Taxation and Taxes

Definition of Tax:
Tax is a mandatory financial charge or levy imposed by a government on individuals, businesses, or other legal entities to fund public
expenditures and services. It is a source of revenue for the government.

Types of Taxes:

Direct Taxes:
These are taxes levied directly on individuals or entities and cannot be shifted to others. Examples include income tax and wealth tax.

Income Tax
This is the tax that is levied on the annual income or the profits which is directly paid to the government.
Everyone who earns any kind of income is liable to pay income tax.
There are different tax slabs for different income amounts. Apart from individuals, legal entities are also liable to pay taxes.
These include all Artificial Judicial Persons, Hindu Undivided Family (HUF), Body of Individuals (BOI), Association of Persons (AOP), companies,
local firms, and local authorities.

Capital Gains
Capital gains tax is levied on the sale of a property or money received through an investment. It could be from either short-term or long-term
capital gains from an investment. This includes all exchanges made in kind that is weighed against its value.

Securities Transaction Tax

STT is levied on stock market and securities trading. The tax is levied on the price of the share as well as securities traded on the Indian Stock
Exchange (ISE).

Prerequisite Tax
These are taxes that are levied on the different benefits and perks that are provided by a company to its employees.

Corporate Tax
The income tax paid by a company is defined as the corporate tax. It is based on the different slabs that the revenue falls under. The sub-
categories of corporate taxes are as follows:

Dividend Distribution Tax (DDT)

This tax is levied on the dividends that companies pay to the investors. It applies to the net or gross income that an investor receives from the
investment.

Fringe Benefit Tax (FBT)

This is tax levied on the fringe benefits that an employee receives from the company. This includes expenses related to accommodation,
transportation, leave travel allowance, entertainment, retirement fund contribution by the employee, employee welfare, Employee Stock
Ownership Plan (ESOP), etc.

Minimum Alternative Tax (MAT)

Companies pay the IT Department through MAT which is governed by Section 115JA of the IT Act. Companies that are exempt from MAT are
those that are in the power and infrastructure sectors.

Indirect Taxes:
These are taxes levied on the production or sale of goods and services, and their impact can be shifted to consumers. Examples include sales
tax, value-added tax (VAT), and excise tax.

Goods and Services Tax (GST)

This is a consumption tax that is levied on the supply of services and goods in India. Every step of the production process of any goods or value-
added services is subject to the imposition of GST. It is supposed to be refunded to the parties that are involved in the production process (and
not the final consumer). GST is classified into Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), and Intergrated
Goods and Services Tax (IGST).

Customs Duty
In case products have been imported from outside India, customs duty is levied. The amount of tax that will be levied will depend on the
product that has been imported.

Excise Duty
The Tax is levied on goods or produced goods in India. The manufacturing company directly collects the tax.

Service Tax
Service tax is charged on the company’s services. It is included in the product’s price and collection of the tax will depend on the type of
service. Several paid services such as advertising, financial services, banking, consultancy, maintenance, healthcare, and telephone are covered
under the tax.

Sales Tax
The tax that is charged to sell the product is sales tax. The seller of the product is charged the tax. The different levels that are applicable under
sales tax are Intra-State Level, Import/Export Sales, and Inter-State Sale.

Other Taxes
Other taxes are minor revenue generators and are small cess taxes. The various sub-categories of other taxes are as follows:
Property tax:
This is also called Real Estate Tax or Municipal Tax. Residential and commercial property owners are subject to property tax. It is used for the
maintenance of some of the fundamental civil services. Property tax is levied by the municipal bodies based in each city.

Professional tax:
This employment tax is levied on those who practice a profession or earn a salaried income such as lawyers, chartered accountants, doctors,
etc. This tax differs from state to state. Not all states levy professional tax.

Entertainment tax:
This is tax that is levied on television series, movies, exhibitions, etc. The tax is levied on the gross collections from the earnings. Entertainment
tax also referred as amusement tax.
Registration fees, stamp duty, transfer tax: These are collected in addition to or as a supplement to property tax at the time of purchasing a
property.

Education cess:
Education Cess is levied to fund the educational programs launched and maintained by the government of India.

Entry tax:
This is tax that is levied on the products or goods that enter a state, specifically through e-commerce establishments, and is applicable in the
states of Delhi, Assam, Gujarat, Madhya Pradesh, etc.

Road tax and toll tax:

Road tax is used for the maintenance of roads and toll infrastructure.

Objectives of Taxation:
Revenue Generation:
The primary purpose of taxation is to generate revenue for the government to finance public expenditure, infrastructure, and services.

Redistribution of Income:
Taxes can be used to redistribute wealth by imposing higher taxes on the wealthy and providing benefits or subsidies to those with lower
incomes.

Economic Stabilization:
Taxes can be used to control inflation, stimulate economic growth, and manage the overall economy.

Promotion of Specific Activities:

Governments may use tax incentives to encourage specific activities such as research and development, investment, and environmental
conservation.

Income Tax

Definition:
Income tax is a direct tax levied on an individual's or entity's income, and it is one of the most common forms of taxation. It can be imposed at
the federal, state, or local level.

The introduction of income tax in India:

The introduction of income tax in India can be traced back to the colonial period under British rule. Here is a brief overview of the history and
development of income tax in India:
Colonial Era (19th Century):
The concept of income tax was first introduced in India by the British colonial government in the mid-19th century. The system at that time was
relatively rudimentary and was mainly aimed at generating revenue for the British government. The Indian Income Tax Act of 1860 was one of
the earliest pieces of legislation related to income taxation in India.

Modern Income Tax (1922):

The modern income tax system in India was established with the passage of the Income Tax Act of 1922. This Act provided the framework for
taxing various forms of income, including income from salaries, property, businesses, and other sources. It introduced a system of progressive
taxation, where higher incomes were taxed at higher rates.

Independence and Reforms (1947): After India gained independence in 1947, the country continued to use the Income Tax Act of 1922 but
made various amendments and reforms to adapt it to the nation's needs. Subsequently, the Income Tax Act of 1961 was enacted, which laid
the foundation for the current income tax system in India.
Progressive Tax System:
India's income tax system is progressive, which means that individuals with higher incomes are subject to higher tax rates. The system also
includes various deductions, exemptions, and tax credits to promote savings, investments, and certain social and economic goals.

Double Taxation Relief:

India has entered into double taxation avoidance agreements (DTAA) with several countries to prevent the double taxation of income for
individuals and businesses with international income sources.

Tax Collection and Administration:

The Income Tax Department, under the Ministry of Finance, is responsible for collecting and administering income tax in India. The department
has regional offices throughout the country.

Recent Reforms:
Over the years, there have been various reforms and changes in the Indian income tax system, including the introduction of the Goods and
Services Tax (GST) in 2017, which transformed the indirect tax structure in the country. The government has also periodically amended tax
rates, introduced new provisions, and implemented digital initiatives to make tax compliance more efficient.
The income tax system in India continues to evolve with changing economic conditions and government policies. It is an essential source of
revenue for the Indian government, and it plays a crucial role in funding public services and infrastructure development in the country. Tax
compliance and regulations are overseen by the Income Tax Department, which continually updates and refines the tax code.

Income Tax Act, 1961

Sections and Acts:
In India, income tax is governed by the Income Tax Act, 1961. The Act contains various sections that specify the rules and regulations for
calculating and paying income tax. Some important sections include:

Section 2(31) - Definition of "person": This section defines who is considered a "person" under the Income Tax Act. It includes individuals,
Hindu Undivided Families (HUFs), companies, firms, associations of persons, and other entities. The definition is crucial in determining the tax
liability of different entities.

Section 4 - Charging section: Section 4 establishes the fundamental principle of income taxation in India. It states that income tax is levied on
the total income of a person for a particular assessment year. It defines the scope of income subject to taxation.

Section 5 – Scope of total income: Section 5 elaborates on what constitutes a person's total income for the purpose of taxation. It includes
income from all sources, such as salary, business income, capital gains, and more. This section defines the various heads of income that need to
be considered while computing the total income.

Section 10 - Exemptions: Section 10 provides a list of income sources that are exempt from income tax. This includes various exemptions for
specific types of income, like agricultural income, income from educational institutions, and more. Taxpayers do not have to pay tax on income
falling under these exemptions.

Section 80C - Deductions: Section 80C allows individuals and Hindu Undivided Families (HUFs) to claim deductions from their total taxable
income for certain specified investments and expenses, such as contributions to Provident Fund (PF), life insurance premiums, and investments
in specified financial instruments. It helps in reducing the taxable income.

Section 139 - Filing of income tax returns: Section 139 deals with the mandatory filing of income tax returns by different categories of taxpayers
within specified due dates. It also addresses the requirement for filing returns even when there is no taxable income, subject to certain
conditions.

Section 234A, 234B, 234C - Interest on delayed payments: These sections deal with the imposition of interest on delayed payment of income
tax. Section 234A covers interest for the delay in filing the income tax return, Section 234B is about interest on the amount of tax unpaid, and
Section 234C pertains to interest on advanced tax payments. These provisions are in place to encourage timely compliance with tax regulations.
This is just a brief overview of the topics you requested. You can delve deeper into each of these aspects in your project, exploring tax rates, tax
planning, the role of tax authorities, and the impact of taxation on individuals and the economy.

Income tax is a tax imposed by a government on the income of individuals, businesses, and other entities within its jurisdiction. It is a
primary source of revenue for governments and is used to fund various public services and government functions. The way income tax is
structured and collected can vary from one country to another, and it can also vary within a country depending on factors such as the level
of income and the nature of the income.

