e-Book on Income Tax Deductions u/s. 80C to 80U for A.Y. 2017-18

There are so many Income Tax Deductions which are allowed to be claimed by an Salaried Employee, Individual or HUF. Though this a few Income Tax Deductions are very useful, which can be easily claimed and are helpful in reducing the tax burden. 

What do you mean by Tax Deductions ?

Tax deduction helps to reducing your tax-liabilities. It decreases your overall tax liabilities and save tax and grow savings. However, depending on the type of tax deduction you claim, the amount of deduction varies. You can claim tax deduction for amounts spent in tuition fees, medical expenses and charitable contributions. Also, you can invest in various schemes such as life insurance plans, retirement savings schemes, and national savings schemes etc. to get tax deductions. The government of India offers tax exemptions for various expenses incurred in different activities to encourage individuals and commercial institutions take part in activities having social benefits.

A number of day-to-day expenditures qualify for deductions, with information about them being crucial to help us save money. Tax deduction can be claimed on money spent for education, medical expenses, charitable contributions, investments in insurance, retirement schemes, etc. These deductions have been put in place to encourage members of the society to participate in certain useful activities, helping everyone involved in the process.

The following e-Book helps you to know more about Income Tax Deductions u/s. 80C to 80U.

e-Book about Income Tax Deducation u/s. 80C to 80U

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Income generated from sale of carbon credits won't be eligible for sec. 80-IA relief

Where assessee deputed some of its employees to AE to render services of commercial value, TPO was justified in making addition to assessee's ALP holding that a markup of 5 per cent should have been charged in addition to reimbursement of salary expenses by AE

Income on sale of Certified Emission Reduction/carbon credit which is admittedly a benefit arising out of business of assessee, would fall within definition of 'income' under section 2(24)(vd) and, thus, it is chargeable to tax

Even though income on sale of Certified Emission Reduction/carbon credit would form part of profit and gains of business, yet it cannot be treated as profit 'derived from' industrial undertaking and, therefore, assessee was not entitled for deduction under section 80-IA in respect of said income

Source: Taxmann

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Taxfree perquisites for Assessment Year 2013-14 for Salaried Employee.

It is general demand of salaried employee (Taxpayee) regarding calculations of Income Tax for the Assessment Year 2013-14 to Deposit Savings, Demand of Tax etc. Thus the taxpayee go through Chaperter-VIA to save tax and project to invest for growing Deposit Savings. In accordance with this  Salaried Employee (Taxpayee) searches Tax free perquisites.  In Fin. year 2012-13 and Assessment Year 2013-14 Taxfree perquisites for Salaried Employee who deducted Tax as TDS monthly from his salary are as follows:

1. Medical Facility or Medical Reimbursement:

• Medical Facility :- The value of any medical treatment provided to an employee or any member of his family in a hospital, dispensary or a nursing home maintained by the employee shall be a tax free perquisite.
• Medical Reimbursement : Any sum paid by the employer in respect of any expenditure incurred by the employee on his medicaltreatment or treatment of any member of his family subject to maximum of Rs. 15,000 in the previous year.

2. Recreational Facilities : Any recreational facility provided to a group of employees (not being restricted to a select few employees) by the employer is not taxable.

3. Training of Employees: Any expenditure incurred by the employer, for providing training to the employees or by way of payment of fees of refresher courses attended by the employees.

4. Use of health club, sports and similar facilities provided uniformly to all employees by the employer.

5. Expenses on Telephone, including a mobile phone, actually incurred on behalf on the employee by the employer.

6. Employer’s Contribution: Employer’s contribution to superannuation fund of the employee or provided such contribution does not exceed Rs. 1,00,000 per employee per year.

7. The premium paid by the employer on an accident policy taken out by it in respect of the employee would not be a perquisite. [CIT v Lala Shri Dhar (1972) 84 ITR 192 (Del) and CIT v Vinay Bharat Ram (1981) 129 ITR 128 (Del)].

8. Motor car provided by the employer to the employee or expenses incurred by the employer in connection with motor car belonging to the employee (for purposes other than exclusively for personal purposes) shall be a tax free perquisite in the hands of the employee.

