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DEDUCTION UNDER CHAPTER VI AThe Income Tax Act provides for allow ability of certain deductions from the gross total income of the assessee. These deductions are given in Chapter VIA of the Income Tax Act. For the purpose of TDS, the employer/ DDO may allow some of these deductions to the employee on furnishing of the required particulars. The deductions allowable by the DDO/employer are being described.SectionNature of DeductionRemarks80 CInvestment or Deposits for maximum of Rs. 1,00,000LIC, National Saving Certificate, Tution fees, Housing Loan, Fixed Deposits, etc80CCCPayment of premium for annuity The premium must plan of LIC or any other insurer, be deposited to keep Deduction is available up to a in force a contract for maximum of Rs. 10,000The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund.80CCFInfrastructure Bonds Max. Rs 20,00080DPayment of medical insurance premium. Deduction is available up to Rs. 15,000 + Rs. 20,000(senior citizen)The premium is to be paid by cheque and the insurance scheme should be framed by the General Insurance Corporation of India & approved by the Central Govt. or any other insurer and approved by the regulatory authority & Development authority. The premium should be paid in respect of health insurance of the assessee or his family members80DD Deduction of Rs. 50,000 or Rs. 1,00,000(severe) in respect of a) expenditure incurred on medical treatment, (including nursing), training and rehabilitation of a handicapped dependent relatives. The handicapped dependent should be a dependent relative suffering a permanent disability (including blindness) or mentally retarded, as certified by a specified physician or psychiatrist. b) Payment or deposit to specified scheme for maintenance of dependent handicapped relative Note: The new section 80DD replace the earlier sections of 80DD and 80DDA which are now clubbed together under the new section. 80DDBDeduction of Rs. 50,000 or Rs. 1,00,000(severe) in respect of medical expenditure incurredExpenditure must be actually incurred by resident assessee on himself or dependant relative for medical treatment of specified disease or ailment. The diseases have been specified in Rule HDD. A certificate in form 101 is to be furnished by the assessee from any registered doctor80EDeduction in respect of payment of Interest on loan taken.This provision has been introduced to provide relief to students taking loans for higher studies. The payment of interest of loan taken will be allowed as deduction.80GDonations to certain funds, charitable institutions etc.The various donations specified in Sec.80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in Sec 80G80GGDeduction available is the least of (i) Rent paid less 10% of total income (ii) Rs. 2,000 per month (iii) 25% of total income 1) Assessee or his spouse or minor child should not own residential accommodation at the place of employment. 2) He should not be in receipt of house rent allowance.3) He should not have a self occupied residential premises in any other place80UDeduction of Rs. 50,000/- or Rs. 1,00,000(severe) to an individual who suffers from a physical disability (including blindness) or mental retardationCertificate should be obtained from a Govt. Doctor. The relevant rule is Rule 11D.In respect of section 80G, no deduction should be allowed by the employer/DDO, from the salary income in respect of any donations made for charitable purposes. The tax relief on such donations as admissible u/s 80G will have to be claimed by the taxpayer in the return of income. However, DDOs, on due verification, may allow donations to the following bodies to the extent of 50% of the contribution:a) The Jawaharlal Nehru Memorial Fund;b) The Prime Minister's Drought Relief Fund;c) The National Children's Fund;d) The Indira Gandhi Memorial Trust;e) The Rajiv Gandhi Foundation, and the following bodies to the extent of 100% of the contribution: 1) The National Defence Fund or the Prime Minister's National Relief Fund;2) The Prime Minister's Armenia Earthquake Relief Fund;3) The Africa (Public Contribution-India) Fund;4) The National Foundation for Communal Harmony;5) The Chief Minister's Earthquake Relief Fund, Maharashtra;6) The National Blood Transfusion Council;7) The State Blood Transfusion Council;8) The Army Central Welfare Fund;9) The Indian Naval Benevolent Fund;10) The Air Force Central Welfare Fund;11) The Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996;12) The