Key points about income tax include:

Taxable Income:
Income tax is typically assessed on an individual's or entity's taxable income. Taxable income is the portion of total income that is subject to
taxation after various deductions, exemptions, and credits are applied.

Progressive Tax System:

Many countries have a progressive income tax system, where the tax rate increases as a person's or entity's income rises. This means that
higher-income individuals or entities pay a higher percentage of their income in taxes.
Tax Deductions:
Various deductions and exemptions may be available to reduce one's taxable income. These can include deductions for mortgage interest,
charitable contributions, education expenses, and more.

Filing and Compliance:

Individuals and entities are typically required to file an annual tax return, disclosing their income, deductions, and credits. They must calculate
the amount of tax owed, and either pay the tax or receive a refund if they overpaid during the year.

Corporate Income Tax:

In addition to individual income tax, most countries also impose income tax on businesses, often referred to as corporate income tax. The rules
and rates for corporate income tax can vary widely.

Withholding:
Many employers withhold income tax from their employees' paychecks and remit it to the government on their behalf. This helps individuals
meet their tax obligations throughout the year.

Tax Codes and Regulations:

Tax codes and regulations are complex and subject to change. Governments often update tax laws to reflect economic conditions, policy
changes, and other factors.

Taxation Authorities:
Each country typically has a government agency responsible for administering and collecting income tax. In the United States, for example, the
Internal Revenue Service (IRS) is responsible for federal income tax, while state and local governments also have their own tax agencies.

Avoidance and Evasion:

Some individuals and entities engage in tax avoidance (legal methods to reduce tax liability) or tax evasion (illegal methods to avoid taxes).
Governments have mechanisms in place to detect and penalize tax evasion.

Use of Tax Revenue:

Income tax revenue is used by governments to fund public services and programs, such as healthcare, education, Défense, infrastructure, and
social welfare.

It's important to understand the specific income tax laws and regulations in your country, as they can vary widely, and seeking advice from a tax
professional or using tax software can be helpful in ensuring compliance with tax obligations.
Income tax is a tax imposed by a government on the income of individuals, businesses, and other entities within its jurisdiction. It is a primary
source of revenue for governments and is used to fund various public services and government functions. The way income tax is structured and
collected can vary from one country to another, and it can also vary within a country depending on factors such as the level of income and the
nature of the income.

Income Tax Slabs in India

Income Tax Slabs in India are announced by the finance minister every year. This year, finance minister Nirmala Sitharaman announced the
Union Budget 2023 on 1 February 2023. The latest budget has introduced certain changes to the existing income tax slab. Currently, there are
two different Income Tax regimes. Under both the new regime and the old regime, taxpayers can avail of tax benefits.

The finance minister announced that under the new tax regime, the rebate for income tax had been increased to Rs.7 lakh from the earlier
limit of up to Rs.5 lakh. There were also certain changes under the tax slab for the new tax regime. Apart from that, the surcharge rate on
Income of Rs.5 crore and above has decreased from 37% to 25%.

Revised Income Tax Slabs for the New Tax Regime (default) FY 2023–24:

Up to Rs.3 lakh - 0% (Nil)

Rs 3 lakh to 6 lakh - 5%
Rs 6 lakh to 9 lakh - 10%
Rs 9 lakh to Rs 12 lakh - 15%
Rs 12 lakh to Rs 15 lakh - 20%
Above Rs 15 lakh - 30%

What is Income Tax Slab?

Income Tax Slab is defined as the Individual taxpayers who will need to pay the income tax based on the slab system they fall under.
Depending on the individual's Income, he/she may fall under a different tax slab. Therefore, individuals with a higher income will need to pay
more taxes. The slab system was introduced to maintain a fair tax system in the country. The slabs tend to change at every budget
announcement.

New Income Tax Slab for FY 2023 - 2024

Given below are the various tables for the Revised Income Tax Slabs and rates for the FY 2023 - 2024:sss
New Regime Income Tax Slab Rates for Individual

Income Tax Slab Income Tax Rate

Up to Rs.3 lakh Nil

Rs.3 lakh - Rs.6 lakh 5%

Rs.6 lakh - Rs.9 lakh 10%

Rs.9 lakh - Rs.12 lakh 15%

Rs.12 lakh - Rs.15 lakh 20%

Above Rs.15 lakh 30%

Note: New income tax rates are optional

Things you Must Keep in Mind before opting for New Regime
There are a few things you must keep in mind before opting for the new regime
The option can be exercised on or before every previous year if you do not have any business income as an individual or a member of a Hindu
Undivided Family (HUF).
As a taxpayer, once you choose the next tax regime as your option, you cannot change it during the year. If you withdraw your option for the
next tax regime and revert to the old tax regime, you can again opt for the new tax regime during the financial year.
Comparison between FY 2023-24 & 2022-23 for New Tax Regime
Income Tax Rates
Deductions and Exemptions under New Tax Regime
Certain deductions and exemptions present under the old tax regime will not be applicable under the new tax regime. Around 70 deductions
and exemptions that are present in the old tax regime will not be applicable in the new tax regime. Some of the common deductions that are
allowed and not allowed in the new tax regime are mentioned below:

Deductions that are Allowed

 Travelling allowance in the case of transfer or for employment
 Apart from additional depreciation, other deductions under Section 32
 Deduction under Section 80JJAA for new employees (employment)
 Any investments that are made in the Notified Pension Scheme (Section 80CCD(2))
 Any conveyance allowance due to work travel
 Especially abled individuals will be provided transport allowance

Deductions that are Not Allowed

 Housing Loan interest under Section 24
 Professional tax
 Standard deduction on salary
 Special allowances under Section 10(14).
 Children education allowance
 Helper allowance
 Relocation allowance
 Conveyance allowance
 House Rent Allowance
 Leave Travel Allowance
Given below is an example of how income tax is calculated for FY 2023-24 under the new tax regime (optional):
Total Income (Gross) Above Rs.9 lakh - Rs.12 lakh
Deductions (80C, 80CCD) Above Rs.12 lakh - Rs.15 lakh
HRA Total Tax that must be Paid
Travel and Medical Allowance Rs.12 lakh
Income that is Taxable -
Up to Rs.3 lakh -
Above Rs.3 lakh - Rs.6 lakh -
Above Rs.6 lakh - Rs.9 lakh 12 lakh
- Rs.45,000
Rs.15,000 -
Rs. 30,000 Rs.90,000
Income Tax slabs & Rates as Per Old Regime FY 2023 - 2024
Given below are the three tables for the alternative Income Tax Slabs:

Income Tax Slab for Individual who are below 60 years

Income Tax slab Nil
Up to Rs.2.5 lakh 5% of the total income that is more than Rs.2.5 lakh + 4% cess
Above Rs.2.50 lakh - Rs.5.00 lakh 20% of the total income that is more than Rs.5 lakh + Rs.12,500 +
Above Rs.5 lakh - Rs.10 lakh 4% cess
Above Rs.10 lakh 30% of the total income that is more than Rs.10 lakh + Rs.1,12,500
Tax Rate + 4% cess

Standard Deduction (Rs.) From Rs,5,00,001 to Rs.10 lakh (Rs.)

Individuals who have an income of less

than Rs.5 lakh are eligible for tax Tax deductions under Section 80C of the
Above
Income
Rs.10
Taxlakh
Act(Rs.)
(Rs.)
deductions under Section 87A

House Rent Allowance deductions Total Tax (Rs.)

Example of How Income
Tax is Calculated under
Old Regime for 3 Gross total income after deductions (Rs.)
Deductions under Section 87A (Rs.)
individuals (A, B, and C)
Up to Rs.2.5 lakh (Rs.) Additions of cess (Rs.)

Components A B
From Rs.2,50,001 to Rs.5 lakh (Rs.) Total payable Tax (Rs.) (Total Tax +

Annual Salary (Rs.) 5,00,000 10,00,00

TDS
TDS on salary:
TDS on salary means that tax has been deducted by the employer at the time of depositing the salary into the employee's account. The amount
deducted from the employee's account is deposited with the government by the employer.
Before an employer deducts tax at source from an employee's salary, he/she must obtain TAN registration. The Tax Deduction and Collection
Account Number or TAN number is essentially a 10-digit alphanumeric number that is used to track TDS deduction as well as a remittance by
the Income Tax Department.

Formula to Calculate TDS on Salary

The formula to calculate TDS on Salary is as follows:
Income Tax Rate = Income Tax Payable (computed with slab rates) / Estimated Revenue for the financial year

How do I Calculate TDS on my Salary under Section 192

While the basic salary is fully taxable according to the respective tax bracket, some exemptions are available for payments made as allowances
and perks. You can calculate TDS on your income by following the below steps.

Step 1: Calculate gross monthly income as a sum of basic income, allowances and perquisites.

Step 2: Calculate available exemptions under Section 10 of the Income Tax Act (ITA). Exemptions are applicable on allowances such as medical,
HRA, and travel.

Step 3: Reduce exemptions according to step (2) for the gross monthly income calculated in step (1).

Step 4: As TDS is calculated on yearly income, multiply the corresponding figure from the above calculation by 12. This is your yearly taxable
income from your salary.

Step 5: If you have any other income source such as income from house rent or have incurred losses from paying housing loan interests,
add/subtract this amount from the figure in step (4).

