TABLE OF CONTENTS
- Who is this article for?
- What are Tax Deductions?
- Why are the Deductions provided?
- What are Tax Declarations?
- Type of Deductions available to individuals
- How to setup declaration settings
Who is this article for?
- Payroll Admins: This will help you understand how to setup declaration cut off dates and take action on employees' declarations
- Employees: This will help you understand how to make declarations in Keka
To understand tax declarations, let us first understand what are tax deductions.
What are Tax Deductions?
The Income Tax Act allows for various deductions from the taxable income of individuals. These deductions reduce the taxable income of the employee which in turn leads to a lower tax liability.
These deductions can be in the form of:
- Standard Deduction
- Deductions under Chapter VI A of the Indian Income Tax Act (Section 80C to 80U)
- Deduction for specific income like Interest on Home Loans, etc
- Tax exempt allowances
Why are the Deductions provided?
The deductions are meant to incentivise certain investments or expenses that are deemed desirable by the government.
What are Tax Declarations?
When an employee chooses to allocate certain part of their income to the tax deductible deductions , he/she can declare the same to their employer to reduce their tax liability and lower the monthly TDS deduction. These are called tax declarations.
Type of Deductions available to individuals
As we discussed in the previous articles, the Indian Tax Act offers two tax regimes:
- Old Tax Regime
- New tax Regime.
The old tax regime allows for a greater number of deductions, while the new tax regime provides lower tax rates but with fewer deductions.
Below is table showing some of the tax deductions available under the two regimes:
| Particulars | Old Tax Regime | New Tax Regime (From 1st April 2023) |
|---|---|---|
| Standard Deduction | ₹ 50,000 | ₹ 50,000 |
| HRA Exemption | ✓ | X |
| Leave Travel Allowance (LTA) | ✓ | X |
| Other allowances including food allowance of Rs 50/meal subject to 2 meals a day | ✓ | X |
| Standard Deduction (Rs 50,000) | ✓ | ✓ |
| Entertainment Allowance and Professional Tax | ✓ | X |
| Perquisites for official purposes | ✓ | ✓ |
| Interest on Home Loan u/s 24b on: Self-occupied or vacant property | ✓ | X |
| Interest on Home Loan u/s 24b on: Let-out property | ✓ | ✓ |
| Deduction u/s 80C (EPF, LIC, PPF, ELSS Funds, etc) | ✓ | X |
| Employee's (own) contribution to NPS | ✓ | X |
| Employer's contribution to NPS | ✓ | ✓ |
| Medical insurance premium - 80D | ✓ | X |
| Disabled Individual - 80U | ✓ | X |
| Interest on education loan - 80E | ✓ | X |
| Interest on electric vehicle loan - 80EEB | ✓ | X |
| Donation to Political party/trust etc - 80G | ✓ | X |
| Savings Bank Interest u/s 80TTA and 80TTB | ✓ | X |
| Other Chapter VI A deductions | ✓ | X |
| All contributions to Agniveer Corpus Fund - 80CCH | ✓ | ✓ |
| Daily Allowance | ✓ | ✓ |
| Conveyance Allowance | ✓ | ✓ |
| Transport Allowance for a specially-abled person | ✓ | ✓ |
It is important to note that these deductions have certain conditions and limits, and employees need to comply with these to claim the deductions.
To read about the deductions in details, click here: Income Tax Deductions
Related Links:
Declaring investments for tax saving
How can employees declare income tax?
Was this article helpful?
That’s Great!
Thank you for your feedback
Sorry! We couldn't be helpful
Thank you for your feedback
Feedback sent
We appreciate your effort and will try to fix the article