Section 80C to 80U (1)

Batch 18 – Finance (Taxation)Anup (018)Kiran (046)Anupam (045)Arvind (049)Archana (032)

Section 80C to 80U specifies the deduction to be made from the gross total income. Gross total income means the total income, under all heads of income, computed in accordance with the provision of the act.

The gross total income is to be arrived at before allowing any deduction and after setting off unabsorbed losses, depreciation, etc. incurred for earning the gross income.

Section 80C replaced the existing Section 88 with more or less the same investment mix available in Section 88. The new section 80C has become effective w.e.f. 1st April, 2006. Even the section 80CCC on pension scheme contributions was merged with the above 80C. However, this new section has allowed a major change in the method of providing the tax benefit. Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt.

The following payments/investments qualify for deduction under this section. The total amount of investments made during the P.Y. under these below mentioned schemes is known as Gross Qualifying Amount ( GQA )

1. Life Insurance premium paid on a policy taken on his own life, life of the spouse or any child (child may be dependent/ independent ). In the case of a Hindu undivided family, policy may be taken on the life of any member of the family. The premium paid should be maximum of 20% of sum assured .

2. Any sum deducted from salary payable to a Government employee for the purpose of securing him a deferred annuity or making provision for his spouse or children (subject to a maximum of 1/5th of salary)

3. Contribution towards statutory provident fund and recognized provident fund.

4. Contribution towards 15 year public provident fund (maximum of Rs 70,000).

5. Contribution towards an approved superannuation fund

6. Subscription to National Savings Certificates, VIII Issue .

6. Contribution for participating in the Unit-Linked Insurance Plan (ULIP) of Unit Trust of India.

7. Contribution for participating in the unit-linked insurance plan (ULIP) of LIC Mutual Fund (i.e. Dhanraksha plan of LIC Mutual Fund)

8. Payment for notified annuity plan of LIC (i.e. Jeevan Dhara, Jeevan Akshay New Jeevan Dhara ,etc ) or any other insurer.

9. Subscription towards notified units of Mutual Fund or UTI

10. Contribution to notified pension fund set up by Mutual Fund or UTI .

11. Any sum paid as subscription to notified Scheme of the National Housing Bank or as a contribution to notified pension fund set up by the National Housing Bank.

12. Any sum paid towards principal part of EMI on Housing Loan

13. The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house 

14. Any sum deposited in accordance with a notified scheme of term deposit for a fixed period of not less than 5 years with a scheduled bank.

15. Any sum paid towards Senior Citizen Savings Scheme (SCSS): SCSS is a deposit scheme specially meant for elderly citizens.

16. Any sum paid as tuition fees to any university/college/educational institution in India for full time education.

Section 80CCC provides deductions from gross (total) income for amounts paid or deposited by the assessee to any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the fund referred to in clause (23AAB).

The deduction is available to an individual who is resident or non-resident, Indian citizen or foreign citizen

The deduction is allowed only if such amount is paid or deposited by the taxpayer out of his income chargable to tax,

If deduction has not been claimed under section 80C. If the aforesaid conditions are satisfied, then

a) the amount deposited

b) Maximum Rs.1,00,000

Whichever is less Surrender value received is taxable in the year of receipt in the hands of the assessee or

nominee. If deduction is claimed under 80CCC, pension received will be taxable in the hands of

assessee or the nominee in the year of receipt.

This section is for allowing deduction to new central Government employees, if the following conditions are satisfied:

The taxpayer is an individual He is employed by the Central Government on or after January 1,

2004. He has in the previous year paid or deposited any amount in his

account under a pension scheme notified by the Central Government.

Amount of Deduction The total employee’s contribution and employer’s contribution to

the notified pension scheme during the year. Or 10% of salary of the employee. Whichever is less

Another avenue to save tax was introduced in the Budget 2010 in the form of section 80CCF. This section allows a deduction of Rs. 20,000 for investments made in Infrastructure Bonds.

The benefit of saving tax through Infrastructure Bonds is available for Individuals and Hindu undivided families(HUF).

The deduction of Rs. 20,000 under section 80CCF is over and above the deduction of Rs. 1,00,000 available under section 80C, 80CCC and 80 CCD.

The face value of each bond is Rs. 5,000 and it is being issued at par value. A minimum investment of Rs. 5,000 is required i.e. 1 bond and further

investment can be made in multiples of  1 bond.  The tenure of the bond is 10 years here is a lock in period of 5 years if you want to avail the tax benefits under section

80CCF.

