More Tax Saving Opportunities

Indian income tax law offers some benefits for certain types of incomes, popularly called Exempt Incomes and are covered in Section 10’s of the law.

Indian tax law also allows certain payments and investments that you make, to be reduced from your income hence lowering your tax liability. These are popularly called Tax Deductions and are generally covered under Section 80’s of the law.


Since you can use deductions to actively bring down your tax liability let’s first look at some important tax deductions with indicative maximum limits:

SectionTax Deductions for Payments & InvestmentsIndicative Max Limit
16(ia)Standard Deduction

A lumpsum amount reduced from an employee’s salary
Rs 50,000
80CPayments for life insurance premiums and certain types of Long-term tax-saving investments
– Life Insurance Premium
– Provident fund relating to employment
– PPF (Public Provident Fund)
– ELSS (Equity Linked Saving Scheme)
– NSC (National Savings Certificates)
– Tuition fees for children
– Home loan repayment
Rs 1,50,000
80CCDInvestment in NPS (National Pension System/Scheme)

Amount invested by you and employer (if employed)
Rs 2,00,000
80DExpenses for treatment of a family member with a disabilityRs 75,000
Rs 1,25,000 for a higher disability
80DDBExpenses for treatment of specified diseasesLower of: Amount actually paid or Rs 40,000 if less than 60 yrs or Rs 1,00,000 if more than 60 yrs

Amount paid to a recognised charitable institution
50% of contribution; 100% for certain charities
80GGRent for a house

You can claim this if you are self employed or where your employer does not pay you HRA (House Rent Allowance)
Lower of :
– Rent paid minus 10% of total income
– Rs. 5000/- per month
– 25% of total income
80TTAInterest Income

Amount of interest you earn can be claimed as a deduction
Rs 10,000
80USuffering from Disability

People suffering from specified disabilities can claim a deduction
Rs 75,000
Rs 1,25,000 for a higher disability
Income Tax Deductions

Exempt Incomes

Some important Exempt Incomes with indicative maximum limits are listed below.

SectionExempt IncomeIndicative Max Limit
10(1)Agricultural Income

Includes rent from agricultural land, agri-operations etc
10(5)Leave Travel Concession

Amount paid by employer to employee for travel in India
Depending upon type of travel and twice in 4 years

Amount of Gratuity received by an employee upon leaving employment
Limited by lower of
– a specified max amount
– percentage of salary
– actual Gratuity

Pension received on accumulated basis (and not monthly)
Percentage of such pension
10(10D)Amount received under a Life Insurance policy

Whether upon maturity of moneyback type of policies (some limits apply) or upon death (no limit)
For moneyback policies, limited depending upon premium as a percentage of the policy value
10(11) & 10(12Provident Fund

Applies to employment related provident fund or PPF (Public Provident Fund) for the following:
– Employer’s contribution to provident fund on behalf of employee
– Interest earned from provident fund
– Amount received from the provident fund at the time of termination
Multiple limits for different types of provident funds
10(13A)House Rent Allowance

Amount received by an employee from employer for renting a house
Lower of:
– 50% (In Metros) or 40% of salary
– Actual HRA
– Rent in excess of 10% of salary

Interest income received on specified securities and bonds
10(16)Scholarship for educationNone
Income Tax Exempt Income
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