DEDUCTIONS

1] DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIA, DEFERRED ANNUITY,

CONTRIBUTIONS TO PROVIDENT FUND, SUBSCRIPTION TO CERTAIN EQUITY
SHARES OR DEBENTURES, ETC. [SEC. 80C]

Section 80C provides deduction in respect of specified qualifying amounts paid or deposited by the
assessee in the previous year. The following are the salient features of section 80C

Who can claim deduction under section 80C- Deduction under section 80C is available only to an
individual or a Hindu undivided family

What is the qualifying investment to avail deduction- Deduction is available on the basis of specified
qualifying investments/contributions/deposits/payments made by the taxpayer during the previous year.
Such investment deposit, etc., can be made out of taxable income or otherwise.

The following investments and payments are eligible for deduction under Section 80C of the Income
Tax Act, 1961:

 Life Insurance : Premiums paid toward all life insurance policies are eligible for tax benefits
under Section 80C. This deduction can be claimed for premiums paid towards insuring self,
spouse, dependent children and any member of Hindu Undivided Family. An important point
to be noted is that if the policy is issued on or prior to March 31, 2012, annual premium up to
a maximum of 20% of the sum assured becomes tax deductible. For insurance policies issued
on or after April 1, 2012, annual premium up to a maximum of 10% of the sum assured is tax
deductible.

 Sukanya Samriddhi Yojana : Investments made in Sukanya Samriddhi Yojana, which is a

saving scheme for the girl child, are eligible for tax deduction under Section 80C of the Income
Tax Act, 1961. A parent or legal guardian of a girl child, who has not reached the age of 10
years, can open this account. Sukanya Samriddhi Yojana account can be opened for two girl
children (one account per girl child) and can be extended to a third if twins are involved.

 Public Provident Fund : Public Provident Fund (PPF) contributions are eligible for tax
deductions under Section 80C. PPF accounts have a maximum deposit limit of Rs. 1,50,000 per
year, therefore, all deposits made to your PPF account can be claimed as deductions under
Section 80C. The money that you put into a PPF account will be locked-in for a period of 15
years. Partial withdrawals are permitted after 7 years.

 Equity Linked Saving Scheme : Investments in equity linked savings scheme qualify for tax
deduction under section 80C of the Income Tax Act. Now, an essential point to be noted about
equity linked savings scheme is that they have a mandatory lock-in period of three years from
the date of investment. If you are considering investing in this scheme, make sure to invest for
longer periods like five to seven years as they are equity schemes. Equity schemes are an ideal
option for wealth creation over a long period.

 Five Year Bank Deposit : Most banking institutions offer tax saving fixed deposits where
deductions can be claimed under Section 80C of the Income Tax Act. The condition associated
with tax saver fixed deposits is that they come with a lock-in period of 5 years. Premature

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 withdrawal is not allowed under this investment. Interest earned on tax saver fixed deposits,
however, are taxable and will be deducted at source.

 Stamp Duty and Registration Charges : While buying a property, one of the largest expenses
you will have to bear is the stamp duty and registration charges. To give taxpayers some relief,
the government has included these expenses under Section 80C of the Income Tax Act, 1961.
The deduction can only be claimed once the property construction is complete and you have
legal possession of the house.

 Senior Citizens Savings Scheme : Investments in Senior Citizens Saving Scheme, which as
the name would suggest is suitable for senior citizens, qualify for deduction under Section 80C
of the Income Tax Act. This scheme has a tenure of 5 years. To participate in the Senior Citizens
Saving Scheme, an individual has to be at least 60 years of age. Those who have taken VRS
(voluntary retirement scheme) can opt for it after the age of 55.

 National Savings Certificate : To encourage taxpayers to park their money in National

Savings Certificate scheme, the government has allowed tax deductions to be claimed under
Section 80C on the investments made in it. Interest earned on National Savings Certificates are
liable to tax. However, if this interest is reinvested, it will be eligible for deduction under
Section 80C. The interest rate on this scheme is similar to that of tax savings fixed deposits,
PPF and other fixed income earning instruments.\

 Home Loan Principal Repayment : The amount that goes into repaying the principal on a
home loan is eligible for deduction under Section 80C. To claim this tax benefit, construction
of the property should be complete. If you transfer the property before the end of 5 years from
the year you had taken its possession, no tax benefits will be awarded. Additionally, the amount
claimed as deduction in the earlier years shall become taxable in the year that the property is
transferred.

