Deductions out of Gross Total Income

DEDUCTIONS OUT OF
GROSS TOTAL INCOME
(SECTION 80)
P R E S E N T E D B Y :
M A M T A B H O L A
( A S S I S T A N T P R O F E S S O R
P G D E P A R T M E N T O F C O M M E R C E A N D M A N A G E M E N T
A R Y A C O L L E G E , L U D H I A N A )

IMPORTANT POINTS REGARDING DEDUCTIONS
U/S 80
A. Incomes not eligible for claiming deductions u/s 80
• Short term capital gains arising out of transfer of equity shares covered under
STT
• Long term capital gains
• Casual incomes under section 56(2) i.e. lottery winning, puzzles and races
etc.
• Incomes covered u/s 115. (royalty and dividend incomes)

U/S 80 (CONT.)
B. Maximum limit on various deductions under section 80
• The aggregate amount of deductions shall not exceed GTI i.e.
 No deductions if GTI is either NIL or negative
 Total income after deductions shall be positive or NIL.
Maximum GTI for deductions u/s 80 = GTI – LTCG – STCG –
Income referred u/s 115 – Casual Incomes

U/S 80 (CONT.)
C. No deduction to members if claimed by AOP/BOI
D. Deduction to be allowed with reference to the income included in the GTI
E. Timely filing of return for claiming certain deductions
F. Onus to claim deduction is on assessee
G. No double deduction

VARIOUS
DEDUCTIONS
In respect of certain
payments
(Section 80 C to 80 GGC)
In respect of certain incomes
(section 80 IA to 80U)

DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS
(SECTION 80C TO 80GGC)
1.Deduction regarding approved saving in
P.F. Life insurance Premium etc. (section
80C)
• Eligible Assessee : individual and HUF
• Rate of deduction : Rs. 1,50,000 u/s 80C, 80CCC and 80CCD

Deduction regarding approved saving in P.F. Life
insurance Premium etc. (section 80C) cont.
• Qualifying amount:
i. Deposits made in Provident funds:
• Deposits in statutory PF : fully qualifies
• Deposits in recognized PF : fully qualifies
• Deposits in unrecognized PF : does not qualify
• Deposits made in Public PF : fully qualifies

Qualifying amount: (cont.)
ii. Payment of Life insurance Premium
Lock in period : 2 years
Policy issued before 1-4-2012
i. Actual premium paid or
ii. 20% of actual capital sum
assured
iii. w.e. is less
Policy issued on or after 1-4-2013
on the life of a person with
disability/disease
ii. 15% of actual capital sum
assured
iii. w.e. is less
Policy issued on or after 1-4-
2012 (other than point c)
ii. 10% of capital sum assured
iii. w.e. is less
Deduction regarding approved saving in P.F. Life insurance Premium
etc. (section 80C) cont.

iii. Amount deducted out of Govt. employee’s salary towards deferred annuity :
Qualifying amount : 20% of salary
iv. Payment towards group insurance
v. Deposits made in approved superannuation fund
vi. Deposits made in ULIP ( Lock in Period : 5 years)
vii. Amount invested in NSS certificates- VIII or IX
viii. Term deposits with banks (not less than 5 years
Qualifying amounts for point iv to viii : Fully Qualify

ix. Repayment of housing loan for purchase/construction : Lock in period :
5 years ( interest repaid shall not be included )
x. Payment of tuition fees of two children
xi. Amount invested in units of mutual funds : Lock in period : 3 years
xii. Subscription to bonds of NABARD

II. Deduction in respect of contribution to pension fund:
(section 80 CCC )
• Only for individuals
• Rate of deduction is actual amount or Rs. 1,50,000
• In case amount is withdrawn by the nominee or by surrender of
this plan ( in full or in part) then whole amount shall become
taxable.

III. Deduction in respect of contribution to National Pension Scheme of Central Government or of any other
Employer: (Section 80CCD)
• Only for individuals
• Qualifying amount
For Central Govt. or Other
Employees
i. Own contribution or 10% of
salary w.e. is less +
ii. Contribution of Govt. or
employer or 10% of salary
w.e. is less
For Other individuals (self
employed)
i. Own contribution or
ii. 20% of gross total income
w.e. is less

IV. Deduction in respect of investment made in any notified equity saving scheme ( section 80CCG)
• For individual residents only
• GTI does not exceed Rs. 12,00,000
• Investment in notified listed equity shares specified under scheme
• Lock in period 3 years
• QA : 50% of investment or Rs. 25,000 w.e. is less
• Deduction will be allowed for consecutive 3 years subject to investment

SECTION 80D
V. Deduction in respect of Medical insurance Premium and contribution to Central
Govt. Health scheme

