Deductions in respect of certain Payments and Investments

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Meaning and Basic Rules of Deductions from Gross Total Income

The aggregate of income computed under each head, after giving effect to the provisions for clubbing of income and set off of losses, is known as “Gross Total Income”. In computing the total income of an assessee, certain deductions are permissible under sections 80C to 80U from Gross Total Income. These deductions are however not allowed from the following incomes although these incomes are part of Gross Total Income: 

(a) Long-term capital gains.

(b) Short-term capital gain on transfer of equity shares and units of equity-oriented fund through a recognised stock exchange i.e. short-term capital gain covered under section 111A. 

(c) Winnings of lotteries, races, etc. 

(d) Incomes referred to in sections 115A, 115AB, 115AC, 115ACA, 115AD and 115D. 

These deductions are of two types: — 

  1. deductions on account of certain payments and investments covered under sections 80C to 80GGC. 
  2. deductions on account of certain incomes which are already included under Gross Total Income covered under sections 80-IA to 80U. 

The income arrived at, after claiming the above deductions from Gross Total Income, is known as Total Income. It may also be called Taxable Income. The Total Income, thus calculated, should be rounded off to the nearest ₹10. 

Deductions in respect of certain Payments
Deductions in respect of certain Payments

Basic Rules of Deductions [Sections 80A/80AB/80AC] 

(1). Deductions cannot Exceed Gross Total Income [Section 80A (2)]:

The aggregate amount of deductions  under sections 80C to 80U. i.e., under Chapter VI-A shall not, in any case, exceed the “Gross Total Income”  (exclusive of long-term capital gains, short-term capital gain covered under section 111A, winnings of lotteries,  crossword, puzzles, etc. and income referred to in sections 115A to 115AD and 115D) of the assessee.

Therefore, the total income after deductions will either be positive or nil. It cannot be negative due to deductions. If the “Gross total income” is negative or nil, no deduction can be permitted under this Chapter. 

(2). Deduction Not Allowed to Members if Allowed to AOP/BOI [Section 80A (3)]:

If a deduction is allowed under the above sections to the AOP or BOI then deductions for the same payment/income will not be allowed to the members of the AOP/BOI. [Section 80A (3)]. 

(3). Double Deduction Not Allowed and Deduction cannot Exceed the Profit of the particular Undertaking  or Unit or Enterprise, etc. [Section 80A(4)]:

Where, in the case of an assessee, any amount of profits and gains of  an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those  provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not  be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits  and gains of such undertaking or unit or enterprise or eligible business, as the case may be. 

(4). Deduction Allowed only when it is Claimed by the Assessee [Section 80A(5)]:

Where the assessee fails to  make a claim in his return of income for any deduction under section 10AA or under any provision of this  Chapter under the heading “C.—Deductions in respect of certain incomes” (i.e. sections 80-IA to 80RRB), no  deduction shall be allowed to him thereunder. 

(5). Assessee’s Duty to Place Relevant Material:

If an assessee approaches a statutory authority for obtaining a  concession under the taxing statute, he should in fairness place all the material before the said authority and be  also in a position to satisfy the said authority that he was entitled to obtain the concession. 

(6). Deduction to be Allowed in respect of Net Income included in Gross Total Income [Section 80-AB]: 

Where any deduction is required to be made or allowed under any section in respect of any income then for the  purpose of computing the deduction under that section, the net income computed in accordance with the  provisions of the Income-tax Act (before making any deduction under this chapter i.e. Chapter VIA) shall alone be  regarded as the income received by the assessee and which is included in his Gross Total Income. [Section  80AB].

(7). Benefits of certain Deductions Not to be Allowed in cases where Return is Not Filed within the specified  time limit [Section 80AC]:

Where in computing the total income of an assessee of any previous year relevant to  the assessment year commencing on or after 1.4.2018, any deduction is admissible under any provision of this  Chapter under the heading “C.—Deductions in respect of certain incomes” (i.e. sections 80-IA to 80RRB), then  such deduction shall not be allowed to him unless he furnishes a return of his income for such assessment year on  or before the due date specified under section 139(1)

1. [Section 80C]: Deduction in respect of Life Insurance Premium, Deferred Annuity, Contribution to PF, Subscription of certain Equity Shares or Debentures etc.

