Income Tax Deductions

Income Tax Deductions Chapter VI-A

Income Tax Deductions specified in Sections 80CCC to 80U, shall be allowed from his Gross Total Income of the assessee.[Section 80A(1)].

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"Gross Total Income" means the total income computed in accordance with the provisions of the Income-tax Act, before making any deduction under this Chapter. [Section 80B(5)].

The aggregate amount of deductions under this Chapter shall not, in any case, exceed the Gross Total Income of the assessee. [Section 80A(1)].

The Chapter VI-A, under the Act, is divided into three, viz.,

  1. Deduction in respect of certain payments - Section 80C to Section 80GGC

  2. Deductions in respect of certain incomes - Section 80IA to Section 80RRB

  3. Other Deductions - Section 80U

Where any deduction is required to be allowed under any section under the head "Deductions in respect of certain incomes", i.e., Sections 80IA to 80RRB, then it shall be restricted to the extent of the amount of such income included in the "Gross Total Income". [Section 80AB].

If in computing the total income of an Association of Persons or a Body of Individuals, any deduction was allowed under sections 80G, 80GGA, 80GGC, 80IA or 80IB, then the same shall not be allowed in the hands of the members of AOP or BOI in relation to the share of such member in the income of the AOP or BOI. [Section 80A(3)].

The deduction under Chapter VI-A can be divided into five classifications, for our comprehensive understanding, viz.,

  1. Income Tax Deductions in respect of certain Investments/Payments ' 80C to 80CCE

  2. Deduction in respect of certain Expenses/Payments ' 80D to 80GGC

  3. Deduction in relation to certain Industrial Undertakings ' 80IA to 80IC

  4. Income Tax Deductions in respect of certain Incomes ' 80JJA to 80RRB

  5. Other Deductions ' 80U

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Income Tax Deductions in respect of Certain Investments/Payments [80C TO 80CCE]

In the case of Individuals and HUFs, rebate was being given under section 88, in relation to any sum contributed by them towards certain investments and certain payments, from the tax liability.

Section 88 has been withdrawn and the contributions/payments are now allowed as deduction from the Total Income itself, under section 80C. The individual limits in most cases of contributions have been removed while doing so.

Income Tax Deductions under section 80C can be availed by Individual or HUF, in respect of certain contributions or payments in respect of certain persons (Persons Covered).

The following table provides for the qualifying amount, which shall not exceed Rs.1,00,000, to be invested or payments to be made: -

S.No Persons Covered Nature of Payment or Deposited Individual Limit
1 Individual By way of deduction from the Salary payable, in accordance with the conditions of his service, by or on behalf of the Government, for the purpose of securing a Deferred Annuity or making provision to his spouse or children 1/5th of the Salary
As contribution to Provident Fund under Provident Funds Act, 1925 (Statutory Provident Fund)
As contribution to Recognised Provident Fund
As contribution to Approved Super Annuation Fund
As contribution to Pension Fund set up by Mutual Funds notified under section 10(23D) or UTI
2 Individual
*Any two children
Tuition Fees (not including Development Fees, Donation, etc.) at the time of admission or thereafter :-
1. To any University, College, School or Other Educational Institution situated in India
2. For the purpose of Full Time Education

3

Individual

  • Individual

  • Spouse

  • Any child

To effect or to keep in force an Contract of Deferred Annuity (not being a plan with a option to receive the sum in cash by Insured and not covered by other clauses below) on Life.
4

Individual

  • Individual

  • Spouse

  • Any child

HUF
  • Any Member
To keep in force an insurance 20% of the Sum Assured
As contribution to Provident Fund set up by the Central Government and notified by the Central Government (Public Provident Fund) -
As contribution for participation in Unit Linked Insurance Plan of UTI -
As contribution for participation in Unit Linked Insurance Plan of ‘LIC Mutual Fund’ notified under section 10(23D) -
5 Individual or HUF As subscription to Central Government Security or Notified Deposits of Government (National Savings Scheme)
As subscription to NSC – VI & VII Issue (Closed)
As subscription to notified savings certificate (NSC VIII Issue)
To effect or keep in force a contract for Annuity Plan of LIC or any other Insurer
As subscription to any Notified Units of Mutual Funds notified under section 10(23D)
As subscription to Notified Deposit or Pension Fund of National Housing Bank
As subscription to any Deposit Scheme of
  • Public Sector Company, engaged in providing long term finance for construction or purchase of houses in India for residential purposes
  • Statutory Authority constituted in India, for dealing with and satisfying the need for
    • housing accommodation or
    • planning, development or improvement of cities, towns and villages, or both

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Income Tax Deductions Available for Payments

Deductions are available for payments by way of: -

1. Installment or Part Payment of the amount due

  • Under any self financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
  • To Company or Co-operative Society of which the assessee is a shareholder or member towards the cost of house property

2. Repayment of amount borrowed from

  • Central Government or State Government
  • Bank (including Co-operative Bank)
  • Life Insurance Corporation
  • National Housing Bank
  • Public Company formed and registered in India with the main object of carrying on the business providing long-term finance for construction or purchase of houses in India for residential purposes and eligible for deduction under section 36(1)(viii) Consisting of payments by way of: -
  • Company (in which public is substantially interested), or Co-operative Society, engaged in the business of financing the construction of houses
  • Assessee's employer where such employer is
    • Public Company or
    • University established by Law or
    • College affiliated to such University or
    • Local Authority
    • Co-operative Society
  • Stamp Duty, Registration Fee and Other Expenses for the purpose of transfer of such house property to the assessee

Note: -

Payment does not include -

  • Admission Fee, Cost of Share and Initial Deposit which a shareholder of a Company or a member of a Co-operative Society has to pay for becoming member
  • Cost of any addition or alteration or renovation or repair of house property after the issue of completion certificate or after occupying the house or after let out
  • Expenditure eligible for deduction

The above payments should be for purposes of

Purchase or construction of a residential house property the income from which is chargeable to tax under the head "Income from House Property" or

If it has not been used for assessee's own residence would have been chargeable under "Income from House Property".

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3. As subscription to

  • Equity Shares or Debentures forming part of any Eligible Issue of Capital approved by a Public Company
  • Eligible Issue of Capital by any Public Financial Institution in the prescribed form
  • Subscription to such Notified Bonds issued by the NABARD
  • Amount in any account under the Senior Citizens Savings Scheme Rules, 2004
  • Five year time deposit in an account under the Post Office Time Deposit Rules, 1981
  • As subscription to Units of any Mutual Fund notified under section 10(23D), approved on an application by such Mutual Fund to Board, which is applied for Eligible issue of Capital

    Note

    Eligible Issue means the issue where the entire proceeds is invested in a Public Limited Company or Public Financial Instituted formed for the purposes of business referred to in section 80IA() - Infrastructure Facility

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