general deductions (under section 80) chapter 1 general

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GENERAL DEDUCTIONS (Under section 80)

CHAPTER GENERAL DEDUCTIONS

(UNDER SECTION 80)

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The income of an assessee is computed separately after considering the permissible deductions

in each heads. The net income of these heads is aggregating to get Gross Total income. From the

gross Total Income deductions are allowed in respect of certain payments and expenses made and

income received by the assessee.

Income Tax Chapter VI-A Deductions for AY 2020-2021 and FY 2019-2020 (with 80C

Deduction) are explained below. The list of Chapter VI-(Income Tax) Deductions starts with Section

80C and ends with Section 80U. This complete list of Chapter VI-(Income Tax) Deductions for AY

2020-2021 and FY 2019-2020 are provided based on Union Budget 2019introduced by the Central

Government.

The aggregate amount of Deduction U/S 80C to 80U cannot exceed the Gross Total income.

The deductions are available only to the assessees where the gross total income is positive. If

however, the gross total income is nil or negative, the question of any deduction from the gross total

income does not arise.

For this purpose, the expression 'Gross Total Income' means the total income of the assessee

computed in accordance with the provisions of the Income-Tax Act, before making any deduction

under Chapter VI-A (Income Tax), i.e., the aggregate income computed under each head, after

giving effect to the provisions for clubbing of income and set off of losses, is known as "Gross Total

Income".

Basic Rules Governing Deductions Under Sections 80C to 80U

The following essential rules have to be kept in mind while calculating deductions under section

80C to 80U:

1. Deductions not available from: Deductions under chapter VIA are not available from :

• Long-term capital gain;

• Short term capital gain covered u/s 111A (i.e., STCG on which STT is charged); and

• Casual income like winning from lotteries, races, etc.

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2. Limit of deduction: The aggregate amount of deduction under chapter VIA cannot exceed

Gross Total Income of the assessee excluding -

• Long term capital gain;

• Short term capital gain covered u/s 111A;

• Casual income like winning from lotteries, card-games, horse races, etc.; and

• Income referred in Sec.115A, 115AB, 115AC, 115ACA, etc.

3. Deduction must be claimed: Deduction under chapter VIA shall be available only if the

assessee claims for it.

4. Double deduction not permissible: Where deduction under any section of chapter VIA has

been claimed then the same shall not qualify for deduction in any other section.

Section 80C

Section 80C provides for a deduction from the Gross Total Income, of savings in

specified modes of investments. The deduction under section 80C is available only

to an individual or HUF. The maximum permissible deduction under section 80C is

Rs.1,50,000.

1. Life insurance premium policy: Premium paid on insurance on the life of the

individual, spouse or any child (minor or major) and in the case of HUF, any

member thereof. This will include a life policy and an endowment policy. Life

insurance premium paid for parents (father / mother / both) or in-laws is not

eligible for deduction under section 80C. If paying premium for more than one

insurance policy, all the premiums can be included. It is not necessary to have the

insurance policy from Life Insurance Corporation (LIC) - even insurance bought

from private players can be considered.

Deduction will be allowed only for premiums upto a maximum of 10% (15% if

insured is disabled) of the sum assured for policy issued on or after April 1, 2013

(10% in 2012-13 and 20% if insured before 1st April 2012).

2. Premium paid in respect of a contract for deferred annuity: Premium paid to effect and

keep in force a contract for a deferred annuity on the life of the individual and/or

his or her spouse or any child (However, contract does not contain an option to

receive cash payments in lieu of annuity).

3. Any sum deducted from the salary payable of a Government employee for securing a

deferred annuity or making provision for his wife/children [qualifying amount limited to

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20% of salary]

4. Contribution by an individual (not being repayment of loan) to SPF/PPF/RPF:

Contributions to any provident fund to which the Provident Funds Act, 1925

applies, Superannuation Fund and recognized provident fund. Contribution made

to any Public Provident Fund established under the Public Provident Fund Scheme,

1968 also qualifies for deduction under section 80C. Such contribution can be made

in the name of the individual, his spouse and any child of the individual; and any

member of the family, in case of a HUF. The maximum limit for deposit in PPF is

Rs. 1,50,000 in a year.

5. Any sum paid an individual for NSC VIII and IX issue and deposit in Sukanya Samruddhi

Scheme Account. The accrued interest thereon is deemed to be reinvested and is eligible for

deduction.

6. Contribution by an individual or HUF to Unit Linked Insurance Plan (ULIP) of

UTI in the name of self, spouse or any child (any member in the case of HUF) and

such Unit Linked Insurance Plan of LIC Mutual Fund (Dhanaraksha).

7. Subscription to any deposit scheme or contribution to any pension fund set up

by the National Housing Bank i.e., National Housing Bank (Tax Saving)

Term Deposit Scheme, 2008.

8. Repayment of housing loan including stamp duty, registration fee and other

expenses: Any payment made towards the cost of purchase or construction of a

new residential house property. The deduction is available in respect of:

a. Any payment by way of instalment or part payment of the amount due to Housing

Board, Co-operative Society, etc.

b. Any repayment of loans borrowed by the assessee from Government, Bank or

LIC of India or any public company formed in India for providing long term

finance for the construction or purchase of residential house.

c. Stamp duty, registration fee and other expenses incurred for transferring such

house to the assessee.

(1) Payments made towards the cost of land, of any addition, renovation or repairs

of the house carried out after its completion or any expenditure in respect of

which deduction is allowable under section 24 are not qualified.

9. Subscription to notified schemes of

(a) Public sector companies engaged in providing long-term finance for purchase/

construction of houses in India for residential purposes

(b) Authority constituted under any law for satisfying need for housing accommodation or

for planning, development or improvement of cities, towns and villages, or for both.

10. Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university,

college, school or other educational institution situated in India, for full time education of any

2 of his/her children.

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11. Sum paid towards notified annuity plan of LIC or other insurer approved by IRDA.

12. Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity

Linked Saving Scheme, 2005).

13. Contribution by an individual to any pension fund set up by any mutual fund which is referred

to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund).

14. Subscription to equity shares or debentures forming part of any approved eligible issue of

capital made by a public company or public financial institutions.

15. Subscription to any units of any approved mutual fund referred to in section 10(23D), provided

amount of subscription to such units is subscribed only in 'eligible issue of capital' referred to

above.

16. Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is

in accordance with a scheme framed and notified.

17. Subscription to notified bonds issued by the NABARD.

18. Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to

certain conditions).

19. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject

to certain conditions)

Section 80CCC: Deductions for contributions made to certain pension funds

Section 80CCC of the Income Tax Act, 1961, allows individuals to claim tax deductions for

contributions made to certain pension funds. This section provides tax deduction up to a maximum

of Rs. 1,50,000 during a year on costs incurred in buying a new policy or continuing an existing plan

that pays pension or a periodical annuity (as referred to in Section 10(23AAB)). However, the

pension amount received, including interest or bonus accrued on the annuity, is taxable during the

year of receipt. An essential point to be noted is that the deduction limit under Section 80CCC is

clubbed with the limit of section 80C and section 80CCD - which means the overall tax deduction

limit that can be claimed is Rs. 1,50,000.

Illustration 01.

From the following particulars furnished by an assessee. Compute deduction U/S 80.

i. PPF deposits .80000

ii. Interest accrued on NSC .7800

iii. LIC premium(own life) .12600, wife's life .7400

iv. ULIP .6000

v. Interest received on NSC matured .4520

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vi. 5 years post office time deposit .12000

vii. Repayment of housing loan .26000

viii. Medical insurance premium 6800

Solution:

Computation of Deduction u/s 80C

Particulars Amount

`

LIC premium(own life) and wife’s life 20000

ULIP 6000

PPF Deposits 80000

Post of?ce time deposits 12000

Interest accrued on NSC 7800

Repayment of Housing loan( principal amount) 26000

Total 151800

Allowable limit is .150000

Section 80CCD: Deduction for Contribution to Pension Account

Employee can contribute to Government notified Pension Schemes (like National Pension

Scheme - NPS). The contributions can be up to 10% of the salary (salaried individuals) and

50,000 additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.

Employee's contribution - Section 80CCD(1): As per Budget 2017-18, the self-employed

(individual other than the salaried class) can now contribute up to 20% of their gross income and

the same can be deducted from the taxable income under Section 80CCD (1) of the Income Tax

Act, 1961, as against current 10%. To claim this deduction, the employee has to contribute to Govt.

recognized Pension schemes like NPS. The 10% of salary limit is applicable for salaried individuals

only and Gross income is applicable for non-salaried. The definition of Salary means Basic +

Dearness Allowance.

Employer's contribution - Section 80CCD (2): If employer contributes to Pension Scheme,

the whole contribution amount (14% of salary) can be claimed as tax deduction under Section

80CCD (2).

Deduction for pension scheme - section 80CCD(1B): Additional exemption up to 50,000

in NPS is eligible for income tax deduction. Contributions to Atal Pension Yojana are also

eligible. Deduction is allowed on contribution up to 50,000. The additional tax deduction of Rs

50,000 u/s 80CCD (1b) is over and above this 1.5 Lakh limit.

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Section 80CCE: Limit on Deduction Under Sections 80C, 80CCC and 80CCD

The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD

[other than deduction in respect of employer’s contribution and additional deduction u/s 80CCD(1B)]

shall not exceed ` 1,50,000.

Specimen to calculate deductions U/s 80C, 80CCC and 80CCD

Particulars Amount

Deduction u/s 80C ****

Deduction u/s 80C ****

Deduction u/s 80CCD [Other than deduction in respect of Employer’s

Contribution and additional deduction u/s 80CCD(1B)]

****

Total [Restricted to maximum of ` 1,50,000 u/s 80CCE] *****

Add: Contribution to the pension scheme by any individual allowable u/s

80CCD(1B) [Sub. to maximum of ` 50,000/-]

****

Add: Employer’s contribution to New Pension System referred to in Sec. 80CCD [Subject to max. of 10% of salary]

****

Deduction available u/s 80C, 80CCC & 80CCD *****

Illustration 02.

Mr. Narendra completed his studies on 1-04-2019 and was immediately employed by the

Government on the following terms –

Basic Salary Rs. 20,000 p.m.

DA Rs. 5,000 p.m. (forming a part of retirement benefit)

Bonus Rs. 40,000

During the year, his employer contributed Rs. 33,000 to the pension scheme being notified

u/s 80CCD of the Income Tax Act, 1961. Narendra also contributed similar amount. His income

from house property is Rs. 50,000. During the year he contributed Rs. 15,000 to pension plan of

LIC, to PPF

Rs. 1,00,000 and paid LIC premium of Rs. 16,000 (Policy value Rs. 1,20,000). Compute his total income.

