Basically there are four common deductions which people can avail for tax savings. They come under the section of the Income Tax Act.

80C deduction: Up to Rs.1 lakh, and used towards certain investments, payment of insurance premium, repayment of home loan principal amount, provident fund etc.

80D deduction: Up to Rs.15,000, and used towards annual medical expenses

80E deduction: Deduction of entire amount of interest paid on higher education loan for any family member

80G deduction: Deduction for contribution to charitable organization

Apart from these there are various other deductions which are not so common or might not apply to you.

Tax Deductions

An item which allows you to take a tax benefit up to the entire amount of the deduction is tax deduction. It reduces your taxable income by the amount of deduction.

Let’s take an example:

Arun’s annual income is Rs. 100

Arun’s eligible deduction is Rs. 30

Therefore, Arun’s taxable income is Rs. 70

If Arun did not have a deduction then his taxable income would have been Rs. 100

By using the deduction Arun has saved taxes on up to Rs. 30