What is the deduction available under section 80C- The maximum amount deduction under section
80C is Rs. 150000.

Is there any combined maximum ceiling- The aggregate amount of deductions under section 80C,
80CCC and 80CCD(1) [I.e contribution by an employee (or any other individual) towards National
Pension Scheme (NPS)] cannot exceed Rs. 150000. However employer’s contribution towards NPS (up
to 10 % of salary) shall not be considered for ceiling of Rs. 150000.

Is there any deduction in respect of accrued interest of National Saving Certificates- Amount
invested in NPS VIII issue or IX issue (NSC) is eligible for deduction under sec. 80C within the overall
limit given below. This investment is for 5 years or 10 years and the amount invested along with the
interest is paid back to the investor at the time of maturity. However, interest is taxable annually on
accrual basis. The accrued interest for any year (except for last year) is deemed as reinvestment and the
same is entitled for deduction under Sec. 80.

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2] DEDUCTION IN RESPECT OF PENSION FUND- WHEN AVAILABLE [80CCC]

The following are salient features of section 80CCC-

Who can claim deduction under section 80CCC- Deduction under section 80CCC is available only to
an individual.

What is the qualifying payment to avail deduction- Amount should be paid or deposited under an
annuity plan of the LIC of India or any other insurer for receiving pension. Amount should be paid or
deposited out of income chargeable to tax.

How much deduction available under section 80CCC- The maximum amount deductible under section
80CCC is Rs.1,50,000.

Is there any combined maximum ceiling- The aggregate amount of deductions under section 80C,
80CCC and 80CCD(1)[i.e, contribution by an employee (or any other individual) towards National
Pension Scheme (NPS)] cannot exceed Rs. 1,50,000. However employer’s contribution towards NPS
(to the extent of 10 Per cent of employee’s salary) shall not be considered for the ceiling of Rs. 1,50,000.

What is the tax treatment of pension- if deduction is claimed under section 80CCC and later on pension
is received by the assesse ( or his nominee), such pension will be taxable in the hands of recipients in
the year of receipt. Likewise, where (after claiming deduction under section 80CCC) the assessee or
his nominee surrenders the annuity before maturity date of such annuity , the surrender value shall be
taxable in the hands of the assesse or his nominee ,as the case may be , in the year of receipt.

3] DEDUCTION IN RESPECT OF CONTRIBUTION TO NATIONAL PENSION SYSTEM

(NPS) {SECTION 80CCD}

The following are salient features of 80CCD

What is NPS- NPS covers National Pension Scheme (notified under Notification No.F.No 5/7/2003-
ECB & PR, dated December 22, 2003) and Atal Pension Yojna (as per Notification No.SO 529(E) dated
February 19, 2016).

Who can join NPS- Any individual who is employed by the Central Government (on or after Jan 1,
2004) will have to join NPS on a compulsory basis. Any other employee (irrespective of date of joining
employment ) may become a member of NPS .(it is optional). Even a self-employed person may join
NPS.

Section 80CCD (1)

This sub-section of Section 80CCD defines the rules related to tax deductions that income tax assesses
can avail, irrespective of whether they are employed by the government or any other employers or are
self-employed. This applies to all citizens of India, including NRIs, between the ages of 18 years to 60
years to NPS, who contribute to the NPS voluntarily.

The deduction is restricted to a maximum of 10% of salary for salaried employees and 10% of gross
income for self-employed taxpayers, i.e. taxpayers who are not salaried employees. Here, salary refers
to the total of basic pay and dearness allowance. However, this was applicable only for the FY 2016-17
because the limit has been increased to 20% from the next financial year, i.e. FY 2017-18 onwards. The
deduction amount cannot be more than INR 1.5 lakh in a particular fiscal year.

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Part (1B) under Section 80CCD has been introduced through amendments made to the 2015 Union
Budget. It offers an additional deduction of INR 50,000 for assesses, both salaried and self-employed,
who have contributed to NPS. After including 80CCD (1B), the maximum deduction limit is restricted
to no more than INR 2 lakh. Tax benefits under this sub-section can be claimed over and above
deductions the limit of Section 80CCD (1).

