All posts by TaxAcumen Team

Every individual tax payer always looking for the way to legally minimize their liability. Here, there are several deductions available under Chapter VI-A of the Income Tax Act that can lower your income tax. The amount of tax you have to pay can be reduced by lowering your gross total income through investments in certain plans or expenditure on qualified expenses.

One must know that, many sections for deductions are not available for those who opt for New Tax Regime tax payers.

Section	Feature
80C	Tax-saving investments and expenses
80CCC	Pension fund payments
80CCD(1), 80CCD(1B), 80CCD(2)	NPS contributions (self and employer)
80D	Medical insurance premium
80DD	Medical care of disabled dependents
80DDB	Treatment of specified diseases
80E	Interest on education loan
80EE	Interest on home loan (first home, FY 2016-17)
80EEA	Interest on housing loan
80EEB	Interest on electric vehicle loan
80TTA	Savings account interest
80TTB	Senior citizens’ deposits interest
80GG	Rent (without HRA)
80U	Deduction for disabled individuals
80G	Donations to charities
80GGB / 80GGC	Donations to political parties
80RRB	Royalty on patents
80QQB	Royalty income for authors

Section 80C – Deductions on Investments and Expenses

For tax savings, Section 80C is the most popular choice. Up to ₹1.5 lakh can be claimed annually for investments and payments, including Sukanya Samriddhi Yojana, EPF contributions, PPF deposits, life insurance premiums, ELSS mutual fund investments, NSC, tax-saving FDs, and Senior Citizens Savings Scheme.

Deductions are also available for principal repayments on home loans, stamp duty/registration costs, and tuition for two children.

Section 80CCC and 80CCD – Pension Schemes

A deduction for pension fund payments is permitted under Section 80CCC, up to a total of ₹1.5 lakh when paired with Section 80C.

The National Pension System (NPS) or Atal Pension Yojana contributions are deductible under Section 80CCD(1). Up to 10% of their salary may be claimed by salaried workers, and up to 20% of their gross total income may be claimed by independent contractors.

Additional payments to NPS are eligible for an additional ₹50,000 deduction under Section 80CCD(1B).

Employers are permitted to contribute to NPS under Section 80CCD(2); these contributions are not included in the ₹1.5 lakh limit.

Section 80D – Medical Insurance Premium

Premiums for health insurance are deductible under Section 80D. You and your family are eligible to receive up to ₹25,000 (or ₹50,000 if you are an elderly person), and your parents are eligible for an additional ₹25,000 or ₹50,000. Preventive health examinations are also eligible for up to ₹5,000 in reimbursement. You can receive up to ₹1 lakh in combined benefits if you and your parents are both elderly.

Medical Care for Dependents with Disabilities Under Section 80DD, deductions are permitted under Section 80DD if you spend money on a disabled dependant’s medical care, education, or rehabilitation. For a standard disability, you can get ₹75,000, and for a severe disability, ₹1.25 lakh.

Section 80DDB – Medical Treatment of Specified Diseases

The costs of treating some serious illnesses, such as cancer or kidney failure, can be deducted under Section 80DDB. If you are under 60, you can claim up to ₹40,000, and if you or your dependant are an elderly person, you can claim up to ₹1 lakh.

Section 80E – Education Loan Interest

For yourself, your spouse, your children, or a student for whom you are a legal guardian, Section 80E permits you to deduct interest paid on an education loan taken out for further education. From the year you begin loan repayment, you can take use of this benefit for eight years.

Section 80EE / 80EEA – Interest on Home Loan

Only homeowners (individuals) who owned a single home on the loan approval date are eligible for the deduction under section 80EE.

Only if the loan was taken out during FY 2016–17 can this deduction be claimed starting in FY 2016–17.

An extra ₹1.5 lakh can be deducted from interest paid on loans taken out for affordable housing under Section 80EEA.

Section 80EEB – Interest on Electric Vehicle Loan

A deduction of up to ₹1.5 lakh can be made under Section 80EEB for interest paid on loans for the purchase of electric vehicles. This encourages people to take eco-friendly transportation.

