Tax benefits under Sec 80C, 80CCF, 80D, 80G and 80E

SEC 80C

            

Section 80C allows you to claim deductions in respect of life insurance premium, contribution to PPF, principal repayment on home loan, etc.

You are entitled to a tax benefit provided you make investments in certain instruments which are eligible for deduction under Sec 80C of the Income Tax Act, 1961, with the maximum total exemption being Rs 1, 00,000. That is, if your income is Rs 500,000 you can claim tax exemption up to Rs 100,000 which leaves you with a taxable income of Rs 400,000.

SEC 80CCF

                                          

Deduction in respect of subscription to long-term infrastructure bonds

Any investments made in long-term infrastructure bonds as notified by the central government shall be allowed as deduction to the extent of Rs 20,000. This is in addition to the limit of Rs 100,000 allowed under Sec 80C of the Income Tax Act, 1961.

SEC 80D

                           

Medical insurance premium

Premium paid for medical insurance up to Rs 15,000 is eligible for deduction under Sec 80D; in case of senior citizens the limit is extended to Rs 20,000.

The table above summarises the provision.

SEC 80 E

                    

Deduction in respect of interest on loan for higher education

The amount of interest paid on loan borrowed from any financial institution or any approved charitable institution is eligible for deduction under Sec 80E of the Income Tax Act, 1961, the loan being taken for the purpose of higher education.

The provisions are simplified in the graphic above.

SEC 80G

                        

Donations to certain funds/ charitable institutions

Donations, charity need not necessarily be one-way traffic but could result in a win-win situation for both parties. To simplify it further, donations made to certain funds or charitable institutions are eligible for deduction under Sec 80G of the Income Tax Act, 1961.

So while the receiving party benefits with the donation, you receive tax benefits arising from the deduction.

Institutions eligible for deduction under this section are categorised in three segments based on the amount of deduction allowed. The three segments have:

• 100 per cent deduction allowed without any limit
• 50 per cent deduction allowed without any limit

a. 100 per cent deduction allowed of restricted amount

b. 50 per cent deduction allowed of restricted amount

Where restricted amount is 10 per cent of the adjusted total income

Illustration: Mr A, an individual, has total income for a year amounting to Rs 400,000. He makes a donation of Rs 150,000 to an approved charitable institution. Depending on the institution he invests in, we have four different scenarios that explain the benefits arising in each case.