There are certain investments or savings or expenditures which are deducted from gross total income of certain specified tax payers. Mostly, these payments relate to future savings of income tax payers or some specified expenditures. The Government of India permits these payments as deductions from gross total income because of following reasons:-

  1. India is a developing country and basic aim of any democratic country is to make sure that every citizen of the country is financially sound. It is also a method for developing the habits of saving among the tax payers. The country also will be solid from finance point of view, automatically.
  2. Normally, these savings are for long terms and investments are made in government institutions, infrastructure companies etc. Therefore, these institutions need not to go for loan from outside country.
  3. Taxpayers get interest on their investment, tax benefits, risk cover of life and good amount in future to meet their social obligations.
  4. There are few expenditures which definitely be allowed as deduction keeping in view the importance of those payments.

DEDUCTIONS ALLOWED FROM GROSS TOTAL INCOME 

FINANCIAL YEAR 2016-17 ONWARDS

U/S 80-C (For Individuals and HUF)

  1. Life Insurance Premium paid for self/wife/husband/child. In case of HUF, life insurance premium paid for any member of HUF.
  2. Premium paid on deferred annuity plan.
  3. Contribution to Provident Fund by income tax payers (Only employees’ contribution).
  4. Deposit with Public Provident Fund up to Rs.1,50,000/=. With effect from 13.05.2005 HUFs are not permitted to open PPF Account. However, accounts already open shall continue till maturity. No extension shall be allowed). Normally the extension is done for another 5 years after completing 15 years. An individual can avail as many as extension in respect of his/her public provident fund account. For example: Mr. X opened a public provident fund account with State Bank of India on 1.4.1999. Accordingly the maturity of this PPF account will be on 31.3.14. Now, if Mr. X wants to extend his PPF account he can extend the same for another 5 years i.e. upto 31.03.19 and can further extend in same manner.
  5. Deposit with Sukanya Samriddhi Account in the name of individual assessee or his girl child or a girl child for whom the assessee is legal guardian up to Rs.150000/= in a year. Interest received under this scheme is totally exempt from income tax. The maturity amount received after the closure of account also will be exempted from income tax. This scheme provides the security for girl child and benefit from income tax.
  6. Investment in National Saving Certificates.
  7. Interest accrued on NSC is deemed to be reinvested. Therefore, accrued interest amount is allowed as deduction under section80-C
  8. Contribution In Unit Link Insurance Plan Of UTI/LIC Mutual Fund
  9. Contribution to a specified pension fund.
  10. Tuition fees whether at the time of admission or thereafter (maximum for two children).
  11. Repayment of loan installment for residential house but any deduction made u/s 24 out of income from house property can not be allowed.
  12. Subscription of equity shares of any Indian public company in infrastructure business.
  13. Fix Deposit with scheduled banks at least for 5 years.
  14. Five year post office time deposit account.

Note: Maximum amount of deduction under above heads will be Rupees one lac fifty thousand only.

U/S 80-CCC (Allowed for individual tax-payers)

If any amount is contributed to Pension Fund of Life Insurance Corporation of India  (Jeevan Suraksha) or of other insurance companies, shall be allowed as deduction.

Note:

  • Maximum amount of deduction of Rs.150000/= is allowed under section 80-CCC.
  • Any amount received under this plan shall be taxable at the time of receipt whether that is bonus, pension, interest or surrender of the plan by the individual concerned or his/her nominee.

U/S 80-CCD(1) (Allowed for individual tax-payers)

Deduction in respect of any amount contributed to Pension Scheme of Central Government.

Note:

  • In case of employee the amount should not exceed 10% of his salary.
  • In case of other individuals the amount should not exceed 10% of his gross total income. With effect from 01.04.17 the amount should not exceed 20% of his gross total income.
  • Any amount received under this plan shall be taxable at the time of receipt in case of individual other than employee. With effect from 01.04.17, the withdrawal from NPS account up to 25% of own contribution by an employee to be exempt.

U/S 80-CCD(1B) (Allowed for individual tax-payers)

An amount deposited by an individual assessee under a new pension scheme subject to a maximum of Rs.50000/=.  (Sec. 80CCD)

Note: The aggregate amount of deduction u/s 80-C, 80-CCC & 80-CCD for Rs.150000/= Is allowed. However, deduction under section 80CCD(1B) (in respect of deposit by the assessee in the new pension scheme up to maximum of Rs.50000/=) shall be available in addition to this limit.

