Unit – IV : Computation of total Income and tax liability

(Sec 80C to 80U also known as Chapter VI-A)

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4.1 Deductions U/s 80-C, 80-D and 80-U
4.2 Computation of Gross Total Income.
4.3 Computation of Total Income.
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Deductions

Chapter wise deduction From Gross Total Income

• Salary : Sec. 16, [Sec. 80C to 80U]

• House Property : Sec. 24

• PGBP : Sec. 30 to 37(1)
• Capital Gain : Sec. 54 Expenses/ Contributions / Investment Income
(Sec.80C to 80GGC) (Sec. 80IA to 80U)
• Other Sources : Sec. 57

General Principles for Deductions from Incomes :

Sec. 80A : Deduction cannot exceed Gross Total Income.
Sec. 80AB : Deductions to be made with reference to the income included in the gross total income.
Sec. 80AC : Deduction not to be allowed unless return furnished.
Important Points :
1. Deduction u/s 80C to 80U can never exceed Gross Total Income.
2. Deduction u/s 80C to 80U shall not be allowed from STCG u/s 111A.
STCG u/s 111A is taxable @ 15%.
Sec. 111A : Short Term Capital Gain :
1) Income from : a) Equity Shares
b) Units of an equity oriented fund
c) Unit of Business trust
2) Such transaction is chargeable to Securities Transaction Tax.
Note: In case of Individual and HUF, less than the maximum amount which is not chargeable
to income tax then the income is not chargeable to that limit.
3. Deduction u/s 80C to 80U shall not be allowed from LTCG u/s 112 or 112A.
Sec. 112 :Long Term Capital Gain :
1. In the case of resident Individual / HUF - @ 20%.
Note: In case of Individual and HUF, less than the maximum amount which is not chargeable
to income tax then the income is not chargeable to that limit.
2. In other assesses @ 20%.

Deductions U/s 80C to 80U Page 1

 3. In case of LTCG on transfer of listed securities (excluding units)/ zero coupon
bonds –
a) @10% of LTCG without indexing
b) @20% of LTCG with indexation
Whichever is less.
[Important note : Debentures are never indexed]
Sec. 112A :Long Term Capital Gain :
1) Income from – a) Equity Shares
b) Units of an equity oriented fund
c) Unit of Business trust
2) On such LTCG, computed without indexing the cost of acquisition, one exceeding Rs.
1 Lakh @ 10%, without providing the benefits of indexation.
4. Deduction u/s 80C to 80U shall not be allowed from Lottery Income.

Tax Rates

Slab Rate Special Rate

[Gives in Finance Act] [Given in Income Tax Act]
STCG 111A LTCG 112 / 112A Lottery Income 115BB
Rate 15% 10% / 20% 30%
Deduction u/s 80C to 80U No No No
Shifting (Only for residents) Yes Yes No

Sec 80C : Deduction in respect of Investment or Contribution

 This deduction is applicable only for Individual (Any type) / HUF.
 Amount of deduction : Rs. 1,50,000 or amount paid / deposited, whichever is less.
[Max. limit Rs. 1,50,000/-]
 Amount has actually paid.
 Investment should be made in –
1. Life Insurance Premium [Self, Spouse, Children (May be dependent or non-
dependent, married or unmarried)]
Deduction Limit : Life Insurance Premium or 10% of capital sum assured.
Type of Policy Max. premium eligible for deduction
Policy issued up to 31-3-2012 20% of actual capital sum assured.
Policy issued on or after 1-4-2012 10% of actual capital sum assured
Policy issued on or after 1-4-2013 for the life 15% of actual capital sum assured
of person referred in section 80U or 80DDB
Sec. 80U : A person with a disability / severe disability
Sec. 80DDB: A person suffering from disease or ailment. (e.g. Cancer, AIDS, etc.)