9. Amount given by the employer of assessee to assessee’s child as scholarship is exempt under section 10(16). [CIT v B.L. Garg (2006) 155 Taxman 189 (All)]

10. Food and Beverages provided to Employees: The following shall be a tax free perquisite in the hands of the employees-

• free food and non-alcoholic beverages provided by the employer to his employees during working hours:

(a) at office or business premises or
(b) through paid vouchers which are not transferable and usable only at eating joints.
Provided the value of such meal is upto Rs. 50 per meal.
(ii) Any tea or snacks provided during working hours.
(iii) Free food and non-alcoholic beverages during working hours provided in a remote area
or offshore installation.
11. Loans to Employees : - In the following cases the value of benefit to the assessee resulting from the provision of interest free or concessional loan shall be nil :
(a) where the amount of loans are petty, no exceeding in the aggregate Rs. 20000;
(b) Loans made available for medical treatment in respect of disceases specified in rule 3A of the Income-tax Rules. However, the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

12. Perquisites provided outside India : Perquisites provided by the Government to its employees, who are citizens of india for rendering services outside India, are not taxable. [Section 10(7)].

13. Rent Free House/Conveyance Facility: Rent free official residence and conveyance facilities provided to a Judge of the Supreme Court/High Court is not a taxable perquisite.

14. Specified Perquisite allowed to certain Persons:
(a) Specified perquisites allowed to Judges of the Supreme Court, Chief Election Commissioner, Election Commissioner.
(b) Chairman or retired Chairman, member or a retired member of U.P. S.C.
are not taxable perquisites.

15. Residence to officials of Parliament etc. :- The Rent Free furnished residence (including maintenance thereof) provided to an officer of the Parliament a Union Minister or Leader of Opposition in Parliament, is not a taxable perquisite.

16. Accommodation in a Remote Area : - The accommodation provided by the employer shall be a tax free perquisite if the accommodation is provided to an employee working at mining site or an onshore oil exploration site or a project execution site, or a dam site or a power generation site or an offshore site which -
(a) being of a temporary nature and having plinth area not exceeding 800 square feet, is located not less than eight kilometres away from the local limits of any municipality or a cantonment board; or
(b) is located in a remote area.

17. Educational Facility for Children of the Employee: where the educational institution itself is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, there shall be no perquisite value if the cost of such education or the value of such benefit per child does not exceed Rs. 1,000 p.m.

18. Use by the employee or any member of his household of laptops and computers belonging to the employer or hired by him.

19. Leave Travel Connection will be discussed in detail later.

20. Tax paid by the Employer on Non-Monetary Perquisites : Tax paid by the employer on non-monetary perquisites of the employee shall be exempt in the hands of the employee. [Section 10(10CC)]

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Benifits in Income Tax of jointly purchase property.

Is it necessary to purchase the property jointly.

Exemption is admissible even if the property is purchased individually:
It is not at all necessary to purchase a joint property to claim an exemption from LTCG. By purchasing two separate property individually also, one can have an exemption from LTCG.

Time Limit to purchase the Property:
Exemption u/s 54 (or u/s 54F,if the asset sold is not a residential house property) is available if the Assessee invests amount of LTCG for purchase of another residental house property.

• within one year before or two years after the date of transfer, or
• constructs a residential house within a period of three years from the date of the transfer of the original house.

Scheme to Deposit:
Although under section 54/54F,the assesee is allowed 2 years to purchase the house property,but the capital gain on transfer of the origional assets is taxable in the previous year in which the transfer took place. The return of income of the previous year is to be filed before the specified date Hence , the assessee will have to take a decision for the purchase/ construction of the house property before the date of furnishing of the return otherwise the capital gain would be taxable.

To avoid the above situation, the income Tax Act has specified an alternative in the form of a Deposit under the Capital Gain Deposit Accounts Scheme-1988 (CGDAS).

The amount of the capital gain, which is not utilized by the assessee for purchase or constructions of the new house before the date of furnishing the return of income, should be deposited by him under the Capital Gain Account Scheme, before the DUE DATE of furnishing the return. After deposits, the amount already utilized by the assessee for purchase/constructions of the new house along with the amount so deposited, shall be eligible for exemption under section 54/54F in the year in which LTCG has arisen.

The investment in the PLAIN FIXED DEPOSITS may not enable you to claim an exemption. Ensure to keep the amount in the CGDAS.

