued by the appropriate medical authority.Deduction is allowed for a dependent of the taxpayer and not the taxpayer himself.Dependent in case of an individual taxpayer means spouse, children, parents, brothers & sisters of the taxpayer. In case of a HUF means a member of the HUF. |
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| Amount of Deduction | The amount of deduction is Rs. 75,000 (Where disability is 40% or more but less than 80%)In case of severe disability (person with 80% or more disability), the amount of deduction will be Rs. 1,25,000. |
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Deduction under Section 80DDB
| Eligible Taxpayer | Resident Individual and Resident HUF |
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| Conditions | Medical treatment expenses must be incurred for the specified disease or ailment.A prescription for such medical treatment must be provided by a neurologist, an oncologist, a urologist, a hematologist, an immunologist, or any other specialist specified by the taxpayer. |
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| Amount of Deduction | The amount of deduction is:In the case of a senior citizen and super-senior citizen, Rs.1,00,000 or amount actually paid, whichever is less.40,000/- or the amount actually paid, whichever is less.The deduction is allowed in respect of the amount actually paid for the medical treatment of such disease or ailment of the specified persons.If the taxpayer or dependent receives medical treatment through insurance or an employer reimburses the taxpayer for medical treatment, the deduction amount will be reduced by such amount as reimbursed. |
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Deduction under Section 80E
| Eligible Taxpayer | Individual |
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| Conditions | The loan must have been taken for the higher education of self or relative (spouse, child or student of whom you are a legal guardian)Notified financial institutions or charitable organizations must have provided the loan.The person who is repaying the loan for the above mentioned people can take benefit of 80E deduction. |
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| Period of Deduction | A total of 8 years or repayment in full, whichever comes first. |
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| Meaning | Higher Education: Any course after 12th standard.Relative: Spouse and/or Children |
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| Amount of Deduction | No maximum or minimum deduction limit specified under section 80E.This section provides a deduction on the actual interest amount paid during the financial year. |
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Deduction under Section 80EE
| Eligible Taxpayer | Individual |
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| Conditions | A taxpayer has taken out a loan for his first home, meaning – s/he does not own a house when a housing loan is approved.The loan is sanctioned in FY 2016-17 and 2017-18.The House is not worth more than Rs. 50,00,000.The loan amount sanctioned does not exceed Rs. 35,00,000.Under this section, the deduction of housing loan interest cannot be taken under any other section.80EE deduction is in addition to the deduction available under section 24 while computing ‘income from house property |
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| Amount of Deduction | Interest paid on the Housing Loan is up to Rs. 50,000 |
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Deduction under Section 80EEA
| Eligible Taxpayer | Individual |
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| Conditions | A taxpayer has taken out a loan for acquiring a residential unit and he/she does not own a house as on the date of loan sanction.The loan is sanctioned between April 1, 2019 to March 31, 2022.Stamp Duty Value of the house should not exceed 45,00,000.80EEA deduction is in addition to the deduction available under section 24 while computing ‘income from house property |
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| Amount of Deduction | Interest paid on the Housing Loan is up to Rs.1,50,000 |
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Deduction under Section 80EEB
| Eligible Taxpayer | Individual |
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| Conditions | Purchase of Electric vehicles.Loan is taken from any financial institution between April 1, 2019 to March 31, 2023. |
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| Amount of Deduction | Interest paid on the Loan is up to Rs.1,50,000. |
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Deduction under Section 80G
| Eligible Taxpayer | Any Taxpayer (individual/ firm/ LLP or any other person). |
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| Categories of Donations | Donations fall into the following categories:Donations to funds like Prime Minister’s National Relief Fund, The National Children’s Fund, etc.Donations to the following:The Jawaharlal Nehru Memorial Fund,Prime Minister’s Drought Relief Fund,Indira Gandhi Memorial Trust,Rajiv Gandhi Foundation.Donation to Government or any approved local authority for the promotion of Family Planning.Donations to Charitable institutions who provide a certificate. |
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| Amount of Deduction | Amount of Deduction is based on the Donee to whom the Donation is made. The following amount of Deduction is available based on categories of donation:100% of Category 1 donation50% of Category 2 donation100% of Category 3 – Subject to the qualifying limit50% of Category 4 – Subject to the qualifying limit |
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| Other Points | Donations should be made to approved recipients. In addition to the receipt for such donations, a certificate is required to take advantage of the deduction.A donation made in kind cannot be deducted.If a cash donation exceeds Rs. 2,000, it cannot be deducted. (i.e. The donation should be made in any mode of payment other than cash if it exceeds Rs. 2,000)Qualifying Limit – All donations made to donees (recipients) listed in Category 3 and 4 combined should not exceed 10% of Adjusted Gross Total Income. |
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List of Donee (recipients) in Category 1:
- The National Defence Fund set up by the Central Government
- Prime Minister’s Relief Fund
- Prime Minister’s Armenia Relief Fund
- The Africa (Public Contributions – India) Fund
- The National Children’s Fund
- The National Foundation for Communal Harmony
- Approved University or educational institution of national eminence
- Maharashtra Chief Minister’s Earthquake Relief Fund
- Any Fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the Gujarat Earthquake
- Any Zila Saksharta Samiti for primary education in villages and towns and for literacy and post-literacy activities
- National Blood Transfusion Council or any State Blood Transfusion Council whose sole objective is the control, supervision, regulation or encouragement of operation and requirements of blood banks
- Any State Government Fund set up to provide medical relief to the poor.
