THE BHOPAL SCHOOL OF SOCIAL SCIENCES

GROSS TOTAL INCOME AND DEUCTIONS

STUDY MATERIAL

INCOME TAX: LAW AND PRACTICE

COMPUTATION OF TOTAL INCOME

GROSS TOTAL INCOME AND DEDUCTIONS FROM GTI

MODULE I

LEARNING OBJECTIVES:
The objective of this lesson is to enable the students to understand: –
 Concept Of Gross Total Income
 Concept of Total Income/ Taxable Income
 Deductions from Gross Total Income

GROSS TOTAL INCOME

The aggregate of the income under the five different heads is known as GROSS TOTAL
INCOME OR GTI. Each and every head of income is computed according to the provisions of
the act, with all inclusions and exclusions. Losses brought forward from the previous years are
also deductible to find out the GTI.

Here we have the list of these five heads of income:

1. Income from Salaries

2. Income from House Property

3. Income from Business or Profession

4. Income from Capital Gains

5. Income from Other Sources

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TOTAL INCOME OR TAXABLE INCOME

It is the amount of income left out after making specific deductions from gross total income or
GTI. These deductions are given under section 80C to 80U of Indian Income Tax Act. These
deductions are related with savings and investments of the assessee.

This is also known as taxable income because its final amount of the income of person on which
income tax is computed and payable to the government.

We can express the computation of the Total Income as under:

Income from Salaries ---

(+) Income from House Property ---

(+) Income from Business or Profession ---

(+) Income from Capital Gains ---

(+) Income from Other Sources ---

GROSS TOTAL INCOME ---

(-) Deductions (From 80C to 80U) ---

TOTAL INCOME ---

DEDUCTIONS

The Income-tax Act provides various tax exemptions and deductions. The incomes which are
exempt from tax, i.e. which are not included in total income are provided under Sections 10 to
13A. Chapter VI A contains deductions from gross total income under section 80C to 80U in
respect of certain payments, investments, incomes and other deductions. Deduction helps in
reducing the taxable income. It decreases the overall tax liabilities and helps to save tax.
However, depending on the type of tax deduction claim, the amount of deduction varies. The
deductions are available only to the assessees where the gross total income is positive. If
however, the gross total income is nil or negative, the question of any deduction from the gross
total income does not arise. For this purpose, the expression ‘gross total income’ means the total

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income of the assessee computed in accordance with the provisions of the Income-Tax Act,
before making any deduction under Chapter VIA, i.e., the aggregate income computed under
each head, after giving effect to the provisions for clubbing of income and set off of losses, is
known as “Gross Total Income”. Sections 80C to 80U of the Income- tax Act lays down the
provisions relating to the deductions allowable to assessees from their gross total income. The
income arising after deduction under section 80C to 80U is called Total Income.

GENERAL PRINCIPLES FOR DEDUCTIONS FROM INCOME

1. From gross total income, deductions shall be allowed under section 80C to 80U

2. The aggregate amount of deductions under sections 80C to 80U shall not be more than gross
total income. However, deductions are not allowed against short-term capital gains under section

111A and long-term capital gains.

3. Where deductions under sections 10AA or 80(1A) to 80RRB have been claimed and allowed
against the income specified in these sections for any assessment Year the deduction in respect of
such profits and gains shall not be allowed under any other provisions of the Act.

4. Where the assessee fails to make a claim in his return of income for any deduction in sections
mentioned, no deduction shall be allowed to him there under.

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1. DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIUM, PROVIDENT FUND, NSC, MUTUAL

FUND ETC. (SEC. 80C)

Allowed to: An Individual and HUF

Allowed for : Maximum Rs. 1,50,000

Allowed in respect of :

For the Assessment Year 2023-24 an Individual or HUF assessee shall get a deduction in respect
of the following payments, contributions and investments under section 80C from Gross Total
Income -

1. Life Insurance Premium- Life insurance premium paid by the assessee during the previous
year subject to maximum of 20% of sum assured. If policy is taken on or after 1.4.2012 premium
amount shall be deductible up to 10% of sum assured. w he case of an individual policy should
be taken on his own life, life of the spouse or any child. Child may be dependent/independent,
male/female, minor/major or married/unmarried. In the case of a Hindu Undivided Family,
policy may be taken on the life of any member of the family.

