ICAI Notes: Deductions from Gross Total Income | Taxation for CA Intermediate PDF Download

 Page 1


LEARNING OUTCOMES 
     
CHAPTER 
6
 
 
  DEDUCTIONS FROM   
 GROSS TOTAL INCOME 
 
After studying this chapter, you would be able to – 
? appreciate the types of deductions allowable from gross total income 
under the default tax regime under section 115BAC; 
? appreciate the types of deductions allowable from gross total income, 
if the assessee has exercised the option of shifting out of the default 
tax regime provided under section 115BAC(1A) and is paying tax under 
the optional tax regime as per the normal provisions of the Act; 
? identify the assessees eligible for deduction under various sections; 
? compute deductions in respect of payments, applying the provisions 
under the relevant sections; 
? compute deductions in respect of certain income, applying the 
provisions under the relevant sections; 
? compute the deduction allowable in the case of a person with disability; 
? compute the deduction available under section 10AA for units 
established in SEZs considering the conditions specified thereunder. 
© The Institute of Chartered Accountants of India
Page 2


LEARNING OUTCOMES 
     
CHAPTER 
6
 
 
  DEDUCTIONS FROM   
 GROSS TOTAL INCOME 
 
After studying this chapter, you would be able to – 
? appreciate the types of deductions allowable from gross total income 
under the default tax regime under section 115BAC; 
? appreciate the types of deductions allowable from gross total income, 
if the assessee has exercised the option of shifting out of the default 
tax regime provided under section 115BAC(1A) and is paying tax under 
the optional tax regime as per the normal provisions of the Act; 
? identify the assessees eligible for deduction under various sections; 
? compute deductions in respect of payments, applying the provisions 
under the relevant sections; 
? compute deductions in respect of certain income, applying the 
provisions under the relevant sections; 
? compute the deduction allowable in the case of a person with disability; 
? compute the deduction available under section 10AA for units 
established in SEZs considering the conditions specified thereunder. 
© The Institute of Chartered Accountants of India
DEDUCTIONS FROM GROSS TOTAL INCOME
6.2
     Section 80C– In respect of LIP, PPF, PF etc.     Section 80JJAA – In respect of employment of new employees 
Section 80CCC– In respect of contribution to certain pension funds        Section 80RRB – In respect of royalty on patents 
Section 80CCD – In respect of contribution to pension scheme of           Section 80QQB – In respect of royalty income etc. of authors  
      of Central Government of certain books other than text books 
Section 80CCH – In respect of contribution to Agnipath scheme 
Section 80D – In respect of medical insurance premium  
Section 80DD – In repect of maintenance including medical treatment of a dependent disabled 
Section 80DDB – In respect of amount paid for medical treatment etc. of specified disease or ailment 
Section 80E – In respect of interest on loan taken for higher education 
Section 80EE/80EEA – In respect of interest payable on loan borrowed for acquisition of house property by an individual 
Section 80EEB – In respect of  interest payable on loan taken for purchase of electric vehicle 
Section 80G – In respect of donations to certain funds, charitable instutions etc. Section 80TTA – In respect of interest on deposits  
      in savings account 
Section 80GG – In respect of rent paid Section 80TTB – In respect of interest on  
      deposits in case of senior citizens 
Section 80GGA – In respect of donations for scientific research and rural development 
Section 80GGB – In respect of contributions given by companies to political parties  Section 80U – Deduction in case of a 
person with disability 
Section 80GGC –In respect of contributions given by any person to political parties 
Note – Only deductions u/s 80CCD(2) [Employer’s contribution to pension scheme of Central Government], 80CCH(2) [Central 
Government’s contribution to assessee’s account in Agniveer Corpus Fund] and section 80JJAA would be available if the eligible assessee 
pays tax at concessional rates of tax u/s 115BAC under the default tax regime. 
Deductions in respect of certain 
payments 
Deductions in respect of certain 
incomes 
Deductions from Gross Total Income under the 
optional tax regime (i.e., normal provisions of the Act) 
Deductions in respect of other 
income 
Other 
Deductions 
Deductions under Chapter VI -A Deduction under section 10AA
CHAPTER OVERVIEW
 
INCOME TAX LAW
6.
 
