CHAPTER 1

INTRODUCTION

Concept Of Deductions
Income tax Act allows for certain deductions from the gross annual income. Gross Total Income
means the aggregate of income calculated under the various heads after giving effect to
provisions as to clubbing of income and set off of losses. These deductions however are not
permissible from the following under mentioned incomes although these incomes form a part of
Gross Total Income. These incomes are:a. Long term Capital Gains
b. Short Term capital gain on transfer of equity shares and units of equity oriented fund through a
recognized 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, II5AC , 115ACA , 115AD , 115BBA and 115D

The deductions basically are of two kinds:Deductions as to certain payments and investments, enumerated under sections 80C -80GGC.
Deductions as to certain incomes already included under gross total income under sections 811A- 80U.

Income arrived at after claiming these deductions is called as Total income or Taxable income.
The total income thus arrived at should be round off to nearest `10.

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 covered under section 111A.

(c)

Winnings of lotteries, races, etc.

(d)

Incomes of a Non resident taxable at special rates.

In computing the total income of an assessee, deductions specified under sections 80C to 80U
will be allowed from his Gross Total Income {Sec. 80B(5)} in accordance with and subject to the
provisions of this Chapter. However, the aggregate amount of deductions under this chapter shall
not, in any case, exceed the gross total income of the assessee.
Where in computing the total income of an assessee, any deduction admissible under section 80IA or 80-IAB or section 80-IB or section 80-IC or Section 80-ID or section 80-IE 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 sub-section (1) of section 139 (section 80AC)

Basic rule while application of section 80A, 80AB, 80 AC

1. Deductions cannot exceed Gross Total Income.
2. Deduction not allowed to members if allowed to AOP/BOI.

3. Deduction should be claimed by assessee.

4. Assessee's duty to place relevant material.
5. Deduction to be allowed in respect of net income included in Gross Total Income.
6. Benefits of certain deductions not to be allowed in some cases where return is not filed within
the specified time limit.

DEDUCTION UNDER SECTION 80C

1. Deduction in respect of Life Insurance Premium, deferred annuity,
contributions to provident fund, subscription to certain equity shares
or debentures, etc. [Section 80C]

[Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund,
subscription to certain equity shares or debentures, etc.
9980C. 1(1) In computing the total income of an assessee, being an individual or a Hindu
undivided family, there shall be deducted, in accordance with and subject to the provisions of
this section, the whole of the amount paid or deposited in the previous year, being the aggregate
of the sums referred to in sub-section (2), as does not exceed 1a[one lakh rupees].
(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous
year by the assessee
(i) to effect or to keep in force an insurance on the life of persons specified in sub-section (4);
(ii) to effect or to keep in force a contract for a deferred annuity, not being an annuity plan
referred to in clause (xii), on the life of persons specified in sub-section (4):