However, one can keep the amount in the plain fixed deposits after the sale of the property and can divert it in the CGDAS before the due date of filling the return of income.

It may be noted that under CGDAS also, two type of accounts can be opened as under-

• Deposit Account A- This is a saving Account.
• Deposit Account B - This is a term Deposit Account

Investment in Capital Gain Bonds:
Exemption can be claimed either by investing in the Bonds u/s. 54EC or u/s. 54 by investing in the house property. Assessee have the choice.

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Latest Amendment in the Section 80C w.e.f. 01st April, 2013

As per latest amendment in the Section 80C of the Incometax Act regadrding deductions on contricution of GPF/PPF, Approved Savings u/s. 80C and other deposit amount which are qualifying maximum amount Rs. 1,00,000/-. Recently Finance Department of Income Tax issued some amendment rule for section 80C of Income Tax. New amendment are see the below:

In section 80C of the Income-tax Act, with effect from the 1st day of April, 2013,—
(i) in sub-section (3), for the words "insurance policy other than a contract for a deferred annuity", the words, figures and letters "insurance policy, other than a contract for a deferred annuity, issued on or before the 31st day of March, 2012," shall be substituted;

(ii) after sub-section (3), the following shall be inserted, namely:—
(3A) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 1st day of April, 2012 as is not in excess of ten per cent of the actual capital sum assured.

Explanation.—For the purposes of this sub-section, "actual capital sum assured" in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking intoaccount—
(i) the value of any premium agreed to be returned; or
(ii) any benefit by way of bonus or otherwise over and above the sum actually assured,which is to be or may be received under the policy by any person.'.

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Can Applicable section 50C of Income Tax to Builders ?

Section 50C of income tax act is not applicable to a builder as his assets as plots and buildings are his stock in trade and not capital assets.

IT : Section 50C not applicable to sale of plots by a builder since plots are his stock-in-trade and not capital assets

• Section 50C uses the word 'capital asset'; for applicability of section 50C one of the essential requirements is that land or buildings sold should be capital asset; stock in trade has been excluded from the definition of capital asset by sec. 2(14).
• Investment in purchase and sale of plots by a builder who is indulged in selling buildings is ancillary and incidental to his business activity; 'stock-in-trade' includes all such chattels as are required for the purposes of being sold or let to hire on a person's trade; [See also • Addl.CIT v. Puttu Coal (P.) Ltd. (1983) 140 ITR 740 (Bom) where the assessee was money lender, who purchased a ship in satisfaction of his major portion of outstanding loan and the ship was considered as stock in trade of the assessee's money lending business].
• In the present case, assessee has treated plots of land as stock in trade in its balance sheet. - [2012] 20 taxmann.com 381 (Allahabad)
  

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Deduction except under Chapter VI-A, in respect of Donation to Certain Funds, Charitable Institution etc.

To encourage donations for social cause all assessees are entitled to this deduction from their gross total income, if the donation is made in the previous year to the following funds or charitable institutions. For the sake of convenience we have divided the donations into four categories depending on the quantum of deduction.

Donations made to following are eligible for 100% deduction without any qualifying limit.

1. Prime Minister’s National Relief Fund
2. National Defence Fund
3. Prime Minister’s Armenia Earthquake Relief Fund
4. The Africa (Public Contribution - India) Fund
5. The National Foundation for Communal Harmony
6. Approved university or educational institution of national eminence
7. The Chief Minister’s Earthquake Relief Fund, Maharashtra
8. Donations made to Zila Saksharta Samitis.
9. The National Blood Transfusion Council or a State Blood Transfusion Council.
10. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.

Donations made to the following are eligible for 50% deduction without any qualifying limit.

1. Jawaharlal Nehru Memorial Fund.
2. Prime Minister’s Drought Relief Fund
3. National Children’s Fund
4. Indira Gandhi Memorial Trust
5. The Rajiv Gandhi Foundation.

Donations to the following are eligible for 100% deduction subject to qualifying limit (i.e. 10% of adjusted gross total income).

1. Donations to the Government or a local authority for the purpose of promoting family planning.
2. Sums paid by a company to Indian Olympic Association

Donations to the following are eligible for 50% deduction subject to the qualifying limit (i.e. 10% of adjusted gross total income).

1. Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.

