Deduction under Income Tax Chapter VI-A · deduction of income so allowed for various years shall...

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Deduction under Income Tax Chapter VI-A

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Gross Total Income vs. Total Income

Gross Total Income (GTI) means the aggregate of income computed under each head as per provisions of the Act

GTI is computed after giving effect to the provisions for clubbing of incomes and set off of losses, but before making any deductions under Chapter VIA of the Act

In order to compute ‘Total Income’, deductions under Chapter VIA are considered and adjusted from GTI

The aggregate amount of deductions under Chapter VIA cannot exceed GTI of the assessee

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Major Sections under Chapter VI-A

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80C

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80C

Available for individual or a Hindu undivided family

The total limit under this section is Rs 1.50 lakh from Financial Year (FY) 2014-15

Before FY 2014-15 the limit was Rs. 1 Lakh

Deduction is available if made investments or utilized money for below mentioned purpose:

• Life Insurance Premium - Policy must be in the assesse's or spouse's or any child's name (child may be dependent/independent, minor/major, or married/unmarried). For a HUF, it may be on life of any member of HUF

• Sum paid under non commutable deferred annuity for an individual on the life of the assesse, spouse or any child

• Sum deducted from salary payable to Government Servant for securing deferred annuity for self-spouse or child. Payment limited to 20% of salary

• Contribution made under Employee's Provident Fund Scheme or Recognized Provident Fund

• Contribution to a 15 year Public Provident Fund (PPF). Under the PPF scheme, maximum contribution is Rs 1,50,000 from Assessment Year 2015-16

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Section 80C

• Contribution to PPF for individual can be in the name of the assesse, the spouse or any child. For a HUF, it can be in the name of any member of the family

• Sum deposited in Five Year Deposit Scheme in Post Office

• Amount deposited under Senior Citizens Saving Scheme

• Subscription to any notified securities/notified deposits scheme. e.g. NSS

• Subscription to any National Savings Certificate e.g. NSC VIII issue and IX issue. Accrued Interest (which is considered reinvested) also qualifies for deduction for any year (except the last year)

• Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanraksha 1989 and contribution to Unit Linked Insurance Plan of UTI

• Contribution to notified Pension Fund set up by Mutual Fund or UTI

• Sum paid as subscription to Home Loan Account Scheme of the National Housing Bank or contribution to any notified deposit scheme/pension fund set up by National Housing Bank

• Subscription to deposit scheme of a public sector, company engaged in providing housing finance (public deposit scheme of HUDCO)

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Section 80C

• Payments of installments or part payments or repayment of loan taken for buying or constructing residential house property. Also allowed for stamp duty, registration fees and other expenses for purpose of transfer of such property to the assesse. However, if the property is transferred before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year

• Contribution to notified annuity Plan of LIC (e.g. Jeevan Dhara and Jeevan Akshay) or Units of UTI / notified Mutual Funds

• Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions

• Tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full time education of any two children (including payments for play school, pre nursery and nursery)

• Subscription to any notified bonds of NABARD (National Bank for Agriculture and Rural Development)

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Section 80CCC

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80CCC

The deduction u/s 80CCC is available to an individual assessee

Also available to a non resident individual

Another condition for claiming deduction u/s 80CCC is that the amount of contribution paid in respect of which deduction has to be claimed, must have been paid out of the income chargeable to tax of the concerned individual assessee

Contributions made towards pension plans of LIC or other insurers are eligible for deduction u/s 80CCC

The amount of deduction u/s 80CCC together with deduction available u/s 80C is maximum Rs. 1.5 Lacs

Where deduction has been allowed u/s 80CCC, deduction u/s 80C will not be available in respect of the payment towards such annuity plan

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Section 80CCG

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80CCG

A new scheme was introduced to encourage flow of saving in financial instruments and improve the depth of domestic capital market

Also aims to promote an ‘equity culture’ in India

Expected to widen the retail investor base in the Indian securities markets and further the goal of financial stability and financial inclusion

The Scheme is named after the former Prime Minister of India Mr. Rajiv Gandhi

Provide for a one time deduction to a resident individual

Who acquires listed equity shares in a previous year in accordance with a scheme notified by the Central Government

The deduction was 50 % of amount invested in such equity shares or ₹ 25,000, whichever is lower

Maximum deduction of ₹ 50,000 in such listed equity shares

Gross total income of the assessee for the relevant assessment year should be less than or equal to ₹ 10 lakh