Illustration:

During financial year 2016-17, Mr. X had the following detail relating to his income and payment made in tax saving schemes:-

Income from business                                            Rs.650000/=

Deposited in Public Provident Fund Account         Rs.140000/=

National Saving Certificate purchased                   Rs.20000/=

Fixed deposit with bank for 5 years                        Rs.20000/=

(For tax saving purpose)

Life Insurance Premium paid                                Rs.10000/=

Tution Fees for his son                                          Rs.15000/=

Amount paid in to notified pension scheme          Rs.12000/=

Calculate his taxable income. He is 40 years old.

Solution:

Income from business                                                           Rs.650000/=

Less: Deductions allowed u/s 80-C

Deposited in Public Provident Fund Account         Rs.140000/=

National Saving Certificate purchased                   Rs.20000/=

Fixed deposit with bank for 5 years                        Rs.20000/=

(For tax saving purpose)

Life Insurance Premium paid                                Rs.10000/=

Tuition Fees for his son                                         Rs.15000/=

Amount paid in to notified pension scheme          Rs.12000/=

Total deductions                                                  Rs. 217000/=

Maximum deductions allowed                                         Rs.150000/=

Net Taxable Income                                                              Rs.500000/=

Clarification:  Though, Mr. X invested in to tax saving schemes Rs.217000/= but there is a ceiling limit of Rs.150000/=. That is why he only can claim for Rs.150000/= as deduction under section 80-C during financial year 2016-17.

Illustration: Mr Y had the following details in respect of his income and investment in saving schemed during financial year 2016-17 (Assessment Year 2017-18) as Under:-

Professional Income received                                       Rs.800000/=

He invested in Public Provident Fund Account              Rs.100000/=

Principal amount paid in respect of loan taken

for his residential house                                                  Rs.80000/=

Contributed to New Pension Scheme                            Rs.60000/=

Calculate his net taxable income.

Solution:

Professional Income received                                            Rs.800000/=

Less: deduction under chapter VI-A

A) Deposit Public Provident Fund Account    Rs.100000/=

Repayment of  housing loan                            Rs.80000/=

Total amount                                                   Rs.180000/=

Restricted under section 80-C                                        Rs.150000/=

b) Contributed to New Pension Scheme         Rs.60000/=

Restricted under section 80CCD                                      Rs.50000/=

Net taxable income.                                                           Rs.600000/=

DEDUCTION  OF MEDICLAIM U/S 80-D

FINANCIAL YEAR 2016-17 ONWARDS

(Allowed for individuals and HUF)

  • Medical Insurance Premium or preventive health check up of resident assessee/wife/ or dependent children Rs.25000/=.  (Rs.30000/=, if any member of HUF  is resident senior citizen or in case of individual he/she or his/her spouse is a senior citizen. Senior citizen means the person who has attained  or completed his/her 60 years or more during the current financial year. For example Mr.A was born on 15.07.56. He completed 60 years of his life 15.07.16 i.e. in financial year 2016-17, he will be treated as a senior citizen and he can get deduction for Rs.30000/= for medical insurance from his taxable income.
  • Medical insurance premium or preventive health check up for parents Rs.25000/= (Rs.30000/= if any one is senior citizen 60 years or more).
  • For preventive medical check up maximum amount is allowed Rs. five thousand only. It can be paid through bank or in cash.
  • Amount for health insurance shall be paid by any mode except cash.

Illustration:

Mr. X 45 years old, has the following details in respect of medical expenses during F.Y.2016-17 (Assessment Year 2017-18):-

Medical insurance premium paid for himself                  Rs.15000/=

Preventive health check up for him self                          Rs.7000/=

Medical insurance Premium paid for his wife                  Rs.8000/=

How much amount he can claim as deduction from his income?

Solution:

Mr. X can claim deduction in respect of medical insurance premium and preventive health check up as under:-

Medical insurance premium paid for himself                  Rs.15000/=

Preventive health check up for him self                          Rs.7000/=

Medical insurance Premium paid for his wife                  Rs.8000/=

Gross payment made by him                                          Rs.30000/=

Maximum deduction allowed under section 80-D           Rs.25000/=

Illustration:-

Mr. Y (30 years old) spent the following amount on medical insurance premium and preventive health check up during financial year 2016-17:-

Medical Insurance Premium paid for himself and his wife   Rs.10000/=

Preventive health check up for himself                                  Rs.6000/=

Medical Insurance premium paid for his parents-

(His father is 62 years old and his mother is 57 years old)   Rs.32000/=

Calculate the amount of deduction under section 80 D during financial year 2016-17.