Provided that such contract does not contain a provision for the exercise by the insured of an
option to receive a cash payment in lieu of the payment of the annuity;
(iii) by way of deduction from the salary payable by or on behalf of the Government to any
individual being a sum deducted in accordance with the conditions of his service, for the purpose
of securing to him a deferred annuity or making provision for his spouse or children, in so far as
the sum so deducted does not exceed one-fifth of the salary;
(iv) as a contribution by an individual to any provident fund to which the Provident Funds Act,
1925 (19 of 1925) applies;
(v) as a contribution to any provident fund set up by the Central Government and notified2 by it
in this behalf in the Official Gazette, where such contribution is to an account standing in the
name of any person specified in sub-section (4);
(vi) as a contribution by an employee to a recognised provident fund;
(vii) as a contribution by an employee to an approved superannuation fund;
(viii) as subscription 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;
(ix) as subscription to any such savings certificate as defined in clause (c) of section 23 of the
Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by
notification4 in the Official Gazette, specify in this behalf;
(x) as a contribution, in the name of any person specified in sub-section (4), for participation in
the Unit-linked Insurance Plan, 1971 (hereafter in this section referred to as the Unit-linked
Insurance Plan) specified in Schedule II of the Unit Trust of India (Transfer of Undertaking and
Repeal) Act, 2002 (58 of 2002);
(xi) as a contribution in the name of any person specified in sub-section (4) for participation in
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any such unit-linked insurance plan of the LIC Mutual Fund 5[referred to in] clause (23D) of
section 10, as the Central Government may, by notification6 in the Official Gazette, specify in
this behalf;
(xii) to effect or to keep in force a contract for such annuity plan of the Life Insurance
Corporation or any other insurer as the Central Government may, by notification7 in the Official
Gazette, specify;
(xiii) as subscription to any units of any Mutual Fund 8[referred to in] clause (23D) of section 10
or from the Administrator or the specified company under any plan formulated in accordance
with such scheme as the Central Government may, by notification9 in the Official Gazette,
specify in this behalf;
(xiv) as a contribution by an individual to any pension fund set up by any Mutual Fund
10[referred to in] clause (23D) of section 10 or by the Administrator or the specified company, as
the Central Government may, by notification11 in the Official Gazette, specify in this behalf;
(xv) as subscription to any such deposit scheme of, or as a contribution to any such pension fund
set up by, the National Housing Bank established under section 3 of the National Housing Bank
Act, 1987 (53 of 1987) (hereafter in this section referred to as the National Housing Bank), as the
Central Government may, by notification in the Official Gazette, specify12 in this behalf;
(xvi) as subscription to any such 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,
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as the Central Government may, by notification13 in the Official Gazette, specify in this behalf;
(xvii) as tuition fees (excluding any payment towards any development fees or donation or
payment of similar nature), whether at the time of admission or thereafter,
(a) to any university, college, school or other educational institution situated within India;
(b) for the purpose of full-time education of any of the persons specified in sub-section (4);
(xviii) for the purposes of purchase or construction of a residential house property the income
from which is chargeable to tax under the head Income from house property (or which would,
if it had not been used for the assessees own residence, have been chargeable to tax under that
head), where such payments are made towards or by way of
(a) any instalment or part payment of the amount due under any self-financing or other scheme
of any development authority, housing board or other authority engaged in the construction and
sale of house property on ownership basis; or
(b) any instalment or part payment of the amount due to any company or co-operative society of
which the assessee is a shareholder or member towards the cost of the house property allotted to
him; or
(c) repayment of the amount borrowed by the assessee from
(1) the Central Government or any State Government, or
(2) any bank, including a co-operative bank, or
(3) the Life Insurance Corporation, or
(4) the National Housing Bank, or
(5) any public company formed and 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
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residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of
section 36, or
(6) any company in which the public are substantially interested or any co-operative society,
where such company or co-operative society is engaged in the business of financing the
construction of houses, or
(7) the assessees employer where such employer is an authority or a board or a corporation or
any other body established or constituted under a Central or State Act, or
(8) the assessees employer where such employer is a public company or a public sector
company or a university established by law or a college affiliated to such university or a local
authority or a co-operative society; or
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house
property to the assessee,
but shall not include any payment towards or by way of
(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a
member of a co-operative society has to pay for becoming such shareholder or member; or
(B) the cost of any addition or alteration to, or renovation or repair of, the house property which
is carried out after the issue of the completion certificate in respect of the house property by the
authority competent to issue such certificate or after the house property or any part thereof has
either been occupied by the assessee or any other person on his behalf or been let out; or
(C) any expenditure in respect of which deduction is allowable under the provisions of section
24;
(xix) as subscription to equity shares or debentures forming part of any eligible issue of capital
approved by the Board on an application made by a public company or as subscription to any
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eligible issue of capital by any public financial institution in the prescribed form14.
Explanation.For the purposes of this clause,
(i) eligible issue of capital means an issue made by a public company formed and registered in
India or a public financial institution and the entire proceeds of the issue are utilised wholly and
exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA;
(ii) public company shall have the meaning assigned to it in section 315 of the Companies Act,
1956 (1 of 1956);
(iii) public financial institution shall have the meaning assigned to it in section 4A16 of the
Companies Act, 1956 (1 of 1956);
(xx) as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and
