3 min read
11 April 2023

The Income Tax Act, 1961 governs the levy and collection of income tax in India. A closer look at this Act will show you that income tax is fairly simple. The Act recognises five heads of income under which earnings are taxed. The rates of income tax depend on the level of a taxpayer’s total taxable income.

The Income Tax Act also has some beneficial provisions that help you save taxes and reduce your tax burden. These provisions are tax deductions available on specified investments and expenses. You can claim these deductions from your total income, reducing your taxable income – and, effectively, your overall tax liability.

Income Tax Slab Rates Under the Old and New Tax Regimes

To understand tax benefits available in the form of deductions as per the Income Tax Act, let us first look at the different tax rates as per the old and new tax regimes.

Income Tax Rates for Resident Taxpayers Under the Old Tax Regime

Income tax slab

Income tax rates for taxpayers aged below 60 years

Income tax rates for taxpayers aged 60 years or more, but below 80 years

Income tax rates for taxpayers aged 80 years or more

Up to Rs. 2,50,000

Nil

Nil

Nil

Rs. 2,50,001 to Rs. 3,00,000

5%

Nil

Nil

Rs. 3,00,001 to Rs. 5,00,000

5%

5%

Nil

Rs. 5,00,001 to Rs. 10,00,000

20%

20%

20%

Above Rs. 10,00,000

30%

30%

30%


Income tax rates for resident taxpayers under the new tax regime

Income Tax Slab

Income Tax Rate

Up to Rs. 2,50,000

Nil

Rs. 2,50,001 to Rs. 5,00,000

5%

Rs. 5,00,001 to Rs. 7,50,000

10%

Rs. 7,50,001 to Rs. 10,00,000

15%

Rs. 10,00,001 to Rs. 12,50,000

20%

Rs. 12,50,001 to Rs. 15,00,000

25%

Above Rs. 15,00,000

30%


Understanding income tax deductions

Once you compute your total earnings under the five different heads of income, you can claim applicable tax deductions. These deductions are offered on various eligible investments and expenses such as life insurance premiums, health insurance premiums, investments in PPF and more.

You can deduct the applicable amounts from your total income to determine your taxable income. Then, based on the income tax rate applicable for the slab, you need to pay taxes to the government.

The Most Important Tax Deductions You Can Claim as per the Income Tax Act, 1961

Most of the deductions available to taxpayers are contained in Chapter VIA of the Income Tax Act. In addition to this, other sections contain tax benefits for specific expenses. Check out the most important income tax deductions available below.

Section of the Income Tax Act

Particulars of the tax deduction

Maximum deduction allowed

Tax regime applicable

24(b)

Interest on home loan for self-occupied or let-out properties, taken for the purpose of construction, purchase, repair, or reconstruction


  • Rs. 2,00,000 for home loans taken on or after April 1, 1999 for construction or purchase of self-occupied properties
  • Rs. 30,000 for home loans taken on or after April 1, 1999 for repairs of self-occupied properties, or taken before April 1, 1999
  • Actual value of interest paid on home loans taken for construction, purchase, repair, or reconstruction of let-out properties

The deduction for interest paid on home loans for self-occupied properties is not available in the new tax regime

80C

Investments made in various schemes like Public Provident Fund (PPF), National Savings Certificate (NSC) etc., as well as different expenses like life insurance premium, home loan principal repayment, tuition fees, etc.

Total of Rs. 1,50,000 (including deductions claimed u/s 80CCC and 80CCD(1))

Available only in the old tax regime

80CCC

Contribution towards any annuity plan offered by LIC or any other pension scheme

Total of Rs. 1,50,000 (including deductions claimed u/s 80C and 80CCD(1))

Available only in the old tax regime

80CCD(1)

Any investments in specified pension schemes of the central government

Total of Rs. 1,50,000 (including deductions claimed u/s 80C and 80CCC)

Available only in the old tax regime

80CCD(1B)

Payments made to any pension schemes of the central government, excluding those covered u/s 80CCD(1)

Rs. 50,000

Available only in the old tax regime

80CCD(2)

Employer’s contribution to a pension scheme of the central government

14% of salary if the employer is the central government, and 10% of the salary if the employer is a state government, a Public Sector Undertaking (PSU) or other entities

Available in the old and new tax regimes

80D

Premium payments made for health insurance (taken for self, spouse, dependent children, or parents) and expenses incurred for preventive health checkups

Rs. 25,000 (or Rs. 50,000 if the policyholder is a senior citizen)

Available only in the old tax regime

80DD

Expenses incurred for maintenance and medical treatment of a dependent person who is disabled

Rs. 75,000 (or, in case of severe disability, Rs. 1,25,000)

Available only in the old tax regime

80DDB

Expenses incurred for medical treatment of specified diseases for self or any dependant

Rs. 40,000 (or, in case of senior citizens, Rs. 1,00,000)

Available only in the old tax regime

80E

Interest repayments made on education loans taken for higher education of self or relatives

Total interest paid during the financial year

Available only in the old tax regime

80EE

Interest on home loans below Rs. 35 lakh, sanctioned in FY 2016-17, for the purchase of a house property whose value does not exceed Rs. 50 lakh

Rs. 50,000

Available only in the old tax regime

80G

Donations made to specified charitable funds and schemes

100% or 50% of the donation made

Available only in the old tax regime

80TTA

Interest received on savings bank accounts

Rs. 10,000

Available only in the old tax regime


The most important takeaway from the above pointers is the distinction between the old and the new tax regimes. While the old regime allows for all the existing tax deductions, the tax benefits in the new regime are significantly limited.

If you already have a lot of deductible investments and expenses, opting for the old tax regime may be more suitable. On the other hand, if you do not have many deductible items in your portfolio, the new tax regime can give you concessional tax rates.

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Frequently asked questions

Can the income tax calculator help me determine deductions under Section 80C?

Yes, an Income Tax Calculator can assist in determining deductions under Section 80C. By inputting your eligible investments like PPF, life insurance premiums, and home loan principal repayments, the calculator provides an accurate estimate of your deductible amount, helping you optimize your tax savings effectively.