Solution:

Mr. Y can claim following amount as deduction in respect medical expenses from his income as under:

Medical Insurance Premium paid for himself and his wife   Rs.10000/=

Preventive health check up for himself                                  Rs.6000/=

Medical Insurance premium paid for his parents-

(His father is 62 years old and his mother is 57 years old)   Rs.32000/=

Gross payment made by him                                                Rs.48000/=

Deduction allowed                                                              Rs.45000/=

Clarification: Maximum amount of deduction during financial year 2016-17 under section 80-D is allowed in respect of medical insurance premium and preventive health check up  paid for himself or wife or dependent children is Rs.25000/=. For his parents, he can claim another Rs.30000/= in respect of medical insurance premium and preventive health check up, even one of his parent is senior citizen. If both of parents are senior citizen, in that case also Rs.30000/= can be claimed as deduction from his income.

DEDUCTION IN RESPECT OF MEDICAL TREATMENT AND DEPOSIT MADE FOR MAINTENANCE OF HANDICAPPED DEPENDENTS (SECTION 80DD)

FINANCIAL YEAR 2016-17 ONWARDS

These deductions are allowed for resident individual and Hindu Undivided family as under:-

1. Any expenses incurred on one or more dependent disabled person during financial year 2016-17 in respect of his medical treatment or for training or rehabilitation.

2. Any amount deposited under any scheme of Life Insurance corporation of India or other insurance company or Unit Trust of India, for the benefit of dependent disable person.

Disabled Person means the person who has any disability of 40% or more.

Severe Disable Person means the person who has any disability of 80% or more.

Dependent for this deduction means:- In case of individual. Son, daughter, wife, father, mother,  brother, sister, wife’s brother and sister, brother and sister of parents, parents of wife.

In case of Hindu Undivided Family, depended disable person means any member of HUF.

Amount of Deductions Allowed in respect of dependent disable person: The maximum amount of Rs.75000/= can be allowed as deduction from the income of the assessee in respect of expenses incurred or amount deposited as above mentioned. An assessee can claim Rs.75000/= whether he has spent less or more money.

Amount of Deductions Allowed in respect of dependent severe disable person: Maximum amount Rs.125000/= can be claimed whether the assesse has spent more or less money.

For example Mr. X spent Rs.25000/= on medical expenses and he deposited Rs.25000/= Life Insurance Corporation of India under the scheme approved by the Central Government of India on his disabled son. He can claim Rs.75000/= as deduction from his income, though he has not spent lesser amount.

We take another example. Mr. Y spent Rs.85000/= on medical expenses and payment made to Life Insurance Corporation of India on his dependent daughter during financial year 2016-17. He can claim only Rs.75000/= as deduction from his income, though he has spent more money.

Note:

The deduction under section 80DD can be claimed only if the disabled person is wholly dependent on the assessee and has not claimed any deduction under section 80U from his income.

The assessee should furnish a certificate of disability to the assessing authority. The certificate is issued by meditcal officer who is authorized by the central government.

Conditions in respect of deposits made under any scheme for disabled/severe dependent person

1. The assessee nominates either disable dependent or any other person or himself/herself or any trust, to receive the payment under any scheme for the benefit of disabled person.

2. In case of death of the assessee before the assessee, the amount deposited under any scheme,  is paid in lump sum or as annuity for the welfare of the disabled person.

3. In case, if the disable dependent dies before the assessee then any amount received under any scheme by the assessee against which the deduction was claimed, such amount shall be added in the income of the assessee during the year he has received the amount.

Example: Mr. A is disable dependent person on his father Mr.B. Mr. A dies during financial year 2016-17. His father received Rs. 200000/= from Life Insurance Corporation of India under a approved scheme by central government of India. Mr. A was covered under this scheme. In this case, the amount of Rupees two Lakh shall be added in the income of Mr. B during financial year 2016-17.

DEDUCTION IN RESPECT OF MEDICAL TREATMENT UNDER SECTION 80DDB  FINANCIAL YEAR 2016-17  ONWARDS

 First of all please understand the difference between deduction allowed under section 80DD and 80DDB. Deduction under section 80DD are allowed in case of expenses incurred on treatment of  dependent disable person under the Disability Act but the deduction under section 80DDB are allowed in respect of expenses incurred by assessee on himself or on a dependent person and in case of HIndu Undivided  Family, any member of that particular HUF in respect of some specified diseases.

