Tax Saving: Deductions Under Section 80C, 80CCC, 80CCD And 80D

22 June 2023
6 min read
Tax Saving: Deductions Under Section 80C, 80CCC, 80CCD And 80D
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Tax deductions can assist a person in reducing their overall tax liability, lowering their taxable income, and ultimately helping them save on taxes. Many people try to reduce their income taxes by investing in tax-saving strategies. The kind of tax benefit asserted determines how much tax can be saved. 

Sections 80C, 80CCD, 80CCC, and 80D of the Income Tax Act provide certain deductions that are subject to various restrictions. The above deductions are a form of government relief that aids citizens in reducing their taxable income, and lowering their tax bill for any given fiscal year. They also help taxpayers build a solid financial future by encouraging them to save and invest. Deduction eligibility is based on several variables, with various thresholds established for multiple goals.

Look at the different investments and spending categories that will enable you to obtain deductions from your taxable income in this blog.

Overview

This section explains Sections 80C and 80D as well as the subsections of Section 80C, including Section 80CCC, Section 80CCD (1), Section 80CCD (1b), and Section 80CCD (2).

Section 80 C

80C permits deductions for investments made in PPF, EPF, LIC premiums, Equity Linked Savings Plans, principal payments made on home loans, stamp duty and registration fees paid for the purchase of property, Sukanya Smriddhi Yojana (SSY), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), ULIP, tax-saving Fixed Deposits for five years, Infrastructure Bonds, and other financial instruments.

Section 80CCC

Annuity pension plan payments are eligible for tax deduction under section 80CCC. However, taxes are due in the year that the annuity's pension is received, as well as any money that is given back when it is surrendered, including any interest or bonuses that have accrued.

Section

80CCD (1)

The maximum deduction for an employee's contribution under section 80CCD (1) is the following –

-   10% of gross salary (in case the taxpayer is an employee)

-   20% of total gross income (in case of self-employment)

-   ₹1.5 Lakh (limit permitted under Section 80C)

Section 80CCCD (1b)

For money deposited into an NPS account, an additional deduction of ₹50,000 is permitted. Contributions to the Atal Pension Yojana are additionally deductible.

Section

80CCD (2)

Under this section, employers may deduct up to 10% of the basic salary plus the depreciation allowance as their contribution. Only those who are salaried and not self-employed are eligible for the benefits in this section.

Section 80D

A taxpayer may deduct tax on premiums paid for medical insurance for themselves, their spouse, their parents, and any dependent children, by Section 80D. Both people and HUF are eligible to use this deduction.

Age affects the maximum deduction amount. For oneself, one's spouse, and dependent children, a deduction of ₹25,000 is available. For insurance paid for parents under 60 years of age, an excess deduction of ₹25,000 is accessible. If any insurer—yourself, your spouse, or your parents—is over 60 years old, a deduction of ₹50,000 is permitted rather than ₹25,000.

DEDUCTION UNDER SECTION 80C

(Deduction on Investments)

By the provisions of Section 80C of the Income Tax Act, which came into force on April 1, 2006, both individuals and HUF are qualified to deduct certain payments from their taxes. Therefore, the most common ways to deduct income taxes are covered here.

The maximum exemption amount allowed by Section 80C is ₹1.5 lakh per year, which is made up of deductions allowed by Sub-sections 80C, 80CCC, and 80CCD.

The investments listed at this moment are those that can be written off and hence are eligible for deduction under Section 80C.

Investments

Risk

Interest

Requirements for Filing Returns

Lock-In Period

Equity Linked Savings Scheme (ELSS)

Equity-Related Risk

12-15% Expected

 

No

 

3 Years

Public Provident Fund (PPF)

Risk-Free

7.1%

 

Yes

 

15 Years

 

National Pension Scheme (NPS)

Equity-Related

Risk

8-10% Expected

 

No

 

Till retirement

National Savings Certificate (NSC)

Risk-Free

7.7%

 

Yes

 

5 Years

Fixed Deposits (FD)

Risk-Free

 

7-9% Expected

 

Yes

5 Years

Unit Linked Insurance Plan (ULIP)

Equity-Related Risk

 

8-10% Expected

No

5 Years

Sukanya Samriddhi Yojana (SSY)

Risk-Free

21 Years

8.0%

 

Yes

21 Years

Senior Citizen Savings Scheme (SCSS)

Risk-Free

8.2%

 

Yes

5 Years

DEDUCTION UNDER SECTION 80CCC

(Deduction for Annuity Premium Paid Under Any Insurance Plan)

Tax deductions on pension fund investments are allowed under this section. Any insurer may provide these pension funds, and an optimum deduction of ₹1.5 lakh may be requested. The only taxpayers who may claim this deduction are individuals.

DEDUCTION UNDER SECTION 80CCD

(Deduction for Pension Account Contribution)

- SECTION 80CCD (1) (Employee)

Employee’s contribution up to 10% of basic salary and dearness allowance (DA) up to ₹1.5 lakh is eligible for a tax deduction.

- SECTION 80CCD (1b) (Self)

Employer’s contribution up to 10% of basic plus DA is eligible for deduction under this section. However, the employer’s contribution is an additional deduction as it is not part of ₹1.5 lakh allowed under Section 80C.

- SECTION 80CCD (2) (Employment)

This is the only section wherein an additional exemption of up to ₹ 50,000 in NPS is eligible for an income tax deduction. Please note that the additional tax benefit of ₹ 50,000 is over and above the benefit of ₹1.5 Lakhs claimed under all other investments.

To sum up, the total tax benefits under Section 80CCD (1) + Section 80CCD (1B) can be as high as ₹2 Lakhs for the relevant financial year, depending on various circumstances.

DEDUCTION UNDER SECTION 80D

(Deduction for Medical Insurance Premiums)

Individuals and Hindu Undivided Families are eligible for deductions under Section 80D. A person may deduct the cost of their health insurance premiums as well as the cost of their own, their spouse's, their dependent children's, and their parents' annual preventive health exams, but this is subject to the restrictions and guidelines outlined in Section 80D of the Income Tax Act of 1961.

In short, the assessee is eligible to claim a deduction of ₹25,000 under Section 80D on insurance for self, spouse, and dependent children. If the assessee is aged above 60 years, then this deduction is available up to a maximum of ₹50,000. Over the claim mentioned above, the assessee is also eligible for an additional deduction for insurance of parents up to ₹25,000.

Moreover, if the parents are above 60, the deduction available is ₹ 50,000. All in all, if both the assessee and his parent(s) are aged 60 years or above, then the maximum deduction that can be availed under this section is ₹100,000.

Conclusion

With the proper knowledge, you can significantly reduce your tax expenses as an investor. For example, an assessee can reduce their tax expenses by as much as ₹50,000 - ₹65,000 by taking advantage of the deductions above.

Depending on the individual's or HUF's tax bracket, a cut of ₹150,000 from the total taxable income results in sizable tax savings. Utilize these investment opportunities wisely to generate returns and reduce your tax liability.

Happy Investing!

Disclaimer: The information mentioned in this blog should only be used for educational purposes and should not be taken as recommendation.

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