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Solution :

Computation of total income of Mr. Narendra for the A.Y.2020-2021

Particulars Amount Amount

Income from Salaries:

Basic (Rs. 20,000 × 12) 2,40,000

Bonus 40,000

Dearness allowances (Rs. 5,000 × 12) 60,000

Employer’s Contribution to pension scheme 33,000

Gross Salary 3,73,000

Less: Standard Deduction u/s 16(ia) 40,000 3,33,000

Income from house property 50,000

Gross Total Income (GTI) 3,83,000

Less: Deduction u/s

80C - LIC premium to maximum of 10% of Policy value

(i.e. 10% ` 1,20,000) 12,000

- Contribution in PPF 1,00,000 1,12,000

80CCC (Pension plan of LIC) 15,000

80CCD (Notified pension scheme)

- Own contribution being lower of:

a)Amount contributed i.e. Rs. 33,000

b)10% of (Basic and DA forming part of retirement

benefit), i.e., 10% of (Rs. 2,40,000 + Rs.60,000)

30,000

1,57,000

As per sec.80CCE, total deduction u/s 80C + 80CCC + 80CCD

(other than employer’s contribution) cannot exceed Rs. 1,50,000

1,50,000

80CCD(1B): Contribution to NPS (Amount not claimed above subject to max. of Rs. 50,000/-)

10,000*

- Employer contribution

mount contributed i.e. ` 33,000

0% of (Basic and DA forming part of retirement benefit), i.e., 10% of

(` 2,40,000 + ` 60,000)

30,000 1,90,000

Total Income 1,93,000

Note: Total Amount contributed to NPS by Narendra is Rs. 33,000. Of which only Rs.

23,000 is claimed u/s 80CCD to get maximum qualified amount of Rs. 1, 50,000. Remaining amount

of Rs. 10,000 is claimed u/s 80CCD(1B).

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Illustration 03.

Mr. Vivek is a Govt. Employee with an annual basic salary of .6,00,000, .2,00,000 as DA

and .120000 as taxable allowances. His other incomes are .100000. the Govt contributes 10% of

his basic towards National Pension Fund while he contributes 10%. He paid . 25000 as LIC

premium, 55,000 as principal amount of Housing loan and deposits . 60,000 in PPF. Compute his

total income.

Solution:

Computation of Total income of Mr. Vivek


Income from Salaries:

Basic 6,00,000

Dearness allowances 2,00,000

Taxable Allowances 1,20,000

Employer’s Contribution to pension scheme (10% of Basic + DA i.e., 6,00,000+2,00,000) 8,00,000 × 10/100

80,000

Gross Salary 10,00,000

Less: Standard Deduction u/s 16(ia) 40,000 9,60,000

Other incomes 1,00,000

Gross Total Income (GTI) 10,60,000

Less: Deduction u/s

80C - LIC 25,000

PPF 60,000

Housing Loan Principal 55,000

1,40,000

80CCD (1) NPS (10% of Basic + DA i.e., 6,00,000+2,00,000) 80,000

2,20,000

As per sec.80CCE, total deduction u/s 80C + 80CCC + 80CCD (other than employer’s contribution) cannot exceed Rs. 1,50,000

1,50,000

80CCD(1B): Contribution to NPS (Amount not claimed above subject to max. of Rs. 50,000/-) (80,000-10,000 = 70,000)

50,000*

- Employer contribution 80,000 2,80,000


Note: Total Amount contributed to NPS by Vivek is Rs. 80,000. Of which only Rs. 10,000 is

claimed u/s 80CCD to get maximum qualified amount of Rs. 1,50,000. Remaining amount is claimed

u/s 80CCD(1B).

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Note:

1. 80C, 80CCC and 80CCD(1) together can't exceed Rs. 1,50,000.

2. Any amount of contribution to NPS subject to a maximum of Rs. 50,000 is deductible u/s

80CCD(1B).

3. Any amount of contribution by employer to NPS is deductible U/S 80CCD(2) is over and

above Rs. 1,50,000 qualified amount as per solution 80 CCE.

Section 80CCG: Investment in Equity Savings

Under this section deduction is available for an amount invested by specified resident individuals on listed

shares as per Rajiv Gandhi Equity savings Scheme subject to certain conditions and limits. The

amount of deduction available is 50% of the total investment or . 25,000 whichever is less. Specified

resident individuals (new retail investors) can claim this deduction. Lock in period is 3 years. From

1st April 2017 this scheme is phased out.

Section 80D: Deduction for premium paid for Medical Insurance This section allows deduction in respect of insurance premium paid by an individual or HUF is allowed in respect of the following payments:

1. premium paid to effect or keep in force an insurance on the health of self, spouse

and dependant children or

2. any contribution made to the Central Government Health Scheme (CGHS) or

3. such other health scheme as may be notified by the Central Government.

Contributory Health Service Scheme of the Department of Atomic Energy has been

notified by the Central Government.

Quantum of deduction: The limit for the same is Rs. 25 000 (Rs. 50,000 in the case of

Senior citizen) for self, spouse, and dependent children. In case of HUF the deduction is given

up to Rs. 25,000/50,000 on health of family member. An additional eduction of Rs. 25,000

(Rs. 50,000 if the parent is a Senior citizen) is allowed for parents. This additional deduction

is not available in the case of HUF.

Deduction in respect of payment towards preventive health check-up: Deduction to

the extent of Rs. 5,000 shall be allowed in respect payment made on account of

preventive health check-up of self, spouse, dependant children or parents made during

the previous year. However, the said deduction of Rs. 5,000 is within the overall limit

of Rs. 25,000 or Rs. 50,000.

Deduction for medical expenditure incurred on senior citizens: any payment made towards medical expenditure of senior citizens i.e., person of the age of 60 years or more and

resident in India, who are unable to get health insurance coverage, deduction of up to

Rs. 50,000 would be allowed, if no payment has been made to keep in force an insurance on the health of such person(s).

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Cash payments are not available for deduction under this section. However, cash payment for

preventive health check-up can be made.

Note: In case the individual or any of his family members is a senior citizen, the

aggregate of deduction, in respect of payment of premium, contribution to CGHS and

medical expenditure incurred, cannot exceed Rs. 50,000.

In case one of the parents is a senior citizen who is covered under mediclaim policy and

another is also a senior citizen but not covered under mediclaim policy, the aggregate of

deduction, in respect of payment of medical insurance premium and medical expenditure

incurred, cannot exceed Rs. 50,000.

Illustration 04.

Mr. Namo, aged 58 years, paid medical insurance premium of Rs. 20,000 during the

P.Y.2019-20 to insure his health as well as the health of his spouse. He also paid

medical insurance premium of Rs. 47,000 during the year to insure the health of his

father, aged 78 years, who is not dependant on him. He contributed Rs. 3,600 to

Central Government Health Scheme during the year. He has incurred Rs. 3,000 in

cash on preventive health check-up of himself and his spouse and Rs. 4,000 by cheque

on preventive health check-up of his father. Compute the deduction allowable under

section 80D for the A.Y. 2020-21.

(Source: ICAI Question Paper)

Solution:

Deduction allowable under section 80D for the A.Y.2020-21

Particulars Actual

Payment

Rs.

Maximum

deduction

allowable

Rs.

A. Premium paid and medical expenditure incurred for self

and spouse

(i) Medical insurance premium paid for self and spouse 20,000 20,000

(ii) Contribution to CGHS 3,600 3,600

(iii) Exp. on preventive health check-up of self & spouse 3,000 1,400

26,600 25,000

B. Premium paid and medical expenditure incurred for father,

who is a senior citizen

(i) Mediclaim premium paid for father, who is over 60 years of age 47,000 47,000

(ii) Expenditure on preventive health check-up of father 4,000 3,000

51,000 50,000

Total deduction under section 80D (Rs. 25,000 + Rs. 50,000) 75,000

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Notes:

1. The total deduction under A.(i), (ii) and (iii) above should not exceed Rs.

25,000. Therefore, the expenditure on preventive health check-up for self and

spouse would be restricted to Rs. 1,400, being (Rs. 25,000 – (Rs. 20,000 + Rs.

3,600)).

2. The total deduction under B. (i) and (ii) above should not exceed Rs. 50,000.

Therefore, the expenditure on preventive health check-up for father would be

restricted to Rs. 3,000, being (Rs. 50,000 – Rs. 47,000).

3. In this case, the total deduction allowed on account of expenditure on preventive

health check-up of self, spouse and father is Rs. 4,400 (i.e., Rs. 1,400 + Rs.

3,000), which is less than the maximum permissible limit of Rs. 5,000.

Illustration 05.

Mr. Ram Prasad, an age of 40 years has made the following payments during the financial

year 2019-2020:

1) Payment of medical insurance premium on his policy of . 15,000.

2) Payment of medical insurance premium on policy of his spouse . 4,000.

3) Payment of medical insurance premium on policy of his younger daughter who is dependent

on him . 3,000.

4) Payment of medical insurance premium on policy of his elder daughter who is self-employed

and not dependent on him . 5,000.

5) Payment of medical insurance premium on policy of his parents (resident and aged 68 years),

. 18,000 on policy of his father and . 18,000 on policy of his mother. Both are dependent on

the brother of Mr. Raja.

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6) Payment of Rs. 3,000 towards expenditure on preventive health check-up (for his own check-

up and check-up of his wife).

Advice Mr. Ram regarding the admissible deduction under section 80D for the AY 2019-20.

Solution:

Considering the above provisions, the deduction in case of Mr. Ram Prasad will be as

follows:

1) Medical insurance premium on his policy of . 15,000 will qualify for deduction.

2) Medical insurance premium on policy of his spouse of . 4,000 will qualify for deduction.

3) Medical insurance premium on policy of Rs. 3,000 of his younger daughter who is dependent

on him will qualify for deduction. However, premium of Rs. 5,000 on policy of elder daughter

who is not dependent on him will not qualify for deduction.

4) Medical insurance premium on policy of his parents of ` 36,000 will qualify for deduction

(being Senior Citizens).

5) Expenditure on preventive health check-up will also qualify for deduction, but, it will be

restricted to Rs. 3,000 only (as the overall limit of deduction under section 80D in respect of

assessee and his family cannot exceed Rs. 25,000).

Thus, total deduction under section 80D will amount to Rs. 22,000 (15000+4000+3000) on

account of expenditure on premium paid in respect of his own health, health of his spouse and

dependent daughter and Rs. 50,000 in respect of premium paid on policy of his parents.

