GIBS BBA 4TH SEMESTER INCOME TAX LAW & PRACTICE DEDUCTIONS FROM GTI

UNIT- IV
CHAPTER 9 DEDUCTIONS FROM GTI
1) SECTION 80C
a. Person entitled to deduction - Individual
b. Amount of Deduction - Amount paid or Rs.1,50,000 Whichever is less
c. Conditions for deduction - Specific savings and contribution-

1) Life insurance premium paid by an individual on his own life, life of spouse or any child.
Deduction will be allowed only for premiums upto a maximum of 10% of the sum assured
for policy issued on or after April 1, 2012. In case of policy issued before March 31, 2012,
deduction will be allowed only for premiums upto a maximum of 20% of the sum assured.
For policy issued on or after 1. 4.2013 deduction will be allowed only for premium upto a
maximum 15% of sum assured.

2) Employee’s contribution to a statutory/recognised/public provident fund .

3) Contribution to a Unit Linked Insurance Plan, 1971.

a) Subscription to any units of UTI and notified Mutual fund
b) Any subscription to Home Loan Account Scheme of National Housing Bank.
c) Subscription to National Savings Certificates, VIII issue.
d) Subscription to National Saving Scheme,1992.
e) Repayment of loan (from any person) or payments towards cost of purchase or
construction of new residential house
f) Payments towards LIC (JeevanDhara and JeevanAkshay).
g) Amount invested in debentures and equity shares of a public co./mutual fund
engaged in infrastructure, proceeds of which are to be utilised for the developing
and maintaining of a new infrastructure facility.
h) Tuition fee for full time education up to 2 children.
i) Fixed deposit with bank for a minimum period of 5 years.

2) SECTION 80CCC
a. Person entitled to deduction - Individual
b. Amount of Deduction - Amount paid or Rs.1,00,000 Which ever is less
c. Conditions for deduction - Annuity plan of LIC for receiving annuity or pension from
the fund.
Note: If assessee or nominee receives any pension or other amount on surrender, then
such amount shall be included in the total income of the PY in which the amount is
received.

3) SECTION 80 CCD: Deduction in respect of Contribution to Pension

Scheme
Under the existing provisions contained in sub-section (1) of section 80CCD of the Act, if an
individual, employed by the Central Government or any other employer on or after 1st
January, 2004, has paid or deposited any amount in a previous year in his account under a
notified pension scheme, a deduction of such amount not exceeding ten per cent. of his
salary is allowed. Similarly, the contribution made by the Central Government or any other
employer to the said account of the individual under the pension scheme is also allowed as

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deduction under sub-section (2) of section 80CCD, to the extent it does not exceed ten
percent. of the salary of the individual in the previous year. Considering the fact that for
employees in the private sector, the date of joining the service is not relevant for joining the
New Pension Scheme (NPS), the provisions of section 80CCD has been amended to
provide that the condition of the date of joining the service on or after 1.1.2004 is not
applicable to them for the purposes of deduction under the said section.

4) SECTION 80CCE: Aggregate deduction of sec 80C, 80CCC and 80CCD

cannot exceed Rs.1,50,000.

5) SECTION 80 D
Essential conditions for claiming deduction under this section:
(1) Deduction is permissible under this section, only to an individual or HUF.
(2) Deduction is allowed for the following purpose -
(a) In case of an individual: It is allowed for—
(i) the amount paid to effect or to keep in force an insurance on the health of the
assessee or his family or his parent or parents, or
(ii) any contribution made to the Central Government Health Scheme or such other
scheme as may be notified by the Central Government in this behalf.
(iii) any payment made on account of preventive health check up of the assessee or
his family or check up of the parent or parents of the assessee.
Family means the spouse and dependent children of the assessee
(b) in the case of a HUF: It is allowed for the amount paid to effect or to keep in force an
insurance on the health of any member of that Hindu Undivided Family.
(c) In case of very senior citizen: Deduction on account of medical expenditure incurred
(instead of sum paid to effect any insurance of the health)
(3) The health insurance should be in accordance with a scheme framed in this behalf by
(a) GIC and approved by the Central Government, or (b) any other insurer and approved
by the Insurance Regulatory and Development Authority.
(4) The payment should be made by him by any mode of payment other than cash.
However, for preventive health check up, it can be made in cash also.
(5) The amount is paid out of his income chargeable to tax.
Quantum of deduction
1. Where the assessee is an individual: The deduction allowed shall be the aggregate
of the following, namely:—
(a) (i) the whole of the amount paid to effect or to keep in force an insurance on the
health of the assessee or his spouse and dependent children
(ii) or any contribution made to the Central Government Health Scheme (CGHS)
as does not exceed in aggregate 25,000; and
(b) the whole of the amount paid to effect or to keep in force an insurance on the
health of the parent or parents (whether dependent or not) of the assessee as
does not exceed in aggregate 25,000.

