Income Tax Deductions Details

Details of IT Deductions Allowed under Chapter VI-A of IT Act

Income Tax Act. Under Chapter VI-A, the Sections covered are Sec.80C, Sec.80CCC, Sec.80D, Sec.80CCG, Sec.80DD, Sec.80U, Sec.80DDB, 80E. Let us discuss briefly about all the Sections with reference to the Income Tax Act 2013-14.

In computing the taxable income of the employee, the following deductions under Chapter VIA of the Act are to be allowed from his gross total income:

Deductions allowed Under Section 80C (Key Points)
Section 80C entitles an employee to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,00,000/-:
  1. Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the spouse or any child of the individual.
  2. Any payment made to effect or to keep in force a contract for a deferred annuity.
  3. Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary; (From the above APGLI, GIS are covered)
  4. Any contribution made by an individual to any Provident Fund to which the Provident Fund Act 1925 applies.
  5. Any subscription to any such saving certificates as defined under section 2(c) of the Government Saving Certificate Act, 1959 as the Government may, by notification in the Official Gazette, specify in this behalf. [The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05 and National Saving Certificate (IXth Issue) vide Notification . G.S.R. 848 (E), dated the 29th November, 2011, publishing the National Savings Certificates (IX-Issue) Rules, 2011 G.S.R. 868 (E), dated the 7th December, 2011, specifying the National Savings Certificates IX Issue as the class of Savings Certificates FNo1-13/2011-NS-II r/w amendent Notification No.GSR 319(E), dated 25-4-2012]
  6. Any sum paid as contribution in the case of an individual, for himself, spouse or any child, a. for participation in the Unit Linked Insurance Plan.(ULIPS)
  7. Any subscription made to any units of any Mutual Fund, of section 10(23D). The investments made after 1.4.2006 in plans formulated in accordance with Equity Linked Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for deduction under section 80C.
  8. Any sums paid by an assessee for the purpose 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 which would, if it has not been used for assessee's own residence, have been chargeable to tax under that head) where such payments are made towards or by way of any installment or part payment of the amount due under any self financing or other scheme of any Development Authority, Housing Board etc.
  9. Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee. It is also clarified that full-time education includes play-school activities, pre-nursery and nursery classes. It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India.
  10. Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution.
  11. Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes. [The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E) dated 28.7.2006]
  12. Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf.
  13. Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.
Section 80CCC: Deduction in respect of Contribution to certain Pension Funds
Section 80CCC allows an employee deduction of an amount paid or deposited out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the Fund referred to in section 10(23AAB). However, the deduction shall exclude interest or bonus accrued or credited to the employee's account, if any and shall not exceed Rs. 1 lakh.

Section 80CCD: Deduction in respect of Contribution to Pension Account (CPS)(by Assessee}

Section 80CCD(1) allows an employee, being an individual employed by the Central Government or any other employer, on or after the 01.01.2004, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 or as may be notifed by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary(includes Dearness Allowance but excludes all other allowance and perquisites).
As per Section 80CCD(2), where an employee receives any contribution in the said pension scheme from the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.

Note:It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,00,000/-. However the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,00,000/- provided under this Section.

Sections under Chapter-IV and Excluded from the 100000 Limit

The Below are the Sections covered under Chapter-IV but excluded from 1 Lakh Limit

Sec 80CCG: Equity Savings Scheme: Rajiv Gandhi Equity Saving Scheme.
Newly inserted Section 80CCG provides deduction wef assessment year 2013-14 in respect of investment made under notified equity saving scheme. Rajiv Gandhi Equity Savings Scheme 2012 has been notified vide SO No 2777 dated 23.11.2012 as a scheme under this section. The investment is locked-in for a period of 3 years from the date of acquisition in accordance with the above scheme. The amount of deduction is at 50% of amount invested in equity shares/units. However, the amount of deduction under this provision cannot exceed Rs. 25,000
  • (a) The assessee is a resident individual
  • (b) His gross total income does not exceed Rs. 12 lakhs;
  • (c) He has acquired listed shares in accordance with a notified scheme or listed units of an equity oriented fund as defined in section 10(38);
  • (d) The assessee is a new retail investor;
  • (e) The investment is locked-in for a period of 3 years from the date of acquisition in accordance with the above scheme;
  • (f) The assessee satisfies any other condition as may be prescribed.
Amount of deduction –The amount of deduction is at 50% of amount invested in equity shares/units. However, the amount of deduction under this provision cannot exceed Rs. 25,000.

Section 80D: Deduction in respect of health insurance premia paid (Medical Insurance):
Section 80D provides for deduction available for health insurance premia paid, etc. which is
calculated as under:

  • The whole of the amount paid to effect or to keep in force an insurance on the health of the employee or his family or any contribution made to the CGHS or such other scheme as may be notified by Central Government (Finance Act 2013) or any payment on account of preventive health check-up of the employee or family, [restricted to Rs 5000/-; cash payment allowed here], the aggregate allowable deduction is Rs.15,000/{For SeniorCitizens it isRs 20000/-}.
  • The whole of the amount paid to effect or keep in force an insurance on the health of the parent or parents of the employee or any payment made on account of preventive health check-up of the parent or parents of the employee [restricted to Rs 5000/-; cash payment allowed here] the aggregate allowable deduction is Rs.15,000.
Section 80DD: Medical treatment of a dependent who is a person with disability
Under section 80DD, where an employee, who is a resident in India, has, during the previous year

 (a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

 (b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions specified in this regard and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability, the employee shall be allowed a deduction of a sum of fifty thousand rupees from his gross total income of that year.

However, where such dependant is a person with severe disability, an amount of one hundred thousand rupees shall be allowed as deduction subject to the specified conditions.

Section 80U: Deductions for a Person with Disability.
Deduction of Rs. 50,000/- to an individual who suffers from a physical disability(including blindness) or mental retardation. Further, if the individual is a person with severe disability, deduction of Rs. 100,000/- shall be available u/s 80U. Certificate should be obtained from a Govt. Doctor. The relevant rule is Rule 11D.

Section 80DDB: Deduction in respect of Medical Expenditure on Self or Dependent Relative
A deduction to the extent of Rs. 40,000/- or the amount actually paid, whichever is less is available for expenditure actually incurred by resident assessee on himself or dependent relative for medical treatment of specified disease or ailment. The diseases have been specified in Rule 11DD. A certificate in form 10 I is to be furnished by the assessee from any Registered Doctor.

Section 80EE: Interest on loan taken for residential house property
Vide Finance Act 2013, an individual is allowed a deduction upto a limit of Rs 1,00,000 being paid as interest on a loan taken from a Financial Institution, sanctioned during the period 01-04-2013 to 31-03-2014 (loan not to exceed Rs 25 lakhs) for acquisition of a residential house whose value does not exceed Rs 40 lakhs. However the deduction is available if the assessee does not own any residential house property on the date of sanction of the loan.

Section 80G: Deduction in respect of Various Donations
The various donations specified in Sec. 80G are eligible for deduction upto either 100% or 50% with or without restriction as provided in Sec. 80G. The Donations made SWF, PMRF, CMRF etc will come under this section. No deduction under this section is allowable in case of amount of donation if exceeds Rs.10000/- unless the amount is paid by any mode other than cash.

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Jane Marsh said...

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Jane Marsh said...

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