Deduction on account of expenditure on preventive health check-up will be Rs. 3,000.

Total deduction under section 80D will amount to Rs. 61,000 (Rs. 22,000 + Rs. 36,000 +Rs. 3,000)

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Illustration 06.

Mr. Azad aged 59 years, paid medical insurance premium of Rs. 22,000 during the

P.Y.2019-20 to insure his health as well as the health of his spouse and dependant

children. He also paid medical insurance premium of Rs. 33,000 during the year to

insure the health of his mother, aged 78 years, who is not dependant on him. He

incurred medical expenditure of Rs. 20,000 on his father, aged 81 years, who is not

covered under mediclaim policy. His father is also not dependent upon him. He

contributed Rs. 6,000 to Central Government Health Scheme during the year.

Compute the deduction allowable under section 80D for the A.Y.2020-21.

(Source: ICAI Material)

Solution:

Computation of deduction allowable under section 80D for the

A.Y.2020-21

Particulars Actual

Payment

Rs.

Maximum

deduction

allowable

Rs.

A. Premium paid and medical expenditure incurred for self,

spouse and Children

(i) Medical insurance premium paid for self, spouse and dependant

children

22,000 22,000

(ii) Contribution to CGHS 6,000 3,000

26,600 25,000

B. Premium paid and medical expenditure incurred for father

and mother, who are senior citizens

(i) Mediclaim premium paid for mother, who is over 78 years of age 33,000 33,000

(ii) Medical expenditure incurred for father, who is over 81 years of age and not covered by any insurance

20,000 17,000

53,000 50,000

Total deduction under section 80D (Rs. 25,000 + Rs. 50,000) 75,000

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Illustration 07.

Mr. Vinod (31 years) has incurred following expenses:

Particulars Amount

Mediclaim Insurance premium paid for himself 9,000

Mediclaim Insurance premium paid for spouse 8,000

Mediclaim Insurance premium paid for dependent children 6,000

Mediclaim Insurance premium paid for father (62 years) 18,000

Preventive health-check up expenditure for father 6,000

Preventive health-check up expenditure for himself (paid in cash) 4,000

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Solution :

Computation of deduction u/s 80D available to Mr. Vinod


Mediclaim Insurance premium paid for himself 9,000

Mediclaim Insurance premium paid for spouse 8,000

Mediclaim Insurance premium paid for dependent children 6,000

Qualifying amount (A) 23,000

Add: Additional deduction for parents

Mediclaim Insurance premium paid for father (B) 18,000

Add: Expenditure incurred for preventive health check up Incurred Max. Limit

Preventive health-check up expenditure for father 6,000 5,000

Preventive health-check up expenditure for himself

(25000 – 23000)

4,000 2,000

7,000

Restricted to overall maximum limit for preventive health checkups (C) 5,000

Deduction u/s 80D (A + B + C) 46,000

Section 80DD: Deduction in respect of maintenance including medical treatment of a

dependant disabled

Eligible Assessee: This deduction can be claimed by Resident Individual/HUF.

1. Options: Taxpayer may have done any (or both) of following options

1. The taxpayer has incurs any expenditure for the medical treatment, training and rehabilitation

of a disabled dependant; or

2. Deposits any amount in schemes like Life Insurance Corporation for the maintenance of a

disabled dependant. An annuity or a lump sum amount is paid to the dependant or to a nominee

for the benefit of the dependant in the event of the death of the individual depositing the money,

from the said scheme,

3. Amount of deduction: A deduction of ` . 75,000 is available. The amount of deduction is

fixed irrespective of the amount deposited/expenditure incurred under option 2.1 or 2.2 as

above. Where the dependant is with a severe disability, a deduction of ` 1, 25,000 is allowed.

4. Death of the dependant occurs before that of the assessee: If the death of the dependant

occurs before that of the assessee, the amount in the scheme is returned to the individual and

is taxable in his hands in the year that it is received.

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5. Certificate : An individual should furnish a copy of the issued certificate by the medical

board constituted either by the Central government or a state government in the prescribed

form, along with the return of income of the year for which the deduction is claimed, However

as per new rule 12 no document is to be attached with Income tax return .

6. Dependant Meaning : The term 'dependant' here refers to

• For Individual: the spouse, children, parents and siblings (brother, Sister) of the assessee

who are dependent on him for maintenance.

• For HUF : Member of HUF who are dependant on him for maintenance

7. Depended claim of 80U: Further Dependant themselves haven't claimed a deduction for the

disability under section 80U in computing their total incomes.

8. Disability: Disability would be as defined under clause (i) of section 2 by the "Persons with

Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995" and

will also include disabilities referred to in clauses (a), (c) and (h) of section 2 of National

Trust for welfare of Person with Autism, Cerebral Palsy, Mental Retardation and Multiple

Disabilities Act, 1999. It includes: Blindness, Low vision, Leprosy-cured, Hearing impairment,

Locomotor disability, Mental retardation, Mental illness, Autism, Cerebral palsy, Multiple

disabilities.

A person with disability means a person suffering from not less than 40% of any of the above

disabilities. Severe disability means 80% or more of one or more of the above disabilities.

Example: X incurred an expenditure of ` 15000/- on medical treatment of his brother who is

disabled 56% in FY2017-18. Calculate deduction available?

Ans: X can claim ̀ 75000/- as deduction even though he has incurred an expenditure of 15000

only. However his brother must be wholly and mainly depended on him and his brother has not

claimed deduction u/s 80U fo his disability .

Illustration 08

Compute total income of Ms. Rituparna from following information:

Taxable salary (Net) Rs. 1,40,000

Income from other sources Rs.60,000

Agricultural income Rs.4,000

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He deposited in LIC annuity plan Rs.18,000

He paid medical insurance premium by cheque for his dependant blind mother (certified as

severe disable person), aged 68 years, Rs. 20,000.

Solution :

Computation of Total income of Ms. Rituparna for the A.Y. 2020-2021

Particulars Amount

Taxable Salaries 1,40,,000

Income from Other Sources 60,000

Gross Total Income 2,00,000

Less: Deduction u/s

80CCC (Paid in LIC annuity plan) 18,000

80D (Medical insurance premium for mother being senior citizen) 20,000

80DD (Dependant severe disable relative) 1,25,000 1,63,000

Total Income 37,000

Section 80DDB: Deduction for Medical Expenditure on Self or Dependent Relative

1. This deduction is available to a resident assessee being an individual or HUF for medical

expenditure incurred for the medical treatment on himself or a dependant relative or any

member of HUF in respect of specified Disease or ailment as prescribed.

2. Dependant in case of an individual means the spouse, children, parents, brother or sister of

an individual and in case of an HUF means a member of the HUF ,wholly or mainly dependant

on such individual or HUF for his support and maintenance.

3. Assessee shall have to submit certificate in form no 10-I from prescribed specialist working

in Government hospital or private hospital.

4. Amount of Deduction: The deduction is the any amount actually paid or Rs. 40,000 (Rs.

1,00,000 in respect of a senior citizen) whichever is less, as reduced by amount reimbursed

by employer or by insurer.

16

5. Specified diseases and ailments for the purpose:

(i) Neurological Diseases such as (a) Dementia ; (b) Dystonia Musculorum Deformans ; (c)

Motor Neuron Disease; (d) Ataxia ;(e) Chorea ;(f) Hemiballismus ;(g) Aphasia ;(h)

Parkinsons Disease; (ii) Malignant Cancers ; (iii) Full Blown AIDS; (iv) Chronic

Renal failure ; (v) Hematological disorders :(a) Hemophilia ;(b) Thalassaemia.

Section 80E: Deduction for Interest on Education Loan for Higher Studies

Deduction is allowed for interest on loan taken for pursuing higher education. This loan may

have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a

legal guardian. The loan must have been taken from an approved financial institution in India for full

time education either in India or abroad. No deduction is allowed for part time or distance mode

education. The deduction is available for a maximum of 8 years or till the interest is paid, whichever

is earlier. There is no restriction on the amount that can be claimed.

Section 80EE: Deductions on Home Loan Interest for First Time Home Owners

The deduction under this section is available only to an individual who is a first time home owner.

The value of the property purchased must be less than Rs. 50 lakh and the home loan must be less

than Rs. 35 lakh. The loan must be taken from a financial institution and must have been sanctioned

between 01 April 2016 to 31 March 2017.

Through this section, an additional deduction of ̀ 50,000 can be claimed on home loan interest. This is

in addition to deduction of ` 2,00,000 allowed under section 24 of the Income Tax Act for a self-

occupied house property.

Section 80EEA : Deduction in respect of interest payable on loan taken for acquisition of residential house property

The deduction under this section is available only to an individual who has taken a loan for acquisition

of residential house property from any financial institution. The benefit of deduction under this

section would be available from A.Y.2020-21 and subsequent assessment years till the repayment of

loan continues.

Conditions: The conditions to be satisfied for availing this deduction are as follows:

Stamp duty value of the house property should be less than Rs 45 lakhs.

The individual taxpayer should not be eligible to claim deduction under the existing Section

80EE. The taxpayer should be a first-time home buyer. The taxpayer should not own any residential

house property as on the date of sanction of the loan.

Loan should be sanctioned by a Financial Institution during the P.Y.2019-20

Amount of deduction: A deduction for interest payments up to Rs 1,50,000 is available under

Section 80EEA. This deduction is over and above the deduction of Rs 2 lakh for interest

payments available under Section 24(b) of the Income Tax Act. Therefore, taxpayers can claim

a total deduction of Rs 3.50 lakh for interest on home loan, if they meet the conditions of section

80EEA.

17

Illustration 09.

Mr. Chinmay, a salaried individual borrowed a loan of Rs. 43 lakh for acquisition of residential house

property for self- occupation which is sanctioned on 1st April 2019 and disbursed on 1st May

2019. The stamp duty value of a house property is Rs. 45 lakh and rate of interest @ 9%. Compute

the amount of interest on housing loan allowable as deduction, under the provisions of the Income-

tax Act, 1961 for A.Y.2020-21 in the hands of Mr. Chinmay. Assume that there has been no

principal repayment during the P.Y.2019-20.

Solution:

Computation of the amount of interest on housing loan available as deduction under the

provisions of Income Tax Act, 1961 for the A.Y.2020-2021

Particulars Amount

Rs.

