Deductions from Gross Total

Income

Introduction

Provided by the Income Tax Act, 1961.

Contained in Chapter VI – A and in the form of deductions from section 80C to 80U.

They are the permissible amount by which the gross total income is reduced to arrive at the total income liable to tax.

They are intended to act as incentive to the assessee for achieving certain economic objectives.

Chapter VIADEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME

Chapter VIANot applicable

LTCG ,STCG ( if STT applies)& Gambling ActivitiesThese deductions are however not allowed from the following incomes although these are part of GTI Long Term Capital Gain Winning of Lotteries, races etc.

Total amount of deductions cannot exceed GTI

Deduction shall be allowed to an individual (whether resident or non resident) or HUF (whether resident or non resident). These savings and investments can be made from taxable income or from exempted income. Deduction shall be lower of:(a) Investments and savings done OR(b) Maximum of Rs. 100000 pa.

80 C DEDUCTION (R& NR)

infrastructure bonds ELSS

NSC(accrued interest also) FD

lic premium

PPF employees contribution toPF

Savings

principal of housing loan only for purchase &construction tuition fees for two children Max

Expenditure

80 c.,80ccc,80ccd

NATIONAL SAVINGS CERTIFICATESVIII ISSUE-Subscription by theassessee in his own name &interestwhich is deemed to have been re-invested shall also qualify fordeduction under this section but onlyfor first 5 years

80CCELimit on deductions under sections

80C, 80CCC and 80CCDmaximum of Rs 100000 of Rs1000

LIMIT NOT APPLICABLE

50%Govt or local authority for charitable purpose,any corp for promotion of minority,any notified temple etc for repair,national Children fund,rajivgandhi foundation,indira gandhimemorial trust,nehru fund,PM drought relief fund

Important points to remember

• LIC for any children either dependent,or non dependent, married, unmarried, adopted ,step

• PPF for spouse,any children (major or Minor)• Tuition Fees ( Whole time Education• If loan taken for repairs, renovation, NA• Even out of past savings or exempt income

,then also allowed• Allowed on paid basis• 80D children &parentsshould be dependent• 80GG should not own house & should not

receive HRA & no RFA

Basic RulesRule 1

The aggregate amount of deductions under sections 80C to 80U cannot exceed gross total income.These deductions are however not allowed from the following incomes although these are part of GTI

Long Term Capital GainWinning of Lotteries, races etc.

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 80C

From AY 2007-08 onwards.

Applicable only to Individual & HUF.

This section provides for deduction in respect of certain expenditure/ investments paid or deposited by the assessee 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.

ConditionsTaxable 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 DeductionAmount paid or Rs. 100,000/- whichever is lower.

Deduction u/s 80CCDDeduction in Respect of Contribution to Pension Scheme of Central Government.

Self employed or 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.

ConditionsNo deduction must have been claimed u/s 80C.Any amount received from the scheme, is taxable in the hands of the assessee in that year or receipt. Salary for the purpose of this section includes dearness allowance if under the terms of employment.

Amount of DeductionAggregate of amount deposited by the employee and the Central government, or 10% of the salary/ GTI in P/Y, whichever is lower.

The aggregate amount of deductions under 80C, 80CCC and 80CCD (except contribution by employer) put together cannot exceed

Rs.1,00,000

Allowed to individual or a HUF. Deduction is allowed for depositing the

amount as subscription to long term infrastructure bonds, as may be notified by the CG.

Amount of deduction – Amount deposited or 20,000 Rs. whichever is less.

Deduction u/s 80CCF

Deduction u/s 80D

Deduction in respect of Medical Insurance Premia.

Individuals/HUF. whether resident or non-resident

Eligible Amount - Insurance premium paid in accordance with the scheme framed by the General Insurance Corporation of India and approved by the Central Government.

ConditionsThe amount should be paid by cheque out of the taxable income.(by any mode other than cash )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 Deduction100% of premium paid subject to a maximum of:

Rs. 20,000 in case of senior citizens (above 65 years)Rs. 15,000 in case of others.

Deduction u/s 80DD

Deduction in respect of dependent relative.

Individuals/HUF can be a resident or a non resident or a foreign national.

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

ConditionsThe assessee 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.If the person being a person with a disability in whose name the sum has been deposited with LIC or any other insurer or UTI, dies before the assessee then the amount equal to the amount which has been deposited shall be deemed to be the income of the assessee in the previous year in which such sum has been received from insurer and shall be chargeable to tax in the year of receipt.

Amount of DeductionRs. 50,000 in case of normal disabilities and Rs. 1,00000 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.(can be a foreign national) or resident HUF Eligible amount – expenditure incurred for the medical treatment of such diseases specified in Rule 11D(e.g. Parkinson's disease, malignant cancers, full blown AIDS, chronic renal failure, etc) for self or dependant individual.

ConditionsThe 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 loan taken for higher education.

Individual being a resident or a non-resident.

Eligible Amount – any amount paid by way of interest on loan taken from any financial institution or any approved charitable institution for higher education.

ConditionsAmount 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 DeductionActual interest paid.

Deduction u/s 80GG

Deduction in respect of amount of rent paid.

Any assessee other than assessee having income allowance consisting HRA or RFA.

Assessee, spouse, minor child or HUF does not own any residential accommodation in the city where he works.

ConditionsThe 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; andRs. 2,000 p.m.

Deduction u/s 80U

Deduction in case of person with disability.

Individual resident of India.

Eligible amount – Flat deduction to a person with disability.

ConditionsHe 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 DeductionA fixed deduction of

Rs. 50,000 in case of a person with disabilityRs. 100,000 in case of a person with severe disability.( having any disability over 80%)

ConclusionUnder the income tax act first of all income under each head is computed.The aggregate of income under each head is known as ‘Gross Total Income’. Out of this gross total income certain deductions are allowed. The income after such deductions is called ‘Total Income’The total deductions from section 80 C - 80 U cannot exceed the total income.

SUMMARY