Deduction from Gross Total Income available to Individual & HUF

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471
Deduction
Position of deduction while computing total income

From Gross Total Income (being aggregate of income under five heads), assessee can claim several deductions as specified in chapter VIA on fulfillment of prescribed conditions as laid down in the respective section. After allowing these deductions, total income of the assessee is arrived & tax is charged on it at the prescribed rates.

However, such deductions are not available from following income:

long-term capital gain;

short term capital gain covered u/s 111A (i.e., STCG on which STT is charged);

casual income like winning from lotteries, races, etc.; and

income referred in Sec.115A, 115AB, 115AC, 115ACA, etc.

Deductions available to individual / HUF are explained here-in-below:

Available to

An Individual or a Hindu Undivided Family (whether resident or non-resident)

Condition to be satisfied

Assessee has made a deposit or an investment in any one or more of the listed items (as given below) during the previous year.

Quantum of deduction

Deduction under this section shall be minimum of the following:

  1. Aggregate of the eligible contributions, expenditure or investments (discussed above)
  2. ₹ 1,50,000

Subject to overall restriction being given u/s 80CCE

Lock in period

Lock in period in following cases –

  • Life Insurance Policy: The Life insurance policy (point 1) cannot be surrendered unless premium for 2 years on such policy has been paid.
  • Housing Loan: The house acquired cannot be transferred before 5 years from the end of financial year in which the possession of such property is obtained by assessee.
  • Unit Linked Insurance Plan: The participation in plan cannot be ceased before contribution in respect of such participation has been paid for 5 years.
  • Shares or debentures of infrastructure company or power company or mutual fund: Equity shares, debentures, etc. cannot be sold or otherwise transferred within 3 years from the date when name of the assessee for those shares or debentures has been entered in the register of member or debenture holder by the company or the Mutual fund.
  • Investment in Senior Citizen Saving Scheme / Post office Time Deposit: Such amount, including interest accrued thereon, shall not be withdrawn by the assessee from his account, before the expiry of 5 years from the date of its deposit. However, any amount received by the nominee or legal heir of the assessee, on the death of such assessee, shall not be included.

Consequence in case of violation of lock in period

If the above lock in period is violated, then entire amount of deduction allowed earlier in any previous year, shall be treated as taxable income in the year in which default is made.

Applicable to

An individual (irrespective of residential status or citizenship of the individual)

Condition to be satisfied
  • Amount paid under an annuity plan: During the previous year, assessee has paid or deposited a sum under an annuity plan of the Life Insurance Corporation of India (LIC) or any other insurer for receiving pension from the fund referred to in Sec. 10(23AAB).
  • Payment out of taxable income: The amount must be paid out of income which is chargeable to tax. However, it is not necessary that such income relates to current year.
Quantum of deduction

Minimum of the following –

    Amount deposited; or

  1. ₹ 1,50,000

Subject to overall restriction being given u/s 80CCE

Any amount received by the assessee or his nominee as pension; or on surrender of such annuity is taxable in the hands of recipient in the year of receipt.

Applicable to

An individual

Condition to be satisfied

During the previous years, the assessee has paid or deposited any amount in his account under a pension scheme notified by the Central Government (New Pension System and Atal Pension Yojna).

Quantum of Deduction
Deduction u/s 80CCD(1)

A. In case of salaried individual

Lower of the following

  • Amount so paid or deposited
  • 10% of his salary in the previous year
Add: The whole of the contribution made by the employer to such account to the maximum of 10% of his salary in the previous year.

B. In case of other individual

Lower of the following

  • Amount so paid or deposited
  • 20% of his gross total income in the previous year
Additional Deduction u/s 80CCD(1B)
Lower of the following shall also be eligible for deduction

  • Contribution to the scheme by any individual [Other than amount claimed and allowed as deduction u/s 80CCD(1)]
  • ₹ 50,000

“Salary” here means Basic + Dearness allowance, if the terms of employment so provide.