approved by the Board on an application made by such mutual fund in the prescribed form17:
Provided that this clause shall apply if the amount of subscription to such units is subscribed only
in the eligible issue of capital of any company.
Explanation.For the purposes of this clause eligible issue of capital means an issue referred
to in clause (i) of the Explanation to clause (xix) of sub-section (2);
18[(xxi) as term deposit
(a) for a fixed period of not less than five years with a scheduled bank; and
(b) which is in accordance with a scheme19 framed and notified, by the Central Government, in
the Official Gazette for the purposes of this clause.
Explanation.For the purposes of this clause, scheduled bank means the State Bank of India
constituted under the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank as defined
in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new
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bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included
in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);]
20[(xxii) as subscription to such bonds issued by the National Bank for Agriculture and Rural
Development, as the Central Government may, by notification in the Official Gazette21, specify
in this behalf;]
22[(xxiii) in an account under the Senior Citizens Savings Scheme Rules, 200423;
(xxiv) as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.]
(3) The provisions of sub-section (2) shall apply only to so much of any premium or other
payment made on an 24[insurance policy, other than a contract for a deferred annuity, issued on
or before the 31st day of March, 2012,] as is not in excess of twenty per cent of the actual capital
sum assured.
Explanation.In calculating any such actual capital sum assured, no account shall be taken
(i) of the value of any premiums agreed to be returned, or
(ii) 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.
25[(3A) The provisions of sub-section (2) shall apply only to so much of any premium or other
payment made on an insurance policy, other than a contract for a deferred annuity, issued on or
after the 1st day of April, 2012 as is not in excess of ten per cent of the actual capital sum assured
:
26[Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance
on life of any person, who is
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(a) a person with disability or a person with severe disability as referred to in section 80U, or
(b) suffering from disease or ailment as specified in the rules made under section 80DDB,
the provisions of this sub-section shall have effect as if for the words ten per cent, the words
fifteen per cent had been substituted.]
Explanation.For the purposes of this sub-section, 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) The persons referred to in sub-section (2) shall be the following, namely:
(a) for the purposes of clauses (i), (v), (x) and (xi) of that sub-section,
(i) in the case of an individual, the individual, the wife or husband and any child of such
individual, and
(ii) in the case of a Hindu undivided family, any member thereof;
(b) for the purposes of clause (ii) of that sub-section, in the case of an individual, the individual,
the wife or husband and any child of such individual;
(c) for the purposes of clause (xvii) of that sub-section, in the case of an individual, any two
children of such individual.
(5) Where, in any previous year, an assessee
(i) terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to
that effect or where the contract ceases to be in force by reason of failure to pay any premium, by
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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 referred to in clause (x) or
clause (xi) of sub-section (2), 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 referred to in clause (xviii) of sub-section (2) 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 under sub-section (1) with reference to any of
the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), 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.
(6) If any equity shares or debentures, with reference to the cost of which a deduction is allowed
under sub-section (1), 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
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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.
Explanation.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.
27[(6A) If any amount, including interest accrued thereon, is withdrawn by the assessee from his
account referred to in clause (xxiii) or clause (xxiv) of sub-section (2), 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:
Provided that the amount liable to tax shall not include the following amounts, namely:
(i) any amount of interest, relating to deposits referred to in clause (xxiii) or clause (xxiv) of subsection (2), 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.]
(7) For the purposes of this section,
(a) the insurance, deferred annuity, provident fund and superannuation fund referred to in clauses
(i) to (vii);
(b) unit-linked insurance plan and annuity plan referred to in clauses (xii) to (xiiia);
(c) pension fund and subscription to deposit scheme referred to in clauses (xiiic) to (xiva);
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(d) amount borrowed for purchase or construction of a residential house referred to in clause
(xv),
of sub-section (2) of section 88 shall be eligible for deduction under the corresponding
provisions of this section and the deduction shall be allowed in accordance with the provisions of
this section.
(8) In this section,
(i) Administrator 28 means the Administrator as referred to in clause (a) of section 2 of the
Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(ii) contribution to any fund shall not include any sums in repayment of loan;
(iii) insurance shall include
(a) a policy of insurance on the life of an individual or the spouse or the child of such individual
or a member of a Hindu undivided family securing the payment of specified sum on the
stipulated date of maturity, if such person is alive on such date notwithstanding that the policy of
insurance provides only for the return of premiums paid (with or without any interest thereon) in
the event of such person dying before the said stipulated date;
(b) a policy of insurance effected by an individual or a member of a Hindu undivided family for
the benefit of a minor with the object of enabling the minor, after he has attained majority to
secure insurance on his own life by adopting the policy and on his being alive on a date (after
such adoption) specified in the policy in this behalf;
(iv) Life Insurance Corporation means the Life Insurance Corporation of India established
under the Life Insurance Corporation Act, 1956 (31 of 1956);
(v) public company shall have the same meaning as in section 329 of the Companies Act, 1956
(1 of 1956);
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(vi) security means a Government security as defined in clause (2) of section 230 of the Public
Debt Act, 1944 (18 of 1944);
(vii) specified company means a company as referred to in clause (h) of section 231 of the
Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(viii) transfer shall be deemed to include also the transactions referred to in clause (f) of
section 269UA.

