Deductions allowed from Gross Total Income

After calculating the income of each head separately, to assess the income tax, add the incomes of the different heads together, combinedly known as the Gross Total Income (GTI).

Further, there are certain deductions under Chapter VI-A of the Income Tax Act, 1961 that can made by the taxpayer and the resultant is called taxable income. 

 

Basic rules –

The deduction has to be claimed via way of means of the assessee:

According to Section 80A (1) of the Income Tax Act, if the assessee requests any of the deductions listed below and shows the circumstances necessitating the kind of deduction, the deduction will be granted.

 

The total gross income should not be exceeded by deductions.

The total of deductions under Section 80C to 80U (Chapter VI-A) should not exceed the Gross Total Income (GTI) of the assessee. Thus, the total income after deducting the deductions can be either positive or nil. And, if the GTI is negative or nil, then no deductions will be allowed under the said chapter.

 

Allowable deduction in relation to net income included in gross total income:

When any deduction is necessary to be made in relation to any income under any provision of the Income Tax Act, the net income computed in accordance with Income Tax Act rules shall only be recognised as the income received by the assessee and included in his gross total income.

Deductions will be not allowed to member if allowed to an AOP/BOI:

It means if a deduction is permitted to an AOP/BOI, no deduction will be allowed to the members of such AOP/BOI.

 

In cases where the return is not filed within the specified time limit, benefits of certain deductions are not to be allowed:

Unless the assessee furnishes his income tax return within the specified time limit us 139(1), deduction shall not be allowed under Section 80-IA/IAB/IB/IC/ID/IE.  

 

Assessee’s duty to place applicable material

In order to convince the statutory authority that he was eligible for the concession under common law, the assessee should fairly present all relevant information to the authority and be opposed.

 

Procedures-

The following deductions for payments, savings, and investments have a total cap of Rs. 1,50,000; that is, if the sum of the payments, savings, and investments exceeds Rs. 1,50,000, the deduction is limited to Rs. 1,50,000:

 

●     Deduction for certain savings, investments, and payments (Sec 80C):

 

Following are some of the investments, payments, and savings that are eligible for a deduction u/s 80C of the Income Tax Act, 1961:

 

●     Deposit or contribution to the employee provident fund.

●     Payment of the premium for life insurance.

●     Investment in public provident funds

●     Investment made in an equity-linked saving scheme.

●     Contribution in Unit-Linked Insurance Plan

●     Amount deposited in mutual fund units that have been informed.

●     Investment in the VIII issue of National Savings Certificates (NSC).

●     Deposits made in the Senior Citizens Savings Scheme, 2004.

●     Sukanya Samriddhi Scheme deposits

●     Deposits in the National Pension Fund Scheme.

●     Term deposit in the bank.

●     Deposits in the Sukanya Samriddhi Scheme.

 

Individuals and HUFs can profit from these deductions, but partnership businesses, LLPs, and other companies are not permitted to do so.

1. Deduction for National Pension Scheme contributions. [Sec 80CCD]

As per Sec 80CCD of the Income Tax Act, employee contributions to the national pension plan are deductible. Additionally, the least of the following is the maximum deduction permitted by this section:

●     10% of an employee's income, including of the dearness allowance

●     10% of his gross total income in the case of any other person

The amount deposited into the NPS account is eligible for an additional deduction of Rs. 50,000 u/s 80CCD(1b) of the Income Tax Act, 1961. Employee contributions to NPS may be deducted up to 10% of basic pay plus dearness allowance u/s 80CCD (2) of the Income Tax Act, 1961. Additionally, only those who are salaried and not self-employed are eligible for benefits under this clause.

 

Deduction for LICs or other insurance companies' pension fund contributions. [Sec 80CCC]

An individual may claim a deduction u/s 80CCC for contributions made to annuity pension plans. The sum paid upon surrender of the annuity or pension received from the annuity, along with any interest or bonus accrued on the annuity, is taxable in the year in which it is received.

 

Deduction for investments made in an equity savings plan [Sec 80CCG]:

The amount invested in such equity shares or units was eligible for a deduction of up to 50% u/s 80CCG. The maximum deduction permitted is Rs. 25,000. However, such a deduction was gradually eliminated as of April 1, 2017.

 

In addition to the deductions listed above, the following deductions are also permitted for expenses and payments, subject to the amount limitations set forth in the heads:

●     Deduction for Medical Insurance Premia, Health Checkup and Medical Treatment [Sec 80D]

According to Sec 80D of the Income Tax Act, 1961, an individual or HUF is eligible to claim a deduction for medical insurance premiums paid through an approved insurance company plan, contributions made to the government's health care programme, payments for preventive health exams, and payments for senior citizens' uninsured medical expenses.