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However, for preventive health check up of assessee his family or his parent or
parents. the maximum amount allowed shall be limited to 5,000 and such amount
subject to maximum limit of 5,000 shall be within the overall ceiling of 25,000 given in
(a) or (b) above.
2. Where the assessee is a Hindu undivided family: The deduction allowed shall be the
whole of the amount paid to effect or to keep in force an insurance on the health of
any member of that Hindu undivided family as does not exceed in aggregate 25,000.
Additional deduction of 5,000: Where the sum specified in clause (1)(a) and (b) and
(clause (2) above is paid to effect or keep in force an insurance on the health of any
person specified therein, and who is a senior citizen, an additional deduction of
5,000 shall be allowed in each case.
3. Deduction an account of medical expenditure incurred (instead of sum paid to effect
any insurance of the health) to be allowed in case of very senior citizen.
w.e.f. A.Y. 2016-17, the individual may also claim the following deduction:
(i) the whole of the amount paid on account of medical expenditure incurred on
his health or any member of his family as does not exceed in the aggregate
₨ 30,000; and
(ii) the whole of the amount paid on account of medical expenditure incurred on
the health of any payment of the assesse, as does not exceeds in the
aggregate ₨ 30,000.
However, the following two conditions must be satisfied to claim deduction of
the amount referred to in sub-clause (i) or sub-clause (ii) above:
(a) The amount should be paid in respect of a very senior citizen, and
(b) No amount should have been paid to effect or to keep in force an insurance pn
the health of such person.
Further that the aggregate of the sum specified under clause (1)(a) and clause
(3)(i) above or the aggregate of the sum specified under clause (1)(b) and clause
(3)(ii) above shall not excced ₨ 30,000.
Example for claiming deduction under clause (1) and (2) above: R pays (through any
mode other than cash) during the previous year medical insurance premia as under:
(i) 12,000 to keep in force an insurance policy on his health and on the health of his
wife and dependent children;
(ii) 17,000 to keep in force an insurance policy on the health of his parents.
R will be allowed a deduction of 27,000 (12,000 + 15,000) if neither of his parents is a
senior citizen. However, if any of his parents is a senior citizen, he will be allowed a
deduction of 29,000 (12,000 + 17,000). Whether the parents are dependent or not, is not a
consideration for deciding the deduction under the new section.
Further, in the above example, if cost of insurance on the health of the parents is 30,00O,
out of which 17,000 is paid (by any non-cash mode) by the son and 13,000 by the father
(who is a senior citizen), out of their respective taxable income, the son will get a deduction
of 17,000 (in addition to the deduction of 12,000 for the medical insurance on self and
family) and the father will get a deduction of 13,000.
Example for claiming deduction under clause (1), (2) and (3) above:
(i) For Individual and his family

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Health Insurance premia

(ii) For parents
Health Insurance of Mother
Medical expenditure on father (very senior citizen)
Deduction eligible u/s 80D ₨ 21,000 +₨ 30,000

1. The deduction is allowed when the payment is made to GIG or any other approved
insurer. It is popularly known as Mediclaim Scheme,
2. The deduction is allowed to non-resident also it the above conditions are satisfied.
3. Senior citizen means art individual resident in India who is of the age of 60 years or
more at any time during the relevant previous year. Hence In the case of an
individual who is of the age of 60 years or more and Is a non-resident in India, the
deduction will be limited to 15,000 as he will not be considered to be a senior citizen
for this purpose.
4. Meaning of very senior citizen: “Very senior citizen” means an individual resident in
India who is of the age of the eighty years or more at any time during the relevant
previous year.
5. In the case of an individual who is of the age of 60/80 years or more but a non-
resident in India will be limited to ₨ 30,000) as he will not be considered to be a
senior citizen for his purpose.

