A Guide to Deduction Limits Under the Income Tax Act

Hello guys, if you are confuse how much deduction limit for income tax for an individual is available under various provisions is available, then you are at proper place to get proper and detail guideline. We discuss in details that how much deduction limit for an individual under various provision of income tax act is available. We will discuss all popular tax deductions.

You will find the answer to following questions:

1. What can be deducted from income tax?
2. What is income tax deduction as per income tax act?
3. what are 4 type of deductions?
4. tax benefit for eduction

Main part of our article will cover:

1. Deduction limit 16(i) of standard deduction.
2. Deduction limit u/s 80C (deduction of investments)
3. Deduction limit u/s 80CCC (pension fund)
4. Deduction limit u/s 80CCD (National Pension Scheme – NPS)
5. Deduction limit of investment u/s 80CCE
6. Deduction limit u/s 80D (Medical Insurance / Health Insurance Premium)
7. Deduction limit u/s 80DD (Physical or mental Disable Dependents)
8. Deduction limit u/s 80DDB (on treatments of certain specified diseases)
9. Deduction limit u/s 80E (deduction of interest of education loan)
10. How much deduction limit u/s 80EE (additional deduction of interest on Housing Loan) is available.
11. Deduction limit u/s 80EEA (additional deduction of interest on Housing Loan)
12. Deduction limit u/s 80EEB (deduction of interest of loan to purchase Electric Vehicle)
13. Deduction limit u/s 80G (deduction of donations)
14. Deduction limit u/s 80GG (payment of House Rent)
15. Deduction limit u/s 80GGA (Deduction in respect of certain donations for scientific research or rural development)
16. Deduction limit u/s 80GGB (deducted any sum contributed by it, in the previous year to any political party)

Let’s start in details the above points:

1. How much deduction limit 16(i) of standard deduction is available.

This deduction is available only to an individual person who is earning from salary. Because this is only deduction which is deducted from income form salary. Maximum limit of deduction till the FY 2018-19 the was 40000/- rupees. From FY 20219-20 the limit is increased to 50000/- rupees. CBDT also clarify that income from pension is also covered under income from salary, so, this deduction is available to the persons who are getting income from pension. So, pensioners are eligible to get benefit of standard deduction up to maximum 50000/- rupees.

2. How much Deduction limit u/s 80C (deduction of investments) is available.

This is the most popular section of income tax from which almost every tax payer is well known, because this the basic deduction section from which tax payer can save tax. The limit of this section allows multiple investments which can be allowable under this section like

• Premium paid of life insurance
• Premium paid of unit linked insurance plan (ULIP)
• Payment of provident fund (PF) and super annuation fund
• Payment of public provident fund (PPF)
• Investment made to resident property (repayment of housing loan)
• Investment in National Saving Certificate (NSC)
• Investment in Home Loan Account scheme
• Investment under Annuity scheme of central government of Life insurance.
• Investment in Notified Mutual Fund or Unit Trust.
• Investment in Recongized pension fund.
• Education fees of two children
• Investment in share, unit or debenture of Infrastructure, power and telecommunication company.
• Investment in 5 years tax saving of Bank FD.
• Investment in Senior Citizen Saving Scheme.
• Investment in 5 years post office Time Deposit.
• Investment in Sukanya Samrudhhi Yojna (SSY)
• Stamp duty and registration fees paid for residential house.

and many other. Thus, this is list where you can save tax to invest money. But, total aggregate limit of all above mentioned investment is 150000/- Rupees.

3. How much Deduction limit u/s 80CCC (pension fund) is available.

Investment in pension fund under section 80CCC is recongized to save tax. But, the limit is set under section 80C, which means investment of pension fund u/s 80CCC is covered u/s 80C which is maximum to 150000/- rupees.

4. How much Deduction limit u/s 80CCD and 80CCD(1B) (National Pension Scheme – NPS) is available.

Investment to National Pension Scheme (NPS) which limit is 10% of Salary is reconized to save tax. But, limit is set under section 80C group, which means investment in NPS u/s 80CCD is covered u/s 80C which is maximum to 150000/- rupees. There is special provision for Central Government Employees which is that, there is no limit set u/s 80C for investment u/s 80CCD, means they can avail additional deduction on investment in Tire-II Account u/s 80CCD (NPS) Investment made u/s 80CCD by Employer is deemed income but, recogized for additional deduction u/s 80CCD (which is maximum to 14% of total Salary means Salary+DA)

But, there is one more section which is 80CCD(1B) in which you can avail benefit of more 50000/- rupees deduction. Which means if investment made under this section (80CCD(1B)) up to Rupees 50000/- and other investment of Rupees 150000/- then total deduction will be Rupees 200000/-.

Additional remarks: On time of Exit from NPS (National Pension Fund) is exempted up to 60% (40% up to FY 2016-17) in the hand of tax payer.