 

 

●     Deduction in case of an individual assessee:

A person may deduct up to Rs. 25,000 for medical insurance premiums, preventive health checks, medical treatment costs for themselves, their spouses, and their dependent children, as well as contributions to the Comprehensive General Health Scheme (CGHS), in accordance with Section 80D of the Income Tax Act, 1961. (Rs. 30,000 in the event that any covered person is an elderly resident 60 years of age or older). For any additional medical insurance premiums or parent's preventive health check-ups, a deduction of Rs. 25,000 is permitted. (Rs. 30,000 in the event that any covered person is a resident senior citizen 60 years of age or older.) The highest amount that can be deducted for any parent's medical expenses is Rs. 30,000. (being quite elderly, 80 years or beyond, and not having health insurance).

 

●     Deduction in case of HUF:

According to this Section, a HUF may deduct the cost of any family member's medical insurance up to a maximum of Rs. 25,000. (Rs. 30,000 in the event that any covered person is a senior citizen who is 60 years of age or older). Medical expenses for every family member may be deducted in addition, up to a maximum of Rs. 30,000 (being a very senior citizen not having any medical insurance cover).

 

●     Deduction for medical treatment & deposit made for the maintenance of handicapped dependent (Sec 80DD):

Under this section, an individual (should be a resident) or HUF is eligible for a deduction under the said Sec 80DD if they:

1. Incurred expenses for the medical treatment (including nursing care), education, or rehabilitation of a dependent who is disabled, or
2. Made a payment or deposit under the designated plan for a disabled dependant relative's maintenance.

 

To be eligible for this deduction under this section, one must present a certificate of disability from the designated medical authority. It should be noted that a fixed deduction of Rs. 75,000 is permitted where the impairment of such a dependent individual is 40% or more but less than 80%. Further, where such a dependent individual has a disability of 80% or more, a deduction of Rs. 1,25,000 is permitted.

 

●     Deduction for Medical Treatment Expenses, etc. (Sec 80DDB):

This deduction is available to any HUF or individual who resides in India. Such a deduction is permitted in relation to the cost of medical care for a specific illness or disease for the taxpayer, a dependent, or a member of a HUF. The deduction permitted by this clause must be less than 40,000 rupees or the amount paid (If the patient is a resident senior citizen 60 years of age or older, the fee is Rs. 60,000.).

 

●     Deduction for individuals with disabilities (Sec 80U):

Sec 80U of the Income Tax Act, 1961 allows for a deduction of Rs. 75,000 in the event of a person with a handicap. This deduction is available to residents who have a severe physical disability. To claim such deduction under this clause, a certificate of incapacity from the designated medical authority is required. When an assessee has a severe condition (a disability of 80% or more), the deduction is increased to Rs. 1,25,000/-.

 

●     Deduction for interest paid on loans obtained to pursue higher education (Sec 80E):

An individual assessee may deduct the amount of interest paid on loans he has obtained from any financial institution or an authorized charitable organization in order to fund his own higher education or the higher education of a relative. The deduction may be taken for up to eight assessment years. There is no upper limit to the amount that can be deducted from any amount that was paid out of his taxable income as interest on such a loan.

 

●     Deduction for donations made to specific funds or charitable organisations [Sec 80G]:

Any contribution made by the assessee to a list of funds or institutions is eligible for a deduction u/s 80G of the act. A deduction is sometimes permitted up to 100% of the donation and other times it is permitted up to 50% of the donation. The amount of the deduction for various types of donations is listed below:

 

The following donations qualify for a 100% deduction with no upper limit:

1. Funds established by the CG for national defence
2. Donation to the Prime Minister National Relief Fund
3. University or other educational institution of national renown that has been authorised by the required authority
4. Any donation to the Zila Saksharta Samiti, which was founded in a district and is led by its collector.
5. Fund for National Illness Assistance
6. Autism, mental retardation, cerebral palsy, and other multiple disabilities national trust.
7. National Foundation for Communal Harmony
8. Fund for National Sports
9. Fund for National Cultural
10. Technology Development and Application Fund
11. Any fund established by a state government to help the underprivileged with their medical needs.
12. Fund for National Illness Assistance
13. Any donations made to the National Blood Transfusions Council or any state's blood transfusion council
14. National Children Funds
15. The armed forces established the Army Central Welfare Fund, Indian Naval Benevolent Fund, and Air Force Central Welfare Fund.
16. Any State or Union Territory's Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund
17. Any trust or fund established by the Gujarati government to help those affected by the earthquake there
18. The Prime Minister established a fund to aid victims of the Armenia earthquake.
19. Monetary donation to the National Fund for the Control of Drug Abuse (applicable from the financial year 2015-16).
20. Contributing to the Clean Ganga Funds (applicable from the FY 2014-2015)
21. Africa (Public Contributions — India) Funds
22. Any funds established by the Gujarat State Govt for aiding those affected by the earthquake in Gujarat
23. Donations made towards the Andhra Pradesh Chief Minister’s Cyclone Relief Funds, 1996
24. Donations made towards the Swachh Bharat Kosh (applicable w.e.f FY 2014-15)

●     An unlimited 50% deduction is available to the following organisations:

●     Jawaharlal Nehru Memorial Fund, and

●     Indira Gandhi Memorial Trust, and

●     Prime Minister’s Drought Relief Fund, and

●     Rajiv Gandhi Foundation, and

●     National Children Fund.