Illustration:
A, an individual has made the following payments in the previous year 2016-17:
(1) 9,000 paid by cheque to GIC for insuring A’s own health.
(2) 9,000 paid by cheque to GIC for insurring health of A’s wife not dependant on him.
(3) 4,000 paid by cheque to GIC for insuring health of A’s dependant major child.
(4) 6,000 paid in cash to GIC for insuring the health of A’s dependant minor daughter.
(5) 6,000 paid cheque to GIC for insuring the health of A’s dependant brother..
(6) 2,000 paid by cheque to GIC for insuring health of A’s father not dependant upon
him (aged 66 years resident in India.)
(7) 14,000 paid by cheque to GIC for insuring health of A’s mother dependant upon A.
(8) 5,000 paid by cheque to GIC for insuring health of A’s grand parents, dependant
upon A.
(9) 1,000 paid by cheque of GIC for insuring health of A’s minor son, not dependent
upon him.
(10) 100 p.m. paid by cheque to LIC for group insurance of which he is a member.
(11) 6,000 p.m. paid in cash n accunt of preventive health check up.
(A) Compute the deduction allowable u/s 80D.
(B) What will be the deduction if A’s father is a non-resident in India.
Solution: (A) The following payments are eligible for deduction u/s 80D:
Amount Amount
paid for paid for
himself, parents
spouse
and
dependent
children Rs.
Rs.
(1) Amount paid on own health 9,000
(2) Amount paid on health of wife (even though not depend 9,000
on A)
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(3) Amount paid on health of dependant major child 4,000

(4) Amount paid on health of minor daughter (not allowed Nil
as paid in cash)
(5) Amount paid on health of brother (not allowed Nil
irrespective of whether he is dependant on A or not)
(6) Amount paid on health of A’s father ( allowed as father 20,000
may or may not be dependant on A)
(7) Amount paid on health of mother 14,000
(8) Amount paid on health of grandfather (not allowed as Nil
grand parents are not covered)
(9) Amount paid on health of A’s minor son (not allowed as Nil
he is not dependant on A)
(10) Amount paid to LIC is not allowable u/s 80D Nil
(11) Mount for paid for preventive health check up allowed 5,000
even if paid in cash. Further the amount shall be limited
to 5,000
Total eligible amount 27,000 34,000
(i) Deduction for self, spouse and dependant children (including for preventive health check
up) will be restricted to a maximum of ₨25,000.
(ii) Deduction in case of parents whether dependant or not is restricted to ₨ 30,000 (₨
25,000 + AddI 5,000 for father being senior citizen. Total deduction ₨ 55,000 (₨ 25,000+
30,000).
(B) In this case as A’s father is non-resident in India, he will not be treated as a senior
citizen. the deduction will be restricted to maximum of ₨25,000. Hence, the total deduction
shall be ₨ 50,000 ( 25,000 + 25,000)

6) SECTION 80 DD
a) Person entitled to deduction - Resident Individual / HUF
b) Amount of Deduction - Rs.75,000 (irrespective of actual expenditure) and
1,25,000 in the case of severe disability. (80%)
c) Conditions for deduction(1) Expenditure on Medical treatment or rehabilitation or
(2) Deposited any amount in a scheme framed by LIC/UTI for the maintenance or
benefit of handicapped dependent.
d) Handicapped dependent means relative of the individual (not self) or a member of
HUF and solely dependent on the individual or HUF.
Note : If the handicapped dependent predeceases the individual in whose name money has
been deposited, the amount deposited under the scheme shall be deemed to be the income
of the PY in which the amount is received by the individual.

