Income tax deductions help individuals lower their taxable income and ultimately reduce their tax liability in a given financial year. Put simply, income tax deductions are investments made during a financial year that are offset against the gross annual income when filing income tax return.
The provision of tax deductions is put in place to inculcate a habit of saving in people to help them build a secure financial future.
The most popular examples of income tax deductions include investments made under Section 80 of the Income Tax Act, 1961, in ELSS funds, principal repayment of home loan, Public Provident Fund (PPF), National Pension Scheme (NPS), etc.
One can avail up to Rs. 5,000 on preventive check-up for self, dependent children, spouse or parents below 60 years of age under Section 80D. For parents 60 years or above, Rs. 7,000 can be claimed.
If your parents aged 60 years or above are not covered under a medical insurance policy, you can still claim deduction on the money spent on their medical bills.
Section 80D allows for the deduction for money spent on maintaining your health and health insurance, and assumes great significance in your tax planning and personal finance. Individual and Hindu Undivided Family (HUF) can claim deduction from taxable income under Section 80D. A person can claim a deduction for the health insurance premium and expense incurred towards preventive health checkup for self, spouse, dependent children and parents. This is-subject to the terms and conditions mentioned in the Section 80D of the Income Tax Act, 1961.
A deduction under Section 80D cannot be claimed if payment for health insurance premium is done by cash. Payment for the medical expense can be made by cash, if payment is made on behalf of working children, siblings, grandparents or any other relative and group health insurance premium made by the company on behalf of the employee.
Section 80C is one of the most popular and favourite sections amongst the taxpayers as it allows to reduce taxable income by making tax saving investments or incurring eligible expenses. It allows a maximum deduction of Rs 1.5 lakh every year from the taxpayers total income.
The benefit of this deduction can be availed by Individuals and HUFs. Companies, partnership firms, LLPs cannot avail the benefit of this deduction. Section 80C allows deduction for investment made in PPF , EPF, LIC premium , Equity linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for purchase of property, Sukanya smriddhi yojana (SSY) , National saving certificate (NSC) , Senior citizen savings scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds etc.