Where any amount standing to the credit of the assessee in his account, (in respect of which a deduction has been allowed), together with the amount accrued thereon is received by the assessee or his nominee, whether –

  1. on account of closure or his opting out of the pension scheme; or
  2. as pension received from the annuity plan purchased or taken on such closure or opting out,

– shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax.
Exemption

  1. As per sec. 10(12A), in case of withdrawal from the NPS by an employee on closure of account or on his opting out of the pension scheme, 40% of the total amount payable to him at the time of such closure or his opting out of the scheme shall be exempt. i.e., 60% shall be taxable.
  2. As per sec. 10(12B), partial withdrawal upto 25% of the amount contributed by the employee under the pension scheme, shall be exempted fully.
  3. Where amount withdrawn is used for purchasing an annuity plan in the same previous year (i.e. year of withdrawal), such receipt shall not be taxable.
  4. Amount received on account of closure or opting out of the pension scheme by the nominee, on the death of the assessee, shall be exempted in hands of the nominee.

Where any amount paid or deposited by the assessee has been allowed as a deduction, no deduction with reference to such amount shall be allowed u/s 80C.

The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD [other than deduction in respect of employer’s contribution and additional deduction u/s 80CCD(1B)] shall not exceed ₹ 1,50,000.

Taxpoint: An assessee can claim deduction u/s 80C, 80CCC & 80CCD:

ParticularsAmount
Deduction u/s 80C
****
Deduction u/s 80C
****
Deduction u/s 80CCD [Other than deduction in respect of Employer’s Contribution and additional deduction u/s 80CCD(1B)]
****
Total [Restricted to maximum of ₹ 1,50,000 u/s 80CCE]
*****
Add: Contribution to the pension scheme by any individual allowable u/s 80CCD(1B) [Sub. to maximum of ₹ 50,000/-]
****
Add: Employer’s contribution to New Pension System referred to in Sec. 80CCD [Subject to max. of 10% of salary]
****
Deduction available u/s 80C, 80CCC & 80CCD
*****
Applicable to

An individual or an HUF (irrespective of residential status or citizenship)

Conditions to be satisfied
  1. Payment for health insurance or medical check-up: The assessee has made payment for health insurance of the following person:
    AssesseeNature of PaymentExpenditure on behalf ofQuantum of Deduction

    1

    Individual
    1. Payment of Mediclaim insurance premium ; or
    2. Contribution to the Central Government Health Scheme or any other notified Health Scheme
    3. Preventive health check up expenditure
    Himself/herself, spouse or dependent childrenLower of the following:

    1. Aggregate of
      • Premium paid; or
      • Contribution made; or
      • Preventive health check up (upto ₹ 5,000)
    2. ₹ 25,000 p.a.

    Senior or Super Senior Citizen

    Where the person, for whom such premium (not for payment made for preventive health check up) is paid, is a senior citizen or super senior citizen, then maximum limit of deduction shall be increased to ₹ 30,000 instead of ₹ 25,000.

    2

    Individual
    1. Payment of Mediclaim insurance premium
    2. Preventive health check up expenditure

    Parents (whether dependent or not)

    Lower of the following:

    1. Aggregate of
      • Premium paid; or
      • Preventive health check up (upto ₹ 5,000)
    2. ₹ 25,000 p.a.

    Senior or Super Senior Citizen

    Where the person, for whom such premium (not for payment made for preventive health check up) is paid, is a senior citizen or super senior citizen, then maximum limit of deduction shall be increased to ₹ 30,000 instead of ₹ 25,000.

    The deduction for payment made for preventive health check up (for self, spouse, dependent children and parents) for category 1 & 2 does not exceed in the aggregate ₹ 5,000 subject to overall limit of ₹ 25,000/- or ₹ 30,000/-

    3

    HUFPayment of Mediclaim insurance premiumAny member of the family.Lower of the following:

    • Premium Paid; or
    • ₹ 25,000

    Senior Citizen

    Where the person, for whom such premium is paid, is a senior citizen or super senior citizen, then maximum limit of deduction shall be increased to ₹ 30,000 instead of ₹ 25,000.

    4

    Individual / HUFAmount paid on account of medical expenditure provided mediclaim insurance is not paid on the health of such personExpenditure incurred for any of the following person who is a super senior citizen :

    In case of Individual

    • Himself/herself, spouse; or
    • dependent children; or
    • Either or both of the parents

    In case of HUF :

    • Any member of the family
    Lower of the following:

    • Medical Expenditure incurred; or
    • ₹ 30,000

    The deduction for category 4 is available only from the overall limit of category 1 or category 2 or category 3 respectively. In other words, maximum deduction under category 1, 2, 3 and 4 are as under:

    CategoryMaximum Deduction

    Category 1 & 4

    ₹ 30,000/-

    Category 2 & 4

    ₹ 30,000/-

    Category 3 & 4

    ₹ 30,000/-

    Children are said to be dependent if their own resources are not sufficient enough to support them.

