Chapter vi a deductions

Every assessee earning more than the basic exemption are eligible to seek deduction from Gross Total Income by way of deductions allowed for investments or payments made, under Chapter VI-A of the Income Tax Act. Chapter VI-A helps an assessee to reduce the overall tax burden to the extent of investment and expenses made within the ambit of law and fulfilemt of prescribed conditions. In this Webinar, we shall be focusing on the provisions of Chapter VI-A which are essential for Individuals, HUF and Firms for the purpose of claiming deductions against their total income.

1. Chapter VI A - Deductions while Computing Total Income - Part I CA Jugal Narendra Gala

2. Credits and Acknowledgments R Harish Kumar V Thirumal

3. Legends used in the Presentation AOP Association of Persons AY Assessment Year BOI Body of Individuals CBDT Central Board of Direct Taxes GTI Gross Total Income HUF Hindu Undivided Family IRDA Insurance Regulatory and Development Authority of India LTCG Long-term Capital Gains NBFC Non Banking Financial Companies PPF Public Provident Fund PY Previous Year RPF Recognized Provident Fund SPF Statutory Provident Fund STCG Short-term Capital Gains

4. Presentation Schema

5. Introduction In this webinar, provisions related to deductions for assesses other than companies are discussed

6. Deductions to be made in Computing Total Income – Sec 80A In computing the Gross Total Income* [GTI] of an assessee, deductions specified in Sec 80C to Sec 80U shall be allowed In any case Total Deductions under Chapter VIA shall not exceed the GTI of the Assessee i.e there can be no loss due to deductions If any deductions are allowed to an AOP/BOI, no deduction under the same Sec shall be allowed to a member in relation to their share in the AOP/BOI The profits and gains allowed as deduction under Sec 10AA or under any provision of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes" in any AY, shall not be allowed as deduction under any other provision of the Act for such AY Such deduction shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business No deduction shall be allowed if the deduction has not been claimed in the return of income The transfer price of goods and services between eligible business and other business of the assessee shall be determined at the market value of such goods or services as on the date of transfer Where a deduction has been allowed under this Chapter for a eligible business, no deduction under Sec 35AD is permissible in relation to such business for the same or any other AY *Gross total income - means the total income computed in accordance with the provisions of Income-tax Act, before making any deduction under this Chapter VI-A

7. Contd. Part C - Deductions in respect of certain incomes under Chapter VI-A Section Deduction 80-IA Deductions in respect of profits and gains from undertakings or enterprises engaged in infrastructure development/ operation/ maintenance, generation/ transmission/ distribution of power etc. 80-IAB Deduction in respect of profits and gains derived by an undertaking or enterprise engaged in development of SEZ 80-IAC Deduction in respect of profits and gains derived by an eligible start-up from an eligible business 80-IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings 80-IBA Deduction in respect of profits and gains from housing projects 80-IC Deduction in respect of profits and gains from certain undertakings or enterprises in certain special category States [Himachal Pradesh and Uttaranchal] 80-IE Deduction in respect of profits and gains from manufacture or production of eligible article or thing, substantial expansion to manufacture or produce any eligible article or thing or carrying on of eligible business in North-Eastern States

8. Contd. Section Deduction 80JJA Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste 80JJAA Deduction in respect of employment of new employees 80LA Deduction in respect of certain income of Offshore Banking Units and International Financial Services Centre 80P Deduction in respect of income of co-operative societies 80PA Deduction in respect of certain income of Producer Companies 80QQB Deduction in respect of royalty income, etc., of authors of certain books other than text books 80RRB Deduction in respect of royalty on patents

9. Deductions to be based on Income included in GTI – Sec 80AB Deduction not to be allowed unless Return Furnished – Sec 80AC Filing of return of income on or before the due date, is mandatory for availing benefit of deductions under any provision of Chapter VI-A under the heading “C. – Deductions in respect of certain incomes ” In case of failure to file return of income on or before the stipulated due date, the undertakings would lose the benefit of deduction

