India as a developing country carrying a population of more than a billion people have always given priority to tax revenues and its periodic structural reforms. Income tax constitutes to 14% of total revenue of the country while all non-tax revenues together contribute 13% to the GDP (2016-17 data). The sum of income tax and corporate tax constitutes the 1/3rd of the total revenue of the country. The government is able to spend whopping amounts of expenditure on other sectors such as Education, Public works, administration, defence, public sector undertakings, and other sectors which are less lucrative because the other sectors are able to generate ample revenue to support the same. Tax revenues have always been steady, and mostly growing, and has hence become the most dependable source of revenue. The tax rates cannot be increased at once beyond a certain limit since only a small proportion of the population derives high scales of income, and the rest of the country falls too far below. In order to reduce this gap, and to advance a token of appreciation to the taxpaying citizens, the government introduce exemptions and deductions from time to time.
The most popular of such deductions are listed in Chapter VIA of the Income Tax Act from section 80C to 80U.
The aggregate amount of the deductions u/s 80C – 80U cannot exceed the gross total income (after excluding short-term capital gain on sale of shares, and Long-Term Capital Gains, and incomes from certain investments (return on investments/Capital gain on transfer of such investments made by foreign companies, FIIs, NRIs or those from GDS, bonds or investments purchased in foreign currency referred to in sections 115A, 115 AB, 115 AC, 115 AD and 115 D) of the assessee.
Some popular deductions under chapter VIA:
There are many more sections under chapter VI A that deals with deductions in respect of certain kinds of income. Those sections are framed exclusively for the development of certain sectors of the economy, and hence they need to be discussed in detail.