National Illness Assistance Fund;13) The Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund, in respect of any State or Union Territory, as the case may be, subject to certain conditions;14) The University or educational institution of national eminence approved by the prescribed authority;15) The National Sports Fund to be setup by the Central Government;16) The National Cultural Fund set up by the Central Government;17) The Fund for Technology Development and Application set up by the Central Government;18) The national trust for welfare of persons with autism, cerebral palsy mental retardation and multiple disabilities.Theory Questions with SolutionWhat is the amount of deductions available in respect of contribution to certain pension funds under section 80 CCC?Ans. Deduction under this section is available to an individual only.Where an assessee has paid or deposited in the previous year any sum out of his income chargeable to tax, under an annuity plan of Life Insurance Corporation or any other insurer for receiving pension from the fund set up by the said corporation, will be allowed as a deduction in the computation of his total income.The amount of deduction is actual amount paid/ deposited or Rs. 1,00,000/- aggregate limit of Rs.1 lakh together with section 80 C.Which type of assessee can claim deduction in respect of Medical Insurance Premium Under Section 80D?Ans.Deduction under this section is available to following assessee:An individualAn HUFWhat are the conditions required to be satisfied to claim a deduction in respect of Medical Insurance Premium Under Section 80D?Ans.The deduction shall be allowed from the total income of the assessee in respect of the amount paid by cheque or any other mode than cash, out of his income chargeable to tax in the previous year.What is the amount of deduction available for Medical Insurance Premium Paid under Section 80d?Ans.Amount of Deduction:In case of an individual such premium is paid on his health or on the health of the spouse or dependent children.If such premium does not exceed Rs. 15,000………..100%.If such premium exceeds Rs. 15,000……………………………….Rs. 15,000 only.In case of an individual such premium is paid on the health of his parent or parents (whether dependant or not) an ADDITIONAL DEDUCTION is allowed.If such premium does not exceed Rs. 20000…………….100%.If such premium exceeds Rs. 20,000…………………….Rs. 20,000 only.However where such premium is paid in respect of insurance on the health of the assessee, or on the health of the wife or husband, or parents or any member of the family in case of Hindu undivided family and such person is a ‘senior citizen’ the permissible deduction will be Rs. 20,000 instead of Rs. 15,000. ‘Senior Citizen’ here means an individual resident in India and who is of the age of 65 years or more any time during the relevant previous year.Discuss the enhanced limit of deduction available to a senior citizen under section 80D.Ans.The deduction shall be allowed from the total income of the assessee in respect of the amount paid by cheque or any other mode than cash, out of his income chargeable to tax in the previous year.Which types of assessee are covered for deduction in under section 80C.Ans.:Deduction under this section is available to:An individualAn HUFExplain provision u/s. 80 CCE in respect of Deduction to be claimed for section 80C and 80CCC?Ans.The total deduction an assessee can claim u/s 80C, 80CCC and 80CCD aggregating together is restricted to Rs. 1,00,000.Which types of assessee are covered to claim deduction under section 80U?Ans.The deduction is allowed only to an individual who will satisfy the following conditions:The individual is a resident in India.Such an individual at the end of the previous year, is suffering from a disability (i.e. action, cerebral palsy, multiple disability blindness, low vision, leprosy cured, hearing impairment, locomoter disability, mental retardation and mental illness) which is certified by a medical authority.Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the Medical authority, along with the return of income, in respect of assessement year for which the deduction is claimed.Can a blind, Non- Resident Individual claim deduction under section 80 U?Ans. No Explain the condition to be satisfied under section 80U for claiming deduction.Ans. The deduction is allowed only to an individual who will satisfy the following conditions:The individual is a resident in India.Such an individual at the end of the previous year, is suffering from a disability (i.e. action, cerebral palsy, multiple disability blindness, low vision, leprosy cured, hearing impairment, locomotor disability, mental retardation and mental illness which is certified by a medical authority.Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the Medical authority, along with the return of income, in respect of assessement year for which the deduction is claimed.An individual satisfying the above condition shall be allowed a deduction of fifty thousand rupees. However, if such an individual is a person with SEVERE disability, the amount of deduction would be one lac rupees.“Person with severe disability” means a person with 80% or more of one or more disability as referred to in Section 56(4) Of the person with equal opportunity, Protect of Right and Full Participation Act, 1995 or a person with severe disability referred to in Section 2(0) of National Trust for Welfare of person with Autism, Cerebral Palsy, Mental Retardation and multiple disability Act,1999. What is the amount of deduction available under section 80U? Does actual expenditure incurred by the assessee affect the deduction? Ans.An individual satisfying the above condition shall be allowed a deduction of fifty thousand rupees. However, if such an individual is a person with SEVERE disability, the amount of deduction would be one lac rupees.“Person with severe disability” means a person with 80% or more of one or more disability as referred to in Section 56(4) Of the person with equal opportunity, Protect of Right and Full Participation Act, 1995 or a person with severe disability referred to in Section 2(0) of National Trust for Welfare of person with Autism, Cerebral Palsy, Mental Retardation and multiple disability Act, 1999.12. What are the deductions under chapter VI-A referred to in the form? Some of the more relevant deductions applicable to the common person in daily life, subject to the proviso that the aggregate amount of deductions should not, in any case, exceed the gross total income, are as follows.Med claim: Sec. 80DDeduction up to Rs. 15,000 is allowed in respect of medical insurance premiums paid by cheque by an individual to benefit the assessee and dependent family including spouse, children, and parents. The same benefit is also available to an HUF for its members. For senior citizens, the deduction is raised to Rs. 20,000. However, premiums paid by senior citizens for covering health of their children, dependent or otherwise, are not eligible for the deduction. Handicapped Dependent: Sec. 80DD Following the merger of Sec. 80DDA with 80DD, the total deductible amount was raised from Rs. 35,000 to Rs. 40,000. Sec. 80DD stipulated that a resident individual or a member of HUF having a dependent relative who suffers from a permanent physical disability (including blindness) or mental retardation was entitled to a deduction of Rs. 20,000 in a year for medical treatment, training or rehabilitation. Payment to LIC’s ‘Jeevan Aadhar’ and UTI’s ‘Special Plan for the Handicapped’ specially designed for such persons was covered by Sec. 80DDA, offering a deduction of Rs. 15,000. Deduction under section 80DD is statutory in nature and is allowed in full, irrespective of the actual expenditure incurred on medical treatment. Treatment of protracted diseases: Sec. 80DDB Exemption of Rs. 40,000 is allowed for expenditure on treatment of protracted diseases (spelled out) to an individual for herself or a dependent relative and to an HUF for any of its members. For senior citizen, this limit would be Rs. 60,000. However, any amount received by way of medical insurance has to be subtracted for arriving at the eligible deduction. Loan for Higher Education: Sec. 80E Repayment of loan as well as interest thereon by an individual taken from a bank, a notified financial institution or any approved charitable institution for higher education is deductible up to a ceiling of Rs. 25,000 (raised to Rs. 40,000 this last time around) per year for 8 successive years. Loans given by employers are not eligible. Higher education means studies for any graduate or post graduate course in engineering, medicine or management or a post- graduate course in applied or pure sciences, including mathematics and statistics.Donations: Sec. 80G An assessee is entitled to a deduction of 50% (and in some cases 100%) of donations made for approved charitable purposes. These donations must be in the form of money and not in kind, unless the donor is the manufacturer of