5. How much Deduction limit of investment u/s 80CCE is available.

Investment in pension fund under section 80CCE is recongized to save tax. But, the limit is set under section 80C, which means investment of pension fund u/s 80CCC and 80CCE is covered u/s 80C which is maximum to 150000/- rupees.

6. How much Deduction limit u/s 80D (Medical Insurance / Health Insurance Premium) is available.

Premium paid of Health or Medical Insurance is additional deduction u/s 80D to save tax. Total limit u/s 80D (Medical or Health insurance premium paid) is Rupees 25000/- (rupees 50000/- in case of senior citizen) Which includes Health Insurance premium paid of Self, spouse, childbed and parents.

Additional deduction of Rupees 25000/- is available when health insurance premium is paid for parents. Additional deduction of Rupees 25000/- is available when health insurance premium is paid for any one Senior Citizen Parents. Which means if health insurance premium paid of senior citizen deduction limit is Rupees 75000/- (self and family limit is rupees 25000+ senior citizen one parent limit or rupees 50000) Additional deduction of rupees 100000/- is also available, when premium paid of senior citizen family member and senior citizen of parents (self and senior citizen family member limit is rupees 50000+ senior citizen parents limit or rupees 50000)

7. How much Deduction limit u/s 80DD (Physical or mental Disable Dependents) is available.

Under this section deduction is available for expenses made for physically or mentally disable depended.

Deduction is available to a resident individual or a HUF and is available on:
Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative or Payment or deposit to specified scheme for maintenance of handicapped dependent relative.

Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000 is available
Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000 is available.
To claim this deduction a certificate of disability is required from prescribed medical authority.

From FY 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.

8. How much Deduction limit u/s 80DDB (on treatments of certain specified diseases) is available.

This deduction is available for actually expense is accrued. List of medical treatment of certain disease is given below:

(1) Neurological Diseases where the disability level has been certified to be of 40% and above.
a. Dementia
b. Dystonia Musculorum Deformans
c. Motor Neuron Disease
d. Ataxia
e. Chorea
f. Hemiballismus
g. Aphasia
h. Parkinsons Disease
(2) Malignant Cancers
(3) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)
(4) Chronic Renal failure
(5) Hematological disorders
a. Hemophilia
b. Thalassaemia

In order to claim Section 80DDB deduction, the taxpayer must provide proof via a certificate of the disease. This information should be provided by the doctor who has supervised the illness/treatment.

It is not necessary for patients receiving treatment in a private hospital to obtain a certificate from a government hospital.

A patient who receives treatment at a government hospital must get the certificate from a specialist who works full time there. Specialists in such fields are required to possess a postgraduate degree in General Medicine or an equivalent qualification recognized by the Medical Council of India (MCI).
The Form 10-I certificate is no longer required.

9. How much Deduction limit u/s 80E (deduction of interest of education loan) is available.

An education loan (from any bank / financial institution or any approved charitable institutions. Loans taken from friends or relatives don’t qualify for this deduction) helps you not only finance your India or foreign studies but it can save you a lot of tax as well. If you have taken an education loan and are repaying the same, then the interest paid on that education loan is allowed as a deduction from the total income under Section 80E.

However, the deduction is provided only for the interest part of the EMI. There is no tax benefit for the principal part of the EMI.

Parents can easily claim this deduction for the loan taken for the higher studies of their children.

• Interest should be paid within 8 years or actually repaid whichever is earlier. (it means when you pay interest it will be deducted form your income within 8 years only)
• Repayment of education loan is not deductible only interest is deductible.
• The loan should be taken for the higher education of (1) Self (2) Spouse or (3) children or (4) for a student for whom the individual is a legal guardian. 
• Interest paid on education loan is additional deduction available to the tax payer.

10. How much deduction limit u/s 80EE (additional deduction of interest on Housing Loan) is available.

If you have housing loan between 1st April, 2016 to 31st March, 2017, then this deduction is available to you only. Some important point to take benefit of this deduction are as under:

• This deduction is available for maximum of Rupees 50000/- who had taken ousing loan between 1st April, 2016 to 31st March, 2017.
• Beneficiary Tax payer should not owner of any resident unit while at the time of taking housing loan.
• Loan taken for the house must be Rupees 35 lakh or less then this deduction is available.
• Value of the house should be Rupees 50 lakh or less then this deduction is available.
• The loan must be sanctioned by a financial institution or a housing finance company.
• Deduction is available to only individuals.
• This deduction is available until the end of this loan (every financial year until loan is fully repaid)

11. How much Deduction limit u/s 80EEA (additional deduction of interest on Housing Loan) is available.

Under the objective “Housing for all”, the Government extended interest deduction under this section. If you have housing loan between 1st April, 2019 to 31st March, 2022, then this deduction is available to you only. Some important point to take benefit of this deduction are as under:

• Maximum deduction available for interest paid is Rupees 150000/-
• The loan must be sanctioned by a financial institution or a housing finance company between 1st April, 2019 to 31st March, 2022.
• Beneficiary Tax payer should not owner of any resident unit at the time of taking housing loan.
• Stamp duty Value of the house should be Rupees 45 lakh or less then this deduction is available.
• This deduction is available until the end of this loan (every financial year until loan is fully repaid)
• But, taxpayer should not be eligible to claim deduction under the existing Section 80EE.
• Deduction is available to only individuals.

