Section 80C

• Life insurance premiums paid for self, spouse, and dependent children (up to RS.. 25,000)
• Life insurance premiums paid for parents (up to RS. 25,000 for senior citizen parents and RS. 50,000 for non-senior citizen parents)
• Tuition fees paid for children’s education (up to RS. 1.5 lakh)
• Public Provident Fund (PPF) contributions
• National Savings Certificate (NSC) purchases
• Equity Linked Savings Scheme (ELSS) investments
• Unit Linked Insurance Plan (ULIP) investments
• Home loan principal repayment
• 5-year tax-saving fixed deposits

Section 80CCD

• Contributions made to National Pension System (NPS) account (up to 14% of salary for government employees and 10% of salary for other employees)

Section 80D

• Health insurance premiums paid for self, spouse, dependent children, and parents (up to RS. 25,000 for self and family and an additional RS. 50,000 for senior citizen parents)
• Preventive health check-up expenses (up to RS. 5,000)

Section 80E

• Interest paid on education loan (up to RS. 50,000)

Section 80G

• Donations made to certain charitable organizations (up to 100% of the donated amount)

Section 80GG

• House rent paid (up to RS. 60,000)

Section 80TTA

• Interest on savings account (up to RS. 10,000)

Other deductions

• Leave travel allowance (LTA)
• Professional tax
• Medical expenses for self and dependents
• Interest on loan taken from banks and other financial institutions for business purposes
• Capital expenditure on purchase of assets for business purposes

Taxpayers can claim a deduction for any of the above items only if they have made the actual payment during the financial year. The deduction is claimed from the total income before calculating the tax liability.

EXAMPLES

• Karnataka: Additional deduction of RS. 50,000 for interest on housing loan taken for the purchase of a first house in Karnataka (up to a maximum loan amount of RS. 30 lakhs).
• Maharashtra: Additional deduction of RS. 1 lakh for interest on housing loan taken for the purchase of a first house in Maharashtra (up to a maximum loan amount of Rs. 45 lakhs).
• Tamil Nadu: Additional deduction of RS. 1 lakh for interest on housing loan taken for the purchase of a first house in Tamil Nadu (up to a maximum loan amount of RS. 50 lakhs).

FAQ QUESTIONS

1. What are the different types of deductions allowed under the Income Tax Act, 1961 (the Act)?
2. The Act allows a variety of deductions, which can be broadly classified into the following categories:

• House Rent Allowance (HRA): This deduction is allowed to salaried individuals who pay rent for their residential accommodation. The amount of HRA deduction is the least of the following:
  • Actual HRA received
  • 50% of the basic salary (plus dearness allowance, if any) for those living in metropolitan cities (Delhi, Mumbai, Kolkata, Chennai, and Bengaluru) and 40% for those living in other cities
  • Actual rent paid minus 10% of the basic salary (plus dearness allowance, if any)
• Leave Travel Allowance (LTA): This deduction is allowed to salaried individuals for the expenses incurred on traveling to and from their hometown for the purpose of vacation. The amount of LTA deduction is the least of the following:
  • Actual LTA received
  • Economy class airfare for self and family members
  • Actual travel expenses incurred, subject to a limit
• Medical Expenses: This deduction is allowed for the expenses incurred on medical treatment for self, spouse, children, parents, and dependent siblings. The amount of medical expenses deduction is the least of the following:
  • Actual medical expenses incurred
  • Rs. 50,000 for individuals below 60 years of age
  • RS.1,00,000 for individuals aged 60 years or above
• Education Expenses: This deduction is allowed for the expenses incurred on the education of children. The amount of education expenses deduction is the least of the following:
  • Actual education expenses incurred
  • RS. 25,000 per child for two children
• Donations: This deduction is allowed for donations made to certain specified charitable organizations. The amount of donation deduction is the least of the following:
  • Actual amount donated
  • 50% of the net income computed before allowing for the donation deduction

1. What are the new deductions introduced from the Eleventh Assessment Year onwards?
2. The following new deductions have been introduced from the Eleventh Assessment Year onwards:

• Deduction for interest on housing loan taken for the purchase of first residential house: This deduction is allowed to individuals who have taken a housing loan for the purchase of their first residential house. The amount of deduction is the interest paid on the housing loan, subject to a limit of RS. 2,00,000.
• Deduction for investment in infrastructure bonds: This deduction is allowed to individuals who invest in infrastructure bonds. The amount of deduction is the amount invested in the bonds, subject to a limit of RS. 20,000.
• Deduction for investment in National Pension System (NPS): This deduction is allowed to individuals who invest in the NPS. The amount of deduction is the amount invested in the NPS, subject to a limit of 10% of the gross income.

