Deductions under Indian Income Tax Act for Individuals and HUFs (FY 2023-2024)

Individuals and HUFs

Deductions under Indian Income Tax Act for Individuals and HUFs.

Individuals and HUFs

Individuals and Hindu Undivided Families (HUFs) have the opportunity to lower their tax burdens by leveraging various deductions offered under the Indian Income Tax Act. These deductions aim to promote savings, investments, and specified expenditures. Mastering and applying these deductions can result in significant tax savings. This article will delve into the deductions tailored for Individuals and HUFs applicable for the financial year 2023-2024.

Section 80D Deductions

Your health is invaluable, but that doesn’t mean you need to spend excessively to safeguard it. Utilizing Section 80D allows you to feel secure knowing that your health insurance premiums not only support your well-being but also offer tax benefits. Ultimately, a healthy body and financial wellness are interconnected!

Deduction Limits
  • You can claim up to Rs 25,000 for health insurance premiums paid for yourself, your spouse, and dependent children (Rs 50,000 for senior citizens).
  • An additional Rs 25,000 deduction is available for premiums paid towards your parents’ health insurance (Rs 50,000 if parents are senior citizens).
Individuals and HUFs
Eligible Health Insurance
  • This includes mediclaim policies, critical illness policies, and expenses for preventive health check-ups.

Note: The total deduction allowed under Section 80D should not exceed the specified limits.

Section 80C Deductions

Imagine securing your family’s future while simultaneously reducing your tax burden – that’s the strength of Section 80C! Whether you’re investing in your child’s education or planning for retirement, Section 80C offers a diverse array of options to help you save tax while accomplishing your financial objectives.

  1. Deduction Limit: Up to Rs 1.5 lakh

  2. Eligible Investments/Expenses:

    • Contributions to Public Provident Fund (PPF)
    • Payment of life insurance premiums
    • Investments in Equity Linked Saving Schemes (ELSS)
    • Contributions to the Employees’ Provident Fund (EPF)
    • Investments in National Savings Certificate (NSC)
    • Deposits in Sukanya Samriddhi Yojana (SSY)
    • Tuition fees for children’s education
    • Repayment of the principal amount on a home loan

Note: The total deduction allowable under Section 80C, 80CCC, and 80CCD(1) cannot exceed Rs 1.5 lakh.

Section 80E Deduction

Individuals and HUFs

Investing in education opens doors to a brighter future, and Section 80E ensures that the journey of learning also comes with tax advantages.

Whether you’re financing your own education or supporting your child’s academic goals, the interest paid on education loans not only nurtures minds but also offers enduring tax benefits. Deduction for Interest on Education Loan:

  • This deduction is applicable for interest paid on loans taken for higher education of oneself, spouse, children, or a student for whom the taxpayer is a legal guardian.
  • There is no upper limit on the deduction amount.
  • The deduction is available for a maximum of 8 assessment years or until the interest is fully repaid, whichever comes earlier.

Section 80G Deductions

Contributing to society isn’t just a commendable deed—it’s also a savvy tax move! With Section 80G, every donation you make to charitable institutions not only impacts lives positively but also reduces your tax liability.

It’s a win-win situation that warms the heart while lightening the burden on your wallet. Deduction for Donations to Charitable Institutions:

  • Deductions are available for donations made to specified charitable institutions and funds.
  • The percentage of deduction varies based on the type of institution and the donation amount.
  • Donations made in cash exceeding Rs 2,000 are not eligible for deduction.

Section 24 Deduction

Dreaming of owning your own home? Section 24 can make that dream a reality while also reducing your tax burden. Whether you’re making monthly mortgage payments or repaying a housing loan, every penny of interest paid brings you closer to tax savings and the joy of homeownership.

Deduction for Interest on Home Loan:

  • This deduction is available for interest paid on a housing loan used for purchasing or constructing a residential property.
  • The maximum deduction allowed is Rs 2 lakh for a self-occupied property.
  • There is no upper limit for rented or deemed-to-be-rented properties.

Section 80TTA/80TTB Deduction

Building savings is straightforward when you can earn tax-free interest by stashing money in a savings account. Whether you’re comfortable with digital banking or prefer traditional methods, Sections 80TTA and 80TTB provide opportunities to earn interest on your savings without tax implications.

Read More: Understanding Form 10F: Purpose, Scope, and Mandatory Conditions

Deduction for Interest on Savings Account/Deposit:

  • Section 80TTA: Deduction of up to Rs 10,000 for interest earned on savings account deposits in banks, post offices, etc.
  • Section 80TTB: Deduction of up to Rs 50,000 for interest earned on deposits by senior citizens in banks, cooperative banks, or post offices.