  2. Mode of payment: The premium or medical expenditure must be paid by any mode other than cash. However, payment shall be made by any mode, including cash, in respect of any sum paid on account of preventive health check-up.
  3. Payment out of taxable income: The amount must be paid out of income, which is chargeable to tax. However, it is not necessary that such income relates to current year.
For claiming higher deduction of ₹ 30,000, payer need not be a senior citizen but person insured must be a senior citizen or super senior citizen.
Applicable to

A resident individual (irrespective of citizenship) or a resident HUF

Conditions to be satisfied
  1. Assessee has a dependant disable relative :
    1. Dependant Relative
      In the case ofRelative includes
      IndividualSpouse, children, parents, brothers and sisters of the individual
      HUFAny member of the Hindu Undivided Family
      Dependant Relative : A relative is said to be dependant if he wholly or mainly depends on such individual or HUF for his support and maintenance.
    2. Disability shall have the meaning assigned to it in Sec. 2(i) of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 and includes “autism”, “cerebral palsy” and “multiple disability” referred to in sec. 2( a ), 2( c ) and 2( h ) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.
    3. Person with disability means a person as referred to in Sec. 2(f) of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or sec. 2( j ) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (i.e., a person suffering with 40% or more of one or more ‘disabilities’ as certified by a medical authority).
    4. Disability includes blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness.
  2. No benefit u/s 80U to disable relative : The disable individual has not claimed benefit u/s 80U.
  3. Expenditure on disable relative : Assessee has –
    • incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or
    • paid or deposited any amount in an approved scheme for the maintenance of a disable dependant being framed by the Life Insurance Corporation or any other insurer or the Administrator # or Unit Trust of India.

    Though assessee needs to fulfill the above condition, the amount of deduction shall not be affected by the actual expenditure incurred on the above two purposes.

  4. Medical certificate : Assessee shall furnish a copy of the certificate issued by the medical authority along with the return of income in respect of the assessment year for which the deduction is claimed.

    Medical authority means medical authority as per Sec. 2(p) of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or such other medical authority as may, by notification, be specified by the Central Government for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person with disability” and “severe disability” referred to in sec. 2(a), 2(c), 2(h), 2(j) and 2(o) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (i.e., specified hospital or institution.)

Quantum of deduction
Relative is suffering from severe disability₹ 1,25,000
Relative is suffering from disability but not severe disability₹ 75,000
Deduction shall be irrespective of actual expenditure incurred i.e. deduction is statutory in nature.
Person with severe disability means

  1. a person with 80% or more of one or more disabilities, as referred to in sec. 56(4) of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995; or
  2. a person with severe disability referred to in sec. 2( o ) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.
Other points

Treatment when handicapped person predeceases [Sec. 80DD(3)]

Condition: Where the assessee has deposited any amount in annuity plan of LIC or UTI, etc. for the benefit of disabled person and such person predeceases.

Treatment : Any amount received from such annuity plan shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee.

Applicable to

A resident individual (irrespective of citizenship) or a resident HUF

Conditions to be satisfied
  1. Expenditure incurred on the medical treatment of relative : The assessee has, during the previous year, actually paid any amount for the medical treatment of a specified disease or ailment as prescribed in rule 11DD. Expenditure is incurred for treatment of the assessee himself or for a dependant relative.Dependant Relative
    In the case ofRelative
    IndividualSpouse, children, parents, brothers and sisters of the individual.
    HUFAny member of the HUF
    Dependant Relative: A relative is said to be dependant if he wholly or mainly depends on such individual or HUF for his support and maintenance.
  2. Medical Prescription: Assesse should obtained the prescription for such medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed.
Quantum of deduction

Minimum of the following –

  1. Actual expenditure incurred by the assessee; or
  2. ₹ 40,000

Deduction for senior citizen: If such expenditure is incurred for a senior citizen, then the maximum amount of deduction shall be enhanced to ₹ 60,000.

Deduction for super senior citizen: If such expenditure is incurred for a super senior citizen, then the maximum amount of deduction shall be enhanced to ₹ 80,000.

