Exemptions under various Sections of the

Income Tax, India

04 July 2011 | 24,416 views 17 Comments

This article may be of primary interest for people having taxable income which is considered under the
Indian Income Tax Law and the exemptions available.
The Income Tax Act, 1961 provides for exemptions from income tax liability under specific conditions.
These criterions are outlined in the various sections of the Act described below:

1) Section 80 C (Limit: Rs. 1,00,000)

1. Income tax deductions is availed under Section 80C. Section 80C is the most popular because it
encourages taxpayers to save a portion of their income. If a taxpayers taxable income lies in the
highest tax bracket, he/she can take advantage of Section 80C to reduce his/her taxable income
by Rs.1 lakh. This leads to a saving of around Rs. 33,000 in taxes by provisions of Section
80C. The following is a list of important ways in which a taxpayer can get benefit of section
80C of Indian Income Tax Act :
1. Provident Fund (PF): Any contributions to Provident Fund, Voluntary provident Fund
(VPF) or savings made in Public Provident Fund (PPF Account) are eligible for income
tax deduction under section 80C of Indian Income Tax Act.
2. Life Insurance Premiums: Any Life Insurance premiums (for one or more insurance
policies) paid by the individual for himself/herself, his/her spouse or children are eligible
under income tax deduction under section 80C of Indian Income Tax Act.
3. ELSS Equity Linked Saving Schemes: Any investment made in certain Mutual Funds
called equity linked saving schemes qualifies for section 80C deduction. It is to be noted
that not all mutual fund investments are eligible for this deduction.
4. ULIP (Unit Linked Insurance Plan): Investments made in certain ULIPs of Unit Trust
of India and LIC of India are eligible for 80C deduction.
5. Bank Fixed deposits or Term deposits of more than 5 years: According to a
relatively new provision amount saved in fixed deposits of term at least five years is
eligible for income tax deduction under section 80C of Indian Income Tax Act.
6. Principal part of EMI on Housing Loan: If an assessee is making EMI payments on a
housing loan, the principal part of the EMI is eligible for income tax deduction under
section 80C. Note that the interest part is also eligible for tax deduction, but under
Section 24 and not Section 80C (please refer below). If one doesnt own a house but
pays rent for it, deduction can be availed under section 80GG of Indian Income Tax Act
which is described below.
7. Tuition Fees: Amount paid as tuition fee for the education of up to two children of the
assessee is eligible for deduction under section 80C of Indian Income Tax Act.
8. Other 80C deductions: Amount saved in National Saving Certificate (NSC),
Infrastructure Bonds or Infra Bonds, amount paid as stamp duty and registration charges

while buying a new home are eligible for income tax deductions under section 80C of
Indian Income Tax Act.

2) Section 80 CCF Additional Rs. 20,000 on investments

towards approved Infrastructure bonds
1. Section 80CCF allows an individual to invest an additional Rs. 20,000 in infrastructure bonds,
and have that amount deducted from his/her taxable income in addition to the Rs. 100,000
deduction assesse gets from other tax saving instruments.
2. These infrastructure bonds are listed on a stock exchange, however they come with a lock in
period, and an individual cant sell them before the lock in period expires. For example, the
IDFC bond has a lock in period of 5 years, so one cant sell these bonds within 5 years.

3) Section 80CCD
1. Where the Central Government or any other employer makes any contribution to the account of
employee for the pension scheme, the assessee shall also be allowed a deduction in the
computation of his/her total income of the whole of the amount contributed by the Central Govt.
or any other employer not exceeding 10% of his salary in the previous year. Contribution to
NPS and returns on NPS are tax free, but withdrawals are still taxable.

4) Section 80 D
1. Section 80D of Indian Income Tax Act is especially useful if the employer does not cover their
employees health or medical expenses. It is a good idea to get medical insurance or health
insurance for the individual, his/her spouse, dependent children or dependent parents, as one can
claim a deduction of up to Rs. 15000/- per annum for the premium paid on this insurance. For
senior citizen this limit is Rs. 20000. With effect from 1-4-2009, one can claim the total of the
following items for deduction under section 80D:
Mediclaim Premium on the Health of
a) Self Spouse and Children
b) Parent/Parents
c) If Parent/ Parents Senior citizen

Investment limit
Rs. 15,000
Rs. 15,000
Rs. 20,000

5) Section 80DD
1. Section 80DD of Indian Income Tax Act provides provision for tax deduction if an individual
(assessee) incurs medical expenditure for the dependents who are disabled. Here dependent
means spouse, children, brothers, sisters or any one of them.
2. Exemption given for Expenditure made for a disabled dependent towards Medical
Treatment/Training/Rehabilitation also includes the LIC/Insurance premium paid towards
maintenance of such dependant.