Step 6: Next, subtract the amount from the gross income determined in step (5) that represents your investments for the year that are subject
to Chapter VI-A of the ITA. A good illustration of this is the up to Rs. 1.5 lakh exemption provided by Section 80C, which covers a variety of
investment options including PPF, life insurance premiums, mutual funds, house loan repayment, ELSS, NSC, Sukanya Samriddhi accounts, and
others.

Step 7: Reduce the maximum salary-related income tax exemptions now. Taxes are currently not due on income up to Rs.2.5 lakh, 10% on
income between Rs.2.5 lakh and Rs.5 lakh, and 20% on income between Rs.5 lakh and Rs.10 lakh. The tax rate on all income over this threshold
is 30%.

Step 8: Do note that senior citizens have different tax slabs and receive higher exemptions than those discussed above.

Example
As per the steps outlined above, let's consider a numeric example for better understanding.

Steps (1) & (2) Suppose your monthly gross income is Rs.80,000. This figure may contain divisions such as - basic pay Rs.50,000, HRA of
Rs.20,000, travel allowance of Rs.800, medical allowance of Rs.1,250, child education allowance (CEA) of Rs.200 and other allowances totalling
12,750.
Steps (3) & (4) Assuming that you stay at your own property, your monthly exemption from allowances equals Rs.2,250 (medical + travel + CEA).
Therefore, your yearly taxable amount comes to (Rs.80,000 - Rs.2,250)*12, which comes to Rs.9,33,000.
Step (5) Let's say you just experienced a loss of Rs.1.5 lakh on house loan interest repayments over the year. Reducing this exempted amount
from the taxable income, your taxable income becomes Rs.7,83,000.
Step (6) Suppose you have invested Rs.1.2 lakh in various categories that fall under Section 80C exemptions, and made another Rs.30,000
investment in categories falling under Section 80D. So, the resulting Rs.1.5 lakh is exempted from taxes according to Chapter VI-A. Deducting
this amount from the gross taxable income calculated above, your taxable income becomes Rs.6,33,000.
Step (7) Finding out your tax slab Your final tax breakup according to income slabs listed by the IT department is as follows: Therefore, the final
TDS to be deducted from your yearly income is Rs.25,000 + Rs.26,600, which comes to Rs.51,600 for the current year's income, or Rs.4,300 per
month for the current fiscal.

Income Tax Slabs TDS Deductions Tax Payable

Up to Rs.2.5 lakhs Nil Nil

Rs.2.5 lakhs to Rs.5 lakhs 10% of (Rs. 5,00,00-Rs.2,50,00 Rs.25,000

Rs.5 lakhs to Rs.6.33 lakhs 20% of (Rs. 6,33,00-Rs.5,00,00) Rs.26,600

The tax rates as per the new regime are listed below:

Income Tax Slab New Tax Rate

Up to Rs.3 lakh Nil

From Rs.3 lakh - Rs.6 lakh 5% above Rs.3 lakh lakh

From Rs.6 lakh - Rs.9 lakh 10% of the total income

From Rs.9 lakh - Rs.12 lakh 15% of the total income

Above Rs.12 lakh - Rs.15 lakh 20% of the total income

Above Rs.15 lakh 30% of the total income

What is TDS Calculated on?

The CTC quoted to you at the time of joining includes components such as basic salary, travel allowance, house rent allowance, medical
allowance, dearness allowance, special allowances and other allowances. The CTC is divided into two major categories : salary and perquisites.
Perquisites, or perks as they are popularly called, include facilities and benefits provided by the employer towards expenses such as travelling,
canteen and fuel subside, hotel expenses and so on.

TDS Deductions
The following process is involved in the deduction of TDS:

Calculating total earning - The employer is required to calculate the total earnings of the employee.
Calculating the total amount eligible for the exemption - The employer is accountable for calculating the total amount that is considered for tax
exemption. The employee needs to declare the type of amount that is eligible for exemption.
Obtaining declaration and investment proof - The employer is required to collect investment and proofs from employees
Depositing TDS deductions - The employer will require depositing the collected TDS to the central government.
The deduction on TDS under different Section follows below:

Section 80C:
An employee can declare for a maximum of Rs.1,50,000 for tax exemption. The following investments schemes are considering for exemption
under Section 80C:
Investment in mutual funds and equity shares, such as ULIP, Linked Saving Scheme of a Mutual Fund/UTI
Life insurance Premium paid
Contribution to statutory PF, 15 years PPF, and superannuation funds
Payments towards subscription for National Saving Certificates and Home Loan Account Scheme
Interest earned through few of the National Savings Certificates are eligible for a certain amount of tax
Fixed deposit scheme for a period of minimum 5 years
Section 80CCG: If an employee invests in certain equity saving programs, they may be eligible for an annual exemption of up to Rs.25,000. The
investment should be made for at least three years after the acquisition of the scheme.
Section 80D: The section 80D offer exemption for the premiums paid for a Medical Insurance. The exemption is also extended to the
individual's dependents. There are various other Sections that regulates many other types of exemptions.

Sect under income tax

Intimation Under Section 143(1) of Income Tax Act
Section 143(1) of the Income Tax Act, 1961, is essentially a computer-generated automated message which lets the taxpayer know of any error
that exists in his/her tax filing. It also tells the taxpayer if he/she has any interest that is payable.
Anytime someone receives a notice from the Income Tax Department, there seems to be an overwhelming sense of trepidation that goes with
it. Just looking at such envelopes can bring thoughts of impending fines and appearances and adds to the stress of daily life. But not all notices
come bearing bad news. While some bear great news such as tax refunds, there are a few that are more of an announcement or statement of
facts and have no positive or negative impact.
One such notice is the Intimation under section 143(1). This notification is a computer-generated message stating any errors made or any
interest found payable or refundable. This message is generated automatically and has no human intervention. These intimations are often
sent via email within a time frame of 1 year from the financial year in which the return was filed.

Section 194J:
Professional fees for technical services are one of the most significant types of payments made by a business organisation. Fee payments made
to doctors, lawyers, chartered accountants, engineers, etc., are a few examples of professional fees. Section 194J applies to such payments
given to residents.
According to the rules and regulations of Section 194J of the Income Tax Act, 1961, a person must deduct their Tax Deducted at Source (TDS)
only at the rate of 10% when certain payments are made to a certain resident.

What is Section 194J of the Income Tax Act?

Section 194J refers to TDS provisions relating to specific services. It requires anybody who pays fees to a resident for such defined services such
as professional or technical services to deduct TDS.
Types of payments covered under Section 194J:
An individual should deduct TDS at the rate of 10% when the following payments are made to a resident, in a fiscal year (higher than
Rs.30,000):

 Amount charged as professional services fee

 Amount charged as technical service fee
 Non-compete fee according to the Income Tax Act of Section 28(VA)
 Royalty
 Remuneration paid to directors with the exception of salary

Professional Services:
It implies the services carried out by an individual in the medical, architectural, legal, medical or engineering profession. Other services include
accountancy, interior decoration, advertising, technical consultancy or any other profession that is accepted by the Board under Section 44AA.
Other services that are accepted under Section 44AA are film artists, company secretaries, and authorized representatives.
Sportspersons, event managers, commentators, anchors, umpires and referees, coaches and trainers, physiotherapists, team physicians and
sports columnists also come under it.

List of Professional Services under Section 194j:

Medical Services
Legal Services
Architectural Services
Engineering Services
Advertising Services
Interior Decoration Services
Technical Consultancy Services
Accountancy Services

Technical Services:
It implies the services rendered by an individual for consultancy, technical or managerial services.
Services such as assembly, mining, construction are not considered as technical services as income from the same would come under the head
salary of the recipient.

List of technical services under section 194j:

Consultancy services
Technical or
Managerial services

Non-Compete Fees:
Non-Compete Fees for Section 194J implies the amount received either in cash or kind in return for an agreement that binds the person from
sharing any patent, license, franchise, trademark, know-how or any commercial or business rights, technique or information likely to be used
elsewhere for manufacture, processing or any other provisional service.

Royalty:
Royalty for the purpose of this section means consideration for:
Transfer of rights for an invention, secret formula, model, design, trademark or patent.
Use of an invention, model, patent, etc.
Sharing any information related to the use of an invention, patent, formula, etc.
Use or right to use the equipment for industrial, scientific or commercial purposes.
Transfer of rights related to literary work, scientific findings, films or videotapes for radio broadcasting, no consideration for the sale, exhibition
or distribution of the same.

Specific Cases:
TDS deduction is also applicable under Section 194J on certain specific cases, decided by the case laws and circulars of the department:
Medical services rendered in hospitals.
Professional fees charged by film artists from advertising agencies.
Amount given to recruitment agencies and HR consultancy.
Payment made by companies to share registrars.
Time Limit for Deposit of TDS

You are required to deposit your TDS within a stipulated time frame:
Payment made before 1st March
Payment made in March month
Deductions from non-government office
7th day from the end of the month
30th of April
Deductions from government office
7th day from the end of the month
Tax payment is made on the pay date of technical or professional fees to the payee. However, the corresponding challan is deposited by the 7th
day from the end of the March month.
Threshold limit for Deducting Tax
The threshold limit for deducting tax is as follows:

Only if the payment of technical/ professional services is above Rs.30,000 in a financial year, can the tax be deducted.
Do note that the Rs.30,000 threshold limit is applicable to each payment or item independently.
There is no threshold limit on payments made as remuneration, fees or commission. Tax will be deducted even on amount below Rs.30,000.
Tax Deduction Rates under Section 194J

The tax deduction rates under Section 194J are mentioned in the table below:
 Nature of Payment Tax Deduction Rate

Fee payments for technical services 2%

Fee payments made to call centres 2%

Royalty paid for the sale, distribution, or screening of a film 2%

Other payments 10%

If the payee fails to provide PAN 20%

Who Can Deduct TDS under Section 194J
All individuals who pay a charge for professional/technical services must deduct tax at the source. However, the following individuals are not
required to deduct TDS on these payments:
HUF/individual involved in business: If the preceding fiscal year's turnover did not surpass Rs.1 crore.
HUF/individual involved in profession: If the preceding fiscal year's turnover did not surpass Rs.50 lakh.
All business entities except HUF/individuals who do not have to conduct a tax audit the previous year must deduct TDS when they make fee
payments for technical/professional services.

