The amount of deduction under general provisions under Income Tax Act, 1961 depends on the specific section under which the deduction is being claimed. Some of the most common deductions under general provisions are:

• Section 80C: This section allows a deduction of up to RS. 1.5 lakh for investments made in certain specified instruments, such as Public Provident Fund (PPF), National Savings Certificate (NSC), Life Insurance Premium, Equity Linked Savings Scheme (ELSS), etc.
• Section 80D: This section allows a deduction of up to RS. 25,000 for health insurance premiums paid for self, spouse, and dependent children. An additional deduction of up to RS. 25,000 can be claimed for health insurance premiums paid for parents below the age of 60. For parents above the age of 60, an additional deduction of up to RS. 50,000 can be claimed.
• Section 80TTA: This section allows a deduction of up to RS. 10,000 for the interest earned on savings account deposits.
• Section 80U: This section allows a deduction for the disability of the taxpayer or their dependent. The amount of deduction varies depending on the severity of the disability.

In addition to these deductions, there are a number of other deductions available under general provisions, such as deduction for donations to charity, deduction for house rent allowance, deduction for leave travel allowance, etc.

To calculate the amount of deduction under general provisions, you need to first identify the specific section under which you are eligible to claim the deduction. Once you have identified the section, you need to determine the quantum of deduction that you are eligible for. The quantum of deduction will vary depending on the specific section and your individual circumstances.

For example, if you are claiming a deduction under Section 80C, you need to identify the specific instruments in which you have made investments. The quantum of deduction will be equal to the total amount invested in the specified instruments, subject to a maximum of RS. 1.5 lakh.

If you are claiming a deduction under Section 80D, you need to identify the amount of health insurance premiums that you have paid. The quantum of deduction will be equal to the total amount of premiums paid, subject to a maximum of RS. 25,000 for self, spouse, and dependent children and an additional RS. 25,000 or RS. 50,000 for parents, depending on their age.

Once you have calculated the quantum of deduction under each section, you need to add them up to arrive at the total amount of deduction that you are eligible for under general provisions.

   EXAMPLE

Example of amount of deduction – general provisions with specific state India

General provisions:

• Standard deduction: Salaried individuals can claim a standard deduction of Rs. 50,000 from their salary income.
• House rent allowance (HRA): Salaried individuals who live in rented accommodation can claim a deduction for HRA up to a certain limit. The limit is 50% of the basic salary + DA for those living in metropolitan cities and 40% of the basic salary + DA for those living in non-metropolitan cities.
• Leave travel allowance (LTA): Salaried individuals can claim a deduction for LTA up to a certain limit. The limit is twice the fare for travel to the home town and back for self, spouse, and children. The travel can be done by any mode of transport.

Specific state:

• Maharashtra: Salaried individuals who live in Maharashtra can claim a deduction for the following:
  • Local travel allowance (LTA): A deduction of RS. 2,500 per month can be claimed for local travel expenses incurred for commuting to and from work.
  • Medical allowance: A deduction of RS. 1,500 per month can be claimed for medical expenses incurred for oneself and family members.
• Karnataka: Salaried individuals who live in Karnataka can claim a deduction for the following:
  • Conveyance allowance: A deduction of RS. 1,600 per month can be claimed for conveyance expenses incurred for commuting to and from work.
  • Medical allowance: A deduction of RS. 1,200 per month can be claimed for medical expenses incurred for oneself and family members.

Example:

A salaried individual living in Mumbai, Maharashtra earns a basic salary of RS. 50,000 per month. He lives in rented accommodation and pays a rent of RS. 25,000 per month. He also has a wife and two children.

The following are the deductions that he can claim:

• Standard deduction: RS. 50,000
• HRA: RS. 25,000 (50% of basic salary)
• LTA: RS. 10,000 (twice the fare for travel to home town and back for self, spouse, and children)
• LTA (Maharashtra): RS. 30,000 (RS. 2,500 per month)
• Medical allowance (Maharashtra): RS. 18,000 (RS. 1,500 per month)

Total deductions: RS. 133,000

The individual’s taxable income will be RS. 50,000 – RS. 133,000 = RS. -83,000. Since the taxable income is negative, the individual will not have to pay any income tax.