SECTION 80D CONT.
VI. Deduction in respect of maintenance including medical treatment of a dependent that is person with disability
(80DD)
• For individual assessee
• QA: fixed deduction of Rs. 75,000
• If dependent is a person with disability then deduction allowed will be Rs. 1,25,000.
VII. Deduction in respect of medical treatment etc. (80 DDB)
• QA : Non senior patient Actual amount or rs. 40,000
• senior patient Actual amount or rs. 60,000
• Super senior patient Actual amount or rs. 80,000

SECTION 80E
VIII.Deduction in respect of interest on loan taken for studies ( Sec. 80E): Only
available to individual assessee for interest paid on loan taken for studies from a
recognized financial institution.
IX. Deduction in respect of interest on loan taken for residential house
property to first time buyer (Sec. 80EE): Deduction provided for interest paid to
a recognized financial institution up to Rs. 50,000 where individual assessee
has acquired the residential house property for the first time and its value does
not exceed Rs. Five lakh and amount of loan does not exceed Rs. 35 lakh.

SECTION 80G
X. Deductions in respect of donations to certain funds, charitable institutions etc. (Sec. 80G)
A. No limit donations : 100% qualify
B. With limit donations : QA (i) actual total of with limit donations or (II) 10 % of GTI
Rate: out of QA 100% of donation for FP + by a company to Indian Olympic Association and balance QA 50% .
XI. Deduction in respect of any payment made to certain institutions or an institution having rural development
programme as its object (Section 80GGA)
XII. Deduction in respect of contribution made by
• Companies to Political parties and electoral trust (80GGB)
• Persons to Political parties and electoral trust (80GGC) 100% qualify

This was all about deductions in
respect of certain payments (section 80c to 80ggc)
Now we shall discuss about the deductions in respect of certain incomes
(section 80ia to 80u)

Deductions in respect of certain Incomes
(Section 80IA to 80U)
I. Deduction for Infrastructure Projects (Section 80IA)
– Rationale and purpose of deduction: The existence of these facilities is very
essential for industrial growth and economic development of economy,
that’s why Income Tax Act provides tax holiday for certain period to an
industrial undertaking or enterprises carrying on the business of
developing, maintaining and operating any infrastructural facility.
– Conditions to be fulfilled for claiming deduction:
i. General conditions :
a. Determination of amount of profits (only out of the activities of eligible business)
b. Audit of accounts and submission of audit report is necessary
c. Transfer of goods and services for the consideration must be recorded in the books of accounts
d. Duplication of deduction is not permissible
ii. Specific conditions (discussed for each category later)

Deductions in respect of certain Incomes (Section 80IA to 80U)
Deduction for Infrastructure Projects (Section 80IA) (cont)
Category 1: Undertaking engaged in
providing infrastructure facility
• Eligible business 80 IA (4) (i):
 Developing
 Operating and maintaining
 Developing, operating and maintaining
any infrastructure facility (a road, port,
airport, rail system, inland water way or
navigation channel etc.)
 The CBDT circular no. 133 provides relief
to private enterprise the deduction under
section 80IA under BOLT scheme of
Railways.
Categories of eligible business
• Specific conditions to be fulfilled
 Form of organization: A company registered in India
 Commencement of operations: On or after1-4-95 but before 1-4-
2017.
 Rate of deduction 100% on profit and gain from such eligible business
 Period of deduction:
a. In case of a port, airport, inland water way or navigational channel:
Deduction will be available for any 10 consecutive years out of 15
years beginning from the year in which undertaking starts operating.
b. In case of housing or other activities which are an integral part of
the highway project: Deduction will be available for any 10
consecutive years out of 20 years beginning from the year in which
undertaking starts operating.
c. In case of other infrastructure facilities: Deduction will be available
for any 10 consecutive years out of 20 years beginning from the year
in which undertaking starts operating.
d. Transfer of business: deduction will be available to transferee for the
unexpired period, as if no transfer has taken place.

Category 2: Telecommunication
services
Eligible business 80 IA (4) (ii): an undertaking
engaged in providing:
a. Telecommunication services whether basic
or cellular
b. Radio paging
c. Network trunking
d. Internet services
e. Domestic satellite service
f. Broadband network
 Form of organization: Any undertaking either corporate or
non corporate
 Commencement of operations: between 1-4-95 to 31-3-
2005
 Rate of deduction
i. 100% of profits and gains for first 5 consecutive years
commencing any time out of first 15 years of starting.
ii. 30% of profits and gains for next 5 consecutive years out of
first 15 years of starting.