Section 80C provides deduction in respect of specified qualifying amounts paid or deposited by the assessee in the previous year.

(A). Which Assessees are Allowed Deduction Under Section 80C

This deduction is allowed only to the following assessees from their gross total income computed as per provisions of the Act:

  1. an Individual; or
  2. a Hindu Undivided Family (HUF)

(B). List of Qualifying Investment/Savings to avail Deduction under Section 80C from Gross Total Income can not Exceed Rs. 1,50,000.

The above assessees shall be entitled to a deduction of whole of the amount paid or deposited in the previous year, being the aggregate of sum referred to below as does not exceed Rs.1,50,000 :

(1) any sum paid by an individual to effect or to keep in force an insurance on the life of: 

(a) an individual himself, 

(b) his/her spouse, and 

(c) any child of such individual. 

The children may be married/unmarried, dependent/not dependent on the individual. 

In the case of Hindu Undivided Family the premium should be paid on the life of any member of the  family. 

Premium paid on Life Insurance Policy exceeding certain percentage of the capital sum assured not  eligible for deduction [Section 80C(3)] 

Premium paid on insurance policy other than contract of deferred  annuityAmount paid eligible for  deduction
(a) for policy issued on or before 31.3.201220% of the capital sum assured
(b) for policy issued on or after 1.4.201210% of the capital sum assured
(c) for policy issued on or after 1.4.2013 for the insurance on life of  a person, who is—  (i) a person with disability or a person with severe disability as  referred to in section 80U, or  (ii) suffering from disease or ailment as specified in the rules  made under section 80DDB15% of the capital sum assured

(2) any payment made by the individual only to effect or keep in force a contract of A Non-Commutable Deferred Annuity on the life of:

(a) an individual himself,

(b)  his/her spouse, and

(c) any child of such individual; 

(3) any sum deducted in accordance with the conditions of services from the salary payable by or on behalf of the Government to any individual for the purpose of securing to him a Deferred Annuity or making Provision for his Spouse or Children. The sum deducted should not exceed 1/5th (20%) of the Salary;

(4) any contribution by the employee towards a Statutory Provident Fund or Recognised Provident Fund. The Deduction in this respect is allowable to an individual only; 

(5) any contribution to a Public Provident Fund by an individual or HUF. The contribution may be made to an account standing in the name of any person mentioned under clause (1) above; 

(6) any contribution by an employee to an Approved Superannuation Fund; 

(7) any subscription, in the name of any person specified in sub-section (4), to any such security of the Central Government or any such deposit scheme as that Government may, by notification in the Official Gazette, specify in this behalf; Following schemes have since been notified: 

(a) subscription by an individual or HUF to National Savings Scheme, 1992 

(b) sum paid or deposited in the name of a girl child under the Sukanya Samriddhi Account Scheme. 

(8) any subscription by an individual or HUF to National Savings Certificates (VIII or IX Issue). Any interest accrued on these certificates which is deemed to be reinvested also qualifies for deduction; 

(9) any contribution by an individual or HUF for participation in the Unit Linked Insurance Plan of the Unit  Trust of India or Unit Linked Insurance Plan of LIC Mutual Fund referred to in section 10(23D).

(10) payment made by an individual or HUF to effect or keep in force a contract for Notified Annuity Plan of the Life Insurance Corporation or any other Insurer. 

(11) any subscription, by an individual or HUF to notified units of

(a) any mutual fund referred to in section 10(23D), or

(b) the Administrator or the specified company as referred to section 2 of the Unit Trust of  India. Equity Linked Saving Scheme (ELSS), 2005 has since been notified; 

(12) any contribution by an individual to a Notified Pension Fund set up by any mutual fund referred to in section 10(23D) or by the Administrator or the specified company as referred to in section 2 of the Unit Trust of India. UTI – Retirement Benefit Pension Fund has since been notified; 

(13) any subscription by an individual or HUF to any Deposit Scheme or contribution to any Pension Fund set up by the National Housing Bank. The Home Loan Account Scheme of the National Housing Bank has been notified; 

(14) a subscription by an individual or HUF to any Notified Deposit Scheme of: 

(a) a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or 

(b) any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;

 (15) any sum paid by an individual as Tuition Fees provided following conditions are satisfied: 

(i) Such sum should have been paid as tuition fees excluding any payment towards development fees or donation or payment of similar nature. 