Deductions U/s 80C to 80U Page 2

Example :
Life Insurance Capital Sum Assured Amt. eligible for
Premium (p.a.) deduction
Rs. 15,000 Rs. 2,00,000 : 10% of 2,00,000 = Rs. 20,000 Rs. 15,000
Rs. 30,000 Rs. 2,00,000 : 10% of 2,00,000 = Rs. 20,000 Rs. 20,000
Rs. 1,60,000 Rs. 17,00,000 : 10% of 17,00,000 = Rs. 1,70,000 Rs. 1,50,000 (Max)

2. Sum paid for annuity plan of LIC. (New Jeevan Dhara, Jeevan Akshay, etc.)
3. Contribution in Unit Linked Insurance Plan (ULIP) of UTI.
4. Contribution to Statutory / Recognized / Public provident fund.
Note :
a) Contribution to unrecognized provided fund is not allowed for deduction.
b) Max. Rs.1,50,000 can deposit in Public Provided fund in the name of self, spouse or
his / her child.
5. Contribution to approved superannuation fund.
6. Contribution to Sukanya Samriddhi Account.
7. Subscription to NSC VII and IX Issue.
8. Interest due on NSC VII and IX Issue.
9. Tution Fees.
Conditions : (a) Only for two children. (b) Full time education
c) Any university, College, School or other education institution situated within India.
10. Payment of installment for cost of purchase / construction of resident house property. Loan is
taken from Government, bank, cooperative bank, LIC, National Housing Bank, Employer (If
employer is public company), University, Cooperative society, etc. The income should be
charged u/h ‘Income from house property’.

Repayment of Housing Loan (Principal + Interest)

Construction / Renovation /
Acquisition of House Repair of House

Principal Interest Principal Interest

(On payment basis) (On accrual basis) (On payment basis) (On accrual basis)

No deduction
Deduction Max. Rs. 2,00,000 p.a. Max. Rs. 30,000
either in Sec. 80C
U/s 80C U/s 24(b) p.a. U/s 24(b)
or 24(b)
[If loan is taken after
1.4.1999 and completed
within five years)

Deductions U/s 80C to 80U Page 3

11. Subscription to equity shares / debentures of a public company which is engaged in –
a) Developing, maintaining and operating an infrastructure facility.
b) Providing cellular telecommunication services
c) Developing industrial park or special economic zone (SEZ)
d) Generation or generation and distribution of power.
12. Term deposit for a period of 5 years or more in scheduled bank.
13. Amount deposited in 5 years time deposit scheme in post office.
14. Notified bonds of NABARD.
15. Amount deposited under Senior Citizens Saving Scheme.
16. Contribution to unit of Mutual Fund notified by Central Government.
17. Contribution to pension fund set up by Mutual Fund.
18. Contribution to pension fund set up by National Housing Bank.
19. Deduction from salary (upto 20% of salary) for deferred annuity.
Illustration 1 :
From the following particulars in respect of Mr. Adarsh an author of books, find out the
deduction allowable to him u/s 80C for the A. Y. 2019-20.
i) Life Insurance Premium (On his own life) policy taken in 2011 Rs. 22,000
ii) Sum assured on the above policy Rs. 2,00,000.
iii) Contribution to unrecognized provided fund Rs. 1,000.
iv) Contribution to Public Provided Fund Rs. 95,000
v) Subscription to National Savings Certificates (VIII Issue) Rs. 18,000
vi) Accrued interest for one year completed NSC (VIII Issue) Rs. 8,000.
vii) Life Insurance Premium (on his mother’s life policy) Rs. 5,000.
viii) Repayment of Bank loan borrowed for construction of the house Rs. 21,000.
Solution :
Computation of Amount Entitled to Deduction u/s 80C
(For the Assessment Year 2019-20)
No. Particulars Rs.
1. Life Insurance Premium (On his own life) 22,000
Policy taken in 2011, hence 20% of Sum assured is allowed
i.e. 20% of 2,00,000 = 40,000 or 22,000, whichever is less.
2. Contribution to unrecognized provided fund Deduction is not allowed
3. Contribution to Public Provided Fund 95,000
4. Subscription to National Savings Certificates (VIII Issue) 18,000
5. Accrued interest for one year completed NSC (VIII Issue) 8,000
6. Life Insurance Premium (on his mother’s life policy) Deduction is not allowed
7. Repayment of Bank loan borrowed for construction of the house 21,000
Eligible amount for deduction u/s 80C 1,64,000
Maximum limit of qualifying amount u/s 80C is Rs. 1,50,000.