10. Deduction in respect of Certain Amounts Paid or Deposited – Sec 80C Eligible Assessee Individual or HUF Maximum Deduction Rs. 150000 Eligible Payments and Deposits Premium paid in respect of Life Insurance policy Premium paid in respect of a contract for deferred annuity Any sum deducted from the salary payable of a Government employee for securing a deferred annuity Contribution to SPF/PPF/RPF Contribution to approved superannuation Fund Any sum paid or deposited in Sukanya Samridhi Account Subscription to National Savings Certificates VII Contribution in Unit-linked Insurance Plan, 1971 Payment of tuition fees to any university, college, school or other educational institutions within India for full-time education for maximum 2 children Eligible Deduction Whole of the eligible amount paid or deposited Subject to the limit of 1,50,000 along with Sec 80CCC, 80CCD(1) as per Sec 80CCE

11. Contd. Eligible Payments and Deposits (contd.) ** Subscription to an issue of capital by public infrastructure co. or a public financial institution lending to infrastructure co.s approved by CBDT * Deposit scheme of public sector co. providing long term finance to housing sector and any other authority established for that purpose *** Mutual funds which are exempt under Sec 10(23D)

12. Deduction in respect of Contribution to Certain Pension Funds – Sec 80CCC Eligible Assessee Individual Maximum Deduction Rs. 150000 Deemed Income Where the balance in the fund on which deduction has been allowed is received by the assessee or his nominee due to surrender of the plan or pension is received from the annuity plan, Such receipt of the assessee/nominee shall be deemed to be their income in the PY Eligible Deduction 100% of Deposit/Payment made towards LIC or any other insurer in the approved annuity plan for receiving pension from the fund referred to in Sec 10(23AAB) (Exempt pension funds approved by IRDA) Subject to limit of 1,50,000 along with Sec 80C, 80CCD(1) as per Sec 80CCE

13. Contribution to Pension Scheme of CG – Sec 80CCD Eligible Assessee Individual Maximum Deduction Sec 80CCD(1) – Assessee’s contribution 10% of salary in case of employees 20% of GTI in case of self employed assessee Deemed Income Amount received by the assessee or his nominee from the balance in the fund on account of closure or opting out of scheme on receiving pension from the annuity plan purchased on such opting or closure shall be deemed as income in the year of receipt Eligible Deduction Contribution to Pension Scheme Specified by CG – Atal Pension Yojana & National Pension Scheme Sec 80CCD(1A) – Additional Deduction Contribution to NPS - Rs 50000 Sec 80CCD(2) - Contribution made by the Employer Govt. employees – upto 14% of salary Any other employers - 10% of salary However, receipt by nominee on death of assessee shall not be taxed Not restricted under Sec 80CCE limit Deduction claimed here cannot be claimed elsewhere Subject to limit of 1,50,000 along with Sec 80C, 80CCC as per Sec 80CCE Not restricted under Sec 80CCE limit

14. Deduction in Respect of Medical Insurance Premium – Sec 80D Eligible Assessee Individual and HUF Quantum of Deduction Individual A Insurance on the health of the assessee or his family or Any contribution made to the Central Government Health Scheme (appropriate fraction in case of multiple years) Upto 25,000 B Insurance on the health of the parent or parents of the assessee (appropriate fraction in case of multiple years) Upto 25,000 The limits are increased to 50,000 in case payment is for Senior citizens Amount upto Rs 5000 spent on preventive health check-up can be claimed subject to the above limits C Amount paid on account of medical expenditure incurred on the health of the assessee or any member of his family Upto 50,000 D Amount paid on account of medical expenditure incurred on the health of any parent of the assessee Upto 50,000 In C and D above the amount should be paid in respect of a senior citizen and no insurance premium has been paid Deduction in respect of Individual & Family (A&C) and parents (B&D) shall not exceed 50,000 each Family means the spouse and dependant children of the assessee

15. Contd. HUF A Insurance on the health of any member of HUF (appropriate fraction in case of multiple years) Upto 25,000 In case payment is in respect of senior citizen limit is enhanced to 50,000 B Medical expenditure incurred on the health of any member of HUF Upto 50,000 Payment must be in respect of a senior citizen and no insurance premium has been paid Mode of Payment The payment can be made: (1) by any mode, including cash, in respect of any sum paid on account of preventive health check-up; (2) by any mode other than cash, in all other cases