DEDUCTION UNDER SECTION 80CCC

2. Deduction in respect of contribution to certain pension funds
[Section 80CCC]

Deduction in respect of contribution to certain pension funds. As per section 80CCC, where an
assessee being an individual has in the previous year paid or deposited any amount out of his
income chargeable to tax 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 referred
to in clause (23AAB) of section 10, he shall, in accordance with, and subject to the provisions of
this section, 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 assessees
account, if any) as does not exceed the amount of one lakh rupees in the previous year. Where
any amount paid or deposited by the assessee has been taken into account for the purposes of this
section, a rebate/ deduction with reference to such amount shall not be allowed under section 88
up to assessment year 2005-06 and under section 80C from assessment year 2006-07 onwards.

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Limit- Deduction shall exclude interest or bonus accrued or credited to the employees account,
if any and shall not exceed Rs. 1 lakh and The aggregate amount of deduction under sections
80C, 80CCC and sub section (1) of Section 80CCD shall not exceed Rs.1,50,000/- (Section
80CCE). Please note that Limit of deduction Under section 80CCC is enhanced to Rs. 1.50 from
One Lakh with effect from assessment year 2016-17 and for subsequent assessment years. Limit
of deduction under 80CCC raised to Rs. 1.50 Lakh

DEDUCTION UNDER SECTION 80CCD

3. Deduction in respect of contribution to pension scheme of

Central Government.

PensionSection 80CCD(1) allows an employee, being an individual employed by the Central

Government or by any other employer on or after 01.01.2004, or any other assessee being an
individual, a deduction of an amount paid or deposited out of his income chargeable to tax under
a pension scheme as notified vide Notification No. F.N. 5/7/2003- ECB&PR dated 22.12.2003
(National Pension System NPS) or as may be notified by the Central Government. However,
the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness
Allowance but excludes all other allowance and perquisites). The deduction under section
80CCD(1) shall not exceed Rs. 1,00,000/-.
As per Section 80CCD(2), where any contribution in the said pension scheme is made by the
Central Government or any other employer then the employee shall be allowed a deduction from
his total income of the whole amount contributed by the Central Government or any other
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employer subject to limit of 10% of his salary of the previous year.

If any amount is standing to the credit of the employee in the pension scheme referred above and
deduction has been allowed as stated above, and the employee or his nominee receives this
amount together with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and taken on such closure or opting out
then the amount so received during the FYs shall be the income of the employee or his nominee
for that Financial Year and accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been taken into account for the
purposes of this section, a deduction with reference to such amount shall not be allowed under
section 80C.
Further it has been specified that w.e.f 01.04.09 that any amount received by the employee from
the new pension scheme shall be deemed not to have received in the previous year if such
amount is used for purchasing an annuity plan in the same previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections
80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. However, the deduction
under Section 80CCD(1)shall not exceed Rs.1,00000 but contribution made by the Central
Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from
the limit of Rs.1,00,000/- provided under this Section.
Budget 2015 Proposes Additional deduction of Up to Rs. 50000/- Under Section 80CCD for
National Pension System contribution
The existing provisions contained in sub-section (1) of section 80CCD, inter alia, provides that in
the case of an individual, employed by the Central Government on or after 1st January, 2004, or
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being an individual employed by any other employer or any other assessee being an individual
who has in the previous year paid or deposited any amount in his account under a pension
scheme notified or as may be notified by the Central Government, a deduction of such amount
not exceeding ten per cent. of his salary is allowed.
It is proposed to omit sub-section (1A) and insert a new sub-section (1B) so as to provide that an
assessee referred to in subsection (1), shall, be allowed an additional deduction in computation
of his total income, of the whole of the amount paid or deposited in the previous year in his
account under a pension scheme notified or as may be notified by the Central Government,
which shall not exceed fifty thousand rupees. It is also propose to provide that no deduction
under this sub-section shall be allowed in respect of the amount on whcih deduction has been
claimed and allowed under sub-section (1).
Consequential amendments have been proposed in sub-section (3) and sub-section (4) of section
80CCD.

DEDUCTION UNDER SECTION 80D

4. Deduction in respect of Medical Insurance premium
[Section 80D]

Persons Covered

An individual or HUF

Essential conditions
It is allowed in respect of any sum paid in the previous year to GIC or any other insurer, towards
medical insurance premium on the health of the following:
(a) in the case of an individual;
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(i) his own health;

(ii) the health of the spouse;
(iii)

the health of parents; ( whether dependent or not)

(iv) the health of dependant children of the assessee.

(b)in the case of an HUF

any member of the family.

Such 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 IRDA.
The payment should be made by him by any mode of payment other than cash.
Quantum of deduction:
In case of an individual
(a)for himself or his spouse and dependent children

Rs. 15,000

(b)for parent or parents (whether dependent or not)

Rs. 15,000.

In case of a Hindu undivided family

Rs. 15,000.

Additional deduction of Rs. 5,000 is allowable in case of a senior citizen.

