Rebates & Deductions

 Deductions from income and rebate from income tax 

The aggregate of income under all heads will give the "Gross Total Income" of the assessee for that previous year. From this GTI, there are certain deductions available to the assessee, provided certain conditions are satisfied. The net income remaining after claiming the available deductions will give the "Net Taxable Income" on which income tax is payable. The following are the various deductions available:-

Deduction U/s. 80CCC - In respect of contribution to Pension Fund of LIC

In respect of contribution to pension fund of LIC (Jeevan Suraksha) or other approved pension scheme of any other insurer

Available to	Individual Assessee only
Amount of Deduction	Amount invested in pension fund subject to maximum of Rs10,000/- per previous year.
Other points	Amounts received from such funds by the assessee or his nominee on account of surrender of  investment or on  account of pension other than commuted pension will be taxable in year of receipt.

Deduction U/s. 80D - In respect of medical insurance premium

 In respect of Medical Insurance Premium. (Not Life Insurance Premium) eg Mediclaim

Available to	Individual and HUF assessees
Amount of Deduction	Amount of premium paid subject to maximum Rs10,000/- per year
Other points	For individual, the deduction is allowed only when it is paid for self, spouse, dependent parents & children. Premium must be paid by cheque only.

Where such premium is paid for the benefit of the assessee or spouse or dependent parents or a member of HUF who is more than 65 years of age, deduction will be a maximum of Rs15,000 instead of Rs10,000 with effect from 1st April, 2000.



Deduction U/s. 80DD - In respect of maintenance including medical treatment of handicapped dependent

 In Respect of Medical expenses on physically handicapped dependent relative and amounts deposited or invested for their maintenance with LIC or UTI or other insurer in specified schemes.

Available to	Resident Individual & HUF Assessees
Amount of Deduction	Amount spent on such treatment and amount so deposited or invested, subject to a maximum of Rs40,000/-

The scheme referred to above must for payment of annuity or lump sum amount for the benefit of a handicapped dependent in the event of death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made.

Meaning of handicapped dependent - It means a person who

is a relative of the individual or, as the case may be, is a member of the Hindu undivided family and is not dependent on any     person other than such individual or Hindu undivided family for his support or maintenance; and

 is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, specified in the rules     made by the Board for the purposes of section 80DD, which is certified by a physician, a surgeon, an oculist or a psychiatrist, as     the case may be, working in a Government hospital, and which has the effect of reducing considerably such person's capacity     for normal work or engaging in a gainful employment or occupation.

If handicapped dependent predeceases the taxpayer

If the handicapped dependent predeceases the individual or the member of the Hindu undivided family referred to above, an amount equal to the amount paid or deposited under section 80DD shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.



Deduction U/s 80DDB - In respect of medical treatment of Assessee

 In respect of:- Medical Treatment of Assessee from specified diseases.

Available to	Individual or HUF who is resident in India.
Amount of Deduction	Rs40,000/- per previous year (Rs60,000/- in case the assessee or dependent relative or member of HUF is more than 65 years of age).
Conditions	Expenses must be for medical treatment of assessee or dependent relative in case of an individual assessee and any member of an HUF in case of an HUF assessee.

Any amount received from an insurer for the medical treatment will be reduced from the aforesaid deduction of Rs40,000/- or Rs60,000/- as the case may be.



Deduction U/s. 80 E - In respect of repayment of loan taken for higher education

Section 80E provides for relief to students taking loans for higher education. Any repayment of the principal amount of loan taken for higher studies and interest thereon is allowed as a deduction from the gross total income up to a maximum amount of Rs25,000 ( Rs. 40,000/- p.a. w.e.f 1/4/2000 ) in a year, provided the loan is taken from a financial institution or a charitable organization which is approved for the purposes of section 10(23C) or 80G (2)(a) This relief is available for those who have undertaken graduate or post-graduates Courses in any branch of engineering including technology/architecture, medicine, or management, or post-graduates courses in any university in pure sciences, applied sciences, mathematics or statistics. The first year in which the deduction is available is the year in which the person starts repaying the loan. The deduction is allowed for a maximum period of 8 years or until the principal amount of such loan together with interest is repaid, whichever is earlier.



Deduction U/s 80G - In respect of certain Donations

1. In respect of :- Certain donations

2. Available to :- Any Assessee

3. Scheme of deduction.

Donations eligible without Restrictions i.e without limit on the quantum of donation

1. *Prime Minister's National Relief Fund

2. Prime Minister's Drought Relief Fund

3. *Prime Minister's (Armenia Earthquake Relief) Fund

4. National Defence Fund

5. National Children's Fund

6. Jawaharlal Nehru Memorial Trust

7. Indira Gandhi Memorial Trust

8. Rajiv Gandhi Foundation

9. *Africa (Public contributions India) Fund

10.* National Foundation for Communal Harmony

11. *Donation to approved University or educational institution of national eminence.