Consequences of Late Deduction/Non-Deduction of TDS

Failing to deduct taxes or deducting it late has two consequences:
Interest will be levied:
If TDS was deducted, an interest rate of 1% per month/part of the month will be levied. If the TDS was deducted but not paid to the
government, an interest rate of 1.5% per month/part of the month will be levied.
Expenses will be disallowed:
If a timely deduction of TDS is not done, the individual is not allowed to claim the deduction of these expenses from PGBP income. 30% of the
payment is the amount of disallowed expenditure.
Applying for TDS at a Lower Rate
According to Section 197, the person receiving payment can apply for a reduction of rate in TDS, by filling in Form 13 and sending it to the
assessing officer. If approved by the officer, a certificate stating a deduction in the TDS is issued to the assessee.

Time Limit to Deposit TDS under Section 194J

The following guidelines on time limit for depositing TDS under the section must be followed:
If the TDS deduction under Section 194J is made by the government or on behalf of the government, the deposit has to be made on the same
day.
In other cases, TDS can be deposited within a week from the month-end in which the tax deduction has been made.
If the payment is made on the last day of the fiscal year, the TDS deposit must happen within two months from that financial year's end in
which it was credited.
Some special cases may be allowed to deduct TDS every quarter, provided the assessing officer has approved.

Complete List of Exemptions under Section 10 of Income Tax Act

Salaried employees under Section 10 covers a wide range of allowances such as Leave Travel Allowance, Uniform Allowance, Travelling
Allowance, House Rent Allowance and some more. However, some special allowances that are exempt fall under Section 10 (14).
Salaried employees get a fixed quantity of money or other forms of allowances apart from their salary for specific requirements of the
employees. Most allowances are a part of the total income unless they come under some specific exemption under the Income Tax Act.
Allowances are given to employees for their services or as compensation for working in unusual conditions.

What is Section 10 of the Income Tax Act?

Section 10 of the Income Tax Act provides tax exemptions to salaried professionals by focusing on income sources that are not part of total
income.

Features of Section 10 of Income Tax Act:

The following are the significant features of section 10 of Income Tax Act 1961:
Under this Income Tax Act section, tax rebate is given to salaried professionals.
Offers tax exemptions, such as tuition fee for children's education, travel allowance, rent allowance, gratuity, and many more to reduce the tax
burden.
Total amount of tax liability of salaried professionals is analysed for calculating total income.

Individuals Receiving Allowances Exemption:

Under section 10(14)(i) and section 10(14)(ii), special allowances are exempted for specific individuals, such as:
UNO employees
Government employees outside India, who are Indian citizen
High Court Judges
High court and Supreme Court judges entitled to receive the Sumptuary Allowance

Various Sub-parts of Section 10:

The following are the sub-parts of Section 10 and the related details regarding exemptions:
1) Section 10 (1) - Exemption on Agricultural Income
The following is the list of exemptions on agricultural income under Section 10 (1):
Sale of agricultural produce
Agricultural operations such as sowing, cultivation, and tilling
Agricultural land in India yielding rent or revenue
Earning from farm building required for agricultural purposes
For preservation and growth or product certain agricultural operations are exempted, such as weeding, pruning, cutting, etc.

2) Section 10(2) - Exemption on the Income of a HUF

The following is the list of exemptions on income of HUF under Section 10 (2):
Income must be paid out of family’s income, in case the income received by the individual
The income must be paid out from the income received from estate belonging to the family in case of impartible estate.

3) Section 10(2A) - Exemption of Income from a Partnership Firm

The following is the list of exemptions on income from partnership of firm under Section 10 (2A):
Profit earned by co-owner or partner is exempted from tax
Income should be taxed as Partnership firm under the Income Tax Act 1961 and the partnership firm must be classified under the act
The tax exempted is limited to a certain amount of the share of the profit earned by the partners of the Firm or LLP

4) Section 10(4) - Exemptions on the Income earned by an NRI from India

The following is the list of exemptions on the income earned by an NRI from India under Section 10 (4):
Redemption of bonds yielding premium income
Credited amount in a Non-Resident (External) Account yielding interest
Exemption as specified by the government from the income earned in the form of interest from bonds or securities
The credited amount in a Non-Resident (External) Account yielding interest earned by resident outside India

5) Section 10(5) - Exemption on Leave Travel Concession

The following is the list of exemptions on leave travel concession under Section 10 (5):
Received from existing employer in a particular financial year for employee and their family
Entitled for a specific amount from employer on the condition of travel concession across India while on leave
Must be received in connection with future travel from previous or existing employer

6) Section 10(6) - Exemption to Indian Citizens Working Outside the Country on their Remuneration
The following is the list of exemptions to Indian citizens working outside the country on their remuneration under Section 10 (6):
Employees must not stay in India for more than 90 days duration
Remuneration is not entitled for deduation under this act
Foreign company should not engage in any kind of trade or business in India under this act

7) Section 10(7) - Exemption on Allowances and Perquisites Paid by the Government

The following is the list of exemptions on allowances and perquisites paid by the government under Section 10 (7):
Tax exempted under this section for all the allowances and perquisites paid by the government to the employees for their service outside India
Can be availed by Indian citizens only who are government employees

8) Section 10(10CC) - Exemption on Tax on Perquisites Paid by the Employer

Under Section 10 (10CC) tax is exempted for non-monetary perquisites on behalf of the employees.

9) Section 10(10D) - Exemption on the Tax of Life Insurance Policy

The following is the list of exemptions on tax on the maturity value of Life Insurance policy under Section 10 (10D):
Tax exempted for policies with premium paid not more than 20% of the sum assured and issued before 1 April 2012.
Tax is exempted for policies, if the premium paid is not more than 10% of the sum assured and issued before 1 April 2012.
Tax exempted on life insurance policies for persons with disability or diseases specified under Section 80U and 80DDB.
As per the Union Budget 2023, the tax exemption rules on life insurance policies issued after 1 April 2023 are:
Premium paid up to Rs.5 lakh for other life insurance policies
Total allowable premium paid up to Rs.2.5 lakh for ULIP policy

10) Section 10(11) - Exemption on Payment Made to Provident Fund and Sukanya Samriddhi Account
The following is the list of exemptions on contribution made to Provident Fund and Sukanya Samriddhi Account under Section 10 (11):
On retirement or termination of service, the contribution made to the Provident Fund account is exempted from taxTax exemption is also
applicable for the contribution made to the Sukanya Samriddhi Account.

11) Section 10(10BC) - Exemption on the Compensation Received for Natural Disaster
The tax exemptions are allowed on the compensation received for natural disaster under Section 10 (10BC) from the State Government, the
Central Government, and local authority.

12) Section 10(13) - Exemptions on House Rent Allowance (HRA)

The following is the list of exemptions on House Rent Allowance (HRA) under Section 10 (1):
Tax exempted if actual rent paid is 10% less than the salary
The HRA would be exempted from tax if HRA on rented property in non-metro cities is 40% of the salary or 50% for metro cities
If the employee receives actual HRA then tax is exempted

13) Section 10(14) - Exemption of Special Allowance

Under special allowance act of Section 10 (14), exemption is granted based on the amount utilised for a specific purpose by the employee. The
exemption depends on the following points:
Allowance amount.
Actual amount used for the purpose for which the allowance has been granted.

1) Section 10 (14) (i)

Under Section 10 (14)(i), allowances are exempted to the extent of the amount received as allowance or amount spent on certain duties,
whichever is the lower figure.
Allowances covered in this category are:
Daily Allowance:
It is given to employees to meet the daily charges incurred when on tour or for the duration of a transfer in the job. This type of allowance is
granted when the employee is not in the usual place of duty.

Travel Allowance:
Travel allowance covers costs related to travel while on tour or on transfer while on duty. This allowance also includes travel costs incurred
while getting transferred to another location, including packaging or transport of personal objects.

Research/ Academic Allowance:

Allowance granted for the purpose of encouraging academic and research related training, education or professional duties is termed as
academic or research allowance.

Conveyance Allowance:
Allowance for conveyance is granted to employees in case of expenses incurred while travelling for duties of office. However, the employer
does not pay for travel from home to work as it is not considered as a duty of the office. This allowance comes under a different section called
as 'Transport allowance' and is not exempt from tax.

Helper Allowance:
Sometimes your employer allows you to appoint a helper for performing official duties of the office. In such cases, helper allowance is granted.

Uniform Allowance:
Allowance when given for the purchase or maintenance of uniform, required to be worn while on duty is referred to as uniform allowance. This
allowance can be opted for only when an office duty prescribes a specific uniform.
Usually, it is not required to furnish details of the expenses incurred under this category of allowance unless the expense are disproportionate
to the salary or unreasonable in reference to the duty performed by the employee. At most times, it is not required for you to keep a proof of
documents and a simple declaration serves the purpose.