The taxpayer is an individual or a Hindu undivided family . Insurance premium is paid by the taxpayer in accordance with the scheme

framed in this behalf by the General Insurance Corporation of India and approved by the Central Government. The scheme is known as “mediclaim” insurance policy.( The amount deposited in a similar scheme of any other insurer who is approved by the Insurance Regulatory and Development Authority shall also be eligible for deduction.)

The aforesaid premium is paid by cheque Mediclaim policy is taken on the health of the taxpayer, on the health of

spouse, dependent parents or dependent children of the taxpayer. In case of HUF on the health of any member of the family

Deduction To Individual

Two type of Deductions are available to Individuals under this section from  Assessment year 2009-10

1. Deduction on Medical insurance premium paid for himself,spouse,dependent children =Rs 15000 maximum.

2. Deduction on Medical insurance premium paid for parents ,whether dependent on assesee or not =Rs 15000 maximum

Deduction To HUF:

Deduction to HUF is available on insurance premium paid for policy taken for  of any member of the  HUF

Addition deduction for Resident Senior Citizen:In addition to two point above,  additional deduction of Rs 5000 is available where assessee or his spouse (wife or husband) or dependent parents or any member of the family in case one and father or mother is a resident in India and a senior  citizen in case two.And same in the case of HUF assessee if policy  has been taken on member which is senior citizen than additional Rs 5000/- deduction is available also to HUF.

Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability.

Deduction is available in respect of -◦ Expenditure incurred from medical / treatment / nursing / training /

rehabilitation, or◦ Amount paid under scheme LIC / UTI other insurer approved by CBDT for

maintenance, of a “dependant”, being a person with disability.

Deduction shall be allowed to the extent of –◦ Rs.50,000 (Rs. 100000 in case of dependant suffering with severe disability),

irrespective of expenditure incurred or sum paid.

Deduction in respect of Medical Treatment, etc.

Deduction is available in respect of sum actually paid during previous year for medical treatment of prescribed disease or ailment for the following – ◦ In case of individual: himself or his spouse, children, parents, brothers and

sisters,◦ In case of HUF: its member(s),◦ Dependant mainly on such individual or HUF for his support and maintenance.

Deduction shall be available to the extent of lower of the following –◦ Sum actually paid, or◦ Rs. 40,000 (Rs. 60,000 in case of a senior citizen).

Deduction in respect of interest on loan taken for higher education.

Deduction in available in respect of sum paid by the assessee in the previous year, out of his income chargeable to tax, by way of interest on loan taken – ◦ For his higher education, or◦ For the higher education of his relative.

100% of the amount of interest on such loan deduction will be admissible.

Deduction in respect of donations to certain funds, charitable institutions, etc.

Eligible Assesses This section is applicable to all assessees, who make an eligible donation, whether

an individual, HUF, NRI or a company.   Deduction Limit The extent of deduction is either 50% or 100% of the contribution, depending on

the charitable institution donated to.    For certain funds, the aggregate deduction is limited to 10% of the “Adjusted Gross

Total Income”. So, in such cases, even if you do make a donation larger than 10% of your Adjusted Gross Total Income, the donation amount eligible for claiming a deduction would be capped at 10% of the Adjusted Gross Total Income.

  The Adjusted Gross Total in this case, is the gross total income minus long-term

capital gain, short term capital gain and all deductions u/s 80CCC to 80U except any deduction under this section.

Scope of Deduction The donation may be paid either out of taxable or exempted income. Only donations made in cash or cheque are eligible for deductions. Donations

made in kind, in the form of food, clothing, medicines etc are not eligible. Donations to foreign charitable trusts or to political parties are not eligible for any

deduction. For donations made to Indian Olympic Association, any association notified u/s

10(23) for development of infrastructure for sports or games, or for sponsorship of sports or games, only a company is eligible for deduction.

Donations made to not all charitable institutions qualify for a deduction. Here is a list of approved charitable institutions and funds that qualify for a deduction.

Deductions in case of Housing Loan

ACTUAL INTEREST paid:

Interest maximum up to 1,50,000 or actual paid (which ever is Less) is directly deducted from taxable income.