Deductions U/s 80C to 80U Page 4

 Sec. 80D : Deduction regarding Medical Insurance Premium
 Assessee : Individual / HUF
Conditions :
1) Scheme for insurance must be framed by General Insurance Corporation of India (GIC),
approved by Central Government and Insurance Regulatory and Development Authority
(IRDA).
2) Amount paid from the income which is chargeable to tax.
3) Amount should be paid in other than cash mode. But the amount of Preventive Health Check-
up can be paid in cash.
Individual, Spouse & Dependent Children Parents
(Aggregate) (Aggregate)
1) Insurance Premium + 1) Insurance Premium +
Preventive Health Check-up Preventive Health Check-up
Amount paid or Rs. 25,000; whichever is less Amount paid or Rs. 25,000; whichever is less
(Note : (Note :
a) Rs. 50,000 instead of Rs. 25,000 if paid for a) Rs. 50,000 instead of Rs. 25,000 if paid for
insurance on health of any person who is Senior insurance on health of any person who is Senior
Citizen. Citizen.
b) Max. deduction on account of PHC Rs. 5,000 b) Max. deduction on account of PHC Rs. 5,000
2) Medical Expenditure 2) Medical Expenditure
Amount paid or Rs. 50,000; whichever is less. Amount paid or Rs. 50,000; whichever is less.
[Applicable for Senior Citizen and Insurance [Applicable for Senior Citizen and Insurance
Premium is not paid] Premium is not paid]
(1) + (2) shall not exceed Rs. 50,000. (1) + (2) shall not exceed Rs. 50,000.

Important Note (Amendment in Finance Act 2018):

Where an amount is paid in a lump sum in the previous year, for health insurance premium,
for more than a year, then, subject to the previsions of this section, there shall be allowed for each of
the relevant previous years, a deduction equal to the appropriate fraction of the amount.

Deductions U/s 80C to 80U Page 5

Examples :

Example : 1 Example : 2 Example : 3

Mr. X 7,000 Mr. X (62 Yrs) 15,000 Mr. X (62 Yrs) 35,000
Med. Exp.
(Premium not paid)
Mrs. X 7,000 Mrs. X (58 Yrs) 12,000 Mrs. X (58 Yrs) 18,000
Son (Dependent) 4,000 PHC 6,000
Daughter 4,000
(Not dependent)
PHC 6,000
Solution Solution Solution
Mr. X 7,000 Mr. X (62 Yrs) 15,000 Mrs. X 35,000
Rs. 35,000 or
Rs. 50,000;
Whichever is less
Mrs. X 7,000 Mrs. X (58 Yrs) 12,000 Mrs. X (58 Yrs) 18,000
Rs. 25,000 or
Rs. 18,000;
Whichever is less
Son (Dependent) 4,000 - -
PHC 5,000 PHC 5,000
(Rs.6,000 or (Rs.6,000 or
Rs. 5,000; Rs. 5,000;
whichever is less) whichever is less)
Total 23,000 Total 32,000
Ded. u/s 80D 23,000 Ded. u/s 80D 32,000 Ded. u/s 80D 50,000
(Rs. 25,000 or (Rs. 50,000 or Rs. 35,000 + Rs.
Rs. 23,000, Rs. 32,000, 18,000 = Rs. 53,000
whichever is less) whichever is less) OR
Max. Rs. 50,000
[Whichever is less)

Deductions U/s 80C to 80U Page 6

Example :
Example Solution
Mr.X 15,000 Part A : (Self, Spouse & Dependent Children)
Mrs. X 8,000 Mr.X 15,000
PHC 6,000 Mrs. X 8,000
Father (62 yrs) 40,000 PHC (Rs.6,000 or Rs. 5,000; whichever is less) 5,000
Mother (58 Yrs) 15,000 Total (A) 25,000
(Rs. 25,000 or Rs. 28,000, whichever is less)
Part B : (Parents)
Father (62 yrs) 40,000
Mother (58 Yrs) 15,000
Total (B) (Rs. 50,000 or Rs. 55,000, 50,000
whichever is less)
Total Ded. u/s 80D (A + B) 75,000

Example :
Example Solution
Mr.X 15,000 Part A : (Self, Spouse & Dependent Children)
Mrs. X 8,000 Mr.X 15,000
PHC 6,000 Mrs. X 8,000
Father (72 yrs) 28,000 PHC (Rs.6,000 or Rs. 5,000; whichever is less) 5,000
(Med. Exp. Incurred,
Insurance premium
not paid)
Mother (68 Yrs) 24,000 Total (A) 25,000
(Rs. 25,000 or Rs. 28,000, whichever is less)
Part B (i): Father 28,000
(Rs. 50,000 or Rs. 28,000, whichever is less)
Part B (ii) : Father (62 yrs) 24,000
(Rs. 50,000 or Rs. 24,000, whichever is less)
Total 52,000
Total [B(i) +B(ii)] 50,000
(Rs. 50,000 or Rs. 52,000, whichever is less)
Total Ded. u/s 80D (A + B) 75,000
(Rs.25,000 + Rs. 50,000)

