An in-depth guide to all the tax saving provisions under Section 80 – Part 1

‘Tax’, more so, ‘income tax’ is a scary term. It requires us to give away our hard earned money. We loathe them. Use unethical means to get away without paying them. And go to great lengths to save them.

What’s not realised is that the government functions on these taxes that people pay. The many services and amenities that the government provides, the expenses of them are fulfilled via these taxes only. And while taxes does seem harsh on people sometimes, the government is not actually cruel to impose them. It’s the way how economies work. And to save people from the wrath of taxes, the government also provides a lot of tax saving provisions which are known as tax deductions.

But before going deep into the different provisions that fall under the purview of section 80, let’s shed some light on,

What actually are tax deductions?

Tax deductions can help taxpayers reduce their tax liability towards the government, enabling them to take home more of their earned money. The government offers different types of deductions which are influenced by certain factors and the amount varies depending on the type of deduction you plan to claim. These benefits can be claimed on the expenses that you have incurred and on the investments you’ve made. And these investments can include national and retirement savings schemes, life insurance plans, provident funds, etc. The reason why the government has put tax deductions in place is to make more people claim and enjoy social benefits, making for a more socially inclusive neighbourhood.

Now, this might seem like easy information, but you might be surprised to know that an extremely low percentage of Indians claim the available tax benefits to its full extent.

The next thing you might be wondering is that why would anyone not want to save on their tax liability and not take the full advantage of the available deductions when the government has made provisions for the same?

Well, there are primarily two reasons for that.

• Because of not a great deal of interest in finance, a huge majority of people are not aware of all the provisions and benefits under section 80.
• The only time taxpayers try to get information on these is when the tax filing date knocks at their doors. What happens in such a scenario is that because there is an infinite amount of information on these topics, it all becomes very confusing. And people reach nowhere in terms of what they want to know.

Hence, this one guide can serve as your go-to resource on just about anything when it’ll come to claiming deductions under Section 80 of the Income Tax Act of India. We’ll look at all the different sections, the factors that affect them and the limits that are in place. (Section 80 has many sections and a few of those sections also has some subsections; so, we’ll look at them one-by-one)

In this article, the five tax deduction provisions of Section 80 that have been covered are:

• Section 80C
• Section 80D
• Section 80E
• Section 80G
• Section 80IA

1. Section 80C

Section 80C of the Income Tax Act 1961, allows the taxpayers to claim various kinds of tax deductions up to Rs. 1,50,000 in a financial year. What this means is that out of a person’s total tax liability, he/she can pay Rs. 1,50,000 less in taxes, after investing in any of the tax planning instruments listed under this section. Although it’s universally known that deductions under section 80C can be claimed by just about anyone, according to the stated eligibility criteria, only an individual or a Hindu Undivided Family (HUF) can claim tax deductions under this section.

Learn from the video how you can save income tax from section 80-c

Following are some of the eligible deductions that can be claimed under section 80C,

• Investments in Employee Provident Fund (EPF) and Public Provident Fund (PPF)
• Investments in Equity Linked Savings Scheme (ELSS)
• Investments in Fixed Deposits (FD)
• Investments in National Pension Scheme (NPS)
• Investments in National Savings Certificates (NSC)
• Investments in Unit Linked Insurance Plans (ULIP)
• Investments in Sukanya Samriddhi Yojna
• Investments in Senior Citizen Savings Scheme (SCSS)

But the story does not end here. Because section 80C has a wide array of deductions, the government has divided it into subsections to give taxpayers a clearer picture of how they can save more. This is how the subsections look,

• Section 80CCC – for deductions against investments in pension funds and insurance schemes
• Section 80CCD – for deductions against pension contributions towards schemes by Central government
• Section 80CCF – for deductions against infrastructure bonds
• Section 80CCG – for deductions under Rajiv Gandhi Equity Savings Scheme (RGESS). Starting 1^st April 2018, RGESS has been discontinued and no new investments will be entertained under this scheme.

For a more detailed view on the whats and hows of all the eligible deductions, you can head over to Section 80C deductions list.

2. Section 80D

Section 80D helps the taxpayers in claiming benefits for money spent towards health insurance premiums. While a lot of people are still negligent towards purchasing health insurance policies, the government has made it a mandate to encourage more people to buy them. A simple case in point is that if you feel you don’t have enough money to pay for the insurance premium, just imagine how you’ll pay for the cost of treatments, in case you or someone in your family gets hospitalized.

To achieve the purpose of making more Indians buy health insurance policies, it allows tax benefits of up to Rs. 25,000 for health insurance premiums for self and family while Rs. 50,000, if you’re a senior citizen. Similarly, in case of your parents, the maximum deduction allowed is Rs. 25,000, which doubles up to 50,000 in case they’re senior citizens. Apart from this, Rs. 5,000 can be claimed every year on health check-up related expenses. And this covers the check-up expenses of all the members of your family –spouse, children and parents.

