Tax Planning Series 3: Deductions under Income Tax Act, 1961 (Applicable for AY 2017-18)-Part 1

Deductions under Income Tax Act, 1961 (Applicable for AY 2017-18)

Section
 Nature of deduction
Who can claim
Relevant Rule
(1)
(2)
(3)
(4)
For certain payments
80C
Life insurance premium for policy :
Individual/HUF
in case of individual, on life of assessee, assessee’s spouse and any child of assessee
in case of HUF, on life of any member of the HUF
Sum paid under a contract for a deferred annuity :
in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity)
Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary]
Contributions by an individual made under Employees’ Provident Fund Scheme
Contribution to Public Provident Fund Account in the name of:
in case of individual, such individual or his spouse or any child of such individual
Contribution by an employee to a recognised provident fund
Contribution by an employee to an approved superannuation fund
Subscription to any notified security or notified deposit scheme (Sukanya Samriddhi Account Scheme) of the Central Government in the case of an individual, in the name of individual, or any girl child of that individual, or any girl child for whom such person is the legal guardian, if the scheme so specifies. (Scheme does not allow deposit in the name of individual)
Subscription to notified savings certificates [National Savings Certificates (VIII Issue)]
Contribution for participation in unit-linked Insurance Plan of UTI :
in case of an individual, in the name of the individual, his spouse or any child of such individual
in case of a HUF, in the name of any member thereof
Contribution to notified unit-linked insurance plan of LIC Mutual Fund [Dhanaraksha 1989]
in the case of an individual, in the name of the individual, his spouse or any child of such individual
in the case of a HUF, in the name of any member thereof
Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]
Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children
Certain payments for purchase/construction of residential house property
Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes or (b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both
Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/Jeewan Akshay-III plan of LIC) or other insurer
Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005)
Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund)
Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions
20
Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above.
20A
Term deposits for a fixed period of not less than 5 years with a sche-duled bank, and which is in accordance with a scheme1 framed and notified.
Subscription to notified bonds issued by the NABARD.
Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions)
5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions)
Notes:
1.
Deduction is limited to whole of the amount paid or deposited subject to a maximum of Rs. 1,50,000. This maximum limit of Rs. 1,50,000 is the aggregate of the deduction that may be claimed under sections 80C, 80CCC and 80CCD.
2.
The sums paid or deposited need not be out of income chargeable to tax of the previous year. Amount may be paid or deposited any time during the previous year, but the deduction shall be available on so much of the aggregate of sums as do not exceed the total income chargeable to tax during the previous year.
3.
Life Insurance premium is part of gross qualifying amount for the purpose of deduction under section 80C. Payment of premium which is in excess of 10 per cent (if policy is issued on or after 1-4-2013, 15% in case of insurance on life of person with disability referred to in section 80U or suffering from disease or ailment specified in section 80DDB/rule 11DD) of actual capital sum assured shall not be included in gross qualifying amount. The value of any premiums agreed to be returned or of any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person, shall not be taken into account for the purpose of calculating the actual capital sum assured.
The limit of 10 per cent will be applicable only in the case of policies issued on or after 1-4-2012. In respect of policies issued prior to 1-4-2012, the old limit of 20 per cent of actual sum assured will be applicable.
‘Actual capital sum assured’ in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—
(i)
the value of any premium agreed to be returned; or
(ii)
any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.
4.
Where, in any previous year, an assessee—
(i)
terminates his contract of insurance, by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—
(a)
in case of any single premium policy, within two years after the date of commencement of insurance; or
(b)
in any other case, before premiums have been paid for two years; or
(ii)
terminates his participation in any unit-linked insurance plan (ULIP), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or
(iii)
transfers the house property before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,
then,—
(a)
no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and
(b)
the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
If any equity shares or debentures, with reference to the cost of which a deduction is allowed, are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.
5.