Section 80CCD (2)

This sub-section of Section 80CCD of Income Tax Act, 1961 is applicable when an employer
contributes towards an NPS fund on behalf of its employees. An employer can contribute towards an
employee’s NPS, along with contributions towards PPF and EPF. The contribution of the employer can
be equal or higher or lower than the employee’s contribution towards NPS. Deductions under this
section can be availed only by salaried employees and not self-employed. The employed are eligible
for deductions over and above the limit as per Section 80CCD (1).

In this case, employees can claim deductions under Section 80CCD (2) up to 10% of their salary, i.e.
basic salary and dearness allowance taken together, or equivalent to the gross total income or equivalent
to the contribution made towards NPS by the employer.

Is there combined maximum ceiling- the aggregate amount of deduction under section 80C,80CCC,
and 80CCD(1) cannot exceed Rs. 1,50,000.however, employer’s contribution towards NPS (to the
extent of 10 per cent of employee’s salary) shall not be considered for the ceiling of Rs. 1,50,000.

Additional deduction of Rs. 50,000 under section 80CCD(1B)- fromm the assessment year 2016-17, a
new sub-section(1B) has been inserted in section 80CCD so as to provide for an additional deduction
in respect of any amount paid(upto Rs.50,000)for contributions made by any individual assessee under
the NPS. On this additional contribution,the ceiling of Rs. 1,50,000 (as given above) is not applicable.

4] DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIA – WHEN AND TO

WHAT EXTENT AVAILABLE [SEC. 80D]

Deduction u/s 80D is available if the following conditions are satisfied-

1. The taxpayer is an individual (maybe resident/non-resident or Indian Citizen/Foreign Citizen)

or a Hindu Undivided Family (maybe resident or non-resident).
2. Payment should be made out of income chargeable to tax.
3. Payment should be made by any mode other than cash. However, payment on account of
preventive health check-up can be made by any mode (including cash).

Maximum deductible amount- The maximum deductible amount and other relevant points are given
below –

Deduction in the case

of individual

For whose benefit payment can be made Family Parents

A. a. Medi-claim insurance premium Eligible Eligible

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 b. Contribution to CGHS/notified scheme Eligible -

c. Preventive health check-up payment Eligible Eligible

Maximum deduction-
Rs.25,000 Rs.25,000
- General deduction [applicable in respect of
(a), (b) and (c)]
- Additional deduction [applicable only in
case of (a)when medi-claim policy is taken Rs.5,000 Rs.5,000
on the life of a senior citizen]
B. Medical expenditure on the health of the person Eligible Eligible
who is a super senior citizen if medi-claim
insurance is not paid on the health of such person

Maximum deduction in respect of (B) Rs.30,000 Rs.30,000

C. Maximum deduction in respect of (A) and (B) Rs.30,000 Rs.30,000

Notes-

1. Family includes individual, spouse of the individual and dependent children of the individual.
2. Parents include father and mother (dependent or otherwise). Father-in-law and mother-in-law
are not included.
3. The aggregate payment on account of preventive health check-up of self, spouse, dependent
children, father and mother cannot exceed Rs. 5,000.
4. The above payments [given under (A) & (B)] should be made by any mode other than cash.
However, payment on account of preventive health check-up can be made by any mode
(including cash).
5. “Senior Citizen” is a resident individual who is at least 60 years of age at any time during the
previous year.
6. “Super Senior Citizen” is a resident individual who is at least 80 years of age at any time during
the previous year.

5] DEDUCTION IN RESPECT OF PAYMENT OF INTEREST ON LOAN TAKEN FOR

HIGHER EDUCATION- WHEN AND TO WHAT EXTENT AVAILABLE [SEC. 80E]

The following are the salient features of section 80E-

Who can claim the deduction- Only an individual can claim deduction under section 80E.

What is the qualifying expenditure- If loan is taken by an individual for any study in India or outside
India(I.e. any study after passing senior secondary examination or its equivalent) from a bank, financial
institution or an approved charitable institution, interest is deductible in the year in which interest is
paid.

For whose education loan should be taken- Interest is deductible if loan is taken for pursuing
assessee’s own education or for the education of his relatives (I.e. spouse, children or any student for
whom the individual is the legal guardian).

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 Minimum monetary ceiling- Entire interest is deductible in the year in which the assessee starts paying
interest on loan and subsequent 7 years or until interest is paid n full .however, interest should be paid
out of income chargeable to tax.

6] DEDUCTION IN THE CASE OF A PERSON WITH DISABILITY- TO WHAT EXTENT

AVAILABLE [SEC. 80U]

The provision of section 80U are given in brief.