12. *Chief Minister's Earthquake Relief Fund, Maharashtra

13. *Zila Saksharta Samiti constituted for promoting literacy & education

14. Any corporation mentioned in section 10(26BB) i.e corporations for protecting and promoting the interests of minorities

15. *National Blood Transfusion Council / State Blood Transfusion Council

16. *State Govt. Fund for medical relief to the poor.

17. *Army Central Welfare Fund/Indian Naval Benevolent Fund/Air Force CWF.

18. *National Illness Assistance Fund

19. *Andhra Pradesh Chief Minister's Cyclone Relief Fund

20. *Chief Minister's Relief Fund or Lt. Govt. Relief Fund

21. *National Sports Fund

22. *National Cultural Fund

23.* Fund for Technology Development and Application set up by the Central Government.

24.*Any fund set up by the Gujarat State Government exclusively for providing relief to the victims of the earthquake in Gujarat.

25.*National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retrdadtion and Multiple Disabilities

26.*Indian Olympic Assocaition or other approved sports association in India

27.*Any trust, institution or fund which complies with the prescribed conditions for providing relief to the earthquake victims in Gujarat during th eperion 26 January 2001 to 30 September 2001.

Donations eligible with restrictions. i.e. benefit will be given only upto 10% of (Gross Total Income Less Other deductions u/s 80 series)

1. Donations to recognized charitable or religious trusts

2. Donations for renovation or repair of any temple, mosque, gurdwara, church or other notified place of archaeological, historic or artistic importance or a place of public worship of renown

3.* Donations for promotion of family planning to the government, local authority or approved institution

4. Donations to the government or local authority for any other purpose

5. Donations to a town planning or housing development authority Actual Deduction

6.Donations by a company assessee to the Indian Olympic Association or to any other notified association or institution for the development of sports infrastructure or sponsorship of sports in India.

100% of eligible amount for items marked with "*".

50% of the eligible amount for balance of items.

Note:-

Donations in kind are not eligible.

Donations for the benefit of a particular community or religion are not eligible.

The institution to which donation is paid, should be approved.



Deduction u/s 80GG - In respect of Rent Paid

 In respect of rent paid

Available to	Individuals
Amount of Deduction	The least of the following  Excess of Rent paid over 10% of [G.T.I. - Other deductions of this chapter  25% of [G.T.I. - Other deductions of this chapter   Rs1,000 per month.
Conditions	Assessee, spouse or minor child or the HUF of which he is member should not own any accommodation where the assessee stays, carries out business of profession and the assessee must not own any accommodation at any other place. The Assessee should not be receiving House Rent Allowance from his employer.

Deduction u/s 80GGA - In respect of certain donations for scientific research or rural or urban development

Donations for purposes of rural development, programmes of conservation of natural resources, afforestation programmes, scientific research, research in statistical data or social research or donation to National Fund For Rural Development, National Urban Poverty Eradication Fund and other approved funds are eligible for deduction u/s 80 GGA provided the assessee is not carrying on any business or profession. If a person is carrying on any business or profession, then these deductions can be claimed u/s 35CCA, u/s 35CCB, u/s 35AC and u/s 35. The amount of deduction is 100% of such donations.



Deduction For Business Involving Foreign Exchange u/s 80 HHB/ HHC/ HHD/ HHE/ HHF

Different sections deal with exports of different items. In respect Foreign Exports of computer software, film software, related T. V. software, projects, business services, music software, or travel services, etc.

