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Deductions in respect of certain Payments

INTRODUCTION

The Aggregate income from all the heads of income is known as Gross Total Income.

In Computing the Total Taxable Income on an assessee, certain deductions under sections 80C to 80U are allowed from his Gross Total Income. It means , firstly, that the income of the assessee shall be calculated under 5 specific Heads of  income and incomes from all heads are put together and then from this total, certain deductions are made and after making deductions whatever remains shall be the total income or total taxable income.

The following essential rules have to be kept in mind while calculating deductions under sec. 80C to 80U. :

1.         The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee.

2.         No such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date

These Deductions are divided into 3 categories :

    1. Deductions in respect of certain PAYMENTS.
    2. Deductions in respect of certain INCOMES.
    3. Other Deductions.

8.1.      DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS :

8.1.1.   Deduction In Respect Of Life Insurance Premia, Deferred Annuity, Contributions To Provident Fund, Subscription To Certain Equity Shares Or Debentures, Etc. [SEC. 80 C ]

In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted the whole of the amount paid or deposited in the previous year, being the aggregate of the sums as does not exceed one lakh rupees (Rs. 1,00,000 ).

However, amount of deduction u/s 80C is…

-          Gross Qualifying Amount or

-          Rs. 1,00,000

whichever is LESS.

8.1.2.   Deduction In Respect Of Contribution To Certain Pension  Funds. [Sec. 80 CCC]

1. Where an assessee paid or deposited any amount out of his income chargeable to tax for any annuity plan of Life Insurance Corporation of India or any other Insurance Company for receiving pension from the fund, he shall be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of (Rs. 1,00,000) one lakh rupees in the previous year.

2. Where any amount received by the assessee or his nominee—

(a)  on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or

(b)  as pension received from the annuity plan,

the whole of the amount shall be the income of the assessee or his nominee in that previous year in which such withdrawal is made shall be chargeable to tax as income of that previous year.

8.1.3.   Deduction In Respect Of Contribution To Pension Scheme Of Central Government Or Any Other Employers [ Sec. 80 CCD ]

(1)    Where an assessee on or after the 1st day of January, 2004, has in the previous year paid or deposited any amount in his account under a pension scheme notified by the Central Government, he shall be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed ten per cent ( 10%)  of his salary in the previous year.

(2)    If  the Central Government or any other employer makes any contribution to his account the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government  or any other employer  as does not exceed ten per cent (10%) of his salary in the previous year.

(3)  Where any amount standing to the credit of the assessee in his account , in respect of which a deduction has been allowed in whole or in part, in any previous year,—

(a)  on account of closure or his opting out of the pension scheme; or

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

the whole of the amount shall be deemed to be the income of the assessee or his nominee, and shall accordingly be charged to tax as income of that previous year.

8.1.4.   Deduction In Respect Of Health Or Medical  Insurance Premia [ Sec. 80 D ]

Medical Pocity should taken on the health of the following persons :---

Tax Payer

Insured Person

8 Individual

On the health of the taxpayer, spouse, patents or dependent children of the taxpayer

8 Hindu Undivided Family (HUF)

On the health of any member of the family

Amount of Deduction from the Assessment Year 2009-10 is as follows :---

 

Individual

HUF

 

Taxpayer, Spouse, and Dependant Children

Parents of the Taxpayer whether dependent or not

Any member of family

Maximum amount deductible

Rs. 15,000

Rs. 15000

Rs. 15000

Additional amount which is deductible when policy is taken on the health of a senior citizen

Rs. 20,000

Rs. 20,000

Rs. 20,000

Note : Upto Rs. 5000/- incurred for preventive check-ups can be claimed within overall limit of Rs. 15,000/- or 20,000/- u/s 80D

8.1.5.   Deduction In Respect Of Maintenance Including Medical Treatment Of A Dependant Who Is A Person With Disability [ Sec. 80 DD ]

(1)        Where an assessee, being an individual or a Hindu undivided family, who is a resident in India, has, during the previous year,-

(a)        incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

(b)        paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability.

the assessee shall be allowed a deduction of a sum of fifty thousand rupees (Rs.50,000) from his gross total income in respect of the previous year:

Rs.1,00,000 where such dependant is a person with severe disability exceeding 80%

8.1.6.   Deduction In Respect Of Medical Treatment, Etc. [ Sec. 80 DDB ]

Where an assessee who is resident in India has, during the previous year, actually paid any amount  for the medical treatment of such disease or ailment

(a) for himself or a dependant, in case the assessee is an individual: or

(b) for any member of a Hindu undivided family (HUF) , in case the assessee is a Hindu undivided family (HUF),
the assessee shall be allowed a deduction of the amount actually  paid or a sum of forty thousand rupees (Rs.40,000), [ Rs. 60,000 for Senior Citizen]

whichever is less

Provided that no such deduction shall be allowed unless the assessee furnishes with the return of income        


8.1.7.   Deduction In Respect Of Interest Of Loan Taken For Higher Education  [Sec. 80 E ]

Any amount paid in the previous year, out of  the income chargeable to tax, by way of  interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education shall be allowed in computing the total income

    1. in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or

    2. until the interest  is paid by the assessee in full, whichever is earlier.

8.1.8.   Deduction In Respect Of Donations To Certain Funds, Charitable Institutions, Etc. [ Sec. 80 G ]

The Claim in respect of such Donation to the Prime Minister’s National Relief Fund, the Chief Minister’s Relief Fund, or the Lieutenant Governor’s Relief Fund will be admissible u/s 80G of the Income Tax Act,1961 on the basis of the certificate issued by the Drawing and Disbursing Officer (DDO) / Employer in this behalf.

Amount of Deduction : 50% of Donation. Income some cases Donation is restricted to 10% of Gross Totoal Income. 100% in some cases like National Defence Fund.

Applicable to All Assessee.

Deduction is allowed only if made in Cheque / Draft.

8.1.9.   Deductions In Respect Of Rents Paid. [ Sec. 80 GG ]

In computing the total income of an assessee, there shall be deducted any expenditure incurred by him in excess of –

-     10% of his total income towards payment of rent in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence,

-     to the extent to which such excess expenditure does not exceed two thousand rupees ( Rs. 2000 ) per month or twenty-five percent ( 25%). of his total income for the year, whichever is less.

[ No Exemption is allowed to those who are in receipt of HRA & Claiming Deduction U/s 10(13A) ]

 

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