Conditions- The following conditions should be satisfied-

1. The taxpayer is an individual and resident in India.

2. He suffers 40 per cent or more than 40 per cent of any disability (I.e. blindness, low vision, leprosy-
cured, hearing impairment, locomotors disability, mental retardation, mental illness).

3. The taxpayer shall have a certificate issued by the medical authority. Where the condition of disability
requires reassessment, a fresh certificate from the medical authority shall have to be obtained after the
expiry of the period mentioned on the original certificate in order to continue to claim the deduction.

4. Amount of deduction- fixed deduction of Rs. 75000 is available. A higher deduction of Rs. 125000
is allowed in respect of a person with severe disability(I.e. having disability of 80 per cent or above).

7] DEDUCTION ON INTEREST UNDER SECTION 8OTTA.

Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an
Individual and HUF.

This deduction is allowed on interest earned –

 From a savings account with a bank

 From a savings account with a co-operative society carrying on the business of banking

 From a savings account with a post office

Maximum Deduction – The maximum deduction is limited to Rs 10,000. If interest income is less than
Rs 10,000, the entire interest income will be deducted. If your interest income is more than Rs 10,000,
deduction shall be limited to Rs 10,000.

8]DEDUCTION IN RESPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE

INSTITUTIONS, ETC.[SEC 80G]

Deduction under this section is available to any taxpayer and calculated under the following steps:

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1] Gross qualifying amount: It is the aggregate of the donations made to any of the institutions/funds.
Donations made in kind shall not be included.

2] Net qualifying amount: It is the amount which qualifies for deductions after considering the limits.

3] Adjusted gross total income: The following will be deducted from gross total income to find out
adjusted gross total income:

A] Amount deductible U/s 80C to 880U

B] Income on which income tax is not paid

C] Long term capital gains

D] Short term capital gains

E] Incomes referred to in section 115A, 115AB, 115AC, 115ACA and 115AD

Sr. Maximum Rate of

No Name of Fund/Institution/Trust Limit deduction
GROUP 1
1 Jawaharlal Nehru Memorial Fund Not 50%
Applicable
2 Indira Gandhi Memorial Trust “ “
3 Rajiv Gandhi Foundation “ “
4 Prime Ministers drought relief fund “ “

GROUP 2
1 National Defence Fund Not 100%
Applicable
2 Prime Ministers National Relief Fund “ “
3 Prime Ministers Armenia earthquake relief fund “ “
4 Africa fund “ “
5 National Children’s fund “ “
6 National Foundation for communal harmony “ “
7 An Approved university/educational institution “ “
8 The Maharashtra Chief Ministers relief fund “ “
9 Any fund set up by the Government of Gujarat for providing “ “
relief to earthquake victims in Gujarat
10 Zila Saksharta Samit “ “
11 National Blood Transfusion Council & State council for “ “
blood transfusion
12 Fund set up by a State Government for medical relief to the “ “
poor
13 Central welfare fund of the army and Air Force and the “ “
Indian Naval Benevolent Fund
14 Andhra Pradesh Chief Ministers Cyclone Relief Fund “ “
15 National Illness Assistance fund “ “
16 Chief Ministers relief fund or Lieutenant Governors relief “ “
fund
17 National sports fund or National cultural fund or Fund for “ “
Technology Development and application
18 Any trust, institution or fund to which sec 80G(5C) applies “ “

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19 National trust for welfare of persons with Autism, cerebral “ “
Palsy, Mental Retardation and Multiple Disabilities
20 Swachh Bharat Kosh “ “
21 Clean Ganga Fund “ “
22 National Fund for Control of Drug Abuse “ “

GROUP 3
1 Any Approved fund or any institution which satisfies 10% of GTI 50%
conditions mentioned in Sec 80G(5)
2 Government or any local authority to be utilized for any “ 50%
charitable purpose other than promoting family planning
3 Any authority constituted in India by any law enacted either “ 50%
for the purpose of dealing with and satisfying the need for
housing
4 Any corporation specified in sec10(26BB) for promoting “ 50%
interest of minority community
5 Government or any approved local authority, institution or “ 100%
association to be utilized for the purpose of promoting
family planning
6 Any notified temple, mosque, gurdwara, church or other “ 50%
place (for renovation or repair)
7 The Indian Olympic Association of to an institute notified “ 100%
by the Central Government for the development of
infrastructure for sports and games in India or the
sponsorship of sports and games in India

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