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Income Tax Deductions under section 80c, 80ccd, 80ccc for AY 2018-19

Even though some of us might not like it, but paying taxes is very important in our country. Taxes account for a major portion of the income earned by the government. This income is utilized to provide certain basic amenities to citizens like roads, railways, clean environment etc. People who earn above a certain limit have to pay taxes defined as per the tax slabs. Though these taxes may seem a bit harsh on the bank balance of the tax payer, there are provisions by which one can save taxes legally.

Tax deductions can help in lowering the taxable income which in turn helps in reducing the total tax payable. One is eligible for different tax deductions which are based upon various factors. First let’s understand what is tax deduction? In one line, tax deduction helps in reducing your total taxable income. It helps you save tax by decreasing your overall tax liabilities. However, the amount of deduction varies depending on the type of tax deduction you claim. Some good examples of where one can claim tax deductions are tuition fees, medical expenses and charitable contributions etc.

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Income Tax deductions under section 80c, 80ccd, 80ccc for AY 2018-19

To get tax deductions one can also invest in various schemes such as retirement savings schemes, life insurance plans and national savings schemes etc. The Indian government offers tax exemptions for expenses incurred in various activities to encourage individuals and commercial institutions to take part in activities that has social benefits. Many expenditures incurred are eligible for tax deductions. It is important to have knowledge of these. These expenditures are classified under certain sections. In this post you will get to know more about income tax deductions under section 80c, 80ccd, 80ccc for AY 2018-19 (FY- 2017-28).

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Section 80C

A deduction of Rs 1,50,000 can be claimed from your total income under section 80C. In a simpler language, one can reduce up to Rs 1,50,000 from the total taxable income through section 80C. Under this section, an individual or an HUF (Hindu United Family) is eligible for a tax deduction. For the financial year 2017-18, the limit for deduction is Rs 1, 50,000. Expenses (investments) in the following are eligible for tax deductions. Please note that one can claim a maximum deduction of Rs 1,50,000 only.

  • Investment in PPF
  • Employee’s share of PF contribution
  • NSCs
  • Life Insurance Premium payment
  • ULIPS
  • ELSS
  • Sum paid to purchase deferred annuity
  • Five year deposit scheme
  • Senior Citizens savings scheme
  • Subscription to notified securities/notified deposits scheme
  • The contribution towards a notified Pension Fund set up by UTI or a Mutual Fund.
  • Children’s Tuition Fee
  • Principal Repayment of home loan
  • Investment in Sukanya Samridhi Account
  • Subscription to equity shares/ debentures of an approved eligible issue
  • Subscription of a Home Loan Account Scheme by the National Housing Bank
  • Subscription to notified bonds of NABARD
  • Subscription to deposit scheme of a public sector or company engaged in providing housing finance
  • Contribution to notified annuity Plan of LIC

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Section 80CCD

This section refers to deduction for contribution to pension account. This section is divided in three categories.

Section 80CCD (1) – For an employee who deposits in his own pension account the maximum deduction allowed is 10% of gross salary.

For a self employed individual, the maximum deduction allowed is 20% of gross salary.

Section 80CCD (1B) – This section refers to deduction for self-contribution to NPS. This particular section has been introduced for an additional deduction of up to Rs 50,000 for the amount deposited by an individual towards their NPS account. Under this section contributions to Atal Pension Yojana are also eligible.

Section 80CCD (2)- This section refers to employer’s contribution to NPS. Under this section an additional deduction is allowed for employer’s contribution to employee’s pension account. This deduction has an upper cap of 10% of the salary of the employee.

Section 80CCC

This section refers to deduction in respect of contribution to certain pension funds.

The Section 80CCC provides an option for tax saving as per Chapter VI-A. This tax saving is from the gross total income of the individual for the financial year in which the contribution is being made. However, there are some terms & conditions applicable as mentioned. The deduction as per this section is on cost incurred towards buying a new policy or continuing with an existing policy for receiving pension from a fund under a pension scheme. These deductions are allowed to encourage the taxpayer towards long-term investments and savings as well as to involve contributions to specific pension funds.

Any individual who has bought annuity plans from either the Life Insurance Corporation of India Ltd or some other insurance companies can avail tax deductions of up to a maximum of Rs 1.5 lakh per year. An individual cannot claim tax deductions on the interests or bonuses accrued from the policy. The interests or bonuses accrued from the policy will be treated as income and a tax will be applicable as per the respective slab rate. Also, it should be noted that this policy should pay pension to the buyer from the accumulated funds based on terms and conditions mentioned in Section 10 (23AAB). If an individual has claimed a deduction for contribution towards a pension fund under Section 80CCC, then he cannot claim a deduction for the same under any other section of the IT Act. Taxes will be imposed on the surrender value of the annuity plan in part or in full.

Please note that, the combined maximum limit for tax deduction that can be availed under section 80C, 80CCC and sec 80CCD (1) is Rs 1, 50,000. Planning for tax saving is very important. With the government of India providing legitimate ways to save tax, people are encouraged to do more savings in the form of insurance, pension schemes etc. As a citizen of India, paying taxes is our duty. Let’s all be a good citizen and pay our taxes on time!

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