(i) Deduction allowable while computing income under the

head “Income from house property”

Deduction u/s 24(b) Rs. 3,54,750 [ 43,00,000 × 9% x 11/12]

Restricted to 2,00,000

(ii) Deduction under Chapter VI-A from Gross Total Income

Deduction u/s 80EEA Rs. 1,54,750 (Rs. 3,54,750 – Rs. 2,00,000)

Restricted to

1,50,000

Total amount of interest on housing loan available as deduction under the

provisions of Income Tax Act, 1961 3,50,000

Section 80EEB: Deduction in respect of interest payable on loan taken for purchase of electric vehicle

This deduction is available to an individual who has taken a loan for purchase of an

electric vehicle from any financial institution. Interest payable on such loan would qualify

for deduction under this section from A.Y.2020-21 and subsequent assessment years till

the repayment of loan continues.

Conditions: The conditions to be satisfied for availing this deduction are as follows:

a. The loan must be taken from a financial institution or a non-banking financial

company for buying an electric vehicle.

b. The loan must be sanctioned anytime during the period starting from 1 April 2019

till 31 March 2023.

Amount of deduction: Interest payable on loan, subject to a maximum of Rs. 1,50,000.

Section 80G: Deduction for donations towards Social Causes

The various donations specified in u/s 80G are eligible for deduction up to either 100% or

50% with or without restriction as provided in section 80G.

From FY 2017-18 any donations made in cash exceeding Rs.2,000 will not be allowed as

18

deduction. The donations above Rs. 2000 should be made in any mode other than cash to qualify

as deduction u/s 80G.

There are four categories of deductions. They are :

19


I Donations with 100% deduction without any qualifying limit:

• National Defence Fund set up by the Central Government

• Prime Minister's National Relief Fund

• National Foundation for Communal Harmony

• An approved university/educational institution of National eminence

• Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of

that district

• Fund set up by a State Government for the medical relief to the poor

• National Illness Assistance Fund

• National Blood Transfusion Council or to any State Blood Transfusion Council

• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and

Multiple Disabilities

• National Sports Fund

• National Cultural Fund

• Fund for Technology Development and Application

• National Children's Fund

• Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to any State

or Union Territory

• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force

Central Welfare Fund, Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996

• The Maharashtra Chief Minister's Relief Fund during October 1, 1993 and October 6,1993

• Chief Minister's Earthquake Relief Fund, Maharashtra

• Any fund set up by the State Government of Gujarat exclusively for providing relief to the

victims of earthquake in Gujarat

• Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the

victims of earthquake in Gujarat (contribution made during January 26, 2001 and September

30, 2001) or

• Prime Minister's Armenia Earthquake Relief Fund

• Africa (Public Contributions - India) Fund

• Swachh Bharat Kosh (applicable from financial year 2014-15)

• Clean Ganga Fund (applicable from financial year 2014-15)

• National Fund for Control of Drug Abuse (applicable from financial year 2015-16)

20

II Donations with 50% deduction without any qualifying limit

• Jawaharlal Nehru Memorial Fund

• Prime Minister's Drought Relief Fund

• Indira Gandhi Memorial Trust

• The Rajiv Gandhi Foundation

III Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income

• Government or any approved local authority, institution or association to be utilised for the

purpose of promoting family planning

• Donation by a Company to the Indian Olympic Association or to any other notified association

or institution established in India for the development of infrastructure for sports and games

in India or the sponsorship of sports and games in India.

IV Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income

• Any other fund or any institution which satisfies conditions mentioned in Section 80G(5)

• Government or any local authority to be utilised for any charitable purpose other than the

purpose of promoting family planning

• Any authority constituted in India 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, villages or both

• Any corporation referred in Section 10(26BB) for promoting interest of minority community

• For repairs or renovation of any notified temple, mosque, gurudwara, church or other place.

Adjusted total income: Adjusted gross total income is the gross total income (sum of income under all heads) less the following:

• Amount deductible under Sections 80C to 80U (but not Section 80G)

• Exempt income

• Long-term capital gains and Short term capital gains taxable at 15%.

• Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-

residents and foreign companies

Illustration 10.

Mr Balagangadhar Thilak aged 58 years, has gross total income of Rs.7,75,000

comprising of income from salary and house property. He has made the following

payments and investments:

21

a. Premium paid to insure the life of his major daughter (policy taken on 1.4.2017)

(Assured value Rs. 1,80,000) – Rs. 20,000

b. Medical Insurance premium for self – Rs. 12,000; Spouse – Rs. 14,000

c. Donation to a public charitable institution registered under 80G Rs. 50,000 by way

of cheque

d. LIC Pension Fund – Rs. 60,000

e. Donation to National Children’s Fund – Rs. 25,000 by way of cheque

f. Donation to Jawaharlal Nehru Memorial Fund – Rs. 25,000 by way of cheque

g. Donation to approved institution for promotion of family planning - Rs.40,000 by

way of cheque

h. Deposit in PPF – Rs. 1,00,000

Compute the total income of Mr. Balagangdhar Thilak for A.Y. 2020-21.

Solution:

Computation of Total Income of Mr. Balagangdhar Thilak for A.Y. 2020-21.

Particulars Amount

Rs.

Amount

Rs.


Less: Deduction under section 80C

Deposit in PPF 1,00,000

Life insurance premium paid for insurance of major

daughter (Maximum 10% of the assured value Rs. 1,80,000, as the policy is taken after 31.3.2012)

18,000

1,18,000

Deduction u/s 80CCC in respect of LIC pension fund 60,000

As per section 80CCE, deduction u/s 80C & 80CCC is

restricted to 1,78,000

1,50,000

Deduction under section 80D

Medical Insurance premium in respect of self and spouse 26,000

Restricted to 25,000

Deduction under section 80G (See Working Note below) 87,500

Total income 5,12,500

22

Working Note: Computation of deduction under section 80G

Particulars of donation Amount

donated

Rs.

% of deduction

Rs.

Deduction

u/s 80G

Rs.

(i) National Children’s Fund 25,000 100% 25,000

(ii) Jawaharlal Nehru Memorial

Fund

25,000 50% 12,500

(iii) Approved institution for

promotion of family planning

40,000 100%, subject to

qualifying limit

40,000

(iv) Public Charitable Trust 1,50,000 50% subject to

qualifying limit

(See Note below)

10,000

Total amount of deduction available u/s 80G 87,500

Note: Adjusted total income = Gross Total Income – Amount of deductions under

section 80C to 80U except section 80G i.e., Rs. 6,00,000 i.e., Rs. 7,75,000 – [Rs.

1,50,000 (80C) + Rs. 25,000 (80D)], in this case.

Rs. 60,000, being 10% of adjusted total income is the qualifying limit, in this case.

Firstly, donation of Rs. 40,000 to approved institution for family planning qualifying

for 100% deduction subject to qualifying limit, has to be adjusted against this amount.

Thereafter, donation to public charitable trust qualifying for 50% deduction, subject to

qualifying limit is adjusted. Hence, the contribution of Rs. 50,000 to public charitable

trust is restricted to Rs. 20,000 (being, Rs. 60,000 – Rs. 40,000), 50% of which would

be the deduction under section 80G. Therefore, the deduction under section 80G in

respect of donation to public charitable trust would be Rs. 10,000, which is 50% of Rs.

20,000.

Section 80GG: Deduction for House Rent Paid where HRA is not received

This deduction is available to an Assessee, who is not in receipt of HRA qualifying for

exemption under section 10(13A) and who pays rent for accommodation occupied by him for

residential purposes.

Conditions:

• This deduction is available for rent paid when HRA is not received. The taxpayer, spouse or

minor child should not own residential accommodation at the place of employment.

• The taxpayer should not have self-occupied residential property in any other place.

23


Deduction available is the least of the following

1. Rent paid minus 10% of adjusted total income;

2. ` 5,000/- per month;

3. 25% of adjusted total income*

*Adjusted Gross Total Income is arrived at after adjusting the Gross Total Income for certain

deductions, exempt incomes, long-term capital gains Short Term Capital Gain and income relating

to non-residents and foreign companies and all deductions U/S 80C other than 80GG.

Illustration 11.

Compute total income of Sri Nagaraju of Mandya from the following data:

Particulars Amount

Profits & gains of business or profession 80,000

Income from house property (let-out and situated at Kolkata) 40,000

Income from other sources 10,000

Rent paid for office 8,000

Rent paid for residential house 40,000

20

Solution :

Calculation of total income of Sri Nagaraju for the A.Y. 2020-2021

Particulars Amount

Profits & gains of business or profession 80,000

Income from house property 40,000



Less: Deduction u/s 80GG# 27,000


# Computation of deduction u/s 80GG

Particulars Amount

Least of the following shall be deductible:

1. Rs.5,000 per month Rs. 5,000 × 12 =60,000

2. 25% of Adjusted Gross total income 25% of ` 1,30,000# =32,500

. Excess of rent paid over 10%

of Adj. GTI

Rs. 40,000 - (10% of Rs. 1,30,000#)

=27,000

27,000

#GTI = Gross total income – Long term capital gain – Short term capital gain covered u/s 111A -

All deduction under 80’s other than section 80GG – Income u/s 115A, etc. = ` 1,30,000

Note : Rent paid for office is irrelevant for the purpose of Sec. 80GG

Section 80GGA: Donation for scientific, social or statistical research or rural development

Certain donations for scientific, social or statistical research or rural development programme

or for carrying out an eligible project or scheme or National Urban Poverty Eradication Fund

(subject to certain conditions). All assessees not having any income chargeable under the head

'Profits and gains of business or profession' can claim this deduction. The rate of deduction is 100%

of the sum donated.

Section 80GGB: Deduction on contributions given by companies to Political Parties

Deduction is allowed to an Indian company for amount contributed by it to any political party

or an electoral trust. Deduction is allowed for contribution done by any way other than cash.amount

of deduction is 100% of contribution.

Political party means any political party registered under section 29A of the Representation

of the People Act. Contribution is defined as per section 293A of the Companies Act, 1956.

21


Section 80GGC: Deduction on contributions given by any person to Political Parties

Deduction under this section is allowed 100% in respect of any contribution made by a

taxpayer except a company, local authority and an artificial juridical person wholly or partly funded

by the government, for any amount contributed to any political party or an electoral trust. Deduction

is allowed for contribution done by any way other than cash.

Section 80QQB: Royalty income

Deduction in respect of royalty income, etc., of authors of certain books other than text books -

Available to resident individual:

Least of the following shall be exempt from tax:

a) In case of Lump sum payment - Amount of royalty income subject to maximum of ̀ . 3,00,000

b) In other cases - amount of such income subject to maximum of 15% of value of books sold

during the previous year.