Category 3: Industrial Park or special
Economic Zone
Eligible business 80 IA (4) (iii):
a. Developing
b. Operating
c. Operating and operating and industrial park
or special economic zone notified by Govt.
with scheme framed and notified.
 Form of organization: Any undertaking either corporate
or non corporate
 Commencement of operations:
i. For industrial park during 1-4-2006 to 31-3-2011
ii. For SEZ during 1-4-1997 to 31-3-2005
 Rate of deduction:
100% of profits and gains for first 10 consecutive years

Category 4: Power Sector:
Eligible business 80 IA (4) (iv):
a. Generation
b. Generation or distribution of power
c. Transmission or distribution
d. Undertakes substantial renovation and
modernization of the existing transmission
or distribution lines.
 Form of organization: Any undertaking either corporate
or non corporate

Category 5: Undertaking set up for
reconstruction or revival of power
generating plant:
Eligible business 80 IA (4) (v):
a. reconstruction or revival of power
generating plant
 Form of organization: Indian Company
 Approval of central government
 Commencement of operations: before 31-3-2011

II. Deduction to developers of Special Economic Zone (80IAB): Deduction will be available
only to the undertakings who are engaged in the business of developing special
economic zones.
Rate of deduction:
100% of profits and gains for first 10 consecutive years commencing any time out of first 15
years of starting.
III. Grant of deduction to eligible start ups from specified business(80IAC): 100% of profits
and gains for innovating and commercializing new products driven by intellectual
property for 3 consecutive years out of first 7 years of commencing the business.

Deduction for setting up new undertakings (80IB)
This deduction is in respect of profits and gains from industrial undertakings in certain cases like storage plant,
prospecting and refining of mineral oil or development of an industrial undertaking.
1. Industrial undertaking:
 It is not formed by splitting up of a business already in existence.
 In case of manufacturing process, no. of employees should be 10 or more when power is used and 20 or
more if power is used.
 Provisions regarding use of second hand machinery: (i) prior to use machinery was not in India and has
been imported from outside India.
(ii)No deduction for depreciation provided prior the machinery was brought to use in India.
(iii)In case machinery has been used in India prior its installation then its value should not increase 20% of total
value of machinery installed.
 Amount of deduction: 100% of profits for first 5 years in case of company, cooperative society or other
persons.
 Amount of deduction will vary for next 5 to 7 years for all assessees separately.

Deduction for setting up new undertakings (80IB) cont…
2. Undertaking engaged in production of refining of mineral oil or natural gas from blocks allotted under NELP-VIII :
 Eligible assessee: all
 Undertaking must employ 10 or more workers if power is used and 20 or more if power is not used.
 Amount of deduction: 100% of profits.
 Period of deduction: for 7 consecutive years including initial assessment year.
3. Undertaking developing and building approved housing projects:
 The housing project should be approved by the local authorities.
 The size of plot of land which has a minimum carpet area of one acre shall qualify for deduction.
Maximum built up area of residential unit: a) Within the cities of Delhi or Mumbai (within 25 km from the municipal limits
of these cities) : 1000 sq. feet
b. At any other place : 1500 sq feet
c. Maximum carpet area of shops: the carpet area of shops included in houses should not increase 3% of the aggregate
built up area or 5000 sq. feet w.e. is more.
 Amount of deduction: 100% of profits and gains from such business.

4. Undertaking engaged in the business of processing, preservation and packaging of fruits or vegetables or
from the integrated business of handling, storage and transportation of food grains:
 Amount of deduction:
Undertaking Amount of deduction Period of deduction
Owned by company 100% of profits For first 5 consecutive
years
30% of profits For next 5 consecutive
years
Owned by other 100% of profits For first 5 consecutive
years
25% of profits For next 5 consecutive
years

4. Undertaking engaged in the business of operating and maintaining a hospital in any area in India other
than excluded area:
 Number of beds: 100
 Approval from local authorities and filing of audit reports is a must.
 Amount of deduction: 100% of profits and gains from such business for first 5 consecutive years.

V. Undertaking developing and building approved housing
projects(80IBA)
 Maximum carpet area of shops: the carpet area of shops included in houses should not
increase 3% of the aggregate carpet area.
 Maximum carpet area of residential unit:
a) Within the cities of Chennai, Delhi, Kolkata or Mumbai (within 25 km from the municipal
limits of these cities) : 30 sq. mt.
b) At any other place : 60 sq mt.
 Amount of deduction: 100% of profits and gains from such activity.
 If any of the condition is not fulfilled by the assessee the provided deduction can be
forfeited by the authorities.

VI. Deduction for setting up industries in backward states (80IC):
1. For manufacturing articles not mentioned in
13th schedule:
Business started in any export oriented zone or
industrial growth centre during:
 23-12-2002 to 1-04-2007 in the state of Sikkim:
100% of such profits for first 10 consecutive
years.
 7-01-2003 to 1-4-2012 in the state of
Uttrakhand: 100% of such profits for first 5 and
next 5 years 25% of such profits consecutive
years and in case of company 30%.
 24-12-1997 to 1-04-2007 in any of the North
eastern state: 100% of such profits for first 10
consecutive years.
2. For manufacturing articles mentioned in 14th
schedule:
Business started during:
 23-12-2002 to 1-04-2007 in the state of Sikkim:
100% of such profits for first 10 consecutive years.
 7-01-2003 to 1-4-2012 in the state of Uttrakhand:
100% of such profits for first 5 and next 5 years
25% of such profits consecutive years and in case
of company 30%.
 24-12-1997 to 1-04-2007 in any of the North
eastern state: 100% of such profits for first 10
consecutive years.