Section 80TTA / 80TTB – Interest on Deposits

Individuals and HUFs may deduct up to ₹10,000 in interest from savings accounts under Section 80TTA.

Senior adults are eligible for a higher deduction limit of ₹50,000 on interest generated from bank and post office accounts under Section 80TTB.

Section 80GG – Rent Paid

If you do not receive House Rent Allowance (HRA) from your employer, you can deduct the amount of your rent under Section 80GG. There are limitations on the deduction depending on your income and rent amount.

Section 80U – Deduction for Disabled Individuals

According to Section 80U, individuals with disabilities are eligible to receive ₹75,000 for a normal disability and ₹1.25 lakh for a severe disability.

Section 80G – Donations to Charitable Institutions

Donations made to authorised charitable organisations and funds are deductible under Section 80G. Depending on the fund’s eligibility, you can claim either 100% or 50% of the donation amount. You must use banking channels to make donations beyond ₹2,000.

Section 80GGB / 80GGC – Political Contributions

Companies that donate to political parties or electoral trusts may deduct their expenses under Section 80GGB.

The same advantage is offered to individual taxpayers under Section 80GGC.

Section 80RRB – Royalty on Patents

Section 80RRB permits you to claim up to ₹3 lakh or the actual income, whichever is less, if you get royalties from a registered patent.

Authors of books (excluding textbooks) can claim a deduction of up to ₹3 lakh under Section 80QQB on their royalty income.

An indirect tax is one that is levied on the consumption of goods and services. It is not applied immediately to a person’s earnings. Instead, the seller must pay the tax in addition to the price of the goods or services they bought. An indirect tax is collected and paid to the government by an individual in the supply chain, such as a manufacturer or retailer.

However, when a customer buys a good or service, the producer or retailer incorporates the tax in the price. The buyer ultimately pays the tax by increasing the product’s price.

The indirect tax structure in India can be better understood by looking at the following list of indirect taxes:

Goods and Services Tax (GST)

One of the most significant reforms in India’s tax structure, GST, or Goods and Services Tax, has replaced many older levies that once fell under different types of indirect taxes. Introduced on July 1, 2017, GST consolidated multiple state and central taxes into a single tax applied to the supply of goods and services across the country.

GST is structured to promote transparency and remove the cascading effect of tax-on-tax. It is applicable at every stage of the supply chain, right from the manufacturer to the end consumer. The tax you pay is divided among different authorities based on the nature of the transaction:

• Central Goods and Services Tax (CGST): Collected by the central government on intra-state sales (within the same state).
• State Goods and Services Tax (SGST): Collected by the state government on intra-state sales.
• Integrated Goods and Services Tax (IGST): Collected by the central government on inter-state transactions (between different states).
• Union Territory Goods and Services Tax (UTGST): Applied in Union Territories where SGST does not apply.

Different slabs of GST rates—0%, 5%, 12%, 18%, and 28%—are distinguished based on the goods or services being offered. The majority of consumer products and services are between 5% and 28%, apart from certain requirements.

GST has made it easier for businesses to comply with the tax system and guaranteed that you, as a consumer, pay a more efficient and transparent tax.

Customs Duty

According to the Customs Act of 1962, customs duty is a tax levied on the import and export of commodities. Basic customs duty, countervailing duty, and anti-dumping duty are some of its constituent parts. In addition of generating money, customs taxes also aid in controlling international trade and safeguarding local businesses.

Excise duty

Previously a significant indirect tax on Indian manufacturing, excise duty is now only applied to specific goods including alcohol, tobacco, and petroleum products. Other products are now subject to the GST system. The central government and state governments in these exempted categories still rely heavily on excise duty as a source of funding.

Value Added Tax (VAT) and Sales Tax

Value Added Tax (VAT) and Sales Tax were the two main state-level taxes on the sale of products prior to the introduction of the Goods and Services Tax (GST). VAT still applies to petroleum items and alcoholic drinks, which are exempt from the GST structure because of constitutional requirements, even though the GST has replaced them for the majority of goods.