2 
© The Institute of Chartered Accountants of India
Page 3


LEARNING OUTCOMES 
     
CHAPTER 
6
 
 
  DEDUCTIONS FROM   
 GROSS TOTAL INCOME 
 
After studying this chapter, you would be able to – 
? appreciate the types of deductions allowable from gross total income 
under the default tax regime under section 115BAC; 
? appreciate the types of deductions allowable from gross total income, 
if the assessee has exercised the option of shifting out of the default 
tax regime provided under section 115BAC(1A) and is paying tax under 
the optional tax regime as per the normal provisions of the Act; 
? identify the assessees eligible for deduction under various sections; 
? compute deductions in respect of payments, applying the provisions 
under the relevant sections; 
? compute deductions in respect of certain income, applying the 
provisions under the relevant sections; 
? compute the deduction allowable in the case of a person with disability; 
? compute the deduction available under section 10AA for units 
established in SEZs considering the conditions specified thereunder. 
© The Institute of Chartered Accountants of India
DEDUCTIONS FROM GROSS TOTAL INCOME
6.2
     Section 80C– In respect of LIP, PPF, PF etc.     Section 80JJAA – In respect of employment of new employees 
Section 80CCC– In respect of contribution to certain pension funds        Section 80RRB – In respect of royalty on patents 
Section 80CCD – In respect of contribution to pension scheme of           Section 80QQB – In respect of royalty income etc. of authors  
      of Central Government of certain books other than text books 
Section 80CCH – In respect of contribution to Agnipath scheme 
Section 80D – In respect of medical insurance premium  
Section 80DD – In repect of maintenance including medical treatment of a dependent disabled 
Section 80DDB – In respect of amount paid for medical treatment etc. of specified disease or ailment 
Section 80E – In respect of interest on loan taken for higher education 
Section 80EE/80EEA – In respect of interest payable on loan borrowed for acquisition of house property by an individual 
Section 80EEB – In respect of  interest payable on loan taken for purchase of electric vehicle 
Section 80G – In respect of donations to certain funds, charitable instutions etc. Section 80TTA – In respect of interest on deposits  
      in savings account 
Section 80GG – In respect of rent paid Section 80TTB – In respect of interest on  
      deposits in case of senior citizens 
Section 80GGA – In respect of donations for scientific research and rural development 
Section 80GGB – In respect of contributions given by companies to political parties  Section 80U – Deduction in case of a 
person with disability 
Section 80GGC –In respect of contributions given by any person to political parties 
Note – Only deductions u/s 80CCD(2) [Employer’s contribution to pension scheme of Central Government], 80CCH(2) [Central 
Government’s contribution to assessee’s account in Agniveer Corpus Fund] and section 80JJAA would be available if the eligible assessee 
pays tax at concessional rates of tax u/s 115BAC under the default tax regime. 
Deductions in respect of certain 
payments 
Deductions in respect of certain 
incomes 
Deductions from Gross Total Income under the 
optional tax regime (i.e., normal provisions of the Act) 
Deductions in respect of other 
income 
Other 
Deductions 
Deductions under Chapter VI -A Deduction under section 10AA
CHAPTER OVERVIEW
 
INCOME TAX LAW
6.
 
2 
© The Institute of Chartered Accountants of India
 
DEDUCTIONS FROM GROSS TOTAL INCOME
6.3
1. GENERAL PROVISIONS
The various items of income referred to in the different clauses of section 10 are 
excluded from the total income of an assessee. These incomes are known as exempted 
incomes. “Exemption” means exclusion. A particular income exempt from tax under 
section 10 shall not enter into the computation of taxable income.  However, there 
are certain items of income referred to in section 10 which are not exempted if the 
assessee pays concessional rates of tax under the default tax regime u/s 115BAC, 
namely, 
10(5) Leave travel concession 
10(13A) House Rent Allowance 
10(14) Special Allowances except - 
(a) Travelling allowance
(b) Daily allowance
(c) Conveyance allowance
(d) Transport allowance to blind/deaf and dumb/orthopedically
handicapped employee
10(17) Daily allowance/Constituency allowance received by any Member of 
Parliament or of State Legislatures 
10(32) Exemption in respect of income of minor child included in assessee’s 
total income 
“Deduction” in relation to Chapter VI-A and section 10AA refers to the amount that 
is reduced from gross total income to arrive at the total income. There are incomes 
which are included in gross total income but are wholly or partly allowed as 
deduction under Chapter VI-A in computation of total income , if the assessee has 
exercised the option of shifting out of the default tax regime provided under section 
115BAC(1A) and pays tax as per the optional tax regime under the normal provisions 
of the Act.  
Deduction is allowed on specific investments or expenses incurred by the taxpayer to 
promote the culture of savings and investments. This could include medical 
expenditure, donations made to charities, investments made in specific avenues such 
as Public Provident Fund (PPF), National Pension Scheme (NPS) etc. 
© The Institute of Chartered Accountants of India
Page 4


