Tax deductions incentivize savings and investments while assessment procedures ensure statutory enforcement.
1. Deductions under Chapter VI-A (Sections 80C to 80U)
These deductions are allowed from the Gross Total Income to arrive at the taxable Net Total Income:
- Section 80C: Deductions for investments in Life Insurance Premium, Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificates (NSC), and school tuition fees. Maximum cumulative limit is capped at Rs. 1,500,000.
- Section 80D: Deductions for health insurance premium paid for self, spouse, children (up to Rs. 25,000; or Rs. 50,000 for senior citizens) and parents (additional Rs. 25,000/Rs. 50,000).
- Section 80G: Deductions for donations made to charitable funds and institutions (either 50% or 100% deduction based on the fund category).
2. Types of Income Tax Assessments
- Self-Assessment (Section 140A): The assessee calculates and pays their tax liability before filing their income tax return.
- Summary Assessment (Section 143(1)): An online, automated check of the tax return to correct arithmetical errors or incorrect claims.
- Scrutiny/Regular Assessment (Section 143(3)): A detailed investigation by the Assessing Officer to ensure the assessee has not understated income or underpaid tax.
- Best Judgment Assessment (Section 144): The Assessing Officer makes the assessment based on their best judgment when the assessee fails to file a return, respond to notices, or produce account books.