Further, Section 80D is divided into two subsections to make it easier for taxpayers to claim the tax benefits, for the premiums they pay, on their medical insurance policies.

• Section 80DD – comes into effect in the case of treatment of dependents with disability.
• Section 80DDB – kicks in for the treatment of some specific illnesses.

For a more detailed view on the whats and hows of all the eligible deductions, you can head over to Section 80D deductions list.

3. Section 80E

After investments and medical expenses, next in line is education costs, which is what section 80E considers. Education, today, is a costly affair and taking a loan to pursue higher education only adds up to people’s woes. Many a times this even discourages taxpayers to get their child educated, which affects the overall standard of living of the society. Hence, to fight this, government has section 80E in place so that taxpayers do not feel the entire heat of education costs and can claim deductions on the same.

Under Section 80E, taxpayers are eligible for tax deductions on the interest repayment of any loans that they take. It’s not limited as the claims can be made on loans taken both for oneself or for educating one’s children. The benefits can be claimed by individuals only and only on the loans taken from government approved organizations/financial institutions. However, there’s no tax benefit for the principal that you pay.

Section 80E is also divided into one subsection to allow for more inclusions.

• Section 80EE – for first time home owner, who can claim deductions on home loan interest.

For a more detailed view on the whats and hows of all the eligible deductions, you can head over to Section 80E deductions list.

4. Section 80G

Section 80G can be effectively termed as the do-gooder provision. Why? Section 80G offers tax benefits on any monetary donations that you make, to funds and charitable organizations. Anyone is eligible to claim deductions under 80G provided that they can show a proof of payment. (Seems like not just god but even the government wants to identify and reward you for your noble efforts towards uplifting the society)

However, not every kind of monetary donations is entitled to full deductions. Even the limit is not universal and is decided to keep a few factors in mind. Following are the different brackets under which your philanthropy efforts will fall,

• 100% deductions without any limit – donations to funds like the National Defence Fund, National Illness Assistance Fund, National Children’s Fund, etc. come under this.
• 100% deductions with qualifying limits – donations to local authorities, associations or institutions, majorly focused on family planning initiatives are covered under this.
• 50% deductions without any limit – donations to funds like Prime Minister’s Drought Relief Fund, Jawahar Lal Nehru Fund, Indira Gandhi Memorial Trust, etc. are considered under this.
• 50% deductions with qualifying limits – donations to local authorities that focus on initiatives other than family planning along with religious organisations fall under this.

Just like others, even section 80G has been divided into subsections. There are certain conditions and limits to how section 80G will be applicable to different kinds of taxpayers and the subsections break this down for easy understanding.

• Section 80GG – for individual taxpayers who don’t receive house rent allowances.
• Section 80GGA – for individual taxpayers who don’t have any sort of income either through business or profession.
• Section 80GGB – for companies that make donations to a political party or towards electoral trust.
• Section 80GGC – for individual taxpayers who make donations to a political party or towards electoral trust.

For a more detailed view on the whats and hows of all the eligible deductions, you can head over to Section 80G deductions list.

5. Section 80IA

Section 80IA facilitates tax deductions for industrial enterprises/undertakings involved in the construction, operation and maintenance of infrastructure development. Now you might be wondering why this?

Infrastructure development is an important aspect of nation building that helps in building assets for a country. These assets are what a country is majorly known for; hence, it becomes important for the government to promote it. Which it does by offering tax deductions to the companies involved in infrastructure building. Following are some of the areas where this is applicable,

• Business Parks and Special Economic Zones (SEZs)
• Telecommunication Services
• Infrastructure Facilities
• Reconstruction of Power Plant
• Distribution of Natural Gas
• Generation and Distribution of Power

Again, Section 80IA is divided into 5 subsections and cover not just the various types of infrastructure developments but are also region specific.

• Section 80IAB – precisely for SEZ developers who can claim deduction on the tax they pay for their profits.
• Section 80-IB – includes housing/dwelling projects or places for leisure activities like multiplex theatres or of public value such as cold storage plants and scientific research and development centres, etc.
• Section 80-IC – for profits generated in the Indian states categorised as special.
• Section 80-ID – covers profits from hotels and convention centres in some specified areas.
• Section 80-IE – takes into consideration assesses with undertakings in the North Eastern part of India, pertaining to certain conditions.

For a more detailed view on the whats and hows of all the eligible deductions, you can head over to Section 80G deductions list.

This is the first part of our in-depth coverage of Section 80 of the Income Tax Act of India, 1961. Here we covered five types of deduction offered by the government of India, under section 80. In the second part, we’ll cover the remaining seven types of deductions. Stay tuned…