LEARNING OUTCOMES 
     
CHAPTER 
6
 
 
  DEDUCTIONS FROM   
 GROSS TOTAL INCOME 
 
After studying this chapter, you would be able to – 
? appreciate the types of deductions allowable from gross total income 
under the default tax regime under section 115BAC; 
? appreciate the types of deductions allowable from gross total income, 
if the assessee has exercised the option of shifting out of the default 
tax regime provided under section 115BAC(1A) and is paying tax under 
the optional tax regime as per the normal provisions of the Act; 
? identify the assessees eligible for deduction under various sections; 
? compute deductions in respect of payments, applying the provisions 
under the relevant sections; 
? compute deductions in respect of certain income, applying the 
provisions under the relevant sections; 
? compute the deduction allowable in the case of a person with disability; 
? compute the deduction available under section 10AA for units 
established in SEZs considering the conditions specified thereunder. 
© The Institute of Chartered Accountants of India
DEDUCTIONS FROM GROSS TOTAL INCOME
6.2
     Section 80C– In respect of LIP, PPF, PF etc.     Section 80JJAA – In respect of employment of new employees 
Section 80CCC– In respect of contribution to certain pension funds        Section 80RRB – In respect of royalty on patents 
Section 80CCD – In respect of contribution to pension scheme of           Section 80QQB – In respect of royalty income etc. of authors  
      of Central Government of certain books other than text books 
Section 80CCH – In respect of contribution to Agnipath scheme 
Section 80D – In respect of medical insurance premium  
Section 80DD – In repect of maintenance including medical treatment of a dependent disabled 
Section 80DDB – In respect of amount paid for medical treatment etc. of specified disease or ailment 
Section 80E – In respect of interest on loan taken for higher education 
Section 80EE/80EEA – In respect of interest payable on loan borrowed for acquisition of house property by an individual 
Section 80EEB – In respect of  interest payable on loan taken for purchase of electric vehicle 
Section 80G – In respect of donations to certain funds, charitable instutions etc. Section 80TTA – In respect of interest on deposits  
      in savings account 
Section 80GG – In respect of rent paid Section 80TTB – In respect of interest on  
      deposits in case of senior citizens 
Section 80GGA – In respect of donations for scientific research and rural development 
Section 80GGB – In respect of contributions given by companies to political parties  Section 80U – Deduction in case of a 
person with disability 
Section 80GGC –In respect of contributions given by any person to political parties 
Note – Only deductions u/s 80CCD(2) [Employer’s contribution to pension scheme of Central Government], 80CCH(2) [Central 
Government’s contribution to assessee’s account in Agniveer Corpus Fund] and section 80JJAA would be available if the eligible assessee 
pays tax at concessional rates of tax u/s 115BAC under the default tax regime. 
Deductions in respect of certain 
payments 
Deductions in respect of certain 
incomes 
Deductions from Gross Total Income under the 
optional tax regime (i.e., normal provisions of the Act) 
Deductions in respect of other 
income 
Other 
Deductions 
Deductions under Chapter VI -A Deduction under section 10AA
CHAPTER OVERVIEW
 
INCOME TAX LAW
6.
 