(ii) It should have been paid at the time of admission or thereafter. 

(iii) It is paid to any university, college, school or other educational institution situated within India. 

(iv) It is paid for the purpose of full-time education.

(v) It is paid for any 2 Children of such individual

(16) any payment by an individual or HUF for purchase or construction of a residential house property, the income from which is chargeable to tax under the head ‘Income from house property’.

(17) Any subscription by an individual or HUF to equity shares or debentures forming part of any eligible issue of capital approved by the Board of wholly public company any public financial institution where such proceeds are utilized for infrastructure company: 

(18) any sum deposited in a Term Deposit— 

(a) for a fixed period of not less than 5 years with a scheduled bank; and 

(b) which is in accordance with a scheme framed and notified by the Central Government in the Official Gazette for the purposes of this clause.

(19) Subscription to such bonds issued by the National Bank for Agriculture and Rural Development (NABARD) as the Central Government may, by notification in the Official Gazette, specify in this behalf. 

(20) Any sum deposited in an account under the Senior Citizens Saving Scheme Rules, 2004. 

(21) Any sum deposited as five years-time deposit in an account under the Post Office Time Deposit Rules, 1981. 

(22) any sum contributed by an employee of the Central Government, to a specified account of the pension scheme referred to in section 80CCD–– 

(a) for a fixed period of not less than three years; and 

(b) which is in accordance with the scheme as may be notified by the Central Government in the Official Gazette for the purposes of this clause. 

IMPORTANT NOTES:  The deduction is allowed only when the specified amount has been actually paid during the previous year. 

2. [Section 80CCC]: Deduction in respect of Contribution to certain Pension Funds

Essential Conditions for Claiming Deduction under this section:

(1) Deduction is permissible, under this section, only to an individual assessee. 

(2) It is allowed in respect of any amount paid or deposited in the previous year by such individual to effect  or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for  receiving pension from the fund set up by LIC/or any other insurer referred to in section 10(23AAB). 

(3) The amount is paid out of his income chargeable to tax. 

Quantum of Deduction:

(a) The whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any)

Or

(b) ₹. 1,50,000,

whichever is less.

3. [Section 80CCD]: Deduction in respect of contribution to Pension Scheme of Central Government. 

(1) Deduction of an Employee’s/ Assessee’s Contribution [Section 80CCD (1)]:

The deduction under this section is allowed to— 

(a) an assessee who is an individual and is employed by the Central Government on or after 1-1-2004 or by any other employer (the date of employment with other employer is not relevant), or 

(b) any other assessee being an individual. 

The deduction is allowed on account of—

(i) any amount not exceeding 10% of salary of the previous year paid or deposited by the employee in his account under the notified pension scheme; 

(ii) any amount contributed by any other assessee being an individual to such pension scheme not exceeding 20% of his gross total income in the previous year. 

(2) Deduction of ₹50,000 under section 80CCD(1B):

The employee or the individual referred to in section 80CCD (1), shall be allowed a deduction in computation of his total income, [whether or not any  deduction is allowed under section 80CCD(1)] to the extent of— 

(a) the whole of the amount paid or deposited in the previous year, or

(b) ₹50,000 

whichever is less. 

However, no deduction under section 80CCD(1B) shall be allowed in respect of the amount on which a deduction has been claimed and allowed under section 80CCD (1). 

(3) Deduction of Employer’s Contribution [Section 80CCD (2)]:

Any amount contributed by the employer (i.e. Central Government or any other employer) to such Pension Scheme shall be allowed as deduction for an amount not exceeding 14% of salary in case of Central Government employee and 10% of the  salary in case of any other employee in the previous year. 

