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Overview

  • Overview & Fundamentals
    • Taxpayer Categories in India
    • Assessment Year vs. Financial Year
      • Financial Year (FY): Year in which income is earned (e.g., FY 2025-26)
      • Assessment Year (AY): Year following FY when tax is assessed (e.g., AY 2026-27)
  • Income Heads
    • Income from Salary (Sections 15–17)
      • Includes wages, pensions, allowances, and perquisites
      • Key exemptions:
        • HRA (Sec 10(13A))
        • Leave Encashment (Sec 10(10AA))
        • Gratuity (Sec 10(10))
    • Income from House Property (Sec 22–27)
      • Taxed based on annual value
      • Deductions:
        • Standard Deduction: 30% of Net Annual Value
        • Interest on Home Loan: Up to ₹2 lakh under Sec 24(b)
    • Income from Business/Profession (Sec 28–44)
      • Includes profits from trade, consultancy, freelancing
      • Presumptive schemes:
        • Sec 44AD: Small businesses
        • Sec 44ADA: Professionals
        • Sec 44AE: Transport operators
    • Capital Gains (Sec 45–55)
      • Short-Term (STCG): Held < 36 months (or 24/12 months for certain assets)
      • Long-Term (LTCG): Held ≥ 36 months
      • Exemptions:
        • Sec 54: Residential property
        • Sec 54EC: Bonds
        • Sec 54F: Other assets
    • Income from Other Sources (Sec 56)
      • Covers income not classified elsewhere
      • Examples:
        • Interest from savings/fixed deposits
        • Gifts exceeding ₹50,000 (with exceptions)
        • Dividend income
  • Deductions & Exemptions
    Section 80C to 80U
    Section Purpose Max Deduction
    80C LIC, PPF, ELSS, NSC ₹1.5 lakh
    80D Health insurance ₹25k–₹1 lakh
    80E Education loan interest No limit
    80G Donations 50% or 100%
    80U Disability (taxpayer) ₹75k–₹1.25 lakh

    Section 10 Exemptions
    • HRA: Based on salary, rent, and city
    • Gratuity: Up to ₹20 lakh
    • Leave Encashment: Up to ₹3 lakh on retirement
  • Tax Filing & Compliance
  • Form 26AS & AIS
    • Form 26AS: Tax credit summary
    • AIS (Annual Information Statement): Expanded view of financial transactions
  • TDS/TCS Compliance
    • TDS: Deducted by payer (Sec 192–194Q) See TDS Mismatch Errors: Causes and Fixes for more details. Please ensure that the Schedule TDS-2 return filed by your employer mentions correct Deducted Year. E.g., for FY 2024-25, the deducted year should be either 2024 or 2025 but never 2023. This is a major cause of TDS mismatch issue and then subsequent notice and tax demand by the income tax department. This is never the fault of the taxpayer employee and beyond the control of the taxpayer. If there is a TDS mismatch, it’s always due to the filing mistakes by your employer or some other data issue in the system.
    • TCS: Collected by seller (Sec 206C)

Types of Income

Income from Other Sources

  • Bank/Post Office Interest
    • Savings account interest (eligible for 80TTA in old regime).
    • Fixed Deposit (FD) interest.
    • Recurring Deposit (RD) interest.
    • Post office savings/term deposit interest.
  • Dividends
    • Dividend from shares or mutual funds (taxable in your hands from FY 2020–21).
  • Family Pension
    • Pension received by family after death of employee (special deduction: lower of ₹15,000 or 1/3rd).
  • Gifts (monetary or property received without consideration)
    • If received from non-relatives and exceeding ₹50,000 in a year.
  • Casual Income
    • Lottery winnings, crossword puzzles, game shows, card games, horse races, etc. (taxed at flat 30%).
  • Other Receipts
    • Interest on compensation/enhanced compensation.
    • Income from sub-letting (if not falling under House Property).
    • Any other receipt that doesn’t fit elsewhere.

Types of Popular Deductions

Section 80C

Overview

Section 80C of the Income Tax Act, 1961 allows individual taxpayers and Hindu Undivided Families (HUFs) to claim deductions up to ₹1,50,000 per financial year by investing in specified instruments or incurring eligible expenses. This section is part of Chapter VI-A and is widely used for tax planning and long-term financial structuring.