2 
© The Institute of Chartered Accountants of India
 
DEDUCTIONS FROM GROSS TOTAL INCOME
6.3
1. GENERAL PROVISIONS
The various items of income referred to in the different clauses of section 10 are 
excluded from the total income of an assessee. These incomes are known as exempted 
incomes. “Exemption” means exclusion. A particular income exempt from tax under 
section 10 shall not enter into the computation of taxable income.  However, there 
are certain items of income referred to in section 10 which are not exempted if the 
assessee pays concessional rates of tax under the default tax regime u/s 115BAC, 
namely, 
10(5) Leave travel concession 
10(13A) House Rent Allowance 
10(14) Special Allowances except - 
(a) Travelling allowance
(b) Daily allowance
(c) Conveyance allowance
(d) Transport allowance to blind/deaf and dumb/orthopedically
handicapped employee
10(17) Daily allowance/Constituency allowance received by any Member of 
Parliament or of State Legislatures 
10(32) Exemption in respect of income of minor child included in assessee’s 
total income 
“Deduction” in relation to Chapter VI-A and section 10AA refers to the amount that 
is reduced from gross total income to arrive at the total income. There are incomes 
which are included in gross total income but are wholly or partly allowed as 
deduction under Chapter VI-A in computation of total income , if the assessee has 
exercised the option of shifting out of the default tax regime provided under section 
115BAC(1A) and pays tax as per the optional tax regime under the normal provisions 
of the Act.  
Deduction is allowed on specific investments or expenses incurred by the taxpayer to 
promote the culture of savings and investments. This could include medical 
expenditure, donations made to charities, investments made in specific avenues such 
as Public Provident Fund (PPF), National Pension Scheme (NPS) etc. 
© The Institute of Chartered Accountants of India
INCOME TAX LAW
 
 
6.4 
However, if the assessee pays concessional rates of tax under default tax regime u/s 
115BAC, only deduction in respect of employer’s contribution to NPS u/s 80CCD(2), 
Central Government’s contribution to Agnipath Scheme u/s 80CCH(2) and deduction 
in respect of employment of new employees u/s 80JJAA would be allowed to the 
assessee. He cannot claim deduction under any other provision in Chapter VI- A under 
the default tax regime.    
Section 10AA also provides for a deduction in respect of units established in SEZ from 
the total income of the assessee. It is available only if the assessee has exercised the 
option of shifting out of the default tax regime provided under section 115BAC(1A). 
This deduction is not available if the assessee pays concessional rates of tax under 
the default tax regime u/s 115BAC. 
The tax liability is calculated on the “total income” which is arrived after reducing 
permissible deductions from gross total income.  
Students should note this very important difference between exemption under section 
10 and the deduction under Chapter VI-A/10AA. 
Difference between Deduction under Chapter VI-A & section 10AA and 
Exemption under section 10 
Particulars Deduction 
(in relation to Chapter VI-A and 
section 10AA) 
Exemption 
(contained in section 10) 
Meaning Investments/ contributions in certain 
instruments (as prescribed under the 
Income-tax Act). Payments made for 
certain purposes. 
The incomes which are 
exempt under section 10 will 
not be included in computing 
gross total income. 
Relevant 
Sections 
Sections 80C to 80U in Chapter VI-A 
and section 10AA of the Income-tax 
Act. 
Section 10 of the Income-tax 
Act. 
Manner of 
treatment 
First included in the Gross Total 
Income and then deductions will be 
allowed from Gross Total Income. 
Not included in the Gross 
Total Income.
The important point to be noted here is that if there is no gross total income, then no 
deductions will be permissible. This Chapter contains deduction under Chapter VI-A 
which includes deductions in respect of certain payments, deductions in respect of 
certain incomes, deductions in respect of other income and other deductions . It also 
includes deduction under section 10AA.   
© The Institute of Chartered Accountants of India
Page 5