Illustration:
A submits the following information regarding his income for the previous year 2016-17.
Rs.
1. Salary 4,40,000
2. Rent received from property in Delhi (per month) 4,000
3. Winnings from lottery (Gross) 15,000
He makes the following deposits/Payments during the year -
1. Contribution towards PPF - 1,10,000

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2. Premium paid in cash on Mediclaim policy for his dependant father 8,000
3. Purchase of listed equity shares of notified company as new retail 40,000
investor
4. Amount paid in cash for preventive health check of himself and 6,000
spouse
He has a son being a person with disability, dependant on him, for whom he incurs
expenses for his medical treatment and rehabilitation. He also deposits a sum of 25,000 for
the benefit of his son under a scheme framed by the UTI for such a purpose.
(a) Compute his Total Income for the assessment year 2017-18.
(b) Compute his tax liability for the assessment year 2017-18.
Solution
Rs. Rs.
Income from salary 4,40,000
Less: Deduction under section 16 Nil 4,40,000
Income from House Property
Rent received 4,000 x 12 48,000
Less: 30% as statutory deduction 14,400 33,600
Income from Other Sources
Winnings from lotteries 15,000
Gross Total Income 4,88,600
Less: Deductions u/s 80C to 80U
(i) 80C 1,10,000
(ii) 80CCG 50% of 40,000 or 25,000 whichever is less 20,000
(iii) 80D (8,000 not allowed as payment is made in
cash, 6,000 paid in cash for preventive health check
up allowed to the extent of 5,000 5,000
(iv) 80DD 75,000 2,10,000
Total Income 2,78,600
(b) Computation of taic-liability: Tax on 2,78,600
(Total income includes 15,000 as winning from lottery
which will be taxable at a special rate of 30% 4,500
balance income of 2,63,600 at the normal slab rate of tax) 1,360 5,860
Less: Rebate u/s 87A 2,000
3,860
Add: Education cess& SHEC — @ 3% 116
3,976
Tax (rounded oft) 3,980

7) SECTION 80 DDB
a) Person entitled to deduction: Resident Individual / HUF
b) Amount of Deduction: Amount spent or 40,000 whichever is less and deduct amount
recd. from insurance co. (60,000 in case of Senior Citizen)
c) Conditions for deduction: Expenditure on Medical treatment of Specified Disease
of himself or dependent relative or member of HUF.

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d) Furnish a certificate in prescribed form from a doctor registered with IMA, having
post graduate degree.

8) SECTION 80 E
a) Person entitled to deduction - Individual
b) Amount of Deduction -Amount paid towards interest part on repayment.
c) Conditions for deductionRepayment of loan (including interest) to financial institution
or charitable institution taken for pursuing higher education.
d) Deduction is available for maximum period of 8 years from the year of first payment.

Illustration:
Gross Total Income of A for previous year 2016-17 is 5,20,000. He had taken a loan of
6,00,000 in 2015-16 from a Bank for pursuing the MBA course by his son from IIM
Bangalore. During the previous year 2016-17, he repaid the 1st instalment of loan of 55,000
and interest of 70,000. Compute his Total Income for assessment year 2017-18.
Solution
Rs.
Gross Total Income 5,20,000
Less. Deduction u/s 80E on account of interest payment 70,000
Total Income 4,50,000

9) SECTION 80 G Deduction in respect of donation to certain funds or

charitable institutions :
a) Person entitled to deduction - Individual, HUF, firm, company etc.
b) Amount of Deduction - Dependent on donation made and others conditions
c) Conditions for deductionDonation should be of sum of money. Donations in kind do
not qualify for deduction. The proof of payment is to be furnished.No deduction shall
be allowed under this section in respect of donation of any sum exceeding
Rs.10,000 unless such sum is paid by any mode other than cash.