Stamp Duty

State governments impose stamp duty, a tax, on a variety of legal documents, including agreements, sale transactions, and property transfers. Stamp duty is a separate fee on transactions involving immovable property and is not included in the GST. It is governed by the Indian Stamp Act, 1899, and the legislation of the respective states.

Entertainment Tax

Now mostly incorporated into GST, the entertainment tax was previously imposed by state governments on services including cable TV, amusement parks, and movie tickets. It may still be applied to certain entertainment services that are not included by the GST system, however, by certain states and local governments.

A Direct Tax is one that is levied upon a person or entity and paid to the government directly. It is impossible to transfer the tax burden to another person.

These are few types of direct tax:

Income Tax (IT)

According to the provisions of the Income Tax Act of 1961, income tax is a tax that is directly imposed on the earnings that individuals, Hindu Undivided Families (HUFs), businesses, limited liability partnerships (LLPs), enterprises, and other entities earn. Five categories are used to categorise the Income: Capital Gains, Profits and Earnings from Business or Profession, Income from House Property, Income from Salaries, and Income from Other Sources. After calculating the relevant deductions and exemptions (such as those provided by Sections 80C, 80D, etc.), tax is due on the total taxable income. Through the Finance Act, the government updates tax rates and slabs every year (Union Budget). The Government of India receives most of its revenue from income tax.

Corporate Tax

According to the Income Tax Act of 1961, Corporate tax is imposed on the net profit of businesses, both local and foreign. While international corporations are only taxed on their income made in India, domestic companies are taxed on their entire income. Under Sections 115BAA and 115BAB, businesses may choose to use concessional rates, subject to specific requirements. Companies may also be required to pay health and education cess and surcharges in addition to corporate tax. India’s revenue is largely derived from corporate taxes, particularly from big businesses in industries like manufacturing, finance, and information technology.

Capital Gains Tax

When Capital Assets, such as buildings, land, gold, shares, and other valuable property, are sold or transferred, the profits are subject to capital gains tax. It is divided into two categories according to the period of time the asset is held: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). Depending on the asset type and holding duration, the tax rate changes.

Securities Transaction Tax (STT)

The Securities Transaction Tax (STT) is a direct tax levied on securities-related transactions carried out on authorised stock exchanges, including the buying and selling of shares, derivatives, and equity-orientated mutual funds. In order to streamline the taxes of stock market transactions, it was created by the Finance Act of 2004. Different transaction types have different STT rates. Depending on the nature of the transaction, the buyer, seller, or both may be responsible for paying the tax, which is collected by stock exchanges.

Gift Tax

The 1958 Gift Tax Act served as the original legislation governing gift tax; however, it was repealed in 1998. Gift taxation is now regulated under Section 56(2)(x) of the Income Tax Act of 1961. The amount of gifts given to an individual or HUF in a fiscal year that exceed ₹50,000 in value (apart from certain relatives or exempt categories) is taxed as income from other sources. Some presents, including those given as a marriage present or as an inheritance, are still excluded.

Wealth Tax (Abolished)

A direct tax referred to as wealth tax was imposed on the net worth of specific people, HUFs, and businesses if it beyond the specified amount. It was regulated by the 1957 Wealth Tax Act. Real estate, gold, expensive cars, and jewellery were all subject to wealth tax. The Finance Act of 2015 eliminated wealth tax for the Assessment Year 2016–17 due to the high expenses of compliance and low revenue yield. However, in order to maintain transparency and stop tax evasion, high-value assets are still required to be reported on income tax returns.

Taxation is an essential resource for governance and revenue collection, and it is a sovereign right. The Constitution of India establishes the basis for taxation and divides authority between the central government and state governments.

In India, taxes are imposed in accordance with laws passed by the state and central governments. Direct and indirect taxes are the two main categories of taxes, and several acts and constitutional clauses regulate how they are implemented.