LEARNING OUTCOMES 
     
CHAPTER 
6
 
 
  DEDUCTIONS FROM   
 GROSS TOTAL INCOME 
 
After studying this chapter, you would be able to – 
? appreciate the types of deductions allowable from gross total income 
under the default tax regime under section 115BAC; 
? appreciate the types of deductions allowable from gross total income, 
if the assessee has exercised the option of shifting out of the default 
tax regime provided under section 115BAC(1A) and is paying tax under 
the optional tax regime as per the normal provisions of the Act; 
? identify the assessees eligible for deduction under various sections; 
? compute deductions in respect of payments, applying the provisions 
under the relevant sections; 
? compute deductions in respect of certain income, applying the 
provisions under the relevant sections; 
? compute the deduction allowable in the case of a person with disability; 
? compute the deduction available under section 10AA for units 
established in SEZs considering the conditions specified thereunder. 
© The Institute of Chartered Accountants of India
DEDUCTIONS FROM GROSS TOTAL INCOME
6.2
     Section 80C– In respect of LIP, PPF, PF etc.     Section 80JJAA – In respect of employment of new employees 
Section 80CCC– In respect of contribution to certain pension funds        Section 80RRB – In respect of royalty on patents 
Section 80CCD – In respect of contribution to pension scheme of           Section 80QQB – In respect of royalty income etc. of authors  
      of Central Government of certain books other than text books 
Section 80CCH – In respect of contribution to Agnipath scheme 
Section 80D – In respect of medical insurance premium  
Section 80DD – In repect of maintenance including medical treatment of a dependent disabled 
Section 80DDB – In respect of amount paid for medical treatment etc. of specified disease or ailment 
Section 80E – In respect of interest on loan taken for higher education 
Section 80EE/80EEA – In respect of interest payable on loan borrowed for acquisition of house property by an individual 
Section 80EEB – In respect of  interest payable on loan taken for purchase of electric vehicle 
Section 80G – In respect of donations to certain funds, charitable instutions etc. Section 80TTA – In respect of interest on deposits  
      in savings account 
Section 80GG – In respect of rent paid Section 80TTB – In respect of interest on  
      deposits in case of senior citizens 
Section 80GGA – In respect of donations for scientific research and rural development 
Section 80GGB – In respect of contributions given by companies to political parties  Section 80U – Deduction in case of a 
person with disability 
Section 80GGC –In respect of contributions given by any person to political parties 
Note – Only deductions u/s 80CCD(2) [Employer’s contribution to pension scheme of Central Government], 80CCH(2) [Central 
Government’s contribution to assessee’s account in Agniveer Corpus Fund] and section 80JJAA would be available if the eligible assessee 
pays tax at concessional rates of tax u/s 115BAC under the default tax regime. 
Deductions in respect of certain 
payments 
Deductions in respect of certain 
incomes 
Deductions from Gross Total Income under the 
optional tax regime (i.e., normal provisions of the Act) 
Deductions in respect of other 
income 
Other 
Deductions 
Deductions under Chapter VI -A Deduction under section 10AA
CHAPTER OVERVIEW
 
INCOME TAX LAW
6.
 
2 
© The Institute of Chartered Accountants of India
 
DEDUCTIONS FROM GROSS TOTAL INCOME
6.3
1. GENERAL PROVISIONS
The various items of income referred to in the different clauses of section 10 are 
excluded from the total income of an assessee. These incomes are known as exempted 
incomes. “Exemption” means exclusion. A particular income exempt from tax under 
section 10 shall not enter into the computation of taxable income.  However, there 
are certain items of income referred to in section 10 which are not exempted if the 
assessee pays concessional rates of tax under the default tax regime u/s 115BAC, 
namely, 
10(5) Leave travel concession 
10(13A) House Rent Allowance 
10(14) Special Allowances except - 
(a) Travelling allowance
(b) Daily allowance
(c) Conveyance allowance
(d) Transport allowance to blind/deaf and dumb/orthopedically
handicapped employee
10(17) Daily allowance/Constituency allowance received by any Member of 
Parliament or of State Legislatures 
10(32) Exemption in respect of income of minor child included in assessee’s 
total income 
“Deduction” in relation to Chapter VI-A and section 10AA refers to the amount that 
is reduced from gross total income to arrive at the total income. There are incomes 
which are included in gross total income but are wholly or partly allowed as 
deduction under Chapter VI-A in computation of total income , if the assessee has 
exercised the option of shifting out of the default tax regime provided under section 
115BAC(1A) and pays tax as per the optional tax regime under the normal provisions 
of the Act.  
Deduction is allowed on specific investments or expenses incurred by the taxpayer to 
promote the culture of savings and investments. This could include medical 
expenditure, donations made to charities, investments made in specific avenues such 
as Public Provident Fund (PPF), National Pension Scheme (NPS) etc. 
© The Institute of Chartered Accountants of India
INCOME TAX LAW
 