Section 80RRB: Deduction with respect to any Income by way of Royalty of a Patent

Deduction for any income by way of royalty for a patent registered on or after 01.04.2003

under the Patents Act 1970 shall be available up to Rs. 3 lakhs or the income received, whichever

is less. The taxpayer must be an individual resident of India who is a patentee. The taxpayer must

furnish a certificate in the prescribed form duly signed by the prescribed authority.

Section 80 TTA: Deduction from gross total income for Interest on Savings bank account

A deduction of maximum Rs. 10,000 can be claimed against interest income from a savings

bank account. Interest from savings bank account should be first included in other income and

deduction can be claimed of the total interest earned or Rs. 10,000, whichever is less. This deduction

is allowed to an individual or HUF. And it can be claimed for interest on deposits in savings account

with a bank, co-operative society or post office. Section 80TTA deduction is not available on

interest income from fixed deposits or recurring deposits or interest income from corporate bonds.

As per Notification No. 32/2011 dated 03.06.2011, interest on post office savings bank is exempt

U/S 10 (15) (i) to the extent of the interest of Rs.3,500 (in case of single account) and

Rs. 7,000 (in case of Joint Account).

Note - Deduction under this section would, however, not be available to a resident senior citizen eligible for deduction under section 80TTB.

Section 80TTB: Deduction in respect of interest on deposit in case of Senior Citizens

This deduction is available to a resident senior citizen up to Rs 50,000/- in respect of

interest on deposits with a bank, cooperative society or a post office.

Illustration 12.

Rituparna, a resident individual aged about 61 years, has earned business income

22

(computed) of Rs. 1,35,000, lottery income of Rs. 1,20,000 (gross) during the P.Y. 2019-

20. He also has interest on Fixed Deposit of Rs. 30,000 with banks. He invested an amount

of Rs.1,50,000 in Public Provident Fund account. What is the total income of Rituparna

for the A.Y.2020-21?

Solution:

Computation of total income of Mr. A for A.Y.2020-21

Particulars Amount

Rs.

Amount

Rs.

Profits and gains of business or profession 1,35,000

Income from other sources

- Interest on Fixed Deposit with banks 30,000

- lottery income 1,20,000


Less: Deductions under Chapter VIA [See Note below]

Under section 80C

- Deposit in Public Provident Fund 1,50,000

Under section 80TTB

- Interest on fixed deposits with banks 30,000

Restricted to 1,80,000 1,65,000


Note: In case of resident individuals of the age of 60 years or more, interest on bank

fixed deposits qualifies for deduction up to Rs. 50,000 under section 80TTB.

Though the value of eligible deductions is Rs. 1,80,000, however, deduction under

Chapter VI-A cannot exceed the gross total income exclusive of long term capital

gains taxable under section 112 and section 112A, short-term capital gains covered

under section 111A and winnings of lotteries of the assessee. Therefore, the maximum

permissible deduction under Chapter VI-A = Rs. 2,85,000 – Rs.1,20,000 = Rs.1,65,000.

Illustration 13.

Mr. Udham Singh, aged 42 years, has salary income (computed) of Rs. 5,50,000 for

the previous year ended 31.03.2020. He has earned interest of Rs. 14,500 on the saving

bank account with State Bank of India during the year. Compute the total income of

Mr. Udham Singh for the assessment year 2020- 21 from the following particulars:

a. Life insurance premium paid to Birla Sunlife Insurance in cash amounting to

Rs. 25,000 for insurance of life of his dependant parents. The insurance policy

was taken on 15.07.2017 and the sum assured on life of his dependant parents

is Rs. 2,00,000.

b. Life insurance premium of Rs. 25,500 paid for the insurance of life of his major

23

son who is not dependant on him. The sum assured on life of his son is Rs.

2,50,000 and the life insurance policy was taken on 30.3.2012.

c. Life insurance premium paid by cheque of Rs. 22,500 for insurance of his life. The insurance policy was taken on 08.09.2016 and the sum assured is Rs.

2,00,000.

d. Premium of Rs. 26,000 paid by cheque for health insurance of self and his wife.

e. Rs. 1,500 paid in cash for his health check-up and Rs. 4,500 paid in cheque for

health check-up for his parents, who are senior citizens.

f. Paid interest of Rs. 6,500 on loan taken from bank for MBA course pursued by

his daughter.

g. A sum of Rs. 15,000 donated in cash to an institution approved for purpose of

section 80G for promoting family planning.

(Source: ICAI Material)

Solution:

Computation of total income of Mr. Udham Singh for the Assessment Year 2020-21

Particulars Amount

Rs.

Amount

Rs.

Amount

Rs.

Income from salary 5,50,000

Interest on saving bank deposit 14,500


Less: Deduction under Chapter VI-A

Under section 80C (See Note 1)

Life insurance premium paid for life insurance of:

- major son 25,500

- self Rs. 22,500 restricted to 10% of Rs. 2,00,000 20,000 45,500

Under section 80D (See Note 2)

Premium paid for Rs. 26,000 health insurance of self and wife

by cheque, restricted to

25,000

Payment made for health check-up for parents: 4,500 29,500

Under section 80E

91,500

For payment of interest on loan taken from bank for MBA

course of his daughter

6,500

Under section 80TTA (See Note 4)

Interest on savings bank account Rs. 14,500 restricted to 10,000


24

Working Notes:

1. As per section 80C, no deduction is allowed in respect of premium paid for life

insurance of parents whether they are dependant or not. Therefore, no deduction

is allowable in respect of Rs. 25,000 paid as premium for life insurance of

dependant parents.

In respect of insurance policy issued on or after 01.04.2012, deduction shall be

allowed for life insurance premium paid only to the extent of 10% of sum

assured. In case the insurance policy is issued before 01.04.2012, deduction

of premium paid on life insurance policy shall be allowed up to 20% of sum

assured.

Therefore, in this case, deduction of Rs. 25,500 is allowable in respect of life

insurance of son since the insurance policy was issued before 01.04.2012 and

the premium amount is less than 20% of Rs. 2,50,000. However, in respect of

premium paid for life insurance policy of himself, deduction is allowable only

up to 10% of Rs. 2,00,000 since the policy was issued after 01.04.2012 and the

premium amount exceeds 10% of sum assured.

2. As per section 80D, in case the premium is paid in respect of health of a person

specified therein and for health check-up of such person, deduction shall be

allowed up to Rs. 25,000. Further, deduction up to Rs. 5,000 in aggregate shall

be allowed in respect of health check-up of self, spouse, children and parents. In

order to claim deduction under section 80D, the payment for health-checkup can

be made in any mode including cash. However, the payment for health insurance

premium has to be paid in any mode other than cash.

Therefore, in the present case, in respect of premium of Rs. 26,000 paid for health

insurance of self and wife, deduction would be restricted to Rs. 25,000. Since the limit

of Rs. 25,000 has been exhausted against medical insurance premium, no deduction is

allowable for preventive health check-up for self and wife. However, deduction of Rs.

4,500 is allowable in respect of health check-up of his parents, since it falls within the

limit of Rs. 5,000.

3. No deduction shall be allowed under section 80G in case the donation is made in

cash of a sum exceeding Rs. 2,000. Therefore, deduction under section 80G is

not allowable in respect of cash donation of Rs. 15,000 made to an institution

approved for the purpose of section 80G for promotion of family planning.

4. As per section 80TTA, deduction shall be allowed from the gross total income

of an individual or Hindu Undivided Family in respect of income by way of

interest on deposit in the savings account included in the assessee’s gross total

25

income, subject to a maximum of Rs. 10,000. Therefore, a deduction of Rs.

10,000 is allowable from the gross total income, though the interest from savings

bank account is Rs. 14,500.

26

Section 80U: Deduction for Person suffering from Physical Disability

Deduction of Rs. 75,000/- to an individual who suffers from a physical disability (including

blindness) or mental retardation. In case of severe disability, deduction of Rs. 1,25,000 can be

claimed. Certificate should be obtained from a Govt. Doctor. The relevant rule is Rule 11D. This is

a fixed deduction and not based on bills or expenses.

Clubbing Of Income

Under the Income Tax Act, 1961, an assessee is generally taxed in respect of his own

income. However, there are certain cases where an assessee has to pay tax in respect of income of

another person. The logic of introducing clubbing provisions is very simple that to restrict assessee to

save tax by routing his income to closed ones who are in lower tax bracket as compared to assessee.

Clubbing of income means Income of other person included in assessee's total income, for

example: Income of husband which is shown to be the income of his wife is clubbed in the income

of Husband and is taxable in the hands of the husband. Under the Income Tax Act a person has to

pay taxes on his income. Section 60 to 64contains various provisions relating to clubbing of income.

1. Transfer of Income Where There is no Transfer of Assets [ Sec.

60]

U/s Sec60, where the assessee transfers to another person some income but without the

transfer of assets producing that income, such an income shall not be the income of the transferee

but it shall be chargeable to income tax as the income of the transferor and shall be included in his

gross total income.

Such a transfer of income may be revocable or irrevocable and whether effected before or

after the commencement of this Act.

2. Revocable Transfer of Assets [Sec. 61]

All income by virtue of a "revocable transfer" of assets arising to any person shall be chargeable

to income-tax in the hands of the transferor and shall be included in his total income. The transferor

includes any settlement, trust, agreement or arrangement.

3. Income of Individual to Include Income of Spouse, Minor Child,

Etc. [ Sec. 64]

Apparently the following incomes belong to persons other than the assessee but these are

included in the assessee's gross total income under Sec.64. These incomes are :

27


(i) Any Salary, Commission, Fee or any other Remuneration received by Spouse

[Sec.64(1)(ii)]

Any income accrued to spouse by way of salary, commission, fee or any other form of

remuneration whether in cash or in kind from a concern in which such individual has a substantial

interest, shall be considered to be the income of such individual.

Any income arising to the spouse where the spouse possesses technical or professional

qualifications and the income is solely attributable to the application of his or her technical or

professional knowledge and experience, it shall not be included with the income of Individual.

(ii) Income of Spouse from Assets transferred [ Sec. 64 (1)(iv)]

In computing the total income of any individual, there shall be included all such income as

arises directly or indirectly- to the spouse of such individual from assets transferred directly or

indirectly to the spouse by such individual otherwise than for adequate consideration or in connection

with an agreement to live apart ;

If the assets are purchased from the income of the transferred assets any income to a spouse

or from such assets shall not be included in the total income the transferor.

(iii) Income from Assets transferred to son's wife without adequate consideration

[Sec.64(1)(vi)]

Any income accruing from asset which is transferred after 1-6-1973 to daughter-in-law

without adequate consideration shall be considered to be the income of transferor w.e.f. assessment

year 1976-77.

