Indian Income Tax Deductions

India follows a progressive system of taxation, having a three-tiered tax slab, wherein the tax rate increases with an increase in the level of income. As per the tax slabs for the assessment year 2009-2010, an individual with an aggregate annual income of Rs.5,00,000 is liable for income tax worth Rs.47,500.

The Income Tax Act, 1961 allows Indian tax payers to save on tax payments through various deduction clauses. In fact, with proper planning and investment, an individual can waive off the entire tax liability.

Income Tax Standard Deductions

Income tax deductions in India are most commonly claimed by individuals under Section 80C of the Income Tax Act. The maximum aggregate deduction that can be claimed under this section for an assessment year is Rs.1,00,000. This section caters to the premiums made towards life insurance and annuity funds of:

• Self
• Spouse
• Children (dependent as well as non-dependant)

Other Income Tax Deduction Sections

Other standard income tax deduction sections are:

• 80D: This section caters to medical insurance premium. An individual can claim up to Rs.15,000 under this section.
• 80DD: This pertains to deduction on account of maintenance or medical treatment of a dependant. An individual can claim as much as Rs.75,000 as deduction, provided the dependent is severely disabled.
• 80E: This relates to deduction with respect to interest on a higher education loan. This section does not have a quantum of deduction, and one can claim the actual amount paid.
• 80GG: This section relates to deductions in respect of rent paid. The maximum amount that can be claimed under this section is Rs.2,000 per month.
• 80U: This pertains to special deductions for individuals with a disability. The maximum claim amount in this case is Rs.75,000.