 
6.4 
However, if the assessee pays concessional rates of tax under default tax regime u/s 
115BAC, only deduction in respect of employer’s contribution to NPS u/s 80CCD(2), 
Central Government’s contribution to Agnipath Scheme u/s 80CCH(2) and deduction 
in respect of employment of new employees u/s 80JJAA would be allowed to the 
assessee. He cannot claim deduction under any other provision in Chapter VI- A under 
the default tax regime.    
Section 10AA also provides for a deduction in respect of units established in SEZ from 
the total income of the assessee. It is available only if the assessee has exercised the 
option of shifting out of the default tax regime provided under section 115BAC(1A). 
This deduction is not available if the assessee pays concessional rates of tax under 
the default tax regime u/s 115BAC. 
The tax liability is calculated on the “total income” which is arrived after reducing 
permissible deductions from gross total income.  
Students should note this very important difference between exemption under section 
10 and the deduction under Chapter VI-A/10AA. 
Difference between Deduction under Chapter VI-A & section 10AA and 
Exemption under section 10 
Particulars Deduction 
(in relation to Chapter VI-A and 
section 10AA) 
Exemption 
(contained in section 10) 
Meaning Investments/ contributions in certain 
instruments (as prescribed under the 
Income-tax Act). Payments made for 
certain purposes. 
The incomes which are 
exempt under section 10 will 
not be included in computing 
gross total income. 
Relevant 
Sections 
Sections 80C to 80U in Chapter VI-A 
and section 10AA of the Income-tax 
Act. 
Section 10 of the Income-tax 
Act. 
Manner of 
treatment 
First included in the Gross Total 
Income and then deductions will be 
allowed from Gross Total Income. 
Not included in the Gross 
Total Income.
The important point to be noted here is that if there is no gross total income, then no 
deductions will be permissible. This Chapter contains deduction under Chapter VI-A 
which includes deductions in respect of certain payments, deductions in respect of 
certain incomes, deductions in respect of other income and other deductions . It also 
includes deduction under section 10AA.   
© The Institute of Chartered Accountants of India
 
    
6.5 DEDUCTIONS FROM GROSS TOTAL INCOME 
Section 80A 
(i) Section 80A(1) provides that in computing the total income of an assessee, 
there shall be allowed from his gross total income, the deductions specified 
in sections 80C to 80U if the assessee has exercised the option of shifting out 
of the default tax regime provided under section 115BAC(1A). 
(ii) According to section 80A(2), the aggregate amount of the deductions under 
this chapter shall not, in any case, exceed the gross total income of the 
assessee. Therefore, the total income after deductions will either be positive 
or nil. It cannot be negative due to deductions. 
 An assessee cannot have a loss as a result of the deduction under Chapter VI-
A and claim to carry forward the same for the purpose of set-off against his 
income in the subsequent year. 
(iii) Section 80A(3) provides that in the case of AOP/BOI exercising the option of 
shifting out of the default tax regime provided under section 115BAC(1A), if 
any deduction is admissible under section 80G/80GGA/80GGC
1
, no deduction 
under the same section shall be made in computing the total income of a 
member of the AOP or BOI in relation to the share of such member in the 
income of the AOP or BOI. 
(iv) The profits and gains allowed as deduction under section 10AA or under any 
provision of Chapter VI-A under the heading "C.-Deductions in respect of 
certain incomes" in any assessment year, shall not be allowed as deduction 
under any other provision of the Act for such assessment year [Section 
80A(4)]. 
(v) The deduction, referred to in (iv) above, shall not exceed the profits and gains 
of the undertaking or unit or enterprise or eligible business, as the case may 
be [Section 80A(4)]. 
(vi) No deduction under any of the provisions referred to in (iv) above, shall be 
allowed if the deduction has not been claimed in the return of income 
[Section 80A(5)]. 
(vii) The transfer price of goods and services between such undertaking or unit or 
enterprise or eligible business and any other business of the assessee shall 
1
80-IA/80-IB/80-IE (these sections will be dealt with at the Final level)
© The Institute of Chartered Accountants of India