Taxation Law

DEDUCTIONS
FROM
SALARY
DEDUCTIONS
UNDER SECTION
16
DEDUCTIONS FROM SALARY UNDER
SECTION 16
The Income Tax Act is not only provides provisions for imposing taxes on the income of
citizens but also offers number of ways through which one can claim deductions and
rebates. The deductions are allowed based on the way the taxpayers spend their income.
● It tax imposes tax but also provides certain features by which tax payers can save tax
by means odf deductions ands exemptons.
1. STANDARD DEDUCTION
2. ENTERTAINMENT ALLOWANCE
3. PROFESSIONAL TAX
STANDARD DEDUCTION
● Only salaried individuals and pensioners can claim a certain amount under standard
deduction by default without any investment or spending of money by the taxpayers.
The provision was taken down for a number of years and was re-introduced during the
Budget announcement in 2018.
● It can be claimed by default
● You don’t have to make any investments or show proof of expenditure for this
● Its unconditional
● It replaced two main allowance – Transport and medical allowance
● Its good because now people wont have to be submit travel and medical bills
● No matter what your salary is – up to Rs 50,000 only (whatever is you salary or

50,000 whichever is lowest)
● Gross salary- 8,00,000
● Then 50,000 will straight get deducted and your net taxable salary will be 7,50,000.
ENTERTAINMENT ALLOWANCE
● Whatever you receive from your employer as entertainment allowance which will be
included in your gross salary
● Later some deductions and exemptions can be claimed and this depends on whether
you are a government employee or non government employee
CENTRAL OR STATE GOVERNMENT
EMPLOYEES
● 5000 rupees
● 20% of basic slary
● Last years allotted entertainment allowance
● LOWEST ONE WILL BE YOUR EXEMPTION AMOUNT AND CAN BE

CLAIMED AS EXEMPTION
● Actual expenses don’t have to be considered, its purely based on the following.
NON GOVT EMPLOYEES
● Includes employees of statutory authority and local bodies

● The entertainment allowance you get from employer is fully taxable and no deduction
or exemptions are available.
PROFESSIONAL TAX
● This tax is not only professionals, its for all businesses, traders, professionals, service
providers and all employees
● Only criteria is how much is your income
● It’s a state tax
● Not applicable in all states only in Andhra Pradesh, Gujarat, Karnataka, Kerala,
Maharashtra, Telangana and West Bengal)
● Eg; Karnataka you have to pay professional tax only for Rs 15,000 onwards of Rs 200
every month which employer cuts.
80 C
● Tax deductions provide a means for individuals to reduce their tax burden. Among the
various tax-saving options, most individuals prefer to claim tax deduction under
Section 80C of the Income Tax Act, 1961.
● Section 80C allows individuals and HUFs to claim tax deduction of up to Rs. 1,50,000
from their gross total income for certain investments and payments.
WITHOUT INVESTMENT
1. EPF :- If you're salaried employee, you can claim your epf from this section without
any extra investment
The tax you get from EPF is not taxable and the whole amount you get later is also not
taxable because it comes under EEE category
2. HOME LOANS:- In home loans, whatever principal amount you pay in one year that
can be claimed under 80 c.
3. STAMP DUTY AND REGISTRATION:- If you bought a house, the stamp duty and
registration charges can be claimed under 80c.
5. LIFE INSURANCE PREMIUM:- can be claimed if your premium is 10% less than
the total amount insured
Applicable to endowment plans and ULIP plan.
6. TUTION FEES:- The school fees or college fees (not total, just the tuition fees) per
parent two kids. (one tax payer can claim for 2 kids) (doesn’t apply for coaching center
and tuitions)
INVESTMENTS
1. NATIONAL PENSION SYSTEM:-
● Part of EEE category
● Whatever you contribute into this has no tax because eyou can claim it under 80 c.
● The returns from this are aslo tax free
● And the amount you withdraw is also tax free
2. 80 ccd (2)
● Employers Contribution can be claimed up to 10% of Basic + DA WAGES
3. EQUITY LINKED SAVINGS SCHEME

● These are mutual funds where if you invest, government give you deductions and
comes under EET (Exempt Exempt Taxable)
● No tax on returns, there is high returns
● But there is tax on final withdrawal as it will be considered part of your income
● SUKANYA SAMRIDHI
● Can be opened for a girl child
● To fund her expenses and education
● Rate of interest is around 8% and changes quarterly
● Locking period is 21 years and 50% can be withdrawn when she turns 21
● Comes under EEE category (Investment, returns and withdrawal all tax free)
● PUBLIC PROVIDENT FUND

● Locking period 15 years
● Rate of Interest around 8%
● Comes under EEE category
● Considered most secure
ETE CATEGORY OPTIONS
● 5 YEAR FD
● POST OFFICE SAVINGS ACCOUNT (5 years)
● NATIONAL SAVINGS CERTIFICATE (5 years)
● SENIOR CITIZENS SAVINGS ACOOUNT
80 D
● This section provides security and safety and keeps your financial position safe
● Every individual or HUF can claim a deduction from their total income for medical
insurance premiums paid in any given year under Section 80D. This deduction is also
available for top-up health plans and critical illness plans.
● The deduction benefit is available not only for a health insurance plan for self but also
for buying the policy to cover spouse, or your dependent children or parent.
Who is eligible for deduction under Section
80D?
● Deduction for medical insurance premiums and medical expenses for senior citizens is
allowed to the Individual or HUF category of taxpayers only.
● Individual or HUF taxpayers, insurance can be availed for :

● Self
● Spouse
● Dependant children
● Parents
● Any other entity cannot claim this deduction. For example, a company or a firm
cannot claim a deduction under this section.
Individual
● can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and
dependent children.
● An additional/separate deduction for parents’ insurance is available to the extent of Rs
25,000 if they are less than 60 years of age, or Rs 50,000 if your parents are aged
above 60.
● If both the taxpayer and parents are aged more than 60 years, for whom the medical
covers have been taken, the maximum deduction that can be availed under this section
is Rs 1,00,000.
● Senior citizen includes senior and very senior citizen above 60 years of age.
HUF
● HUF can claim a deduction under Section 80D for a mediclaim taken for any of the
members of the HUF.
● This deduction will be Rs 25,000 if the member insured is less than 60 years, and will
be Rs 50,000 if the insured is 60 years of age or more
Section 80D Limit
PERSONS COVERED EXEMPTION LIMIT (IN RS.
Self and Family 25,000
Self and Family along with Parents 25,000 + 25,000 = 50,000
Self and family along with senior citizen 25,000 + 50,000 = 75,000
parents
Self (Senior Citizen) along with senior
citizen parents 50,000 + 50,000 = 1,00,000

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DEDUCTIONS

● No matter what your salary is – up to Rs 50,000 only (whatever is you salary or

● LOWEST ONE WILL BE YOUR EXEMPTION AMOUNT AND CAN BE

● Includes employees of statutory authority and local bodies

3. EQUITY LINKED SAVINGS SCHEME

● PUBLIC PROVIDENT FUND

● Individual or HUF taxpayers, insurance can be availed for :

PERSONS COVERED EXEMPTION LIMIT (IN RS.

Self and Family 25,000

Self and Family along with Parents 25,000 + 25,000 = 50,000

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