12. How much Deduction limit u/s 80EEB (deduction of interest of loan to purchase Electric Vehicle) is available.

If you buy an electric vehicle, this deduction is available to you.

Some important point to take benefit of this deduction are as under:

• Payment of Interest of loan to purchase EV (electric vehicle) is availble.
• Deduction is available to only individuals.
• Maximum deduction available for interest paid is Rupees 150000/-
• The loan must be sanctioned by a financial institution or a NBFC (finance company) between 1st April, 2019 to 31st March, 2023 for buying Electric Vehicle.
• This benefit is available for vehicle used for personal or business use.
• Beneficiary Tax payer should have interest certificate, sanction letter and tax invoice of the vehicle.
• This deduction is available until the loan is fully paid starting form FY 2019-20.

13. How much Deduction limit u/s 80G (deduction of donations) is available.

If tax payer have donated sum of rupees to a recognized organizations or certain relief funds and charitable institutions, 100% or 50% deduction is available for tax benefit. Some important point to take benefit of this deduction are as under:

• To avail benefit of tax deduction, Donation should be give to recognized organization or certain relief funds and charitable institutions under 80G.
• Tax payer must take in to consideration, that donation should be given only to certified institute who had holding certificate under section 80G.
• Donation, more than Rupees 2000/- should not be given in form of cash (as amended from FY 2017-18).
• Deduction is available only for donation made in cash form, not in form of object or thing.
• A tax payer can donate only 10% of his adjusted gross total income. It means total income after deduction u/s 80C to 80U, all exempted income on which there is no income tax, short term capital gain, long term capital gain etc.

But, there are some donation which have no limitation of 10% of adjusted gross total income and 100% of deduction is available on donation given, which list is given below:

National Defense Fund	PM Care Fund
Prime Minister National Relief Fund	Prime Minister’s Armenia Earthquake Relief Fund.
Africa (Public Contributions – India) Fund.	National Children’s Fund.
National Foundation for Communal Harmony.	A University or any educational institution of national eminence approved by the prescribed authority in this behalf.
Chief Minister’s Earthquake Relief Fund, Maharashtra.	Fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat.
Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district for the purposes of improvement of primary education invillages and towns in such district and for literacy and post-literacy activities. Town means a town with a population not exceeding one lakh as per last census.	National Blood Transfusion Council or any State Blood Transfusion Council which has its sole object the control, supervision, regulation or encouragement in India of the services related to operation and requirements of blood banks.
Fund set up by a State Government to provide medical relief to the poor.	Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants.
The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996.	National Illness Assistance Fund.
The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union territory, as the case may be.	National Sports Fund set up by the Central Government.
National Cultural Fund set up by the Central Government.	Fund for Technology Development and Application set up by the Central Government.
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities.	Swachh Bharat Kosh, set up by the Central Government.
Clean Ganga Fund, set up by the Central Government. (There is no benefit u/s 80G for Corporate Social Responsibility (CSR) u/s 135(5) of Companies Act, 2013)	The National Fund for Control of Drug Abuse constituted under section 7A of the Narcotic Drugs and Psychotropic Substances Act, 1985.

There are some donation which have no limitation of 10% of adjusted gross total income and 50% of deduction is available on donation given, which list is given below:

• Jawaharlal Nehru Memorial Fund.
• Prime Minister’s Drought Relief Fund.
• Indira Gandhi Memorial Trust.
• Rajiv Gandhi Foundation.

There are some donation which have limitation of 10% of adjusted gross total income but, 100% of deduction is available on donation given, which list is given below:

• Donations to the Government or to any such local authority, institution or association as may be approved in this behalf by the Central Government, to be utilised for the purpose of promoting family planning
• Donation to Indian Olympic Association or any recognized sports activity organization under section 10(23)

There are some donation which have limitation of 10% of adjusted gross total income but, 100% of deduction is available on donation given, which list is given below:

• Any fund or any institution established for charitable purposes and approved by the Commissioner of Income-Tax, which is constituted as a Public charitable trust; or Registered under the Societies Registration Act, 1860; or Registered under section 8 of the Companies Act, 2013; or University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law; or Is an institution financed wholly or in part by the Government or a local authority.
• Government or any local authority, to be utilised for any charitable purpose other than the purpose of promoting family planning.
• Any corporation for promoting interest of minority community.
• Donations for the renovation or repair of any such temple, mosque, gurdwara, church or other place as is notified by the Central Government in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States.

