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
There are two types of deduction:
- Payment related deduction
- 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:
Section | Eligible Assessee | Eligible Investment and Expenses | Amount of Deduction |
80C | Individual or HUF | Life 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 |
80CCC | Individual or HUF | Contribution to pension fund of LIC or Other Insurance Company | Maximum Rs. 1,50,000 |
80CCD (1) | Individual or HUF | Contribution to pension of central government or Atal pension scheme | For 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 HUF | Additional Contribution to National Pension Scheme | Maximum Rs. 50,000 |
80CCD (2) | Individual or HUF | EmployerContribution to National Pension Scheme for employee benefit | Lower of Employer contribution or 10% of salary |
80D | Individual or HUF | Mediclaim premium or Medical expenses or Central government health scheme | In 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 |
80DD | Resident Individual or HUF | Deduction in respect of medical treatment and maintenance of handicapped dependent relative | Normal disability = Rs. 75,000 Severe disability = Rs. 1,25,000 |
80DDB | Resident Individual or HUF | Deduction in respect of medical treatment of specified disease | Lower of Actual amount of expenses or 40000/ 100000 (40000 in normal case and 100000 for senior citizen) |
80E | Individual | Deduction in respect of interest on loan for higher education | Interest amount for 8 consecutive year |
80EE | Individual | Deduction in respect of Interest on housing loan | Maximum Rs. 50,000 for loan sanctioned from 01/04/2016 to 31/03/2017 |
80EEA | Individual | Deduction in respect of Interest on housing loan | Maximum Rs. 1,50,000 for loan sanctioned from 01/04/2019 to 31/03/2020 |
80EEB | Individual | Deduction in respect of Interest on Electric Vehicle Loan | Maximum Rs. 1,50,000 for loan sanctioned from 01/04/2019 to 31/03/2023 |
80G | All assessee | Donations | Note 1 |
80GG | Individual | Rent paid on house property if HRA not received | Lower of Rs. 5,000 per month25% of Adjusted Gross total incomeRent paid – 10% of Adjusted Gross total income |
80GGA | All assessee | Donation to scientific research or rural development | 100% of donation |
80GGB | Indian Company | Donation to political parties or electoral trust | 100% of donation |
80GGC | Any person other than Indian company | Donation to political parties or electoral trust | 100% of donation |
80JJAA | Any assessee engaged in business and to whom section 44AB applies | Deduction in respect of employment of new employees | 30% of additional employee cost (Note 2) |
Note:
- Eligible donation:
- Unlimited category donation 100%:
The assessee will get 100% deduction of the amount of donation made to the following entity:
- National defense fund
- PM national relief fund
- PM Armenia earthquake relief fund
- CM relief fund
- Zilla Sakshatra Samiti
- National Sports fund
- National Children Fund
- National Cultural Fund
- Swachh Bharat Kosh
- Clean Ganga Fund
- The national fund for control of drug abuse
- Fund for army
- Unlimited category donation 50%:
The assessee will get 50% deduction of the amount of donation made to the following entity:
- Jawaharlal Nehru Memorial Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
- 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:
- Indian Olympics association or National sports institution
- 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:
- Housing development authority
- Institution promoting interest of minority communities
- Notified temple or place of historical importance
- 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
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- Notes relating to Deduction under 80JJAA:
- Additional employee cost includes, total emoluments or salary paid or payable to additional employees employed during the previous year.
- 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:
Section | Eligible Assessee | Eligible Income | Amount of Deduction |
80QQB | Resident individual | Royalty from books of literacy, artistic, scientific nature | Lower of Royalty received or Rs. 3,00,000 |
80RRB | Resident individual | Royalty from Patents | Lower of Royalty received or Rs. 3,00,000 |
80TTA | Individual or HUF | Interest on savings interest | Lower of Interest amount or Rs. 10,000 |
80TTB | Resident senior citizen | Interest on Deposits | Lower of Interest amount or Rs. 50,000 |
80JJAA | All assessee | Profits from Collecting and Processing Bio-degradable waste | 100% of profits for 5 consecutive years |
80IBA | All assessee | Income from Developing building and housing projects | 100% of Profit |