Deduction Allowed:

1. Maximum amount of deduction under section 80DDB, allowed, is Rupees forty thousand or actual amount paid  whichever is less.

2. In case of the senior resident person, the amount of deduction shall be allowed as actual amount spent or Rupees sixty thousand, whichever is less. Senior  citizen means who has completed 60 years of age during the relevant financial year.

3. In case of very senior citizen who is 80 or more, Rs. 80000/= or actual amount which ever is less.

Conditions for Availing the Above Deduction:-

1. The amount of deduction shall be reduced by the amount received by assessee under any insurance cover.

2. Assessee has to furnish the medical certificate to the income tax department in respect of the disease from the prescribed authority.

Illustration:

Mr. X is 62 years old and is suffering with a specified disease. he spent Rs.85000/= on the treatment of his disease during the financial year 2016-17. He received from insurance cover Rs.25000/=

Calculate the amount of deduction under section 80DDB.

Solution:

Total expenses incurred by Mr.X                                           Rs.85000/=

Maximum Limit of allowable deduction                                 Rs.60000/=

Less: Amount received from insurance company                Rs.25000/=

Amount can be claimed as deduction                                   Rs.35000/=

Note: Mr. X is a senior citizen, that is why he can claim maximum amount of Rs.60000/=. Out of which he received Rs.25000/= from insurance company. Therefore, balance amount of Rs.35000/= can be claimed as deduction under section 80DDB.

Deduction in Respect of Interest on Loan Taken for Higher Education (U/S 80-E)

Financial Year 2016-17  onwards

Allowable to individual assessee only.

Interest on loan taken from financial institution or any approved charitable institution or from any other institution as approved by income tax department for higher education loan purpose for himself/spouse and children and for any other children for whom the assessee is a legal guardian.

Notes:  Any amount of interest paid by the assessee, will be allowed as deduction from taxable income for a maximum of 8 years beginning from the year in which payment of interest on the loan begins or till the interest is paid in full, whichever is earlier.

Higher Education means any course or study, pursued after passing senior secondary examination or equivalent.

Illustration:

Mr. Y took loan for Rs.500000/= 10% per year on 01.04.16 for the higher study of his son. He paid an interest on loan for Rs.50000/=. His total income for the financial year 2016-17 was Rs.400000/=. Calculate his taxable during financial year 2016-17.

Solution:

Total Income of Mr. Y                                                   Rs.400000/=

Less: Interest paid for loan taken for higher-

study of his son during financial year 2014-15             Rs.50000/=

Net Taxable Income of Mr. Y                                         Rs.350000/=

Deduction in Respect of Interest Paid on Loan Taken for Residential House U/S 80EE Financial Year 2016-17  onwards

Allowable to an individual assessee who has taken a loan from any bank/housing finance company for the purpose of acquiring a residential house property.

Amount of deduction:- Amount of interest payable on such loan subject to a maximum limit of Rs.50000/=.

Conditions to avail the deduction

1. Interest is allowed to an individual assesse only.

2. Loan must be relating to residential house only.

3. Deduction under section 80EE is allowed only in respect of the loan sanctioned during the period of 01.04.16 to 31.03.17.

4. Maximum amount of loan should be Rupees Thirty Five Lakhs only.

5. The value of residential house should not be more than Rupees 50 lakhs.

6. The assessee must not have any other residential house property on the date of sanction of loan.

7. The interest claimed under section 80EE can not be claimed under any other provision for the same or other assessment year. For example if the interest is claimed under section 80EE then it can not be claimed under income from housing property.

DEDUCTIONS IN RESPECT OF DONATIONS  U/S 80G

FINANCIAL YEAR 2016-17 onwards

For claiming deduction in respect of donations made during the financial year 2016-17, following points must be kept in mind:-

1. The deduction for donation made, are allowed to all type of tax payers.

2. The Institutions or Trusts or any one else, must be having a valid registration certificate under section 80G at the time of accepting the donations. In other words, you must pay the donations to those persons who are registered under section 80G of Income Tax Act to claim the deduction from your income.