16. Deduction in Respect of Maintenance including Medical Treatment of a Dependant who is a Person with Disability – Sec 80DD Eligible assessee Individual and HUF Maximum Deduction Rs. 75,000 and in case of severe disability (having disability over 80%) Rs.1,25,000 Eligible Deduction Any amount incurred for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability, or paid or deposited under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator The scheme should provide for payment of annuity or a lump sum amount for the benefit of a dependant Declaration in Form 10IA along with income tax return   Assessee Dependant (1) Individual the spouse, children, parents, brother or sister of the individual who is wholly or mainly dependant on such individual and not claimed deduction under Sec 80U in the computation of his income (2) HUF a member of the HUF, wholly or mainly dependant on such HUF and not claimed deduction under Sec 80U in the computation of his income Dependent

17. Deduction in Respect of Medical Treatment – Sec 80DDB Eligible Assessee Individual or HUF Quantum of deduction The amount actually paid or Rs. 40,000, whichever is lower In case of senior citizen amount actually paid or Rs. 1,00,000, whichever is lower Amount of deduction shall be reduced by amount received under any insurance or as a reimbursement from employer Condition No such deduction shall be allowed unless the assessee obtains the prescription for such medical treatment from a neurologist, an oncologist, a urologist, a hematologist, an immunologist Eligible Deduction Medical expenditure incurred for eligible diseases on himself or a dependant. HUF - expenditure incurred on any of its members Expenditure medical treatment of persons suffering from autism, cerebral palsy and multiple disabilities (specified in Rule 11DD)

18. Interest on Loan taken for Higher Education – 80E Eligible Assessee Individual Conditions Loan must be taken for the purpose of higher education of himself or his relative Loan must be from any financial institution (banking co.) or any charitable institution (approved under Sec 80G or institutions under Sec 10(23C)) Deduction would be allowed for Initial AY and 7 consecutive AYs or until interest on loan is repaid in full whichever is earlier Eligible Deduction Any amount of interest on loan paid by him in the previous year out of his income chargeable to tax Relative means the spouse and children of that individual or 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 recognised school, board or university

19. Interest on Loan taken for Residential House Property – Sec 80EE Eligible Assessee Individual Conditions Value of House Property does not exceed Rs 50 lakhs Loan is sanctioned during PY 2016-17 Assessee does not own any House Property on date on sanction of loan Loan amount does not exceed Rs 35 lakhs Eligible Deduction Interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property Financial Institution Banking company or an Housing Finance Company Housing Finance Company means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes Maximum Deduction Rs 50,000 (this is over and above the 2,00,000 available under Sec 24 (IFHP)) AY17-18 onwards

20. Interest on Loan taken for Certain House Property – Sec 80EEA Eligible Assessee Individual Conditions Stamp Duty Value of House Property does not exceed Rs 45 lakhs Loan is sanctioned during PY 2019-20 Assessee does not own any House Property on date on sanction of loan Eligible Deduction Interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property Maximum Deduction Rs 1,50,000 (this is over and above the 2,00,000 available under Sec 24 (IFHP)) AY20-21 onwards Stamp Duty Value Value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property Financial Institution Banking company or an Housing Finance Company Housing Finance Company means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes Inserted by Finance Act (No.2), 2019

21. Purchase of Electric Vehicle – Sec 80EEB Eligible Assessee Individual Conditions Loan is sanctioned during the period 1/4/2019 to 31/3/2023 Eligible Deduction Interest payable on loan taken by him from any financial institution for the purpose of purchase of an electric vehicle Financial Institution Banking company or any bank or banking institution and includes deposit-taking NBFCs or a systematically important non-deposit taking NBFC governed by the Banking Regulation Act 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 Maximum Deduction Rs 1,50,000 AY20-21 onwards Inserted by Finance Act (No.2), 2019

22. Deduction in respect of donations to certain funds, charitable institutions etc. - Sec 80G Eligible Assessee Any Assessee Eligible Deduction Payment of any sum as donation to eligible funds or institutions Categories of Eligible Donations Donation qualifying for 100% deduction, without any qualifying limit Donation qualifying for 50% deduction, without any qualifying limit Donation qualifying for 100% deduction, subject to qualifying limit Donation qualifying for 50% deduction, subject to qualifying limit Qualifying limit Payment of any sum as donation to eligible funds or institutions Deduction under the categories subject to Qualifying limit aggregated should be limited to 10% of the Adjusted Total Income Adjusted Total Income GTI of the assessee as reduced by Deductions (other than 80G), STCG, LTCG and exempt income and incomes taxable at special rates for non-residents Quantum of Deduction Other conditions Donations in kind and in cash exceeding Rs 2000 shall not be allowed Deductions claimed here cannot be claimed elsewhere

