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April 17, 2020

Various Deduction Individual and HUF can claim for FY 2020-21 as per Income Tax Act, 1961

Various Deduction Individual and HUF can claim for FY 2020-21 as per Income Tax Act, 1961 from April 2020

Deduction allows the assessee to reduce the tax liability, one can avail the deduction only if you have made tax saving investments or incurred eligible investment or expenses. There are various deductions covered under chapter VIA, the most popular are 80C to 80U deduction under chapter VIA is restricted to gross total income. The investment or expenditure if it is in excess of prescribed limit then deduction cannot be carry forward to next financial year. So it becomes important to allocated the limited resources – money smartly. To do that a consolidated list can help taxpayers to take proper decision. The deduction under chapter VIA is not allowed to set off against income in nature of Long term capital gain (LTCG), Short term capital gain (STCG) and special rate income.

The Deduction and benefit as mention below for FY 2019-20 can be availed upto 30 June 2020. However any Investment made or expenditure incurred for availing deduction between 1 April 2020 to 30 June 2020, the taxpayers has option to claim in FY 2019-20 or FY 2020-21

In FY 2020-21 there if Taxpayers opts for New Slab Rate then many deduction are not allowed to know click here for complete list

There are two types of deduction:

  1. Payment related deduction
  2. Income related deduction

Let us understand the various deductions under chapter VIA as per Income tax act 1961:

Payment related deductions

In case of payment related deduction, the assessee has to make investment or expenses in order to claim the deduction. The various payment related deduction is explained as under:

SectionEligible AssesseeEligible Investment and ExpensesAmount of Deduction
80CIndividual or HUFLife Insurance premiumEmployees contribution to statutory or recognized provident fundNational Savings CertificateTax Saver DepositTuition feesNABARD bondsTax saver Mutual fundsSukanya Samridhi SchemeRepayment of Housing LoanStamp duty paid on purchase of house propertyNotified pension scheme of UTI  Maximum Rs. 1,50,000
80CCCIndividual or HUFContribution to pension fund of LIC or Other Insurance CompanyMaximum Rs. 1,50,000
80CCD (1)Individual or HUFContribution to pension of central government or Atal pension schemeFor Salaried employee: Lower of Employers contribution or 10% of salary   For Others Lower of Assessee contribution or 20% of Gross total income
80CCD(1B)Individual or HUFAdditional Contribution to National Pension SchemeMaximum Rs. 50,000
80CCD (2)Individual or HUFEmployerContribution to National Pension Scheme for employee benefitLower of Employer contribution or 10% of salary
80DIndividual or HUFMediclaim premium or Medical expenses or Central government health schemeIn case of individual less than 60 years then:Self, family and children: Rs. 25,000 deductionParents: Rs. 25,000 if age of parent is less than 60 and Rs. 50,000 in case parent age is more than 60   In case of individual age more than 60 years then:Self, family and children: Rs. 25,000 deductionParents: Rs. 50,000 deduction
80DDResident Individual or HUFDeduction in respect of medical treatment and maintenance of handicapped dependent relativeNormal disability = Rs. 75,000 Severe disability = Rs. 1,25,000
80DDBResident Individual or HUFDeduction in respect of medical treatment of specified diseaseLower of Actual amount of expenses or 40000/ 100000   (40000 in normal case and 100000 for senior citizen)
80EIndividualDeduction in respect of interest on loan for higher educationInterest amount for 8 consecutive year
80EEIndividualDeduction in respect of Interest on housing loanMaximum Rs. 50,000 for loan sanctioned from 01/04/2016 to 31/03/2017
80EEAIndividualDeduction in respect of Interest on housing loanMaximum Rs. 1,50,000 for loan sanctioned from 01/04/2019 to 31/03/2020
80EEBIndividualDeduction in respect of Interest on Electric Vehicle LoanMaximum Rs. 1,50,000 for loan sanctioned from 01/04/2019 to 31/03/2023
80GAll assesseeDonationsNote 1
80GGIndividualRent paid on house property if HRA not receivedLower of Rs. 5,000 per month25% of Adjusted Gross total incomeRent paid – 10% of Adjusted Gross total income
80GGAAll assesseeDonation to scientific research or rural development100% of donation
80GGBIndian CompanyDonation to political parties or electoral trust100% of donation
80GGCAny person other than Indian companyDonation to political parties or electoral trust100% of donation
80JJAAAny assessee engaged in business and to whom section 44AB appliesDeduction in respect of employment of new employees30% of additional employee cost (Note 2)

Note:

  1. Eligible donation:
    • Unlimited category donation 100%:

The assessee will get 100% deduction of the amount of donation made to the following entity:

  1. National defense fund
  2. PM national relief fund
  3. PM Armenia earthquake relief fund
  4. CM relief fund
  5. Zilla Sakshatra Samiti
  6. National Sports fund
  7. National Children Fund
  8. National Cultural Fund
  9. Swachh Bharat Kosh
  10. Clean Ganga Fund
  11. The national fund for control of drug abuse
  12. Fund for army
  • Unlimited category donation 50%:

The assessee will get 50% deduction of the amount of donation made to the following entity:

  1. Jawaharlal Nehru Memorial Fund
  2. Indira Gandhi Memorial Trust
  3. Rajiv Gandhi Foundation
  4. P.M. Drought relief fund
  •  Limited Category donation 100%:

The assessee will get 100% deduction of the amount of donation made to the following entity subject to qualifying limit:

  1. Indian Olympics association or National sports institution
  2. Government or Local authority or approved institution for promoting family planning
  •  Limited Category donation 50%:

The assessee will get 50% deduction of the amount of donation made to the following entity subject to qualifying limit:

  1. Housing development authority
  2. Institution promoting interest of minority communities
  3. Notified temple or place of historical importance
  4. Government or Local authority or approved institution for charitable purpose

In case limited category donation shall be restricted as follows:

  • Total donation                                                XXX
  • 10% of Adjusted total income                     XXX

Lower of a or b                                                       XXX

Adjusted total income is total income before deduction under section 80G

Contributing to PM CARES Fund? Know How much Tax you can save in 80G and donate Generously

  • Notes relating to Deduction under 80JJAA:
    1. Additional employee cost includes, total emoluments or salary paid or payable to additional employees employed during the previous year.
    2. Additional employees do not include:
      • Employee whose emoluments or salary is more than Rs. 25,000 per month
      • Employee who is employed for less than 240 days / 150 days (in case of manufacture of apparel or footwear or leather products) in the previous year
      • Employee does not participate in RPF
      • Employee for whom the entire contribution is paid by government under employee pension scheme notified in accordance with the provision of the Employees Provident Funds and Miscellaneous Provision act, 1952.

Income related deductions

In case of income related deduction, the assessee gets deduction when he earns the specified income from specified activities. The various income related deduction is explained as under:

SectionEligible AssesseeEligible IncomeAmount of Deduction
80QQBResident individualRoyalty from books of literacy, artistic, scientific natureLower of Royalty received or Rs. 3,00,000
80RRBResident individualRoyalty from PatentsLower of Royalty received or Rs. 3,00,000
80TTAIndividual or HUFInterest on savings interestLower of Interest amount or Rs. 10,000
80TTBResident senior citizenInterest on DepositsLower of Interest amount or Rs. 50,000
80JJAAAll assesseeProfits from Collecting and Processing Bio-degradable waste100% of profits for 5 consecutive years
80IBAAll assesseeIncome from Developing building and housing projects100% of Profit