The Income Tax Act, 1961 provides deductions under various provisions to individuals and businesses. These deductions are provided to ease businesses and prevent overburdening of business finances with taxes. These deductions are necessary for supplying relief to small taxpayers too. In this article, we will discuss income tax deductions for AY 2020-21. Deductions are mentioned in Chapter VI-A of the Act
Income Tax Deductions for AY 2020-21 – Section 80C to 80U
There is a list of deductions which are provided from Section 80C to 80U under Income tax Act.
1. Income tax deductions for AY 2020-21 – Section 80C
Any individual or HUF can claim deduction u/s 80C up to Rs. 1,50,000. This deduction is given as a result of investment in specified investments.
The investments under which income tax deductions for AY 2020-21 are allowed are as under
- Life insurance premium
- Employee’s contribution to Statutory Provident Fund (SPF) or Recognized Provident Fund (RPF)
- Investment in
- National Saving Certificates (NSCs)
- Fixed Deposit for 5 years or more
- bonds of NABARD
- The senior citizens’ savings scheme
- Public Provident Fund (PPF)
- Unit Linked Insurance Plan (ULIP)
- Mutual Fund or Unit Trust of India (UTI)
- Pension scheme of Mutual Fund or UTI
- Sukanya Samridhi Scheme Account
- By an employee of Central Government in a specified pension scheme
- Repayment of the principal component of loan taken for construction of the house.
- Tuition fee paid towards child education. (Maximum 2 children allowed)
- Stamp duty, the registration fee for the acquisition of house property.
This deduction is the most sought after amongst income tax deductions for AY 2020-21
2. Income tax deductions for AY 2020-21 – Section 80CCC
Deduction u/s 80CCC is provided on the amount of contribution made in Pension Account of an Insurance Company or LIC. This deduction is available to only an individual.
3. Income tax deductions for AY 2020-21- Section 80CCD
This deduction is given on contribution to the Pension Scheme of the Central Government.
Under section 80CCD(1)- Contribution made by an employee or other individuals
|Lower of employees contribution or 10% of salary
|Lower of assessee contribution or 20% of gross income.
Additional deduction for contribution in National Pension Scheme (NPS)- An additional deduction up to Rs. 50,000 is provided if an assessee as mentioned above contributes to the National Pension scheme. This additional deduction in separate from the limit specified i.e. Rs. 1,50,000 for sec 80C, 80CCC and 80CCD.
|Section 80CCD (2)
Employer’s contribution to NPSThe deduction is provided when the employer of an individual contributes some amount to NPS. The maximum amount allowed under this section can be lower of:- Amount contributed by the employer
– 10% of salary
4. Income tax deductions for AY 2020-21 (under section 80D): Payment of Premium for Medical Insurance
If any individual or HUF has made any payment towards medical insurance premium during the financial year. Then the amount paid towards such premium is eligible for income tax deductions for AY 2020-21
An individual can pay such premium for himself, spouse, parents, and dependent children.
Whereas, HUF can pay such premium for any member of the HUF.
- The deduction for premium paid for self is allowed up to Rs. 25,000. However, if the premium is paid for parents then additional deduction up to Rs. 25,000 is also allowed.
- If in any case the assessee has paid a premium for any senior citizen (i.e. age 60 or more), then in such a case added deduction of up to Rs. 25,000 is allowed.
- It is to be noted that if during the previous year any medical expenditure is incurred for which no medical premium was paid then such person can claim a deduction for such expenditure under this section of up to Rs. 25,000. Such expenditure must be related to the person mentioned above.
- The maximum amount an individual can claim as for preventive health check-up cannot exceed Rs. 5000.
5. Income tax deductions for AY 2020-21 (under section 80DD): Treatment for handicapped dependent
Amount spent or deposited for maintenance of handicapped dependent relative, can be claimed as income tax deductions for AY 2020-21 under this section. The amount maximum amount that can be claimed as deduction is limited to lower limit specified or actual amount spent. However, such limit specified varies on the nature of severity
- If the disability is normal, then the limit is Rs. 75,000
- If the disability is severe, then the limit is Rs. 1,25,000
6. Deductions (under section 80DDB) : Medical Treatment for a specified disease
Amount spent treatment of the specified disease can be claimed as deduction under this section.
The amount maximum amount that can be claimed as deduction is limited to the limit specified. The limit is as follows
|If age is less 60 years old
|Lower of Rs. 40,000 or actual amount spent
|If age is 60 or more
|Lower of Rs. 1,00,000 or actual amount spent
However, this deduction shall be reduced by the amount of insurance claims received by the individual.
