Chapter VI (A) of the Income Tax Act: Know the Deductions Available
Chapter VI (A) income tax deductions allow taxpayers to claim deductions for certain investments, costs, and donations made throughout the fiscal year, which represents a substantial tax-saving opportunity. Thus, deductions are essential for reducing the total tax liability of an individual or business to the government. In this article, we will explain the deductions under this chapter of the Income Tax Act you can avail of as a taxpayer.
Table of Contents:
What is Income Tax Chapter VI (A)?
A number of section 80 subsections that permit deductions from gross total income help taxpayers lower their tax liability. These subsections are included in Chapter VI (A) of the Income Tax Act. A range of tax-saving investments, qualified expenses, charity contributions, and other items qualify for these deductions. They give people a way to reduce their tax liability in addition to allowing them to invest and save money. There is a broad framework for tax savings because deductions can be claimed under many sections, including 80C, 80CCC, 80CCD, 80CCE, and 80D to 80U.
Deductions Under Chapter VI (A)
Section 80C
Among the most often used and accessible sections in Chapter VI (A). When combined with Sections 80CCC and 80CCD, it permits the highest tax deduction of Rs. 1.5 lakh. Various investments that permit deductions and aid in the production of tax returns make it feasible to deduct under Chapter VI (A) for Section 80C. Taxpayers must keep in mind that investments must be made in the same fiscal year in order to get benefits under this section of chapter VI (A). The provisions of this section extend to both investments and expenses. The following is a list of assets and expenses that qualify for deductions under Chapter VI (A), section 80 C.
Employee Provident Fund (EPF)
Voluntary Provident Fund (VPF)
National Pension System (NPS) contribution
Unit Linked Insurance Plan (ULIP)
Equity Linked Savings Scheme (ELSS)
Sukanya Samriddhi Yojana
Life Insurance Policy Premiums
Payment of Tuition Fees
Five-Year Tax Saver FDs
Five-Year Post Office Time Deposit (POTD) Scheme
Home Loan Principal Repayment
Section 80CCC
Individuals who have made contributions to certain pension funds of LIC or other insurance companies are eligible for a deduction under Section 80CCC. A deduction of Rs. 1,50,000 is permitted. In addition, all annuity pensions and amounts earned upon relinquishing them, including accrued interest and bonuses, are taxable in the year that they are received.
Section 80CCD (1)
This section allows deductions for contributions paid to the central government's pension schemes. Under it, the maximum deduction amount is Rs. 1.5 lakh. In the event that you work, 10% of your base pay and dependents' allowance will be tax-free. In all other cases, the maximum is unaltered and 20% of total income is tax-free.
Section 80CCD (1B)
For the National Pension System (NPS), NPS Swavalamban, and Atal Pension Yojana pension schemes, deductions under chapter VI (A) for this sub-section of 80CCD are taken into account. In this instance, the tax exemption is capped at Rs. 50,000.
Section 80CCD (2)
Tax deductions for corporate NPS and subscribers to the federal and state governments' NPS are also included in this section. In case the central government is the employer, the tax benefit amounts to 14% of basic + DA (dearness allowance). This tax benefit is only available to business NPS subscribers and is capped at 10% of basic + DA. The Income Tax Act sub-section offers a tax benefit that surpasses the Rs. 2 lakh total maximum provided by NPS under sections 80 C and 80 CCD (1B).
Section VI The premiums paid for health insurance and the payment for the critical illness rider on life insurance plans are deductible under this clause. For older citizens who are paying for their own and their parents' health insurance premiums, the maximum tax deduction under Section 80D is ₹1 lakh. You can deduct up to ₹25,000 from your premium if you are a regular taxpayer. If you are a senior citizen, it is ₹50,000 for you and your family.
This provision addresses maintenance deductions that cover a dependent's medical expenses if they are a disabled person. It has a deduction cap of Rs. 75,000 in place. Diseases covered u/s 80DD are:
Autism
Cerebral palsy
Low vision
Blindness
Hearing impairment
Leprosy cured
Locomotor disability
Mental illness
Mental retardation
A Severely Disabled Person (with 80% or more of the disability) can claim a deduction of up to Rs. 1,25,000.
This section covers costs incurred for medical care from a specialist, such as an immunologist, urologist, oncologist, neurologist, or haematologist, for deductions under Chapter VI (A). The Rs. 40,000 deduction cap is in place. The deduction is Rs. 1,00,000 for persons over 60.