- The Army Central Welfare Fund or Indian Naval Benevolent Fund or Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of past and present members of such forces or their dependants.
- The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- The National Illness Assistance Fund
- The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund
- The National Sports Fund set up by the Central Government
- The National Cultural Fund set up by the Central Government
- The Fund for Technology Development and Application set up by the Central Government
- National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
- The Swachh Bharat Kosh, set up by the Central Government
- The Clean Ganga Fund, set up by the Central Government (only Residents are eligible for deduction)
- The National Fund for Control of Drug Abuse
Deduction under Section 80GG
| Eligible Taxpayer | Individual self-employed, or salaried not receiving HRA at any time during the year |
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| Conditions | The taxpayer, his/her spouse, minor children, or HUF of which he/she is a member shall not own any residential accommodations in a place where he/she currently resides, is employed, or engaged in business or profession.Any residential property owned by the taxpayer at any other location should not be assessed as self-occupied residential property.Rental payments must be made by the taxpayer.You being an individual can only be entitled to receive this deduction.If you are salaried, you must not receiving any HRA or RFA benefits and you are not even entitled to receive so, to avail the benefit of section 80GG. |
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| Amount of Deduction | If any deduction is made, it will be the lowest of:Rs. 5,000 per month or annually rs. 60,00025% of Adjusted Total IncomeRent Paid Less 10% of Adjusted Total Income |
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| Meaning of Adjusted Total Income | Adjusted Total Income is defined as Gross Total income after reducing:Short Term Capital Gain under 111ALong Term Capital GainAll Deduction under Section 80C to 80U except deduction under this section.Incomes of NRIs and foreign companies, etc. which are taxed at special rate of tax such as incomes u/s 115A, 115AB, 115AC or 115AD.Note that deduction under under Section 80GG is to be excluded. |
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| Other requirements | The taxpayer needs to file Form 10BA containing details of payment of rent. |
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| Example | Mr. Raj Kumar pays a monthly rent of Rs. 10,000. Prior to deductions under Section 80GG, he earned Rs. 4,80,000. In accordance with section 80GG, he will be entitled to the following deduction:Amount calculated at Rs. 5,000 per month is equal to Rs. 60,00025% of Total Income (Rs. 4,80,000/- X 25%) is equal to Rs. 1,20,000Rent Paid Less 10% of Total Income:
[(Rs. 10,000 X 12) – (10% X Rs. 4,80,000) is equal to Rs. 72,000Under Section 80GG, the lowest amount will be allowed as a deduction, which is Rs. 60,000. |
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Deduction under Section 80GGB
| Eligible TaxpayerAn Indian companies. |
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| Conditions | Any mode of contribution other than cash is acceptable. |
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| Amount of Contribution | Contribution made in full. |
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| Contribution to whom? | Electoral trust or political party. The term Political Party refers to any Political Party that has registered under section 29A of the Representation of the People Act. |
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Deduction under Section 80GGC
| Eligible Taxpayer | All taxpayers, other than an Indian companies, local authorities, and artificial juridical persons wholly or partly funded by the government. |
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| Conditions | Any mode of contribution other than cash is acceptable. |
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| Amount of Contribution | Contribution made in full. |
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| Contribution to whom? | Electoral trust or political party. The term Political Party refers to any Political Party that has registered under section 29A of the Representation of the People Act. |
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Deduction under Section 80TTA
| Eligible Taxpayer | Individual (Other than Resident Senior Citizen) or HUF |
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| Conditions | Interest income on deposits in Savings Bank Accounts of Banks, Co-Operatives Banks or Post Office. |
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| Amount of Deduction | The amount of interest earned or Rs. 10,000, whichever is less. |
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| Other Points | The deduction does not apply to interest on bonds, partner’s capital, FD interest, sweep TD interest, etc. |
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Deduction under Section 80TTB
| Eligible Taxpayer | Individual (Only Resident Senior Citizen: age 60 years or more) |
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| Conditions | Interest income on deposits in Savings Bank Accounts of Banks, Co-Operatives Banks or Post Office, banking company, cooperative, society engaged in the banking business etc. |
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| Amount of Deduction | The amount of interest earned or Rs. 50,000, whichever is less. |
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Deduction under Section 80U
| Eligible Taxpayer | Resident Individual |
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| Conditions | When filing an income tax return, the taxpayer should provide a copy of the certificate issued by the appropriate medical authority. |
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| Amount of Deduction | Rs. 75,000 is the amount of deduction (having a disability of 40% or more). If the person has 80% or more disability, the deduction will be Rs. 1,25,000. |
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| Other Points | It is a fixed deduction and is not based on actual expenses. |
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The Chapter VIA deductions are advantageous as they not only help in saving money but also in growing it, allowing you to expand and protect your corpus. It is recommended to start investing in Chapter VIA instruments now to maximize your returns. Connect with our trusted financial experts today!
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