ACTUAL PRINCIPAL paid

Principal is considered as Deduction in U/S 80C with in the maximum limit of 1,00,000/-.

Conditions:

Rent paid is in excess of 10 % of the total income Rent paid is in respect of accommodation for the purpose of

his own residence The deduction is to be claimed only if the residential

accommodation is not owned by the assessee or his spouse or minor child or by Hindu undivided family of which he is member.

The assessee, being an employee, who is entitled to house rent allowance from employer is eligible for exemption under section 10(13A) but not under section 80 GG.

In computing the total income, an assessee will be allowed deduction for the sum paid in the previous year

To a scientific research association or University, college or other institution for undertaking of scientific research, and approved for the purposes of section 35(1)(iii).

To a University, college or other institution to be used for research in social science or statistical research, and approved for the purposes of section 35(1)(iii).

To an association or institution, 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; or

To an association or institution for the training of persons for implementing programmes of rural development. Provided that the assessee furnishes the certificate referred to in section 35CCA(2) or 35CCA(2A) from such association or institution.

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. Provided that the assessee furnishes the certificate referred to in clause (a) of sub-section (2) of section 35AC from such public sector company or local authority or, as the case may be, association or institution.

To a rural development fund set up and notified by the Central Government for the purposes of clause (c) of sub-section (1) of section 35CCA.

To the National Urban Poverty Eradication Fund set up and notified by the Central Government for the purposes section 35CCA(d)(1).

Section 80GGBDeduction in respect to contributions given by companies to political partiesDeduction is allowed to an Indian company, for any sum contributed by it

in the previous year to any political party or an electoral trust .

Section 80GGCDeduction in respect to contributions given by any person

to political partiesDeduction is allowed to any person, except local authority and every

artificial juridical person wholly or partly funded by the Government, for any amount contributed by him in the previous year to a political party or an electoral trust .

Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development

Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section

The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops or develops and operates or maintains and operates a special economic zone referred to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution of power:

Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.

Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3)

This section applies to any industrial undertaking which fulfils all the following conditions

A- it is not formed by splitting up, or the reconstruction, of a business already in existence :

B- it is not formed by the transfer to a new business of machinery or plant previously used for any purpose

C- it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule

Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone

Where the gross total income of an assessee, being a Developer, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after the 1st day of April, 2005 under the Special Economic Zones Act, 2005, there shall, in accordance with and subject to the provisions of this section, be allowed

The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which a Special Economic Zone has been notified by the Central Government 

The provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA shall apply to the Special Economic Zones for the purpose of allowing deductions under sub-section

Special provisions in respect of certain undertakings or enterprises in certain special category States

A- Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section

B- there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section

Deduction in respect of profits and gains from business of hotels and convention centres in specified area

Where the gross total income of an assessee includes any profits and gains derived by an undertaking from any business referred to in sub-section (2) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for five consecutive assessment years beginning from the initial assessment year.

This section applies to any undertaking (i) engaged in the business of hotel located in the specified area (ii) engaged in the business of building, owning and operating a

convention centre, located in the specified area (iii) engaged in the business of hotel located in the specified district

having a World Heritage Site

Special provisions in respect of certain undertakings in North-Eastern States.

(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking, to which this section applies, from any business referred to in sub-section (2), there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years commencing with the initial assessment year. (2) This section applies to any undertaking which has, during the period beginning on the 1st day of

April, 2007 and ending before the 1st day of April, 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.

Deduction is allowed where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste.

Deduction @ 100% of such profits and gains are allowed for a period of five consecutive assessment years.

Conditions:

1) The assessee is an Indian company whose gross total income includes profits and gains derived from any industrial undertaking engaged in the manufacture or production.

2) the industrial undertaking is not formed by splitting up or reconstruction of an existing undertaking or amalgamation with another undertaking.

3) the assessee has employed new regular workmen in the previous year.

- “Regular workmen” does not include a casual workmen and employed for a period of less than 300 days during the previous year.

Deduction allowed in the form of 30% of the additional wages paid to the new regular workmen employed in the previous year and it is available for 3 assessment year.

Conditions: 1) The assessee is either:

- a scheduled bank or any bank incorporated under the law outside India and having an offshore banking unit in a SPEZ or a unit of IFSC.

2) The income:

- from an offshore banking unit in a SPEZ.

- from the business referred to in section 6(1) of the Banking Regulation Act,1949.

- from any unit of the IFSC from its business.