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Section 80CCG

Assessee should be a new retail investor as per the requirement specified under the notified scheme

The investment should be made in such listed investor as per the requirement specified under the notified scheme

Minimum lock in period in respect of such investment is three years from the date of acquisition in accordance with the notified scheme

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Section 80DD

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80D

This deduction is allowed only to an individual (resident / non resident/ Indian citizen/ foreign citizen) or a Hindu undivided family (resident/ non resident)

Payment is made towards premium for mediclaim policy

Fixed benefit policies like personal accident and critical illness policies do not qualify for this deduction

In case of the individual taxpayer, following payment also qualifies for the deduction

Payment made to the Central Government Health Scheme

Preventive health check-up will also qualify towards this deduction

Payment has to be made by a mode other than cash (e.g. credit card, cheque, net banking etc.)

Deduction under Section 80D is not allowed for payment through cash

However, payment on account of preventive health check-up can be made by any mode (including cash)

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Section 80DD

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80DD

To be claimed by Resident Individual/HUF

May be ordinary resident Indian or Not ordinary resident Indian

May be foreign citizen or Indian citizen

Non resident can not claim this deduction.

Incurs any expenditure for the medical treatment, training and rehabilitation of a disabled dependant or

Deposits any amount in schemes like Life Insurance Corporation for the maintenance of a disabled dependent

Deduction of Rs 50,000 is available

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Section 80E

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80E

Available to an individual, not to HUF or other type of Assessee

Amount of interest paid is eligible for deduction

No cap on the amount to be deducted

No benefit available on the repayment of principal amount of the loan

If Interest is been paid during the previous year and was paid out of income chargeable to tax

Interest should have been paid on loan taken by him

Loan from any financial institution or any approved charitable institution for pursuing his higher education

Interest on Loan taken from relatives or friends will not be eligible

Higher education means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognized by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so

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Section 80E

Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian

Parents are also eligible to claim deduction of interest paid by them on loan taken for their children’s education

Deduction shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by the assessee in full, whichever is earlier

The tax benefits on education loan are only valid once you start the repayment and moreover they are only available up to eight years

If loan tenure exceeds eight years, cannot claim for deductions beyond eight years

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Section 80E

Loan should be in the name of Individual

If parents, spouse or sibling has taken the loan for your studies, then individual not entitled to get tax benefit

The loan includes not only tuition or college fees but also other incidental expenses for pursuing such studies like hostel charges, transport charges etc

Repayments of education loan NOT covered under Section 80C

Course may be in or outside India

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Section 80G

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80G

Section 80G has been introduced by Government to give tax benefits on donations

The amount donated towards charity attracts deduction under section 80G of the

Income Tax Act, 1961

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Section 80G

Available to all kind of Assessee

Donations made to foreign trusts do not qualify for deduction

Donation to Political Parties is not eligible for deduction

Only donation made to made to prescribed funds and institutions qualify for deduction

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Section 80G

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Deduction of Donation Under Section 80G

Without anyMaximum Limit

Subject to Maximum Limit of 10% of adjusted gross

total income

100% deduction of the amount

donated


donated


donated


donated

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Without any Maximum / Qualifying Amount


Donations with 100% deduction without any qualifying limit

Prime Minister’s National Relief Fund National

Defense Fund Prime Minister’s Armenia Earthquake Relief Fund

The Africa (Public Contribution – India) Fund

The National Foundation for Communal Harmony

Approved university or educational institution of national eminence

The Chief Minister’s Earthquake Relief Fund, Maharashtra

Donations made to Zila Saksharta Samitis

The National Blood Transfusion Council or a State Blood Transfusion Council

The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund

Army Central Welfare Fund, Indian Naval Ben. Fund, Air Force Central Welfare Fund

National Illness Assistance Fund

Chief Minister’s or Lt. Governor’s Relief Fund

National Sports Fund National Cultural Fund

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Government or local authority or institution or association towards promoting family planning

Central Government's Fund for Technology Development & Application

National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities

Indian Olympic Association or other such notified association

Andhra Pradesh Chief Minister’s Cyclone Relied Fund

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Jawaharlal Nehru Memorial Fund

Prime Minister’s Drought Relief Fund

National Children’s Fund

Indira Gandhi Memorial Trust

The Rajiv Gandhi Foundation Donations to government or local authority for charitable purposes (excluding family planning)

