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Income tax Exemption for certain savings, expenses and payments under Chapter VIA of Income Tax Act

Income Tax Exemption for certain savings, expenses and payments – Deductions under Chapter VI-A of the Income Tax Act 1961

In computing the taxable income of the employee, the  following deductions under Chapter VI-A of the Act are to be allowed from his gross total income:

Deduction in respect of Life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. (section 80C)

A.        Section 80C, entitles an employee to deductions for the whole of amounts paid or deposited in the current  financial  year in  the following schemes,   subject to a  limit of Rs.1,50,000/-:

(1)  Payment of insurance premium to effect or to  keep in force  an  insurance on the life of the individual, the spouse or any child of the individual.

(2)  Any  payment made to effect or to keep in force  a  contract for a deferred annuity, not being an annuity plan   as is   referred to in item (7) herein below on the life   of the individual,  the  spouse or any child  of  the individual, 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;

(3)  Any sum deducted 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 deducted does not exceed 1/5th of the salary;

(4) Any contribution made :

(a) by an individual to any Provident Fund to which the Provident Fund Act, 1925 applies;

(b) to  any  provident  fund  set  up  by  the  Central Government, and notified by it in this behalf  in the Official Gazette, where such contribution is to an  account standing in the name of an individual, or spouse or children;

[The  Central  Government  has  since  notified  Public  Provident  Fund  vide
Notification S.O. No. 1559(E) dated 3.11.05]

(c) by an employee to a Recognized Provident Fund;

(d) by an employee to an approved superannuation fund;

It  may be noted that “contribution” to any Fund  shall not include any sums in repayment of loan or advance;

(5) Any sum paid or deposited during the year as a subscription :-

(a) in the name of employee or a girl child of that employee including a girl child for whom the employee is the legal guardian in  any such security of the Central Government or  any  such deposit scheme as the Central  Government may, by notification  in  the Official  Gazette, specify in this behalf;
[The Central Government has since notified the scheme ‘Sukanya Samriddhi Account’ vide  Notification GSR No. 863(E) dated 02.12.2014]

(b) to any such saving certificates as defined  under section  2(c) of the Government Saving Certificate Act, 1959 as the Government may, by notification in the Official Gazette,  specify in  this  behalf.

[The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05and National Saving Certificate (IXth Issue) vide Notification . G.S.R. 848 (E), dated the 29th    November, 2011, publishing the National Savings Certificates (IX- Issue) Rules, 2011 G.S.R. 868 (E), dated the 7th December, 2011, specifying  the  National  Savings  Certificates  IX  Issue  as  the  class  of Savings   Certificates F No1-13/2011-NS-II r/w amendment Notification No.GSR 319(E), dated 25-4-2012 ]

(6)  Any  sum  paid as contribution in the case  of  an individual, for himself, spouse or any child,

a.   for  participation  in the Unit  Linked  Insurance  Plan, 1971 of the Unit Trust of India;

b.   for  participation  in any  unit-linked  insurance  plan  of  the  LIC  Mutual Fund   referred to section 10 (23D) and as notified   by  the Central Government.

(7)  Any subscription made to effect or keep in force a contract for such annuity plan of  the Life Insurance Corporation   or any other insurer as the Central Government may, by notification in the Official Gazette, specify;

[The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O.  No.  1562(E) dated  3.11.05  and  Jeevan  Akshay-III  vide  Notification  S.O.  No.
847(E) dated 1.6.2006 ]

(8) Any subscription made to any units of any Mutual Fund, of section 10(23D), or from  the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under   any   plan formulated   in   accordance with any scheme as  the  Central Government,  may, by notification in the Official  Gazette, specify in this behalf;

[The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]

The investments made after 1.4.2006 in plans formulated in accordance with Equity Linked Saving  Scheme,  1992  or  Equity  Linked  Saving  Scheme,  1998  shall  also  qualify  for deduction under section 80C.