Interest paid on student loans taken out for postsecondary study is deductible under Section 80E. Nevertheless, the student loan principal repayment is not eligible for the deduction under section 80E. Furthermore, this part has no financial restrictions. As a result, the entire amount of interest paid by an individual is deductible. Nevertheless, a deduction is only permitted for a period of eight years. Individuals who meet the following requirements are the only ones who can claim the deduction under section 80E:
The lender has to be a financial or nonprofit organisation.
The taxpayer is required to return the debt.
The loan should be taken out with the intention of helping a relative or yourself pursue higher education. A spouse, children, and a student for whom a person is the legal guardian are all considered relatives.
Section 80EE
With a maximum deduction limit of INR 1 lakh, Section 80EE was initially introduced in the 2014 Budget and was only intended to be used for two years (FY 2013–14 & 2014–15). Nonetheless, the 2017 Budget reinstated this section. As of FY 2016–17 (AY 2017–2018), a person is eligible to deduct up to Rs. 50,000 till the loan is paid back. This INR 50,000 cap is in addition to the Rs. 2 lakh deduction for house loan interest under Section 24. To be eligible for this income tax deduction, the following requirements need to be met:
A person is purchasing a house for the first time.
A residential home's worth should not be more than Rs. 50,000,000.
The loan must be approved between April 1, 2016, and March 31, 2017.
Financial institutions or housing finance companies must approve a loan.
The maximum sanctioned loan amount that can be granted is Rs. 35,000,000.
On the day the loan is sanctioned, the taxpayer cannot be the owner of another residential property.
The loan taken out to buy commercial real estate is not eligible for a deduction.
Section 80 EEA
Individuals are eligible for an extra tax deduction on home loan interest under Section 80 EEA. Rs. 1,50,000 is the maximum amount that can be deducted. Furthermore, the Rs. 1,50,000 cap exceeds the Rs. 2 lakh deduction for house loan interest permitted under Section 24. to be eligible for this income tax deduction, the following requirements need to be met:
The loan is scheduled to be sanctioned on April 1, 2019, and March 31, 2022.
A financial institution or home finance firm provides the loan.
The house's stamp duty value cannot be more than Rs. 45 lakh.
Section 80EE deductions cannot be claimed by the taxpayer.
On the day the loan is sanctioned, the taxpayer cannot be the owner of another residential property.
This part deals with loans for the purchase of electric vehicles. The maximum deduction of ₹1.5 lakh is allowed, and it is based on interest.
Section 80G
Donations to specific relief funds and charity organisations are eligible for income tax deductions under Section 80G for individuals, HUFs, and corporations. But the only gifts that are eligible for a deduction are those donated to funds that the Indian government has designated. Depending on the charity organisation, different qualifying limits are available for deduction. Some categories of donations under section 80G are exempt from income tax:
Income tax deduction of 100% without any qualifying restrictions
50% Income Tax Deduction (no qualifying threshold)
10% of adjusted gross total income is deducted from the 100% income tax.
10% of adjusted gross total income is deducted from the 50% income tax.
Section 80GG
For either furnished or unfurnished housing, rent paid is deductible from taxes under Section 80GG. Nonetheless, only taxpayers who do not receive any HRA from their employer are eligible for the deduction. To be eligible for a deduction under Section 80GG for rent paid, the following requirements must be met:
Self-employed or salaried individuals who pay rent can claim.
A salaried individual shouldn't be getting a house rent allowance from their job.
Form-10BA must be turned in to the Income Tax Department in order to claim a deduction.
The assessee, spouse, minor child, or HUF of which they are a part shall not possess any residential property at the address where they dwell, work at an office under the table, conduct business, or engage in any other occupation.
The assessee's income cannot be computed as income from self-occupied house property if they own a house property somewhere.
The lowest of the following deductions will be made under this section:
10% of overall revenue less the entire rent paid
25% of the yearly pay
Rs. 5,000 a month, or Rs. 60,000 a year
Under this part of chapter VI (A), deductions may be claimed for the whole amount donated for rural development or scientific research.
Under this section, non-cash contributions to political parties are deductible. 100% of the deduction is permitted under it.