DEDUCTION UNDER SECTION 80DD

5.Deduction in respect of maintenance including medical treatment of a
dependant who is a person with disability
[Section 80DD]

Persons Covered

an individual or a HUF who is resident in India

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Essential conditions
Deduction is available if the assessee 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 any scheme framed by the LIC or any other insurer or UTI
and which is approved by the CBDT.
The assessee shall furnish a copy of the certificate issued by the medical autt hority in the prescribed
form and manner, along with the return of income under section 139
Quantum of deduction:
Rs. 50,000 irrespective of actual expenditure incurred/amount deposited or Rs. 1,00,000 where
such dependant is a person with severe disability.

DEDUCTION UNDER SECTION 80DDB

6.Deduction in respect of medical treatment, etc.
[Section 80DDB]

Persons Covered

an individual or a HUF who is resident in India

Essential conditions
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

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In the case of HUF

for any member of the HUF

The assessee should furnish a certificate in the prescribed form from a specialist doctor working
in a Government hospital.
Quantum of deduction:
Amount actually paid or Rs. 40,000 (Rs. 60,000 in case if senior citizen) whichever is less.
If any amount is received under insurance from the insurer or reimbursed by an employer for the
medical treatment of the person, the amount so received shall be reduced from the deduction
allowable under this section.
Case law
In case of Snehlata C. Chandrakant chalishazar v Thanvi held that the requirement is only of
working in government hospital. It does not require employment in government hospital on
regular basis. A surgeon rendering honorary services at the government hospital is as such
surgeon working in government hospital

DEDUCTION UNDER SECTION 80E

7. Deduction for interest paid on loan taken for pursuing higher education
[Section 80E]

Persons Covered

Individual assessee who must have taken a loan from:

(a)

any financial institution, or

(b)

any approved charitable institution.

Essential conditions
The loan must have been taken for pursuing higher education. Such education must be of
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assessee himself or any of his relatives. Relative means the spouse and children of that
individual or the student for whom the individual is the legal guardian.
The deduction shall be allowed only in respect of any sum paid by him, in the previous year by
way of interest on such loan.
Such amount should be paid out of his income chargeable to tax.
Quantum of deduction:
The amount paid during previous year towards interest.
Meaning of higher education: 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.

DEDUCTION UNDER SECTION 80G

8.Deduction in respect of donations to certain funds, charitable institutions,
etc.
[Section 80G]
Persons Covered

All assesses

Essential conditions
- The donation should be of a sum of money. Donations in kind do not qualify for deduction.
-

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

The properproofofpaymentistobefurnishedalongwithreturnofincome.

(A) Donations made to following are eligible for 100% deduction without any qualifying
limit:
(i) National Defence Fund set up by the Central Government.
(ii) Prime Minister's National Relief Fund;
(iii) Prime Minister's Armenia Earthquake Relief Fund;
21

(iv) Africa (Public Contributions India) Fund;

(v) National Foundation for Communal Harmony;
(vi) University/Educational Institution of National Eminence approved by the prescribed
authority;
(vi) Zila Saksharta Samiti constituted in any district;
(vii) The National Blood Transfusion Council or any State Blood Transfusion Council;
(viii) Any fund set up by a State Government to provide medical relief to the poor;
(ix) The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force
Central Welfare Fund;
(x) National Illness Assistance Fund;
(xi) 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;
(xii) National Sports Fund set up by the Central Government;
(xiii) National Cultural Fund set up by the Central Government;
(xiv) Fund for Technology Development and Application, set up by the Central Government;
(xv) National Trust for Welfare of persons with Multiple Disabilities;
(B) Donations made to the following are eligible for 50% deduction without any qualifying
limit:
(i)

Jawaharlal Nehru Memorial Fund;

(ii) Prime Minister's Drought Relief Fund;

(iii) National Children's Fund;
(iv) Indira Gandhi Memorial Trust;
(v) Rajiv Gandhi Foundation.
(C) Donations to the following are eligible for 100% deduction subject to qualifying limit:
(i) Donation to Government or any approved local authority, institution or association to be
utilised for promoting family planning.
(ii) any sums paid by a company as donations to Indian Olympic Association or to any other
notified association or institution for
(a) the development of infrastructure for sports and games; or
22

(b) the sponsorship of sports and games, in India.

(D) Donations to the following are eligible for 50% deduction subject to qualifying limit:
(i) Donation to Government or any approved local authority, institution or association to be
utilised for any charitable purpose other than promoting family planning.
(ii) Any other fund or institution which satisfies the conditions of section 80G(5).
(iii) 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.
(iv) To any corporation established by the Central or any State Government for promoting
interests of the members of a minority community.
(v) 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.
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.