Authority or corporation having income exempt

Donations for repair/ renovation of notified places of worship

World Vision India

Udavum Karangal

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With Maximum / Qualifying Limit of 10% of Adjusted Gross Income


Maximum / Qualifying Limit

The qualifying limits u/s 80G is 10% of the adjusted gross total income

The limit is to be applied to the adjusted gross total income

The ‘adjusted gross total income’ for this purpose is the gross total income (i.e. the sub total of income under various heads) reduced by the following:

• Amount deductible under Sections 80CCC to 80U (but not Section 80G)

• Exempt income

• Long-term capital gains

• Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies

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Donations with 100% deduction with qualifying limit

Donations to the Government or a local authority for the purpose of promoting family planning

Sums paid by a company to Indian Olympic Association

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Donations with 50% deduction with qualifying limit

Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning

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Section 80TTA

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80TTA

Available if total income of an assessee includes any income by way of interest on deposits in a savings account with

• Bank

• Co-operative society engaged in carrying on business of banking

• Post Office

Maximum Deduction – Rs 10,000

Available for Individual or a Hindu undivided family,

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Section 80U

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80C

80CCC

80CCG

80D

80DD

80E

80G

80TTA

80U


Section 80U

Deduction available in case of a person with disability

Certified by the medical authority to be a person with disability

Deduction

• Severe Disability Rs 100,000

• Others Rs 50,000

Furnish a copy of the certificate issued by the medical authority in the prescribed form and manner

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Deduction in relation to royalty, copyright, etc.

Deduction u/s 80QQB

Eligibility – Deduction in respect of royalty or copyright fees of authors

Maximum Deduction in case of lump sum consideration – 100% of the royalty income etc. subject to a maximum of Rs.3,00,000

Maximum Deduction in other cases – In case of royalty or copyright fees, not in lump sum consideration, maximum deduction is 15% of the value of books sold during the Previous Year

Deduction u/s 80RRB

Eligibility – Deduction in respect of royalty on patents

Maximum Deduction – 100% of such income subject to a maximum Rs.3,00,000

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Deduction for interest on loan for residential house property

Deduction u/s 80EE

Eligibility – Deduction in respect of interest on loan for residential house property

Conditions –

• Assessee has taken a loan from a financial institution during Financial Year 2013-14, for acquiring residential

house property.

• Amount of loan does not exceed Rs.25 lakhs.

• Value of house property does not exceed Rs.40 lakhs.

• Assessee does not own any residential house property on the date of sanction of loan

Maximum Deduction – Interest payable for the previous year shall be deductible for the

Assessment Year 2014-15 subject to a maximum of Rs.1 lakh

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Case Studies on Deductions


Case 1 – Deduction u/s 80C

Mr. N is employed at a gross salary of Rs.8,00,000. He gets Rs.15,000 interest on bank deposit. Hehas made the following investment/deposit during the year 2013-2014. Besides, interest of Rs.1,632on NSC-VIII, (purchased during the year 2008-2009) has been credited on them during the year2013-2014. Compute deduction u/s 80C for the Assessment Year 2014-2015.

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Case 1 – Deduction u/s 80C (Solution)

Computation of Deduction u/s 80C of Mr. N for the Assessment Year 2014-2015

40


Case 2 – Deduction u/s 80D

Mr. C, manager of L Ltd., has paid Rs.38,000 during the Previous Year 2013-2014 by way of medical insurance under GIC approved medical policies. The details are given as below:

For himself Rs.6,000

For Mrs. C, a Canadian citizen, resident in Toronto and not dependent on him Rs.5,000

For B, married son living with him and dependent on him Rs.3,000

For D, minor son resident in Toronto and not dependent on him Rs.3,000

For Mrs. B, daughter-in-law, dependent on him Rs.5,000

For E, a minor grandson dependent on him Rs.3,000

For K, father, 67 years, resident and dependent on him Rs.3,000

For M, mother, 66 years, resident in Toronto and dependent on him Rs.6,000

For Grandfather, dependent on him, 95 years of age and resident in India Rs.4,000

C has earned gross salary of Rs.2,50,000 during the year and also earns Rs.95,000 as interest from 7% Capital Investment Bonds, purchased on 31 May 2004. Compute his eligible deduction u/s 80D for the Previous Year 2013-2014 assuming the following situations:

I. Premium is paid by cheque from his salary income.

II. Premium is paid in cash from his salary income. He holds a valid receipt for cash payment.

III. Premium is paid by cheque out of interest from 7% Capital Investment Bonds, acquired on 31-5-2004.

IV. Premium is paid in cash out of interest from 7% Capital Investment Bonds, acquired on 1-6-2004.

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Case 2 – Deduction u/s 80D (Solution)

Computation of Deduction for Medical Insurance Premium u/s 80D

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Case 2 – Deduction u/s 80D (Solution) … contd.

