Deductions from Gross Total Income Shankar Bose Inspector of Income-tax MSTU, Puri
IntroductionProvided by the Income Tax Act, 1961.Contained in Chapter VI – A and in the formof deductions from section 80C to 80U.They are the permissible amount by whichthe gross total income is reduced to arriveat the total income liable to tax.They are intended to act as incentive to theassessee for achieving certain economicobjectives.
Basic Rules Rule 1 The aggregate amount of deductions under sections 80C to 80U cannot exceed gross total income. Rule 2 These deductions are to be allowed only if the assessee claims these and gives the proof of such investments/ expenditure/ income.
Categories of Deductions 1. To encourage savings 2. For certain personal expenditure 3. For socially desirable activities 4. For physically disabled persons
Deduction u/s 80CFrom AY 2007-08 onwards.Applicable only to Individual & HUF.This section provides for deduction inrespect of certain expenditure/investments paid or deposited by theassessee in the previous year.
The gross qualifying amount under this section refer to the payment/investment under some of the following schemes:- Life Insurance Premium Paid. Deferred Annuity Contract. Statutory Provident Fund and Recognized Provident Fund. 15 Year Public Provident Fund. Approved Superannuation Fund. National Savings Certificates. Unit-linked Insurance Plan (Ulip). Dhanraksha Plan of LIC Mutual Fund. Jeevan Dhara, Jeevan Akshay, New Jeevan Dhara. Notified Units of Mutual Fund or UTI.
Amount of Deduction 100% of the amount invested or Rs. 1,00,000/- whichever is lower.
Deduction u/s 80CCC Deduction in respect of Contribution to Certain Pension Funds. Individual Eligible Amount – amount paid/deposited under an annuity plan of the Life Insurance Corporation of India or any other insurer for receiving pension.
Conditions Taxable income. This must not be allowed as deduction u/s 80C. Any amount withdrawn or pension received from the plan is taxable in the hands of the assessee or nominee in the year of receipt.Amount of Deduction Amount paid or Rs. 10,000/- whichever is lower.
Deduction u/s 80CCD Deduction in Respect of Contribution to Pension Scheme of Central Government. Individual who is an employee of Central Government on or after 1.1.2004. Eligible Amount – Deposit made under a pension scheme notified by the Central Government.
Conditions No deduction must have been claimed u/s 80C. Any amount received from the scheme, is taxable in the hands of the assess in that year or receipt. Salary for the purpose of this section includes dearness allowance if under the terms of employment.Amount of Deduction Aggregate of amount deposited by the employee and the Central government, or 10% of the salary, whichever is lower.
The aggregate amount of deductions under 80C, 80CCC and 80CCD put together cannot exceed Rs.1,00,000
Deduction u/s 80D Deduction in respect of Medical Insurance Premia. Individuals/HUF. Eligible Amount - Insurance premium paid in accordance with the scheme framed by the General Insurance Corporation of India and approved by the Central Government.
Conditions The amount should be paid by cheque out of the taxable income. The policy is taken on the health of the assessee, on the health of spouse, dependent parents or dependent children of the assessee. In case of HUF on the health of any member of the family.Amount of Deduction 100% of premium paid subject to a maximum of: Rs. 15,000 in case of senior citizens (above 65 years) Rs. 10,000 in case of others.
Deduction u/s 80DD Deduction in respect of dependent relative. Individuals/HUF who is a Resident of India. Eligible Amount – expenditure incurred on medical treatment OR/AND amount paid or deposited under any scheme framed by the LIC of India or any other insurer for the payment of an annuity or a lump sum amount for the benefit of such dependent
Conditions The assess shall have to furnish a certificate in the prescribed form. Dependant means the spouse, children, parents and siblings in case of individuals, or any member of the family in case of HUF. Person with severe disabilities means a person suffering from 80% or more of one or more disabilities.Amount of Deduction Rs. 50,000 in case of normal disabilities and Rs. 75000 in case of severe disabilities, This is irrespective of the amount expended.
Deduction u/s 80DDB Deduction In Respect Of Medical Treatment Individuals/HUF who is a Resident of India. Eligible amount – expenditure incurred for the medical treatment of such diseases specified in Rule 11D(e.g. Parkinsons disease, malignant cancers, full blown AIDS, chronic renal failure, etc) for self or dependant individual.
Conditions The concerned assessee must attach a copy of certificate in the prescribed Form no. 10-1 along with the return of income. Dependant again means the spouse, children, parents and siblings in case of individuals, or any member of the family in case of HUF. The deduction shall be reduced by the amount received, if any, under an insurance from an insurer for the medical treatment of person mentioned in this section or reimbursed by the employer.
Amount of Deduction 100% of the expenses incurred subject to a maximum of Rs. 60,000 in the case of expenses incurred for senior citizens (above 65 years) Rs. 40,000 in the case of others.
Deduction u/s 80EDeduction in respect of repayment of loantaken for higher education.IndividualEligible Amount – any amount paid by way ofinterest on loan taken from any financialinstitution or any approved charitableinstitution for higher education.
Conditions Amount is paid out of his income chargeable to tax. Higher education means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied science or pure sciences including mathematics and statistics. the deduction shall be allowed for the previous year in which the assessee starts repaying the loan or interest thereon and seven previous years immediately succeeding it or until the loan together with interest thereon is paid by the assessee in full ,whichever is earlier.
Financial institution means banking company or financial institution notified by the central government. Approved Charitable Institutions means an institution referred u/s 10(23C) of the act.Amount of Deduction Actual interest paid or Rs. 40,000 whichever is lower.
Deduction u/s 80GGDeduction in respect of amount of rentpaid.Any assessee other than assessee havingincome allowance consisting HRA.Eligible Amount – Any expenditure incurredby him on payment of rent in excess of 10%of his total income.
Conditions The assessee files a declaration in Form No. 10BA regarding the payment of rent. Such accommodation is occupied by him for his own residence. Deduction under this section can be claimed even if accommodation at concessional rent is provided by the employer. Adjusted Gross Total income( Adj.GTI) for this purpose means his gross total income minus long-term capital gain, short term capital gain taxable u/s 111A, and all deductions u/s 80CCC to 80U except any deduction under this section.
Amount of Deduction The amount of deduction under this section will be the least of the following- excess of actual rent paid over 10% of adjusted gross total income: 25% of his adjusted gross total income; and Rs. 2,000 p.m.
Deduction u/s 80UDeduction in case of person with disability.Individual resident of India.Eligible amount – Flat deduction to a personwith disability.
Conditions He is certified by the medical authority to be a person with disability, at any time during the previous year. He furnishes a certificate issued by the medical authority in the prescribed form along the return of income.Amount of Deduction A fixed deduction of Rs. 50,000 in case of a person with disability Rs. 75,000 in case of a person with severe disability. ( having any disability over 80%)
ConclusionUnder the income tax act first of all income undereach head is computed.The aggregate of income under each head is knownas ‘Gross Total Income’.Out of this gross total income certain deductionsare allowed.The income after such deductions is called ‘TotalIncome’The total deductions from section 80 C - 80 Ucannot exceed the total income.