DEDUCTION UNDER SECTION 80GG

9.Deductions in respect of rent paid
[Section 80GG]

Persons Covered

an individual who is
-

either a self-employed person or

if he is an employee, he is neither entitled to any

HRA nor a rent-free accommodation.

Other conditions
23

(1) 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.
(2) Such individual should fulfill such other conditions or limitations as may be prescribed,
having regard to the area or place in which such accommodation is situated and other relevant
considerations. The assessee must file a declaration in Form No. 10BA alongwith the return of
income to claim deduction under section 80GG.
Quantum of deduction:
The deduction shall be the minimum of the following amounts:
(i) Excess of rent paid over 10% of 'Adjusted Total Income';
(ii)25% of the "Adjusted Total Income";
(iii)Rs. 2,000 per month.
Adjusted Total Income: Adjusted Total Income means the
GTI LTCG STCG u/s 111A Deduction under chapter VI-A(except section 80GG)

DEDUCTION UNDER SECTION 80GGA

10.Deduction in respect of certain donations for scientific research or
rural development [Section 80GGA]

The deduction is available to a non-business assessee for payments made to the following
institutions:
(i)

to an approved scientific research association, university, college or institution for scientific

research;
(ii)

to an approved university, college or institution for research in social science or statistical

24

research;
(iii) to notified rural development fund or to the notified National Urban Poverty Eradication
Fund.
(iv) 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.
Quantum of deduction:
100% of the sum paid to the above institutions.

DEDUCTION UNDER SECTION 80GGB

11.Deduction in respect of contributions given by companies to
political parties
[Section 80GGB]
Any sum contributed by an Indian company in the previous year to any political party or
electoral trust shall be allowed as deduction while computing its total income.

DEDUCTION UNDER SECTION 80GGC

12. Deduction in respect of contribution given by any person to
political parties
[Section 80GGC]
Any amount of contribution to political parties or electoral trust an assessee being any person,
except
-

local authority and

every artificial juridical person wholly or partly funded by the

Government

Shall be allowed as deduction which computing the total income of such person.
25

DEDUCTION UNDER SECTION 80JJA

13.Deduction in respect of profits and gains from business of
collecting and processing of bio degradable waste [Section 80JJA]

Persons Covered

All assesses

Essential conditions
The business should of collecting and processing or treating of bio-degradable waste for:
(i) generating power, or
(ii) producing, bio-fertilizers, bio-pesticides or other biological agents, or
(iii) producing bio-gas, or
(iv) making pellets or briquettes for fuel, or
(v) organic manure,
a deduction under section 80JJA shall be allowed.
Quantum of deduction:
The whole of such profits or gains shall be allowed as a deduction for a period of five
consecutive assessment years beginning with the assessment year relevant to the previous year in
which such business commences.

DEDUCTION UNDER SECTION 80QQB

14.Deduction in respect of royalty income, etc., of authors of certain books
other than text books [Section 80QQB]

26

Persons Covered

- Resident Individual who is an author or co-author of a book

Essential conditions
- The book should be a work of literary, artistic or scientific nature.
-The income must be derived by him in the exercise of his profession.
Quantum of deduction
100% of royalty or Rs. 3,00,000, whichever is less. Royalty in excess of 15% of the value of
book sold during P.Y. shall be ignored.
Income from outside India
Deduction is restricted to the amount brought into India
-in convertible foreign exchange
-

Within a period of 6 months from the end of the previous

year or within such further period as the competent
authority may allow.

Certificates to be furnished Deduction allowed only if certificate from publisher is submitted

along with the return of income.

DEDUCTION UNDER SECTION 80RRB

15.Deduction in respect of royalty on patents
[Section 80RRB]

Persons Covered

Resident Individual who is a patentee or co-patentee

Essential conditions
The patent should be registered on or after 1-4-2003 under the Patents Act, 1970.The income
27

must be derived by him in the exercise of his profession.

Quantum of deduction - 100% of such royalty income or Rs. 3,00,000, whichever is less.
Income from outside India Deduction is restricted to the amount brought into India
-

in convertible foreign exchange

within a period of 6 months from the end of the previous

year or within such further period as the competent
authority may allow.

Certificates to be furnished Deduction allowed only if certificate by the prescribed authority is

submitted along with the return of income.

DEDUCTION UNDER SECTION 80U

16.Deduction in case of a person with disability
[Section 80U]

Persons Covered

Resident Individual who is a person with disability

Essential conditions
He is certified by the medical authority to be a person with disability, at any time during the
previous year.
Quantum of deduction:
Rs. 50,000 in case of a person with disability.
Rs. 1,00,000 in case of a person with severe disability.

