In India, the income tax department suggests income tax slabs and income tax is calculated based on those and the rates for the applicable financial year (FY) and assessment year (AY). The Finance Minister reveals the income tax slab for AY 2023-24 as part of the Union Budget 2022-23.
You must pay income tax based on the slab system into which you fall. You may fall into a different tax bracket depending on your income. As a result, people with higher incomes will have to pay more taxes.
The slab system keeps the country’s tax system equitable. The slabs change with each budget announcement.
As of the most recent budget, there are two tax regimes: old and new. Each has its benefits, and you decide yours after analyzing them.
These new regimes also got modifications on tax deductions and exemptions. In this article, let’s learn more about income tax deductions for AY 2023–24.
What Deductions Are Allowed for Income Tax?
The Income Tax Act of India allows deductions and exemptions to save hard-earned money from paying taxes. You can claim these deductions while filing your income tax returns and benefit from them. Section 80C is the most popular section for claiming deductions. You can claim up to Rs.1.5 Lakh under this section.
The list that comes under section 80C for deductions is,
1. Public Provident Fund
2. National Savings Certificate
3. National Pension Scheme
4. Employees Provident Fund
5. Tuition fees
6. Post Office tax-saving deposits
7. Five-year bank deposit
8. Life Insurance Premium
9. Equity Linked Saving Schemes
10. Sukanya Samriddhi Account Deposit Scheme
11. Post Office Senior Citizens Savings Scheme
You can claim deductions in these categories under section 80C.
There are also deductions under other sections of the income tax act of
India. These sections include,
Section 80CCC, 80CCD, 80D, 80DD, 80DDB, 80CCG, 24D, 80E, 80EE, 80EEA, 80G, 80TTA, 80U.
All these sections have options that help you to claim deductions.
What Is the Exemption Limit of Income Tax?
According to the old tax regime of the income tax act of India, if your gross income is below Rs.2.5 Lakhs, you are not liable to pay tax. It holds if you are below 60 years. In the case of senior citizens, you need not pay tax if your gross income is below Rs. 3 Lakhs annually. For people above 80 years, the exemption limit is Rs. 5 Lakhs annually.
Other than this basic limit for tax liability, if you are liable to pay the tax you can claim deductions under various sections of the income tax act. The maximum limit for these deductions under the old regime is Rs.1.5 Lakhs. This means you cannot claim any deduction above 1.5 Lakhs.
What Are 80C Exemptions?
Section 80C is the most crucial and popular section for deductions. The maximum exemption limit in the section is ₹1,50,000. Various instruments that come under this section are PPF, EPF, term insurance, NPS, etc.
Public Provident Fund
If you have contributed to the Public Provident Fund (PPF), you can file for tax deduction under Section 80C. The maximum limit of the Public Provident Fund is Rs.1,50,000. Thus, it allows you to claim the entire amount as an exemption under this section.
Your voluntary contribution towards the provided fund is also eligible for tax deduction under Section 80C of the Income Tax Act.
Life Insurance Premiums
Premiums you pay for life insurance policies are also eligible for tax benefits under the 80C limit. Deductions under this instrument are available against policies held by self, spouse, dependent children, etc. Currently, an annual premium of up to 10% of the insurance policy’s total sum assured is tax-exempt under this scheme.
Your returns from the Employee Provident Fund (EPF) are eligible for deduction under Section 80C. It also includes the interest amount. However, you are eligible if you have been in service for at least five years. Your voluntary contribution to EPF also comes under tax exemptions of Section 80C.
Tax Saving FD
Few of the fixed deposit schemes offered by banks and post offices allow tax deductions under Section 80C. They have a lock-in period of 5 years and offer a maximum of Rs.1.5 lakh in tax exemption (on the principal amount). However, the returns on these fixed deposits are taxable.
If your investment in an infrastructure bond is equal to or higher than Rs.20,000, it is eligible for tax exemptions under Section 80C. This is applicable for long-term secured bonds as well. The maximum limit for these bonds is Rs.1.5 Lakhs.
Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana is a savings scheme designed to meet the financial requirements for a girl’s education and marriage. Parents or legal guardians of a girl child (not older than 10 years of age) can open this account, and parents of two or more (only in the case of twins) girls can also invest in this plan.
The interest earned from this investment scheme is eligible for tax exemption under Section 80C.
These are some of the 80C exemptions you can claim while filing your income tax returns.
How Much TDS Is Deducted from Salary per Month?
Your employer deducts TDS from your salary at the ‘average income tax rate. It is computed as follows:
Average Income tax rate = Income tax payable (calculated through slab rates) divided by your estimated income for the financial year.
The TDS rate on salary depends on the income you receive from your employer. You come under different tax slabs, based on your income. According to the tax slab, the rate for your TDS deduction on salary will range from 10% to 30%.
FAQs: Income Tax Deductions for AY 2023-24
1. How much amount can be exempted from income tax?
The maximum limit of exemption is Rs.1.5 Lakhs. You can claim this exemption under single or various sections combined.
2. How many deductions can I claim?
You can claim as many deductions as you are eligible for while filing your returns. However, the maximum limit for these exemptions is Rs.1.5 Lakhs.
Though you are eligible for more, you can only claim up to Rs. 1.5 lakh in deductions.
3. What is the deduction allowed under section 24 in income tax?
If you avail of a home loan, you can claim a deduction of up to Rs 2 Lakhs on the interest of your home loan under Section 24. However, you must reside in your home to avail yourself of this benefit. The entire interest is waived off as a deduction when the house is on rent.
4. What tax deductions can I claim in India?
You can claim deductions under Section 80C, 80DD, 24, etc., as discussed above. They include various instruments like deductions on your,
- Public Provident Fund
- National Pension Scheme
- Interest in your Home Loan
- Fixed Deposit interests
- Life Insurance Premiums
- Employee Provident Fund
and many more. Use these benefits and claim deductions so that you can reduce your tax liability.
You might become aware of the various income tax deductions available in our country. These deductions are made to enhance the saving habits of people. Enjoy these deductions and save your hard-earned money from taxes.
I hope this helps; please let us know if you have any further questions.