2) Section 10 (14) (ii)

Under this section, allowance granted to employees for working under certain set of conditions while on duty. The amount exempted is either
the amount received as allowance or the limit mentioned, whichever is lesser.
The types of allowances in this category and exempt in allowances are listed below:
Allowance for children education:
Rs.100 pm for each child and a maximum of two children.
Compensatory allowance for working in areas of high altitude or hilly areas, also known as climate allowance:
Hilly areas of HP, UP, J&K and North East - Rs.800
Siachen are of J&K - Rs.7000 per month
Common places above 1000mtr or above - Rs.300
Scheduled or tribal or agency areas allowance:
Karnataka, West Bengal, MP, Assam, Orissa, Tamil Nadu, Bihar, UP and Tripura. - Rs. 200
Allowance for duty in border area or remote area or any difficult/disturbed areas:
Allowances ranging from Rs.200 to Rs.1300 pm are exempt under the Rule 2BB.
Allowance for working in a transport system for personal expenses, while on duty:
70% of allowance up to Rs.10,000 pm.

Field area allowance:

Areas of Nagaland, J&K, HP, UP, AP, Sikkim and Manipur - Rs.2600 pm
Allowance for employee's children's hostel expenses:
Rs.300 pm for each child up to two children.

Allowance granted to armed forces for cases of counter insurgency:

Rs.3900 per month.
Transport allowance to physically disabled employee on duty to travel to work:
Rs.1600 per month.

Transport allowance for commute between work and residence:

Rs.1600 pm.

Compensatory allowance for duty in modified field area:

Specific areas of West Bengal, North East, Rajasthan, J&K, UP and HP - Rs.1000 pm.

Island Duty allowance granted to armed forces in Andaman & Nicobar and Lakshadweep:
Rs.3250 per month.

Allowance for working in underground mines:

Rs.800 per month.

Special compensatory highly active field area allowance:

Rs.4200 pm.
Allowance for armed forces in a high-altitude region:
9000 - 15,000ft - Rs.1060 pm
Above 15,000 ft - Rs.1600 pm
14) Section 10(15)

The following are the exemptions under section 10(15):

Section 10(15)(i): On redemption, interest, securities, bonds, premiums, deposits for all assesses
Section 10(15)(iib): Bonds of Capital Investment yielding interest for all HUF or individual
Section 10(15)(iic): Interest from relief bonds for HUFs or individuals
Section 10(15)(iid): Declared bonds yielding interest that is bought in foreign exchange which is subject to certain limitations and is applicable
for NRI individuals gifting.
Section 10(15)(iii): Interest from securities and is issued by department under the Central Bank of Ceylon
Section 10(15)(iiia): Interest earned on deposits from scheduled bank after approval from RBI and exempted to incorporated bank board
Section 10(15)(iiib): Interest paid to Nordic Investment Bank and exempted to Nordic Investment Bank
Section 10(15)(iiic): Interest is payable to the European Investment Bank and exempted to European Investment Bank
Section 10(15)(iv)(a): Interest earned from the local authority or government on the money lent before 1 June 2001 and exempted to financial
institutions of foreign nations
Section 10(15)(iv)(b): Interest received from the industrial undertaking in India under agreement of loan before 1 June 2001 and exempted to
financial institutions of foreign nations
Section 10(15)(iv)(c): Interest earned from Industrial undertakings in a foreign nation for purchasing the raw materials, machinery, and capital
plant within certain limitations and conditions before 1 June 2001 and exempted to all the assesses who participated in lending cash.
Section 10(15)(iv)(d): Interest earned from lending money to financial institutions in Indian before 1 June 2001 and exempted to all assesses
who participated in lending cash.
Section 10(15)(iv)(e): Interest earned from the money lent outside India before 1 June 2001 by financial institutions in Indian under loan
agreement and exempted to all assesses who participated in lending cash.
Section 10(15)(iv)(h): Interest received from approved debentures or bonds of company and exempted to all assesses.
Special Individuals Receiving Allowances Exempt
There are certain individuals who also receive allowances exempt under Section 10(11):
Allowances granted to High Court Judges.
Allowance given to a UNO employee.
Sumptuary allowance received by Supreme Court and High Court Judge.
Allowances granted to government employees who are Indian citizens, working abroad.
According to Section 10(11A) of the Income Tax Act, this is an income tax exemption for anyone working outside India and representing India in
that country:
Trade commissioners, High ranking Embassy officials, and other officers, are eligible for the benefits of this provision.
For employees working in foreign enterprises provided their living tenure in India should not exceed 90 days, and the company does not have
trade or business in India.

Section 80C:
Section 80C of the Income Tax Act allows for deductions up to Rs.1.5 lakh p.a. Under the section, individuals can invest in several savings
schemes to claim deductions on their taxable income.

What is Section 80C?

Section 80C of the Income Tax Act allows for certain expenditures and investments to be exempt from income tax. If you plan your investments
across different financial assets such as PPF, NSC, ELSS, etc., you can claim deductions of up to Rs.1.5 lakh under Section 80C, thereby lowering
your tax liability.

Union Budget 2023 update regarding Section 80C

Finance Minister Nirmala Sitharaman during the recently concluded Union Budget 2023 did not make any changes to the existing rules
regarding Section 80C. Hence, if you are following the old tax regime, you will be able to avail yourself of deductions of up to Rs.1.5 lakh. The
deduction rules do not apply if you have opted for the new tax regime option.
Here are the various investments you can make to save tax under Section 80C of the Income Tax
Act:

Minimum lock-in Associated

Investment options Rate of interest
period Risk

NPS Till the age of 60 years 8% to 10% High

Ranging between 12% and

ELSS 3 years High
15%

PPF 15 years 7.1% Low

SCSS 5 years 8.2% Low

NSC 5 years 7.7% Low

ULIP 5 years Ranging between 8% and 10% Moderate

Fixed Deposit 5 years Up to 8.40% Low

Sukanya Samriddhi
21 years 8.00% Low
Yojana

Provident Fund:
Provident Fund is a type of retirement investment that is automatically subtracted from your monthly salary.
An employee and his/her employer both contribute towards PF.
While the contribution made by the employer is exempt from tax, the contribution made by the employee is eligible for deductions under
Section 80C.
Employees are also allowed to make voluntary contributions towards the Provident Fund Account. Voluntary Provident Fund or VPF as it is
called, is also eligible for tax deductions under Section 80C of the Income Tax Act.

Public Provident Fund

Public Provident Fund is a popular long-term investment instrument as it offers assured returns.
Interest is compounded on an annual basis and the maturity period of the scheme is 15 years.
The least that you can contribute towards PPF is Rs.500 and the maximum contribution allowed is Rs.1.5 lakh.
The amount you contribute towards PPF is eligible for tax deductions under Section 80C of the Income Tax Act.

Premium Payments towards Life Insurance:

If you have purchased a Life Insurance Policy for yourself, your children or your spouse, the premiums you pay towards it are eligible for
deductions under Section 80C of the Income Tax Act.
In case you have multiple life insurance policies from different insurance providers, you can club all the premiums and claim deductions up to
Rs.1.5 lakh p.a.
Equity Linked Savings Scheme (ELSS)
Certain mutual fund schemes have been designed especially for the purpose of tax savings. Equity Linked Savings Schemes, or ELSSs as they are
generally called, allow investors to claim tax deductions to the extent of Rs.1.5 lakh under Section 80C of the Income Tax Act.

National Savings Certificate:

National Savings Certificate or NSC as it is known in its abbreviated form, is one of the most popular tax-saving instruments available to Indian
citizens.
The maturity period of the scheme is five years and 10 years.
The interest in this long-term fixed income scheme is compounded semi-annually.
The minimum amount of money that you can invest in this certificate is Rs.100 and there is no maximum limit on the amount of investment
you can make in NSC.
The amount you invest in National Savings Certificate is eligible for tax deductions under Section 80C of the Income Tax Act, subject to a
maximum of Rs.1.5 lakh per financial year.

Sukanya Samriddhi Scheme:

Individuals can open a Sukanya Samriddhi account for a girl child anytime from the date of her birth to the day she turns 10 years old.
The minimum amount that you can invest in the Sukanya Samriddhi scheme is Rs.1,000 and the maximum is limited to Rs.1.5 lakh in a financial
year.
The interest in this account is calculated on an annual basis and compounded on an annual basis too.
The interest you accrue through this scheme is eligible for tax deductions under Section 80C of the Income Tax Act.
Unit Linked Insurance Plans (ULIPs)
These insurance plans offer coverage to the policyholder and provide substantial returns in the long term.
One of the main reasons why these plans have become so popular in recent times is the fact that they not only help in saving money, but also
provide tax benefits under Section 80C of the Income Tax Act.

Repayment of Home Loan Principal Amount:

The EMI amount that goes towards the repayment of the principal amount on your home loan is also eligible for tax deductions under Section
80C.
The repayment of your home loan amount has two components, viz. the principal amount and the interest.
While the interest part of the repayment cannot be claimed as deduction under Section 80C of the Income Tax Act.
Registration Charges and Stamp Duty for a Home/Property
In case you purchase a home or a property and pay for stamp duty and registration, these amounts can be claimed as tax deductions under
Section 80C of the Income Tax Act.

Infrastructure Bonds:
Infra bonds as they are commonly called, Infrastructure bonds are issued not by the government but by infrastructure companies. In case you
invest in these bonds, you can claim tax deductions up to Rs.1.5 lakh under Section 80C of the Income Tax Act.