23. Eligible Donations Donation qualifying for 100% deduction, without any qualifying limit The National Defence Fund set up by the Central Government Prime Minister’s National Relief Fund. Prime Minister’s Armenia Earthquake Relief Fund The Africa (Public Contributions-India) Fund The National Children’s Fund The National Foundation for Communal Harmony Approved University or educational institution of national eminence Chief Minister’s Earthquake Relief Fund, Maharashtra Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the Gujarat earthquake Any Zila Saksharta Samiti for primary education in villages and towns and for literacy and post-literacy activities National Blood Transfusion Council or any State Blood Transfusion Council whose sole objective is the control, supervision, regulation or encouragement of operation and requirements of blood banks Any State Government Fund set up to provide medical relief to the poor The Army Central Welfare Fund or Indian Naval Benevolent Fund or Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of past and present members of such forces or their dependants.

24. Eligible Donations Donation qualifying for 100% deduction, without any qualifying limit The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996 The National Illness Assistance Fund The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund in respect of any State or Union Territory The National Sports Fund set up by the Central Government The National Cultural Fund set up by the Central Government The Fund for Technology Development and Application set up by the Central Government National Trust for welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities The Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of CSR The Clean Ganga Fund, set up by the Central Government, where such assessee is a resident, other than the sum spent in pursuance of CSR The National Fund for Control of Drug Abuse constituted under Sec 7A of the Narcotic Drugs and Psychotroic Substances Act, 1985 Donation qualifying for 50% deduction, without any qualifying limit The Jawaharlal Nehru Memorial Fund Prime Minister’s Drought Relief Fund Indira Gandhi Memorial Trust Rajiv Gandhi Foundation

25. Eligible Donations Donation qualifying for 100% deduction, subject to qualifying limit The Government or to any such local authority, institution or association as may be approved for promotion of family planning Sum paid by a company as donation to the Indian Olympic Association or any other association/institution established in India, as may be notified by the Government established – for the development of infrastructure for sports or games, or the sponsorship of sports and games in India Donation qualifying for 50% deduction, subject to qualifying limit Any Institution or Fund established in India for charitable purposes approved under Sec 80G(5). The Government or any local authority for utilisation for any charitable purpose other than the purpose of promoting family planning. An authority constituted in India by or under any other law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or of planning, development or improvement of cities, towns and villages, or both. Any Corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community as referred in Sec 10(26BB). for renovation or repair of any such temple, mosque, gurdwara, church or other place as notified by the Central Government to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States.

26. Deduction in respect of Rent Paid – Sec 80GG Eligible Assessee A person who is not in receipt of House Rent Allowance and who pays rent for accommodation occupied by him for residential purposes Quantum of deduction The deduction admissible will be the least of the following: (1) Actual rent paid minus 10% of the total income of the assessee before allowing the deduction, or (2) 25% of such total income (arrived at after making all deductions under Chapter VI A but before making any deduction under this Sec), or (3) Amount calculated at Rs 5,000 p.m Conditions The expenditure incurred by him on rent of any furnished or unfurnished accommodation should exceed 10% of his total income arrived at after all deductions under Chapter VI-A except Sec 80GG. The accommodation should be occupied by the assessee for the purposes of his own residence The assessee or his spouse or his minor child or a HUF of which he is a member should not own any accommodation at the place where he ordinarily resides or perform duties of his office or employment or carries on his business or profession Declaration in Form 10BA along with income tax return

27. Deduction in Respect of Donations for Scientific Research and Rural Development – Sec 80GGA Eligible Assessee Any assessee not having income chargeable under the head “Profits and gains of business or profession” Eligible Deduction To a research association which has, as its object, the undertaking of scientific research or to a University, college or other institution to be used for scientific research Any sum paid to a Research Association which has as its object the undertaking of research in social science or statistical research , University, College or other institution to be used for research in social science or statistical research Any sum paid 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 Any sum paid by the assessee in the previous year to National Urban Poverty Eradication Fund Restrictions on deduction Where Deduction is claimed and allowed under this Sec, deduction cannot be claimed elsewhere Deduction over and above Rs. 10000 in the form of cash shall not be allowed