VII. Deduction in respect of profit and gains from business of hotels in specific
area/ world heritage site and convention centres in specified area (80ID)
Eligible undertakings:
• Undertakings engaged in the business of hotels in specified area.
• Undertakings engaged in the business of owing and operating a convention centre in the specified area.
• Undertakings engaged in the business of hotel located in the specified district having a world heritage site.
Form of undertaking: any (i.e. sole proprietorship, partnership or company)
Specific conditions: i. No split up or reconstruction of existing business.
II. The eligible business is not formed by the transfer to a new business of building previously used as a hotel
or a convention centre.
III. Submission of audit reports is necessary.
IV. If plant and machinery has been imported in India then its value should not exceed 20% of the existing
plant and machinery used in the business.
Amount of deduction: 100% of profits and gains from such business for a period of first 5 consecutive years.

VII. Deduction in respect of certain undertakings in North- Eastern States (80IE)
Eligible undertakings:
• Undertakings manufacturing eligible article or thing. (excluding products mentioned in chapter 21, 24, 27 of
central excise tariff act, 1958)
Specific conditions: i. No split up or reconstruction of existing business.
II. The eligible business is not formed by the transfer to a new business of building previously used as a hotel
or a convention centre.
III. Submission of audit reports is necessary.
IV. If plant and machinery has been imported in India then its value should not exceed 20% of the existing
plant and machinery used in the business.
Amount of deduction: 100% of profits and gains from such business for a period of first 10 consecutive years.

IX. Deduction in respect of profits and gains from business of
collecting and processing of bio-degradable waste (80JJA)
Eligible business: collecting and processing of bio-degradable waste for generating power or producing
bio-fertilizers, bio-pesticides or making pellets or organic manure.
Amount of deduction: 100% of profits and gains from such business for first 5 consecutive years.

x. Deduction in respect of employment of new employees (80JJAA)
 Eligible business: all (any assessee who has to audit hes/her accounts)
 No split up or amalgamation of business
 Employment of new employees: The business must employ additional employees during the year.
Additional employee means any person who has increased the number of employees employed by
employer as on the last date of previous year.
 The emoluments paid to such employees should not increase Rs. 25,000 p.m.
 The entire contribution to such employee is not paid by Govt.
 The business must incur additional cost in the form of emoluments for employing such employees.
 here emoluments means amount payable to employee for his employment and it shall not include any kind
of pension fund or any lump sum payment in the form of retrenchment benefit or commutation of pension.
XI. Deduction in respect of certain incomes of offshore Banking units and International Financial Services
Centre (80LA):
 Eligible assessee: scheduled bank or unit of an international financial services centre.
 Eligible income: (a) income from an offshore banking unit or (b) income from any unit of international
financial service centre from its business.
 Conditions: (a) submission of audit report. (b) permission from appropriate authority.
 Amount and period of deduction: 100% for 5 consecutive years commencing from the date when
permission was obtained and 50% of such profits for next 5 years.

XII. Deduction in respect of income of Co-operative Societies(80P)
 If cooperative society is engaged in any activity such as banking business,
cottage industry, marketing of agricultural products or fishing or other allied
activities etc. The whole amount of profits and gains attributable to any one or
more activities shall be deducted out of GTI. i.e. 100% deduction every year.
XIII.Deduction in respect of royalty income etc. of authors of certain
books(80QQB)
 Eligible only for resident individuals authors and co-authors.
 Amount of deduction: Rs. 3,00,000 or actual income from royalty w.e. is lower.
XIV.Deduction in respect of royalty on patents(80RRB)
 Eligible for resident individual
 Amount of deduction: Rs. 3,00,000 or actual income from royalty w.e. is lower

XV. Deduction in respect of Interest on deposits in saving account (80TTA)
 For individual and HUF
 Eligible Income: interest on deposits from bank, cooperative society or post office
 Amount of deduction: Actual or Rs. 10,000 w.e. is less.
XVI. Deduction in case of a person with disability (80U)
 Only available for resident of India
 Rate of deduction: Rs. 75,000 in case of 40% disability suffered by assessee and Rs. 1,25,000 if he sufferes 80%
disability (severe disability).

Deductions out of Gross Total Income

Deductions out of Gross Total Income

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Deductions out of Gross Total Income