The Income Tax Act's Section 80TTA permits an interest deduction on savings accounts. Therefore, for a financial year, individuals (except senior people) and HUFs are eligible to deduct up to Rs. 10,000. The bank account statements are needed to compute and submit the u/s 80TTA deduction. The following interests can be written off under Section 80TTA:
Interest obtained through a bank savings account
Any interest obtained through a cooperative savings account
Interest obtained through a post office savings account
A ₹50,000 annual tax discount is offered under this tax benefit, which is exclusively available to senior persons. Under section 80TTB, the following interests are deductible from income tax:
Interest received on bank deposits, such as interest on fixed deposits, recurring deposits, and savings account interest.
Interest accrued on deposits made to a cooperative society that conducts banking.
Interest received on post office deposits, such as interest from savings accounts, NSCs, time deposits, accounts under the Senior Citizens Savings Scheme, recurrent deposits for five years, and monthly income plans.
Individuals with disabilities should take note of this. The type of handicap affects the amount of the deduction. Under this Chapter VI (A) deduction, the annual maximum is ₹1.25 lakh.
Agnipath Plan
This exemption, which allows for a deduction on contributions paid to the Agniveer Corpus fund, was included in the Budget 2023. For those who enrol in the Agnipath Scheme, it offers tax benefits. The old and new regimes both permit this deduction.
Conditions for Claiming Deductions under Section VI (A)
Special rate incomes, such as short-term capital gains under Section 111A and long-term capital gains under Section 112A, are not deductible under Chapter VI (A).
Taxpayers are not permitted to deduct more than their gross total income under Chapter VI A. For instance, X earns Rs. 4 lakh in gross total income, of which INR 4,50,000 is his entire deduction under Chapter VI (A). Because the deduction (Rs. 4,50,0000) cannot exceed the gross total income (Rs. 4 lakh), the amount available for deduction is Rs. 4 lakh.
Moreover, you are unable to carry over the deduction.
Conclusion
Even though Chapter VI A appears to offer a lot of deductions, to avoid penalties, you must present appropriate documentation when claiming advantages. Note that these tax incentives are only available to those who want to remain under the previous tax structure.
FAQ
Q1. What is Chapter VI (A) in income tax?
Several sub-sections of section 80, which permit deductions from gross total income, are included in Chapter VI (A) of the Income Tax Act and enable taxpayers to lower their tax liability. Various tax-saving investments, qualified expenses, charity contributions, and more are all eligible for these deductions.
Q2. Can I claim deductions for Chapter VI (A) under the New Tax Regime?
The deduction under Chapter VI A is not available to you if you choose the New Tax Regime.
Q3. Who is eligible for 80C deduction?
Individuals and HUFs are eligible for a deduction of INR 1,50,000 under Section 80C. As a result, LLPs, companies, partnerships, and firms are not eligible for the Section 80C tax deduction.
Q4. What is the income tax deduction for salaried employees?
For salaried workers, there is a standard deduction of Rs. 50,000. In addition, they can deduct Chapter VI A expenses to reduce their taxable income.
Q5. Is it mandatory to submit proof to the employer to claim Chapter VI (A) deductions?
Proof of investments is not required in order to make a claim for Chapter VI (A) deductions. Therefore, you can still claim the investments when submitting your ITR even if you haven't reported them. However, it is best to disclose the investments so that your employer can account for them when calculating your taxable income and deducting TDS.
Q6. How do you claim deductions under Section 80TTA?
Interest on savings accounts up to Rs 10,000 can be claimed as a deduction under Section 80TTA.
Q7. What is the total amount deductible under any other provision(s) of Chapter VI (A)?
For salaried workers, there is a standard deduction of Rs. 50,000. In addition, they can reduce their taxable income by claiming Chapter VI (A) deductions. Individuals and HUFs are eligible for a deduction of Rs. 1,50,000 under Section 80C.
Q8. Is house rent deductible under Chapter VI (A)?
The house rent allowance (HRA) is typically paid by your company in addition to your salary. If you are not eligible for HRA, you may be able to deduct the amount of rent you pay for your home. This tax reprieve is permitted by Section 80GG of Chapter VI-A of the Income Tax Act (ITA), 1961.
Q9. Is Section 24 under Chapter VI (A)?
When filing income tax returns, Section 24 is claimed as a deduction under income from dwelling property. When filing income tax returns, Section 80EE is claimed as a deduction under the heading "Deductions Under Chapter VI."
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