Chapter 11 : Deduction and Rebates Advance Direct Tax and Service Tax [Sub code : 441]
Learning Objectives Deductions from Total Income Deductions available under Chapter VI-A Rebates available under section 88 Taxability of items allowed as deductions in earlier years Chapter 11 : Deduction and Rebates 2
Introduction Chapter VI-A of the Income Tax Act, 1961 contain deductions to be made in computing total income. Section 80A prescribes 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. However, the aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. Chapter 11 : Deduction and Rebates 3
Section 80C Qualifying Payments / Investments Condition (s) Individual / HUF Payments made out of Taxable Income for Life Insurance Premium, Contribution to Provident Fund, NSC, Housing Loan Repayment, Tuition Fees of Children, Term Deposits with Banks or Post office for 5 years, ULIP etc. The maximum amount deductible under section 80C, 80CCC, 80CCD combine cannot exceed Rs. 1,00,000/- Qualifying Amount of Deduction Rs. 1,00,000/- Quantum Actual amount invested OR Rs. 1,00,000/-, whichever is Lower Chapter 11 : Deduction and Rebates 4
Section 80CCC Qualifying Payments / Investments Individual Payments made out of Taxable Income to Life Insurance Corporation or to any other approved insurer for approved Pension Plan Condition (s) Rebate Not allowed under section 88 Pension received or amount withdrawn is taxable in the year of receipt The maximum amount deductible under section 80C, 80CCC, 80CCD combine cannot exceed Rs. 1,00,000/- Qualifying Amount of Deduction Quantum Rs. 1,00,000/- (covered by limit of section 80C) Actual amount invested OR Rs. 1,00,000/-, whichever is Lower Chapter 11 : Deduction and Rebates 5
Section 80CCD Qualifying Payments / Investments Individual Amount paid or deposited in his account under a Pension Scheme notified by the Government Condition (s) Rebate Not allowed under section 88 Pension received or amount withdrawn is taxable in the year of receipt The maximum amount deductible under section 80C, 80CCC, 80CCD combine cannot exceed Rs. 1,00,000/- Qualifying Amount of Deduction Quantum Amount paid or deposited OR 10% of Salary 100% of qualifying amount OR Rs. 1,00,000/-, whichever is Lower Chapter 11 : Deduction and Rebates 6
Section 80CCF Individual / HUF Qualifying Payments / Investments Condition (s) Qualifying Amount Quantum Amount paid or deposited as subscription to notified long term Infrastructure Bonds Deduction under this section is available from A.Y. 2011-12 TO A.Y. 2012-13 Amount paid or deposited Rs. 20,000/- OR Amount actually paid or deposited, whichever is Lower Chapter 11 : Deduction and Rebates 7
Section 80D Qualifying Payments / Investments Condition (s) Qualifying Amount of Deduction Quantum Individual / HUF Premium paid out of Taxable Income to approved scheme of GIC (Mediclaime, Bhavishya Aarogya) or any other approved insurer for Health of his and his family members Payment for Preventive Health Check-up of family and Parents Family means Spouse and Children Payment may be made by any mode other than Cash For preventive health check-up cash payment is allowed Senior citizen means age of 60 years or more Rs. 15,000/- for Self & Family Rs. 15,000 for Parents (Rs.20,000 in case Parents are Senior Citizens) Rs. 5,000/- for Preventive Health Check up 100% of Premium actually paid for self, family & parents OR Rs. 15,000 for self & family + Rs.15,000 / Rs.20,000 for Parents, whichever is Lower Chapter 11 : Deduction and Rebates 8
Qualifying Payments / Investments Condition (s) Quantum Individual / HUF Section 80DD Expenses incurred for Medical Treatment (including Nursing), Training and Rehabilitation of a Dependent with Disability (Severe / Ordinary) Amount paid / deposited to any scheme framed by LIC or approved insurer for payment of annuity or lump sum amount for the benefit of dependent person with disability Disability means disabilities define under Persons with Disabilities (Equal Opportunities, Protection of Right and Full Participation) Act, 1995 (PDEOPRFP) As per PDEOPRFP Act, Person with disability means a person suffering from not less than 40% of any disability and Severe Disability means 80% or more of such disability A certificate in Prescribed Form and manner from Medical Authority is required to file along with Return of Income. Rs. 50,000/- for Ordinary Disability Rs. 1,00,000/- for Severe Disability Chapter 11 : Deduction and Rebates 9
Section 80DDB Qualifying Payments / Investments Condition (s) Qualifying Amount of Deduction Quantum Individual / HUF (Resident) Amount actually paid for Medical Treatment of such Disease or Ailments as may be specified Deduction available for Expenses on Self, Dependent or for a member of HUF is required to furnish a certificate in prescribed form from a Neurologist, an Oncologist, a Urologist, a Hematologist, an Immunologist or from such other specialist as may be prescribed, working with a Government Hospital Rs. 40,000/- [Rs.60,000/- for Senior Citizen) Actual amount paid OR Rs. 40,000/- (Rs.60,000/- for Senior Citizen), whichever is Lower Amount received from an insurer or reimbursed by an employer for medical treatment is to be reduced from above mentioned amount Chapter 11 : Deduction and Rebates 10
Section 80E Qualifying Payments / Investments Condition (s) Individual INTEREST paid on (out of taxable income only) Loan taken for pursuing Higher Education The Loan should be from an approved charitable institution or from a Banking company or from a notified financial institution only Higher Education means full time studies for any graduate / post graduate course in Engineering, Medicine, Management etc. or for post graduate course in applied science or pure science including mathematics and statistics Deduction available for 8 A.Y. including first A.Y. from which the repayment has been started Quantum The total amount of INTEREST paid during the year Chapter 11 : Deduction and Rebates 11
