A Comprehensive Guide to Income Tax Deductions FY 2023-24
Introduction to Income Tax Deductions
Income tax deductions can significantly reduce your taxable income and help you save money. For the Financial Year 2023-24 (Assessment Year 2024-25), the Indian government offers various deduction options under different sections of the Income Tax Act.
Some Popular Section 80C Deductions: Maximum Limit ₹1.5 Lakh
Life Insurance Premiums
Life insurance premium payments qualify for deduction under Section 80C. The entire premium is deductible, provided it doesn’t exceed 10% of the sum assured. This applies to policies taken for yourself, your spouse, and your children. 15% in case of severe disability under section 80U or 80DDB.
ELSS Investments
Equity Linked Saving Schemes (ELSS) offer dual benefits of tax savings and wealth creation. These mutual funds have a lock-in period of 3 years and provide market-linked returns.
PPF Contributions
Public Provident Fund (PPF) investments up to ₹1.5 lakh per year qualify for deduction. PPF offers a guaranteed return with a current interest rate of 7.1% per annum. Contributions can be made with respect to self-spouse and children.
Home Loan Principal Repayment
The principal component of your home loan EMI qualifies for deduction under Section 80C, making homeownership more tax-efficient.
Sukanya Samriddhi account
The contribution made by an individual in the name of his/her girlchild is eligible for deduction under section 80C of the Income Tax Act.
Children’s Tuition Fees
Tuition fees paid for up to two children’s education at any university, college, or school within India qualify for the deduction.
Investment in five-year Term Deposit:
Investment in term deposit -for a period of five years with a scheduled bank and which is in accordance with a scheme framed and notified by the Central Government in the Official Gazette qualifies as an eligible investment for availing deduction under section 80C.
Section 80CCC Deductions
Pension Plans
Contributions to pension plans offered by insurance companies qualify for deduction under Section 80CCC, with a maximum limit of ₹1.5 lakh.
Annuity Plans
Investments in annuity plans from insurance companies also qualify under this section, helping secure your retirement.
Section 80CCD Deductions
National Pension System (NPS)
- Employee contributions: Up to 10% of salary
- Additional deduction of ₹50,000 under Section 80CCD(1B)
Atal Pension Yojana
Contributions to Atal Pension Yojana qualify for deduction under Section 80CCD(1).
The total deductions under above is restricted to 1,50,000.
Section 80D Deductions
Health Insurance Premiums
- For self, spouse, and dependent children: Up to ₹25,000, 50,000 in case of senior citizens.
- For parents: Up to ₹25,000 (₹50,000 if parents are senior citizens)
- ₹5,000 for preventive health check-ups. However, the said deduction of 5,000 is within the overall limit of 25,000 or 50,000.
Preventive Health Check-ups
Expenses on preventive health check-ups for self, spouse, dependent children, and parents qualify for deduction within the overall Section 80D limits.
Combined Benefits and Limits
The total deduction under Sections 80C, 80CCC, and 80CCD(1) cannot exceed ₹1.5 lakh. However, additional benefits are available under Section 80CCD(1B) for NPS contributions and Section 80D for health insurance.
Conclusion
Understanding and utilizing these tax deductions can help you optimize your tax liability while building long-term financial security. It’s advisable to plan your investments early in the financial year to maximize these benefits.
Frequently Asked Questions
- Q: Can I claim deductions under both old and new tax regimes?
A: No, these deductions are only available under the old tax regime.
- Q: Is there any age limit for claiming Section 80D deductions?
A: No, there’s no age limit, but higher limits apply when insuring senior citizens.
- Q: Can I claim Section 80C benefits for investments in my spouse’s name?
A: Yes, investments in specific instruments like life insurance for your spouse qualify.
- Q: Are ELSS investments better than PPF for tax saving?
A: It depends on your risk appetite – ELSS offers potentially higher returns but with market risks.
- Q: Can NRIs claim these tax deductions?
A: Yes, NRIs can claim most of these deductions if they have taxable income in India.
For further queries, feel free to contact us.
Disclaimer :
The information presented here is for informational purposes only and should not be interpreted as advice. While we strive to provide accurate and up-to-date information, errors or omissions may occur. Tax Laws change frequently. Please verify any information before relying on it. We are not responsible for any gain or loss as a result of the content of our website. The information provided is as is without any warranty.