Transcript Deductions under Chapter VIA

Deductions under Chapter VIA
DAY 4
Session I –IV
Slide 4.1
An Overview
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1] General provisions
2] Deduction in respect of certain payments
3] Deduction in respect of certain incomes
4]Other deductions.
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Gross Total Income
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Total income computed as per the provisions of
the Act before deductions under Chapter VIA
& after reducing LTCG [S 80B(5) & 112(2)].
 Unabsorbed loss or depreciation carried
forward from earlier years should be adjusted
for determining GTI.
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Limitation on deduction
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Deductions under this chapter are available from
GTI.
 Total deductions cannot exceed the GTI.
 If AOP or BOI is allowed certain deductions,
such deductions cannot be allowed to the
members out of the share income.
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Limitation on deduction
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Section 80AB provides that for the purpose of calculating the
deductions specified in sections 80HH to 80TT, the net income
as computed in accordance with the provisions of the Act
(before making any deduction under Chapter VIA, i.e., sections
80CCC to 80U) shall alone be regarded as the income which is
received by the assessee and which is included in his gross total
income. Accordingly, the deductions specified in the aforesaid
sections will be calculated with reference to the net income as
computed in accordance with the provisions of the Act (viz.,
after deducting expenses under sections 30 to 43B and 57 and
after adjusting losses but before making any deduction under
sections 80CCC to 80U) and not with reference to the gross
amount of such income, subject, however, to the other
requirements of the respective sections
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Contribution under annuity plan
of LIC for Pension [Sec. 80CCC]
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Individual assessee only
Deduction allowable upto Rs.10,000/-.
Contribution out of assessee’s income
chargeable to tax.
Pension or amount received on surrender of the
plan along with interest & bonus taxable in the
year of receipt.
No deduction u/s 88..
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Medical insurance premium
[Sec 80D]
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Individual :- Self, wife, dependent parents &
dependent children.
HUF :- Any member
Limit :- Rs.10,000/Senior citizens :- Rs.15,000/- [From AY 20002001]
Payment by cheque out of income chargeable
to tax.
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Handicapped dependent
Medical treatment [Sec.80DD]
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Individual & HUF
Permanent physical disability, blindness or
mental retardation.
Limit :- Rs.40,000/- from AY 1999-2000 to AY
2003-2004
Rs.50000/- from AY 2004-2005
Higher deduction of Rs.75000/- for severe
disabilities (i.e. disability over 80 per cent)
Exp. on medical treatment [including nursing],
training & rehabilitation of handicapped
dependent.
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Slide 4.1
Handicapped dependent
Medical treatment [Sec.80DD]
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Deposit under approved scheme of LIC or
UTI for the purpose.
 Annuity or lump sum amount should go to the
benefit of such dependent on the death of the Ind.
or concerned member of HUF.
 Sum deposited will be taxed in assessee’s hands if
such dependent predeceases the Ind.or member of
HUF in the year of receipt.
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Handicapped assessee
[Sec.80U]
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Individual only.
Permanent physical disability, blindness or
mental retardation at the end of the previous year.
Limit :- Rs.40,000/- from AY 1999-2000 to AY
2003-2004
Rs.50000/- from AY 2004-2005
Higher deduction of Rs.75000/- for severe
disabilities (i.e. disability over 80 per cent)
Medical certificate should be filed in the I year.
Deduction not subject to expenditure.
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Certain disease or ailment
Medical treatment [Sec.80DDB]
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Individual - Self or dependent relative
HUF
- Any member.
Expenditure actually incurred on the
treatment of specified disease or ailment as
reduced by sum received under medical
insurance.
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Certain disease or ailment
Medical treatment [Sec.80DDB]
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Limit
- Rs. 40,000/- upto AY 2003-04
 Senior citizens - Rs. 60,000/- upto AY 2003-04
 From AY 2004-05 the allowance would be also be
limited to the amount actually incurred by the
assessee on the treatment. That is to say if the
amount incurred is less than the aforesaid limits
the allowance would be restricted to the
expenditure incurred.
 Specified disease or ailment - Rule 11DD
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Higher education
Repayment of loan [Sec.80E]
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Individual
Repayment of loan (with interest) taken for
pursuing own higher education [engg, med,
management etc] from financial institution or
approved charitable institution.
Repayment out of income chargeable to tax
Limit :- Rs.25,000/- per year.[Rs.40,000/w.e.f. A Y 2001-02]
Maximum for 8 consecutive years.
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Donations [Sec.80G]
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Certain donations - 100% deduction.
Some other donations - 50% deduction.
Limit on certain donations - 10% of
Gross Total Income.
Only monetary donation is eligible for
deduction.
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Rent [Sec.80GG]
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Non - salaried Individual.
Rent for own residence paid in excess
of 10% of Total Income.
Limit of deduction :- Rs.2,000/- per month
or 25 % of Total Income whichever is
lower.
From AY 1998-99.
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Donation for scientific research
etc. [Sec. 80GGA]
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Person having no income from business or
profession.
 Deduction : Any amount paid to approved
association, institution, university or college.
 Purpose : Scientific research, social science,
statistical research, rural development,
conservation of natural resources, afforestation
etc.
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Profits of foreign projects
[Sec. 80HHB]
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50 % of the profits & gains of the Indian
company or resident Indian on a/c of foreign
project taken on contract.
 Conditions
• Maintenance of separate a/c & submission of
certificate of accountant with return of income.