Available to	Any Indian Company OR Any Other Resident assessee. However, benefit u/s 80 HHF available only to an Indian company.
Amount of Deduction	U/s 80 HHB : A deduction of the amount of profits or gains from such business equal to 40 % ( in respect of financial year 2000-2001 ), 30 % ( in respect of financial year 2001-2002 ), 20 % ( in respect of financial year 2002-2003 ), 10 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the profits from the foreign project provided the money is brought into India in convertible foreign exchange within 6 months from the end of the relevant previous year and transferred to a "Foreign Project Reserve Account" to be used within 5 years for approved purposes. U/s 80 HHC : 80 % ( in respect of financial year 2000-2001 ), 70 % ( in respect of financial year 2001-2002 ), 50 % ( in respect of financial year 2002-2003 ), 30 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the profits from exports provided the money is brought into India in convertible foreign exchange within 6 months from the end of the relevant previous year. U/s 80 HHD : 40 % ( in respect of financial year 2000-2001 ), 30 % ( in respect of financial year 2001-2002 ), 20 % ( in respect of financial year 2002-2003 ), 10 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the profits from such business of hotels, tour operator or travel agent provided the money is brought into India in convertible foreign exchange within six months from the end of the relevant previous year plus amounts transferred to a special Reserve account to be used within five years for approved purposes. U/s 80 HHE : 80 % ( in respect of financial year 2000-2001 ), 70 % ( in respect of financial year 2001-2002 ), 50 % ( in respect of financial year 2002-2003 ), 30 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the profits from export of software provided the money is brought into India in convertible foreign exchange within six months from the end of the relevant previous year. U/s 80 HHF : 80 % ( in respect of financial year 2000-2001 ), 70 % ( in respect of financial year 2001-2002 ), 50 % ( in respect of financial year 2002-2003 ), 30 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the profits from exports provided the money is brought into India in convertible foreign exchange within six months from the end of the relevant previous year.

Notes:-

1. The amount of foreign project reserve u/s 80 HHB & reserve u/s 80 HHD should be utilized within the next five years for the purpose of business, but not for declaring dividend. Otherwise the deduction is cancelled in the original year (in respect of Sec. 80HHB) & it considered as business income in the sixth year (in respect of Sec. 80 HHD)



Deduction u/s 80 O - In respect of certain royalties, commissions, fees for professional services etc, earned in convertible foreign exchange

Available to	Indian Company or other non-corporate resident assessee In respect of : any income received by the assessee from the government of a foreign state or a foreign enterprise in consideration for the use outside India, of any patent, invention, design, or registered trade mark and such income is received in convertible foreign exchange outside India and is brought into India within 6 months from the end of the relevant previous year.
Amount of Deduction	An amount equal to 40 % ( in respect of financial year 2000-2001 ), 30 % ( in respect of financial year 2001-2002 ), 20 % ( in respect of financial year 2002-2003 ), 10 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the income so received in, or brought into, India, in computing the total income of the assessee. Services rendered or agreed to be rendered outside India shall include services rendered from India but shall not#include services rendered in India.
Conditions	Assessee, spouse or minor child or the HUF of which he is member should not own any accommodation where the assessee stays, carries out business of profession and the assessee must not own any accommodation at any other place. The Assessee should not be receiving House Rent Allowance from his employer.

Deductions u/s Sec.80 R Sec. 80 RR Sec.80 RRA

 In respect of Professional Remuneration of teachers being Indian Citizens for teaching services rendered outside India in     educational institutions or in respect of authors, artists, playwrights, musicians, actors, sportspersons being Indian residents     for services rendered outside India or in respcet of technicians being Indian Citizens for services rendered outside India

 Deduction is to the extent of 60 % ( in respect of financial year 2000-2001 ), 45 % ( in respect of financial year 2001-2002 ), 30     % ( in respect of financial year 2002-2003 ), 15 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year     2004-2005 ) of such remuneration brought into India within Deduction six months from end of the relevant P. Y. or within such     period as may be extended by the Commissioner or Chief Commissioner.

Note :

1. Professionals like sports persons, artists, singers, authors, playwrights, cameramen etc.

2. Technicians include actuaries, banking, insurance, journalism professionals

Deduction u/s 80L - In respect of certain types of dividend or interest income

Available to	Certain interest income such as Bank Interest, Dividend from co-operative society, Interest on deposit with Co-operative society, Interest on NSC and NSS, Interest on Govt. securities, Interest on deposits with financial corporation engaged in providing long term finance for industry or construction / purchase of residential houses in India, etc
Amount of Deduction	Rs9,000 per year + additional Rs3,000 for interest on Govt. Securities. This deduction is not available in respect of interest on deposits with a limited company or interest on debentures unless the company is engaged in housing development. The deduction is considered on net income ie after deducting relevant expenses.

Deductions available to Industrial Undertakings U/s 80 JJA - In respect of Profits from business of collecting and processing bio-degradable waste

Available to	Any assessee carrying on the business of collecting and processing or treating bio-degradable waste for generating power, producing bio-gas, producing bio-fertilizers or bio-pesticides or other biological agents or making pellets or briquettes or fuel or organic manure
Amount of Deduction	Amount of profits from the aforesaid business for five years beginning with the year in which the business commences

U/s 80 JJAA - In respect of employment of new workmen

Available to	An Indian Company from profits earned from any industrial undertaking engaged in the manufacture or production of any article or thing
Amount of Deduction	An amount equal to 30 % of additional wages paid to new workmen employed during the previous year for 3 years
Conditions	The assessee must have employed at least 100 workmen and the increase in workmen employed is at least 10 % over the earlier year.