7. Income tax deductions for AY 2020-21 (under section 80DDB): Handicapped Assessee
If the individual who is filing the return under the Act, is differently disabled, then such an individual can claim the deduction, irrespective of any amount paid towards such deduction.
8. Income tax deductions for AY 2020-21 (under section 80E): Interest on Education Loan
If any individual has taken an education loan for the higher education of himself or any of his relatives. Then such individuals can claim an income tax deductions for AY 2020-21 in respect of the interest paid on such loan. Such deduction is available for a consecutive period of 8 years, starting from the year assessee starts to pay interest.
9. Deduction under section 80EE: Interest on Loan for House Property
If any individual has paid any interest on loan taken for residential property. Then such individuals can claim an income tax deductions for AY 2020-21 in respect of the interest paid on such loan.
- The maximum amount to be allowed is up to Rs. 50,000
- The purchase price of the house cannot be more than Rs. 50 lakhs
- The loan amount should be up to Rs. 35 Lakhs
- The assessee must not have another residential house property when such loan was sanctioned
- The loan should be sanctioned between April 1, 2016 to March 31, 2017.
10. Deduction under section 80EEA: Interest on Loan of House Property (not covered u/s 80EE)
If any individual has paid any interest on loan taken for residential property. Then such individuals can claim a income tax deductions for AY 2020-21 in respect of the interest paid on such loan.
- The maximum amount to be allowed is up to Rs. 1,50,000
- The stamp duty value of the house cannot be more than Rs. 50 lakhs
- The assessee must not have another residential house property when such loan was sanctioned
- The loan should have been approved in the period falling from April 1, 2019 to March 31, 2020.
11. Deduction under section 80EEB: Interest on Loan of an Electric Vehicle
If any person being an individual, has taken a loan for the purchase of an electric vehicle. Then such an individual can claim income tax deductions for AY 2020-21 in respect of the amount paid towards payment of interest on such loan. The conditions are as follows:
- The maximum amount to be allowed is up to Rs. 1,50,000
- The loan sanctioned must be beginning on or after April 1, 2019 and ending before March 31, 2023.
12. Deduction under section 80G: Donations
Any person making contributions to specified funds, organizations is eligible for income tax deductions for AY 2020-21 under his section. The deduction may range from unlimited to limited at 100 % or 50%.
It is important to note that donations made in case of more than Rs. 2,000 will not be allowed. Therefore, all payments for the purpose of claiming deductions, must be made through a mode other than cash.
Donations eligible for 100% of deduction; without any ceiling
- National Defense Fund;
- M. National Relief Fund;
- M. Armenia Earthquake Relief Fund;
- M. Relief Fund;
- Lieutenant Governor’s Relief Fund;
- Zila Saksharta Samiti;
- National Sports Fund;
- National Cultural Fund;
- Swachh Bharat Kosh;
- Clean Ganga Fund;
- National Fund for Control of Drug Abuse;
- Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund;
- University or an educational institution of national eminence;
- Africa (Public Contributions – India) Fund;
- National Blood Transfusion Council or any State Blood Transfusion Council;
- The National Illness Assistance Fund;
- any fund set up by a State Government to supply medical relief to the poor;
- the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities;
- The Fund for Technology Development and Application set up by the Central Government;
- The National Children’s Fund;
Note: Please note that the above list does not include all funds which are eligible for a 100% deduction without a ceiling.
Donations eligible for 50% of deduction; without any ceiling
- Jawaharlal Nehru Memorial Fund
- Indira Gandhi Memorial Trust
- M. Drought Relief Fund
- Rajiv Gandhi Foundation
Donations eligible for 100% of deduction, but limited to 10% of Adjusted total income
- Donations to the government or local authority, or approved institution to be used for the purpose of promoting family planning.
- Donation by a Company to the Indian Olympic Association or
- Donation by the company to notified association or institution set up in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India
Donations eligible for 50% of deduction, but limited to 10% of Adjusted total income
- Housing development authority
- For renovation/repair of the temple, gurudwara, mosque or church, etc.
- Public Charitable Trust
- Promotion for minority
13. Deduction under section 80GG: Rent paid
This deduction is available to an individual, whether self-employed or salaried, who does not receive House Rent Allowance (HRA).