3. Proper receipt must be obtained for the donation amount from the person whom you are paying the amount.

4. If the amount of the donation is more than Rs.10000/= then it must not be paid in cash otherwise it can not be allowed as deduction from gross total income. with effect from 01.04.17 the limit for cash donation under section 80G reduced to Rs.2000/=

5. The If the aggregate of donations made by the assessee in certain cases exceeds 10% of gross total income, such excess shall not qualify for deduction.

6. Gross total income for this purpose shall be reduced by following amounts:-

  • deductions allowable u/s 80-C to 80-U (except 80-G)
  • Income on which tax is not payable
  • Long term capital gains
  • Short term capital gains taxable at special rate u/s 111-A

7. The tax payer can claim 100% deduction or 50% deduction in case of donation made to certain notified institutions.

The qualifying amount of deductions of donations are classified in 4 categories as under:-

CATEGORY NO. 1:- You can claim 100% deduction in respect of the amount of donation paid to the certain notified institutions even the amount of donation is more than 10% of your gross total income.

Example: You paid Rs.50000/= as donation to a notified institution against which you can claim 100% deduction. Your gross total income is Rs.300000/=. You can claim Rs.50000/= as deduction under section 80G though you are exceeding the qualifying amount i.e. 10% of Rs.300000/=.

Following  are the name of those institutions against which you can claim 100% deductions irrespective of qualifying amount :-

  • National Defence Fund
  • Prime Minister’s National Relief Fund.
  • Armenia Earthquake Relief Fund.
  • Africa (Public Contribution India) Fund.
  • National Children’s Fund.
  • National Foundation for Communal Harmony.
  • An approved University or Educational Institution of National Eminence.
  • Chief Minister Earthquake  Relief Fund, Maharashtra.
  • Any Fund Set up by the Government of Gujrat Exclusively for Providing Relief to Earthquake Victims.
  • A Zila Saksharata Samiti Constituted for Improvement of Primary Education and Literacy in Villages and Towns.
  • The National Blood Transfusion Council or any State Blood Transfusion Council.
  • Any State Government Fund for Providing Medical Relief to the poor.
  • The Army Central Welfare Fund/ Indian Naval Benevolent/ Air Force Central Welfare Fund.
  • The Andhra Pradesh Chief Minister’s Cyclone Relief Fund,1996..
  • The National Illness Assistance Fund.
  • The Chief Minister’s Relief Fund/ Lieutenant Governor’s Relief Fund or any State or Union Territory.
  • The National Sports Fund.
  • The National Cultural Fund.
  • The Fund for Technology Development and Application.
  • The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities.
  • Swachh Bharat Kosh.
  • The Clean Ganga Fund. (Effective from Financial year 2014-15)
  • The National Fund for Control of Drug Abuse

CATEGORY NO. 2:- You can claim 50% deduction in respect of the amount of donation paid to the certain notified institutions even the amount of donation is more than 10% of your gross total income.

Example: You paid Rs.80000/= as donation to a notified institution against which you can claim 50% deduction. Your gross total income is Rs.300000/=. You can claim Rs.40000/= as deduction under section 80G though you are exceeding the qualifying amount i.e. 10% of Rs.300000/=.

Following  are the name of those institutions against which you can claim 50% deductions irrespective of qualifying amount :-

  • Jawahar Lal Nehru Memorial Fund.
  • Prime Minister’s Drought Relief Fund.
  • Indira Gandhi Memorial Trust.
  • Rajiv Gandhi Foundation.
  • Donation During 26.01.2001 to 30.09.2001 for Providing Relief to Earthquake Victims in Gujrat, to any trust, Institution or Fund Established for a Charitable Purpose u/s 80G(5C).

CATEGORY NO. 3:- You can claim 100% deduction in respect of the amount of donation paid to the certain notified institutions subject to a maximum limit of 10% of your gross income.

Example: You paid Rs.50000/= as donation to a notified institution against which you can claim 100% deduction. Your gross total income is Rs.300000/=. You can claim Rs.30000/= as deduction under section 80G because qualifying amount is Rs.30000/= i.e. 10% of your Gross Total Income of Rs.300000/=.

Following  are the name of those institutions against which you can claim 100% deductions subject to the qualifying amount i.e. 10% of your Gross Total Income:-

  •  The Government or any Approved Local Authority, Institution or Association for Promoting Family Planning.
  • Indian Olympic Association or any other Notified Association/Institution for Development of Infrastructure of Sponsorship of Sports and Games in India (Donation by Company).