28. Deduction in Respect of Contributions given by any Person to Political Parties – Sec 80GGC Eligible Assessee Any sum contributed in the PY by any person to a political party or an electoral trust Ineligibility This deduction will, not be available to a local authority and an artificial juridical person, wholly or partly funded by the Government No deduction shall be allowed in respect of any sum contributed by way of cash Political party It means a political party registered under Representation of the People Act, 1951 Electoral Trust A non-profit company created in India for orderly receipt of the voluntary contributions from any person and for distributing the same to the respective political parties Deduction in respect of income of co-operative societies - Sec 80P has already been discussed in webinar for Assessment of Co-operative Society

29. Deduction in Respect of Royalty Income, etc., of Authors of Certain Books other than Text Books – Sec 80QQB Eligible assessee Individual Quantum of deduction Income derived as author or Rs. 3,00,000 whichever is less Eligible income Income may be received either by way of a lumpsum consideration for the assignment or grant of any of his interests in the copyright of any book Such book should be a work of literary, artistic or scientific nature, or of royalties or copyright fees Deduction shall not be allowed - Royalty income received from brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, textbook for schools, tracts and other publications of similar nature The amount of eligible income (royalty or copyright fee received otherwise than by way of lumpsum) before allowing expenses to such income, shall not exceed 15% of the value of the books sold during the relevant PY Manner of Computation Conditions Furnishing of certificate in form 10CCD Where the assessee earns any income from any source outside India, he should bring such income into India in convertible foreign exchange within a period of six months from the end of the PY

30. Deduction in Respect of Royalty on Patents – Sec 80RRB Eligible Assessee Resident individual who is registered as the true and first inventor in respect of an invention under the Patents Act, 1970 Quantum of deduction Rs. 3,00,000 Eligible income This deduction shall be restricted to the royalty income including consideration for transfer of rights in the patent or for providing information for working or use of a patent, use of a patent or the rendering of any services in connection with these activities Conditions Any such income which is earned from sources outside India, the deduction shall be restricted to such sum as is brought to India in convertible foreign exchange within a period of 6 months or extended period as is allowed by the RBI Furnish a certificate in form 10CCE Revocation of Patent Where the patent is subsequently revoked - deduction allowed during the period shall be deemed to have been wrongly allowed – recomputing the total income of the assessee for the relevant PY The period of 4 years available for rectification shall be reckoned from the end of the PY in which the order of the revocation of the patent is passed Royalty In respect of a patent, means consideration for the transfer of all or any rights, the imparting of any information concerning the working of, or the use of, a patent, the use of any patent,

31. Interest on Deposits in Savings Account – Sec 80TTA Eligible Assessee Individual or HUF (other than Senior Citizens covered under Sec 80TTB) Other Provisions Where such income is derived from a deposit held on behalf to a Firm/AOP/BOI, no deduction shall be allowed to any partner or member Eligible Deduction Income by way of interest on deposits (not being time deposits) in a savings account with: Banking Company including any bank or banking institution under Banking Regulation Act, 1949 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) A Post Office Maximum Deduction Aggregate of all such incomes subject to maximum of Rs 10,000

32. Interest on Deposits in Case of Senior Citizens – Sec 80TTB Eligible Assessee Senior Citizens Other Provisions Where such income is derived from a deposit held on behalf to a Firm/AOP/BOI, no deduction shall be allowed to any partner or member Eligible Deduction Any income by way of interest on deposits with: Banking Company including any bank or banking institution under Banking Regulation Act, 1949 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) A Post Office Maximum Deduction Aggregate of all such incomes subject to maximum of Rs 50,000

33. Deduction in the Case of a Person with Disability – Sec 80U Eligible assessee Resident individual, who, at any time during the PY, is certified by the medical authority to be a person with disability Quantum of deduction A deduction of Rs. 75,000 in respect of person with disability Rs. 1,25,000 in case of severe disability (having disability over 80%) Conditions The assessee shall furnish a copy of the certificate issued by the medical authority in the form 10IA 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

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