(4) Taxability of amount received from Pension Scheme [Section 80CCD (3)]:

Where any amount standing to  the credit of the assessee in his account referred to in section 80CCD(1) or (1B), in respect of which a  deduction has been allowed under those sub-sections or section 80CCD(2), together with the amount  accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any previous  year,— 

(a) on account of closure or his opting out of the pension scheme referred to in section 80CCD(1) or (1B);  or 

(b) as pension received from the annuity plan purchased or taken on such closure or opting out, 

the whole of the amount referred to in clause (a) or clause (b) 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 as income of that previous year. 

However, the amount received by the nominee, on the death of the assessee, under the circumstances referred  to in clause (a) above, shall not be deemed to be the income of the nominee.

4. [Section 80CCE]: Limit on Deductions under sections 80C, 80CCC and 80CCD 

The aggregate amount of deduction under section 80C, section 80CCC and section 80CCD(1) [excluding  employer’s contribution to pension scheme or contribution made by the assessee under section 80CCD(1B)] shall  not, in any case, exceed ₹1,50,000.

5. [Section 80D]: Deduction in respect of Medical Insurance Premia 

(1). Essential Conditions for Claiming Deduction U/s 80D:

  1. Deduction is permissible, under this section, only to an individual or HUF.
  2. Deduction is allowed for the following purpose—
    1. In case of an individual: It is allowed for—
      1. 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
      2. any contribution made to the Central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf.
      3. 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.
      4. Family means the spouse and dependent children of the assessee
    2. In the case of a HUF:
      1. 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.
    3. In case of very Senior Citizen:
      1. Deduction on account of medical expenditure incurred (instead of sum paid to affect 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.

(2). Quantum of Deduction under Section 80D

(A) As per section 80D(2), in case of an Individual,

it is allowed for such sum as referred to below by the  aggregate of the following— 

(a) (i) the whole of the amount paid to effect or to keep in force an insurance on the health of the individual or any member of his/her family, 

(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 individual or any member of his/her family, 

as does not exceed in the aggregate ₹25,000 (₹50,000 in case if any such person specified in this clause (a) is a senior citizen), and 

(b) the amount paid to effect or to keep in force an insurance on the health of the his/her parent or  parents, or any amount paid on account of Preventive Health Check-Up of his parent or parents as  does not exceed in the aggregate ₹25,000 (₹50,000 in case if any such person specified in this  clause (b) is a senior citizen).

(c) the whole of the amount paid on account of medical expenditure incurred on the health of the  individual or any member of his/her family who is a senior citizen as does not exceed in the  aggregate ₹50,000 provided no amount has been paid to effect of keep in force an insurance on  the health of such person, and 

(d) the whole of the amount paid on account of medical expenditure incurred on the health of his  parent who is a senior citizen as does not exceed in the aggregate ₹50,000 provided no amount  has been paid to effect of keep in force an insurance on the health of such person. 

Provided that the aggregate of the sum specified under clause (a) and clause (c) or the aggregate  of the sum specified under clause (b) and (d) above shall not exceed ₹50,000. 

(B) As per section 80D(3), in the case of a HUF,

it is allowed for such sum as referred to below by the  aggregate of the following— 

(a) whole of the amount paid to effect or to keep in force an insurance on the health of any member  of the Hindu undivided family as does not exceed in the aggregate ₹25,000 (additional ₹25,000 if  any member for whom the amount is paid is a senior citizen); and 

(b) whole of the amount paid on account of Medical Expenditure incurred on the health of any  member of the Hindu undivided family who is a senior citizen as does not exceed in the aggregate  ₹50,000 provided that no amount has been paid to effect or to keep in force an insurance on  the health of such person. 

However, the aggregate of the sum specified under clauses (a) and (b) above shall not exceed  ₹50,000.

6. [Section 80DD]: Deduction in respect of Maintenance Including Medical Treatment of a Dependent who is a Person with Disability

The provisions of section 80DD are given below—

(1) Who can claim deduction –

A Resident Individual or a Resident HUF can claim deduction under section 80DD.

(2) What is the Qualifying Expenditure -?

A resident individual/HUF can claim deduction under section 80DD, if he/ it has incurred an expenditure for the medical treatment (including nursing), training and rehabilitation of a dependent relative (being a person with a disability).