Constitutional Framework

The power to levy taxes in India is derived from:

Article 265: “No tax shall be levied or collected except by the authority of law.”

Article 246: Distribution of legislative powers under three lists:

• Article 246(1): Union List
• Article 246(3):  State List
• Article 246(2): Concurrent List

Seventh Schedule: Subjects on which central, state, or both can levy taxes.

Classification of Taxes

Direct Tax: One cannot transfer direct taxes to another party; they are imposed directly on people or organisations. Examples are corporation tax and income tax. They are progressive, which means that those with higher incomes pay more, so advancing income equality.

Indirect Tax: Imposed on products and services and have the possibility to be transferred from producers to consumers. Customs duty, excise duty, and GST are a few examples. Regardless of income, all consumers pay the same rate, making these regressive in general.

Criteria	Direct Tax	Indirect Tax
Nature	Progressive	Regressive
Example	Income Tax, Corporate Tax	GST, Customs Duty
Burden	On the taxpayer	Passed on to the consumer
Administered by	CBDT	CBIC
Compliance	Complex and documentation-heavy	Easy to collect at point of sale

Cess and Surcharge

The terms “cess” and “surcharge” are frequently confused. Article 270 of the Constitution refers to a cess, which is a form of tax collected for a particular purpose, such as infrastructure or education. However, as stated in Article 271, a surcharge is an additional tax that is imposed on top of already-existing taxes, typically to generate money for certain purposes.

The Consolidated Fund of India, which the government uses for public spending, receives the sums from both cess and surcharge. In the M/s. SRD Nutrients Pvt. Ltd. vs. Commissioner of Central Excise, Guwahati [SC 2017] case, the Supreme Court made it clear that the higher education and education cess should be regarded as a surcharge.

Advantages and Disadvantages

Aspect	Direct Taxes	Indirect Taxes
Nature	Progressive: determined by wealth or income	Regressive – same rate for everyone
Progress	Promotes income equality	The burden falls more on lower-income consumers
Transparency	Clearly specified and documented	Hidden in prices, consumers are unaware
Tax Burden	Cannot be shifted to others	Shifted to end consumers
Administration	Complicated filing and compliance procedures	Easily gathered at the moment of sale
Stability of Revenue	Predictable government revenue	Varies according to patterns in consumption
Impact on Inflation	Can aid in reducing inflation	Tends to cause inflation and price increases
Risk of Compliance	Increased chances of tax evasion	Integrated collection reduces evasion
Impact on Economy	Could discourage investment	Promotes saving; can be modified to meet policy objectives

This Article is here for educational purpose only. The Author here explains the very basic concept of Tax System in India.

In the 2020 budget, the Indian government introduced a new tax regime to simplify the tax system. Taxpayers have the option to choose between the old and new tax regimes under the existing tax system. Both regimes use different methods for calculating income taxes, and their tax slabs and deductions differ; each tax system has unique advantages over the others.

The old regime permitted several exemptions and deductions. The new regime, on the other hand, aims for a simple process of filing by eliminating most of these deductions while offering reduced tax rates. A major advantage of the new system for FY 2025–2026 is that the tax burden is zero for incomes up to ₹12,00,000.

Old Tax Regime

The traditional Indian tax system is referred to as the “old tax regime”. The HRA, LTA, Sections 80C and 80D, and other exemptions and deductions are available to taxpayers under this regime to reduce their taxable income and, consequently, their tax liabilities. The old and new tax systems are offered to the taxpayers according to their choice.

New Tax Regime

In 2020, the new tax system went into effect. Tax rates are lowered for all income levels. Most exemptions and deductions, including HRA, LTA, 80C, 80D, and others, are eliminated, somehow. This led to a lack of interest in the new tax system. Currently, the default tax system is the new one as well. In Budgets 2023 and 2024, the government made a few changes to increase the regime’s stability.