CATEGORY NO. 4:- You can claim 50% deduction in respect of the amount of donation paid to the certain notified institutions subject to a maximum limit of 10% of your gross income.

Example: You paid Rs.50000/= as donation to a notified institution against which you can claim 50% deduction. Your gross total income is Rs.300000/=. You can claim Rs.25000/= as deduction under section 80G because qualifying amount is Rs.30000/= i.e. 10% of your Gross Total Income of Rs.300000/=.

Following  are the name of those institutions against which you can claim 50% deductions subject to the qualifying amount i.e. 10% of your Gross Total Income:-

  • Any Fund or Institution Established in India for a Charitable Purpose as is referred to u/s 80G(5).
  • Any Fund or Institution Established in India for a Charitable Purpose Which Incurs Expenditure, Maximum 5% of Its Income for a Religious Purpose u/s 80G(5B)
  • Government or Local Authority for Charitable Purposes (Other than Family Planning).
  • An Authority for Town Planning and Housing etc,
  • Any Corporation Established by the Central/State Government for Promoting the Interest of the Member of a Minority Community.
  • Any Temple, Mosque, Gurdwara, Church or Other Place of Worship Which is of Historic, Archaeological or Artistic Importance.

DEDUCTION IN RESPECT OF RENT PAID  U/S 80GG

FINANCIA YEAR 2016-17 ONWARDS

(Allowed for Individuals only)

This deduction is allowed to all individual whether employed or otherwise, for rent paid for residential accommodation subject to following conditions:-

  1. He/she, spouse, or minor child does not own any residential house at the place of employment or business or profession.
  2. The assessee does not any residential house at any other place which is valued under self-occupied property.

Least of the following amount will be allowed as deduction:-

  1. Rent paid minus 10% of his/her total income or
  2. Rs.5000/= per month or
  3. 25% of total income

Note: Total income here means that income after deducting all the deductions from section 80-C to 80-U except u/s 80-GG and also will be reduced by short term capital gain and long term capital gains.

DONATION TO POLITICAL PARTIES U/S 80GGA

FINANCIAL YEAR 2016-17ONWARDS

(Allowed to all tax-payers)

Any amount of donation paid to any political party who is registered under section 29-A of Representation of the People Act,1951 or an electoral trust.

100% deduction is allowed for any amount paid as donation to such political parties.

Condition: Any donation made in cash can not be allowed as deduction under this section.

DEDUCTION IN RESPECT OF ROYALTY INCOME OF AUTHORS U/S 80QQB

FINANCIAL YEAR 2016-17 ONWARDS

(Allowed for individual being an author or joint author)

  • 100% Deduction will be allowed in respect of royalty income etc. received subject to maximum of Rs.300000/=.
  • In case of royalty or copyright fees is not received in lumpsum during the relevant financial year then the amount of deduction shall be restricted to 15% of the value of the books sold.
  • Book means a work of literacy, artistic or scientific nature.
  • The income from newspapers, brochures, commentaries, diaries, guides, journals, magazines and other publications of similar type is not allowed for deduction under this section.

DEDUCTION IN RESPECT OF ROYALTY INCOME ON PATENT U/S 80RRB

FINANCIAL YEAR 2016-17 ONWARDS

  • The deduction shall be allowed to any resident individual who is registered under the Patent Act, 1970.
  • The deduction can not be allowed to to the assignees or mortgagees in respect of all or any rights in the patent.
  • 100% Deduction will be allowed in respect of royalty received from working or use of the patent subject to maximum of Rs.300000/=.

DEDUCTION IN RESPECT OF INTEREST RECEIVED FROM SAVING ACCOUNT

U/S 80TTA

FINANCIAL YEAR 2016-17 ONWARDS

  • Deduction is allowed to resident individuals or Hindu Undivided Family only, in respect of interest received  from saving bank accounts from any bank including co-operative banks and post office.
  • The maximum amount of deduction under this section is allowed Rs.10000/=.
  • This deduction is not allowed in respect of interest from fix deposits with banks.

Example-1: Mr. X earned total interest from saving bank account from banks and post office for Rs.22500/= during financial year 2016-17. The amount of deduction under this section shall be allowed maximum for Rs.10000/= from his income.

