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UNIT -1

Deductions to be made in
Computing total income
DEDUCTIONS
in computing total income of an assessee the
deductions under sections 80-C to 80-U are to be
allowed from GTI
Gross total means: the total income computed in
accordance with the provisions of this act before
making any deduction under the u/s 80-C to 80-U.
BASIC RULES GOVERNING DEDUCTIONS
 Deductible from GTI
 Aggregate deduction not to exceed GTI ( excluding
LTCG, STCG taxable under section 111A, casual
income)
 Double deduction is not possible in respect of the same
business income
DEDUCTIONS IN RESPECT OF CERTAIN PAYMENT

 Section 80-C
Specified qualifying amount deposited by the assessee
in the previous year. LIC premium, contribution to
EPF, PPF, NSS, tuition fees of child paid to school and
collage in India.
(a) Available to an individual or a HUF only.
(b) Maximum amount of deduction under this section
is Rs. 150000.
(c) Available on actual payment basis
SECTION 80-CCC
 Deduction contribution to certain pension fund
 Available only to an individual
 Qualifying payment- any amount towards any annuity
plan for LIC of India or Any other insurer for receiving of
the whole amount deposited not exceeding 150000

Tax treatment of pension- taxable in hands of recipients in


the year of receipt.
SECTION 80-CCD
 Deduction contribution to a National Pension Scheme (NPS)
 NPS- covers New Pension Scheme (2003), Atal Pension Yojna
(2016).
 Who can join NPS- individual employed by the CG (on or after
2004) will have to join NPS on compulsory basis. Any other
employees (irrespective of date of joining employment) may
become member of NPS. The maximum amount of deduction
under this section is Rs. 150000.
 Additional deduction of Rs. 50,000 under section
80CCD (1B). On this contribution, the ceiling of Rs.
1,50,000 is not applicable.

The aggregate amount of deduction


under sections-80-C, 80-CCC & 80-CCD
shall not exceed Rs. 150000/-
SECTION 80-D
(a) Available to an individual or a HUF only
(b) Payment must be made by any mode other than cash
 Medical insurance- an assessee (below 60 years) can
claim a deduction up to Rs. 25,000 (Self & Family)
and Rs. 50,000 (Self, Family & Parents) and Senior
citizen up to 50,000 for premium paid by him for
health insurance
 Maximum amount= 25000 (Individual) and 50000
for senior citizen.
SECTION 80-DD
 Medical treatment of a dependent being a person
with disability. (Handicapped dependant- Blindness, low
vision, hearing impairment, mental illness and locomotor)
 for Individual and HUF
 Qualifying expenditure- assessee has incurred an
expenditure for medical treatment.
 Dependent- Spouse, children, parents, brother and
sister.
 Medical Certificate required
SECTION 80-DD
 Deduction= A fixed deduction of Rs.75,000 in case of
normal disability (less than 40%)
 Deduction = A fixed deduction of Rs.1,25,000 in case
of severe disability or 80 % disability
Deduction under this section is available regardless
of actual expenditure.
SECTION-80-DDB
 Medical treatment of specified diseases
 for Individual and HUF
 Qualifying expenditure- actually incurred expenditure for the
medical treatment.
Deduction of expenses or medical treatment of specified ailments
(such as AIDS, Cancer, neurological diseases)
The maximum amount of deduction (no medical reimbursement
received from any incurrence company) for individual or HUF
up to Rs. 40000 for medical treatment during the previous year.
In case of senior citizen it would be Rs. 1,00,000.
SECTION-80-E
Payment of interest on loan taken for higher
education
 For individual only – loan is taken by an individual for any
study in India or abroad. Interest is deductible in the year in
which its paid.
 For whose EL should be taken- interest is deductible if loan is
taken for pursuing assessor's own education or his relatives (
spouse and children)
amount of deduction- full interest is deductible in the year in
which the assessee starts paying and subsequent 7 years or until
interest is paid in full
SECTION-80-EE
 Interest on loan taken for residential house
property
 For individual who has taken home loan