NABARD Rural Bonds:

NABARD, or the National Bank for Agriculture and Rural Development, offers two kinds of bonds, viz. Bhavishya Nirman Bonds and NABARD
Rural Bonds. However, only the latter qualifies for tax deductions under Section 80C of the Income Tax Act, and the maximum amount that you
can claim as deductions is Rs.1.5 lakh.

Senior Citizen Savings Scheme:

The Senior Citizen Savings Scheme is the best possible long-term debt investment scheme for senior citizens. The returns are relatively lucrative
in comparison with other schemes, and the interest is paid on a quarterly basis.
Individuals who are above 60 years of age can invest in this scheme and claim tax benefits up to Rs.1.5 lakh under Section 80C of the Income
Tax Act.
Five-year Post Office Time Deposit Scheme
Post office deposit schemes are a lot like fixed deposits offered by banks.
The duration of these long-term debt schemes could range from one year to five years, but only the interest earned on five-year post office
time deposit schemes are eligible for tax deductions under Section 80C of the Income Tax Act.
Income Tax Deduction Limits Under Section 80C, 80CCC, 80CCD(1), and 80CCD(2)
Since we have already covered the investments that are eligible for deductions under Section 80C of the Income Tax Act, let's look at the
various sub-sections and the investments that can be used for deductions:

Section

Deduction on

Maximum Deduction

Section 80C

Investments in ELSS, PPF, SSY, NSC, Life Insurance Premiums, e.t.c

Rs. 1,50,000

Section 80CCC

Amount deposited in LIC or other insurer's annuity plan for a pension from a fund mentioned in Section 10 (23AAB)

Rs. 1,50,000

Section 80CCD (1)

Payments made towads Goverment Schemes like APY, NPS e.tc

Self-Employed - 20% of Gross Income

Employed - 10% of the salary + DA

Section 80CCD (2)

Employer's contribution to National Pension Scheme account

Up to 10% of the salary

Section 80CCD (1B)

Additional contribution to National Pension Scheme account

Rs.50,000

Section 80CCG

Rajiv Gandhi Equity Scheme

Rs.25,000 or 50% of the amount invested in equity shares, whichever is less.

Section 80D
Medical investments are always a better option to safeguard oneself from unforeseen medical emergencies. Adding medical insurance to the
investment portfolio not only provides health coverage but also allows an individual to avail themselves of tax benefits according to Section
80D of the Income Tax Act, 1961. Read on to learn about the deductions available under Section 80D, deduction limit, eligibility, and other
information.

What is Section 80D?

Under section 80D, deduction can be claimed for medical insurance premium for both top-up health plans and critical illness plans by any
individual or Hindu Undivided Families (HUF).
The taxpayer can claim deduction for health insurance plan not only for self but for other member of the family, as applicable under Section
80D.

Eligibility for Deduction under Section 80D:

A taxpayer can claim the deductions u/s 80D. The health insurance premium paid for the following members in a family are eligible for
deductions:
Self
Spouse
Dependent children
Parents
Hindu Undivided Families (HUF) can also claim deductions under this section. Premium payments of any member in a HUF can be used for tax
deduction subject to upper limit as per the act.

Eligible Payments under Section 80D Deduction

The mentioned below are the payments on which individual or HUF can claim deductions under Section 80D:
Premium paid for medical insurance for spouse, dependent parent, or children through any mode
Preventive check-up expenses
Medical expenses of on the health of senior citizen above 60 years and not covered under any health insurance scheme
Deduction can be claimed for contribution to Central Government Health schemes
Note: Claiming deduction on medical insurance premium will not be applicable if amount paid through cash

Deduction Available under Section 80D

As per Section 80D, a taxpayer can claim deductions on health insurance premiums paid for
self/family and parents, apart from deductions on expenses related to health check-ups. The
overall deduction limits are as follows:

Deduction Amount

Cases
For Self, Spouse, and Dependent For Maximum
Children Parents Deduction
 For Self and Parent below 60 years
Rs.25,000 Rs.25,000 Rs.50,000
of age

Self below 60 years and parents

Rs.25,000 Rs.50,000 Rs.75,000
above 60 years

Self and Parents above 60 years of

Rs.50,000 Rs.50,000 Rs.1 lakh
age

What is Covered under Section 80D?

Deductions under Section 80D provide tax savings benefits for expenses related to health and critical illness insurance. You can take advantage
of Section 80D's income tax benefits for paying medical insurance premiums for yourself, your spouse, children, and your elderly parents as
well as for healthcare-related expenses. Additionally, payments made for critical illness (CI), preventative health checks, and various other
health-related riders included in a life insurance policy are covered by Section 80D.

What is Covered under Medical Expenditure?

Although the Income Tax Act of 1961 lacks a clear definition of medical expenses, the Finance Act of 2015 introduced the deduction for such
costs. The deduction was specified for super senior citizens (those who are 80 years of age or older). The deduction for senior citizens' medical
expenses has been raised under the Union Budget 2018. It was carried out to help senior citizens.

Individuals can claim expenses like consultation fees, hearing aids, and medications as a deduction. Medical expenses for particular illnesses
are also covered under Section 80DDB in addition to Section 80D. Deductions for medical expenses under Section 80D can be claimed if,

The expenses must be incurred for a person aged 60 years or older.

The senior citizen must not have any health insurance plan.
Section 80D Deduction Limit

As per Section 80D, a taxpayer can claim deductions on health insurance premiums paid for
self/family and parents, apart from deductions on expenses related to health check-ups. The
overall deduction limits are as follows:

Deduction Amount

Cases
For Self, Spouse, and Dependent For Maximum
Children Parents Deduction

For Self and Parent below 60 years

Rs.25,000 Rs.25,000 Rs.50,000
of age

Self below 60 years and parents

Rs.25,000 Rs.50,000 Rs.75,000
above 60 years

Self and Parents above 60 years of

Rs.50,000 Rs.50,000 Rs.1 lakh
age

Example:
Suppose you are 60 years old paying an yearly premium of Rs.32,000 for yourself and your dependents. Apart from this, you are also paying a
health premium of Rs.35,000 for your parents' policy, who are 80 years old. As per Section 80D terms, you are eligible for:
Tax deduction of Rs.32,000 on Rs.32,000 paid as health insurance premium for you and your dependents.
Tax deduction of Rs.35,000 for your parents (senior citizens) out of the overall payment of Rs.35,000.
Total tax deduction that can be claimed is Rs.67,000 out of the overall premium payment of Rs.67,000.
Note: Please note that the maximum tax deduction which can be claimed is subject to the provisions under Section 80D of the Income Tax Act.
Always consult an expert to get the most out of the tax saving provisions.

Section 80D and 80C

Section 80D is sometimes confused with, Section 80C. Section 80C provides deductions up to Rs.1.5 lakhs per year while Section 80D offers
deductions up to Rs.65,000, subject to conditions.
Another differentiating point is that Section 80C includes investments made in a wide range of financial instruments such as small savings
schemes, Life insurance premium, mutual funds etc., while Section 80D is meant exclusively for deductions on health insurance premiums paid.

Tax Benefits on Health Insurance for Senior Citizens:

According to Section 80D of the Income Tax Act of 1961, senior citizens in India are eligible for the health insurance tax benefits. These benefits
may be claimed by the senior citizen themselves or by their children if the latter pays the bill for the elderly parent's health insurance. Tax
deductions on health insurance premiums are available under Section 80D up to a maximum of Rs.25,000 per fiscal year.

For a policy you purchase for yourself, your spouse, or your dependent children, you are eligible for a tax deduction. If you purchase health
insurance, you can avail deductions up to Rs.25,000 under Section 80D for yourself and your family (Rs.50,000 if the insured is 60 years or
older) and up to Rs.25,000 (Rs.50,000 if the insured is 60 years or older) for your parents. In addition, you are eligible for a tax deduction of
Rs.5,000 per year for preventive healthcare for your family.

Deduction for Mediclaim under Section 80D:

The deduction of Mediclaim under Section 80D happens so that your insurance policy stays active. This insurance can be for the policy holder
or for the spouse of the policy holder. Mediclaim is of utmost importance as it takes care of your medical expenditure bills, if you fall ill and
require medical assistance.
Points to be remembered at the time of purchase of medical insurance
There are certain points you must keep in mind before purchasing medical insurance:
If you pay premium on behalf of working children, you cannot claim tax exemption under Section 80D.
You cannot claim tax deduction under Section 80D if you pay premiums on behalf of your siblings, grandparents, uncles, aunts, or any other
relatives.
In case you and your parents have part paid your premiums, then both of you can claim tax benefits under Section 80D.
You cannot claim tax deduction for the premium paid for group medical health insurance provided to you by your employer.
You will have to take the deduction without taking the service tax and cess portion from premium amount payable.

Section 80DDB:
Section 80DDB - Diseases Covered, Ailments & Deductions
Paying taxes to the government after a certain threshold is a must for every citizen. Under Chapter VI A of the Income Tax Act 1961, citizens can
claim tax deduction for medical expenses for specific diseases as mentioned under the provision for their dependent family members.

Here are the details that you should know about Section 80DDB that includes the deduction amount, list of diseases covered, and many other
significant information.
Details of Deduction Allowed under Section 80DDB
Deduction made under Section 80DDB is allowed for medical treatment of a dependent who is suffering from a particular disease which are
mentioned below:
It can be claimed by an individual or HUF.
He or she should be an Indian resident.
Dependents include spouse, parents, children, and siblings.
If a taxpayer has spent money on dependent’s treatment.

