Ten Most Common Deductions On Income Tax

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Income Tax is a direct tax levied by the Union Government on income of an assessee. Assessee may be an Individual, Firm, Company or any other association of persons. Tax liability of an individual is computed on the net income of the assessee. There are a number of Income Tax deductions allowed under the Income Tax Act from the gross income of an individual. By making suitable financial planning many of these deductions can be easily availed by the tax payer. The 10 most common deductions normally claimed by the individual assessee are provided here:

Repayment of Housing Loan

If you have taken a housing loan from bank or financial institution, the principal amount of housing loan repaid during the year (financial year starts from April to March) qualifies for deduction under section 80 C of the Income Tax Act. The maximum amount of deduction allowed under this section is Rs.1,00,000/-. You have to obtain a certificate from the concerned bank separately showing the principal and interest repaid during the relevant year.

Interest ...
... on Housing Loan

In addition to the principal portion repaid, the interest paid on housing loan during the year is also eligible for deduction up to a maximum of Rs.1,50,000/-. Instead of deducting the same from total income it is shown as loss under income from house property. If the housing loan is jointly taken by husband and wife, both can claim the deduction @50%.

Interest on Educational Loan

Any amount paid as interest on loan taken for higher education of an individual out of his income chargeable to tax can be deducted under Section 80E of the Act. This will be available up to 8 years or till completion of loan, whichever is earlier. There is no maximum ceiling fixed for this deduction.

Life Insurance Premium

Life Insurance Premium paid by the assessee on the life of self, spouce or children can be claimed as deduction under Section 80C. One may note that apart from such premium paid to Life Insurance Corporation of India, premia paid to any other private life insurance companies are also eligible for this deduction.

Provident Fund Contribution

Contribution towards provident fund to which PF Act, 1925 applies, is eligible for deduction under Section 80C.

Medical Insurance Premium

Under Section 80D of the Income Tax Act, any medical insurance premium (like Mediclaim) paid by the assessee for self, spouce and children during the year can be deducted from his total income subject to the ceiling of Rs.15,000/- . You can claim another fifteen thousand rupees if you paid the same for your parents. If your parents are senior citizen (Income Tax Act recognizes a person as senior citizen only on completion of 65 years and not 60 years as considered elsewhere such as Indian Railways), you can claim upto Rs.20,000/-. Hence maximum deduction one would get under this section is Rs.35,000/-

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