Features	Old Tax Regime	New Tax Regime (FY 2025-2026)
Tax slabs	Higher	Lower
Deductions/Exemptions	Numerous deductions and exemptions for various investments, expenses, and savings. These include deductions under Sections 80C, 80D, 80E, LTA, and house rent allowances.	Restricted major deductions or exemptions.
Standard Deduction	₹50,000	₹75000
Income eligibility for rebate u/s 87A	Up to ₹5,00,000 Rebate: 12,500	Up to ₹12,00,000 Rebate: 60,000
Complexity	Complex due to various deductions	Simplified tax filing
Best for	People who are claiming and paying home loan interest, HRA, etc.	People who do not claim HRA, House property loss due to loan repayment, etc.

Which regime is best to choose?

You should consider several criteria while deciding between the new and old tax regimes:

• Level of Income: Determine your yearly income and compare it to the tax slabs under the two regimes.
• Financial Objectives: Think about your financial goals. This can involve making a long-term investing plan or setting aside money for retirement. Through deductions, the previous administration promoted smart saving.
• Financial responsibilities: The old regime might have been preferable if planning for home loan, the income structure consists of HRA, where Sukanya samriddhi scheme is found more appropriate to investment for girl child, or any other financial planning.
• Tax Deductions: Speak with a financial counsellor or use a tax calculator. Before choosing, you can use this to compare the actual taxes due under the two regimes.

Tax slab for financial year 2025 – 2026

New Tax Regime

The revised tax slabs under the new regime that are applicable from 1st April 2025 are as follows:

Tax Slab	Tax Rate
Upto  Rs. 4,00,000	Nil
Rs. 4,00,001 – Rs. 8,00,000	5%
Rs. 8,00,001 – Rs. 12,00,000	10%
Rs. 12,00,001 – Rs. 16,00,000	15%
Rs. 16,00,001 – Rs. 20,00,000	20%
Rs. 20,00,001 – Rs. 24,00,000	25%
More than 24,00,000	30%

Old Tax Regime

The tax slabs under the old regime is unchanged for AY 2025-26 and AY 2026-27 are as follows:

Tax Slab	Tax Rate
Upto  Rs. 2,50,000	Nil
Rs. 2,50,001 – Rs. 5,00,000	5%
Rs. 5,00,001 – Rs. 10,00,000	20%
Rs. 10,00,001 – Rs. 15,00,000	30%
More than 15,00,000	30%

How to chose which Regime is better for you?

Taxpayers must know that NEW TAX REGIME has been set as default for all eligible taxpayers. One who wants to opt for the OLD TAX REGIME for tax computation, must select “OPT OUT” option within the due date of the return.

Also, the Taxpayer must mention Date of filing and Acknowledgement Number of the FORM 10-IEA for the same.

Disclaimer: The content here is only for reference and is subject to update time to time. To get to know the tax liability, consult your professional advisor or connect to our operation team via 91-9267970588 or taxacumen.consultancy@gmail.com

Introduction

A tax deduction granted by Section 87A of the Income Tax Act, 1961 to Indian residents (it is not applicable to HUFs, businesses, or firms) whose total income for a financial year does not exceed ₹5,00,000. This ceiling limit is for the old tax regime. If your yearly income is ₹5 lakh or less, you are eligible to receive a deduction on the income tax that you owe to pay. The deduction is equal to either ₹12,500 or 100% of the tax owed, whichever is less.

After deducting other expenses, such as those under Section 80C or 80D, this deduction is applied. Your income may therefore be exempt from income tax altogether if it falls below the ₹5 lakh threshold. But if your income even slightly exceeds ₹5 lakh, you would not be qualified for this rebate.

The Indian Government is promoting the new tax regime to follow for tax payers to provide many additional benefits for the same. In this context, the limit of 87A has been increased for those who opt for the new tax regime. The said limits according to the relevant year is being discussed here in the article below.

Key Points for Old Tax Regime

• Only applicable to individuals who are Indian residents and does not apply to Hindu Undivided  Family (HUF’s), Companies, or firms.
• Yearly total income is 5 lakh or less,
• Deduction is equal to either ₹12,500 or 100% of the tax owed, whichever is less,
• Deductions (like 80C, 80D, HRA) is allowed

*There is no change in limit for those who opt for the old tax regime for this particular exemption to be claimed. This above said limit is applicable to FY 2024- 2025 and FY 2025-2026 as well.