Treatment of Mediclaim or amount reimbursed by the employer: Deduction under this section shall be reduced by the amount received, if any –

  1. under an insurance from an insurer; or
  2. reimbursed by an employer,

– for the medical treatment of the person.

Specified diseases as per rule 11DD are –

  1. Neurological disease:
    1. Dementia
    2. Dystonia Musculorum Deformans
    3. Motor Neuron Disease
    4. Ataxia
    5. Chorea
    6. Hemiballismus
    7. Aphasia
    8. Parkinson’s Disease (all neurological disease must have disability of 40%and above);
  2. Cancer;
  3. Full Blown Acquired Immuno Deficiency Syndrome (AIDS);
  4. Chronic Renal Failure;
  5. Hemophilia; and
  6. Thalassaemia.
Applicable to

An Individual (irrespective of residential status and citizenship of the individual).

Conditions to be satisfied
  1. Loan from specified institution: The assessee had taken a loan from –
    1. a financial institution; or
    2. an approved charitable institution
  2. Purpose of loan: The loan must have been taken for the purpose of pursuing higher education of himself/herself or for any other following persons:
    1. Spouse
    2. Children (dependent or not); or
    3. the student for whom the individual is the legal guardian

    Higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so

  3. Payment of interest: The assessee pays interest on such loan.
  4. Payment out of taxable income: The amount must be paid out of income chargeable to tax. However, it is not necessary that such income relates to the current year.
Quantum of deduction

Amount paid during the year by way of payment of interest.

Maximum permissible period for which deduction is available [Sec.80E(2)]

Deduction under this section shall be allowed for the initial assessment year and 7 assessment years immediately succeeding the initial assessment year or until interest is paid by the assessee in full, whichever is earlier.
Initial Assessment Year means the assessment year relevant to the previous year, in which the assessee starts repaying the loan or interest thereon.

Applicable to

Individual (resident or non-resident)

Conditions to be satisfied
  1. Loan : The assessee has taken loan for acquisition of the residential house property
  2. Sanction of Loan : The loan has been sanctioned by the financial institution during the Previous Year 2016-17.
  3. Amount of Loan : The amount of loan sanctioned for acquisition of the residential house property does not exceed ₹ 35 lakhs.
  4. Value of Residential Property : The value of the residential house property does not exceed ₹ 50 lakhs.
  5. No other residential property : The assessee does not own any residential house property on the date of sanction of the loan.
Quantum of Deduction

Minimum of the following:

  1. Interest on loan payable for the previous year
  2. ₹ 50,000

It is irrelevant whether such interest pertains to pre-construction period or post construction period.

Applicable to

All assessee (irrespective of residential status and citizenship of the assessee)

Conditions to be satisfied
  1. Donation: Assessee must donate (not in kind ) to specified Funds or Organisations (as listed below). Donation in kind shall not qualify for deduction
  2. Mode of donation: Donation in excess of ₹ 2,000 shall be made by any mode (but not in kind) other than cash.
  3. Proof of donation: Proof of donation, in original, should be attached (now keep ready) with the return of income.
Other Points
  1. Specified funds or organizations : Specified Funds or Organisations are divided into two categories:
    1. On which limit is not applicable (Item No.1 to 25 given in the list) (hereinafter referred as Category A Organisation).
    2. On which limit is applicable (Item No.26 to 32 given in the list) (hereinafter referred as Category B Organisation).
  2. Double deduction is not permissible
  1. The limit is applicable only on category B organizations or funds.
  2. The limit is applicable on qualifying amount of donation and not on deduction.
  3. The limit is not on individual donation but on aggregate donation.
Computation of quantum of deduction
ParticularsAmount
100% or 50% of donation to category A organizations or funds***
Add : 100% or 50% of donation to category B organizations or funds (subject to the Limit #)***
Deduction u/s 80G***
# Limit: 10% of Adjusted Gross total income (hereinafter referred as Adj. GTI)

Adjusted GTI = Gross total income – Long term capital gain – Short term capital gain covered u/s 111A – All deductions u/s 80C to 80U other than deduction u/s 80G – Income referred u/s 115A, 115AB, 115AC, etc.

