What is Chapter VI (A) & The Deductions It Offers

Now that the importance and key benefit of Chapter VI (A) have been established, let's quickly learn what Chapter VI A is. Also you need to keep in mind that Chapter VI A tax benefits can only be availed only if you have opted for the old tax regime as the new tax regime does not offer most if not any of these benefits.

The chapter contains various popular ways to save income tax like Section 80C, Section 80D, Section 80 CCD and more that allow an assessee to claim deductions from the total income earned during the financial year. The deductions under Chapter VI A are allowed on account of various tax-saving benefits, investments, donations, and others. Chapter VI A deductions help in reducing the tax load considerably.

The various subsections of Section 80 under chapter VI A make reductions in taxes to be paid possible. The overview of the section can be understood better in the following paragraphs.

But before learning about the deductions permissible under these sub-sections, learning about all the sections included in chapter VI A is crucial:

As we move to learn about chapter VI A deductions, let us get to the details of some of the popular Section 80 sub-sections and the types of investments, expenses or donations that allow tax savings:

80C: This is one of the most popular and availed sections under chapter VI A. It allows the most tax deductions of ₹1.5 lakh when clubbed with Sections 80CCC and 80CCD(1).

Deductions under chapter VI A for Section 80C are made possible because of various investments that allow deductions and help generate tax returns. Taxpayers need to remember that to avail of benefits in a financial year under this section of chapter VI A, the investments also need to be made in the same financial year.

The section applies not only to investments but also to expenditures.

Here's the list of expenditures and investments that can be claimed for deductions under 80 C of chapter VI A:

• Employee Provident Fund (EPF) & Voluntary Provident Fund (VPF)
• Public Provident Fund (PPF)
•   Life Insurance Policy Premiums
• Contribution to National Pension System (NPS)
• Payment of Tuition Fees
• Unit Linked Insurance Plan (ULIP)
• Five-Year Tax Saver FDs
• Sukanya Samriddhi Yojana
• Equity Linked Savings Scheme (ELSS)
• National Savings Certificate (NSC)
• Senior Citizen Savings Scheme (SCSS)
• Five-Year Post Office Time Deposit (POTD) Scheme
• Home Loan Principal Repayment

The schemes mentioned above are some of the more popular deductions that you can avail under Chapter VI A.

80CCC: The section of chapter VI A is responsible for deductions made against contributions to pension schemes. Clubbed with 80C and 80CCD (1), the deduction limit is ₹1.5 lakh.

80CCD (1): Contributions made to the central government's pensions funds are eligible for deductions under the section. The deduction limit under it is ₹1.5 lakh. If you are an employee, 10% of your basic salary and dearness allowance will be exempt from tax. In any other case, 20% of total income will be tax-free, but the limit remains the same.

80CCD (1B): Deductions under chapter VI A for this sub-section of 80CCD are considered for pension scheme self National Pension System (NPS)/NPS Swavalamban and Atal Pension Yojana. The tax exemption, in this case, is limited to ₹50,000.

80CCD (2): This section also deals with tax deductions related to corporate NPS and central/state government NPS subscribers. The tax benefit is 14% of basic + DA (dearness allowance) if the employer is the central government. In case of corporate NPS subscriber, this tax benefit is limited to 10% of basic + DA. The tax benefit of this sub-section of the Income Tax Act is over and above the Rs. 2 lakh overall limit offered by NPS u/s 80 C and 80 CCD(1B)

80D: Chapter VI A deductions under this section are made on health insurance premiums and premium paid for critical illness rider of life insurance policies. The max tax deduction limit under Section 80D is ₹1 lakh for a senior citizen paying health insurance premium for self and parents. A premium of up to ₹25,000 qualifies for deductions if you are a normal taxpayer. It is ₹50,000 for self and family if you are a senior citizen.

80DD: The section deals with deductions on maintenance that includes medical treatment of a dependent who is a person with a disability. The deduction limit under it is set as ₹75,000.

80DDB: Expenses made on medical treatment from an oncologist, neurologist, urologist, haematologist, immunologist, or any other specialist are covered under this section for deductions under chapter VI A. The deductions limit is ₹40,000.

80E: There is no upper limit on deductions in this section. Section 80E tax benefits apply to interest payments made towards education loans taken for higher education.

80EE: This applies to loans taken for purchases residential house property and sanctioned between 1^st April 2016 to 31^st March 2017. Chapter VI A dictates that the upper limit for deductions here is ₹50,000. However, this benefit can only be availed by a first time home buyer purchasing an affordable housing property.

80EEB: The section applies to purchasing an electric vehicle via a loan. The deduction is given on interest, and the maximum limit is ₹1.5 lakh.

80G: It deals with donations to funds or charitable institutions. The nature of the doner determines the deduction limit. It may be up to 100% of the donated amount.

80GG: The maximum deduction limit here is ₹5,000 per monthly or 25% of total yearly income, whichever is less. This Chapter VI A deduction applies to salaried individuals who do not have a House Rent Allowance salary component.

80GGA: The complete amount donated for scientific research or rural development can be claimed for deductions under this section of chapter VI A.

80GGC: The non-cash donations made to political parties qualify for deductions under this section. The deduction allowed under it is 100%.

80TTA: The maximum amount that can be claimed under this deduction of chapter VI A is ₹10,000. The section applies to interest on saving bank accounts. The limit doesn't apply to senior citizens.

80TTB: This tax benefit is available only to senior citizens, and tax deduction of ₹50,000 annually can be claimed under it.

80TTB: is also applicable to interest on savings and fixed deposit accounts held with banks or India Post Office.

80U: This is relevant for people with disability. The deduction amount varies with the kind of disability. The overall limit under this Chapter VI A deduction is ₹1.25 lakh annually.

While all the deductions under chapter VI A appear quite lucrative, valid documents must be presented while claiming benefits to avoid penalty. It must also be noted that these tax benefits only apply to those opting for the old tax regime.