  FAQ QUESTIONS

What is a deduction under the Income Tax Act?

A: A deduction is an expense that can be subtracted from your income before calculating your tax liability. Deductions can be claimed for a variety of expenses, such as medical expenses, travel expenses, and charitable donations.

Q: What are the general provisions for claiming deductions under the Income Tax Act?

A: To claim a deduction, you must meet the following general provisions:

• The expense must be incurred for the purpose of earning income.
• The expense must be actually incurred and paid, or incurred and accrued.
• The expense must be supported by documentary evidence.
• The expense must not be prohibited by any other provision of the Income Tax Act.

Q: What are some of the most common deductions that taxpayers can claim?

A: Some of the most common deductions that taxpayers can claim include:

• Standard deduction: This is a deduction that is available to all taxpayers, regardless of their source of income. The amount of the standard deduction is Rs. 50,000 or the amount of salary/pension, whichever is lower.
• House rent allowance (HRA): This is a deduction that is available to salaried taxpayers who pay rent for their accommodation. The amount of the HRA deduction is the least of the following three amounts:
  • Actual HRA received from the employer
  • Rent paid minus 10% of salary
  • 50% of salary (for metro cities) or 40% of salary (for non-metro cities)
• Leave travel allowance (LTA): This is a deduction that is available to salaried taxpayers for the expenses incurred on traveling to and from their hometown for the purpose of leave. The amount of the LTA deduction is the least of the following three amounts:
  • Actual LTA received from the employer
  • Cost of travel tickets and accommodation
  • Leave encashment
• Medical expenses: This is a deduction that is available to taxpayers for the medical expenses incurred for themselves, their spouse, dependent children, and parents. The amount of the medical expense deduction is RS. 25,000 for individuals and RS. 50,000 for senior citizens (individuals aged 60 years and above).
• Charitable donations: This is a deduction that is available to taxpayers for the donations made to charitable institutions. The amount of the charitable donation deduction is 50% of the amount donated, up to a maximum of 10% of the total income.

Q: How do I claim a deduction under the Income Tax Act?

A: To claim a deduction under the Income Tax Act, you must file your income tax return and attach all supporting documentation. The supporting documentation may include receipts, bills, and invoices.

Q: What are the consequences of making false claims for deductions?

A: If you are found to have made false claims for deductions, you may be liable to pay a penalty and interest. You may also be prosecuted for tax evasion.

 CASE LAWS

• CIT v. Engineering Analysis Centre (2021): The Supreme Court held that the obligation to deduct tax at source (TDS) under Section 194E of the Act is not affected by a double taxation avoidance agreement (DTAA). In other words, the deduct or is required to deduct TDS even if the deducted is entitled to claim relief under the DTAA. The deducted can then claim a refund of the TDS if they are able to establish that the income is not taxable in India.
• CIT v. Air India Limited (2018): The Mumbai Tribunal held that the benefit of the proviso to Section 201(1) of the Act, which allows for a lower deduction of TDS in certain cases, is available only when the deduction does not deduct tax or, after deduction, fails to pay the same to the credit of the government.
• Madras High Court v. S. Balasubramanian (2023): The Madras High Court held that the Assessing Officer (AO) cannot recover taxes from an assesses if the tax deducted on their income was not deposited by the deduction. The High Court held that the deduction is the assesses-in-default in such cases and that the recovery of tax should be directed against the deduction only.
• Bombay High Court v. M/s. Purvesh Developers (2022): The Bombay High Court held that no tax shall be deducted under Section 194A of the Act from interest paid by the builder while refunding the advance to the buyer on its failure to hand over possession of the flat. The High Court held that the term ‘interest’ is defined under Section 2(28A) of the Income-tax Act and that the interest paid in this case was compensatory in nature.