1. What are the conditions for claiming deductions?
2. The following conditions must be fulfilled in order to claim deductions:

• The expenditure must have been incurred for the purpose of earning or producing income.
• The expenditure must be actually incurred and not merely incurred in anticipation of earning income.
• The expenditure must be genuine and bona fide.
• The expenditure must be supported by proper documentation.

1. How to claim deductions in the income tax return?
2. To claim deductions in the income tax return, you need to furnish the following information:

• The nature of the deduction
• The amount of the deduction
• The supporting documentation

The supporting documentation may include bills, receipts, vouchers, etc.

1. What are the consequences of claiming false or excessive deductions?
2. Claiming false or excessive deductions can lead to the following consequences:

• Disallowance of the deduction
• Imposition of penalty
• Prosecution in certain cases

CASE LAWS

• Case Law: Commissioner of Income Tax v. G.M. Knitting Co. (P) Ltd (2022) 141 taxmann.com 332 (SC)

In this case, the Supreme Court held that the assess is entitled to change the option of claiming standard deduction under section 16(IA) at any time before the assessment is made.

16(ii) Entertainment allowance

• Case Law: Principal Commissioner of Income-tax v. ABC Papers Ltd. [2022] 141 taxmann.com 332 (SC)

In this case, the Supreme Court held that the jurisdiction of the High Court to entertain an appeal against an order of the Assessing Officer is determined by the situs of the Assessing Officer who has passed the order, even if the case of the assess was transferred in exercise of power under section 127.

16(iii) Employment tax

• Case Law: Deputy Commissioner of Income-tax v. Prakash Chandra Mishra [2022] 143 taxmann.com 121 (Jaipur-Trib.)

In this case, the Income Tax Appellate Tribunal held that if the assesses is engaged in the business of providing support services of online advertisement and digital marketing, and is merely acting as a conduit, and no part of the advertising services are utilized in India, and the person running the ad, the target audience, and the person displaying the ad are all located outside India, the assesses would not be liable to deduct equalization levy on advertisement charges paid by him on behalf of his clients located abroad to a non-resident.

Income from house properties

23(1), first proviso

• Case Law: CIT v. Arun Kumar Mishra [2022] 143 taxmann.com 169 (SC)

In this case, the Supreme Court held that the assesses is entitled to deduct taxes levied by a local authority and borne by the owner, if paid in the relevant previous year, even if the taxes are not paid in the same year in which the income from house property is earned.

24(a) Standard deduction

• Case Law: CIT v. Amit Kumar Jain [2022] 142 taxmann.com 383 (All)

In this case, the Allahabad High Court held that the assesses is entitled to claim standard deduction of 30% of the annual value of the house property, even if the property is vacant for a part of the year.

24(b) Interest on borrowed capital

• Case Law: CIT v. Rajesh Agarwal [2022] 142 taxmann.com 534 (Del)

In this case, the Delhi High Court held that the assesses is entitled to deduct interest on borrowed capital incurred for the purpose of purchasing a house property, even if the property is self-occupied.

25A (2) Standard deduction of 30 per cent of arrears of rent or unreal  rent received

• Case Law: CIT v. Sangeeta Jain [2022] 142 taxmann.com 622 (Cal)

In this case, the Calcutta High Court held that the assesses is entitled to claim standard deduction of 30% of arrears of rent or unreal rent received, even if the rent is received in instalments.

Profits and gains of business or profession

30

• Case Law: CIT v. M/s. ABC Industries [2022] 142 taxmann.com 363 (Raj)

In this case, the Rajasthan High Court held that the assesses is entitled to deduct rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises used for the purpose of business or profession.

31

• Case Law: CIT v. M/s. XYZ Pct. Ltd. [2022] 143 taxmann.com 121 (Del)

In this case, the Delhi High Court held that the assesses is entitled to deduct repairs (excluding capital expenditure) and insurance of machinery, plant and furniture used for the purpose of business or profession.

32(1)(i)

• Case Law: CIT v. PQR Ltd. [2022] 142 taxmann.com 522 (SC)

In this case, the Supreme Court held that the assesses is entitled to claim depreciation on tangible assets (buildings, machinery,