If any amount, including interest accrued thereon, is withdrawn by the assessee from his deposit account made under (a) Senior Citizen Saving Scheme or (b) Post Office Time Deposit Rules, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year.
The amount liable to tax shall not include the following amounts, namely:—
(i)
any amount of interest, relating to deposits referred to above, which has been included in the total income of the assessee of the previous year or years preceding such previous year; and
(ii)
any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.
Section
 Nature of deduction
Who can claim
Relevant Rule
(1)
(2)
(3)
(4)
80CCC
Contributions to certain pension funds of LIC or any other insurer (up to Rs. 1,50,000 from assessment year 2016-17) (Rs. 1,00,000 for assessment year 2015-16) (subject to certain conditions)
Individual
80CCD
Contribution to pension scheme notified by Central Government up to 10% of salary (subject to certain conditions and limits)
Individual
80CCF
Amount up to Rs. 20,000, paid or deposited, during the previous year relevant to assessment year 2011-12 or 2012-13, as subscription to notified long-term infrastructure bonds
Individual/HUF
80CCG
50 per cent of amount invested by specified resident individuals in notified equity savings scheme(subject to certain conditions and limits) (maximum deduction : Rs. 25,000)
Specified resident individuals (new retail investors)
80D
Medical insurance premia paid by any mode other than cash to LIC or any other insurer up to specified limits(subject to certain conditions)
Individual/HUF
80DD
Deduction of Rs. 50,000 (Rs. 1,00,000 in case of severe disability) (with effect from assessment year 2016-17 deduction is Rs. 75,000 and Rs. 1,25,000 in case of severe disability) to a resident individual/HUF where (a) any expenditure has been incurred for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] including autism, cerebral palsy and multiple disability as referred to in National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999), or (b) any amount is paid or deposited under an approved scheme framed in this behalf by the LIC or any other insurer or the Administrator or the specified company [as referred to in UTI (Transfer of Undertaking & Repeal) Act, 2002] for the maintenance of a dependent, being a person with disability (subject to certain conditions)
Resident Indivi- dual/HUF
11A
80DDB
Expenses actually paid for medical treatment of specified diseases and ailments subject to certain conditions
Resident Individual/HUF
11DD
80E
Amount paid out of income chargeable to tax by way of payment of interest on loan taken from financial institution/approved charitable institution for pursuing higher education (subject to certain conditions) (maximum period : 8 years)
Individual
80EE
Interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property (subject to certain conditions and limits) (maximum deduction : Rs. 1,00,000)
Individual
80G
Donations to certain approved funds, trusts, charitable institutions/donations for renovation or repairs of notified temples, etc. [amount of deduction is 50 per cent of net qualifying amount]. 100 per cent of qualifying donations to National Defence Fund, Prime Minister’s National Relief Fund, Prime Minister’s Armenia Earthquake Relief Fund, Africa (Public Contributions – India) Fund, National Children’s Fund, Government or approved association for promoting family planning, universities and approved educational institutions of national eminence, National Foundation for Communal Harmony, Chief Minister’s Earthquake Relief Fund (Maharashtra), Zila Saksharta Samitis, National or State Blood Transfusion Council, Fund set up by State Government to provide medical relief to the poor, Army Central Welfare Fund, Indian Naval Benevolent Fund and Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, National Illness Assistance Fund, Chief Minister’s Relief Fund or the Lt. Governor’s Relief Fund in respect of any State or Union Territory, National Sports Fund, National Cultural Fund, Fund for Technology Development and Application, Indian Olympic Association, etc., fund set up by State Government of Gujarat exclusively for providing relief to victims of earthquake in Gujarat, National Trust for Welfare of Persons with Autism, Cerebral palsy, Mental retardation and Multiple Disabilities, the Swachh Bharat Kosh and the Clean Ganga Fund and National Fund for Control of Drug Abuse (from assessment year 2016-17) [subject to certain conditions and limits]
All assessees
18AAAA,18AAAAA
80GG