U/s 80 HHBA - In respect of profits from housing projects

Available to	Indian Companies and any other resident Assessee
In Respect of	Profits from the execution of housing project awarded to the assessee on the basis of a global tender where the project is aided by the World Bank
Amount of Deduction	40 % ( in respect of financial year 2000-2001 ), 30 % ( in respect of financial year 2001-2002 ), 20 % ( in respect of financial year 2002-2003 ), 10 % ( in respect of financial year 2003-2004 ), 0 % ( in respect of financial year 2004-2005 ) of the profits from such business and transferred to a "Housing Project Reserve Account" to be used within 5 years for approved purposes.

Deduction u/s 80 P - In respect of certain incomes of a cooperative society

The following incomes can be claimed as a deduction u/s 80P by a co-operative society only :-

 Income from banking or providing credit facilities to members.

 Income from cottage Industry.

 Income from marketing agricultural produce of members

 Income from purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of     supplying them to members.

 Income from processing of agricultural produce of members without the aid of power.

 Income from collective disposal of labour of members.

 Income from fishing or allied activities including reserving, storing, marketing of fish or purchase of materials and equipment in     connection therewith for supplying them to members.

II. In case of a co-operative society which is a primary society engaged in supplying milk, oil seeds, fruit or vegetables raised by its members to a federal co-operative society, government local authority, government company or a statutory corporation, all profits from such activities.

III. A lumpsum deduction of Rs40,000 in case of a consumers co-operative society (Rs20,000) in other cases will be allowed to all co-operative societies.

IV. Interest on dividends received by a co-operative society on its investments in another co-operative society will be deductible.

V. Income of a co-operative society from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities will be deductible.

VI. In case of a co-operative society other than a housing society or an urban consumer's society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where gross total income does not exceed Rs20,000 the amount of income by way of interest on securities or income from house property will be deductible.



Deduction u/s 80 U - In respect of handicapped assessees

Available to	Partially or totally blind or physically handicapped (including mentally handicapped) persons resident in India. The disabilities are prescribed in Rule 11D.
Amount of Deduction	Rs.40,000 p.a.

Rebate from Income Tax 

Once net income is calculated and the income tax is determined, from the tax liability, a further deduction of rebate can be claimed if certain conditions are satisfied. Rebate is a reduction from income tax liability and not a deduction from income. Let us consider the various rebates available.

U/s 88 - In respect of Certain Investments and Deposits

Available to	Individual and HUF Assessees only
Rebate	Rebate is @ 20 % of the investemnt / payment / deposit made. However in respect of indivdivduals whose salary income is less than Rs.1 lakh before claiming deduction u/s 16 and whose salary comprises at least than 90 % of his gross total inocme, rebate will be @ 30 %.

In Respect of: Investments, deposits and payments made in the following items:-

 In respect of an individual assessee, Life Insurance Premium paid on the policy for self spouse children but not parents.

 Own contribution is statutory or recognized provident Fund.

 PPF contribution

 Deposit in 10 year Account under post office saving bank cumulative time deposit rules 1959 [CTD]

 Contribution of ULIP, Dhanraksha plan or LIC Mutual Fund equity linked saving scheme of mutual fund.

 Repayment at loan from a public financial institution in respect of a residential accommodation or cost of construction but the     maximum eligible amount Rs20,000 for a previous year.

Deposit in NSS

 Investment in notified infrastructure bonds, debentures, mutual fund and shares

 Upto Rs. 60000, rebate is available on on all eligible investments including infrastructure bonds. Within this limit, maximum     rebate of Rs. 4000 ( i.e investment of Rs.20000 ) will be allowed on on house loan repayment/ house acquisition. Similarly,     maximum rebate of Rs.2000 will be allowed on investments upto Rs.10000 in MEP schemes of mutual funds.

 An additional investment of Rs. 20000 in infrastructure bonds, shares , etc will qualify for a further rebate of Rs.4000.     Accordinly, the maximum rebate which can be claimed will be Rs.12000+Rs.4000 = Rs.16000.

U/s 88B - In respect of senior citizens

Available to	Resident Individuals who are more than 65 years of age
Rebate	Income Tax liability or Rs15,000, whichever is lower.

U/s 88C - In respect of women assessees

Available to	Women Assessees resident in India who are below the agre of 65 years
Rebate	Income Tax liability or Rs5,000, whichever is lower.

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(Source :: sify.com)