2. Central Govt. Employee's Insurance Scheme- Payment made in Government employees to

the Central Government Employee's Insurance Scheme and payment made by a person under
children's deferred endowment assurance policy.

3. Deferred Annuity- Payment in respect of non-commutable deferred annuity. Any sum

deducted from salary payable to a Government employee for the purpose of securing him a
deferred annuity (subject to a maximum of 20% of salary.

4. Employee's Contribution to SPF or RPF- Contribution of employee towards statutory

provident fund and recognised provident fund.

5. Contribution to PPF- Contribution towards 15 year public provident fund maximum

contribution limit is Rs.1.5 Lakh. In the case of an individual, the provident fund account should
be in his own name or in the name of his/her spouse or any child. In the case of a Hindu
Undivided Family, provident fund account should be in the name of any member of the family.

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6. Contribution to Superannuation Fund- Employee's contribution towards an approved

superannuation fund.

7. National Savings Certificate, VIII Issue- Subscription to National Savings Certificates, VIII
Issue during the previous year. Accrued interest on preceding NSC is also qualified for deduction
for first 5 years.

8. Unit-Linked Insurance plan (ULIP)- Contribution for participating in the Unit-Linked

Insurance Plan (ULIP) of Unit Trust of India or unit-linked insurance plan (ULIP) of LIC Mutual
Fund.

In the case of an individual, ULIP should be taken on his own life, life of the spouse or any child
(child may be dependent/independent, male/female, minor/major or married/unmarried). In the
case of a Hindu Undivided Family, ULIP may be taken on the life of any member of the family.

9. Notified Annuity Plan of LIC or other insurer- Payment for notified annuity plan of LIC
(i.e., Jeevan Dhara, Jeevan Akshay, New Jeevan Dhara and New Jeevan Akshay, New Jeevan
Dhara 1 and New Jeevan Akshay 1) or any other insurer.

10. Purchase of Tax savings Mutual Fund Units- Subscription towards notified units of
Mutual Fund or UTI. Contribution to notified pension fund set up by Mutual Fund or UTI.

11. Home Loan Account Scheme- Any sum paid (including accrued interest) as subscription to
Home Loan Account Scheme of the National Housing Bank or contribution to any notified
pension fund set up by the National Housing Bank.

12. Deposit to Housing Finance Public Sector Company or Housing Board- Any sum paid as
subscription to any scheme of -

(a) Public sector company engaged in providing long term finance for purchase/construction of
residential houses in India .

b) Housing board constituted in India for the purpose of planning, development or improvement
of cities / towns.

13. Tuition Fees- Any sum paid as tuition fees (not inclucluding any payment towards
deevelopment fees / donation / payment of similar nature) whether at the time admission or
otherwise to any university or college or educational in full time education maximum for two
children.

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14. Repayment of house loan - Any payment towards the cost of purchase in of a residential
property including repayment of loan taken from Government Bank, Co-operative Bank, LIC,
National Housing Bank etc.

15. Investment in infrastructure company- Amount invested in approved debentures of and

equity shares in a public company engaged in infrastructure ling power sector or units of a
mutual fund proceeds of which are utilised for the developing, maintaining etc. of a new
infrastructure facility.

16. Term Deposit with bank for 5 years or more amount deposited as deposit for a period of 5
years or more with a scheduled bank in accordance with a scheme framed by the Govt.

17. Investment in Notified Bonds of NABARD- Subscription to any notified bonds of National
Bank for Agriculture and Rural Development (NABARD) will be eligible for deduction u/s 80C.

18. Senior Citizens Saving Scheme- Amount deposited to Senior Citizens Savings Scheme.

19. Five Years Time Deposit Scheme in Post Office- Amount deposited to Five Years time
deposit scheme in Post Office.

20. Deposit to Sukanya Samraddhi Account - By parents or guardian for welfare of girl child.

AMOUNT OF DEDUCTION

Gross qualifying amount is the figure derived from aforesaid items. However, amount for
deduction under section 80C is allowed as under Gross qualifying amount;

(i) Aggregate amount of items covered u/s 80C.