DEDUCTION UNDER SECTION 80IA

17.Deduction for undertakings
infrastructure development, etc.
[Section 80 IA]

or

28

enterprises

engaged

in

The deduction under this section is available to an assessee whose Gross Total Income includes
any profits and gains derived by:
(a) any enterprise carrying on the business of
(i) developing,
(ii) operating and maintaining, or
(iii) developing, operating, maintaining and any infrastructure facility;
(b) an undertaking which is engaged in the business of providing telecommunication service,
etc.;
(c) an undertaking which develops, maintains, etc. an industrial park;
(d) an undertaking which is engaged in generation, transmission, distribution of power, etc.;
(e) an undertaking which lays and begins to operate a cross country natural gas distribution
network.
Conditions applicable to all undertakings/enterprises mentioned above:
(1) Compulsory Audit of accounts and the report should be furnished by the assessee alongwith
his return of income.
(2) Inter-unit transfer of goods or services should be made at market price.
(3) Power of Central Government to declare that the section shall not apply by notification in the
Official Gazette.
29

(4) Deduction not to be allowed in cases where return is not filed on or before the due date
specified u/s 139(1).

Quantum and period of deduction in case of all above undertakings/enterprises

Undertaking/enterprise

Period and quantum of deduction

(1) For all the above 100% of profits and gains derived from such business for 10
undertaking/enterprises
other

than

consecutive assessment years out of 15 years* beginning with

the the year in which undertaking or the enterprise develops and

enterprise engaged in begins to operate any infrastructure facility or develops an

the

business

of industrial park or special economic zone or generates power or

providing

commences transmission or distribution of power or undertakes

telecommunication, etc. substantial renovation or modernisation.

(2)

For

enterprise For the first 5 consecutive assessment years 100%,

engaged in the business

of

providing

Subsequent 5 consecutive assessment years 30%

telecommunication

out of 15 years beginning with the year in which enterprise starts

services, etc.

providing telecommunication services.

However, in case of enterprises engaged in developing, etc of any infrastructure facility other
than port, airport, inland waterway or inland port or navigational channel in the sea, the period of
15 years shall be substituted by 20 years.

DEDUCTION UNDER SECTION 80IAB

30

18.Deduction for an undertaking or an enterprise engaged in

development of SEZ -[Section 80 IAB]

The deduction is available to an assessee, being a Developer, and engaged in the business of
developing a SEZ, notified under the Special Economic Zones Act, 2005.
Quantum of deduction:
The deduction shall be allowed of an amount equal to 100% of the profits and gains derived from
such business for 10 consecutive assessment years, out of 15 years beginning from the year in
which a SEZ has been notified by the Central Government.
Consequences of transfer of the undertaking: Where an undertaking, being a Developer who
develops a SEZ and transfers the operation and maintenance of such Special Economic Zone to
another Developer, the deduction shall be allowed to such transferee Developer for the remaining
period in the 10 consecutive assessment years as if the operation and maintenance were not so
transferred to the transferee Developer.
Conditions applicable:
(1) Compulsory Audit of accounts and the report should be furnished by the assessee along with
his return of income.
(2) Inter-unit transfer of goods or services should be made at market price.
(3) Power of Central Government to declare that the section shall not apply by notification in the
Official Gazette.
(4) Deduction not to be allowed in cases where return is not filed on or before the due date
specified u/s 139(1).

DEDUCTION UNDER SECTION 80-IB

31

19.Deduction for certain industrial undertakings other than infrastructure

development undertakings [Section 80-IB]

The deduction under this section is available to an assessee whose Gross Total Income includes
any profits and gains derived from the business of:
S.
No.
1

Nature of activity
Commercial

production

Quantum of deduction allowed

and

refining

of 100% of profits for a period of 7 A.

mineral oil

Y.

Processing, preservation and packaging of

fruits or vegetables

100% of profits for a period of first

Integrated business of handling, storage and 5 A. Y.

transportation of food grains

25% of profits for next 5 A.Y.

Preservation and packaging of meat and meat

4

products or poultry or marring or daily (30% in case of Company assessee)

products.

Operating and maintaining a hospital in a rural 100% of profits for a period of 5 A.

area

Y.

Operating and maintaining a hospital in any

6

where in India other than excluded area. [w.e.f.

A. Y. 2009-10]

100% of profits for a period of 5 A.

Y.