(9)   Any  contribution made by an individual to  any  pension  fund  set  up by any Mutual Fund   referred to in   section 10(23D), or, by the Administrator or the specified company defined  in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the Central Government  may,  by notification in  the Official Gazette, specify in this behalf;

[The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]

(10)  Any subscription made to any such deposit  scheme of, or,  any contribution made to any such pension fund set  up by, the National Housing Bank, as the Central Government may,  by notification in the Official Gazette, specify in this behalf;

(11) Any subscription made to any such deposit  scheme, as the Central Government  may, by notification in the Official   Gazette, specify   for   the   purpose of being floated by  (a) public sector companies 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.

[The Central Government has since notified the Public Deposit Scheme of HUDCO vide  Notification  S.O.  No.37(E),  dated  11.01.2007,  for  the  purposes  of  Section 80C(2)(xvi)(a)].

(12)   Any   sums paid by an assessee for the purpose   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 has not been   used  for  assessee’s   own residence,  have been chargeable  to tax under that head) where such payments are  made towards or by way of any instalment or part payment of the amount   due under any self- financing or other scheme of any Development Authority,  Housing  Board  etc.

The deduction  will also be allowable in respect of  re-payment of loans  borrowed  by an assessee from the Government,   or any bank or Life Insurance Corporation, or National Housing Bank,   or certain other categories of institutions   engaged in the     business   of providing     long   term   finance   for construction or purchase of houses in India.   Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be 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   cooperative  society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act.

The stamp duty, registration fee and other expenses incurred for the purpose of transfer  shall also   be   covered.    Payment   towards   the   cost   of   house property,   however, will not include, admission fee or cost of share   or initial deposit or 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 by competent authority, or after the  occupation  of the house by the assessee or after  it  has been  let out.  Payments towards any expenditure in respect of which the deduction is allowable under the provisions of  section  24 of the Act will also not be included in payments towards the cost of purchase or construction of a house property.

Where the house property in respect   of which   deduction has been allowed under these provisions is transferred  by the tax-payer at any time before the expiry of five  years from the end of the financial year in  which possession  of  such  property  is obtained by  him  or he  receives  back,    by    way  of  refund  or    otherwise,    any    sum  specified  in  section 80C(2)(xviii), no deduction under  these provisions shall be allowed in respect of such sums paid in such   previous   year in which the transfer is made and   the aggregate amount of deductions of income so allowed  in  the earlier years shall be added to the total income of the assessee of such previous year and shall be liable to tax accordingly.

(13) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee.

Full-time  education  includes  any  educational  course  offered  by  any  university,  college, school or other educational institution to a student who is enrolled full-time for the said course.  It is also clarified that full-time education includes play-school activities, pre-nursery and nursery classes.

It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing   payment in the nature of development fees or donation or capitation fees or payment of similar nature.

(14)  Subscription  to  equity   shares  or  debentures forming  part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution.

(15)  Subscription  to  any units of  any  mutual  fund referred  to in clause (23D) of Section 10 and approved  by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company.

(16)   Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes.

[The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E) dated 28.7.2006]

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

(18) Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004.

(19) Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.

B.        Section 80C(3) & 80C(3A) states that in case of Insurance Policy other than contract for a deferred annuity the amount of any premium or other payment made is restricted to:

Policy issued before 1st April 2012 20%   of   the   actual   capital   sum
assured
Policy issued on or after 1st April 2012 10%   of   the   actual   capital   sum
assured
Policy issued on or after 1st April 2013 * – In cases of
persons   with   disability   or   person   with   severe disability as per Sec 80 U or suffering from disease or  ailment  as  specified  in  rules  made  under  Sec
80DDB
15%   of   the   actual   capital   sum
assured

*Introduced by Finance Act 2013

Actual capital sum assured in relation to a life insurance policy means 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  may  be  received  under  the  policy  by  any person.

Deduction in respect of contribution to certain pension funds (Section 80CCC)

Section 80CCC allows an employee deduction of an amount paid or deposited  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  section 10(23AAB). However, the deduction shall exclude interest or bonus accrued or credited to the employee’s account, if any and shall not exceed Rs.
1,50,000.