Rent paid in excess of 10% of total income for furnished/unfurnished resi-dential accommodation (subject to maximum of Rs. 2,000 p.m. or 25% of total income, whichever is less) (subject to certain conditions)
Individuals not receiving any house rent allowance
11B
80GGA
Certain donations for scientific, social or statistical research or rural development programme or for carrying out an eligible project or scheme or National Urban Poverty Eradication Fund (subject to certain conditions)
All assessees not having any income chargeable under the head ‘Profits and gains of business or profession’
80GGB
Sum contributed to any political party/electoral trust
Indian company
80GGC
Sum contributed to any political party/electoral trust
All assessees, other than local authority and artificial juridical person wholly or partly funded by Government
For certain incomes
80-IA
Profits and gains from industrial undertakings engaged in infrastructure facility, telecommunication services, industrial park, development of Special Economic Zone, power undertakings, etc. (subject to certain conditions and limits)
All assessees
18BBB,18BBD, 18BBE,18C
80-IAB
Profits and gains derived by undertaking/enterprise from business of developing a Special Economic Zone notified on or after 1-4-2005 (subject to certain conditions and limits)
Assessee being Developer of SEZ
80-IB
Profits and gains from industrial undertakings, cold storage plant, hotel, scientific research & development, mineral oil concern, housing projects, cold chain facility, multiplex theatres, convention centres, ships, etc. (subject to certain conditions and limits)
All assessees
11EA,18BBB, 18BBC, 18D,18DA, 18DB, 18DC, 18DD, 18DDA
80-IC
Profits and gains derived by an undertaking or an enterprise in special category States (Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) (subject to certain limits, time limits and conditions),
All assessees
18BBB
(a)which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the specified period.
(b)which has begun or begins to manufacture or produce any article or thing specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the specified period
80-ID
Profits and gains from business of hotels and convention centres in specified areas (subject to certain conditions).
All assessees
18DE
80-IE
Deduction in respect of certain undertakings in North Eastern States.
All assessees
80JJA
Entire income from business of collecting and processing or treating of bio-degradable waste for generating power, or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas, making pellets or briquettes for fuel or organic manure (for 5 consecutive assessment years)
All assessees
80JJAA
30 per cent of additional wages paid to new regular workmen employed in the previous year for 3 assessment years including the assessment year relevant to the previous year in which such employment is provided (subject to certain conditions)
All assessees having profits and gains derived from manufacture of goods in factory
19AB
80LA
Certain incomes of Scheduled banks/banks incorporated outside India having Offshore Banking Units in a Special Economic Zone/Units of International Financial Services Centre (subject to certain conditions and limits)
Scheduled Banks/banks incorporated outside India/Units of International Financial Services Centre
19AE
80P
Specified incomes [subject to varying limits specified in sub-section (2)]
Co-operative societies
80QQB
Royalty income of author of certain specified category of books (up to Rs. 3,00,000) (subject to certain conditions)
Resident Individual – Author
19AC, 29A
80RRB
Royalty on patents up to Rs. 3,00,000 in the case of a resident individual who is a patentee and is in receipt of income by way of royalty in respect of a patent registered on or after 1-4-2003 (subject to certain conditions).
Resident individuals
19AD,29A
80TTA
Interest on deposits in savings bank accounts (up to Rs. 10,000 per year)
Individuals/HUFs
80U
Deduction of Rs. 75,000 (from assessment year 2016-17) to a resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] [including autism, cerebral palsy, and multiple disabilities as defined under National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999] [in the case of a person with severe disability, allowable deduction is Rs. 1,25,000] (from assessment year 2016-17) (subject to certain conditions).
Resident individuals
11A
Rebates
87A
Tax rebate in case of individual resident in India, whose total income does not exceed five hundred thousand rupees; quantum of rebate shall be an amount equal to hundred per cent of such income-tax or an amount of Five thousand rupees, whichever is less.
Individual

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