Navigating the complicated tax landscape can be difficult, but understanding the nuances of standard tax deductions can have a significant financial impact. When you start the yearly tax filing ritual, it's critical to recognise and take advantage of every chance to lower your taxable income.
In this blog, you can see several necessary tax deductions to which you should pay attention and show how they can help you determine your tax due more accurately and calculate income tax liability with an income tax calculator.
What are Tax Deductions?
Expenses are amounts people or companies can deduct from their taxable income to lower the income that is liable to taxes. With the help of deductions, taxpayers can reduce their taxable income and possibly their tax obligation.
What are the Common Tax Deductions in India?
Here is a list of standard tax deductions in India that you must know to calculate tax liability:
- Section 80C Deductions
Individual taxpayers can leverage various deductions provided by Section 80C of the Income Tax Act. These standard deductions encompass investments in Employee Provident Funds (EPF), National Savings Certificates (NSC), Public Provident Funds (PPF), Equity-Linked Savings Schemes (ELSS), and Life Insurance Premiums.
Moreover, costs like principal repayment on a home loan and child education tuition are also deductible. Taxpayers may deduct up to Rs. 1.5 lakh in total every financial year under Section 80C.
- Medical Insurance Premiums (Section 80D)
Taxpayers can write off health insurance premiums under the Income Tax Act 1961. This is known as Section 80D. Individual and family health insurance policies that cover the taxpayer, spouse, dependent children, parents, grandparents, or in-laws are deductible.
Siblings and non-dependent family members are not eligible. Age and coverage have an impact on the deduction. It is INR 25,000 for the self, spouse, and children under 60 and INR 50,000 for those above 60. An extra INR 50,000 can be claimed if a different policy covers parents over 60. The insured members' ages determine the total deduction, which might be between INR 25,000 and INR one lakh.
- Deductions for Persons with Disabilities (Section 80U)
Depending on the extent of their handicap, people with disabilities are eligible for a specific deduction under Section 80U of the Income Tax Act of 1961. The taxpayer must be confirmed by a recognised medical authority to have a disability of at least 40% to be eligible. NRIs are not eligible; only taxpayers who are residents of India are.
The highest deduction for severe disabilities (over 80%) is Rs. 1,25,000, while the deduction for disabilities below 80% is restricted at Rs. 75,000. By providing relief regardless of the actual costs incurred due to their condition, this provision seeks to lessen the financial burden on disabled people.
- Education Loan Interest (Section 80E)
Borrowers can benefit from a tax deduction on education loan repayments under Section 80E of the Income Tax Act, 1961. This deduction applies to the interest component of EMIs and is available for up to 8 years or until interest is fully repaid. A certificate from the financial institution detailing interest and principal repayment is required to claim.
- Donations (Section 80G)
By making charitable contributions to qualified organisations, taxpayers can save taxes under Section 80G of the Income Tax Act of 1961. Grants made by taxpayers to eligible institutions and organisations are deductible at 50% to 100% of the donation amount.
Under Section 80G, all taxpayers—resident or non-resident—who have made charitable contributions to approved funds, organisations, or associations are entitled to a deduction from their gross total income before taxes are levied.
It's critical to keep up with the most recent tax rules and regulations to calculate tax liability.