However, if any amount is standing to the credit of the employee in the fund referred to above and deduction has been allowed as stated above and the employee or his nominee receives this amount together with the interest or bonus accrued or credited to this account due to the reason of
(i)     Surrender of annuity plan whether in whole or part
(ii)    Pension received from the annuity plan

then the amount so received during the Financial Year 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.

Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD):

Section  80CCD(1) allows  an    employee,  being  an  individual  employed  by the Central Government  on or after 01.01.2004 or being an individual employed by any other employer,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 F. N.
5/7/2003- ECB&PR dated 22.12.2003 National Pension System-NPS or as may be notifed 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).

As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed an deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed Rs. 50,000.  The deduction of Rs. 50,000 shall be allowed whether or not any deduction is allowed under sub-section(1).   However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section
80CCD.

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 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 any amount received by the employee from the New Pension Scheme shall be deemed not to have been 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/-. The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS upto Rs. 50,000/-.  However, the 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.1,50,000/- provided under this section.

Deduction  in  respect  of  investment  made  under  an  equity  savings  scheme (Section 80 CCG):

Section 80CCG provides deduction wef assessment year 2013-14 in respect of investment made under notified equity saving scheme. Rajiv Gandhi Equity Savings Scheme 2012 has been notified vide SO No 2777 E,   dated 23.11.2012 (subsequent corrigendum SO NO.
2835E dated 05.12.2012) and  amended vide notification SO No. 3693E dated 18.12.2013 as a scheme under this section. The scheme was modified in December 2013 vide notification SO 3693 dated 18.12.13 ( RGESS, 2013). The deduction under this section in accordance with RGESS 2013 is available if following conditions are satisfied:

(a) The assessee is a resident individual
(b) His gross total income does not exceed Rs. 12 lakhs;
(c)  He has acquired listed shares in accordance with a notified scheme or listed units of an equity oriented fund as defined in section 10(38);
(d) The assessee is a new retail investor;
(e)  The investment is locked-in for a period of 3 years from the date of acquisition in accordance with the above scheme;
(f) The assessee satisfies any other condition as may be prescribed.

Amount of deduction –The amount of deduction is at 50% of the amount invested in equity shares/units. However, the amount of deduction under this provision cannot exceed Rs.
25,000.

Withdrawal of deduction – If the assessee, after claiming the aforesaid deduction, fails to satisfy the above conditions, the deduction originally allowed shall be deemed to be the income of the assessee of the year in which default is committed.

This deduction is allowed for three consecutive assessment years beginning with the AY in which the listed equity shares or units were first acquired. If any deduction is claimed by a taxpayer under this section in any year, he shall not be entitled to any deduction under this section for any other year.

Deduction in respect of health insurance premia paid, etc. (Section 80D)

Section 80D provides for deduction available for health insurance premia paid, etc. which is calculated as under:

 

Sl
No

Persons for
whom payment made

Nature of payment Mode of
payment

Allowable
Deduction
(in Rs)

1

Employee
or his family*

v   the whole of the amount paid to effect or
to  keep  in  force  an  insurance  on  the health of the employee or his family or
v   any contribution made to the CGHS or such other scheme as may be notified by Central Government (Finance Act 2013)

any
mode other
than cash

Aggregate
allowable is Rs 25,000/ (Rs 30000/- for senior
and very
senior citizen)

2

v   any  payment  on  account  of  preventive
health   check-up   of   the   employee   or family, [restricted to Rs 5000/-; cash payment allowed here]

any
mode including cash

3

v   Whole of the amount paid on account of
medical expenditure incurred on health of a very senior citizen and no amount has been paid to effect of keep in force an insurance on the health of such person

any
mode other
than cash

Aggregate
allowable is
Rs 30,000/

4

Parent or
Parents of employee*
v   the whole of the amount paid to effect or
keep in force an insurance on the health of the parent or parents of the employee

any
mode other
than cash

Aggregate
allowable is Rs 25,000/ (Rs 30000/-

 