Applicable to

An Individual (irrespective of the residential status and citizenship of the individual)

Conditions to be satisfied
  1. No House rent allowance: Assessee is not receiving House Rent Allowance (HRA).
  2. No house at the place of employment: He or his spouse or minor child or HUF of which he is a member, should not own any residential house at a place where the assessee resides, perform the duties of his office, or employment or carries on his business or profession.
  3. No claim for the benefit of self-occupied house property: Assessee should not treat any residential house situated at other places as self-occupied property u/s 23(2)(a) or 23(4)(a).
  4. Proof for payment of rent: A declaration in Form 10BA should be filed (now keep handy)for expenditure incurred by him towards payment of rent.

Rent must be paid for a residential house property whether furnished or unfurnished.

Quantum of deduction

Minimum of the following:

  1. ₹ 5,000 per month;
  2. 25% of Adjusted Gross total income for the year (referred as Adj. GTI); or
  3. The excess of actual rent paid for accommodation over 10% of Adjusted Gross total income.Arithmetically, [Rent paid – 10% of Adj. GTI]

Adjusted GTI = Gross total income – Long term capital gain – STCG taxable u/s 111A – All deduction u/s 80’s other than sec. 80GG – Income u/s 115A, 115AB, 115AC, etc.

Applicable to

An assessee, who is not having any income under the head “Profits & gains of business or profession”;.

Conditions to be satisfied
  1. During the previous year, assessee paid any sum –
    PurposesAmount paid to
    For Rural development
    • Approved association or institution, being engaged in any approved programme of rural development, to be used for carrying any rural development programme provided the assessee furnishes a certificate as referred in sec. 35CCA(2);
    • Approved association or institution engaged in training the persons for implementing programme of rural development provided that the assessee furnishes a certificate referred in sec. 35CCA(2A);
    • Notified Rural Development Fund for the purpose of sec. 35CCA(1)(c)
    For poverty eradicationNotified National Urban Poverty Eradication Fund setup and notified by the Central Government for the purpose of sec. 35CCA(1)(d).
    For Scientific researchResearch association, university, college or to other institution as approved u/s 35(1)(ii) to be used for scientific research.
    For social science or statistical researchResearch association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution approved u/s 35(1)(iii) to be used for research in social science or statistical research.
    For other purposeA public sector company or a local authority or an association or institution approved by the National Committee for carrying out any eligible project or scheme, provided a certificate is obtained from such company etc. as mentioned u/s 35AC(2)(a).
  2. Mode of Payment: Payment in excess of ₹ 10,000 to aforesaid purpose shall be made by any mode other than cash.
Quantum of deduction

Amount actually paid is fully deductible.

Applicable to

All assessee except local authority and every artificial juridical person wholly or partly funded by the Government

Conditions to be satisfied

Assessee has contributed any sum (by any mode other than cash), in the previous year, to any political party or an electoral trust.

Quantum of deduction

100% of such contribution made in the previous year

Applicable to

An individual or a Hindu Undivided Family

Conditions to be satisfied

Gross total income of an assessee includes any income by way of interest on deposits (not being time deposits ) in a savings account with:

  1. a banking company;
  2. a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or
  3. a Post Office
Quantum of deduction

Minimum of the following

  1. Interest on such deposits in saving account
  2. ₹ 10,000

As per Notification No. 32/2011 dated 03-06-2011, interest on Post Office Saving Bank is exempt u/s 10(15(i) to the extent of the interest of ₹ 3,500 (in case of single account) and ₹ 7,000 (in case of joint account)

Applicable to

A resident individual (irrespective of citizenship of the individual)

Conditions to be satisfied
  1. Assessee is a disable-individual: Assessee, at any time during the previous year, is certified by the medical authority to be a person with disability.
  2. Report : Assessee must furnish a copy of the certificate issued by the medical authority in the prescribed form along with the return of income, in respect of the assessment year for which the deduction has been claimed.
Quantum of Deduction
Assessee is suffering from severe disability (i.e. disability to the extent of 80% or more)₹1,25,000
Assessee is suffering from disability but not severe disability (i.e. disability to the extent of 40% or more but less than 80%)₹75,000
Deduction under this section is irrespective of actual expenditure incurred i.e. deduction is statutory.

Disability, Person with disability and Person with severe disability: Refer Sec.80DD

Deduction u/s 80U is for disable-assessee whereas deduction u/s 80DD is for dependant disable-relative

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