• 50 % of profit to be debited to P/L a/c & credited to
F.P.R a/c for utilisation in assessee’s business in next 5
years,
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Profits of foreign projects
[Sec. 80HHB]
• 50 % of profit to be brought in C.F.E. within 6
months from the end of the Previous Year or
extended time allowed by RBI or other
competent authority regulating FE.
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If the amount deposited in F.P.R.a/c or
brought in C.F.E. falls short of 50%, the
deduction will be restricted to that amount.
In case of default in utilisation of sum
deposited in F.P.R.a/c, action u/s 154.
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Profits of housing projects
[Sec. 80HHBA]
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Execution of housing projects aided by
World Bank awarded on the basis of
Global Tender by Indian company or
resident Indian.
Deduction :- 50 % of profits.
Conditions
• 50 % of profit to be debited to P/L a/c &
credited to H.P.R.A/c. for utilisation in
assessee’s business in next 5 years,
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Profits of housing projects
[Sec. 80HHBA]
• Maintenance of separate a/c & submission of
audit report.
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If the amount deposited in H.P.R.a/c falls
short of 50%, the deduction will be
restricted to that amount only.
In case of default in utilisation of sum
deposited in H.P.R.a/c, action u/s 154.
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Profits on exports
[ Sec.80HHC ]
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Deduction : 100 % profit of the business of export
of any item excepting mineral oil & some
minerals and ores by Indian company or resident
Indian.
 Conditions:
• Sale proceeds to be brought in C.F.E. within 6 months
from the end of the Previous Year or extended time
allowed by RBI or other competent authority regulating
FE. [Except for Supporting Manufacturer]
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eport of accountant with return.
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Profits on exports
[ Sec.80HHC ]
• Report of accountant with return.
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Supporting Manufacturer:
Deduction:
• Profit on sale of goods to Export House or
Trade House
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Conditions:
• Report of accountant with return.
• Certificate of House that it has not claimed
deduction on that T.O. u/s 80HHC.
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Export House
or Trading House
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If the supporting manufacturer gets deduction on
certain T.O. on the basis of the certificate issued
by the House,
Then profit not entitled to deduction in the case
of the House
Said T.O.
= Total profit X -------------------Total Export T.O.
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Part Export
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Export of trading goods:
• Eligible profit = Export turnover - Direct & indirect
costs of such export.
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Export of manufacturing goods:
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Export T.O.
 Eligible profit = -------------- X Total profit
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Total T.O.
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Part Export
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Both trading & manufacturing goods:
• Profit on trading goods: Export turnover Direct & indirect costs of such export.
• Profit on mfg. goods:
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Adj. Export T.O.
• = Adjusted profit X -----------------•
Adj. Total T.O.
• Both
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Earnings in C.F.E. by hotels etc
[Sec. 80HHD]
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Business of approved hotel, tour operator &
travel agent.
 Deduction :
• 50 % of profit from the service of foreign tourists
• + Amount credited to Reserve A/c out of remaining
profit for specified business purpose in 5 years.
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Receipts in CFE in 6 months or extended time as
in 80HHC.
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Export of computer software etc
[ Sec. 80HHE ]
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Business of export of computer software.
 Technical service rendered outside India for
development & production of computer
software.
 Deduction :- 100 % of profit.
 Consideration in CFE in 6 months or extended
time as in 80HHC.
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Export of film software etc
[ Sec. 80HHF ]
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Business of export of
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film software,
television software,
music software,
television news software including telecast rights.
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Deduction :- 100 % of profit.
 Receipts in CFE in 6 months or extended time as
in 80HHC.
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Phasing out the deduction on
foreign exchange earnings
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Deduction u/s 80HHB, 80HHBA, 80HHC,
80HHD, 80HHE & 80HHF will be phased out in 5
years.
Asst Year
Reduction by
2001-02
20%
2002-03
40%
2003-04
60%
2004-05
80%
2005-06
100%
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Industrial undertakings etc
[Sec. 80-IA]
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Business of
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industrial undertaking,
hotel,
infrastructural facility,
telecommunication service,
scientific & industrial research,
housing projects,
industrial park,
production & refining of mineral oil in NER
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[Sec. 80-IA]
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Deduction :- 25 % to 100 % of profit.
Period :- 5 to 12 A.Ys.
Conditions :• Not formed by splitting or reconstruction of
existing business,
• Not formed by transferring of old plants &
machineries.
• Not manufacturing an item of 11th Schedule
[Except for SSIU, industry in backward area
etc.]
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Bifurcation of deduction
between Sec. 80-1A & 80-1B
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The Finance Act, 99 has split the deductions
available u/s 80-1A into two sections.
 Sec. 80-IA :- Infrastructural facility,
telecommunication service, power etc.
 Sec. 80-IB :- Other industrial undertaking, hotel
etc.
 W.E.F. AY 2000-01.
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Deduction from certain income
[Sec. 80L]
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Individual & HUF
Deduction of Rs. 12,000/- on interest on
deposit with bank, financial corporation,
post office, NSC etc.
Additional deduction of Rs. 3,000/- on
interest on Govt. security, income from
UTI & income from specified M.F.
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Certain income received from
foreign party [ Sec.80-O ]
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Income from use of patent, invention, design &
registered trade mark outside India
 Condition: Income received from foreign state or
foreign enterprise in C.F.E. in 6 months from the
end of the P.Y. or extended time as in 80HHC.
 Deduction :- 50 % of income.[To be phased out
in 5 years]
 Expl. 3 :- Service rendered in India.
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