The income tax deductions for AY 2020-21 shall be the lower of the following:
- 5,000 per month
- 25% of Adjusted Gross Total Income
- Rent paid more than 10% of Adjusted total income
14. Deduction under section 80GGA: Donations for scientific research or rural development
Any person making a contribution towards scientific research or rural development is eligible for a 100 % deduction of the contribution made.
- Assessee having income under the head PGBP are not eligible.
- Donations of more than Rs. 10,000 made in cash are not eligible
15. Deduction under section 80GGB: Donations to Political Parties
An Indian Company making donations to any political party or electoral trust is eligible for 100% of the deduction of the amount donated. Such donations must be made in any mode other than cash.
16. Deduction under section 80GGC: Donations to Political Parties
Any person other than a company or local authority, making donations to any political party or electoral trust is eligible for 100% of the deduction of the amount donated. Such donations must be made in any mode other than cash.
17. Deduction under section 80QQB: Royalty from books
A resident individual is eligible to claim income tax deductions for AY 2020-21 under this section, if he is an author of any book of any literary, artistic or scientific in nature.
The amount eligible for deduction shall be lower of the following:
- Total Royalty received
- The assessee must be an individual resident or resident. The assessee may be an Indian foreign national
- Book does not mean brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, textbooks for schools, tracts, and other publications
- Form 10CCD needs to be obtained from the person making payment to claim the deduction.
- If payment is not received in a lump sum, then 15% of the value of the books sold during the year must be ignored (before allowing any expenses)
18. Deduction under section 80RRB: Royalty from Patents
If during the previous year any resident individual assessee received income as a royalty form patents. The amount earned can be claimed as income tax deductions for AY 2020-21 under this section. The deduction shall be the lower of the following:
- Royalty received
If royalty is earned from any source outside India, then such royalty must be brought into India within 6 months from the end of the previous year, in the form of convertible foreign exchange to claim a deduction or the time allowed by RBI.
19. Deduction under section 80TTA: Interest on Savings Account
Any individual or HUF which has earned interest from saving accounts during the year is eligible for income tax deductions for AY 2020-21 under this section. The savings account must be opened with a banking company, co-operative banks, or a Post office.
The deduction is lower of:
- Interest received
This deduction is not available for interest income earned from fixed deposits, recurring deposits, or any other deposit.
Senior citizens eligible for deduction under section 80TTB are not allowed to claim deduction under this section.
20. Deduction under section 80TTB: Interest on Savings account for Senior Citizens
Any resident senior citizen who has earned interest income on savings account with any bank, co-operative bank or post office is eligible for deduction under this section. The income tax deductions for AY 2020-21 is lower of the following:
- Interest received; or
21. Deduction under section 80JJA: Income from Collecting and Processing of bio-degradable waste
If during the year any person earns an income by way of:
- collecting and processing or treating of bio-degradable waste
- for generating power; or
- producing bio-fertilizers, bio-pesticides, or other biological agents; or
- for producing biogas or making pellets or briquettes for fuel; or
- organic manure
In such a case, such assessee will be allowed whole income as a income tax deduction for AY 2020-21 for a period of 5 consecutive assessment years from the year business started.
22. Deduction under Section 80U – Tax Deduction for Disabled Individuals
Section 80U offers tax benefits for individuals with disability. The disability covers the following:
- Lowered vision
- Hearing impairment
- Loco motor disability
- Mental retardation
- Mental illness
For people with disabilities, the income tax deductions for AY 2020-21 is Rs. 75,000 is allowed and for people with severe disabilities, deduction of Rs. 1,25,000 is allowed
Income tax deductions for AY 2020-21 – (FAQs)
1. What is the maximum amount of limit of income tax deductions for AY 2020-21 allowed under section 80C of income tax act?
The amount allowable is up to Rs. 1,50,000 during the year. This deduction is applicable for investment in under section 80C, 80CCC, 80CCD.
2. The tuition fee charged by school for my son studies in is Rs. 50,000, can I claim it as a deduction in Income Tax?
Any individual can claim a deduction under sec 80C for paying the tuition fee. However, such deduction is restricted to the tuition fee of 2 children.
3. During the year as a protective measure, I bore Rs. 15,000 towards health check-up of me and my family during the year. Is this expenditure allowed as a deduction?
During the year, an individual is eligible to claim income tax deductions for AY 2020-21 up to Rs. 5,000 for expenditure towards preventive health check-up. This includes expenditure incurred on self, spouse, dependent children, and parents.
StairFirst is an e-service platform which provides company registration, corporate compliances, income tax-related and other professional services related to startups / new and old businesses. Contact Us for details.