Deductions U/s 80C to 80U Page 7

Sec. 80G : Deduction in respect of donations to certain funds, charitable institution, etc.
 Assessee : Any Assessee
 Conditions :
i) Donation in the form of money only. (Not in kind)
ii) Amount of donation exceeds Rs. 2,000 should be paid other than cash.
iii) Donation to specific organizations.
iv) Produce documentary evidences.
v) Amount of deduction : Category A + B + C + D. (Detail list given below)

Sec. 80G : Donation

Wihtout Limit Within Limit

Cat A : 100% Cat B : 50% Cat C : 100% Cat D : 50%

Key Words Key Words Key Words Key Words

i)National Fund Gandhi-Nehru i) Family Planning i) Charitable trust /

ii) PM/CM Fund, etc Family Fund + ii) Olympic NGO for charitable
Drought Relief Fund purpose
ii) Mandir /
Gurudwara / Masjid,
Church, etc.
(Approved only)
Calculation of limit :
1) 10% of qualifying amount of Gross Total Income.
2) Gross Total Income = GTI (-) STCG (Sec.111A) (-) LTCG (-) Deductions u/s 80C to 80U.
Category A : (100% Without Limit)

No. Donee Deduction

1. National Defence Fund set up by the Central Government 100%

2. Prime Minister’s National Relief Fund 100%

3. Prime Minister’s Armenia Earthquake Relief Fund 100%

4. Africa (Public Contribution – India) Fund 100%

5. National Children’s Fund 100%

6. National Foundation for Communal Harmony 100%

7. Approved University or Educational Institution of National Eminence 100%

Deductions U/s 80C to 80U Page 8

 8. Chief Minister’s Earthquake Relief Fund, Maharashtra 100%

9. Fund set up by State Government of Gujarat for providing relief to the victims 100%
of earthquake in Gujarat

10. Zila Saksharta Samiti 100%

11. National Blood Transfusion Council or a State Blood Transfusion Council 100%

12. Fund set up by a State Government for the medical relief to the poor 100%

13. Central Welfare Fund of Army or the Indian Naval Benevolent Fund or The Air 100%
Force Central Welfare Fund

14. Andhra Pradesh Chief Minister’s Cyclone Relief Fund 100%

15. National Illness Assistance Fund 100%

16. Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund 100%

17. National Sports Fund or National Cultural Fund or Fund for Technology 100%
Development and Application

18. Swachh Bharat Kosh 100%

19. Clean Ganga Fund 100%

20. National Fund for Control of Drug Abuse 100%

Category B : (50% Without Limit)

No. Donee Deduction

1. Jawaharlal Nehru Memorial Fund 50%

2. Prime Minister’s Drought Relief Fund 50%

3. Indira Gandhi Memorial Fund 50%

4. Rajiv Gandhi Foundation 50%

Category C : (100% Within Limit)

No. Particulars Deduction
1. Donation to Government or any approved local authority, institution or 100%
association to be utilized for the purpose of promoting family planning.
2. Donation by a company to the Indian Olympic Association or to any other 100%
association or institution notified for the development of infrastructure for
sports and games in India or the sponsorship of sports and games in India.
(Note: Only the donations/ contributions made by companies are eligible
to claim deduction under this i.e. this particular deduction is not available
to any other assessee.)

Deductions U/s 80C to 80U Page 9

Category D : (50% Within Limit)
No. Particulars Deduction
1. Funds/ Institutions which satisfies conditions mentioned under section 50%
80G(5)
2. Donation to Government or any local authority for the purpose of 50%
utilization for any charitable purpose other than promoting family
planning
3. Any authority constituted in India for dealing with and satisfying the needs 50%
for housing accommodation or for the purpose of planning/development of
towns, villages, etc.
4. Any corporation specified in section10(26BB) for promoting the interest of 50%
minority community
5. Any notified temple, mosque, gurdwara, church or other places for the 50%
purpose of renovation or repairs

Deductions U/s 80C to 80U Page 10

Deductions U/s 80C to 80U Page 11