Do you know that Personal income tax (PIT) contributed around 25.3% to the total Taxes collected in the FY 20-21 by the Govt. of India? Salaried employees forms the major part of the personal income taxes collected every year. Unlike in businesses one cannot claim expenses as deductions against the salary, barring few. Chances are that salaried employees seldom know how to cut taxes. In this post we will lay out few easy ways for salaried employees to lower taxable income and increase take home pay. So read on and learn how cutting taxes can be simple!

Chapter VI A under Income Tax act, 1961

Chapter VI A of Income Tax Act contains various sub-sections of section 80 that allows an employee to claim deductions from the gross total income on account of various tax-saving investments, permitted expenditures, donations etc. Such deductions allow employee to cut the taxes. Following is the summary of various sections which will help in reducing the Gross total income thereby reducing taxes.

Chapter VIA deductions

SectionDeduction onAllowed Limit (maximum) FY 2020-21
80C– Contribution made towards Public Provident Fund (PPF)
– Employee’s Contribution made towards Employee Provident Fund (EPF)
– Amount paid as premium towards Life Insurance policy (LIP)
-Amount invested in Equity linked saving scheme (ELSS) qualified mutual funds popularly known as tax saving mutual funds
Principal amount paid towards home loan in the financial year
– Stamp duty and registration charges paid for purchasing a property
– Any contribution made towards Sukanya Samriddhi Yojana (SSY) for the girl child
– Amount deposited in National saving certificate (NSC)
– Amount deposited under Senior citizen savings scheme (SCSS)
– Premium paid under Unit Linked Insurance Plan (ULIP)
– Tax saving FD with a term 5 years etc.
– Children’s Tuition Fee
Rs. 1,50,000 individually or together with 80CCC, 80CCD (1) & 80CCD(2)
80CCCAmount deposited in annuity pension plans offered by LIC, Kotak, SBI etc. which qualifies as a fund referred to in Section 10(23AAB)Rs. 1,50,000 individually or together with 80C, 80CCD (1) & 80CCD(2)
80CCD(1)Employee’s contribution to NPS account (maximum up to Rs 1,50,000)Rs. 1,50,000 individually or together with 80C, 80CCC & 80CCD(2)
80CCD(2)Employer’s contribution to NPS accountMaximum up to 10% of salary (Basic + DA). Rs. 1,50,000 individually or together with 80C, 80CCC & 80CCD(2)
80CCD(1B)Additional contribution to NPSRs. 50,000 over and above the limit of Rs. 1.5 lakhs under 80C, 80CCC, 80CCD(1) & 80CCD(2)
80DMedical InsuranceFor 1.Self, spouse, children, Siblings and 2.Parents who are not senior citizens Rs. 25,000.
For 1.Self, Spouse, Children, Siblings and 2.Parents who are senior citizens Rs. 50,000
Please note that Medical insurance paid can be claimed for both sl. no.s 1 & 2 in the same financial year
80DDMedical treatment for handicapped dependents
Where disability is 40% or more but less than 80% Rs. 75,000. Where disability is 80% or more Rs. 1,25,000
80DDBMedical Expenditure on Self or dependent Relative for diseases specified in Rule 11DDFor less than 60 years old, lower of Rs. 40,000 or the amount actually paid. For 60 years old or above (Senior Citizens), lower of Rs. 1,00,000 or the amount actually paid
80EInterest on education loanInterest paid on the loan availed for a period of 8 years
80EETax deduction for Interest on home loan for first time home ownersRs 50,000 over and above deduction available under section 24 of Rs 2 lakhs
80EEATax deduction for Interest on home loan for first time home ownersRs 1.5 lakhs over and above deduction available under section 24 of Rs 2 lakhs
80GGFor rent paid where HRA is not received from employerLeast of :
– Rent paid minus 10% of total income
– Rs. 5000/- per month
– 25% of total income
80GGCContribution by individuals to political partiesAmount contributed (not allowed if paid in cash)
80TTA(1)Interest Income from Savings accountMaximum up to 10,000
80TTBExemption of interest from banks, post office, etc. Applicable to senior citizens onlyMaximum up to 50,000
80USelf-suffering from disability
An individual suffering from a physical disability (including blindness) or mental retardation Rs. 75,000. An individual suffering from severe disability Rs. 1,25,000

The above sections have been summarised to give you an idea of all the available deductions under chapter VIA for a Salaried employee. Kindly contact us through any of the below mentioned medium to know more about the eligibility and the quantum of deduction.

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