Related Post

image

Filing Income Tax Returns Including Foreign Income

Filing Income Tax Returns Including Foreign Income Filing Income Tax Returns for Foreign Income: Understanding Residential Status, Utilizing DTAA Provisions, and Following Procedural Requirements With the upcoming July 31 deadline…
Read More
image

Creating a Strategy for Tax Savings in FY25 with ELSS Mutual Funds

Creating a Strategy for Tax Savings in FY25 with ELSS Mutual Funds Are you still adhering to the old tax regime? Considering tax savings under Section 80C? With the commencement…
Read More
image

7 Essential Documents for Filing ITR AY 2024-25

7 Essential Documents for Filing ITR AY 2024-25 Filing income tax returns (ITR) is obligatory for every taxpayer annually. For the Assessment Year (A.Y.) 2024-25, the CBDT has updated all ITR…
Read More

Book A One To One Consultation Now
For FREE

How can we help? *

5 Heads Of Income Tax

5 Heads Of Income Tax

As per the Income Tax Act, individuals’ incomes are categorized into five heads for tax purposes. Properly classifying your earnings under these heads at the end of each financial year is crucial for accurate tax assessment. Understanding which earnings belong to each category is important for effective tax planning. Read on to gain a comprehensive understanding of these income heads.

5 Heads of Income

Income from Salary

Income earned from services provided under an employment contract is subject to taxation under this category. This encompasses salary, advance salary, benefits, gratuity, commissions, annual bonuses, and pension received.

The Income from Salary is governed by the following sections:

  • Section 15 addresses the tax treatment of income from Salary.
  • Section 16 outlines the deductions available for salary.
  • Section 17 details the components of Salary, including monetary compensation, perquisites, and other elements.

Under this tax category, certain exemptions are also applicable:

House Rent Allowance (HRA): Salaried individuals residing in rented accommodations can claim House Rent Allowance for partial or complete tax relief.

Transport Allowance: Employees who are blind, deaf and dumb, or orthopedically handicapped can claim an allowance of Rs 1,600 per month for tax benefits.

Income from House Property

Income earned from an individual’s house property or any land connected to such property is categorized under the head of income from house property for taxation purposes. Simply put, this head covers the taxation of rental income derived from owned properties.

Income from House Property is broadly classified into three categories:

  • Self-Occupied Property
  • Let-Out Property
  • Deemed Let-Out Property

If an individual owns more than two self-occupied houses, only two are treated as self-occupied, and any additional properties are considered deemed let-out for taxation purposes. This taxation applies to income generated from both commercial and residential properties.

Income from Profits and Gains from Business or Profession

Income derived from any business or profession is subject to taxation under this category. You can deduct your business expenses from your total income to determine the taxable amount.

The types of income chargeable under this head include:

  • Profits from the sale of licenses
  • Gains during an assessment year
  • Profits earned by organizations
  • Cash received from government export schemes
  • Business benefits received
  • Profits, bonuses, or salaries from partnerships with firms

Individuals or Hindu Undivided Families (HUF) earning income from business or profession must file either ITR-3 or ITR-4 for income tax returns.

Income from Capital Gains

Income derived from the sale or transfer of an asset held for investment purposes is taxed under the head of income from capital gains. Various assets such as gold, bonds, mutual funds, real estate, and stocks are considered capital assets.

Capital gains are further categorized into:

  • Short-term capital gains
  • Long-term capital gains

The table below outlines the holding period and corresponding tax rates for different asset classes:

tax

The table below outlines the holding period and corresponding tax rates for different asset classes:

Nature of Asset

Holding Period

Short-term tax rate

Long-term tax rate

Immovable Property

24 months

Slab Rates

20% after Indexation

Unlisted equity shares

24 months

Slab Rates

20% after Indexation

Listed Equity shares or Equity oriented mutual funds

12 months

15%

10%

Other Capital assets

36 months

Slabs rate

20% after indexation

Non-Equity Mutual funds (Debts funds) – Purchased after 1st April 2023

Not Applicable

Slab rates

Slab rates

Details of capital gains must be disclosed in Schedule CG of your Income Tax Return (ITR) form. If you are an individual, you will need to use either ITR-2 or ITR-3 to report this information.