(iv) When an individual is assessable in respect of income from assets transferable to a

person for the benefit of Spouse [ Sec. 64(1)(vii)]

The provisions of section 64(1)(vii) are given below with conditions

1. The taxpayer is an individual and had transferred an assets which may be direct or indirect.

2. The asset is transferred to a person or an association of person.

3. It is transferred for the immediate or deferred benefit of his/her spouse.

4. The transfer is without adequate consideration.

(v) When an individual is assessable in respect of income from assets transferable to a

person for the benefit of Son's Wife[ Sec. 64(1)(viii)]

The provisions of section 64(1)(vii) are given below with conditions

1. The taxpayer is an individual and had transferred an assets after May 31, 1973 and which

may be direct or indirect.

2. The asset is transferred to a person or an association of person.

3. It is transferred for the immediate or deferred benefit of his/her Son's Wife.

4. The transfer is without adequate consideration.

28

(vi) When an Individual is assessable in respect of income of his minor child [Sec.64(1A)]

In computing the total income of any individual, there shall be included all such income as

arises or accrues to his minor child on account of any-

(A) manual work done by him ; or

(B) activity involving application of his skill, talent or specialized know-ledge and experience.

Clubbing provisions of section are not applicable--- when a minor child suffering from any

disability of the nature specified in section 80U.

Set-off and Carry Forward of Losses

Set-off of losses

If assessee having more than one source of income during the same year or he may have loss

in one source of income or more, the loss of that income can be set off against same income or other

in the same year or in the future under income tax provision.

The provisions regarding set off of losses are as under:

The process of setting off of losses and their carry forward may be covered in the following

Steps:

Step-1: Inter-Source adjustment under the same head of income

Step-2: Inter-head adjustment in the same assessment year and will be applied only if a loss cannot

be set off under STEP-1.

Step-3:Carry Forward of Loss is applied only if a loss cannot be set off under STEP-1 & STEP-2

I Set off of Loss From One Source Against Income from Another Source Under The Same Head of Income [Sec. 70 ]

If the net result for any assessment year in respect of any source falling under any head of

income, other than "Capital gains", is a loss, the assessee shall be entitled to have the amount of

such loss set off against his income from any other source under the same head.

Exceptions :

1. Loss from speculation business ;

2. Long-Term Capital Loss ;

3. Loss from the activity of owning and maintaining race houses ;

4. Loss can not be set off against winnings from lotteries, crossword puzzles, etc. ;

5. Loss from sale of Securities.

29

Illustration 14.


Compute Gross Total Income of Mr. Saavanth from the following:

Source of income Amount

Income from house property (A) 30,000

Income from house property (B) (10,000)

Speculation income 80,000

Business income (30,000)

Income from activity of owning and maintaining race-horses business (A) (50,000)

Income from activity of owning and maintaining race-horses business (B) 20,000

Income from agricultural business (25,000)

Short term capital gain (transaction A) 30,000

Short term capital gain (transaction B) (10,000)

Long term capital gain (transaction A) (30,000)

Long term capital gain (transaction B) 10,000

Income from lottery 40,000

Income from horse races 10,000

Income on card games (5,000)

Interest on securities 20,000

Solution

Computation of Gross Total Income of Mr. Saavanth for the A.Y. 2020-2021

Amount Amount

Income from House Property :

House Property A 30,000

House Property B (10,000) 20,000

Profits & Gains of Business or Profession:

Speculation income

Other business

80,000

(30,000) 50,000

Income from agricultural business (Exempted): Nil

Capital Gains

Short term capital gain:

Transaction A 30,000

Transaction B (10,000) 20,000

30

Income from other sources:

Casual income:


Income from horse races 10,000 50,000

Income on card games (losses not to be considered) Nil

Income from activity of owning & maintaining race-horses:

Business (A) (50,000)

Business (B) 20,000 (30,000)*

Other income:



* Loss from activity of owning & maintaining race horse (30,000)

** Long term capital loss (20,000)

II Set Off of Loss From One Head Against Income From Another [Sec. 71]

If the Net Result of the computation under any head of income, OTHER THAN "CAPITAL

GAINS", is a loss, the same can be set off against the income from other heads subject to the

following exceptions…

1. Loss from speculation business can not be set off against any other income

2. Long-Term Capital Loss ; which can only set off against "Capital Gain".

3. Loss from the activity of owning and maintaining race horses ; which can not be set off

against any other income.

4. Loss can not be set off against winnings from lotteries, crossword puzzles, etc. ;

5. Loss from sale of Securities.

6. Business Loss can not be set off against Salary Income.

31


Illustration 15.

Compute Gross Total Income of Mr. Jaggu from following data :

Source of income Amount

Income under the head ‘Salaries’ 2,60,000

Income from house property (A) 60,000

Income from house property (B) (2,80,000)


Business income (1,30,000)

Income from activity of owning and maintaining race-horses (1,50,000)

Income from agricultural business (1,25,000)

Short term capital gain 30,000

Long term capital gain (1,00,000)


Income from horse races 1,70,000

Dividend income from non-domestic company (shares purchased out of borrowed (90,000)

money)


32

Solution :

Computation of gross total income of Mr. Jggu for the A.Y.2020-2021

Particulars Amount Amount Amount

Salaries: 2,60,000

Income from house property:

House property A 60,000

House Property B (2,80,000) (2,00,000)1

Profits & gains of Business or Profession:


Other business income (1,30,000)

Income from agricultural business [exempted u/s Nil (1,10,000)

10(1)]

Capital Gains:

Short term capital gain 30,000

Long term capital gain (1,00,000) Nil 2

Income from Other Sources:

Casual income


Income from horse races 1,70,000 1,80,0003

Income from activity of owning and maintaining (1,50,000) Nil4

race-horses

Other income:

ividend from non-domestic company (90,000)

nterest on securities 20,000 (70,000)

Gross Total Income (90,000)5 1,80,000

Note:

1. Maximum limit of loss from House Property, balance shall be carried forward Rs. 2,00,000

only and remaining loss of Rs. 20,000 (including loss over and above ‘ 2,00,000) shall be

carried forward.

2. Long term capital loss cannot be set off against any income & shall be carried forward.

3. As no loss can be set off against Casual Income.

4. Loss from activity of owning and maintaining race-horses cannot be set off against any

income & shall be carried forward,

33


5. From salary income, losses under the head income from other sources Rs. 70,000 is adjusted

first and then loss under the head ‘Income from house property’ considering following:

Loss under the head ‘Profits and gains of business or profession’ cannot be set-off against

salary income; and Loss under the head income from other sources cannot be carried forward.

Thereafter, loss under the head ‘Income from house property’ of Rs. 10,000 and losses under

the head ‘Profits & gains of business or profession’ up to Rs. 20,000 is adjusted against Short term

capital gain of Rs. 30,000 and remaining losses under the head Profits and gains of business or

profession Rs. 90,000 shall be carried forward.

Alternatively, loss under the head Income from house property of ` 30,000 and loss under

the head Profits & gains of business or profession of ` 80,000 can be carried forward.

III Carry-forward of losses

If the assessee could not set off the losses in the A.Y. of their occurrence, the unabsorbed loss can

be carried forward for set off against his income in subsequent years. He should determine the loss

in pursuance of a return field by him.

1. Carry Forward and Set off of Loss Under the Head "Income From House Property".

[Sec. 71B]: This section provided that set-off of loss under the head "Income

from house property" against any other head of income shall be restricted to

Rs. 2,00,000 for any assessment year. However, the unabsorbed loss shall be

allowed to be carried forward for set-off in subsequent 8 years.

2. Carry Forward and Set off of Business Losses. [ Sec. 72]: The right of carry

forward and set off of loss arising in a business or profession is subject to the

following restrictions:

a. The carried forward business loss can be set off against the income from same business

or any other business.

b. Loss can be carried forward for 8 assessment years immediately succeeding the

assessment year for which the loss was first computed.

c. Carried forward loss can’t be set off against any other heads of income.

d. Unabsorbed depreciation can be carried forward indefinitely. Further it can be set off

against other heads of income.

e. A Loss cannot be carried forward unless it is determined in pursuance of a Return

Filed within the time allowed.

34

3. Losses in Speculation Business [ Sec. 73]: Any unabsorbed speculation loss can

be set off in subsequent years only against any speculation business. This loss

shall be carried forward for 4 assessment years immediately succeeding the

assessment year for which the loss was first computed.

4. Losses Under the Head "Capital Gains" [ Sec. 74]: Long term capital loss and

short term capital loss can be carried forward to subsequent 8 assessment

years. Short term capital loss can be set off against STCG or LTCG, but Long

term capital loss can be set off only against LTCG.

5. Losses from Certain Specified Sources Falling Under the Head "Income from other

Sources" [ Sec. 74A]: The amount of loss incurred by the assessee in the activity

of owning and maintaining race horses in any assessment year shall be set off

against income from the activity of owning and maintaining race horses. if the

loss cannot be wholly so set off shall be carried forward to 4 assessment years

immediately succeeding the assessment year and set off only against income from

maintain race horses.

35


Table Showing Set Off and Carry Forward of Losses

Head of income under which Loss

is incurred

Whether loss can be set off within the same year

Whether Losses can be carried forward and set off in subsequent years.

Time limit for carry forward and set off of

losses

Under the same head

Under any other Head

Under the same head

Under any other Head

1. Income from Salaries NA NA NA NA NA

2. Income from House Property Yes Yes Yes No 8 years

3. Profit and gain from Business or Professions :

a. Non-speculation Business Yes Yes Yes No 8 years

b. Speculation Business Yes No Yes No 4 years

c. Unabsorbed Depreciation Yes Yes Yes No N.A.

d. Unabsorbed Investment or Development allowance.

Yes Yes Yes Yes 8 years

4. Capital Gain (Short-Term) Yes No Yes No 8 years

5. Capital Gain (Long -Term) Yes No Yes No 8 years

6. Income from Other Sources:

a. Lotteries, Crossword, Puzzle, Card Games, Gambling, or betting of any form.

No

No

No

No

NIL

b. Loss from activity of owning and maintaining Race Horses

Yes

No

Yes

No

4 Years

c. Other Income Yes Yes No No NIL

36

Illustrations on Deductions U/S 80 and Set off and Carry Forward of Losses

Illustration 16.

Mr. Harish's gross total income is ̀ 3,20,000 for the A.Y. 2020-2021. He lives in a rented house

at Bangalore and pays a rent of ` 4,500 p.m. He is entitled to deductions u/s 80D and 80C of

` 10,000 and ` 15,000 respectively. He is the owner of a factory building which is situated at Mysore

and let out. Assuming that the conditions for allowing deduction u/s 80 GG are satisfied compute

the total income.

Solution:

(Nov/Dec. 2010)

Computation of total Income of Mr. Harish for the A.Y. 2020-2021

Particulars

Amount

`

Amount

`


Less: Deduction U/S 80

a. 80C –

b. 80D –

Adjusted Total Income (ATI)

c. 80GG (least of the below):

. i. Rent paid – 10% of ATI (54,000 – 29,500)

ii. 5,000 x 12 60,000

iii. 25% of 2,95,000 73,750

15,000

10,000

25,000

24,500

2,95,000

24,500


Illustration 17

Sri Jagadish's gross total income for the P.Y. 2019-2020 in ` 12,50,000. It includes LTCG 5`

0,000 and STCG taxable at 15% ` 20,000. He paid ` 10,000 as medical insurance premium and `

30,000 to HDFC Bank towards educational loan of his son (interest ` 20,000, Principal ` 10,000).

He made the following donations during the year.

i) PMNRF ` 30,000

ii) NDF ` 20,000

iii) NCF ` 20,000

iv) National Foundation for Communal Harmony - ` 5,000

v) Indian Institute of Science, Bangalore (national eminence) ` 20,000.

37


vi) Books to local college (worth) ` 15,000

vii) ` 20,000 given as aid to a poor student.

viii) Local temple for renovation - ` 5,000

ix) Govt. for construction of college building - ` 5,000

x) Recognised charitable trust - ` 10,000

xi) Karnataka Govt. for family planning - ` 10,000

xii) To an approved High School for midday meal scheme (Rice) ` 5,000.

Compute the total income for the A.Y. 2020-2021. (Nov/Dec. 2010)

Solution:

Computation of total Income of Sri Jagadish for the A.Y. 2020-2021

38

Note: 1. U/S 80E interest on Education loan is eligible, principal amount is not eligible.

2. Donation to local temple is not eligible for deduction. Only notified temples are eligible.

3. 100% deduction is available on donation to promotion of Family planning.

Illustration 18.

Mr. Azad whose Gross Total Income ` 46,00,000 makes the following donations during the previous year ending 31-3-2020:

a) To Prime Minister's National Relief Fund `

1,00,000 b) To National Defence Fund 2,00,000 c) To a temple of public worship for its repair (so notified) 2,00,000 d) To local college for the construction of auditorium 1,00,000 e) To a poor, most deserving student for his P.G. studies 20,000 f) To municipality 1,00,000 g) To Primary Health Centre Chandigarh for promotion of family planning

50,000 h) To Chief Minister's Earthquake Relief Fund Maharastra 20,000 i) Books worth 50,000 to a newly formed university.

The gross total income included 10,00,000 as LTC gains 4,00,000 as winnings from card games and 30,000 being short term capital gains taxable at 1%.

Compute his total income for the A.Y. 2020-2021. (Oct./Nov. 2011) Solution:

Computation of Total Income of Mr. Azad for the AY 2020-2021

Particulars Amount

` Amount

`

Gross Total Income Less: Deduction U/S 80G:

Donations without limit i. PMNRF 1,00,000

ii. NDF 2,00,000 iii. CMERF Maharastra 20,000

Donations with limit 1. Temple repair 2,00,000 2. Primary health centre 50,000 3. Local college 1,00,000 4. Municipality 1,00,000

4,50,000

or 10% of ATI

(46,00,000–(10,00,000+30,000)=35,70,000X10/100 =3,57,000

Rate: @ 100% donations without limit 3,20,000

Primary health centre 50,000

on balance @ 50% (3,57,000-50,000)=3,07,000x50/100

3,20,000

3,57,000

46,00,000

5,23,500

6,77,000

3,70,000

1,53,500


39


Note: 1. ATI = Total income - LTCG & STCG

2. 100% deduction is available on donation to Primary health centre.

Illustration 19.

The Gross Total Income of Sri Kumar is ` 3,25,000 including short term capital gains taxable

at 15% ` 1,00,000. He donated ` 6,000 to Prime Ministers National Relief Fund. During the year he

repaid ` 8,500 towards education loan (` 5,000 towards principle and ` 3,500 towards interest). He

stays in a rented house paying a rent of 2,500 p.m.

Compute taxable income for AY 2020-2021 (Oct/Nov.2012)

Solution:

Computation of total Income of Sri Kumar for the A.Y. 2020-2021

Particulars

Amount

`

Amount

`

Gross Total Income


a. 80E – Interest on education loan

b. 80G – Donation to PMNRF

c. 80GG - (least of the below)

a. Excess rent paid above 10% of ATI

3,25,000 – (3,500 + 6,000 + 1,00,000)

10% of 2,15,500 i.e., 30,000 – 21,550 8,450

b. 25% of 1,15,500 28,875

c. 5,000/m (5000 x 12) 60,000

3,25,000

3,500

6,000

8,450

17,950


Illustration 20.

Mr. Khanna has made the following donations during the A.Y. 2020-2021.

i) National Children's Fund 2,00,000

ii) National Blood Transfusion Council 2,00,000

iii) Kasturba Medical College 4,00,000

iv) An approved charitable institution 2,00,000

v) Repairs of notified church 50,000

vi) Help to poor student 20,000

vii) Books donated to an approved college 30,000

40

viii) Congress I party 55,000

ix) Municipality for family planning 80,000

His gross total income amounted to ̀ 62 lakhs. This included long term capital gains 2

lakhs. During the year he paid ` 18,000 as medical insurance premium. Compute the Total Income.

(Oct/Nov.2012)

Solution:

Computation of total Income of Mr. Khanna for the A.Y. 2020-2021

Particulars Amount

Rs.

Amount

Rs.

Amount

Rs.

Gross Total Income


a. 80D – Mediclaim

b. 80G –

Donations without limit

i. NCF 2,00,000

ii.NBT Council 2,00,000

Donations with limit

I. KMC 4,00,000

ii. Charitable institution 2,00,000

iii. Church repairs 50,000

iv. Family planning 80,000

7,30,000

or

10% of ATI

62,00,000–(2,00,000+18,000+55,000)

59,27,000X10/100 = 5,92,700

Rate:

@ 100% donations without limit 4,00,000

Family planning

on balance @ 50% (5,92,700-80,000) x50/100

c. 80GGC – Donation to Congress I party

62,00,000

18,000

4,00,000

5,92,700

9,92,700

4,80,000

2,56,350

7,36,350

55,000

8,09,350


Note: 1. Donation in kind is not qualified for deduction..

2. Help to poor student is not eligible under section 80G.

3. ATI = GTI-LTCG-80D-80GGC.

41


Illustration 21.

The Gross Total Income of Mrs. Pavithra is ` 4,16,000 which includes long term capital gains

` 1,00,000. She donated ` 10,000 to PMNRF; paid ` 16,000 towards medical insurance premium

including preventive medical bill of ̀ 7,000, deposited ̀ 70,000 in PPF. She paid a rent of ` 3,000 per

month for the house. Assuming that the conditions for allowing deduction u/s 80GG are satisfied.

Compute the total income of Mrs. Pavithra for the AY 2020-2021.. (Oct./Nov.2013)

Solution:

Computation of total Income of Mrs. Pavithra for the A.Y. 2020-2021

((16,000-7,000 = 9000 +5,000)

14,000

1,08,000

3,08,000

Note: 2. Since the maximum qualifying amount for preventive health check up is Rs. 5,000, qualifying deduction u/s 80D is Rs. 14,000.

Illustration 22.

From the following particulars of Mr. Alwyn whose gross total income is 9,50,000 has made

following payments/investments.

a) Life insurance premium (Wife's life) 5,000

b) Public Provident Fund deposits 20,000

c) Engineering college tuition fees of his daughter aged 20 38,000

d) Unit liked insurance plan 16,000

e) Investment in Rajiv Gandhi Equity Saving Scheme 50,000

f) Interest paid on education loan of his daughter 26,000

g) Medical insurance policy premium paid 18,000

Calculate the deductions allowable u/s 80 assuming Mr. Alwyn as a first time equity investor.

42

(Oct./Nov.2013)

43

Solution:

Computation of deductions allowable U/s 80

Illustration 23.

The Gross Total Income of Ms. Suresh is ` 5,80,000. He paid ` 14,000 as medical insurance

premium on his health. Spent 20,000 for the treatment of severally handicapped brother and ` 75,000

for the treatment of his father (aged 72 years) who suffers from dementia (specified disease). Suresh

invested ` 48,000 in new shares under Rajiv Gandhi Equity Savings Scheme.

(Oct./Nov.2014)

Solution:

Computation of total Income of Mr. Sures for the A.Y. 2020-2021

75,000

2,38,000

3,42,000

44

Illustration 24.


Rituparna's Gross Total income is 10,50,000 which includes long term capital gains 1,00,000

interest on education loan repaid 16,000 and Accrued interest on NSC 10,000. She made the following

donations during the previous year.

a) Prime Minister's Drought Relief Fund ` 20,000.

b) National Foundation for Communal Harmony ` 15,000

c) National Blood Transfusion council ` 9,000

d) National Children's Fund ̀ 8,000

e) Notified Church at Goa ` 18,000

f) Government hospital for building expansion ̀ 15,000

g) Family planning Association of India ` 12,000

h) Recognised political party ` 5,000

i) Scholarships to poor students ` 10,000

During the year she paid ` 20,000 as medical insurance premium. Compute her total income.

(Oct./Nov.2014)

40

Solution:

Computation of total Income of Rituparna for the A.Y. 2020-2021

Particulars Amount

Rs.

Amount

Rs.

Amount

Rs.



a. 80C - NSC 10,000

b. 80D – Mediclaim 20,000

c. 80E – Interest on education loan 16,000

d. 80G –

Donations without limit

i. PMDRF 20,000

ii. NFCH 15,000

iii. NBTC 9,000

iv. NCF 8,000 52,000

Donations with limit

i. To Church 18,000

ii. Govt. Hospital 15,000

iv. Family planning 12,000

45,000

or

10% of ATI

10,50,000–(1,00,000+46,000+5000)

8,99,000X10/100 = 89,900 45,000

97,000

Rate: @ 100% donations without limit

(NFCH, NBTC,NCF = 15,000+9,000+8,000) 32,000

@ 50% donations PMDRF (20,000x50%)= 10,000

Family planning 12,000

on balance @ 50% (45,000-12,000) x50/100 54,000

16,500

70,500

80GGC – Donation to political party 5000

e. 1,21,500


Note: 1.ATI = GTI-Capital Gain-80C-80D-80E-80GGC.

41

Illustration 25


Mr. Murali gives the following particulars for the previous year. Gross Total Income ̀ 10,00,000

this includes LTCG ` 1,00,000 and STCG taxable at 15% ` 40,000.

He paid ̀ . 22,000 medical insurance premium for self and ̀ . 30,000 to SBI towards education

loan of his daughter (Interest ` . 20,000 and Principal ` . 10,000). He made the following donations

during the previous year:

a) Rajiv Gandhi Foundation ̀ . 30,000.

b) National Foundation for Communal Harmony ` . 20,000.

c) NDF ` . 25,000.

d) Indian Institute of Science (National eminence) ` . 30,000.

e) Govt. for construction of Hospital building ̀ . 20,000.

f) Books for local school ` . 50,000.

g) Local temple for Renovation ` 18,000.

h) Govt. health centre for Family planning ` . 15,000.

i) Renovation of Taj Mahal ` 15,000.

Compute his total income for AY 2019-20.

(Nov./Dec. 2015)

42

Solution:

Computation of total Income of Mr. Murali for the A.Y. 2019-20

Note:

1. Donation in kind is not qualified for deduction..

2. Donation to local temple renovation is not eligible under section 80G.

3. ATI = GTI-LTCG-STCG-80D-80E.

43

Illustration 26.


The Gross Total Income of Rahul amounted to ` . 8,32,000 which includes long term capital

gains ` 2,00,000, accrued interest on NSC ` . 40,000 and he donated ` . 32,000 to PMNRF; paid

` 32,000 towards medical insurance premium including preventive medical bill of ` 7,000. He paid

a rent of ` 6,000 per month for the house. Assuming that the conditions for allowing deduction u/s

80GG are satisfied. Compute the total income for the AY 2020-2021.

Solution:

Computation of total Income of Rahul for the A.Y. 2020-21

(Nov.2016)

Note:

ATI = GTI-LTCG-80C-80D-80G

8,32,000 - 2,00,000 - 40,000 - 25,000 - 32,000 = 5,35,000.

10% of 5, 35,000 = 53,500.

Illustration 27.

Mr. Chinmay Raj furnishes the following particulars of his income and losses for the year:

1. Salary income ` . 4,00,000.

2. Interest on self-occupied housing loan ` . 45,000.

3. STCG ` . 40,000.

4. LTCG ` . 55,000.

5. Long Term Capital Loss ` . 1,00,000.

44

6. Business income (speculation) ` . 80,000.

45

7. Business loss ` . 2,15,000.

8. Bank interest ` . 25,000.

9. Winning from horse race (net) ` . 35,000.

10. Loss from Buffalo race ` . 5,000.

Compute Gross Total Income of Chimay Raj for AY 2020-

2021.

Solution:

(Nov.2016)

Computation of Gross Total Income of Chinmay Raj for the A.Y. 2020-2021

Note:

1. Business loss cannot be set off against salary income. But it can be set off from

46

LTCG, STCG and Bank interest

47


2. Business loss cannot be set off against speculative income, but vice-versa is not allowed.

3. No loss can be set off against casual income such as winning from horse race, cards, and lotteries.

4. LTCG can be set off only against LTCG. Balance can be c/f to next 8 years.

5. Balance of business loss can be c/f to subsequent 8 years.

6. Loss from buffalo race cannot be set off.

Illustration 23.

Mr. Narendra has made the following donations during

the A.Y. 2020-2021.

i) National Children's Fund 2,00,000

ii) National Blood Transfusion Council 3,00,000

iii) Mysuru University 5,00,000

iv) An approved charitable institution 2,50,000

v) Repairs of notified Gurudwara 1,20,000

vi) Help to poor student 35,000

vii) Books donated to an approved college 57,500

viii) Congress I party 55,000

ix) Municipality for family planning 80,000

His gross total income amounted to ̀ 62 lakhs. This included long term capital gains ` 2 lakhs.

During the year he paid ̀ 48,000 (Principal amount ` . 30,000) towards the education loan. Compute

the Total Income.

(Nov.2016)

48

Solution:

Computation of total Income of Mr. Narendra for the A.Y. 2020-2021

Note:

1. Donation in kind is not qualified for deduction..

2. Help to poor student is not eligible under section 80G.

3. ATI = GTI-LTCG-80E-80GGC.

49


Illustration 28.

Mr.Pavan (suffering from severe disability) is a self employed person doing Tax practice in

Mangaluru . He furnishes the following particulars of his income and investments for PY 2018-19.

Compute amount deductible U/s 80GG and the taxable income for the AY. 2019-20. If he or his

wife do not own a house at working place.

Particulars `

Income from Profession 6,00,000

Long Term Capital gain 35,000


Rent paid ` 7,000 p.m.

Solution:

Computation of Total Income for the A.Y. 2020-2021 of Mr.

Pavan

(Nov.2017)

50

Illustration 29.

Mr Vaman Rao , a resident individual, submits the following information :

a. Income from salary 4,50,000.

b. Income from House Property A 30,000

c. Loss from house property B 34,000

d. Income from interest on securities 20,000

e. Loss from a Cycle business 20,000

f. Profit from Steel business 10,000

g. Profit from speculation business 25,000

h. Loss from short-term capital asset 6,000

i. Long-term capital loss 25,000

j. Long-term capital gain 21,000

k. Income from crossword puzzles (TDS 9,000) 21,000.

Compute Gross Total Income.

(Nov.2017)

Solution:

Computation of Gross Total Income

51


Note:

1. No loss can be set off against casual income such as winning from horse race, cards, and lotteries.

2. LTCG & STCG can be set off only against LTCG/STCG. Balance can be c/f to next 8 years.

Illustration 30.

The gross total income of Ms.Ashalatha is Rs 8,60,000 which includes long term capital gain

Rs 2,00,000 .She donated Rs 15,000 to Swacch Bharath Kosh, paid Rs 35000 towards medical

insurance premium including preventive health check-up bill of Rs 8,000, deposited Rs 75,000 in

PPF. She paid a rent of Rs5,000 per month for the house. Assuming that conditions for allowing

deduction under section 80GG are satisfied, compute her total income.

(Nove/Dec. 2018)

Solution :

Computation of Total Income of Ms. Ashalatha for the AY 2020-2021

Particulars Amount Amount Amount

Gross Total Income

Less : Deduction U/S 80

1. Sec 80C : Deposit in PPF

2. Sec 80D : Medical insurance

3. Sec 80G: Donation to S.B.Kosh

3.Sec 80 GG : Deduction for rent paid

( least of the following )

a) Rent paid above 10 % of AGTI (60,000-54,500)

Rent paid: Rs. 5,000 X 12 = Rs. 60,000.

10% of AGTI = 54,500.

b) 25 % of AGTI (5,45,000 X 25 % )

c) Rs. 5,000 X 12

8,60,000

75,000

25,000

15,000

5,500

1,36,250

60,000

5,500

1,20,500


Note : AGTI = GTI-(PPF + Medical insurance + S.B.Kosh + LTCG)

AGTI = 8,60,000 – (75,000+25,000+15,000+2,00,000) = 5,45,000.

Illustration 31.

The gross total income of Mr. Ashrith for the assessment year 2020-2021 is Rs 25,00,000,

which included long term capital gain of Rs 2,50,000 . He made the following donations:

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1. Indian Naval benevolent fund Rs 10,000.

2. National fund for control of drug abuse Rs 40,000.

3. Central fund for technology development and appreciation Rs 1,00,000.

4. Indian Gandhi Memorial Trust Rs 30,000

5. .To local college for the construction of auditorium Rs 15,000.

6. Approved Charitable Institution Rs 1,00,000.

7. State government fund for medical relief to poor Rs 50,000.

8. To primary health centre for promotion of family planning Rs 10,000.

During the year he paid Rs 26,000 as Medical Insurance Premium, Compute total income.

(Nov./Dec. 2018)

51

Solution:


Computation of Total Income of Mr. Ashrith for the AY 2020-2021

Particulars Amount Amount Amount Amount

Gross Total Income

Less : Deduction u/s 80

1.Sec 80D : Medical Insurance

2.Sec 80G : Donation

a) Without limit- 100 % deduction

I.N.B fund

N F for control pf drug abuse

Cent Fund for Tech development Fund

State Govt fund for med relief

b) Without limit- 50 % deduction

IGM trust

c) With limit donation :

Local college

Approved Charitable Institution

PHC for F P

OR

10% of ATI

(25,00,000-(25,000+2,50,000)= 22,25,000

Rate @ 100% deduction :

PHC for F P

Rate @ 50% deduction:IGM (30,000x50%)

(1,25,000 – 10,000)=1,15,000X50/100

Total income

25,00,000

25,000

10,000

40,000

1,00,000

50,000

30,000 2,30,000

15,000

1,00,000

10,000

1,25,000

2,22,500 1,25,000

2,00,000

10,000

15,000

2,25,000

57,500

3,07,500

21,92,500

Illustration 31.

Mr. Ashok Rao submits the following information of the net income and losses:

a) Salary income

b) Income from house property

1,24,000

House A (income) 10,000

House B (Income) 30,000

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c) Income from Business :

Cloth business (profit) 30,000

Hardware business (loss) 12,000

Unabsorbed depreciation B/F 5,000

Speculation (profit) 12,000

Speculation (loss) 17,000

d) Capital Gain

Short term (gain) 8,000

Short term (loss) 24,000

Long term (gain) 8,000

e) Other sources :

Income from betting 12,000

Loss from card games 6,000

Income from card games 9,000

Interest on securities (gross) 8,000

Compute his gross total income.

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Solution:


Computation of gross total income of Ashok Rao for the A.Y.2020-2021


1. Income from salary 1,24,000

2. Income from House Property:

House A 10,000

House B 30,000 40,000

3. Income from business:

Profit from Cloth business 30,000

Less :Loss from Hardware Business 12,000

18,000

Less : Unabsorbed depreciation 5,000 13,000

Profit from speculation business 12,000

Less : Speculation loss 17,000

Speculation loss carry forward (5,000)1 Nil

4. Capital Gains:

STCG 8,000

Long-term capital gain 8,000

16,000

Less : STC Loss 24,000

STC loss carry forward (8,000)2 Nil

5. Income from other sources:

Income from betting 12,000

Income from card games 9,000

Interest on securities 8,000 29,000


Note :

1. Speculation loss shall not be set off against any other income except against profits and gains

of another speculation business and it shall be carried forward for next 4 years.

2. Short term capital loss cannot be set off against any income & shall be carried forward.

No loss can be set off against Casual Income.

general deductions (under section 80) chapter 1 general

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