AS MENTIONED FROM FY 2021-22, beneficiary for donation, should have take in to consideration that trust, or organization should file and mention in statement in form 10BD and should issue certificate in form 10BE (this information will be reflected in Annual information statement – AIS)

14. How much Deduction limit u/s 80GG (payment of House Rent) is available.

If you are paying rent for your resident, then this deduction is available up to Rupees 60000/- for you under below mentioned conditions:

• You are self-employed or salaried
• No HRA received under section 10(13A) from Employee if you are a salarised person.
• You, your spouse, your minor child or HUF of which you are a member – do not have owned any residential accommodation at the place where you currently residing, perform duties of the office, employment or carry on business or profession.
• You will be required to file Form 10BA with details of payment of rent.

Lowest amount is available as deduction from below three:

• (1) Rupees 5000/- per month
• (2) 25% of Total income (Total income after deduction u/s 80C to 80U, all exempted income on which there is no income tax, short term capital gain, long term capital gain etc.)
• Actual Rent paid minus 10 percent the adjusted total income.

15. How much Deduction limit u/s 80GGA (Deduction in respect of certain donations for scientific research or rural development) is available.

A tax payer who is earning form business or profession and made donation or expenditure u/s 35, 35CCA, 35CCB and 35AC for specific reason is deductible under this section such as:

• Scientific Research
• Social science or Statistical Research
• Rural Development
• Conservation of Natural Resources
• Afforestation
• Implementation of Other recognized scheme

will be deductible 100% as an expenditure from profit. Donations can be made in the form of a cheque, a draft, or cash. However, cash donations over Rupees 2,000 are not allowed as deductions. 100% of the amount donated or contributed is eligible for deductions.

A tax payer who is not earning form business or profession and made donation u/s 35 for specific reason is deductible under this section such as:

• To an approved Scientific Research Association, university, college, or other institution to be used for scientific research. (Same deduction allowed to business tax payer u/s 35)
• To an approved university, college or other institution for research in social science or statistical research. (Same deduction allowed to business tax payer u/s 35)
• To an association or institution engaged in any approved program for rural development, or which is engaged in training of persons for implementation of rural development programs, or to a notified rural development fund or to the notified urban poverty eradication fund. (Same deduction allowed to business tax payer u/s 35CCA). In this case, the tax payer should furnish a certificate as is required u/s 35CCA.
• To a public sector company or a local authority, or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme. (Business tax payer were allowed this deduction u/s 35AC. In this case as well, the tax payer should furnish a certificate as is required u/s 35AC

If a deduction has been allowed under Section 80GGA, such expenses shall not be deductible under any other provision of the Income Tax Act.

16. How much Deduction limit u/s 80GGB and 80GGC (deducted any sum contributed by it, in the previous year to any political party) is available.

Donation made more than rupees 2000 to

• Political Party (The political party that is receiving the donation must be duly registered under Section 29A of the Representation of People Act, 1951)
• Electoral Trust (The electoral trust receiving the donation amount must be duly registered and recognized by the competent authorities)

is eligible for 100% deductible from income under this section.

Brief of the above mentioned deductions and popular deduction list with remark is as under:

Sr No	Section	Section Details	Maximum Limit (Rupees)	Remarks
1.	16(i)	Standard Deduction	50000/-	Only available to Salaried tax payers Maximum to Rupees 50000/-
2.	80C, 80CCC, 80CCE	Popular Deductions under chapter VI-A of Income Tax (there are several way to get deduction by investing in recognized way)	150000/-	Invested money is deductible maximum to Rupees 150000/-
3.	80CCD (1B)	Investment to National Pension Fund (NPS)	50000/-	Rupees 50000/- Maximum deduction available.
4.	80D	Premium paid for Health Insurance	25000/-	By some conditions, you can  maximize to Rupees 100000/-
5.	80DD	expenses made for physically or mentally disable depended	75000/- or 125000/-	Based on percentage of disability deduction is available. disability is 40% or more but less than 80% 75000/- and 80% or more 125000/- deduction is available.
6.	80DDB	Treatment of certain specified diseases.
7.	80E	Interest paid for Higher Education Loan	100% deduction	Maximum for 8 years or actually paid.
8.	80EEB	Interest paid for loan to purchase EV (electric vehicle)	150000/-	Loan must be sanctioned between April, 2019 to 31st March, 2023 for buying Electric Vehicle.
9.	80G	Donation to recognized organization.	10% of Gross Total Income	But, there are donation available for which 10% limit is not set.
10.	80GG	Payment of House Rent	60000/-	Maximum to Rupees 60000/- conditions apply.