Who can Claim the Deductions Under Section 80DDB?

Tax deductions under Section 80DDB is only applicable to the following:
All individuals
Hindu Undivided Families (HUFs)
Tax deductions can be claimed provided that the entity concerned is residing within India for that tax year and the expenditure relating to
medical treatment must be either for the individual or HUF or a family member such as a spouse, parent or sibling that is dependent on them.

Medical Treatments Allowed Under Section 80DDB:

Section 80DDB specifies the following medical ailments and diseases for which tax deductions can be availed:
Diseases that are neurological in nature such as:
Ataxia
Dementia
Aphasia
Dystonia Musculo rum Deformans
Hemiballismus
Parkinson's Disease
Chorea
Motor Neuron Disease
Chronic Renal Failure
Malignant Cancers
Haematological Disorders such as:
Thalassemia
Haemophilia
Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)

Extent of Deduction that can be claimed under Section 80DDB

Deductions totalling to the following amounts can be claimed under Section 80DDB according to the following assessment years:
From the Financial year 2018-2019 onwards (Assessment Year 2019-20 Onwards)
For normal citizens: Rs.40,000 or the amount paid to the medical institution (whichever is lower)
For senior citizens and super senior citizens: Rs.1 lakh or the amount paid to the medical institution (whichever is lower)
For the Financial Year 2017-2018 (Assessment Year 2018-19)
The actual amount paid for medical treatment or Rs 40,000, whichever is lower
For senior citizens between the ages of 60 and 80, the actual amount paid for medical treatment or Rs 60,000, whichever is lower
For senior citizens above the age of 80, the actual amount paid for medical treatment or Rs 80,000, whichever is lower

For the Financial Year 2015-2016(Assessment Year 2016-17 Onwards)

The actual amount paid for medical treatment or Rs 40,000, whichever is lower
For senior citizens between the ages of 60 and 80, the actual amount paid for medical treatment or Rs 60,000, whichever is lower
For senior citizens above the age of 80, the actual amount paid for medical treatment or Rs 60,000, whichever is lower
Acquisition of Certificate of the Disease
In order for an individual to be eligible for tax deduction under Section 80DDB, he or she must acquire a certificate of the disease. The income
tax department has made it easier to acquire this particular certificate by implementing the following changes:

For those patients availing of medical treatment at a privately owned hospital

The certificate of the disease can be acquired from the same hospital
The certificate need not be acquired from a government owned hospital
It is mandatory that the certificate is acquired from a specialist. The specialist must possess a degree in his or her field of specialisation that is
validated by the Medical Council of India
For those patients availing of medical treatment at a government owned hospital
The certificate must be acquired via a specialist who is employed on a full-time basis at the hospital
It is mandatory for the specialist in question to possess a general post-graduate degree or an internal medicine degree or similar, which is
validated by the Medical Council of India
The certificate of the disease in Form 101 will not be necessary

Section 80DDB Finance Act 2015 Amendment:

As per the Finance Act 2015, Section 80DDB was amended in order for people suffering from medical ailments to claim tax deductions in a
simpler and more convenient manner. According to the amendment, all an assessee has to do to claim deductions is to provide a certificate,
which he or she has acquired from a doctor who has specialized in that particular field of treatment for which the assessee has sought
treatment for.
The doctor could either be employed at a government run hospital or a privately owned hospital. Before the amendment, the taxpayer in
question had to mandatorily provide a certificate acquired from a specialist doctor who was employed in a government run hospital.

Section 80C to 80U

Individuals can claim tax deduction benefits for payments made towards life insurance policies, fixed deposits, superannuation/provident
funds, tuition fees, and construction/purchase of residential properties under Section 80C of the Income Tax Act.

Taxes are an integral component in our country, with them accounting for a major portion of the income earned by the government, income
which is utilized to provide certain basic provisions to citizens. Individuals who earn more than a certain amount are expected to pay taxes, as
per the existing tax slabs.

Investments that Qualify for Deductions under Section 80C

The following are the investments that qualify for deductions under Section 80C of the Income Tax Act:

PPF (Public Provident Fund)

EPF (Employee Provident Fund)
Voluntary Provident Fund
Five-Year Post Office Time Deposit
ELSS (Equity Linked Savings Scheme)
Five-Year Tax Saving Bank Fixed Deposit
NSC (National Savings Certificate)
SCSS (Senior Citizens Savings Scheme)
Unit Linked Insurance Plan
Sukanya Samriddhi Scheme
Infrastructure Bonds
NABARD Rural Bonds
Expenses that Qualify for Tax Deductions under Section 80C
The following are the expenses that qualify for tax deductions under Section 80C of the Income Tax Act:

Premium payments made towards Life insurance policies

Tuition fees for children's education
Repayment of principal amount on home loan
Registration fees and stamp duty for house property
Tax Deductions under Section 80C
Section 80C of the Income Tax Act provides provisions for tax deductions on a number of payments, with both individuals and Hindu Undivided
Families eligible for these deductions. Eligible taxpayers can claim deductions to the tune of Rs 1.5 lakh per year under Section 80C, with this
amount being a combination of deductions available under Sections 80 C, 80 CCC and 80 CCD.

income tax deductions under Section 80C to 80U

Some of the popular investments which are eligible for this tax deduction are mentioned below.

Payment made towards life insurance policies (for self, spouse or children)
Payment made towards a superannuation/provident fund
Tuition fees paid to educate a maximum of two children
Payments made towards construction or purchase of a residential property
Payments issued towards a fixed deposit with a minimum tenure of 5 years
This section provides for a number of additional deductions like investment in mutual funds, senior citizens saving schemes, purchase of
NABARD bonds, etc.

Subsections under Section 80C

Section 80C has an exhaustive list of deductions an individual is eligible for, which have led to the creation of suitable sub-sections to
provide clarity to taxpayers.

Section 80CCC: Section 80CCC of the Income Tax Act provides scope for tax deductions on investment in pension funds. These pension funds
could be from any insurer and a maximum deduction of Rs 1.5 lakh can be claimed under it. This deduction can be claimed only by individual
taxpayers.
Section 80CCD: Section 80CCD aims to encourage the habit of savings among individuals, providing them an incentive for investing in pension
schemes which are notified by the Central Government. Contributions made by an individual and his/her employer, both are eligible for tax
deduction, subject to the deduction being less than 10% of the salary of the person. Only individual taxpayers are eligible for this deduction.
Section 80CCD (1):All individuals who have subscribed to the National Pension Scheme (NPS) will be eligible to claim tax benefits under Section
80 CCD (1) up to the limit of Rs.1.5 lakh. In addition to that, an exclusive tax deduction for investments of up to Rs.50,000 in NPS (Tier I
account) can be availed by the subscribers under Section 80 CCD (1B).
Section 80CCF: Open to both Hindu Undivided Families and Individuals, Section 80CCF contains provisions for tax deductions on subscription of
long-term infrastructure bonds which have been notified by the government. One can claim a maximum deduction of Rs 20,000 under this
Section.
Section 80CCG: Section 80CCG of the Income Tax Act permits a maximum deduction of Rs 25,000 per year, with specified individual residents
eligible for this deduction. Investments in equity savings schemes notified by the government are permitted for deductions, subject to the limit
being 50% of the amount invested.

Tax Deductions under Section 80D

Section 80D of the Income Tax Act permits deductions on amounts spent by an individual towards the premium of a health insurance policy.
This includes payment made on behalf of a spouse, children, parents, or self to a Central Government health plan.

An amount of Rs 15,000 can be claimed as a deduction when paid towards the insurance for spouse, dependent children, or self, while this
amount is Rs 30,000 (Union Budget 2017) if the person is over the age of 60 years.

On February 1, 2018, Finance Minister Arun Jaitley presented the Union Budget 2018 with a few changes in the tax deductions applicable for
senior citizens. Under Section 80D, the income tax deduction limit for senior citizens has been increased to Rs.50,000 for medical expenditure.

Both individuals and Hindu Undivided Families are eligible for this deduction, subject to the payment being made in modes other than cash.

Subsections under Section 80D

Section 80D is further subdivided into two sub-sections, offering clarity on the benefits available to taxpayers.

Section 80DD: Section 80DD provides provisions for tax deductions in two cases, with the permitted deduction being Rs 75,000 for normal
disability and Rs 1.25 lakh if it is a severe disability. This deduction can be claimed in case of the following expenditures.
On payments made towards the treatment of dependents with disability
Amount paid as premium to purchase or maintain an insurance policy for such dependent
The permitted deduction is Rs 75,000 for normal disability and Rs 1.25 lakh for a severe disability. Both Hindu Undivided Families and resident
individuals are eligible for this deduction. The dependant, in this case can be either a spouse, sibling, parents or children.

Section 80DDB: Section 80DDB can be utilised by HUFs and resident individuals and provides provisions for deductions on the expense incurred
by an individual/family towards medical treatment of certain diseases. The permitted deduction is limited to Rs 40,000, which can be increased
to Rs 60,000 (Union Budget 2015) if the treatment is for a senior citizen.The deduction under Section 80DDB for senior citizens and very senior
citizens has been increased to Rs.1 lakh in Union Budget 2018.
Tax Deductions under Section 80E
Under Section 80E of the Income Tax Act has been designed to ensure that educating oneself doesn’t become an additional tax burden. Under
this provision, taxpayers are eligible for tax deductions on the interest repayment of a loan taken to pursue higher education.

