indian tax system has two parts. direct taxes. indirect taxes.
direct taxes are on income or wealth. paid directly. indirect taxes are on goods and services. someone else collects and passes to government.
direct taxes are under cbdt. indirect taxes under cbic.
here are the direct tax types. the common deductions. what can be claimed.
direct tax types
direct taxes are imposed on individuals and companies based on income, property, or wealth. the burden cannot be transferred to someone else.
income tax.
paid by individuals and hufs based on annual income. different slabs for different income levels.
corporate tax.
paid by companies on their profits. domestic and foreign companies have different rates.
capital gains tax.
paid on profit from selling capital assets. property. stocks. gold. two types. short term. long term. depends on holding period.
securities transaction tax (stt).
charged on buying or selling securities on stock exchanges. collected at the time of trade.
direct tax vs indirect tax. quick table.
|
basis |
direct tax |
indirect tax |
| what it is on | income or wealth | sale or consumption |
| who pays | individuals, companies | end consumer |
| who administers | cbdt | cbic |
| can the burden be shifted | no | yes |
common deductions under chapter vi-a
old tax regime has deductions. new tax regime does not.
in the old regime, taxable income can be reduced using these sections.
section 80c. ₹1.5 lakh limit.
most popular deduction. up to ₹1.5 lakh per year.
what qualifies.
- life insurance premium
- epf contribution
- ppf contribution
- nsc
- tax-saving fd (5 year lock in)
- elss mutual funds
- home loan principal repayment
- children’s tuition fees
- sukanya samriddhi yojana
keep policy numbers or document ids handy when claiming.
section 80ccd(1b). extra ₹50,000 for nps.
over and above 80c. additional ₹50,000 deduction for nps contributions.
section 80d. health insurance.
deduction for medical insurance premiums.
- self, spouse, children: ₹25,000 (₹50,000 if senior citizen)
- parents: ₹25,000 (₹50,000 if senior citizen)
- preventive check up: ₹5,000 included in limit
if self and parents are both senior citizens, total deduction can go up to ₹1 lakh.
section 80e. education loan interest.
interest paid on education loan for higher studies. no upper limit. available for self, spouse, children, or legal guardian. for up to 8 years.
section 80dd. disabled dependent.
deduction for dependent with disability.
- 40% disability: ₹75,000 deduction
- 80% disability: ₹1,25,000 deduction
section 80ddb. specified diseases.
medical treatment for self or dependent for specified diseases.
- ₹40,000 deduction
- ₹1,00,000 if senior citizen
section 24(b). home loan interest.
interest paid on home loan.
- self occupied house: up to ₹2 lakh deduction
- let out property: full interest deduction allowed
what is not covered under 80c
many people think all investments qualify under 80c. that is not true.
national pension system (nps). nps has its own section. 80ccd(1b). not 80c. many investors put nps under 80c and miss the extra limit.
sukanya samriddhi yojana. covered under 80c. but many parents do not know. they miss the deduction.
children’s tuition fees. only for two children. full time education only. not coaching classes. not study abroad.
home loan principal. only after possession. not during construction phase. many people claim too early. notice comes later.
old regime vs new regime. which one to pick.
old regime allows deductions. new regime has lower rates but no deductions.
| income level | old regime | new regime |
| up to ₹5 lakh | no tax (rebate under 87a) | no tax (rebate under 87a) |
| ₹5-7.5 lakh | 20% with deductions | 10% without deductions |
| ₹7.5-10 lakh | 20% with deductions | 15% without deductions |
| ₹10-12.5 lakh | 30% with deductions | 20% without deductions |
| above ₹12.5 lakh | 30% with deductions | 25% (₹12.5-15 lakh) or 30% (above ₹15 lakh) |
for most people with deductions above ₹3-4 lakh, old regime works better. for people with minimal deductions, new regime is simpler.
common mistakes people make
one. claiming 80c without proof. keep receipts. keep policy documents. keep bank statements.
two. missing 80ccd(1b). many people forget this extra ₹50,000. it is separate from 80c.
three. not claiming 80d for parents. even if not living with them, the deduction can be claimed if premium is paid.
four. claiming home loan interest on under construction property. not allowed until possession. many people get notices for this.
five. choosing new regime without checking deductions. some people pick new regime because it sounds simpler. then they lose ₹2-3 lakh in deductions.
FAQs
1. what are direct taxes in india ?
A. taxes on income, profits, or wealth. income tax. corporate tax. capital gains tax. the burden is borne directly.
2. what is the difference between direct and indirect taxes ?
A. direct tax is on income. paid directly. indirect tax is on goods. collected by someone else and paid to government.
3. what deductions are available under section 80c ?
A. life insurance. epf. ppf. nsc. tax saving fd. elss. home loan principal. children’s tuition. sukanya samriddhi. up to ₹1.5 lakh.
4. can both 80c and 80ccd(1b) be claimed ?
A. yes. 80ccd(1b) is extra. ₹50,000 more for nps contributions.
5. are section 80c and 80d available under new tax regime ?
A. these deductions are only for old tax regime. new regime has lower rates but no deductions.