Deduction can also be claimed, if the resident individual/ HUF has paid or deposited under any approved scheme of LIC (or any other insurer) or UTI for the maintenance of such dependent relative.

(3) Who is Dependent Relative suffering from Disability –

In the case of an individual, “Dependant” means Spouse, Children, Parents, Brothers and Sisters, who is wholly and mainly dependent upon the individual.

In the case of Hindu Undivided Family (HUF), “Dependant” means any member (of the family) who is wholly and mainly dependent upon the family.

“Person with disability” means a person who suffers 40% or more of any of the following – Blindness, Low Vision, Leprosy-Cured, Hearing Impairment, Locomotor Disability, Mental Retardation and Mental Illness.

(4) How much is Deductible under Section 80DD –

  • A fixed deduction of Rs. 75,000 is available.
  • A higher deduction of Rs. 1,25,000 is available if such dependent relative is suffering from a severe disability (i.e., having disability of 80 per cent or above).
  • Deduction under this section is available regardless of actual expenditure.

(5) Certificate if any required –

For claiming the above deduction, the assessee should have a certificate issued by the medical authority. This may be furnished to the Assessing Officer whenever he wants to examine it. Where the condition of disability requires reassessment, a fresh certificate from the medical authority shall have to be obtained after the expiry of the period mentioned on the original certificate in order to continue to claim the deduction.

(6) Consequences if the dependant being a person with disability predeceases the individual or the member of the HUF [Section 80DD (3)]:

If the dependant being a person with disability predeceases the individual or the member of the HUF in whose name money has been deposited, an amount equal to the amount paid or deposited under the scheme shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.

7. [Section 80DDB]: Deduction in respect of Medical Treatment, etc.

Essential Conditions for Claiming Deduction U/s 80DDB:

(1) Deduction is available to a person who is—

  1. Resident in India, and
    1. Is either an individual or HUF.

(2) Deduction is allowed in respect of any expenditure Actually incurred for the medical treatment of the following persons for such disease or ailment as may be specified in the rules made in this behalf by the Board:

In the case of individual — for himself or a dependant

In the case of HUF — for any member of the HUF

(3) No deduction under section 80DDB shall be allowed unless the assessee obtains 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 under Section 80DDB :

(i) Amount actually paid or

(ii) Rs. 40,000

whichever is Less.

(A) However if the person for whom such expenditure is incurred happens to be a Senior Citizen, the maximum deduction shall be allowed for a sum of Rs. 1,00,000 [instead of Rs. 40,000.]

In other words, the deduction in this Senior Citizen case shall be ..

(i) Actual amount incurred or

(ii) Rs. 1,00,000, 

whichever is Less.

(5) Further, if any amount is received under an insurance from the insurer or reimbursed by an employer for the medical treatment of the person mentioned in point (2) above, the amount so received shall be reduced from the deduction allowable under this section.

8. [Section 80E]: Deduction in respect of Interest of Loan taken for Higher Education

The following are salient features of section 80E –

(1) Who can Claim Deduction under Section 80E-

Only an individual can claim deduction under section 80E.

(2) What is the Qualifying Expenditure for availing Deduction under Section 80E-

If loan is taken by an individual for any study in India or outside India (i.e., any study after passing senior secondary examination or its equivalent) from a bank, financial institution or an approved charitable institution, interest is deductible in the year in which interest is paid.

(3) For whose Education Loan should be taken to get Deduction U/s 80E-

Interest is deductible if loan is taken for pursuing assessee’s own education or for the education of his relatives (i.e., spouse, children or any student for whom the individual is the legal guardian).

(4) Maximum Monetary Ceiling U/s 80E-

Entire interest is deductible in the year in which the assessee starts paying interest on loan and subsequent 7 years or until interest is paid in full. However, interest should be paid out of income chargeable to tax.

(5) Quantum of Deduction under Section 80E :

The amount paid during previous year towards INTEREST.

(6) Period of Deduction under Section 80E:

Deduction shall be allowed for 8 assessment years starting from the assessment year in which the assessee starts paying the interest on loan, or until the interest thereon is paid by the assessee in full, whichever is earlier.

(7) Meaning of Higher Education for the purpose of Deduction U/s 80E :

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.