Key Points for New Tax Regime

• Only applicable to individuals who are Indian residents and does not apply to Hindu Undivided Family (HUF’s), Companies, or firms,
• Yearly total income is 7 lakh or less. (for FY 2024-20205)
• Deduction is equal to either ₹25,000 or 100% of the tax owed, whichever is less
• Deductions (like 80C, 80D, HRA) is not allowed (except NPS, EPF, standard deduction etc).

*In budget 2025, FM raised the limit of income to ₹ 12 Lacs for the exemption under section 87A from the Financial year starting from  1st April 2025, i.e. for FY 2025-2026 and rebate of Rs. 60,000 or 100%, whichever is less is allowed under the new regime for the same. 

Standard Deduction

Introduction: Pensioners and salaried individuals are allowed to claim the standard deduction without requiring proof or documentation from the salary or pension part of income. Here as well, there are two limits that have been provided to tax payers on the basis of old and new tax regimes. By lowering the gross salary, this deduction lowers the taxable income.

Eligibility: Only pensioners and salaried individuals are eligible for the deduction of 75,000 under the new tax regime and 50,000 for old tax regime.

For example, a salaried person making ₹7.75 lakh a year would qualify for the full ₹25,000 refund under Section 87A since their taxable income would be ₹7 lakh after the standard deduction for the year 2024 – 2025 as a financial Year.

Marginal Relief under Section 87A

Marginal relief has been introduced for those taxpayers who earn a little bit more than the rebate maximum (such as ₹7,01,000 under the new regime) from having to pay more tax than the additional income. To prevent this scenario, it has been provided.

Also, there is no provision of marginal relief for taxpayers who opt for the old regime, if income exceeds ₹5,00,000 even with ₹1. This benefit is available for the new tax regime taxpayers.

In case, the taxpayer is earning ₹5,00,001 under the old tax regime after all the deductions other than 87A, the person needs to pay tax on ₹5,00,001 ignoring the benefit of 87A. The taxpayer does not fall for the limit here to claim section 87A.

Example of Marginal Relief

• Income: ₹7,00,000 → Tax = ₹0 (after rebate)
• Income: ₹7,01,000
• Tax on ₹7,01,000 = ₹25,050
• Extra income = ₹1,000
• Extra tax = ₹25,050

The provision of marginal relief helps to avoid this unjust burden. The amount of tax that must be paid cannot exceed the amount which would be payable for the income of 7,00,000 and the minor excess income earned over the year. This means that instead of paying ₹25,050 in taxes, the individual will only pay ₹1,000.

Feature	Old Tax Regime	New Tax Regime (FY 2024-2025)
Eligibility	Resident Individuals	Resident Individuals
Rebate Income Limit	Total income ≤ ₹5,00,000	Total income ≤ ₹7,00,000
Maximum Allowable Rebate	₹12,500	₹25,000
Marginal Relief Available?	Not specifically stated	Yes, provided to avoid paying more tax on minor excess income
Deductions (like 80C, 80D, HRA)	Allowed	Not allowed (except NPS, EPF, standard deduction etc.)
Best for Whom?	Those whose income is below ₹5 lakh due to deductions	Those with incomes up to ₹7 lakh and no or few deductions

How to File a Section 87A Tax Rebate Claim

Step 1: Figure out how much money you made overall during your financial year.

Step 2: Reduce the amount of your tax deductions for investments, tax savings, etc.

Step 3: After deducting the tax deductions, calculate your total taxable income.

Step 4: Fill out your ITR by declaring your gross income and tax deductions.

Step 5: If your total income stays below certain thresholds, you can claim a tax refund under section 87A.

Disclaimer: The content here is only for reference and is subject to update time to time. To get to know the tax liability, consult your professional advisor or connect to our operation team via 91-9267970588 or taxacumen.consultancy@gmail.com