5

  v   any   payment   made   on   account   of
preventive health check-up of the parent or parents of the employee [restricted to Rs 5000/-; cash payment allowed here]

any
mode including cash

for senior
and very senior citizen)

6

v   Whole of the amount paid on account of
medical expenditure incurred on health of a very senior citizen and no amount has been paid to effect of keep in force an insurance on the health of such person

any
mode other
than cash

Aggregate
allowable is
Rs 30,000/

*Aggregate of the sum allowable as deduction under Sl No 1, 2 & 3  and 4, 5 &6 above shall not exceed Rs 30000/-

 

Here i) “family” means the spouse and dependent children of the employee.

ii) Senior citizen” means an individual  resident in India who is of the age of sixty years or more at any time during the relevant previous year.

iii) Very senior citizen means an individual  resident in India who is of the age of eighty years or more at any time during the relevant previous year

The DDO must ensure that the medical insurance referred to above shall be in accordance with a scheme made in this behalf by-

(a)     the General Insurance Corporation of India formed under section 9 of the General Insurance   Business   (Nationalization)   Act,   1972   and   approved   by   the   Central Government in this behalf; or

(b)     any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999.

Deductions in respect of expenditure on persons or dependants with disability

Deductions in respect of maintenance including medical treatment of a dependent who is a person with disability (section 80DD):

Under  section  80DD,  where  an  employee,  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 company subject to the conditions specified in this regard and  approved by the Board in this behalf for the maintenance of a dependant, being a person with disability, the employee shall be allowed a deduction of a sum of Rs 75,000/- from his gross total income of that year.

However,    where  such  dependant  is  a  person  with   severe  disability,  an  amount  Rs
1,25,000/- shall be allowed as deduction subject to the specified conditions.

The  deduction  under  (b)  above  shall  be  allowed  only  if  the  following  conditions  are fulfilled:-

(i) the scheme referred to in (b) above provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual in whose name subscription to the scheme has been made;

(ii) the employee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability.

However, if the dependant, being a person with disability, predeceases the employee, an amount equal to the amount paid or deposited under sub-para(b) above shall be deemed to be the income of the employee of the previous year in which such amount is received by the employee and shall accordingly be chargeable to tax as the income of that previous year.

Deductions in respect of a person with disability (section 80U):

Under  section 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of Rs 75,000/-. However, where such individual is a person with severe disability, a higher deduction of Rs 1,25,000/-  shall be allowable.

DDOs should note that 80DD deduction is in case of the dependent of the employee whereas
80U deduction is in case of the employee himself. However, under both the sections, the employee shall furnish to the DDO the following:

1.     A copy of the certificate issued by the medical authority as defined in Rule 11A(1) in the prescribed form as per Rule 11A(2) of the Rules.  The DDO has to allow deduction only after seeing that the Certificate furnished is from the Medical Authority defined in this Rule and the same is in the form as mentioned therein.

2.     Further  in  cases  where  the  condition  of  disability  is  temporary  and  requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period  unless a new certificate is obtained from the medical authority  as in 1 above and furnished before the DDO.
3.         For the purposes of sections 80DD and 80 U some of the terms defined are as under:-

(a) “Administrator” 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 ; (b) “dependant” means—

(i)        in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them;

(ii)       in the case of a Hindu undivided family, a member of the Hindu undivided family, dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year;

(c) “disability” shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 and includes “autism”, “cerebral palsy” and “multiple disability” referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;

(d) “Life Insurance Corporation” shall have the same meaning as in clause (iii) of sub- section (8) of section 88;

(e) “medical authority” means the medical authority as referred to in clause (p) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or such other medical authority as may, by notification, be specified  by  the  Central  Government  for  certifying  “autism”,  “cerebral  palsy”, “multiple disabilities”, “person with disability” and “severe disability” referred to in clauses (a), (c), (h), (j) and (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;

(f)  “person with disability” means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999;

(g) “person with severe disability” means—

(i)        a person with eighty per cent or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995; or

(ii)       a person with severe disability referred to in clause (o) of section 2 of the  National  Trust  for  Welfare  of  Persons  with  Autism,  Cerebral  Palsy, Mental Retardation and Multiple Disabilities Act, 1999;

(h) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002.