Amount of deduction
The quantum of deduction is as follows :
Category A- 100 % of amount donated
Category B -50 % of the amount donated in the funds
Category C – 100% of the amount donated in the funds subject to maximum limit of 10% of Adjusted GTI.
Category D – 50% of the amount donated in the funds subject to maximum limit of 10% of Adjusted GTI.

The total of these deductions under categories A,B,C, & D is the quantum of deduction under this section without any maximum amount.

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Effect on Income Tax by Section 80C Deduction and its guidelines.

Section 80C of income tax act:- In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:


Provident Fund & Voluntary Provident Fund
Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer’s contribution. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free.

Public Provident Fund
An account can be opened with a nationalized bank or Post office. The current rate of interest is 8%, which is tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the maximum is Rs 70,000.

National Savings Certificate
These are 6-year small-savings instrument, where the rate of interest is 8% and is compounded half-yearly. The interest accrued every year is liable to tax but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.

Equity-Linked Savings Scheme
Mutual funds offer you specially-created tax saving funds called ELSS. These schemes invest your money in equities and hence, return is not guaranteed. Money invested here is locked for a period of three years.

Life Insurance Premiums
Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included in section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life insurance with benefits of equity investments are also eligible for deduction under Section 80C.

Home Loan Principal Repayment
Your EMI consists of two components, namely principal and interest. The principal component of the EMI qualifies for deduction under Section 80C.

Stamp Duty and Registration Charges For Home
The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C. However, this can be done only in the year in the year of purchase of the house.

Five-Year Bank fixed deposits
Tax-saving fixed deposits (FDs) of scheduled banks with a tenure of five years are also entitled for section 80C deduction.

Others
Apart from the above, things like children’s education expenses that can be claimed as deductions under Section 80C. However, you need receipts to claim the same

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How to determine and undertaking Deductions u/s. 80IC of Income Tax Act.

In respect to determine and undertaking Deductions u/s. 80 IC of Income Tax in certain special category states are as under:

Assessee eligible for deduction: - every assessee is eligible for this deduction irrespective of its residential status or corporate status. Deduction is operative from the assessment year 2004-05 and onwards.

Conditions to be satisfied: - the following conditions to be satisfied for the deductions under section 80 IC of income tax act.

Return of income to be furnished: - under section 80 AC of income tax act, the assessee should furnish return of income within the time limit specified under section 139(1) of income tax act.

Accounts of the enterprises or undertaking to be audited: - under section 80IA (7) of income tax act, the accounts of the assessee should be audited by a chartered accountant from the relevant year for which deduction is claimed. The report of such report should be furnished along with the return of income in the prescribed form duly signed and verified by chartered accountant.

Undertaking should be new and not formed by splitting up or reconstruction of an existing business: - under section 80IC (4) of income tax act, the object of these incentives is to promote new investment and not just relocation of existing ones. Therefore, it has been provided that the eligible undertaking should be new and not formed by splitting up and reconstruction of an existing business.

Exception in case of re-establishment, reconstruction of revival of an undertaking: - however this condition does not apply where the undertaking is discontinued due to extensive damage or destruction of its building, machinery or plant and furniture or account of natural disasters, civil disturbance, accidental fire or explosion, enemy action etc. and such undertaking is re-established within 3 years from the end of such previous year.
New plant and machinery used by the undertaking: - under section 80 IC (4) of income tax act, use of old plant and machinery is prohibited except under the following cases.

For import and use of second hand plant or machinery in India is deemed to be a new plant and machinery. Second hand plant or machinery imported and put to use for the first time in India is not to be regarded as machinery or plant previously used provided the following conditions are satisfied.
(1) It was used outside India by a person other than the assessee.
(2) Such plant and machinery is used in India for the first time.
(3) No depreciation in respect of such plant and machinery has been allowed or is allowable under the act for a period prior to its installation by the assessee.

Transfer of old plant or machinery not exceeding 20% of the total value of plant or machinery of the new undertaking :- where the value of plant or machinery previously used by the assessee is transferred to the new undertaking, such value should not exceed 20% of the total value of plant or machinery used in the new undertaking.

Production schedule, nature of product and location: - the enterprise or undertaking must manufacture or produce the specified articles or things within the stated time period in special category states. An existing enterprise or undertaking manufacturing or producing eligible articles or things will be covered, provided it’s substantially expands its business.

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