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© EduPristine For [Certificate in Accounting and Compliance]© EduPristine – www.edupristine.com
Deduction under Income Tax Chapter VI-A
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
Section 80C
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80C
80CCC
80CCG
80D
80DD
80E
80G
80TTA
80U
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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
50% deduction of the amount
donated
100% deduction of the amount
donated
50% deduction of the amount
donated
© EduPristine For [Certificate in Accounting and Compliance] 24
Without any Maximum / Qualifying Amount
© EduPristine For [Certificate in Accounting and Compliance]
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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Donations with 100% deduction without any qualifying limit
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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Donations with 50% deduction without any qualifying limit
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
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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
© EduPristine For [Certificate in Accounting and Compliance]
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
© EduPristine For [Certificate in Accounting and Compliance]
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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© EduPristine For [Certificate in Accounting and Compliance] 38
Case Studies on Deductions
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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
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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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© EduPristine For [Certificate in Accounting and Compliance] 44
Computation
© EduPristine For [Certificate in Accounting and Compliance]
Computation
45
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
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Computation
46
Income Head Particulars
Income from house property
Adjusted net value
Less:Deduction under section 24
Taxable income under the head "Income from House Property"
2
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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
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Computation
48
Income Head Particulars
Capital gains
Amount of gains
Less:Amount exempt under sections 54
Taxable under the head "Capital Gains"
4
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Computation
49
Income Head Particulars
Income from other sources
Gross income
Less:Deductions under section 57
Taxable income under the head "Income from Other Sources"
5
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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
© EduPristine For [Certificate in Accounting and Compliance] 51
Case Studies on Total Income Computation
© EduPristine For [Certificate in Accounting and Compliance]
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.
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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
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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
55
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