Deductions allowed @ 100% of the income referred to in condition (2) above for 5 consecutive assessment years.

In the case of a co-operative society engaged in

- carrying on the business of banking

- a cottage industry

- the marketing of agricultural products

- engaged in fishing and allied activities

the whole amount of profits and gains of such business is allowed for deduction

The whole amount of income mentioned below derived by the co-operative society is allowed for deduction:

- income by way of interest and dividend derived from its investment

- income from the letting of godowns or warehouses or

- income by way of carrying on transport business or engaging in the performance of manufacturing operations.

Conditions: 1) The assessee is an individual resident in India, being an author

2) assessee gross total income includes any income , derived in the exercise of his profession.

3) the assessee is required to furnish a certificate in the prescribed Form No.10CCD.

Deduction @ 100% of income referred to in condition (2) above , subject to monetary limit of Rs.3,00,000.

Conditions: 1) The assessee is an individual resident in India and who is a patentee

2) The assessee is in receipt of any income by way royalty in respect of a patent registered on or after 01-04-2003 under the Patent Act,1970.

3) The assessee is required to furnish a certificate in the prescribed Form No. 10CCE duly signed by the prescribed authority along with the return of income.

Deduction @ 100% of income referred to in condition (2) above , subject to monetary limit of Rs.3,00,000.

Conditions:• The assessee is an individual being a resident

• He is a person with disability.

• He is certified by the medical authority to be a person with disability, at any time during the previous year.

• He furnishes a certificate issued by the medical authority in the prescribed form along the return of income

A fixed deduction of:

Rs. 50,000 in case of a person with disability

Rs. 75,000 in case of a person with severe disability.( having any disability over 80%)

The Gross Total income of Mr. A for the assessment year 2010-11 isRs. 7,10,000/-The detail of his expenses & investment is as follows

House rent paid (@ 8,000 /month *12) 96,000.00

LIC Premium paid 55,000.00

Deposit in PPF 30,000.00

NSC 20,000.00

Medi-claim policy 10,000.00

Donation to Charitable institute 1,000.00

Housing Loan paid (Interest + Principle) 1,38,000.00

Computation of Rent Deduction :

Rent paid for the year (@ 8,000 /month *12) 96,000

Rent paid Less 10% of Basic Salary :

Rent paid (@ 8,000 /month *12) : 96,00010% of Basic Salary (10% * 20,000 /month*12) : (24,000) 72,000

Least of the following i.e 72,000/- is exempt for Deduction.

Deduction for Housing Loan

1. Interest paid in the financial year 96,000

2. Principal paid in the financial year 42,000

(In this case following are considered)1. Employee must be the owner of the house.

2. Benefit of Housing loan is allowed when the possession of the house is taken by employee.

3. Principal paid is become the part of Deduction U/S 80 C (maximum limit of 1,00,000)

4. Only one benefit is allowed from( housing loan or house rent).

Computation of Deduction u/s 80C

LIC Premium paid of self 35,000

LIC Premium paid of Child 10,000

LIC Premium paid of Spouse 10,000

Deposit in PPF 30,000

NSC 20,000

Principle of Housing Loan EMI 42,000

TOTAL 1,47,000

Only 1,00,000/- is allowed as Deduction

Deduction u/s 80D

Mediclaim Policy 10,000

10,000 is allowed as Deduction

Donation of Charitable Institute Deduction allowed is 50%

500/- is allowed as Deduction

Deduction u/s 80G

Computation of Taxable Income

Total Income (A) 7,10,000

Less Deduction of House Rent 72,000Less Deduction U/S 80 C 1,00,000Less Deduction U/S 80 D 10,000 Less Deduction U/S80 G 500 TOTAL Deduction (B) 1,82,500

Total Taxable Income (A- B) = 5,27,500 (Tax will be deducted on this Income)

Computation of Taxable Income

Taxable Income 5,27,500

TAX UP TO 1,60,000 IS NIL1,60,001 TO 3,00,000 = 140000 *10 % 14,0003,00,001 TO 5,00,000 = 200000 *20% 40,0005,00,001 TO 5,27,500 = 27500 * 30% 8,250

TAX 62,250CESS 3% 1,868TOTAL TAX 64,118

TOTAL TAXEQUILY DEVIDED IN 12 MONTHS64,118.00 / 12 = 5345/- Per month