Example-2: Mr. Y received interest from saving account for Rs.5400/= and from fixed deposits Rs.4000/= during financial year 2016-17. In this case,  the amount of deduction under section 80TTA shall be allowed only Rs.5400/=. The interest received form fixed deposit shall not be allowed as deduction under this section.

DEDUCTION IN RESPECT OF DISABLED PERSON  U/S 80U

FINANCIAL YEAR 2016-17 ONWARDS

During financial year 2016-17 the amount of deduction under this section is increased as under:

  • Deduction under this section is allowed to resident individual suffering from any disability for Rs.75000/= from his/her income.
  • In case of an individual  suffering with severe disability a deduction of Rs.125000/= will be allowed from his/her income.
  • The assessee must furnish the certificate of disability from the authorized doctor.

FEW ILLUSTRATIONS IN RESPECT OF DEDUCTIONS CLAIMED UNDER CHAPTER – VI-A

Illustration1.

Mr. X who is 66 years old, has the following details of income and savings during financial year 2016-17 (assessment year 2017-18) :-

Net Income from Business Rs.600000/=

Bank interest received from fixed deposits Rs.40000/=

Dividend received mutual funds Rs.20000/=

Invested in Public Provident Fund Rs.100000/=

NSC purchased for Rs.20000/=

Life Insurance Premium paid for self Rs.40000/=

Mediclaim Insurance premium paid Rs.25000/=

Accrued interest on NSC Rs.6000/=

Solution:

COMPUTATION OF TAXABLE INCOME OF MR. X

INCOME FROM BUSINESS & PROFESSION
INCOME FROM BUSINESS 600000
INCOME FROM OTHER SOURCES
BANK INTEREST FROM FIXED DEPOSITS

40000

ACCRUED INTEREST ON NSC

6000

DIVIDEND FROM MUTUAL FUNDS
(EXEMPT FROM TAX)

20000

0

 46000
GROSS TOTAL INCOME

646000

LESS: DEDUCTION CHAPTER VI-A
U/S 80-C
DEPOSIT WITH PPF

100000

NSC PURCHASED

20000

LIFE INSURANCE PREMIUM

40000

ACCRUED INTEREST ON NSC
(RE-INVESTMENT)

6000

TOTAL INVESTMENT U/S 80-C

166000

DEDUCTION RESTRICTED TO

150000

U/S 80-D
MEDICLAIM INSURANCE

25000

DEDUCTION RESTRICTED TO

25000

175000

NET TAXABLE INCOME

471000

Illustration:

Calculate taxable income of Mr. X for financial year 2016-17 (assessment year 2017-18) who is 68 years old, from the following details:-

PARTICULARS

AMOUNT

(In Rupees)

Net Income from Business (Proprietorship Firm)

500000

Bank interest received on fixed deposits

40000

Interest received from Saving Bank Accounts

15000

Dividend received mutual funds

22000

NSC purchased

15000

Deposited in Public Provident Fund Account

150000

Mediclaim Insurance premium paid

26000

Accrued interest on NSC

6000

Solution:

COMPUTATION OF TAXABLE INCOME OF MR. X

PARTICULARS AMOUNT AMOUNT AMOUNT
  (In Rupees) (In Rupees) (In Rupees)
INCOME FROM  BUSINESS
Profit from proprietorship firm

500000

INCOME FROM OTHER SOURCES
Bank interest received on fix deposits

40000

Interest received from Saving Bank Accounts

15000

Dividend received from Mutual Funds

22000

0

Accrued Interest on NSC

6000

61000

GROSS TOTAL INCOME

561000

LESS: DEDUCTIONS UNDER CHAPTER VI-A

U/S 80-C

Investment in NSC

15000

Deposited in Public Provident Fund

150000

Accrued Interest on NSC

6000

Total investment u/s 80-C

171000

Deduction u/s 80-C restricted to

150000

U/S 80-D

Medical Insurance Premium paid

26000

Deduction u/s 80-D  restricted to

26000

U/S 80-TTA

Interest from Saving Bank Accounts

10000

Gross Deductions Allowed u/s Chapter VI-A

186000

NET TAXABLE INCOME

375000

Note:

  1. Mr X is Senior Citizen. Therefore, mediclaim insurance premium paid by him shall be allowed for Rs.30000/=
  2. Dividend from Mutual Funds is fully exempted.

Interest from saving bank account is allowed as deduction up to Rs.10000/= under Chapter VI-A from financial year 2012-13 (Assessment Year 2013-14) onward.

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