(8) Meaning of Relatives for the purpose of Deduction U/s 80E :

Relative in relation to an individual, means the spouse and children of that individual or the student for whom the individual is a legal guardian.

9. [Section 80EE]: Deduction in respect of Interest on Loan taken for Residential House Property

An individual shall be allowed a deduction under section 80EE on account of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential property subject to the following conditions being satisfied:

  1. the loan has been sanctioned by the financial institution during the period beginning on 1-4- 2016 and ending on 31-3-2017;
  2. the amount of loan sanctioned for acquisition of the residential house property does not exceed Rs. 35,00,000 (Rs. 35 Lakh) ;
  3. the value of residential house property does not exceed Rs. 50,00,000 (Rs. 50 Lakh) ;
  4. the assessee does not own any residential house property on the date of sanction of loan.
  5. where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.

Quantum of Deduction:

The deduction under this section shall not exceed Rs. 50,000 and shall be allowed in computing the total income of the individual for the assessment year beginning on 1-4-2017 and subsequent assessment years.

10. [Section 80EEA]: Deduction in respect of Interest on Loan taken for Certain House Property [W.e.f. A.Y. 2020-21] 

In order to provide an impetus to the ‘Housing for all’ objective of the Government and to enable the home  buyer to have low-cost funds at his disposal, the Act has inserted a new section 80EEA so as to provide a  deduction in respect of interest up to ₹1,50,000 on loan taken for residential house property from any financial  institution subject to the certain conditions. 

An individual (not eligible to claim deduction under section 80EE) shall be allowed a deduction under section 80EEA on account of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential property subject to the following conditions being satisfied: 

(i) the loan has been sanctioned by the financial institution during the period beginning on 1.4.2019 and ending on 31.3.2020; 

(ii) the stamp duty value of residential house property does not exceed ₹45,00,000; 

(iii) the assessee does not own any residential house property on the date of sanction of loan. 

(iv) where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.

Quantum of Deduction:

The deduction under this section shall not exceed ₹1,50,000 and shall be allowed in  computing the total income of the individual for the assessment year beginning on 1.4.2020 and subsequent  assessment years. 

In addition to the deduction of ₹1,50,000 under section 80EEA, the assessee can also Claim Deduction upto  ₹2,00,000 for interest in respect of a Self-Occupied House and the actual interest in case of a Let Out House  Property.

11. [Section 80EEB]: Deduction in respect of Purchase of Electric Vehicle [W.e.f. A.Y. 2020-21] 

With a view to improve environment and to reduce vehicular pollution, the Act has inserted a new section  80EEB so as to provide for a deduction in respect of interest on loan taken for purchase of an electric vehicle from  any financial institution up to ₹1,50,000 subject to certain conditions. 

An individual, shall be allowed a deduction under section 80EEB on account of interest payable on loan taken  by him from any financial institution for the purpose of purchase of an electric vehicle subject to the following  conditions being satisfied. 

(i) the loan has been sanctioned by the financial institution during the period beginning on 1.4.2019 and  ending on 31.3.2023; 

(ii) where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect  of such interest under any other provision of this Act for the same or any other assessment year. 

Quantum of Deduction:

The deduction under this section shall not exceed ₹1,50,000 and shall be allowed in  computing the total income of the individual for the assessment year beginning on 1.4.2020 and subsequent  assessment years. 

For the purposes of this section,––  (a) “electric vehicle” means a vehicle which is powered exclusively by an electric motor whose traction  energy is supplied exclusively by traction battery installed in the vehicle and has such electric  regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy  into electrical energy;

12. [Section 80G]: Deduction in respect of Donations to Certain Funds, Charitable Institutions, etc. 

1. Essential Conditions for Claiming Deduction U/s 80G:

(1) Deduction under this section is allowed to all assessees, whether company or non-company, whether having income under the head ‘profits and gains of business or profession’ or not.

(2) The donation should be of a sum of Money. (Donations in Kind do not qualify for deduction.)

(3) The donation should be made only to specified funds / institutions.

(4) No deduction shall be allowed under this section in respect of donation of any sum exceeding Rs. 2,000 unless such sum is paid by any mode other than cash.