the items donated. Some of these funds have an aggregate ceiling of 10% of gross total income, as reduced by the standard deduction under Section 16(i) as well as professional tax under Section 16(iii) and also by other permissible deductions under Chapter VI-A. Accommodation expenses: Sec. 80GG All assessees, including employees not getting HRA, paying rent for furnished or unfurnished accommodation in excess of 10% of their total income are entitled to a deduction of least of i) rent in excess of 10% of total income; ii) 25% of total income and iii) Rs. 2,000 per month. The deduction is not available if the accommodation is i) owned by the assessee or his spouse or minor child or the HUF of which he is a member at the place where he normally resides or has her office, employment, business or profession or ii) owned by him at any other place and occupied by him. The assessee is required to file a declaration in Form-10BA. Problems with Solution1) Let us take an illustration. Mr. X an individual and M/s. Y Pvt. Ltd., a Company both give donation of Rs. 1,00,000/- to a NGO called Satyakaam. The total income for the A.Y. year 2011-2012 of both Mr. X and Ms. Y Pvt. Ltd. is Rs. 3,00,000/-. The tax benefit would be as shown in the table:Mr. XMS. Y Pvt. Ltd.i) Total Income for the year 2011-123,00,000.003,00,000.00ii) Tax payable before Donation14,000.0090,000.00iii) Donation made to charitable organisations1,00,000.001,00,000.00iv) Qualifying amount for deduction (50% of donation made)50,000.0050,000.00v) Amount of deduction u/s 80G (Gross Qualifying Amount subject to a maximum limit10% of the Gross Total Income)30,000.0030,000.00iv) Taxable Income after deduction2,70,000.002,70,000.00v) Tax payable after Donation11,000.0081,000.00vi) Tax Benefit U/S 80G (ii)-(v)3,000.009,000.00Note :Education Cess & Sec. & Higher Educ. Cess has not been included in working of tax benefit.Illustration of Benefits under Section 80g1. Donations to private trustsStep 1: Find out the qualifying amountThe qualifying amount under this category will be lower of the following two amounts:a) The amount of donationb) 10 per cent of the gross total income as reduced by all other deductions under Chapter VI-A of the Income Tax Act such as 80C (PPF, LIC etc.), 80D (mediclaim), 80CCC (pension schemes etc.).For example, a taxpayer named Laxmi Arcelor has taxable salary of Rs 500,000. He has deposited Rs 70,000 in Public Provident Fund and Rs 60,000 in his company provident fund. He donates Rs 45,000 to CRY (Child Relief & You) trust. Presuming he has no other income, his taxable income will be computed as under:Gross salaryRs 500,000Less: Deduction under section 80C restricted toRs 100,000Gross total income (before 80G)Rs 400,000After making donation to CRY, his qualifying amount for 80G will be:Actual amount of donationRs 45,00010% of Gross total income as computed aboveRs 40,000 whichever is lowerSince 40,000 is lower, the qualifying amount will be Rs 40,000Step 2: Find out actual deductionThe next question that arises is how much would be the actual deduction? In the case of donations to private trusts, the actual amount of donation would be 50 per cent of the qualifying amount.Therefore, in the example given above, since the donation is made to a private trust, the deduction will be 50 per cent of the qualifying amount ie 50 per cent of Rs 40,000 = Rs 20,000.So,Gross total income (Before 80G)Rs 400,0002. Deduction in Respect of Medical Insurance Premium (U/S 80 D)Mr Ashok owns a self-occupied house known as “Girnar”. The national rent of the house is Rs. 12000/-p.a. The municipal Taxes paid for this property are Rs. 2000/-. He is employed with M/s Technova Ltd on a salary of Rs. 16000/- to general Insurance corporation in respect of Medical Insurance for self, his wife and children. You are required to calculate his taxable income for the assessment year 2009-10.Solution:Name of the Assessee : Mr. AshokAssessment year : 2009-10Previous year : F.Y 2008-09Legal Status : An individual Residential Status : R & O.RComputation of Total IncomeParticularsRsRsIncome from salarySalary@Rs.10000/-p.mLess : Deduction U/s 16Income from House PropertyS.O.H.P : “Girnar”Annual ValueLess: Deduction U/s 24 Gross Total IncomeLess: Admissible Deductions under Chapter VI AU/s 80D : Deduction in respect of Medical Insurance PremiaNet taxable Income120000 NIL NIL NIL120000NIL120000150001050000Points to be noted :Deduction in respect of Medical Insurance Premia is allowable as deduction up to Rs. 15000/- maximum.3. Sec. 