There are various kinds of deductions which are allowed to Gross total income. Some of them are to encourage savings, some for certain personal expenditure and some for economic growth. Gross total income means total income computed in accordance with the provisions of the Act before making any deduction u/s 80C to 80U.
The income of a person is computed under the following heads:
1. Salaries.
2. House property.
3. Profits and gains of business or profession.
4. Capital gains.
5. Other sources.
Following are the deductions from total income available u/s 80C to 80U of the Income Tax Act.
Deduction in respect of life insurance premium, etc (Sec. 80C)
Deduction under this section is available only to individual & Hindu Undivided Family.
Gross Qualifying Amount
The payments/investments qualify for deduction under this section mentioned here below. These schemes are known as Gross Qualifying Amount (GQA):
1. Life Insurance premium paid on a policy taken on his own life, life of the spouse or any child (child may be dependent/ independent). In the case of a Hindu undivided family, policy may be taken on the life of any member of the family. The premium paid should be maximum of 20% of sum assured.
2. Any sum deducted from salary payable to a Government employee for the purpose of securing him a deferred annuity (subject to a maximum of 20% of salary).
3. Contribution towards statutory provident fund and recognized provident fund.
4. Contribution towards 15 year public provident fund (maximum of Rs 70,000).
5. Contribution towards an approved superannuation fund.
6. Subscription to National Savings Certificates, VIII Issue.
7. Contribution for participating in the Unit-Linked Insurance Plan (ULIP) of Unit Trust of India.
8. Contribution for participating in the unit-linked insurance plan (ULIP) of LIC Mutual Fund (i.e. Dhanraksha plan of LIC Mutual Fund).
9. Payment for notified annuity plan of LIC (i.e. Jeevan Dhara, Jeevan Akshay, New Jeevan Dhara, etc) or any other insurer.
10. Subscription towards notified units of Mutual Fund or UTI.
11. Contribution to notified pension fund set up by Mutual Fund or UTI.
12. Any sum paid (including accrued interest) as subscription to Home Loan Account Scheme of the National Housing Bank.
13. Any sum paid as tuition fees to any university/college/educational institution in India for full time education.
Under this section, deduction from total income in respect of various investments/expenditures/payments in respect of which tax rebate u/s 88 was earlier available. The total deduction under this section (along with section 80CCC and 80CCD) is limited to Rs.1 lakh only.
Deduction in respect of pension fund (Sec. 80CCC)
The following conditions need to be satisfied to claim deduction under this section:
- The taxpayer is an individual
- During the previous year, he has paid/deposited a sum under an annuity plan of the Life Insurance Corporation of India or any other insurer for receiving pension.
- If deduction has not been claimed under section 80C.
Amount of deduction:
The amount deposited or Rs. 10,000 whichever is lower, is deductible.
The total deduction under this section (along with section 80C and 80CCD) is limited to Rs.1 lakh only.
Deduction in respect of contribution to Pension scheme of Central Government (Sec. 80CCD)
Deduction is allowed if,
- The tax payer is an individual
- He is employed by the Central Government
- He has in the previous year paid or deposited any amount in his account under a Pension scheme notified by the Central Government.
Amount of deduction:
a) The total employee’s contribution and employer’s contribution to the notified pension scheme during the year or
b) 10% of salary of the employee whichever is less.
Salary means basic salary including dearness allowance if under the terms of employment.
The total deduction under this section (along with section 80C and 80CCC) is limited to Rs.1 lakh only.
Deduction in respect of Medical Insurance premium (Sec 80D)
Deduction is available upto Rs. 20,000/- for senior citizens and upto Rs. 15,000/ in other cases for insurance of self, spouse and dependent children. Additionally, a deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 20,000/- if parents are senior Citizen and Rs. 15,000/- in other cases. Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/-. From AY 2013-14, within the existing limit a deduction of upto Rs. 5,000 for preventive health check-up is available.
Deduction in respect of Dependent Relative (Section 80DD)
This deduction is available to individuals, HUF, who is resident in India. It is given to a Assessee if a person with disability is dependent on him. A person with disability means disabilities like autism, cerebral palsy, mental retardation, etc. as specified in Persons with Disabilities Act 1995.