 The amount of loan sanctioned for residential house


does not exceeds Rs. 35,00,000
 The value of House property does not exceed Rs.
50,00,000
 Deduction for interest payable on the above loan or Rs.
50,000, whichever is less
SECTION 80-G
Deduction in respect of donations to certain funds in
charitable institutions/ NGO’s
Deduction is available to any tax payer. three types
of deduction -100%, 50% & 10% of AGTI
(Adjusted gross total income)
SECTION 80 GG
 Deduction in respect of rent paid.
 Who can claim- Only for individual & self
employed. An employee who does not get HRA
from the employer.
 Qualifying expenditure- only an individual who
pays rent for a residential house for himself &
family.
Amount of deduction- least of the following
 Rs. 5,000 per month or 25% of total income or
excess of actual rent paid over 10% of total
income.
 Total income= (GTI-LTCG/STCG/Deductions)
SECTION 80-P
 Deduction in respect of income of co-operative societies
When a co-operative society is an assessee, the following
amounts are allowed as deductions.
The whole of the profit (100%) attributable to any one or more of
the following activities
i. Cottage industry
ii. Marketing of agriculture product of its member
iii. Engaged in supplying milk, fruits or vegetables raised or
grown by its members
Iv The business of banking or providing credit facilities to its
member
SECTION QQB
 Deduction in respect of Royalty income of authors
 for individual resident in India.

 The book authored by him is work of literary, artistic or


scientific nature.
 Income includes- royalty and copyright fees

 furnished of form no. 10CCD- the taxpayer has to obtain a


certificate from the person responsible for paying the income
and furnish it electronically along with return
 Return of income- deduction not available unless it is claimed
in the return of income.
 Amount- Rs. 3,0,00,00 or income from royalty ( whichever is
less)
SECTION 80-TTA
 The interest received on saving bank account is
considered as income and its taxable. Section 80-TTA
offers tax deduction on interest income from deposits
held in savings accounts.
 Who is eligible- Individual and HUF (Banks and Post
office)
 Deduction limit- Up to Rs. 10,000 is tax deductible
from the gross income. Any interest earned over and
above Rs. 10,000 is considered income.
SECTION 80-TTB (2019)
 Section 80-TTB offers tax deduction on interest
income from deposits held in savings accounts.
 Who is eligible- Senior Citizens, for saving
accounts in Banks and Post office
 Deduction limit- claim a deduction of Up to Rs.
50,000 from the total interest earned during a financial
year.
SECTION 80-U

 Deduction in respect of disabled person.


 The assess has to obtain a certificate from medical
authority constituted by central or state Govt.
 Deduction= 75,000 in case of normal disability (less
than 40%)
 Deduction = 1,25,000 in case of severe disability or
80 % disability
 80-DD deduction is in case of depended of the
employee whereas 80-U deduction in case of the
employee himself
SET OFF AND CARRY FORWARD OF LOSSES
An assessee is chargeable to tax on his total income.

Set-off
“The process of adjusting or written- off of losses against
income"
 When loss of one source is set-off against the income of other
source, means set-off losses within the sources.
SECTION 70-79 OF THE INCOME TAX 1961.
Loss from one source is set off against the incomes of other
sources or heads and thus the total income of an Assessee is
ascertained

If the quantum of loss is greater than profits, the net income of


the assessee will be loss. such loss, which could not be set off
due to non-availability of profit, is carried forward to be set off
against future profit.
PROVISIONS REGARDING SET-OFF OF LOSSES

 (a) Inter-sources set off (b) Inter-head set-off

(a) Inter-sources set off:-(sec-70) loss from any sources falling


under any head of income other than capital gains, the assessee
will be entitled to set-off such loss against his income from any
other source under the same head of income.
EXCEPTION CASES
 Loss from a speculation business can be set-off only against the
profit in a speculation business. Like- betting on a horse race,
investing in stocks/bonds etc
 Agricultural loss can not be set-off against income from other
sources.
 Long term capital loss can be set off only against long term
capital gain
 Loss incurred from the activity of owning and maintaining
horse race can be set off against income from same activity
Note- Casual losses can not be set off from any income
OTHER POINTS
 Loss from a house property can be set off against
income from any other house property
 Loss from non- speculation business can be set off
against income from speculation or non- speculation
business.
 Short term capital loss can be set off against any
capital gain.
(B) INTER-HEAD OF SET-OFF (SEC-71)
Loss from one head can be set off against the income
from other heads.
 Loss from house property can be set-off against
incomes under other heads - income from Business and
salary.
 Loss from capital gain can only set off against any
income under the head capital gain, it cannot be set-off
against any other income.
Note- Business loss can not be set off against salary
income
CARRY FORWARD OF LOSSES
 Excess of losses over income, shall be carried forward
and written off against the income of the subsequent
years. Called- carry forward of losses