Or

(ii) Rs. 1,50,000 maximum limit. whichever is lower, Shall be deducted from G.T.I.

may be noted that the amount of deduction under sections 80C, 80CCC and 80CCD cannot
exceed 1,50,000.

DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIUM U/S 80 D

Allowed to: An Individual and HUF

Allowed for : Maximum Rs.25,000 (upto Rs.50,000 If policy is taken for parents in addition)

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Allowed in Respect of : Medical/Health Insurance Premium

This deduction is allowed for the payment of the medical or health insurance premium by
cheque. The amount of the deduction will be maximum Rs. 25,000 or the real medical insurance
premium (which ever is least). This is for himself, spouse and children. If dependant parent’s
medical insurance premium is also paid then additional deduction of Rs.25,000 or the real
medical insurance premium (which ever is least) is also allowed. If parents are senior citizen then
maximum limit will be increased to Rs. 50,000

DEDUCTION IN RESPECT OF MAINTENANCE EXPENSES INCLUDING MEDICAL

TREATMENT OF DEPENDENT DISABLED RELATIVE U/S 80DD

Allowed to: An Individual and HUF

Allowed for : Maximum Rs.75,000

Allowed in Respect of : Maintenance expenses of dependent disabled relative.

This deduction is allowed to a person who is paying the maintenance expenses for the dependent
relative with disability The standard amount of the deduction is Rs. 75,000. If the dependent
relative is suffering from severe disability then the amount will be increased to Rs. 1,25,000.

DEDUCTION IN RESPECT OF INTEREST ON LOAN TAKEN FOR HIGHER EDUCATION

U/S 80E

Allowed to: An Individual

Allowed for : Real amount of interest

Allowed in Respect of : Interest on loan taken for higher education purpose.

This deduction is allowed for the payment made in the previous year for the interest on loan
taken for the purpose of the higher education of the assessee . The amount of the deduction will
be the real amount of the interest.

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DEDUCTION DONATION TO CERTAIN CHARITABLE INSTITUTIONS AND FUNDS

U/S 80G
Allowed to: All Assessees

Allowed for : Donation Amount (Under Certain Terms)

Allowed in Respect of : Donation to certain charitable institutions and funds

Section 80G provides deduction to all assessee’s for donations to specified organizations or
institutions or funds. Where an assessee has claimed and has been allowed any deduction under
this section in respect of any amount of donation, the same amount will not again qualify for
deduction under any other provision of the Act for the same or any other assessment year.
Donations in kind is not eligible as per the Supreme Court Ruling (Vijaipat Singhania v. CIT).

The quantum of deduction under this section is the aggregate of deduction permissible under
clauses (A), (B), (C) & (D) mentioned below. Together for (C) and (D) below, there is a
qualifying limit which is 10% of adjusted Gross Total Income.

Adjusted Gross total income means the “Gross Total Income” as reduced by:

I. Long-term Capital gains, if any which have been included in the “Gross Total
Income”.

II. All deductions permissible under Sections 80C to 80U excepting deduction under
Section 80G.

III. Exempted Income

IV. Income of NRIs and Foreign Companies under Sections 115A, 115AB, 115AC,
115ACA or 115AD.

(A) 100% Deduction without any qualifying limit:

(i) National Defence fund.

(ii) Prime Minister’s National relief fund or the Prime Minister’s Citizen Assistance and Relief in
Emergency Situations Fund (PM CARES FUND) [Amendment vide Finance Act, 2020]

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(iii) Prime Minister’s Earthquake relief fund.

(iv) Africa fund.

(v) National Trust for welfare of persons with autism, cerebral palsy, mental retardation and
multiple disabilities.

(vi) National cultural fund set up by the Central Government.

(vii) The Chief Minister’s relief fund or the lieutenant Governor’s relief fund.

(viii) National Illness Assistance fund.

(ix) The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996.

(x) The Army/Air force Central welfare fund or the Indian Naval Benevolent fund.

(xi) Any fund set up by a State Government to provide medical relief to poors.

(xii) The National/State Blood transfusion Council.

(xiii) Zila Saksharta Samiti constituted in any district.

(xiv) Any fund set up by the State Government of Gujarat, exclusively for providing relief to the
victims of earthquake in Gujarat.