Eligible Taxpayers

  • Resident and Non-Resident Individuals
  • Hindu Undivided Families (HUFs)

Maximum Deduction Limit

  • ₹1,50,000 per financial year
  • Applies to total of all eligible investments and expenses under Section 80C

Eligible Investments

  • Public Provident Fund (PPF): Long-term government-backed savings with tax-free returns
  • Employee Provident Fund (EPF): Mandatory retirement savings for salaried employees
  • Equity Linked Savings Scheme (ELSS): Mutual funds with a 3-year lock-in and market-linked returns
  • National Savings Certificate (NSC): Fixed-income investment issued by post offices
  • Tax-saving Fixed Deposits: 5-year lock-in deposits with banks
  • Life Insurance Premiums: Premiums paid for self, spouse, or children
  • Sukanya Samriddhi Yojana (SSY): Savings scheme for girl children with attractive interest rates
  • Unit Linked Insurance Plans (ULIPs): Hybrid insurance-investment products

Eligible Expenses

  • Tuition Fees: Paid for up to two children studying in India
  • Home Loan Principal Repayment: Only the principal component qualifies under 80C
  • Stamp Duty and Registration Charges: Paid during purchase of residential property

Important Notes

  • Deductions under Section 80C are not available to companies, firms, or LLPs
  • Investments must be made within the financial year to qualify
  • Documentation and proof of investment/payment are essential for claiming deduction
Tip: Keep investment receipts and proof of payment ready at the time of filing your income tax return.

Strategic Planning Tips

  • Combine ELSS and PPF for balanced exposure to equity and debt
  • Align 80C investments with long-term goals like retirement or child education
  • Avoid last-minute investments. Plan early to optimize returns and liquidity

Section 80D

What is Section 80D?

Section 80D of the Income Tax Act, 1961 allows an individual or a Hindu Undivided Family (HUF) to claim a deduction for medical insurance premiums paid and certain health-related expenses. It aims to encourage health insurance coverage and reduce out-of-pocket medical costs.

Who can claim?

  • Individuals: Premiums paid for self, spouse, dependent children and parents.
  • HUF: Premiums paid for any member of the HUF.
  • Payment should generally be made by non-cash modes (cheque, net-banking, card, UPI). Exception: preventive health check-up payment may be in cash.

Eligible expenses

  • Medical insurance premiums (health policies).
  • Preventive health check-ups (up to ₹5,000 included within limits).
  • Actual medical expenditure for senior citizens where no insurance exists (subject to limits).

Deduction limits (summary)

Self, spouse & dependent childrenUp to ₹25,000 (₹50,000 if senior citizen)
Parents (dependent or not)Up to ₹25,000 (₹50,000 if parents are senior citizens)
Preventive check-upIncluded in above limits up to ₹5,000
Uninsured senior citizen medical expenseUp to ₹50,000

Maximum possible deduction: Up to ₹1,00,000 in a financial year (for example, if both taxpayer and parents are senior citizens and limits are fully used).

Illustration

Scenario: Mr. Rajesh (45) pays:

  • ₹20,000 -> Premium for self, spouse & two children
  • ₹48,000 -> Premium for parents (both aged >= 60)

Deduction available:

  • For self & family: ₹20,000 (within ₹25,000 limit)
  • For parents: ₹48,000 (within ₹50,000 senior-citizen limit)

Total deduction = ₹68,000.

Key points to remember

  • Premiums paid via cash are generally not eligible (except preventive check-ups).
  • Deduction allowed even if parents are not dependent on the taxpayer.
  • GST included in the premium is eligible for deduction as part of the premium amount.
  • Group health insurance paid by employer is not eligible under Section 80D for the employee (since employee did not bear the cost).

Significance

Section 80D incentivizes taxpayers to buy health insurance and promotes preventive health measures. It provides enhanced support for senior citizens, who typically have higher medical expenditure.

Quick printable checklist

  1. Collect receipts / policy documents for premiums paid (ensure non-cash payment receipts).
  2. Include preventive health check-up bills (limit ₹5,000 within overall cap).
  3. Confirm tax payer age (senior citizen = age 60 or more) for limit validation.
  4. Claim premiums paid for parents even if they are not financially dependent.

Section 80TTA and 80 TTB

Section 80TTA – Deduction for Interest on Savings Account

Section 80TTA of the Income Tax Act, 1961 allows individuals (other than senior citizens) and HUFs to claim a deduction of up to ₹10,000 per financial year on interest earned from savings accounts with banks, post offices, or co-operative societies.

  • Eligible Taxpayers: Resident Individuals (below 60 years) and HUFs
  • Deduction Limit: Up to ₹10,000 per year (aggregate interest from all savings accounts)
  • Not Applicable to: Interest earned on fixed deposits (FDs), recurring deposits (RDs), or time deposits
Interest must be reported as "Income from Other Sources" first; deduction is then claimed under Section 80TTA.

Section 80TTB – Deduction for Interest Income for Senior Citizens

Section 80TTB is exclusively available to resident senior citizens (aged 60 years or more). It allows deduction of up to ₹50,000 on interest income earned from deposits.

  • Eligible Taxpayers: Resident Senior Citizens (60 years and above)
  • Deduction Limit: Up to ₹50,000 per financial year
  • Applicable Sources: Savings accounts, fixed deposits (FDs), recurring deposits (RDs) with banks, post offices, and co-operative banks
  • Not Applicable to: Non-residents or taxpayers below 60 years
If Section 80TTB is claimed, deduction under Section 80TTA cannot be availed in the same year.