Donations without limit

A. Donations made to the following are eligible for 100 % deduction without any limit.
(1) National Defense Fund set up by central Govt.
(2) PM National Relief Fund
(3) PM Armenia Earthquake Relief Fund
(4) National Foundation for Communal Harmony
(5) An approved university or educational institution of National Eminence.
(6) Maharastra Chief Minister’s Earthquake Relief Fund
(7) Gujarat Earthquake Relief Fund
(8) ZilaSakshartaSimiti constituted in any district
(9) National Sports Fund set up by the Central Govt.
(10) National Cultural Fund set up by the Central Govt.
(11) Fund for Technology Development and application.
(12) National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation
etc.
(13) Donations made by any assesse (resident and non-resident) to the swachhbharatKosh
set up by the Central Government (Inserted by the Finance Act, 2015 w.r.e.f. A.Y. 2015 -16)
(14) Donations made by a resident assesse to clean Ganga Fund set up by the Central
Government (Inserted by the Finance Act, 2015 w.r.e.f. A.Y. 2015 -16)

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(15) The National Fund for control of Drug Abuse (Inserted by the Finance Act, 2015 w.r.e.f.
A.Y. 2016 -17)

B. Donations made to the following are eligible for 50% deduction without any limit.
Jawaharlal Nehru Memorial Fund
PM Drought Relief Fund
National Children Fund
Indira Gandhi Memorial Trust
Rajiv Gandhi Foundation

Donations with Limit

A. Donation to the following are eligible for 100% deduction subject to qualifying limit
❖ Donation to Govt. or any approved local authority, institution or association for
promoting family planning.
❖ Donation made by a company to Indian Olympic Association or to any other notified
institution, for development of infrastructure for sports in India.
B. Donation to the following are eligible for 50% deduction subject to qualifying limit
❖ Donation to an approved charitable institution which satisfies the conditions of Sec
80 G.
❖ Any notified temple, mosque, gurdwara, church or other place notified by the central
Govt. to be of historic or artistic importance, for renovation or repair of such place.

Qualifying Limit : 10% of adjusted gross total income or Total Donation made Whichever
is less.
Adjusted Gross Total Income : Gross Total Income
less LTCG
less all other deductions except u/s 80G.

Illustration:
A, whose Gross Total Income for assessment year 2017-18 is 3,85,000 (which includes
long-term capital gains of f 40,000 and short-term capital gains of 20,000) submits the
following information:
Rs. Rs.
1. Contribution towards PPF 10,000
2. LIP paid for married son not dependant on him. 5,000
3. Mediclaim Premium paid by cheque for:
(a) Himself 2,000
(b) For married son not dependant on him 3,000 5,000
4. He has made the following donations by cheques:
(a) National Defence Fund 5,000
(b) PM’s National Relief Fund 2,000
(c) Swachh Bharat Kosh 2,000
(d) Indira Gandhi Memorial Trust 5,000
(e) Delhi University (declared as an institution of national
eminence) 2,000
(f) ZilaSakshartaSamiti 4,000
(g) An approved charitable institution 25,000
(h) Government for Family Planning. 20,000
(i) Donations of blankets to an orphanage 4,000
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(j) Donations to National Children Fund 2,000

Compute: (A) Total Income for the assessment year 2016-17
(B) Tax Payable for the assessment year 2016-17
Solution
Rs. Rs. Rs.
(A) Gross Total Income 3,85,000
(Includes LTCG but while claiming deduction
u/s 80C to 80U, LTCG is to be excluded).
Less: Deduction u/s 80C to 80U:
(1) 80C (10,000 + 5,000) 15,000
(2) 800 - for himself 2,000
for son not dependant — 2,000
(3) 80G – Donations
(A) Donations to which qualifying limit does not
apply.
(a) Allowed @ 100%
(i) National Defence Fund 5,000
(ii) Delhi University 2,000
(iii) ZilaSakshartaSamiti 4,000
(iv) National Blood Transfusion Council 2,000
(v) PMs National Relief Fund 2,000 17,000
(vi) Swachh Bharat Kosh 2,000
(b) Allowed @ 50%
Indira Gandhi Memorial Trust (5,000) 2,500
(B) Donations which are subject to qualifying
limit:
Actual donations made to:
(i) Government for Family Planning 20,000
(ii) Approved Institutions 25,000
45,000
But limited to 10% of Adjusted Total
Income of 3,28,000, 32,800
Out of 32,800 Donation of 20,000
for Family Planning @100% 20,000
Balance ‘12,800 @ 50% 6,400 26,400 62,900
Total Income 3,22,100
(B) Tax on 3,22,100
Long-term capital gain 40,000 @ 20% 8,000
Balance Income of 2,82,100 at slab rate 3,210
Tax payable 11,210
Less: Rebate u/s 87A 2,000
9,210
Add: Education cess& SHEC — @ 3% 276
9,486
Tax (rounded off) 9,490