Read More: Benefits Of Filing Your Income Tax Return

Income from Other Sources

Within the five heads of income tax, this category encompasses any additional income not covered by the preceding four heads. Such income is defined under Section 56(2) of the Income-tax Act and includes earnings from dividends, interest, rental income from plant and machinery, lottery winnings, bank deposits, gambling proceeds, card game winnings, sports prizes, and similar sources.

Related Post

image

Filing Income Tax Returns Including Foreign Income

Filing Income Tax Returns Including Foreign Income Filing Income Tax Returns for Foreign Income: Understanding Residential Status, Utilizing DTAA Provisions, and Following Procedural Requirements With the upcoming July 31 deadline…
Read More
image

Creating a Strategy for Tax Savings in FY25 with ELSS Mutual Funds

Creating a Strategy for Tax Savings in FY25 with ELSS Mutual Funds Are you still adhering to the old tax regime? Considering tax savings under Section 80C? With the commencement…
Read More
image

7 Essential Documents for Filing ITR AY 2024-25

7 Essential Documents for Filing ITR AY 2024-25 Filing income tax returns (ITR) is obligatory for every taxpayer annually. For the Assessment Year (A.Y.) 2024-25, the CBDT has updated all ITR…
Read More

Book A One To One Consultation Now
For FREE

How can we help? *

Benefits Of Filing Your Income Tax Return

Income Tax Return

Benefits Of Filing Your Income Tax Return

Income Tax Return

Filing income tax returns goes beyond fulfilling a legal requirement; it represents a civic duty that underscores your dedication to the development and welfare of your nation. By contributing your fair share towards national growth, you actively support the functioning of the government and the provision of vital services to fellow citizens.

As per the income tax department, filing income tax returns is a responsibility that grants you the pride of actively contributing to the nation’s development. Additionally, your income tax returns establish your creditworthiness with financial institutions and enable you to access various financial benefits such as bank loans, and more.

Benefits of filing ITR

Compliance with Legal Requirements:

Filing income tax returns is compulsory for individuals whose income exceeds the threshold set by the Income Tax Department. By adhering to this obligation, you avoid penalties and legal repercussions.

Tax Refund Claims:

If you have paid more taxes than required through TDS or advance tax payments, filing a return enables you to claim a refund. This is particularly advantageous if you have eligible investments or expenses that qualify for deductions or exemptions.

Access to Financial Services:

Many financial institutions, including banks and NBFCs, require income tax returns as part of their loan application process. A history of filing returns enhances your credibility and improves your chances of obtaining loans, credit cards, and other financial products.

Income Tax Return

Establishing Creditworthiness:

Filing income tax returns helps establish your financial credibility. Lenders often review tax returns to assess your repayment capacity and risk profile when you apply for loans or credit facilities.

Utilizing Deductions and Exemptions:

Filing a return allows you to avail deductions and exemptions under the Income Tax Act, such as those for investments in tax-saving instruments (e.g., Provident Fund, ELSS), insurance premium payments, charitable donations, and expenses related to housing loans and education.

Minimizing Scrutiny:

Regularly filing returns reduces the risk of being scrutinized or investigated by the Income Tax Department. It promotes transparency in your financial dealings and lowers the chances of being suspected of tax evasion or non-compliance.

Read More: Tips for Stock Market Investors to Reduce Income Tax Liability through ITR Filing

Financial Management:

Filing income tax returns provides a detailed record of your financial transactions, income sources, and tax liabilities. This information is valuable for financial planning, budgeting, and making informed decisions about investments, savings, and expenses.

Accessing Government Benefits:

Certain government welfare schemes and subsidies require proof of income, which can be provided through income tax returns. By filing returns, you become eligible for various social security benefits, subsidies, and entitlements offered by the government.

Related Post

image

Filing Income Tax Returns Including Foreign Income

Filing Income Tax Returns Including Foreign Income Filing Income Tax Returns for Foreign Income: Understanding Residential Status, Utilizing DTAA Provisions, and Following Procedural Requirements With the upcoming July 31 deadline…
Read More
image

Creating a Strategy for Tax Savings in FY25 with ELSS Mutual Funds

Creating a Strategy for Tax Savings in FY25 with ELSS Mutual Funds Are you still adhering to the old tax regime? Considering tax savings under Section 80C? With the commencement…
Read More
image

7 Essential Documents for Filing ITR AY 2024-25

7 Essential Documents for Filing ITR AY 2024-25 Filing income tax returns (ITR) is obligatory for every taxpayer annually. For the Assessment Year (A.Y.) 2024-25, the CBDT has updated all ITR…
Read More

Book A One To One Consultation Now
For FREE

How can we help? *