80CCE- Limit on deductions under section 80C, 80CCC and 80CCDMr. Ravi varman, Director, X Pvt. Ltd., furnishes the following particulars for year ending 31.03.2008.Investment in NSC – Rs. 60000Life Insurance Premium paid – Rs. 30000Deferred Annuity Plan – Rs. 30000ICICI Pension Plan – Rs. 15000Contribution to pension schemes of Govt. (equivalent to 10% of salary) – Rs. 25000Compute the deduction admissible under chapter VIA for A.Y 2008-09Ans: Computation of deduction eligible under chapter VIA forParticularsAmount Rs.Amount Rs.Deduction u/s 80C-NSC-LIC Premia-Deffered Annuity Plan Gross amount eligibleDeductions under section 80C restricted to Deduction u/s 80CCCICICI Plan Deductions under section 80CCC restricted toDeduction u/s 80CCDCentral Govt. Pension SchemeGross amount eligible u/s 80CCE60,00030,00030,0001,20,00015,0001,00,00015,00025,0001,40,000Deduction under section 80CCE restricted to 1,00,000Illustration 4: X, a chartered Accountant, derives Rs. 1,63,000 as taxable professional income. Income of X from other sources is Rs. 7,000. He pays Mediclaim insurance premium Rs. 2,000 for insuring the health of his department parents; Rs. 3,000 for self and spouse and Rs. 2,000 for his brother. He incurs Rs. 12,000 expenditure on medical treatment of his dependent mentally retarded (severe disability) sister in medical approved hospital duly certificate. He pays rent of Rs. 2,500 per month. Calculate his total income for assessment year 2008-09 after claiming deduction under chapter VI-A.Ans: Computation of total IncomeParticularsAmount Rs.Amount Rs.Professional Income Income from other sourcesGross Total IncomeLess: Deduction under chapter VI-AMediclaim Insurance – 80D Expenditure for dependent mentally retarded – 80DDRent Paid – 80GG – least of the following is eligible for deductionExcess of rent paid over 10% of total income (30,000 – 9,000) = 21,00025% of total Income = 22,500Ceiling limit Rs. 2,000 p.m. = 24,0005,00075,00021,0001,63,0007,0001,70,0001,01,000Total Income Rs.69,000Note: Mediclaim Insurance for using insuring health of X’s brother does not quality for deduction u/s 80DDeduction u/s 80DD is a flat amount of Rs. 75,000 irrespective of the actual expenditure incurred (for persons with severe disability)Practical Questions without SolutionMr. Lakhpati submits the following details for the year 2010-11:Serial no.ParticularsRs.1.Income from business1,00,0002.Received as share from H.U.F.20,0003.Donations made:Prime Minister’s Armenia Earthquake relief fund.Government of India for promoting Family PlanningDelhi University(being an approved institution u/s 80G)10,0005,00010,000Compute his net income.Mr. Dayalu, whose gross total income during the previous year was Rs. 12,50,000 has made the following donations.Rs. 20,000 for the repairs of Taj Mahal a notified place.Rs. 10,000 for repairs of a temple at home-town.He donated utensils worth Rs. 10,000 to people of quake-affected villages at Bhuj.He donated Rs. 1,00,000 to an educational institution recognized u/s 80G(5) for building a school on the condition that the school will be named after his mother.Compute the net income.Mr. De, whose gross total income during the previous year was Rs. 10,00,000 has made the following donations.Scholarship of Rs.1,000p.m to a brilliant but poor student for going abroad for higher studies.Rs. 1,00,000 paid to World Wild Life Fund approved u/s 80-G(5) for conservation of Wild life.Rs. 25,000 paid for an orphanage to be built by the Mumbai Municipality.Rs. 50,000 for the construction of an approved remand home for children.Compute the net income.Mr. dharmatma, whose gross total income is Rs. 5,00,000 has made the following donations during the previous year.Serial No.ParticularsRs.1.Jawaharlal Nehru Memorial Fund5,0002.Rajiv Gandhi Foundation50,0003.Africa (Public contribution-India Fund)10,0004.Mumbai Municipal Corporation to open a school for blind.50,0005.Chanakya Memorial Trust (Recognised) to erect a statue of Chanakya at Magadh.10,0006.Approved Regimental Fund established by Armed Forces.10,000Compute the deduction available under section 80G, and the Net Income.Mr. Danshur, whose gross total income is 5,00,000 has made the following donations:Serial no.ParticularsRs.1.Prime Minister’s Drought Relief Fund10,0002.Prime Minister’s National Relief Fund10,0003.National Defence Fund50,0004.National children’s Fund25,0005.Indira Gandhi Memorial Trust50,000Compute the deduction available under section 80G.Mr. Large-hearted has earned a gross