Chapter VI-A Deductions: Boosting Your Tax Savings (Especially in the Old Regime)

Chapter VI-A of the Income Tax Act, 1961, is a crucial part of tax planning for many Indian taxpayers. It allows individuals and Hindu Undivided Families (HUFs) to reduce their taxable income by claiming deductions for various investments, expenditures, and contributions. These deductions are subtracted from your Gross Total Income to arrive at your Total Taxable Income, on which your final tax liability is calculated.  

While the introduction of the New Tax Regime (default for AY 2025-26 / FY 2024-25, but with the option to choose the Old Regime) has changed the landscape, understanding Chapter VI-A is still vital, particularly if you opt for the Old Tax Regime to maximize tax savings.

How Chapter VI-A Deductions Reduce Your Taxable Income

The basic principle is straightforward:

Gross Total Income – Deductions under Chapter VI-A = Total Taxable Income

A lower Total Taxable Income directly translates to a lower tax payable.

Key Deductions Under Chapter VI-A (FY 2024-25 / AY 2025-26)

Chapter VI-A encompasses a wide range of deductions, each covered under specific sections. Here are some of the most commonly utilized ones:  

1. Section 80C, 80CCC, 80CCD(1) – The Popular Trio (Overall Limit under Section 80CCE)

This is perhaps the most well-known group of deductions, allowing a maximum combined deduction of ₹1.5 Lakhs under Section 80CCE.  

• Section 80C: Covers various investments and expenditures like:
  • Contributions to Public Provident Fund (PPF), Employees’ Provident Fund (EPF), Voluntary Provident Fund (VPF).  
  • Investments in Equity Linked Savings Schemes (ELSS) of mutual funds.  
  • Investments in National Savings Certificates (NSC).  
  • Premium paid for Life Insurance Policy for self, spouse, or children.  
  • Repayment of Principal amount of Home Loan.
  • Tuition Fees paid for full-time education of up to two children in India.  
  • Investments in Tax Saving Fixed Deposits (with a lock-in of 5 years).  
  • Contributions to Sukanya Samriddhi Yojana (SSY).
  • Investments in Senior Citizens Savings Scheme (SCSS).  
• Section 80CCC: Deduction for contributions made to certain pension funds offered by insurance companies. The maximum deduction is ₹1.5 Lakhs, subject to the overall limit of Section 80CCE.  
• Section 80CCD(1): Deduction for employee’s contribution to the National Pension System (NPS) or Atal Pension Yojana. The deduction is limited to 10% of salary (Basic + Dearness Allowance) for salaried individuals or 20% of Gross Total Income for self-employed individuals, subject to the overall limit of Section 80CCE.  

2. Section 80CCD(1B) – Additional NPS Benefit

This section provides an additional deduction of up to ₹50,000 for contributions made by an individual to their NPS account. This deduction is over and above the ₹1.5 Lakh limit under Section 80CCE, effectively allowing a total deduction of up to ₹2 Lakhs for NPS contributions and other eligible investments/expenses under 80C/80CCC/80CCD(1).

3. Section 80CCD(2) – Employer’s NPS Contribution

This section allows a deduction for the employer’s contribution to the employee’s NPS account. The deduction is limited to 10% of the employee’s salary (Basic + DA) for most employers, and 14% for the Central Government employer. This deduction is available to the employee and is not part of the individual’s ₹1.5 Lakh or ₹50,000 limits. This deduction is available in both the Old and New Tax Regimes.

4. Section 80D – Health Insurance Premium and Medical Expenditure

This section allows deductions for:

• Medical insurance premium paid for self, spouse, and dependent children.  
• Medical insurance premium paid for parents.  
• Expenditure incurred on preventive health check-ups (up to ₹5,000 within the overall 80D limit).  
• Medical expenditure incurred on self or family or parents who are senior citizens and not covered by health insurance.

The maximum deduction limits vary based on the age of the insured individuals (below 60 or 60 and above/senior citizens). For FY 2024-25, the limit is generally ₹25,000 for self, spouse, and children, and an additional ₹25,000 for parents (or ₹50,000 if they are senior citizens). If the individual or any family member (including parents) is a senior citizen, the limit for premium/medical expenditure for that senior citizen is enhanced to ₹50,000. This deduction is available in both the Old and New Tax Regimes.

