The income tax law, allows the subtraction of some specified expenditures / investments from your gross total income, for the calculation of taxes.These specified expenditures/investments are covered under Chapter VI-A of the Income Tax Act under various sections (Section 80C -Section 80U).These deductions cannot exceed the gross total income.
Chapter VI-A Deductions
Chapter VI-A of the Income Tax Act features numerous sections, each specifying different types of expenditures or investments that may be subtracted from an individual's gross total income for tax calculation purposes. It is significant to note that the total deductions under this chapter cannot exceed the gross total income of the individual.
Key Sections under Chapter VI-A
- Section 80C: This is the most commonly utilized section for tax deductions. It encompasses a wide range of investments and expenses, including life insurance premiums, contribution to provident fund, and tuition fees, among others.
- Section 80D: This section pertains to the deduction of premiums paid towards health insurance for self, spouse, children, and parents.
- Section 80E: This section allows deductions for interest on education loans for higher studies.
- Section 80G: This section applies to donations made to specified relief funds and charitable institutions.
- Section 80U: This section provides deductions for persons with disabilities.
Each section carries its own rules and limits for deduction. As such, it is advised to consult with a tax consultant or a chartered accountant to understand these sections in depth and make the most of the tax benefits offered under Chapter VI-A.
Understanding Gross Total Income (GTI)
Gross Total Income is the aggregate income earned by an individual from various sources before allowing deductions under Chapter VI-A. It includes income from salaries, income from house property, profits from business or profession, capital gains, and income from other sources. The maximum amount of deductions that can be claimed under Chapter VI-A cannot exceed the Gross Total Income.