India Tax Deduction

There are various India Tax Deductions or tax exemptions provided by the Indian Income Tax Act. The tax deductions help to deduct an amount from the taxable income and help to save tax. Each year, one can save thousands of rupees in income tax through income tax exemptions.

The Central Board for Direct Taxes (CBDT) governs the Indian Income Tax department. The department is also part of the Department of Revenue which is managed under the Indian Revenue Service (IRS) under the Ministry of Finance, Govt. of India.

Income taxes are imposed by the government of India on taxable income of Hindu Undivided Families (HUFs), companies, individuals, firms, co-operative societies and trusts (which are identified as a body of Individuals and Association of Persons) and any other artificial person. There are separate levy of taxes on each persons which are governed by the Indian Income Tax Act, 1961.

Some of the income tax deductions and tax exemption limits for the financial year 2008-09 are given below -

Income Tax deduction - Section 80C of the Indian Income Tax Act

Section 80C is one of the most common income tax deductions. This is quite popular as it encourages monthly savings from income. If someone has a taxable income in the highest tax bracket, the deductions under this section can help one reduce the taxable income by 1 lakh rupees. This deduction can be availed if one has invested money in Life Insurance premium, Provident Funds, mutual fund investments in ELSS (Equity Linked Savings scheme), bank deposits (more than 5 years), National Saving Certificate (NSC), tuition fees, principal part of EMI on housing loan, ULIPS (Unit Linked Insurance Plans). The maximum tax deduction or tax exemption limit is Rs.1, 00,000.

Income Tax deduction - Section 80D of the Indian Income Tax Act

This section of India Tax Deduction is helpful if there is no coverage of health and medical expenses. It is better if one gets health and medical insurance for oneself, spouse, dependent parents and dependent children. Through this one can claim deduction till Rs. 15000/- per annum for the insurance premium. The limit for senior citizens is Rs 20,000.

Income Tax deduction - Section 80G of the Indian Income Tax Act

According to Section 80G in the India tax deduction rules, donations to National Children Foundation, University or educational institution of national importance, Prime Minister's Relief Fund, charitable institutions etc are deductible from the taxable income. Income tax deduction for 50% of the donated amount is eligible for other donations. The maximum tax deduction or tax exemption limit is 100% for various funds and 50% for other donations.