Deduction in respect of medical treatment, etc. (Section 80DDB):

Section 80DDB allows a deduction in case of employee,  who is resident in India, during the previous year, of any amount actually paid for the medical treatment of such disease or ailment as may be specified in the rules 11DD (1) for himself or a dependant.  The deduction allowed is equal to the amount actually paid is in respect of the employee or his dependant or Rs. 40,000 whichever is less.

Now the deduction can be allowed on the basis of a prescription from an oncologist, a urologist, nephrologist,   a haematologist, an immunologist or such other specialist, as mentioned in Rule 11DD. However, the amount of the claim shall be reduced by the amount if any received from the insurer or reimbursed by the employer. Further in case of the person against whom such claim is made is a senior citizen (60 age  years or more) then the deduction upto Rs 60,000/- is allowed and in case of very senior citizen (80 age years or more)  the deduction upto Rs 80,000/- is allowed.
For the purpose of this section, in the case of an employee, “dependant” means individual, the spouse, children, parents, brothers and sisters of the employee or any of them, dependant wholly or mainly on the employee for his support and maintenance.

Vide Notification SO No. 2791(E) dated 12.10.2015, Rules 11DD has been amended to do away with the requirement of furnishing a certificate in Form 10-I.  A prescription from a specialist as specified in the Rules containing the name and age the patient, name of the disease/ailment along with the name, address, registration number & qualification of the specialist issuing the prescription would now be required.

Deduction in respect of interest on loan taken for higher education (Section 80E):

Section 80E allows deduction  in  respect of payment of interest on loan taken from any financial institution or any approved charitable institution for   higher education for the purpose of pursuing his higher education or for the purpose of higher education of his spouse or his children or the student for whom he is the legal guardian.

The  deduction  shall be  allowed  in computing  the total income for the Financial   year in which the employee starts paying the  interest on the loan taken and immediately succeeding seven Financial years or until  the  Financial year in which  the interest  is paid in  full by the employee, whichever is earlier.
For the purpose of this section –

(a) “approved     charitable     institution”     means    an institution  established for charitable purposes  and  approved  by the prescribed authority  section  10(23C),  or an institution referred  to  in section 80G(2)(a);

(b) “financial    institution”   means  a banking  company   to  which    the  Banking Regulation Act, 1949 applies  (including  any bank or banking  institution referred to in section 51 of that Act);   or any other financial   institution   which the   Central Government  may, by notification in the Official Gazette, specify in this behalf;

(c) “higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognized by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so;

Deductions on respect of donations to certain funds, charitable institutions, etc. (Section 80G):

Section 80G provides for deductions on account of donation made to various funds , charitable organizations etc. In cases where employees make donations to the Prime Minister’s National Relief Fund, the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund through their respective employers, it is not possible for such funds to issue separate certificate to every such employee in respect of donations made to such funds as contributions made to these funds are in the form of a consolidated cheque. An employee who makes donations towards these funds is eligible to claim deduction under section 80G. It is, hereby, clarified that the claim in respect of such donations as indicated above will be admissible under section 80G on the basis of the certificate issued by the Drawing and Disbursing Officer (DDO)/Employer in this behalf – Circular No. 2/2005, dated 12-1-2005.

No deduction under this section is allowable in case the amount of donation exceeds Rs.
10000/- unless the amount is paid by any mode other than cash.

