Tax Deductions in India

The annual budget of India stipulates the tax slabs that serve to identify the income groups that are supposed to pay taxes in a year. However, these income groups are entitled to receive tax deductions in India on fulfilling requisite conditions.

Tax deductions in India for investment in pension plans:

Any individual who has invested in a pension plan, for example, the annuity plan of Life Insurance Corporation of India is allowed certain tax deductions in India on the premia paid by him/her as per section 80 CCC of the Income Tax act, 1961. However, that individual or his nominee who receives the principal amount on that policy is liable to pay taxes on that principal amount on its maturity.

Tax deductions in India for physically challenged persons:

Physically challenged persons whose disability has been endorsed by a qualified medical practitioner of any government hospital are entitled to receive tax deductions in India. In case the persons are subjected to permanent physical disability or suffering from mental retardation, they are allowed tax deductions of a maximum of Rs. 40,000. The Income Tax Act, 1961 provides for the different kinds of disability in a person that will entitle him/her to tax deductions as per section 80DD and 80U of the Income Tax Act. The sections certify a person with either permanent or 50%-60% disability in the limbs as physically challenged. The criteria also include people with permanent blindness or those who have lost their voice.

Tax Deductions in India for Other Investments:

Apart from investments in pension plans, the Income Tax Act of 1961 also provides for tax deductions in India for a substantial number of other investments. As per section 80L of this act, individuals are entitled to receive tax deductions on their interest or dividend incomes and the maximum amount of such deduction is provided for, as Rs. 15,000. Some of the prominent investments that are entitled to receive tax deductions comprise:

• Investment in under monthly income scheme of the post office
• Investment in Debentures or Bonds of an institution/ authority/ public sector company/ cooperative society or other such organization notified by central government.
• Investment in with banking institutions
• Investment in under other schemes which are notified by central government like national saving schemes, time deposit schemes, recurring deposit schemes.
• Investment in units of UTI and Mutual Funds (under Section 10(23D) of the Income Tax Act)
• Investment in such authorities which are working for planning & development of cities and village
• Investment in financial institution working for Industrial Development of India
• Investment in co-operative societies
• Investment in under National Deposit Schemes as notified by Central Government

Special Tax Deductions in India:

Section 80 RR of the Income Tax Act, 1961 covers Indian residents who earn foreign currency are subjected to tax deductions. The category includes prominent individuals like:

• Film directors
• Sports persons
• Authors
• Musicians

Such individuals are allowed tax deductions of 75% of the income received in the form of foreign currency and this deduction will be effected within 6 months of the receipt of the income. The time of rebate may however be decided by the Chief Commissioner of the Income Tax Department in special cases. However, section 80 RRA of the Income Tax Act governs the tax rebates allowed to any person who is employed outside India and receives income in the form of foreign currency. Such an individual is entitled to receive tax deduction as high as 75% on his income. The time of tax deduction in this case also will be within 6 months of the receipt of income or vary as per the decision of the Chief Commissioner of the Income Tax Department.