Section 80G Qualifying Payments / Investments Condition (s) Qualifying Amount Any Donation for Charitable Purpose as specified in Section 80G(2) Donation should not be in Kind If paid out of any previous year s income or out of income not includible in assessment of the current year, the deduction is still available Amount of Donation not exceeding 10% of Gross Total Income (This limit does not apply in certain cases) Quantum 50% Generally; and 100% in cases of PM s Relief Fund, CM s Relief Fund, Gujarat Earthquake Relief fund etc. [refer section 80G(1)(i)] Chapter 11 : Deduction and Rebates 12
Qualifying Payments / Investments Condition (s) Qualifying Amount Quantum Individual Section 80GG Expenditure incurred towards payment of Rent in respect of Furnished or Unfurnished accommodation occupied for his own residence This does not apply where the residential accommodation is owned by the assessee or his family where he ordinarily resides and carried on business or profession need to submit a declaration in Form 10BA Expenditure in excess of 10% of his total income Rs. 2000/- per month; OR 25% of Total Income; OR Excess of Rent Paid over 10% of Salary, whichever is Lower Chapter 11 : Deduction and Rebates 13
Section 80GGA Qualifying Payments / Investments Condition (s) Quantum Any Donation to Scientific Research or research in Social Science or Rural Development or Conservation of Natural Resources or to National Urban Poverty Education Fund or for eligible project or scheme should not have income under the head Profit and Gains from Business or Profession Donee should be under section 35, 35CCA or 35AC 100% of Amount of Donation Chapter 11 : Deduction and Rebates 14
Section 80-IAB Developer of Special Economic Zone Qualifying Payments / Investments Condition (s) Profit from development of Special Economic Zone The gross total income includes profit and gains derived by undertaking from business of development of special economic zone Such special economic zone is notified after 01/04/2005 Qualifying Amount Quantum 100% of Profit 100% of Profit for 10 consecutive A.Y. out of 15 A.Y. Chapter 11 : Deduction and Rebates 15
Section 80JJA Qualifying Payments / Investments Quantum Any Profit and Gains derived from the business of collecting and processing or treating of Bio-degradable waste for generating power or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas pellets or briquettes for fuel or organic manure Whole of Such Profit or Gain for first 5 consecutive A.Y. Chapter 11 : Deduction and Rebates 16
Section 80P Eligible Undertaking [1] Profits arising to a co-op. society engaged in the business of banking or providing credit facilities to its members; cottage industry; marketing, of agricultural produce grown by its members; purchase of agricultural implements seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members; processing, without the aid of power of the agricultural produce of its members; collective disposal of the labour of its members; fishing or allied activities, purchase of materials and equipment in connection with fishing or allied activities for the purposes of supplying them to its members. [2] Primary Co-operative Society engaged in supplying milk, oil seeds, fruits or vegetables grown by its member to specified bodies. Amount 100% of profits attributable to such activities 100% of Profit and Gains of such Business Chapter 11 : Deduction and Rebates 17
Contd Eligible Undertaking [3] Co-operative Society engaged in activities other than those specified in (1) and (2) above (either independent of or in addition to all or any of the activities so specified) if such co-operative society is a Consumer Co-operative Society; in any other case. [4] Income by way of interest or dividends derived from investments with any other Cooperative Societies. [5] Income derived from letting godowns and warehouses for storage, processing or facilitating the marketing of commodities. Amount Maximum amount of Rs.1,00,000/- Rs. 50,000/- 100 % of such income 100 % of such income Chapter 11 : Deduction and Rebates 18
Most Preferred Investment u/s 80C Employee s share of Provident Fund Life Insurance Policy Premium paid for self, spouse and children Amount deposited in Public Provident Fund Account of self, spouse and children Investment in unit linked life insurance plan Term deposit with scheduled bank for not less than 5 years specifically for Tax Saving Purpose and having PAN of employee in deposit itself Time deposit with Post office for 5 years National Saving Certificates Chapter 11 : Deduction and Rebates 19
Contd Tuition fees to any university, college or school for full time education of kids Housing Loan Principal Repayment Stamp duty and Registration charges on purchase of house property Investment in Tax saving ELSS or Mutual fund schemes Investment in Bonds issued by NABARD as specify by central govt. Chapter 11 : Deduction and Rebates 20
Section 88E Rebate in respect of Securities Transaction Tax Individual, HUF, Firm or any other Person Condition (s) His income includes any income chargeable under the head Profit and Gain from Business or Profession arising from taxable securities transactions Quantum of Rebate Equal to Securities Transaction Tax paid by assessee in respect of taxable securities transactions Chapter 11 : Deduction and Rebates 21
Section 80CCA What Triggers Tax Incidence / Taxable Event Year in which Taxable Amount Taxable Individual / HUF Withdrawal of principal and/or interest from NSS Account Previous Year in which withdrawal is made Whole of the amount withdrawn Individual / HUF Bonus received on Annuity plan of LIC under section 80CCA Previous Year in which bonus received Whole of the amount of bonus received Individual / HUF Annuity or surrender value received in respect of such notified annuities Previous Year in which such amount received Whole of the amount received Note : Amount paid after the death of the assessee to the legal heirs is not Taxable in hands of legal heirs. Chapter 11 : Deduction and Rebates 22
Section 80CCB Individual / HUF What Triggers Tax Incidence / Taxable Event Year in which Taxable Receipt of whole or part of amount invested either on repurchase of notified units or on termination of the plan Previous Year in which amount so received Extent of Taxability Amount Taxable to the extent of original investment Amount received in excess of original investment is taxable as Capital Gain under section 45(6) Amount is subject to TDS under section 194F @ 20% Chapter 11 : Deduction and Rebates 23