5. Section 80E – Interest on Education Loan

A deduction is allowed for the entire amount of interest paid on a loan taken for higher education (for self, spouse, or children). This deduction is available for the assessment year from which the assessee starts paying interest and for seven immediately succeeding assessment years or until the interest is paid in full, whichever is earlier. There is no upper limit on the amount of interest that can be claimed as a deduction under this section.  

6. Section 80G – Donations to Charitable Institutions

Deductions are available for donations made to certain notified charitable institutions and funds. The amount of deduction can be 100% or 50% of the donated amount, subject to certain conditions and a qualifying limit in some cases. Donations made in cash exceeding ₹2,000 are not eligible for deduction.  

7. Section 80TTA and 80TTB – Interest from Deposits

• Section 80TTA: Deduction up to ₹10,000 on interest earned from savings accounts held with a bank, co-operative society, or post office. This deduction is available to individuals and HUFs (excluding senior citizens).  
• Section 80TTB: Deduction up to ₹50,000 on interest earned from deposits (savings accounts, fixed deposits, recurring deposits, etc.) held with banks, co-operative societies, or post offices. This deduction is only available to senior citizens (individuals aged 60 years or more). Senior citizens cannot claim deduction under Section 80TTA.

8. Section 80U – Deduction for Person with Disability

A resident individual who is certified by a medical authority to be a person with a disability can claim a fixed deduction:

• ₹75,000 for a person with a disability.
• ₹1,25,000 for a person with severe disability.  

9. Section 80DD – Maintenance of a Dependent with Disability

A resident individual or HUF can claim a deduction for expenditure incurred on the medical treatment (including nursing, training, and rehabilitation) of a dependent relative with a disability, or for amount paid to an insurance scheme for the maintenance of such dependent. The deduction limits are the same as Section 80U: ₹75,000 for a dependent with a disability and ₹1,25,000 for a dependent with severe disability.  

10. Section 80DDB – Medical Treatment of Specified Diseases

A resident individual or HUF can claim a deduction for expenditure actually incurred on the medical treatment of certain specified diseases or ailments for self or a dependent. The maximum deduction is ₹40,000. This limit is increased to ₹1,00,000 if the expenditure is incurred for a senior citizen (aged 60 years or more). A medical certificate from a neurologist, oncologist, urologist, nephrologist, hematologist, immunologist, or other specified specialist is required.  

Chapter VI-A in the Context of Old vs. New Tax Regime (AY 2025-26)

For Assessment Year 2025-26 (covering income earned in Financial Year 2024-25), the New Tax Regime is the default option. However, taxpayers have the option to choose the Old Tax Regime.  

The crucial difference lies in the availability of deductions:

• Old Tax Regime: Allows taxpayers to claim a wide range of deductions under Chapter VI-A (including most of the sections mentioned above like 80C, 80D, 80E, 80G, 80TTA/80TTB, 80U, 80DD, 80DDB) and various exemptions (like HRA, LTA). This regime is often beneficial for individuals who make significant investments or incur eligible expenses.  
• New Tax Regime: Offers lower tax rates but allows very limited deductions and exemptions. The key deductions available in the New Regime for individuals include:
  • Standard Deduction of ₹50,000 (for salaried individuals and pensioners).  
  • Deduction under Section 80CCD(2) (Employer’s contribution to NPS).  
  • Deduction under Section 80CCH (Contribution to Agniveer Corpus Fund).  
  • Deduction under Section 80JJAA (for employment generation, mainly for businesses).  
  • Although the overall structure of the New Regime often makes relying heavily on such deductions less advantageous compared to the lower tax rates.

Taxpayers should carefully compare their potential tax liability under both regimes based on their income structure and the deductions/exemptions they are eligible to claim.

Importance of Documentation

To claim any deduction under Chapter VI-A, it is mandatory to maintain proper supporting documents. This includes investment proofs (receipts, certificates), premium payment receipts, loan statements, rent receipts (if claiming HRA, which impacts Gross Total Income calculation but is relevant for the regime choice), medical bills, doctor’s certificates, and donation receipts. The Income Tax Department may ask for these documents during assessment.

Conclusion

Chapter VI-A deductions provide valuable opportunities for taxpayers to reduce their tax burden, particularly under the Old Tax Regime. By strategically planning investments and expenditures in eligible avenues, individuals can significantly lower their taxable income. While the New Tax Regime simplifies the tax structure with lower rates, a thorough understanding of Chapter VI-A is still essential to make an informed choice between the two regimes and optimize your tax savings. Always keep your documentation in order to substantiate your claims.