Tax Deductions from Gross Total Income, Rebate & Relief - Income Tax Laws | Income Tax Laws - B Com PDF Download

DEDUCTIONS FROM GROSS TOTAL INCOME (CHAPTER VI-A) FOR ASSESSMENT YEAR 2018-2019

DEDUCTIONS IN RESPECT OF PAYMENTS

1. DEDUCTION IN RESPECT OF INVESTMENTS IN SPECIFIED ASSETS (SECTION 80C) 

Section 80C provides for a deduction of savings in specified modes of Investments form gross total income. It is available only to an Individual or HUF. The Maximum permissible deduction is Rs.1,50,000 along with deduction u/s 80CCC & 80CCD.

Admissible Deductions:-

• Life insurance premium paid to assure life of individual, his spouse or children (minor, major, married or unmarried) or any member of HUF shall qualify up to - actual premium paid or 20% of sum assured, whichever is less qualifies for deduction. But if policy is issued on or after 1-4-2012, amount qualifying shall be 10%  of sum assured or actual premium paid, whichever is less.
• Sum paid under the contract for deferred on life of the Assessee or his/her spouse or children.
• Sum deducted by the government from the salary of an employee for securing a deferred annuity for self, spouse or children.
• Contribution to any PPF.
• Contribution by an employee to RPF.
• Contribution by an employee to an Approved Superannuation Fund.
• Contribution made to any PPF set up by the Central Government.
• Subscription to any deposit scheme or contribution to any Pension fund set up by the National Housing Bank.
• Payment of Tuition fees by an Individual Assessee at the time of admission to any university, college, school or other educational institutions within India for the purpose of full time education of any two children.
• Subscription to deposit scheme of Public Sector, engaged in providing housing finance.
• Subscription to units of Mutual funds notified u/s 10(23D).
• Sum deposited in Fixed Deposits (FDs) with tenure of five years.
• Sum deposited in 5 yrs Post Office Time Deposit (POTD) scheme.

2. DEDUCTION IN RESPECT OF CONTRIBUTION TO CERTAIN PENSION FUNDS (SECTION 80CCC)

Deduction in respect of Payment of premium for annuity plan of LIC or any other Insurer is provided. The Premium must be deposited to keep in force a contract for annuity plan of LIC or any other insurer for receiving pension from the fund. For this purpose, the Interest or Bonus accrued or credited to the Assessee’s Account shall not be reckoned as Contribution. The Maximum Deduction allowed is Rs.150000 p.a.

3. DEDUCTION IN RESPECT OF CONTRIBUTION TO PENSION SCHEME OF CENTRAL GOVERNMENT (SECTION 80CCD)

a. Employee’s contribution – Section 80CCD (1) is allowed to an individual who makes deposits to his/her pension account. Maximum deduction allowed is 10% of salary (in case the taxpayer is an employee) or 20% of gross total income (in case the taxpayer being self-employed) or Rs 1, 50,000, whichever is less. 

b.Deduction for self-contribution to NPS – section 80CCD (1B) A new section 80CCD (1B) has been introduced for an additional deduction of up to Rs 50,000 for the amount deposited by a taxpayer to their NPS account. Contributions to Atal Pension Yojana are also eligible.

c. Employer’s contribution to NPS – Section 80CCD (2) Additional deduction is allowed for employer’s contribution to employee’s pension account of up to 10% of the salary of the employee. There is no monetary ceiling on this deduction.  

4. LIMIT ON DEDUCTION U/S 80C, 80CCC, 80CCD(1) 
The Limit for maximum deduction available u/s 80C, 80CCC, 80CCD(1) (combined together) is Rs.150,000 only.

Grant of additional deduction u/s 80CCD(1B) upto Rs. 50000.

5. DEDUCTION IN RESPECT OF INVESTMENT BY A RESIDENT INDIVIDUAL IN LISTED EQUITY SHARES (SECTION 80CCG)
This Section provides one time deduction to a Resident Individual who has acquired listed equity shares in a previous year in accordance with a scheme notified by the Central Government. The Amount of deduction would be 50% of amount invested in such shares or Rs.25000 whichever is less.

Conditions to be satisfied:

• The gross total income of the Assessee should be less than or equal to Rs.12lakhs.
• The Assessee should be a New Retail Investor (explained below).
• The investment should be made in such listed shares as per the requirement specified under the notified scheme.
• The Minimum lock-in period is 3 years from the date of Acquisition.