(5) For availing deduction under this section it is obligatory on the part of the assessee to produce proper proof of payment. Where the payment is not proved by production of proper receipt, etc., the deduction under section 80G is not available.

(6) Where a deduction is allowed in respect of any donation for any assessment year, no other deduction shall be allowed in respect of such sum for the same or any other assessment year.

2. Amount Deductible Under Section 80G

Deduction u/s 80G is available on account of any donation made by the assessee to specified funds or institutions. In some cases, deduction is available after applying a qualifying limit while in others, it is allowed without applying any qualifying limit. Again in some cases, deduction is allowed to the extent of 100% of the donation and in some cases it is allowed to the extent of 50% of the donation. The quantum of deduction in respect of various kinds of donations is given as under:

Deduction without Qualifying Limit –

(A) Donations U/s 80G made to following are eligible for 100% Deduction without any Qualifying Limit:

  1. National Defence Fund set up by the Central Government.
  2. Prime Minister’s National Relief Fund;
  3. Prime Minister’s Armenia Earthquake Relief Fund;
  4. Africa (Public Contributions India) Fund;
  5. National Foundation for Communal Harmony;
  6. University/Educational Institution of National Eminence approved by the prescribed authority;
  7. Maharashtra Chief Minister’s Earthquake Relief Fund;
  8. Any fund set up by the State Government of Gujarat, exclusively for providing relief to the victims of earthquake in Gujarat;
  9. Zila Saksharta Samiti constituted in any district;
  10. The National Blood Transfusion Council or any State Blood Transfusion Council;
  11. Any fund set up by a State Government to provide medical relief to the poor;
  12. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund;
  13. The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996;
  14. National Illness Assistance Fund;
  15. The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union Territory, as the case may be;
  16. National Sports Fund set up by the Central Government;
  17. National Cultural Fund set up by the Central Government;
  18. Fund for Technology Development and Application, set up by the Central Government;
  19. National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities;
  20. National Children’s Fund.
  21. Donations made by any assessee (resident and non-resident) to the Swachh Bharat Kosh set up by the Central Government (inserted by the Finance Act, 2015 w.r.e.f. A.Y. 2015-16);
  22. Donations made by a resident assessee to Clean Ganga Fund set up by the Central Government (inserted by the Finance Act, 2015 w.r.e.f. A.Y. 2015-16);
  23. The National Fund for Control of Drug Abuse (inserted by the Finance Act, 2015 w.e.f. A.Y. 2016-17).

(B) Donations U/s 80G 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. Indira Gandhi Memorial Trust;
  4. Rajiv Gandhi Foundation.

Deduction with Qualifying Limit –

(C) Donations U/s 80G to the following are eligible for 100% Deduction subject to Qualifying Limit:

  1. Donation to Government or any approved local authority, institution or association to be utilised for promoting family planning.
  2. Any sums paid by the assessee, being a company, in the previous year as donations to Indian Olympic Association or to any other association or institution established in India and notified by the Central Government for—
    1. the development of infrastructure for sports and games; or
    1. the sponsorship of sports and games, in India.

(D) Donations U/s 80G to the following are eligible for 50% Deduction subject to Qualifying Limit:

  1. Donation to Government or any approved local authority, institution or association to be utilised for any charitable purpose other than promoting family planning.
  2. Any other fund or institution which satisfies the conditions of section 80G(5).
  3. To any authority constituted in India by or under any law for satisfying the need for housing accommodation or for the purpose of planning development or improvement of cities, towns and villages or for both.
  4. To any corporation established by the Central or any State Government specified under section 10(26BB) for promoting interests of the members of a minority community.
  5. Any notified temple, mosque, gurdwara, church or other place notified by the Central Government to be of historic, archaeological or artistic importance, for renovation or repair of such place.

3. Net Qualifying Amount

For applying qualifying limit, all donations made to funds/institutions covered under (C) and (D) above shall be aggregated and the aggregate amount shall be limited to 10% of Adjusted Gross Total Income.