total income of Rs. 10,00,000 for the current assessment year. During the previous year, he made the following donations:Serial No.ParticularsRs.1.Prime Minister’s National Relief Fund20,0002.Narmada Bachao Andolan2,00,0003.Lioness Club20,0004.National Defence Fund2,00,0005.University of Patna approved as Nationally Eminent1,00,0006.An approved institution for promoting family planningCompute his claim for deductions.Mr. Donor has earned Rs.2,00,000 for business during 2005-06. He has made the following donations during the year:Serial No.ParticularsRs.1.Prime Minister Drought relief Fund10,0002.National Defence Fund8,0003.Approved Public Charitable Institution11,0004.Paid to the student who stood First in T.Y. B.COM. examination to help him joined M.com1,0005.Clothes donated to poor families worth Rs.2,0006.Hindu Relief committee for building Rest-House for Hindus at Banaras10,000Compute the deduction available under section 80G.Mr. Natwarlal submits the following details for the computation of income for the assessment year 2006-07:Serial No.ParticularsRs.1.Income for business48,0002.Income for unit trust of India5,0003. Interest on National deposit scheme deposit2,0004.Dividend from Indian companies4,0005.NSC interest3,000Mr. Karam chand submits the following particulars of his income for the assessment year 2006-07:Serial No.ParticularsRs.1.Salary21,6002.9% Tax -free debentures of MTNL1,0003.Interest on NSC7,000Compute his taxable income. Mr. Gyani furnishes the following particulars for competition of his income for the assessment year 2006-07:Serial No.ParticularsRs.1.Income from salary30,0002. Income from house property(as computed)10,0003.Dividends from Indian company3,0004. Collection charges on above where1005.Interest on post office savings bank account1,0006.Interest on Public Provident Fumd Account5007. Dividend from SBI mutual Fund3,0008.Interest on NSC5,000Case Studies80DM, an individual has made the following payments in the previous year 2005-06:Rs. 5,000 paid by cheque to GIC for insuring M’s own health.Rs. 4,000 paid by cheque to GIC for insuring health of M’s wife, not dependent on him.Rs. 6,000 paid by cheque to GIC for insuring health of M’s dependent major child.Rs. 6,000 paid by cheque to GIC for insuring health of M’s dependent minor daughter.Rs. 6,000 paid by cheque to GIC for insuring health of M’s dependant brother.Rs. 6,000 paid by cheque to GIC for insuring health of M’s father, not dependent upon him.Rs. 4,000 paid by cheque to GIC for insuring health of M’s mother a senior citizen, dependent upon M.Rs. 3,000 paid by cheque to GIC for insuring health of M’s grand father dependent upon M.Rs. 3,000 paid by cheque to GIC for insuring health of M’s minor son, not dependent upon him.Rs. 300 p.m paid by cheque to LIC for group insurance of which he is a member.Compute the deduction allowable u/s 80D.What will be the deduction if M’s mother is a non-resident in India. 80GMark A,B,C or D against the following funds/institutions in case of which:100% deduction on account of donation under 80G is allowed without any overall limit.50% deduction allowed without an overall limit.100% deduction subject to an over all limit.50% deduction subject to an over all limit.Prime Minister National Relief Fund.National Defence Fund.Prime Minister National Drought Relief Fund.National Foundation for communal Harmony.Jawaharlal Nehru Memorial Fund.University/ Educational Institution of National Eminence approved by the prescribed authority.National Children Fund.Zila Saksharta Samiti in any district.The National Blood Transfusions Council or any State Blood Transfusion Council.Indira Gandhi Memorial Trust.Any fund set up by a State Government to provide medical relief to the poor.The Army Central Welfare Fund or the India Benevolent Fund or the Air Force Central Welfare Fund.Rajiv Gandhi Foundation.Government or any approved local authority, institution or association to be utilized for promoting family planning.National illness Assistance Fund.Any approved charitable institution which satisfies the conditions laid down under section 80G (5).The chief Minister Relief Fund or Lieutenant Governors Relief Fund.National Cultural Fund.Fund for technology Development and Application.Donation to Government on any approved local authority, institution or association for any charitable purpose other than family planning.Donation to Indian Olympic Association or other notified association or institution.
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