 Note-

If return of the income (loss of the year in which loss


is incurred) is not submitted before due date of
submission, the loss can not be carried forwarded
SET OFF AND CARRY FORWARD OF LOSSES
S Types of loss Set-off in the same Income against which No.
. to be carried assessment year carried forward loss can of
N forward to be set off in next year (s) year
next year (s) s
1 House property From any head of income Income under the head “ Income from 8
loss (up to Rs. 2,00,000 only House Property”
from salary)
2 Speculation Loss Speculation profits Speculation profits 4

3 Non- Speculation Any income except salary Profit or gain from business 8
business loss

4 Short term capital Both short term and long Both short term and long term 8
loss term

5 Long term capital Long term capital gain Long term capital gain
loss

6 Loss of the activity income from activity of income from activity of owning and 4
of owning and owning and maintaining maintaining race horse
maintaining race race horse
CLUBBING OF INCOME
 Income of other person included in assessee’s total
income.
 Certain cases where income of one person is required
to be included in the income of another person if some
conditions are satisfied.
CLUBBING OF INCOME
Transfer of Income Without Transfer Of Asset
(Sec. 60)
Section 60 is applicable if the following conditions are
satisfied:
 The taxpayer owns an asset

 The ownership of asset is not transferred.

 The income from the asset is transferred to any


person under a settlement, trust or agreement.
 If the above conditions are satisfied, the income from
the asset would be taxable in the hands of the
transferor
TRANSFER OF INCOME WITHOUT TRANSFER OF
ASSET (SEC. 60)

 Any person who transfers income without


transferring the ownership of the assets, such income
is taxable in the hands of transferor.

 Illustration: X owns Debentures worth Rs 1,000,000


of ABC Ltd. interest being Rs. 100,000. On April 1,
2018 he transfers interest income to Y, his friend
without transferring the ownership of these
debentures. interest of Rs. 100,000 is received by Y, it
is taxable in the hands of X as per Section 60.
REVOCABLE TRANSFER OF ASSETS
 If an asset is transferred under revocable transfer,
income from such asset is taxable in hands of the
transferor.
Situation.1-if assets is transferred Example- X transfers a House to a
under a trust and it is revocable trust for the benefit of A & B., X has
during the lifetime a right to revoke. it is a revocable
transfer and income arising from the
house property is taxable in hands of
X.

Situation.2- if assets is transferred to a Example- X transfers a House property


person and it is revocable during the to a A. However, X has a right to
lifetime revoke the transfer. it is a revocable
transfer and income is taxable in hands
of X.
CLUBBING OF INCOME EARNED BY SPOUSE OF AN
INDIVIDUAL ( REMUNERATION TO SPOUSE)

When an assessee receives remuneration from a concern


in which his/her spouse has substantial interest, their
incomes are clubbed and tax liability is computed on
the aggregate income.
 A concern may be a business (Sole proprietorship,
partnership or company)
 Substantial interest- individual beneficially holds 20%
of equity shares or (20% share in profit) in the company

 Illustration- X has substantial interest in ABC ltd.


And Mrs. X is employed by ABC ltd. Without any
technical and professional qualification. In this case
salary income of Mrs. X shall be taxable in hands of X.
CLUBBING OF INCOME EARNED BY SPOUSE OF AN INDIVIDUAL
(ASSETS TRANSFERRED TO SPOUSE)

Where an asset is transferred by an individual to his


spouse, income from such assets is deemed to be
income of the transferor (apart from house property)
Following cases, this section is not applicable
1. If assets are transferred before marriage

2. adequate consideration
3. agreement to live apart
CLUBBING OF INCOME OF MINOR CHILD
Income earned by a miner child is clubbed in the
income of that parent whose income is higher.
However, if the minor’s parents are separated, his/her
income clubbed with the income of the parent who
maintained the minor.

As per section 10(32) Minor’s income up to Rs.1500


exempted.

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