New Retail Investor means the following persons:-

• Any individual who has not opened a Demat Account and has not made any transactions in the derivative segment ;
• Any individual who has opened a Demat Account before the notification of the scheme but has not made any transactions in the equity segment or derivative segment and
• Any individual who is not the first account holder of an existing joint Demat Account shall be deemed to have not opened an Account for the purpose of this scheme.

If any Individual after claiming such deduction fails to satisfy the conditions then the deduction earlier claimed shall be deemed to be the income of the Previous Year in which he fails to comply with the condition.

6. DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIUM (SECTION 80D)

Deduction under this section is available to an individual or a HUF.

 A deduction of Rs. 25,000 can be claimed for insurance of self, spouse and dependent children. An additional deduction for insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 (has been increased in Budget 2018 from Rs 30,000) if parents are more than 60 years old. 

In case, a taxpayers age and parents age is 60 years or above, the maximum deduction available under this section is to the extent of Rs. 100,000. 

Further Deduction of Rs. 5000 shall be allowed in respect of payment made on Account of preventive health check-up of self, spouse, children or parents made during the previous year.
7. DEDUCTION IN RESPECT OF REHABILITATION OF HANDICAPPED DEPENDENT RELATIVE (SECTION 80DD)

This deduction is available to a resident individual or a HUF and is available on:

a. Expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative

b. Payment or deposit to specified scheme for maintenance of dependent handicapped relative.

i. Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.

ii. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,25,000.

8. DEDUCTION IN RESPECT OF MEDICAL TREATMENT (SECTION 80DDB)
The deduction of Rs. 40000 or Amount actually paid whichever is less shall be allowed to an Assessee (non-senior) who is resident in India being an Individual or HUF. Deduction shall be allowed of any amount paid for the medical treatment of such disease or ailment as may be specified in the rules.

 In case, the Amount is paid in respect of a senior citizen (i.e. of age 60 years or above) then the deduction would be Rs.60,000  or the Amount actually paid whichever is less.

In case, the Amount is paid in respect of a  very senior citizen (i.e. of age 80 years or above) then the deduction would be Rs.80,000 or the Amount actually paid whichever is less.

9. DEDUCTION IN RESPECT OF INTEREST ON LOAN TAKEN FOR HIGHER EDUCATION (SECTION 80E)
This section provides deduction  is allowed to an individual for interest on loan taken for pursuing higher education. This loan may have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a legal guardian. The deduction is available for a maximum of 8 years (beginning the year in which the interest starts getting repaid) or till the entire interest is repaid, whichever is earlier. There is no restriction on the amount that can be claimed.    

10. DEDUCTION IN RESPECT OF INTEREST ON LOAN TAKEN FOR RESIDENTIAL HOUSE PROPERTY APPLICABLE FORM a.y 2017-18 (SECTION 80EE)
The following conditions should be satisfied in order to claim deduction under section 80EE:-

1. Assessee is an individual. He may be resident or non resident.
2. He has taken a loan and loan is taken for acquisition of residential house property. Loan is taken form bank or a housing finance company and loan has been sanctioned during april 1, 2016 and march 31, 2017.
3. The amount of loan sanctioned for residential house property does not exceeds Rs. 35 lakhs and value of residential house property does not exceeds Rs. 50 lakhs.
4. Assessee does not own any residential house property on the date of sanction of loan.
5. This deduction is over and above the Rs 2 lakhs limit under section 24 of the income tax act.

If above conditions are satisfied, the assess can claim deduction under section 80EE of the interest payable on the above loan or Rs. 50,000 whichever is less. This deduction is available for the assessment year 2017-18 and subsequent assessment years.

11. DEDUCTION  IN RESPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS ETC. (SECTION 80G)
The deduction under section 80G is availabe to any tax payer (may be individual, company, firm or any other person, maybe resident or non -resident). The various donations specified under this section are eligible to deduction upto either 50% or 100% with or without restrictions. Sub Section 5D has been inserted in section 80G to provide that no deduction shall be allowed in respect of donation of any sum exceeding Rs.10000 unless such sum is paid by any mode other than cash.

12. DEDUCTION IN RESPECT OF RENT PAID (SECTION 80GG)
Admissible deduction :-
The deduction will be least of the following:-

• Actual Rent paid less 10% of the total income before allowing such deduction, or
• 25% of such total income or
• Rs. 5000 per month (Rs. 2000 per month, upto the assessment year 2016-17)

Total income will not include long term capital gains and any income referred to in sections 115A to 115D.

Conditions to be satisfied:-

• Assessee should not be in receipt of House Rent Allowance.
• The expenditure incurred by him on rent of any furnished or unfurnished accommodation should exceed 10% of his total income arrived at after all deductions under Chapter VI A except section 80GG.
• The Accommodation should be occupied by the Assessee for the purpose of his own residence.
• The Assessee should not have self occupied residential premises in any other place.
• Assessee should file a declaration in form 10BA, confirming the details of rent paid.