 

●     Up to the qualifying limit, the following donations are eligible for a 100% deduction:

●     Donations made to the government or any authorised local authority, organisation or institution, to be used for promotion of importance of family planning.

●     Any sum donated by a business/company to the Indian Olympic Association or an institution set up in Inda.

 

●     The donations to the following organisations are eligible for a deduction of 50% to the qualifying limit:

●     Donation to the government or any authorised local authority, institution, or association to be used for any philanthropic purpose other than encouraging family planning.

●     Any additional institution or fund that meets the requirements of Sec 80G.

●     To any authority established in India by or pursuant to any Law for the purpose of meeting the need for housing or to plan the growth or improvement of cities, towns, and villages, or for both.

●     Donation to any organisation founded and managed by the central or state government to advance the interests of people from minority groups,

●     Donation for reconstruction or repair of any temple, mosque, gurdwara, church, or other location designated by the central government as having historic, archaeological, or artistic importance.

●     Deduction of rents paid [Sec 80GG]:

When a taxpayer rents an apartment in a designated area, lives there without receiving a house rent allowance, and neither he nor his spouse, minor child, or HUF owns a home there (or elsewhere) that is claimed as a self-occupied property, the taxpayer is entitled to a deduction equal to the least of the following:

i) Rent paid (-) 10% of adjusted total income

ii) Rs. 5,000 pm

iii) 25% of adjusted total income

●     Deduction in relation to specific gifts for rural development or scientific research [Sec 80GGA]:

The following amount must be subtracted from an assessee's total income u/s 80GGA.

 

Any money (amount) that the assessee gave to a scientific research association with the intention of conducting research, or to a university, college, or any other institution, in the preceding year.

 

●     Deduction for contributions made by any person to political parties [Sec. 80GGC]:

Any contribution made by a person to a political party or an electoral trust that has been authorised by the board in this regard may be deducted when calculating the assessee's total income.

●     Deduction for interest earned on savings account deposits [Sec 80TTA]:

In accordance with Sec 80TTA, an assessee (who may be an individual or HUF) may deduct up to Rs. 10,000 in total from any income received in the form of interest on savings bank deposits held by a banking institution, a co-operative society engaged in the business of banking, or a post office.

●     Deduction for royalties on patents [Sec 80RRB]:

Sec 80RRB permits a resident individual to deduct up to Rs 3,00,0000 from any income received in the form of royalties for patent rights registered under the Patent Act of 1970. Additionally, such a taxpayer must provide a certificate in the appropriate format, fully authenticated by the appropriate body

Summary Table

Section	Deduction	Limit for FY 2021-22
80C	Investment in PPF – Employee’s share of PF contribution – NSCs – Life Insurance Premium payment – Children’s Tuition Fee – Principal Repayment of home loan – Investment in Sukanya Samridhi Account – ULIPS – ELSS – Sum paid to purchase deferred annuity – Five year deposit scheme – Senior Citizens savings scheme – Subscription to notified securities/notified deposits scheme – Contribution to notified Pension Fund set up by Mutual Fund or UTI. – Subscription to Home Loan Account scheme of the National Housing Bank – Subscription to deposit scheme of a public sector  or company engaged in providing housing finance – Contribution to notified annuity Plan of LIC – Subscription to equity shares/ debentures of an approved eligible issue – Subscription to notified bonds of NABARD	Rs. 1,50,000
80CCC	For amount deposited in annuity plan of LIC or any other insurer for a pension from a fund referred to in Section 10(23AAB)
80CCD(1)	Employee’s contribution to NPS account (maximum up to Rs 1,50,000)
80CCD(2)	Employer’s contribution to NPS account	Up to 10% of salary
80CCD(1B)	Additional contribution to NPS	Rs. 50,000
80TTA(1)	Interest Income from Savings account	up to 10,000
80TTB	Exemption of interest from banks, post office, etc.	up to 50,000
80GG	For rent paid when HRA is not received from employer	Least of : – Rent paid minus 10% of total income – Rs. 5000/- per month – 25% of total income
80E	Interest on education loan	Interest paid for 8 years
80EE	Interest on home loan for first time home owners	Rs 50,000
80D	Medical Insurance for  – Self, spouse, children – Parents more than 60 years old or (from FY 2015-16) uninsured parents more than 80 years old	– Rs. 25,000 – Rs. 50,000
80DD	Medical treatment for handicapped dependent or payment to specified scheme for maintenance of handicapped dependent – Disability is 40% or more but less than 80% – Disability is 80% or more	– Rs. 75,000 – Rs. 1,25,000
80RRB	Deductions on Income by way of Royalty of a Patent	Lower of Rs 3,00,000 or income received