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Ahead of the Budget 2025, here’s a comprehensive guide to the key deductions available under the old tax regime.
Though the major tax relief is likely to be announced for the new tax regime, taxpayers need to know the current deductions available under the old tax regime.
The Union Budget 2024-25 is just around the corner, and as Finance Minister Nirmala Sitharaman prepares to unveil the roadmap for India’s economy, taxpayers are keenly awaiting any announcement on the income tax relief. Though the major tax relief is likely to be announced for the new tax regime, taxpayers need to know the current deductions available under the old tax regime.
Here’s a comprehensive guide to the key deductions available under the old tax regime:
1. Section 80C: Investments and Expenses
Section 80C is the most popular avenue for tax savings, allowing a maximum deduction of up to Rs 1.5 lakh. Common qualifying investments and expenditures include:
- Life Insurance Premiums
- Employee Provident Fund (EPF) contributions
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Five-year tax-saving fixed deposits with banks or post offices
- Principal repayment of a home loan
- Sukanya Samriddhi Yojana (SSY) contributions
- Tuition fees for children (restricted to two children)
2. Section 80CCD(1B): Additional Deduction for NPS
Taxpayers contributing to the National Pension System (NPS) can claim an additional deduction of Rs 50,000 under Section 80CCD(1B) over and above the Rs 1.5 lakh limit under Section 80C. This is particularly beneficial for long-term retirement planning.
3. Section 80D: Health Insurance Premiums
— Under Section 80D, deductions are available for health insurance premiums paid for self, family, and parents:
— Up to Rs 25,000 for premiums for self, spouse, and dependent children.
— An additional Rs 25,000 (Rs 50,000 if parents are senior citizens) for premiums paid for parents.
— Preventive health check-up costs of up to Rs 5,000 can also be claimed (included within the overall limits).
4. Section 24(b): Home Loan Interest
— Interest paid on a home loan for a self-occupied property can be claimed as a deduction under Section 24(b):
— Up to Rs 2 lakh per year for self-occupied property.
— For properties rented out, there is no upper limit on interest deduction, but the net loss from house property is capped at Rs 2 lakh.
5. Section 80E: Interest on Education Loan
The interest paid on an education loan for higher studies (self or dependents) can be claimed as a deduction under Section 80E. There is no upper limit, but the deduction is available for a maximum of 8 years or until the loan is fully repaid, whichever is earlier.
6. Section 80G: Donations to Charitable Institutions
Taxpayers can claim deductions for donations made to specified funds and charitable institutions. The deduction is typically 50 per cent or 100 per cent of the donated amount, depending on the organization, and subject to certain limits.
7. Section 80TTA and 80TTB: Interest on Savings
— Under Section 80TTA, individuals can claim a deduction of up to Rs 10,000 on interest earned from savings accounts.
— Senior citizens can claim up to Rs 50,000 under Section 80TTB for interest earned from savings accounts, fixed deposits, or recurring deposits.
8. Section 80DD and 80DDB: Disability and Medical Expenses
— Section 80DD provides deductions for expenses incurred for the treatment of a dependent with a disability, ranging from Rs 75,000 to Rs 1.25 lakh.
— Section 80DDB allows deductions of up to Rs 40,000 (Rs 1 lakh for senior citizens) for expenses incurred on specified medical treatments.
9. Section 80GGC and 80GGB: Political Contributions
Deductions are allowed for contributions made to political parties:
— 80GGC: For individuals contributing to political parties.
— 80GGB: For corporate entities making similar contributions.
10. Standard Deduction for Salaried Individuals
Salaried individuals can claim a standard deduction of Rs 50,000, which is directly subtracted from the gross salary.
11. Section 87A: Tax Rebate
Individuals with taxable income not exceeding Rs 5 lakh are eligible for a rebate under Section 87A, effectively eliminating their tax liability.
The government is expected to announce income tax cut for individuals in the upcoming Union Budget 2025-26.
According to reports, in the upcoming Budget 2025 session of Parliament, the government is likely to introduce a new income tax bill to simplify the current I-T law, make it comprehensible and reduce the number of pages by about 60 per cent.
“The new Income Tax law will be introduced in the Budget session of Parliament. It will be a new law and not an amendment to the existing Act. Currently, the draft law is being vetted by the law ministry and it is likely to be brought in Parliament in the second half of the Budget session,” according to a PTI report citing a source.
Sitharaman in her July Budget had announced a comprehensive review of the six-decade old Income Tax Act, 1961, within six months.