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1. Adjusted Gross Total Income is calculated as Under:

Rs.
Gross Total Income 3,85,000
Less: (1) Long-term Capital Gain 40,000
(2) Deduction u/as 80C to 80U excepting 80G 17,000 57,000
3,28,000

2. Donations made in kind of blankets do not qualify for deduction u/s 80G.

10. SECTION 80 GG Deduction in respect of Rent Paid.

a. Person entitled to deduction - Individual
b. Amount of Deduction -Least of the following
Rent paid – 10% of adjusted total income
25% of adjusted total income
2,000 per month
Adjusted Gross Total Income :Gross Total Income
less LTCG
less all other deductions except u/s 80GG.
c. Conditions for deduction:
1) Allowed to individual who is self - employed or if he is an employee, he is not entitled to
HRA
2) Assessee, spouse, minor child or HUF does not own any residential accommodation at
the work place.
3) If assessee owns any residential accommodation at any other place, then the concession
of self occupied is not claimed by him.
4) The assessee paid rent in specified cities.
5) Declaration in the form No. 10BA regarding the expenditure incurred by him towards
payment of rent.

11.SECTION 80 GGADeduction in respect of Certain Donation for

Scientific Research or RuralDevelopment

a. Person entitled to deduction - Individual, HUF, firm, company etc.

b. Amount of Deduction -100% to the sum paid
c. Conditions for deduction
1. This deduction is allowed to any person if GTI does not include income under PGBP
2. If deduction is claimed under this section then shall not be allowed for such payment
under any otherprovisions of the act
3. The sum paid to the following institutions: Approved scientific research association,
university,college or other institution to be used for scientific research, Approved university,
college or other institution for research in social science or statistical research.

12. Deduction under SECTION 8OJJA In respect of profits from the

business of processing of bio-degradable waste
Section 80JJA is applicable where gross total income of an assessee includes any profits
and gains derived from the business of collecting, processing or treating of biodegradable

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waste for generating power or producing bio-fertilizers, bio-pesticides or other biological

agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure.

Amount of Deduction:- 100% of Profits for a period of 5 consecutive years beginning

from the year of starting of business.
13. Deduction is respect of Royalty income of authors (80 QQB)
The taxpayer is resident individual of Indian or foreign citizen. He is an author or joint author
of books on literary, artistic or scientific nature.

Amount of deduction 300000 or income (whichever is less)

1. If the income is earned outside India then it is to be brought into India in foreign
convertible exchange.
2. If royalty is not in lump sum consideration, then it should not exceed 15% of the value of
books sold.
3. No deduction under any other section.

14. Deduction for interest received on deposits (SECTION 80 TTA)

Deduction to an individual or a HUF in respect of interest received on deposits upto
Rs.10,000.

Meaning of Deposits refers to deposits (not being time deposits) in a saving account
banks, cooperative banks and post office.

15. SECTION 80 U: Deduction to a Totally Blind or Physically

Handicapped Resident Person.

Persons Entitled: Resident Individual who is suffering from specified disability at any time
during the previous year.

Amount of deduction: Rs75,000(Rs.1,25,000 in the case of disability over 80%)

irrespective of actual amount spent.

Conditions for Deduction: A certificate issued by the medical authority should be

furnished along with the return. If certificate is given for a certain period then after such
period new certificate should be obtained.

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