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India Individual - Deductions

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Employment expenses

A standard deduction from salary income has been increased from INR 40,000 to INR 50,000 effective 1 April 2019.

Deduction from total income

Personal deductions

  • No deductions are available for interest or taxes paid to tax authorities. Deductions up to certain limits are allowed for contributions to approved charities and to a very limited extent, allowances for children’s education/ hostel expenses received from the employer.
  • A deduction from income is available upto INR 0.15 million for investments made in the tax year in certain eligible schemes in India, namely –
    • Life insurance premium on the life of self, spouse or any child
    • Contribution by employee to recognise provident fund
    • Contribution to public provident fund/ National Pension System (NPS)
    • Contribution to a tax plan of an Indian mutual fund
    • Tuition fees of any university, college, school or other educational institution in India for the purpose of full-time education of the individual, spouse or any child
    • Repayment of housing loan (principal), etc.
  • An additional deduction of up to INR 50,000 over and above the aforesaid limit of INR 0.15 million will be also available on the individual’s contribution to notified pension scheme of the Government, i.e. NPS.
  • An additional deduction up to 10% (14% in case of contribution made by Central Government) of salary is available in respect of employer’s contribution to NPS.
  • At the time of retirement, an individual can withdraw a lump-sum up to 60% of the corpus fund and balance 40% is required to be invested in an annuity plan. Such withdrawal of up to 60% of the corpus fund is exempt from tax. This applies to all subscribers. However, nothing would be taxable if the amount is received by the nominee due to death.
  • In case of partial withdrawal from NPS by employees, 25% of their own contribution is exempt from tax in the year of withdrawal.

Earlier, tax exemptions on withdrawal on account of closure or opting out of NPS was available only to employees. Tax Exemption is now available to every individual who are members of NPS scheme. 

Charitable contributions

On donation of a certain amount to certain approved funds, charitable institutions, etc., an individual can claim a deduction of 50% to 100% of the amount donated, subject to restrictions provided by the law. Deduction for funds, charitable institutions in excess of INR 2,000 to be allowed only if the donation is made otherwise than in cash.

Education expenses

An individual can claim a deduction for interest paid on a loan taken for the purpose of his higher education or of his relative (spouse, children or student for whom the individual is the legal guardian). It should be noted that the interest is paid by the individual out of his taxable income.

Medical insurance premium

  • A deduction is available for health insurance premiums or contributions made to an approved insurance scheme by an individual for insuring the health of the self, spouse and dependent children. The deduction available is up to INR 30,000 (INR 50,000 where any of the insured persons is a senior citizen). Further, an additional deduction of INR 30,000 is available for insuring one’s parents (INR 50,000 where either of the parents is senior citizen).
  • An amount of up to INR 5,000 spent on preventive health check-up of self, spouse, dependent children and parents is also eligible for deduction within the overall limit provided above.

The medical expenditure incurred for senior citizens (60 years and above) will be deductible up to INR 50,000 if no payment has been made towards any existing health insurance policy for such individuals.

Personal allowances

There are no personal allowances apart from the limited deduction for certain hardship related cost of living allowances in connection with postings in specified hilly, border, remote, or tribal areas.

Business expenses

Expenses relating to business income are allowed as a deduction from that income. Expenses incurred in relation to exempt income are not allowed as a deduction. 

See Deductions in the Corporate summary for more information on business expenses.

Losses

Type of loss to be carried forward to subsequent year(s) Income against which loss can be offset in the subsequent year(s) Number of years for which loss can be carried forward
Loss under the heading ‘income from house property’ ‘Income from house property’ only 8
Speculation business loss Speculation profits only 4
Unabsorbed depreciation Any income, except salary Perpetually
Business loss (other than speculation business losses) Any business profit 8
Short-term capital loss Any income under the head ‘capital gains’ 8
Long-term capital loss Long-term capital gains only 8

Last Reviewed - 03 October 2019

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