Deductions is respect of rents paid (Section 80GG):

Section  80GG  allows the employee  to  a deduction in respect of house rent paid by him for his own residence. Such deduction is  permissible subject to the following conditions :-

(a)  the  employee has not been in receipt of any  House Rent  Allowance  specifically granted to him  which qualifies  for exemption under section 10(13A) of  the Act;

(b) the  employee  files the declaration in Form  No.10BA.  (Annexure X)

(c) The employee does not own:

(i)       any residential accommodation himself or by his spouse  or minor child or where such employee is  a member of a Hindu Undivided Family, by such family, at   the   place   where   he   ordinarily  resides or performs duties  of his office or carries  on  his business or profession;  or

(ii)      at   any  other   place,   any   residential accommodation which is in the occupation of  the  employee,  the  value of which  is  to  be determined under section 23(2)(a) or section 23(4)(a), as the case may be.

(d)  He  will  be entitled to a deduction in respect  of house  rent paid by him in excess of 10% of his  total  income. The deduction shall be equal to 25% of total income or Rs.  2,000/- per month,  whichever is  less. The total income for working out these percentages  will  be  computed before  making  any deduction under section 80GG.

The  Drawing and Disbursing Authorities should  satisfy themselves  that  all the conditions mentioned  above  are satisfied  before such deduction is allowed by them to  the employee. They should  also satisfy themselves  in  this regard  by  insisting on production of evidence of actual  payment of rent.

Deductions in respect of certain donations for scientific research or rural development (Section 80 GGA):

Section 80GGA allows deduction from total income of employee in respect of donations  of any sum as given in the Table below:

Sl
No
Donations made to persons

Approval /
Notification under Section

Authority granting
approval/ Notification

1

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
u/s 35(1)(ii) Central Government

2

A research association which has as its object
the undertaking of research in social science or statistical research or to a University, college or other institution to be used for research in social science or statistical research
u/s 35(1)(iii) Central Government

3

an association or institution, which has as its
object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved for the purposes of section 35CCA
furnishes the
certificate u/s
35CCA (2)

Prescribed Authority
under Rule 6AAA

4

an association or institution which has as its
object the training of persons for implementing programmes of rural development.
furnishes the
certificate u/s
35CCA (2A)

Prescribed Authority
under Rule 6AAA

5

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.
furnishes the
certificate u/s
35AC(2)(a)

National Committee
for Promotion of Social & Economic Welfare

7

a rural development fund

notified u/s
35CCA (1)(c)

set up and notified
by the Central
Government

8

National Urban Poverty Eradication Fund notified u/s set up and notified

 

    35CCA (1)(d) by the Central
Government

 

No deduction under this section is allowable in case:

i)   The employee has gross total income which includes income which is chargeable under the head “Profits and gains of business or profession”.

ii)  The amount of donation exceeds Rs 10000 and is paid in cash.

The  Drawing and Disbursing Authorities should  satisfy themselves  that  all the conditions mentioned  above  are satisfied  before such deduction is allowed by them to  the employee. They should  also satisfy themselves  in  this regard  by  insisting on production of evidence of  actual  payment of donation and a receipt from the person to whom donation has been made and ensure that the approval/notification has been issued by the right authority. DDO must ensure a self-declaration from the employee that he has no income from “Profits and gains of business or profession”.

Deduction  in  respect  of  interest  on  deposits  in  savings  account  (Section 80TTA):

Section 80TTA has been introduced from the Financial Year 2012-13 and it allows to an employee from his gross total income if it includes any income by way of interest on deposits (not being time deposits) in a savings account, a deduction amounting to:
(i) in a case where the amount of such income does not exceed in the aggregate ten thousand rupees, the whole of such amount; and

(ii) in any other case, ten thousand rupees.

The deduction is available if such savings account is maintained in a

(a) banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act);

(b) 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); or

(c) Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898,

Check also the following articles for more information on Income Tax 2015-16

Want to Calculate your Income Tax for the Year 2015-16? Use GConnect online income tax calculator

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Download Income Tax Department Circular No.20/2015 (F.No. 275/192/2015-IT(B) dated 02.12.2015

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