80C, 80CCC, 80CCD, 80D – Deduction under Income Tax Act –

Why has the government of India has provided various deductions such as 80C, 80CCC, 80CCD, 80D?

Deduction from 80C, 80CCC, 80CCD, 80D is some of the most used deductions used by an individual to save taxes. The income tax department with an aim to inculcate saving and investment habits among individuals, and spread awareness for health insurance, has provided tax benefits under sections 80C and 80D. In the current era where education cost has increased and people take education loan to cover the cost of education, the government by providing deduction under 80E for the interest paid on education loan.

80C & 80CCC, 80CCD

80C is one of the most favorable sections and can be regarded as a gift to an individual given by Income-Tax Authorities to save some taxes. It is one of the most widely used sections for reducing taxes. Whenever you watch any news channel before the financial budget, you will hear people’s demand to increase the limits provided under Section 80C. The benefit under this section is provided to individuals and HUFs.

Note – Companies, LLPs, Partnership Firm, AOI, BOI, and other forms of business cannot avail the benefit under this section.

What is the current limit under 80C?

  • ⦁ The current overall limit under section 80C is Rs. 1,50,000.
  • ⦁ Even if you invest under 80CCC, the overall limit is still Rs. 1,50,000 (In easier sense limits combined for both 80C and 80CCC is Rs. 1,50,000) with an exception that you can avail the extra tax benefit of Rs. 50,000 if you invest in NPS covered under section 80CCD(1B).

Instrument covered under section 80C?

The instrument for Tax Deduction
80C Following instrument qualifies for a deduction under section 80C – Public Provident Fund, Employees Provident Fund (the employees’ contribution, Equity Linked Saving Scheme (ELSS Mutual Fund), Life Insurance Premium, Stamp duty, and registration charges when a new property is purchased, principal payment for housing loan, Sukanya Samriddhi Yojna, National Saving Certificate (NSC), ULIP Policies, Tax Saver FD for 5 years, Infrastructure Bond, Senior citizen savings scheme (SCSS), etc.
80CCC Deduction for life insurance annuity plan. 80CCC allows a deduction for payment of premium/contribution for annuity pension plans.
Note – Pension received from the annuity or amount received upon surrender of the annuity, including interest or bonus accrued on the annuity, is taxable in the year of receipt.Note – The contribution above is combined with Rs 1.5 Lakh (limit allowed u/s 80C).
80CCD(1) Deduction for NPS Employee’s contribution under NPS is deductible under section 80CCD(1) –

Maximum deduction allowed is least of the following
– 10% of salary (Basic Salary+Dearness Allowances) (in case taxpayer is employed) and
– 20% of gross total income (in case of self-employment).

Note – The contribution above is combined with Rs 1.5 Lakh (limit allowed u/s 80C).

80CCD(1B) Deduction for NPS Additional deduction of Rs 50,000 per year is allowed for the amount deposited into the NPS account eligible under section 80CCD(1B).

Note – Contributions made to Atal Pension Yojana are also eligible for deduction under 80CCD(1B).

80CCD(2) Deduction for NPS Benefit in this section is allowed only to salaried individuals and not self-employed.
Employers’ contribution is allowed for deduction up to
– 10% of basic salary plus dearness allowance.

80D

80D – Deduction for payment of Medical Insurance Premium –

Section 80D is allowed as a deduction for money spent on maintaining your health and health insurance and assumes great significance in your tax planning and managing personal finance.

The deduction is available for payment of premiums for health insurance policies and medical expenses for senior citizens.

Who can avail the deduction, for whom and up to what amount?

⦁ Any individual or HUF can avail of deduction u/s 80D.

⦁ The deduction is available for payment of insurance premium of –

  • ⦁ Self
  • ⦁ Spouse
  • ⦁ Dependant children
  • ⦁ Parents
Insured Deduction Amount in Rs.
Age Below 60 yrs. Age Above 60 yrs.
Self, Spouse, and Children 25,000 50,000
Parents 25,000 50,000
Max Deduction 50,000 1,00,000
Opt Preventive Healthcare* 5,000 5,000

What is Preventive Heath Checkup, and what qualifies for deduction?

⦁ To promote the habit of getting your body checkup every year, the government started giving deductions for a preventive health checkup from 2013-14. The idea of preventive health check-ups is to identify any illness and mitigate risk factors at an early stage through frequent health checkups.

⦁ The expenditure for health checkups can be made in cash.

⦁ Maximum deduction for self, spouse, and family is Rs. 5,000 (subject to overall ceiling mentioned above) and Rs. 5,000 for parents (subject to overall ceiling mentioned above).

Can we claim a deduction for Medical Expenses of Parents who are senior citizen?

⦁ In case your parents are senior citizens and they don’t have any active health insurance policy and they are not filing their Income Tax Returns, then you can claim expenditure incurred on their medical treatment as expenses subject to a maximum deduction of Rs. 50,000.

⦁ Expenditure can be made in cash.

⦁ Senior citizen includes super senior citizen.

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Note –

  • ⦁ Cash Payment for paying health insurance premiums is not allowed as a deduction, hence the premium has to be paid electronically or cheques.
  • ⦁ In case premium or expenditure is paid on behalf of grandparents or siblings or working children or any other relative, then the deduction is not allowed.
  • ⦁ HUF can claim a deduction under Section 80D for a medical insurance taken for any of the members of the HUF.. deduction will be Rs 25,000 if the member insured is less than 60 years, and will be Rs 50,000 if the insured is 60 years of age or more.