Common Tax Deductions for Taxpayers: A Simplified Guide


Deduction TypeSectionEligibilityDeduction LimitReal-Life Example
Standard DeductionSec 16(ia)Salaried individuals and pensioners₹75,000 (New Tax Regime), ₹50,000 (Old Tax Regime)Raj claims a ₹75,000 deduction on his salary under the new tax regime.
House Rent Allowance (HRA)Sec 10(13A)Salaried individuals who pay rentBased on salary, rent, and cityJai, a salaried employee living in a rented apartment, benefits from HRA deductions.
Leave Travel Allowance (LTA)Sec 10(5)Salaried individuals for domestic travelActual travel expenses (as per rules)Vani claims LTA for his family vacation within India.
Home Loan Interest DeductionSec 24(b)Homeowners paying interest on home loans₹2,00,000 for self-occupied propertyArun saves ₹2 Lakh by claiming home loan interest deduction.
80C InvestmentsSec 80CIndividuals investing in instruments like PPF, Life Insurance, etc.₹1,50,000Arjun saves taxes by investing ₹1.5 Lakh in PPF.
Medical Insurance PremiumSec 80DIndividuals paying premiums for health insurance for self, spouse, parents₹25,000 (self/family), ₹50,000 (senior citizens)Mathiri claims ₹50,000 for her parents’ medical insurance.
Education Loan InterestSec 80EIndividuals paying interest on loans for higher educationNo LimitVamsi gets a tax break on the interest she paid for her education loan.
Donations to CharitySec 80GDonations to approved charitable institutions50% or 100% of donated amountKamal donates ₹10,000 to a registered charity and claims tax deduction.
Interest on Savings AccountSec 80TTAIndividuals earning interest on savings account (excluding senior citizens)₹10,000Darun reduces his taxable income by ₹10,000 on his savings account interest.
Senior Citizens’ Fixed DepositsSec 80TTBSenior citizens earning interest on fixed deposits₹50,000Mohan, a senior citizen, claims a deduction on his FD interest.

1. Standard Deductions:

  • Is the standard deduction updated based on the latest budget? (₹75,000 for the new tax regime as of July 2024)

2. HRA, LTA, and Other Exemptions:

  • Have you included the most common exemptions like House Rent Allowance (HRA) and Leave Travel Allowance (LTA)?
  • Is there clarity on the eligibility and maximum claim amounts for these exemptions?

3. Medical Insurance (Sec 80D):

  • Ensure that the limits for individuals, senior citizens, and preventive check-ups are clearly specified.

4. Home Loan Interest (Sec 24):

  • Is there clear differentiation between self-occupied and rented properties regarding home loan interest deductions?

5. Educational Loan Interest (Sec 80E):

  • Confirm that education loan interest is mentioned and that the fact there’s no upper limit is highlighted.

6. Investment Deductions (Sec 80C and 80CCD):

  • Verify if both traditional (PPF, EPF) and newer instruments (NPS, ELSS) are included, along with their respective limits.

7. Other Deduction Sections (80G, 80TTA, 80TTB):

  • Ensure coverage of donations to charity (80G) and interest on savings (80TTA for individuals, 80TTB for senior citizens).

8. New Changes in Tax Rules for FY 24-25:

  • Have the latest updates such as TDS rate changes, income tax slabs, and surcharge rate reductions been incorporated?

9. Maximizing Refund Tips:

Does the guide include practical tips on maximizing tax refunds, like ensuring correct ITR forms, mismatch checks for Form 26AS/AIS, and gathering proof for deductions?

FAQs:

Q1: What is the difference between 80C and 80D?
A: Section 80C allows for deductions on investments like PPF, while 80D allows deductions on medical insurance premiums.

Q2: Can I claim both HRA and home loan interest deduction?
A: Yes, but you must meet the conditions for both. For example, you can claim HRA if you live in a rented house while also paying a home loan for a different property.

Q3: Is it mandatory to invest in tax-saving schemes to claim deductions under 80C?
A: Yes, investments in eligible schemes under Section 80C are required to claim the deduction.


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