(xv) Maharashtra Chief Minister’s Earthquake Relief Fund.

(xvi) University/Educational Institute of National Eminence approved by the prescribed

authority. (xvii) National foundation for communal harmony.

(xviii) Fund for technology development and application, set up by the Central Government.

(xix) National sports fund set up by the Central Government.

(xx) National Children’s Fund.

(xxi) The Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by
the assessee in pursuance of Corporate Social Responsibility

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(xxii) The Clean Ganga Fund, set up by the Central Government, whereas such assessee is a
resident and such sum is other than the sum spent by the assessee in pursuance of Corporate
Social Responsibility

(xxiii) the National Fund for Control of Drug Abuse constituted under section 7A of the Narcotic
Drugs and Psychotropic Substances Act, 1985 (61 of 1985);

(B) 50% Deduction without any qualifying limit:

(i) Jawaharlal Nehru Memorial Fund.

(ii) Indira Gandhi Memorial Trust.

(iii) Rajiv Gandhi Foundation.

(iv) Prime Minister’s Drought Relief Fund.

(C) 100% Deduction subject to qualifying limit:

(i) Any sum to Government or any approved local authority, institution or association to be
utilized for promoting family planning.

(ii) Any sum paid by the assessee, being a company, in the previous year as donation to Indian
Olympic Association or to any other association established in India and notified by the Central
Government for: I. Development of infrastructure for sports and games or II. Sponsorship of
sports and games in India.

(D) 50% Deduction subject to qualifying limit:

(i) Donation to Government or any approved Local Authority, Institution or Association to be

utilized for any Charitable purpose other than promoting family planning.

(ii) Any other Fund or Institution, which satisfies the conditions of Section 80G(5).

(iii) Notified Temple, Mosque, Gurudwara, Church or any other place notified by the Central
Government to be of historic, as chorological or artistic importance, for renovation or repair of
such place.

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(iv) Any corporation established by the Central or State Government specified under Section
10(26BB) for promoting interests of the members of a minority community.

(v) Any authority constituted in India by or under any law for satisfying the need for housing
accommodation or for the purpose of planning development or improvement of cities, towns and
villages or for both.

DEDUCTION IN RESPECT OF PAYMENT OF HOUSE RENT U/S 80GG

Allowed To: An Individual(non Salaried) or Salaried Individual (not getting HRA) and a HUF

Allowed For : Least of three Specific Amounts

Allowed In Respect of :Payment of House Rent

This deduction is allowed for the payment made in the previous year for the house rent. The
amount of the deduction will be the least of the following:

1. Rent Paid over 10% of GTI

2. 25% of GTI

3.Rs.5,000 per month

[Here GTI = Original GTI- Long Term Capital Gains(LTCG) – All Deductions,
excluding u/s 80GG]

DEDUCTION IN RESPECT OF DONATION TO POLITICAL PARTY OR ELECTORAL

TRUST U/S 80GGB AND 80GGC

Allowed to: Indian Company (80GGB) and Any person other than Indian Company (80GGC)

Allowed for : Full Donation Amount (100%)

Allowed in Respect of : Donation to Political Party or Electoral Trust

This deduction is allowed for the amount donated in the previous year to the Political Party or
Electoral Trust by the assessee. The full amount of the donation (100%) is allowed for deduction:

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DEDUCTION IN RESPECT OF ROYALTY RECEIVED BY THE AUTHORS OF BOOKS

U/S 80QQB

Allowed to: Authors of books

Allowed for : Rs. 3,00,000 or Actual amount of Royalty, which ever is least

Allowed in respect of : Royalty received by the authors of books

This deduction is allowed to all the authors of the books receiving royalty income during the
previous year. The term book shall not include diaries, guides, journals, brochures, magazines,
news papers and school text books. The rate of the royalty should not be more than 15% of the
value of the books sold during the previous year. The amount of the deduction will be Rs.
3,00,000 or Actual amount of Royalty, which ever is least.

DEDUCTION IN RESPECT OF INTEREST ON SAVINGS BANK ACCOUNT IN BANKS OR

IN POST OFFICES U/S 80TTA

Allowed to: An Individual and HUF

Allowed for : Maximum Rs.10,000

Allowed in respect of : Interest on savings bank account in banks or in post offices.