3. Maximum deduction allowed is Rs. 50,000/- in case of normal disability and Rs. 1 Lakh in case
of severe disability.

6) Section 80DDB
1. Costs incurred for treatment of specified illnesses, could fetch one a tax benefit under section
80DDB.
2. Available Deduction For individual assesses less than 65 years of age, a deduction limit of Rs.
40,000 is applicable. For a senior citizen, the limit is Rs. 60,000.
3. Scope of Deduction Deduction is applicable for treatment of self, spouse, children, siblings,
and parents, wholly dependent on assessee.
1. Diseases covered
- Neurological Diseases (where the disability level has been certified as 40% or more).
- Parkinsons Disease
- Malignant Cancers
- Acquired Immune Deficiency Syndrome (AIDS)
- Chronic Renal failure
- Hemophilia
- Thalassaemia

7) Section 80E
1. Under section 80E of Indian Income Tax Act, any amount of interest paid on educational loan
taken for assessees higher education or higher education of assessees husband / wife or
children is deductible from assessees taxable income. Here higher education means studies
for any graduate or post-graduate course in engineering, medicine, management or for postgraduate course in applied sciences or pure sciences including mathematics and statistics.
2. Deduction is allowed for repayment of interest component of Higher Education loan. All
education after Class XII is considered, either vocational or Fulltime given that the
school/institute/university is recognized by the government.

8) Section 80G
1. Donations made to funds like Prime Ministers Relief Fund, National Children Foundation, any
University or educational institution of national eminence, etc. are deductible from assessees
taxable income according to section 80G of Indian Income Tax Act.
2. Contribution to exempt charities 25/50/75/100% depending on the charity and as per approval

9) Section 80U
1. It is deduction in the case of a person with disability. An individual who is suffering from a
permanent disability or mental retardation as specified in the Persons with Disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for

Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability the deduction
is Rs. 1,00,000.
2. The assessee should furnish a certificate from a medical board constituted by either the Central
or the State Government, along with the return of income for the year for which the deduction is
claimed.

10) Section 24(1)(vi)

1. Housing loan interest. Maximum Investment Limit Rs. 1,50,000 (for loans taken after 1 April
1999. For loans before that date, Maximum Investment Limit is Rs.30,000).
Let us look at an example to see how
Suppose assessees total taxable income is Rs. 5,00,000.
Total Repayment of Home loan is 3,30,000 in current financial year.
Principal repayment = Rs 1,50,000
Interest Payable = Rs 1,80,000.
But the total deductions allowed are calculated as follows:
Deduction on Principal repayment = 1,00,000 (Section 80C)
Deduction on interest component = 1,50,000 (Section 24b)
Thus the total deduction allowed = 2,50,000
Hence now assesees total taxable income becomes only Rs. 2,50,000 (5-2.5Lacs)

11) Superannuation
Any contribution made by a company to a superannuation fund uptoRs. 1,00,000 is tax free in the
hands of the employee.

12) Conveyance/Transport Allowance

Any Conveyance / Transport Allowance given to an employee is tax free up to Rs. 9,600 /- (No
Supporting Bills required)

13) Medical Allowance

Any Medical Allowance given to an employee is tax free up to Rs. 15,000 /- (Supporting Bills
required)

14) HRA
Any House Rent Allowance given to an employee is tax free up to the minimum value of the following

conditions (subject to when an employee can produce rent paid receipts from landlord for the period
and if the employee has not availed of tax exemptions for home loan interest / principal repayment):
1. 50% of Annual Basic (40% of Annual Basic in case of non-metros)
2. Actual HRA received
3. Rent Paid (10% of Annual Basic)

15) Professional Tax

Any Professional Tax deducted from an employees salary can be reduced from the annual salary
income to arrive at taxable salary
All the visitors are requested to visit http://www.incometaxindia.gov.in/ before making any decisions.