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Key Tax Deductions Every Salaried Individual Should Know


Tax deductions can significantly reduce the amount of taxable income for salaried individuals. Here are some of the most important tax deductions that salaried persons should be aware of:

1. Standard Deduction

  • Amount: A fixed deduction from the salary income, which is revised periodically by the government.
  • Purpose: Simplifies the tax calculation process by replacing various smaller deductions.

2. Section 80C

  • Limit: Up to ?1,50,000
  • Eligible Investments and Expenses:
    • Employee Provident Fund (EPF)
    • Public Provident Fund (PPF)
    • National Savings Certificate (NSC)
    • Life Insurance Premiums
    • Tax-saving Fixed Deposits
    • Equity Linked Savings Scheme (ELSS)
    • Principal repayment on home loan
    • Tuition fees for children
    • Sukanya Samriddhi Yojana

3. Section 80D

  • Limit: Up to ?25,000 for self, spouse, and children; an additional ?25,000 for parents (?50,000 if parents are senior citizens)
  • Purpose: Deduction for premiums paid for health insurance policies.

4. Section 80TTA

  • Limit: Up to ?10,000
  • Purpose: Deduction for interest earned on savings account deposits.

5. Section 80E

  • Purpose: Deduction for interest paid on education loans.
  • Limit: There is no upper limit, but the deduction is available for a maximum of 8 years.

6. Section 24(b)

  • Limit: Up to ?2,00,000 on interest paid on home loans for a self-occupied property.
  • Purpose: Deduction for interest paid on housing loans.

7. House Rent Allowance (HRA)

  • Purpose: Exemption on HRA received if the employee is living in rented accommodation.
  • Calculation: Least of the following is exempt from tax:
    • Actual HRA received
    • 50% (40% for non-metro cities) of salary (basic + DA)
    • Rent paid minus 10% of salary (basic + DA)

8. Section 80G

  • Purpose: Deduction for donations to specified funds, charitable institutions, etc.
  • Limit: Depending on the organization, the deduction can be 50% or 100% of the donated amount, with or without a cap.

9. Leave Travel Allowance (LTA)

  • Purpose: Exemption for expenses incurred on travel within India for self and family.
  • Frequency: Allowed twice in a block of four years.

10. Section 80GG

  • Purpose: Deduction for house rent paid where HRA is not received.
  • Limit: Least of the following:
    • ?5,000 per month
    • 25% of total income
    • Rent paid minus 10% of total income

11. Section 80GGC

  • Purpose: Deduction for contributions made to political parties.
  • Limit: No maximum limit, but the contribution must be made through modes other than cash.

12. Section 80DD and 80DDB

  • Section 80DD: Deduction for expenses incurred on the medical treatment of a dependent with a disability.
    • Limit: ?75,000 for normal disability; ?1,25,000 for severe disability.
  • Section 80DDB: Deduction for expenses incurred on specified diseases for self or dependent.
    • Limit: Up to ?40,000 (?1,00,000 for senior citizens).

13. Professional Tax

  • Purpose: Deduction of professional tax paid.
  • Limit: As per the slab decided by the state government (generally up to ?2,500 per annum).

Utilizing these deductions effectively can help reduce taxable income and, consequently, the overall tax liability. It is advisable to keep records and proofs of all the expenses and investments made for claiming these deductions.

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