This loan can be availed either by the taxpayer himself/herself or to sponsor the education of his/her ward/child. Only individuals are eligible
for this deduction, with loans taken from approved charitable organizations and financial institutions permitted for tax benefits.

Subsections of Section 80E

Section 80EE: Only individual taxpayers are eligible for deductions under Section 80EE, with the interest repayment of a loan taken by them to
buy a residential property qualifying for deductions. The maximum deduction permitted under this section is Rs 3 lakhs.

Tax Deductions under Section 80G

Section 80G encourages taxpayers to donate to funds and charitable institutions, offering tax benefits on monetary donations. All assesses are
eligible for this deduction, subject to them providing proof of payment, with the limit of deductions decided based on a few factors.

100% deductions without any limit: Donations to funds like National Defence Fund, Prime Minister’s Relief Fund, National Illness Assistance
Fund, etc. qualify for 100% deduction on the amount donated.
100% deduction with qualifying limits: Donations to local authorities, associations or institutes to promote family planning and development of
sports qualify for 100% deduction, subject to certain qualifying limits.
50% deduction without qualifying limits: Donations to funds like the PMs Drought Relief fund, Rajiv Gandhi Foundation, etc. are eligible for 50%
deduction.
50% deduction with qualifying limit: Donations to religious organisations, local authorities for purposes apart from family planning and other
charitable institutes are eligible for 50% deduction, subject to certain qualifying limits.
The qualifying limit refers to 10% of the gross total income of a taxpayer.

Subsections of Section 80G

Under Section 80G has been further subdivided into four sections to simplify understanding.

Section 80GG: Individual taxpayers who do not receive house rent allowance are eligible for this deduction on the rent paid by them, subject to
a maximum deduction equivalent to 25% of their total income or Rs 2,000 a month. The lower of these options can be claimed as deduction.
Section 80GGA: Tax deductions under this section can be availed by all assesses , subject to them not having any income through profit or gain
from a business or profession. Donations by such members to enhance social/scientific/statistical research or towards the National Urban
Poverty Eradication Fund are eligible for tax benefits.
Section 80GGB: Tax deductions under this section can be availed by Indian Companies only, with the amount donated by them to a political
party or electoral trust qualifying for deductions.
Section 80GGC: Under this section, funds donated/contributed by an assessee to a political party or electoral trust are eligible for deduction.
Local authorities and artificial juridical persons are not entitled to the tax deductions available under Section 80GGC.

Tax Deductions under Section 80 IA

Section 80 IA provides an avenue for all taxpaying assesses to claim tax deductions on the profits generated through industrial activities. These
industrial undertakings can be related to telecommunication, power generation, industrial parks, SEZs, etc.

The following subsections are related to Section 80-IA

Section 80-IAB: Section 80 IAB can be used by SEZ developers, who can claim tax deductions on their profits through development of Special
Economic Zones. These SEZs need to be notified after 1/4/2005 in order for them to be eligible for tax deductions.
Section 80-IB: Provisions of section 80-IB can be used by all assesses who have profits from hotels, ships, multiplex theatres, cold storage
plants, housing projects, scientific research and development, convention centres, etc.
Section 80-IC: Section 80 IC can be used by all assesses who have profits from states categorised as special. These include Assam, Manipur,
Meghalaya, Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Mizoram, Tripura and Nagaland.
Section 80-ID: All assesses who have profits or gain from hotels and convention centres are eligible for deduction under this section, subject to
their establishments being located in certain specified areas.
Section 80-IE: All assesses who have undertakings in North-East India are eligible for deductions under this Section, subject to certain
conditions.
Tax Deductions under Section 80J
Section 80J of the Income Tax Act was amended to include two subsections, 80JJA and 80 JJAA

Section 80 JJA: Section 80 JJA relates to deductions permitted on profits and gains from assesses who are in the business of processing/treating
and collecting bio-degradable waste to produce biological products like bio-fertilizers, bio-pesticides, bio-gas, etc.All assesses who deal with
this are eligible for deductions under this section. Such assesses can claim deduction equivalent to 100% of their profits for 5 successive
assessment years since the time their business started.
Section 80 JJAA: Deductions under Section 80 JJAA can be claimed by Indian companies which have profits from the manufacture of goods in
factories. Deductions equivalent to 30% of the salary of new full time employees for a period of 3 assessment years can be claimed. A
chartered accountant should audit the accounts of such companies and submit a report showing the returns. Employees who are taken on a
contract basis for a period less than 300 days in the preceding year or those who work in managerial or administrative posts do not qualify for
deductions.
Tax Deduction under Section 80LA
Deductions under Section 80LA can be availed by Scheduled Banks which have offshore banking units in Special Economic Zones, entities of
International Financial Services Centres and banks which have been established outside India, in accordance to the laws of a foreign nation.

These assesses are eligible for deductions equivalent to 100% of the income for the first 5 years, and 50% of income generated through such
transactions for the next 5 years, subject to the rules of the land.

Such entities should have relevant permission, either under the SEBI Act, Banking Regulation Act or registration under any other relevant law.

Tax Deduction under Section 80P

Section 80P caters to cooperative societies, offering tax deductions on their income, subject to certain conditions. 100% deduction is permitted
to cooperative societies which have incomes through cottage industries, fishing, banking, sale of agricultural harvest grown by members and
milk supplied by members to milk cooperative societies.

Cooperative societies which are involved in other forms of business are eligible for deductions ranging between Rs 50,000 and Rs 1 lakh,
depending on the type of work they are involved in.

Deductions which can be claimed by all cooperative societies are listed below.

Income which a cooperative society makes by renting out warehouses

Income derived through interest on money lent to other societies
Income earned through interest from securities or properties
Tax Deduction under Section 80QQB
Section 80QQB permits tax deductions on royalty earned from sale of books. Only resident Indian authors are eligible to claim deductions
under this section, with the maximum limit set at Rs 3 lakhs. Royalty on literary, artistic and scientific books are tax deductible, whereas
royalties from textbooks, journals, diaries, etc. do not qualify for tax benefits. In case of an author getting royalties from abroad, the said
amount should be brought into the country within a specified time period in order to avail tax benefits.

Tax Deduction under Section 80RRB

Patent owners are given tax breaks under Section 80RRB, which also grants tax relief to residents who receive royalties from their patent as
income. If the patent is registered after March 31, 2003, royalty payments up to Rs 3 lakh can be deducted. Those who get royalties from
overseas must bring those funds into the nation within a certain time frame in order to be qualified for tax deductions on those royalties.

Tax Deduction under Section 80TTA

Deductions under Section 80TTA can be claimed by Hindu Undivided Families and Individual taxpayers. This section permits deductions to the
tune of Rs 10,000 every year on the interest earned on money invested in bank savings accounts in the country.

Tax Deduction under Section 80U

Only resident individual taxpayers with disabilities are eligible to claim tax deductions under Section 80U. A maximum deduction of Rs.75,000
per year is available to anyone who have been declared Persons With At Least 40% Disability by the pertinent medical authorities. If they meet
certain requirements, those with severe disabilities are eligible for a maximum deduction of Rs.1.25 lakh. Autism, mental retardation, cerebral
palsy, and other conditions are among the disabilities that qualify for tax advantages.

Summary of Tax Deductions Available under Section 80C to 80U

Section Permissible limit (maximum) Eligible Claimants

Rs 1.5 lakh (aggregate of 80C,

80 C Individuals/Hindu Undivided Families
80CCC and 80CCD)

Rs 1.5 lakh (aggregate of 80C,

80 CCC Individuals
80CCC and 80CCD)

Rs 1.5 lakh (aggregate of 80C,

80 CCD Individuals
80CCC and 80CCD)

80 CCF Rs 20,000 Individuals/Hindu Undivided Families

• RS 50,000 for senior citizens

80 CCG Individuals/Hindu Undivided Families
 • Rs 25,000 for other individuals

80 D RS 20,000 Individuals/Hindu Undivided Families

 Rs 75,000 for general disability

 Rs 1.25 lakh for severe
80 DD Resident Individuals/Hindu Undivided Families
disability

• Rs 1 lakh for senior citizens

80
Resident Individuals/Hindu Undivided Families
DDB • Rs 40,000 for others

80 E No limit mentioned Individuals

80 EE Rs 3 lakh Individuals

80 G Different limits based on donation All assesses

80 GG Rs 2,000 per month Individuals who do not get HRA

80 All assesses who do not have income from profit or gains

Depends on quantum of donation
GGA from a business/profession

80
Depends on quantum of donation Indian companies
GGB

80 All assesses apart from local/Artificial judicial authorities

Depends on quantum of donation
GGC who are funded by the government

80 IA No maximum limit defined All assesses

80 IAB No maximum limit defined All assesses who are SEZ developers

80 IB No maximum limit defined All assesses

80 IC No maximum limit defined All assesses

80 ID No maximum limit defined All assesses

80 IE No maximum limit defined All assesses

80 JJA All profits earned for first 5 years All assesses

80
30% of increased wages Indian companies which have income from profit/gains
JJAA

80 LA Portion of their income Scheduled banks, IFSCs, banks established outside India

80 P Portion of their income Cooperative societies

80
Rs 3 lakh Authors – resident individuals
QQB

80 RRB Rs 3 lakh Resident individuals

80 TTA Rs 10,000 per year Individuals/Hindu Undivided Families

 Rs 75,000 for people with

disabilities
80 U  Rs 1.25 lakh for people with Resident individual
severe disabilities