The amount of deduction under income tax varies depending on the specific deduction being claimed. However, some of the most common deductions and their corresponding limits include:

• Section 80C: This section allows for a deduction of up to ₹1.5 lakhs for various expenses, including contributions to provident funds, life insurance premiums, investments in equity-linked saving schemes (ELSS), and tuition fees for children.
• Section 80D: This section allows for a deduction of up to ₹25,000 for health insurance premiums paid for self, spouse, and dependent children. An additional deduction of up to ₹25,000 or ₹50,000 is available for health insurance premiums paid for parents, depending on their age.
• Section 80TTA: This section allows for a deduction of up to ₹10,000 for interest income on savings accounts.
• Section 24: This section allows for a deduction of interest paid on home loans. The maximum deduction is ₹2 lakhs per year.
• Section 80CCD (1): This section allows for an additional deduction of up to ₹10,000 for contributions made to certain pension schemes.
• Section 80CCD(1B): This section allows for an additional deduction of up to ₹50,000 for contributions made to certain pension schemes for self and family.

EXAMPLE

There are many different types of deductions available to taxpayers in India, and the amount of deduction that is available can vary depending on the specific state and the taxpayer’s individual circumstances. Some of the most common types of deductions include:

• Deductions under Section 80C: This section allows taxpayers to deduct certain expenses, such as contributions to a provident fund, life insurance premiums, and tuition fees, from their taxable income. The maximum deduction under Section 80C is RS. 1.5 lakh per year.
• Deductions under Section 80D: This section allows taxpayers to deduct certain medical expenses, such as the cost of hospitalization, surgery, and medication, from their taxable income. The maximum deduction under Section 80D is RS. 25,000 per year for taxpayers under the age of 60 and RS. 50,000 per year for taxpayers over the age of 60.
• Deductions under Section 80GG: This section allows taxpayers to deduct a certain amount of rent paid from their taxable income. The maximum deduction under Section 80GG is RS. 5,000 per month.
• Deductions under Section 24: This section allows taxpayers to deduct the interest paid on a home loan from their taxable income. The maximum deduction under Section 24 is RS. 2 lakh per year.

In addition to these general deductions, there are also a number of state-specific deductions that may be available. For example, in the state of Maharashtra, taxpayers can deduct up to RS. 10,000 per year for donations made to certain charitable organizations.

The specific amount of deduction that is available to a taxpayer will depend on a number of factors, such as their income, their age, and their state of residence. Taxpayers should consult with a tax advisor to determine the specific deductions that they are eligible for.

FAQ QUESTIONS

• What are deductions under income tax?

Deductions are expenses that you can subtract from your taxable income to reduce your tax liability. There are various deductions available under the Income Tax Act, 1961, for different types of income and expenses.

• Who can claim deductions under income tax?

Individuals, Hindu Undivided Families (HUFs), companies, and other assesses are eligible to claim deductions under the Income Tax Act.

• How are deductions different from exemptions?

Deductions are subtracted from your taxable income, while exemptions are excluded from your taxable income altogether. For instance, the amount of interest earned on savings bank accounts up to a certain limit is exempt from income tax.

FAQs related to specific deductions

• What are the deductions available for salaried individuals?

Salaried individuals can claim deductions under various sections of the Income Tax Act, including:

• Section 80C: Deduction for investments in specified avenues, such as Public Provident Fund (PPF), life insurance premiums, and contributions to retirement funds.
• Section 80TTA: Deduction for interest earned on savings bank accounts up to a certain limit.
• Section 80D: Deduction for medical expenses incurred for self, spouse, children, and dependent parents.
• What are the deductions available for taxpayers who own a house?

Taxpayers who own a house can claim deductions under various sections of the Income Tax Act, including:

• Section 24: Deduction for interest paid on housing loans.
• Section 80C: Deduction for principal repayment on housing loans.
• Section 25: Deduction for house rent paid if you are not self-occupied.
• What are the deductions available for taxpayers who have business or professional income?

Taxpayers who have business or professional income can claim deductions under various sections of the Income Tax Act, including:

• Section 16: Deduction for expenses incurred for carrying out business or profession, such as rent, travel expenses, and salary paid to employees.
• Section 30: Deduction for depreciation of assets used for business or profession.
• Section 32: Deduction for contributions to approved pension funds.

Important Points to Remember

• Deductions are allowed only as per the provisions of the Income Tax Act.
• You are required to maintain proper records and documentation to substantiate your claims for deductions.
• It is advisable to consult with a tax advisor to determine the deductions applicable to your specific situation.

CASE LAWS

The amount of deduction under income tax in India is determined by a set of case laws that interpret and apply the provisions of the Income Tax Act, 1961. These case laws provide guidance on the deductibility of various expenses, contributions, and investments for the purpose of computing taxable income.

Here are some of the key case laws related to the amount of deduction under income tax:

• Ayodhya Prasad vs. CIT (1968): This case established the principle of “wholly and exclusively” for determining the deductibility of expenses. The Supreme Court held that an expense is deductible only if it is incurred wholly and exclusively for the purpose of generating income.
• Wadhwa vs. CIT (1986): This case dealt with the issue of pre-paid expenses. The Supreme Court held that pre-paid expenses are deductible only if they relate to the income of the year in which they are incurred.
• CIT vs. P.K. Ghosh (1999): This case clarified the distinction between capital expenditure and revenue expenditure. The Supreme Court held that an expense incurred to acquire or enhance the capital asset is a capital expenditure, while an expense incurred for the maintenance or repair of a capital asset is a revenue expenditure.
• CIT vs. Associated Builders (2005): This case dealt with the deductibility of interest on borrowed capital. The Supreme Court held that interest on borrowed capital is deductible only if it is used for the purpose of generating income.
• CIT vs. Kelvinator of India Ltd. (2007): This case clarified the deductibility of donations. The Supreme Court held that donations are deductible only if they are made to certain specified charitable institutions.