This deduction is allowed to an assessee who receives interest income on his savings account
maintained in any type of bank or post office. The amount of the deduction will be total interest
received from all savings accounts or Rs. 10,000, which ever is least.

TAX REBATE UNDER SECTION 87A

Individuals having taxable income of up to Rs 5 lakh will be eligible for tax rebate under section
87A up to Rs 12,500, thereby making zero tax payable in the old and new tax regime as well.

DEDUCTION IN RESPECT OF INTEREST ON DEPOSITS OF SENIOR CITIZEN UNDER

SECTION 80TTB

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For Senior Citizens, the Interest income earned on Fixed Deposits & Recurring Deposits (Banks /
Post office schemes) will be exempt till Rs 50,000. This deduction can be claimed under new
Section 80TTB. However, no deductions under existing 80TTA can be claimed if 80TTB tax
benefit has been claimed .
Section 80TTA of Income Tax Act offers deductions on interest income earned from savings
bank deposit of up to Rs 10,000. From FY 2018-19, this benefit will not be available for late
Income Tax filers.

 Interest income from deposits held with companies will not benefit under this section. This means,
senior citizens will not get this benefit for interest income from corporate fixed deposits us/
80TTB.

DEDUCTION IN RESPECT OF DISABLED ASSESSEE SECTION 80U

Allowed to – An Individual resident of India who is certified by the medical authority to be a

person with a disability.

Quantum of deduction - Rs. 75,000 but in case of severe disability it is Rs. 1,25,000.

This is similar to Section 80DD. Tax deduction is allowed for the Individul assessee who is
physically and mentally challenged. Quantum of deduction is Rs. 75,000 but in case of severe
disability it is Rs. 1,25,000.

Illustration 1

From the following information compute the amount entitled to 80C in the assessment of Mr. X
for the Assessment Year 2023-24 :

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1. Life insurance policy of 80,000 on own life taken in 2016, the premium paid Rs. 9000

2. Life insurance policy of 15,000 on married daughter's life, the premium paid Rs.1000

3. Life insurance policy of Rs. 40,000 on wife's life taken on 1.5.2016 , the premium paid
Rs. 5,000.

4. Contribution to Recognised Provident Fund Rs.15,000.

5. Contribution to Public Provident Fund Rs.74,000.

6. Group insurance premium paid Rs. 1,200.

7. National Savings Certificates VIII Issue purchased Rs. 20,000.

8. Accrued interest on National Savings Certificates VIII Issue Rs. 1,730

9. Loan installment repaid to L.I.C. of India Rs. 25,000. The loan was taken in 2009 to

purchase a D.D.A. Flat for own residential purposes.

10. Tuition Fees paid of his son 15,000.

Solution:

Computation of Amount Entitled to Deduction w/s 80C

(for the Assessment Year 2023-24)

Rs.

1. Life Insurance Premium on own life 8,000

(Max. qualifying amount 10% of sum assured)

2. Life Insurance Premium on married daughter's life (It qualifies for deduction) 1,000

3. Life Insurance Premium on wife's life 4,000

(Max. qualifying amount 10% of sum assured)

4. Contribution to R.P.F. 15,000

5. Contribution to P.P.F. 74,000

6. Group Insurance Premium 1,200

7. Purchase of N.S.C. VIII Issue 20,000

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8. Interest accrued on N.S.C. VIII Issue deemed to be re-invested 1,730

9. Repayment of loan installment to L.I.C. 25,000

10. Tuition fees 15,000

1,64,930

Amount entitled to Deduction Qualifying amount for deduction u/s 80C restricted to 1,50,000.

*****

REFERENCES
 Shripal Saklecha and CA. Anit Saklecha. (2023-24), Income Tax Law & Practice.
Satish Printers and Publishers, Indore.
 Dr. H. C. Mehrotra and Dr. S. P. Goyal. (2023-24), Income Tax Law &
Practice. Sahitya Bhawan Publications, Agra.
 V. P. Gaur and D. B. Narang. (2023-24), Income Tax Law & Practice. Kalyani
Publishers
 Taxation, Study Material , ICSI (2023)

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