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FAQs on Income Tax VIII - Deductions and Rebates

Mr. C.S. Sudheer | Updated On Monday, November 17,2014, 01:16 PM
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FAQs on Income Tax VIII - Deductions and Rebates

 

1. What are the Deductions available under Income Tax Act, 1961? What are Chapter VI deductions?

Deduction shall be allowed from the gross total income in computing the total income of an assessee, the deductions are specified in sections 80C to 80U subject to :

  • The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee.
  • Deductions to be made with reference to the income included in the gross total income.
  • Deduction not to be allowed unless Income tax return furnished.

Following are broad deductions available under chapter VI.

Deductions

For Other than Senior citizen

For Senior Citizen

Medical Insurance Premium (sec 80D)

10000*

15000

Medical for handicapped dependents (Sec 80DD)

40000

40000

Medical for specified diseases (Sec 80DDB)

40000

60000

Higher Education Loan Interest Repayment (Sec 80E)

40000

40000

Donation to approved fund and charities (sec 80G)

N.A

N.A

Rent deduction (sec 80GG) only if HRA not received

least of (i) rent in excess of 10% of total income; (ii) 25% of total income and (iii) Rs. 2,000 per month.

Interest and Dividend  (Sec  80L)

15000

15000

Deduction for permanent disability (80U)

Ad hoc 40000

Ad hoc 40000

* Budget 2008 proposes to give addition deduction of Rs. 15000 to those who pay medical insurance premium for their parents. Thus, increasing the total deduction available to Rs 30,000.

Other deductions :

  • Deduction under Pension scheme (sec 80C)
  • NSC (sec 80C)
  • Public Provident Fund (sec 80C)
  • Employees Provident Fund & Voluntary PF (sec 80C)
  • Children's Education (sec 80C)
  • Housing loan principal repayment (sec 80C)
  • Insurance premium (sec 80C) Infrastructure Bonds & others (MF, ULIP, etc.) (Sec 80C) Rebate

2. What are tax rebates and how do I claim them?

Rebate is a reduction from tax payable. Tax Rebate is available u/s 88. An Individual or HUF is entitled to a following tax rebates :

in the case of an individual or a HUF, whose Gross Total Income (GTI) before Chapter VI-A deductions, is Rs. 150000 or less

20% of the aggregate sum
30% if his income under the head Salaries
--> does not exceed Rs. 100000 before deduction u/s 16
--> is not less than 90% of his GTI

in the case of an individual or a HUF, whose Gross Total Income (GTI) before Chapter VI-A deductions, is >Rs. 150000 but <=500000

15% of the aggregate sums

in the case of an individual or a HUF, whose Gross Total Income (GTI) before Chapter VI-A deductions, is > 500000

NIL

Aggregate sum :
Following sums paid or deposited in the previous year by the assessee :

  • Life insurance premium of persons specified in sub-section (4);
  • Annuity to keep in force a contract for a deferred annuity on the life of persons specified in sub-section (4): Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;
  • Provident fund contribution
  • Superannuation fund contribution
  • Contribution in a 10 year account or 15 year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, where such sums are deposited in an account standing in the name of the persons specified in sub-section (4);
  • Subscription to the National Savings Certificates (VI Issue) and National Savings Certificates (VII Issue) issued under the Government Savings Certificates Act, 1959 (46 of 1959);
  • Contribution in the name of any person specified in sub-section (4), for participation in the Unit-linked Insurance Plan (ULIP)
  • As subscription upto Rs.10,000 to any units of any notified Mutual Fund
  • The tax rebate will also be available for contributions to pension funds set up by a Mutual Fund or by National Housing Bank and other subscriptions to the Schemes which at present are covered under Section 80CCA
  • Subscription to any such deposit scheme of, or as a contribution to any such pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) (hereafter in this section referred to as the National Housing Bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;
  • Tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter, (a) to any university, college, school or other educational institution situated within India; (b) for the purpose of full-time education of any of the persons specified in sub-section (4);
  • Repayment of the amount borrowed by the assessee from
    (1) The Central Government or any State Government, or
    (2) Any bank, including a co-operative bank, or
    (3) The Life Insurance Corporation, or
    (4) The National Housing Bank, or
  • Repayment of housing, loans for construction/acquisition of residential flat

Person specified sub-section (4) is as follows:

  • For the purposes of clauses (i), (iii), (vii) and (viii) above,
    (i) in the case of an individual, the individual, the wife or husband and any child of such individual, and
    (ii) in the case of a Hindu undivided family, any member thereof;
  • For the purposes of clause (ii) above,
    (i) in the case of an individual, the individual, the wife or husband and any child of such individual, and
  • For the purposes of clause (v) above,
    (i) in the case of an individual, such individual or a minor of whom he is the guardian;
    (ii) in the case of a Hindu undivided family, any member of the family;
  • For the purpose of clause (xi) above,
    (i)in the case of an individual, any two children of such individual.
  • The maximum amount of savings on which rebate is allowable is as under
    Rs.1,00,000

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Mr. C.S. Sudheer

Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.

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