Notes:

Medical insurance premium on spouse’s health is always eligible irrespective of whether the spouse is dependent on the assessee or not. The condition of dependency applies only in case of children and parents.

Medical premium on health of grandson, grandparents, daughter-in-law or son-in-law are not eligible for deduction u/s 80D.

Only the premium on health of dependent father will qualify for relaxation as a senior citizen. Since dependent mother is non-resident and, therefore, outside the purview of being a “senior citizen”. However, the premium for health of mother will qualify for the normal limit irrespective of the residential status.

Any premium paid in cash or by cheque or out of exempted income does not quality for deduction u/s 80D.

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Computation


Computation

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Income Head Particulars

Income from Salary

Income by way of allowance

Taxable value of perquisite

Less: Allowances / Taxes

Taxable income under the head "Salaries"

1


Computation

46


Income from house property

Adjusted net value

Less:Deduction under section 24

Taxable income under the head "Income from House Property"

2


Computation

47

Profits and gains of business or profession

Net profit as per P & L a/c

Add:Amounts which are not allowed

Taxable under the head "Profit and Gains of Business or Profession"

3


Computation

48


Capital gains

Amount of gains

Less:Amount exempt under sections 54

Taxable under the head "Capital Gains"

4


Computation

49


Income from other sources

Gross income

Less:Deductions under section 57

Taxable income under the head "Income from Other Sources"

5


Computation

50

Particulars Amount

Tax on net income xx

Add:Surcharge xx

Tax and surcharge xx

Add: Education cess and secondary and higher education cess xx

Less:Rebate under sections 86, 89,90, 90A and 91 (xx)

Less: Pre-Paid Taxes (xx)

Less: Tax deducted or collected at source (xx)

Less: Tax paid in advance / Advance Tax (xx)

Less: Tax paid on self assessment (xx)

Tax to be paid / (refund) xx

Particulars Amount

Total Gross Income (i.e. 1+2+3+4+5) xx

Less:Deductions under Sections 80C to 80U (xx)

Total income or net income liable to tax xx


Case Studies on Total Income Computation


Case 1 – Total Income Computation

R borrowed a sum of Rs.25,00,000 from the State Bank of India @ 12% p.a. on 1.5.2013 and purchased a house property for Rs.36,00,000 on the same day. He does not own any residential house property on the date of taking the loan. He has been using the house property for his own residence since its acquisition.

Compute the total income of R assuming he has salary income of Rs. 9,60,000 and he deposited Rs.1,30,000 in PPF during the previous year 2013-14.

52


Case 1 – Total Income Computation (Solution)

Computation of total income of R for Assessment Year 2014-15

Note:

Total interest @ 12% on Rs.25,00,000 for 11 months

= 25,00,000 × (12/100) x (11/12)

= Rs.2,75,000

53


Case 2 – Comprehensive Problem on Total Income

M, resident in India, furnishes the following particulars of his receipts and outgoings during the Previous Year 2013-2014.

Receipts:

I. Income from Salary Rs.2,00,000

II. Income from House Property Rs.3,00,000

III. Gross winning from crossword puzzle Rs.3,50,000

Outgoing :

I. Term deposits for a fixed period of 5 years with a scheduled bank Rs.15,000

II. Medical insurance premium:

a) For himself Rs.4,000

b) His wife, not dependent Rs.3,000

c) Mother, non-resident, 67 years, dependent Rs.5,000

III. M had borrowed a sum of Rs.2,00,000 in 2003 @ 9% interest to complete his B.Tech. degree from Delhi University. In March 2014, he repaid a sum of Rs.75,000 (including Rs.20,000 interest)

Students are required to compute Total Income of M for the Assessment Year 2014-2015

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Case 2 – Comprehensive Problem on Total Income (Solution)

Computation of Total Income for AY 2014-2015

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