Tax deductions offered in Budget 2010

A bank employee counts currency notes at a cash counter inside a bank in Agartala February 26, 2010.

iTrust Financial Advisors (www.iTrust.in)

The finance minister made two announcements related to income tax deductions that are likely to please many individual taxpayers. These relate to the annual tax deduction under section 80C, and health care deductions under section 80D.

Let's show you how you can benefit.

Firstly, there will be a new section 80CCF inserted into the tax code towards a deduction in respect of an investment in long-term infrastructure bonds as may be notified by the government.

The deduction will be Rs 20,000 and this will be over and above the Rs 1 lakh deduction available under section 80C, 80CCC and 80CCD. It will be applicable from the start of the new financial year in April 2010.

As a result, you can save up to Rs 6,000 if you avail of this deduction by investing in long-term infrastructure bonds.

Secondly, it will now be possible to take a deduction under section 80D for contributions made to CGHS medical facilities (Central Government Health Scheme). CGHS is a health scheme available to serving and retired government servants. This facility is similar to the facilities available through health insurance policies.

The amount of aggregate amount of the deduction remains the same, which is set at Rs 15,000 per annum for self, spouse and dependent children, and an additional deduction of Rs 15,000 in case of an insurance policy for dependent parents, and Rs 20,000 in both cases if the insured is above 65 years of age. This deduction will be applicable from the start of the new financial year in April 2010.

Pre-budget expectations on what the Finance Minister might do to expand the scope of the section 80 deductions were high. Clearly, there was much by way of speculation. We're glad that at least some benefits are being offered.

For full coverage of Budget 2010 click here

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