DEDUCTION UNDER SECTION 80 IC

20.Special provisions for certain undertakings or enterprises in certain
special category States[Section 80-IC]
32

Where any assessee, in the States of Himachal Pradesh and Uttaranchal, is engaged in the
business of manufacturing or producing
Quantum of deduction:
The deduction shall be 100% of such profits and gains for 5 A. Y. commencing with the initial
assessment year and thereafter, 25% (or 30% where the assessee is a company) of the profits and
gains.
Other provisions
(1) Deduction to be allowed both for newly established units or for existing undertaking which
makes substantial expansion (50% increase in the value of plant & machinery)
(2) Aggregate period of deduction for existing undertakings not to exceed 10 years
(3) Other conditions of section 80-IA(as given above) also applicable.

DEDUCTION UNDER SECTION 80-ID

Deduction in respect of profits and gains from business of hotels &
convention centres in specified area [Section 80-ID]

Deduction is allowed to an assessee whose gross total income includes any profit or gain derived
from
(a) the business of hotel located in the NCT of Delhi and the districts of Faridabad, Gurgaon,
Gautam Budh Nagar and Ghaziabad, if such hotel is constructed and has started or starts
functioning at any time during the period beginning on 1-4-2007 and ending on 31-3-2010; or
(b) the business of building, owning and operating a convention centre, located in the National
Capital Territory of Delhi and the districts of Faridabad, Gurgaon, Gautam Budh Nagar and
33

Ghaziabad, if such convention centre is constructed at any time during the period beginning on
1-4-2007 and ending on 31-3-2010.
(c) With a view to promoting tourism and to attract tourists to certain World Heritage Sites in
India, the Act has extended the scope of 100% tax benefits available in this section also to new
two-star, three-star or four-star category hotels located in specified districts having a World
Heritage Site. Such hotels are required to be constructed and start functioning at any time during
the period beginning on 1-4-2008 and ending on 31-3-2013. [w.e.f. A. Y. 2009-10]
The above business is hereinafter referred to as the eligible business.

Conditions to be satisfied for claiming deduction [Section 80-ID(3)]

(i) The eligible business is not formed by the splitting up, or the reconstruction, of a business
already in existence;
(ii) The eligible business is not formed by the transfer to a new business of a building previously
used as a hotel or a convention centre, as the case may be;
(iii) The eligible business is not formed by the transfer to a new business of machinery or plant
previously used for any purpose.
(iv)

Other conditions of section 80-IA(as given above) also applicable.

Benefit under their section shall not be available to amalgamated company in

case of amalgamation.
Quantum of deduction
100% of the profit and gains derived from such business for 5 consecutive assessment years
beginning from the initial assessment year.

DEDUCTION UNDER SECTION 80-IE

34

Special provisions in respect of certain undertakings in North

Eastern States-[Section 80 IE]

Deduction is allowed to an assessee whose gross total income includes any profits and gains
derived by an undertaking which fulfils the following conditions:
(1) It has during the period beginning on 1-4-2007 and ending before 1-4-2017 begun or begins
in any of the North-Eastern States:
(i) To manufacture or produce any eligible article or thing;
(ii) To undertake substantial expansion to manufacture or produce any eligible article or thing;
(iii) To carry on any eligible business.

(2)It is not formed by splitting up, or the reconstruction, of a business already in existence:

(3)It is not formed by the transfer to a new business of machinery or plant previously used for
any purpose.

(4) Other conditions of section 80-IA(as given above) are also applicable.

Quantum of deduction
100% of the profits and gains derived from such business for 10 consecutive assessment
years commencing with the initial assessment year.

CONCLUSION

Income tax Act allows for certain deductions from the gross annual income. Gross
35

Total Income means the aggregate of income calculated under the various heads
after giving effect to provisions as to clubbing of income and set off of losses.
These deductions however are not permissible from the following under mentioned
incomes although these incomes form a part of Gross Total Income. These incomes
are:a. Long term Capital Gains
b. Short Term capital gain on transfer of equity shares and units of equity oriented
fund through a recognized stock exchange i.e. short term capital gain covered
under section 111A.
c. Winnings of lotteries, races etc.

Income Tax provides for relaxation and some certain circumstances prohibition
with regards to payment of taxes. Such circumstances needs to be defined by
judiciary time to time. Court is burden with task to refine the judgment as per the
fact and circumstances.

BIBLIOGRAPHY
Books referred

Vinod Singhania & Kapil Singhania, Direct Taxes law and practice, 2007-2008

36

Website referred
http://www.scribd.com/doc/42765419/Deductions-to-Be-Made-in-Computing-Total-Income

37