13. DEDUCTION IN RESPECT OF DONATIONS FOR SCIENTIFIC RESEARCH AND RURAL DEVELOPMENT (SECTION 80GGA)
Admissible Deductions:-

• Any sum paid by the Assessee to the Research Association which has, as its object, the undertaking of scientific research
• Any sum paid to an Association or Institution which has, as its object, the undertaking of any programme of Rural Development to be used for carrying for carrying out any programme of Rural Development.
• Any sum paid to Research Association which has, as its object the undertaking of research in Social Science or Statistical Research.
• Any sum paid to Public Sector company or a local authority for carrying out any eligible project or scheme.
• Any sum paid to Rural Development fund.
• Any sum paid to National Urban Poverty Education Fund (NUPEF).

Sub-section (2A) has been inserted which provides that no deduction shall be allowed in respect of donation of any sum exceeding Rs. 10000 unless such sum is paid by any mode other than cash.

14. DEDUCTION IN RESPECT OF CONTRIBUTIONS GIVEN BY COMPANIES TO POLITICAL PARTIES (SECTION 80GGB)
This provides of deduction of any sum contributed in the Previous Year by an Indian Company to any Political Party or an Electoral Trust. No deduction shall be allowed in respect of any sum contributed by way of cash.

15. DEDUCTION IN RESPECT OF CONTRIBUTIONS GIVEN BY ANY PERSON TO POLITICAL PARTIES (SECTION 80GGC)
This provides for deduction of any sum contributed in the Previous Year by any Person to a Political Party or an Electoral Trust. It will not be available to a Local Authority and an Artificial Judicial Person. From assessment year 2014-15, no deduction shall be allowed in respect of any sum contributed by way of cash.

16. DEDUCTION FOR PERSON SUFFERING FROM PHYSICAL DISABILITY (SECTION 80U)

A deduction of Rs. 75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, deduction of Rs. 1,25,000 can be claimed. From FY 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.

17. DEDUCTION WITH RESPECT TO ANY INCOME BY WAY OF ROYALTY OF A PATENT (SECTION 80 RRB)

Deduction for any income by way of royalty for a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available up to Rs. 3 lakhs or the income received, whichever is less. The taxpayer must be an individual resident of India who is a patentee. The taxpayer must furnish a certificate in the prescribed form duly signed by the prescribed authority.

18. DEDUCTION OF INTEREST ON DEPOSITS FOR SENIOR CITIZENS (SECTION 80TTB)

A new section 80TTB has been inserted vide Budget 2018 wherein, a deduction in respect of interest income from deposits held by senior citizens will be allowed as a deduction from the total income. The limit for this deduction is Rs. 50,000. Further, no deduction under section 80TTA shall be allowed. In addition to section 80 TTB, section 194A of the Act will also be amended so as to increase the threshold limit for deduction of tax at source on interest income payable to senior citizens from the existing limit Rs 10,000 to Rs. 50,000.  

Difference between Income Tax Deduction, Rebate and Relief

Key Difference: Tax Relief is any program or incentive that helps reduce the tax in some way or another. This tax relief can be in the form of a tax deduction or a tax credit. A tax deduction is basically a deduction of tax. It allows one to deduct an amount from the total income of the person. A tax rebate, also known as tax refund, is a refund of tax that has already been paid by a person.

One of the responsibilities of growing up is to pay taxes to the government, so that it may continue to give its citizens the benefits that it always has. These benefits include things such as law enforcement, public services such as parks and recreation, sanitation, etc. In order to provide these services, as well as run the country, the government needs revenue. In fact, taxes are the primary source of income for any government.

However, despite of just taking taxes, the government can provide relief to its citizens. It does this by helping to reduce taxes via the form of tax relief. Tax Relief is any program or incentive that helps reduce the tax in some way or another. This tax relief can be in the form of a tax deduction or a tax credit.

A tax deduction is basically a deduction of tax. It allows one to deduct an amount from the total income of the person. Hence, the total taxable income of a person goes down, as does the tax payable. This deduction is usually on calculated on the basis of expenses, particularly those that are incurred to produce additional income.

 A tax rebate, on the other hand, is completely different. A tax rebate, also known as tax refund, is a refund of tax that has already been paid by a person. This refunds the tax that has usually been already paid in advance, or in excess, and for which the citizen is now eligible for a refund.

Comparison between Income Tax Deduction, Rebate and Relief: