As we know that the Income tax is payable after all the adjustments which are as follows:
Income under all the heads of Income ****
Profits & gains from business & profession
Less: Brought forward Losses & Allowances ****
Gross Total Income ****
Less: Deductions under Chapter VI-A ****
Estimated Income ****
Income tax on estimated income ****
Add: Surcharge ****
Less: Relief under Section 89 ****
Add: HC & SHEC ****
Total Tax liability ****
Less: Relief under Section 90,90A & 91 ****
Less: MAT Credit u/s 115JAA ****
Less: TDS deducted as per Form 16/16A ****
Now, today, we will discuss all the deductions under Chapter VI-A. The main motive to provide the tax exemptions under the same is to enhance the investments under the schemes which are mentioned in the said sections. Hence, the assessee makes the investment which serves the two purposes, at one side, government gets the funds & liquidity of resources in the particular schemes, on the other hand, assessee gets the deduction under Income tax for the same
Deductions under chapter VI-A Explained:
The deduction under section 80C is allowed from the Gross Total Income of the assessee. These are available to an Individual or a HUF. The deduction is allowed for various investments, expenses and payments.
Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurance is available under Section 80CCC . This section provides deduction to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer for receiving pension from a fund referred to in Section 10(23AAB). In case the annuity is surrendered before the date of its maturity, the surrender value is taxable in the year of receipt.
Section 80CCD: Deduction in respect of Contribution to Pension Account
Earlier, the amount of deduction under 80C, 80CCC and 80CCD(1) together was limited to Rs. 1,00,000. However, as per new amendment since the financial year 2014-15(assessment year 2015-16) the amount of deduction is Rs. 1,50,000.
Deductions on Savings Bank Account under Section 80 TTA:
Deduction from gross total income with respect to any Income by way of Interest on Savings account. Deduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in respect of 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.
Deductions on House Rent -Section 80GG:
This deduction is available for rent paid when HRA is not received. Assessee or his spouse or minor child should not own residential accommodation at the place of employment. Assessee should not be in receipt of house rent allowance. He should not have self occupied residential premises in any other place.
Deduction available is the least of
- Rent paid minus 10% of total income
- Actual HRA received
- 50% of salary (Basic+ DA) for Metro cities & 40% for Non-metro cities
Deductions on Loan for Higher Studies under Section 80E
Deduction in respect of interest on loan taken for pursuing higher education. This loan is taken for higher education for the assessee, spouse or children or for a student for whom the assessee is a legal guardian.
Deduction for First Time Home Owners under Section 80EE
This section provided deduction on the Home Loan Interest paid and is valid for financial years 2013-14 & 2014-15 (Assessment year 2014-15 and 2015-16) only. The deduction under this section is available only to Individuals for first house purchased where the value of the house is Rs 40lakhs or less and loan taken for the house is Rs 25lakhs or less. And the Loan has been sanctioned between 01.04.2013 to 31.03.2014. The total deduction allowed under this section is Rs 1,00,000.
Section 80CCG: Rajiv Gandhi Equity Saving Scheme (RGESS)
The Rajiv Gandhi Equity Saving Scheme (RGESS) was launched after the 2012 Budget. Investors whose gross total income is less than Rs. 12 lakhs can invest in this scheme. Upon fulfillment of conditions laid down in the section, the deduction is lower of – 50% of amount invested in equity shares or Rs. 25,000.
Section 80D: Deduction in respect of Medical Insurance
For financial year 2014-15 – Deduction is available up to Rs. 15,000/- to an assessee for insurance of self, spouse and dependent children. If individual or spouse is more than 60 years old the deduction available is Rs 20,000. An additional deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 15,000/- if less than 60 years old and Rs 20,000 if parents are more than 60 years old. Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/-. (From AY 2013-14, within the existing limit a deduction of up to Rs. 5,000 for preventive health check-up is available).
For financial year 2015-16 – Deduction is raised from Rs 15,000 to Rs 25,000. The deduction for senior citizens is raised from Rs 20,000 to Rs 30,000. For uninsured super senior citizens (more than 80 years old) medical expenditure incurred up to Rs 30,000 shall be allowed as a deduction under section 80D. However, total deduction for health insurance premium and medical expenses for parents shall be limited to Rs 30,000
Section 80DD: Deduction in respect of Rehabilitation of Handicapped
Deduction is available on:
- Expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependent relative
- Payment or deposit to specified scheme for maintenance of dependent handicapped relative.
Where disability is 40% or more but less than 80% – fixed deduction of Rs 50,000. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,00,000.A certificate of disability is required from prescribed medical authority.