Adjusted Gross Total Income:

The following shall be Deducted from Gross Total Income to find out Adjusted Gross Total Income—

  1. amount deductible under sections 80C to 80U (but not section 80G);
  2. such incomes on which income-tax is not payable; i.e. share from AOP.
  3. long-term capital gains;
  4. short-term capital gain which is taxable under section 111A at the rate of 15% ; and
  5. incomes referred to in section 115A, 115AB, 115AC, 115ACA or 115AD.

4. Quantum of Deduction U/s 80G

The quantum of deduction shall be the aggregate of the deductions permissible under clauses (A), (B), (C) and (D).

5. Mode of Payment in respect of Donation U/s 80G

Donation can be given in cash or by cheque or draft.

However, no deduction shall be allowed under section 80G in respect of donation in cash of an amount exceeding Rs. 2,000.

13. [Section 80GG]: Deduction in respect of Rents Paid

1. Essential Conditions for Claiming Deduction U/s 80GG :

  1. Only an individual can claim deduction under section 80GG.
  2. The individual should pay rent for his residential accommodation, whether furnished or unfurnished.
  3. The individual is either a self-employed person or if he is an employee, he is neither entitled to any house rent allowance nor a rent-free accommodation.
  4. The individual, his or her spouse or minor child or a HUF of which he/she is a member, does not own any residential accommodation at the place where such an assessee ordinarily resides or at the place where he works or carries on his business or profession.
    If the assessee i.e. the individual owns any residential accommodation at any place, other than the place of residence or work of the assessee, then such property should not be assessed in the hands of the individual as self-occupied property.
  5. Only an individual who pays rent for a residential accommodation for himself (and family) can avail deduction under section 80GG provided he gives a declaration electronically in Form No. 10BA.

2. Quantum of Deduction U/s 80GG :

The deduction shall be the minimum of the following amounts:

  1. Excess of rent paid over 10% of ‘Adjusted Total Income’;
  2. 25% of the “Adjusted Total Income”;
  3. Rs. 5,000 per month.

Adjusted Total Income :

Adjusted Total Income, for this purpose, means the “Gross Total Income” as reduced by:

  1. Long-term capital gains if any, which have been included in the “Gross Total Income”;
  2. Short-term capital gains of the nature referred to in section 111A (i.e. short-term capital gain on transfer of shares through a recognised stock exchange which are taxable @ 15%);
  3. All deductions permissible u/ss 80C to 80U excepting deduction under this section i.e. section 80GG.
  4. Income referred to in section 115A, 115AB, 115AC or 115AD. These sections relate to incomes of NRIs and foreign companies etc. which are taxable at special rate of tax.

14. [Section 80GGA]: Deduction in respect of certain Donations for Scientific Research or Rural Development

The deduction is available in respect of the payments made during the previous year to the following institutions:

  1. to an approved research association, university, college or other institution to be used for scientific research (Business assessees were allowed this deduction u/s 35);
  2. to an approved research association which has as its objects the undertaking of research in social sciences or statistical research or to university, college or other institution for research in social science or statistical research (Business assessees were allowed this deduction u/s 35);
  3. to an association or institution engaged in any approved programme for rural development, or which is engaged in training of persons for implementation of rural development programmes, or to a notified rural development fund or to the notified National Urban Poverty Eradication Fund (Business assessees were allowed this deduction u/s 35CCA). In this case the assessee should furnish a certificate as is required under section 35CCA;
  4. to a public sector company or a local authority, or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme (Business assessees were allowed this deduction u/s 35AC). In this case also the assessee should furnish a certificate as a required under section 35AC.

Who can Claim Deduction –

An assessee (other than an assessee whose gross total income includes income chargeable under the head “Profits and gains of business or profession”) can claim deduction under section 80GGA.

What is the Qualifying Expenditure –

Donation/contribution should be given to an approved research association, university, college or other institution to be used for scientific research or rural development. A contribution can also be given for the purpose of eligible project/scheme under section 35AC or for the purpose of notified National Fund for Rural Development or notified National Urban Poverty Eradication Fund. 149.1

Amount of Deduction under Section 80GGA –

100 % for the aforesaid Donation or Contribution is Deductible.

Donation can be given in cash or by cheque or draft.

However, no deduction shall be allowed under section 80GGA in respect of a cash contribution (exceeding Rs. 10,000).

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