Amount of Deduction:
The amount of deduction is fixed at Rs. 50,000 irrespective of actual expenditure.
In case of a person with severe disability (over 80 %) a higher deduction of Rs. 75,000 shall be allowed irrespective of actual expenditure.
Dependent means-
i) In case of an individual, the spouse children, parents, brothers, sisters of the individual or any of them.
ii) In case of HUF, a member of the HUF wholly or mainly dependent on such individual or HUF for support and maintenance.
Deduction In Respect Of Medical Treatment (Section 80DDB)
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.
Deduction In Respect Of Repayment of Loan Taken For Higher Education – (Section 80E)
Deduction in respect of interest on loan taken for pursuing higher education of himself or a relative.
Amount of deduction:
The entire amount paid by way of interest on such loan or Rs.40,000
Whichever is less is deductible in this section.
Further, the deduction shall be allowed for the previous year in which the Assessee starts repaying the loan or interest thereon and seven previous years immediately succeeding it or until the loan together with interest thereon is paid by the Assessee in full, whichever is earlier.
Donation to Certain Funds, Charitable Institution Etc. (Section 80G)
A) Donations made to following are eligible for 100% deduction without any qualifying limit.
1. Prime Minister’s National Relief Fund
2. National Defence Fund
3. Prime Minister’s Armenia Earthquake Relief Fund
4. The Africa (Public Contribution – India) Fund
5. The National Foundation for Communal Harmony
6. Approved university or educational institution of national eminence
7. The Chief Minister’s Earthquake Relief Fund, Maharashtra
8. Donations made to Zila Saksharta Samitis.
9. The National Blood Transfusion Council or a State Blood Transfusion Council.
10. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund.
B) Donations made to the following are eligible for 50% deduction without any qualifying limit.
1. Jawaharlal Nehru Memorial Fund
2. Prime Minister’s Drought Relief Fund
3. National Children’s Fund
4. Indira Gandhi Memorial Trust
5. The Rajiv Gandhi Foundation.
C) Donations to the following are eligible for 100% deduction subject to qualifying limit (i.e. 10% of adjusted gross total income).
1. Donations to the Government or a local authority for the purpose of promoting family planning.
2. Sums paid by a company to Indian Olympic Association
D) Donations to the following are eligible for 50% deduction subject to the qualifying limit (i.e. 10% of adjusted gross total income).
1. Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.
Amount of deduction:
The quantum of deduction is as follows:-
Category A- 100 % of amount donated
Category B -50 % of the amount donated in the funds
Category C – 100% of the amount donated in the funds subject to maximum limit of 10% of Adjusted GTI.
Category D – 50% of the amount donated in the funds subject to maximum limit of 10% of Adjusted GTI.
The total of these deductions under categories A, B, C, & D is the quantum of deduction under this section without any maximum amount.
Adjusted gross Total income for this purpose means his gross total income minus long-term capital gain, short term capital gain taxable u/s 111A, and all deductions u/s 80CCC to 80U except any deduction under this section.
Deduction in respect of House Rent Paid (Sec. 80GG)
Deduction available is the least of-
1. Rent paid less 10% of total income
2. Rs. 2000/- per month
3. 25% of total income, provided
Assessee or his spouse or minor child should not own residential accommodation at the place of employment.
He should not be in receipt of house rent allowance.
He should not have self occupied residential premises in any other place.
Deductions in respect of Person suffering from Physical Disability (Sec. 80U)
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.
A person with ‘severe disability’ means a person with 80% or more of one or more disabilities as outlined in section 56(4) of the ‘Persons with disabilities (Equal opportunities, protection of rights and full participation)’ Act.
Deduction in respect of any Income by way of Royalty of a Patent (Sec. 80RRB)
Deduction in respect of any income by way of royalty is respect of a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available upto Rs. 3 lacs or the income received, whichever is less. The Assessee must be an individual resident of India who is a patentee. The Assessee must furnish a certificate in the prescribed form duly signed by the prescribed authority.
Deduction in respect of any Income by way of Interest on Savings Account (Sec. 80TTA)
Deduction from gross total income of an individual or HUF, upto a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account ( not time deposits ) with a bank, co-operative society or post office, is allowable w.e.f. 01.04.2012 (Assessment Year 2013-14).