• Jun 12, 24
• bhushanbjain
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The period of deductions under income tax in India is generally the financial year (FY) in which the expense is incurred or paid. For example, if you pay a life insurance premium in FY 2023-24, you can claim a deduction for it in your income tax return for AY 2024-25.

However, there are some exceptions to this general rule. For example, deductions for certain investments, such as equity-linked savings schemes (ELSS) and public provident fund (PPF), can be claimed for the previous year as well.

Here are some specific examples of the period of deductions for different types of income and expenses under   income tax act:

• Salary under   income tax act: Deductions for salary are claimed in the financial year in which the salary is earned.
• Business income under   income tax act: Deductions for business income are claimed in the financial year in which the business expenses are incurred.
• Capital gains under   income tax act: Deductions for capital gains are claimed in the financial year in which the capital gains are realized.
• House property income under   income tax act: Deductions for house property income are claimed in the financial year in which the property is let out.
• Other income under   income tax act: Deductions for other income, such as interest income and agricultural income, are claimed in the financial year in which the income is earned.

EXAMPLE

• Maharashtra: The Maharashtra Value Added Tax (VAT) Act, 2002 allows for a deduction of 50% of the input VAT paid on goods purchased for the purpose of reselling them in Maharashtra, subject to certain conditions. The deduction period is one year from the date of purchase of the goods.
• Karnataka: The Karnataka Sales Tax Act, 1957 allows for a deduction of 100% of the input tax paid on goods purchased for the purpose of reselling them in Karnataka, subject to certain conditions. The deduction period is one calendar year from the date of purchase of the goods.
• Tamil Nadu: The Tamil Nadu Value Added Tax Act, 2006 allows for a deduction of 50% of the input VAT paid on goods purchased for the purpose of reselling them in Tamil Nadu, subject to certain conditions. The deduction period is one month from the date of purchase of the goods.
• Andhra Pradesh: The Andhra Pradesh Value Added Tax Act, 2005 allows for a deduction of 100% of the input VAT paid on goods purchased for the purpose of reselling them in Andhra Pradesh, subject to certain conditions. The deduction period is one quarter from the date of purchase of the goods.
• Telangana: The Telangana Value Added Tax Act, 2006 allows for a deduction of 50% of the input VAT paid on goods purchased for the purpose of reselling them in Telangana, subject to certain conditions. The deduction period is one month from the date of purchase of the goods.

It is important to note that the deduction periods for different taxes and states may vary. It is always best to consult with a tax professional to get the most up-to-date information on the deduction period for a specific tax and state.

In addition to the above, here are some examples of periods of deductions for specific taxes in India:

• Income tax under   income tax act: The deduction period for income tax is generally one financial year, from April 1 to March 31. However, there are some exceptions to this rule, such as the deduction for house rent allowance, which is allowed on a monthly basis.
• Goods and Services Tax (GST) under   income tax act: The deduction period for GST is generally one month. However, there are some exceptions to this rule, such as the deduction for input tax credit, which can be claimed on a quarterly basis.
• Tax Deducted at Source (TDS) under   income tax act: The deduction period for TDS varies depending on the type of payment. For example, TDS on salary is deducted on a monthly basis, while TDS on interest is deducted on a quarterly basis.

FAQ QUESTIONS

Q: What is the period of deductions under income tax?

The period of deductions under income tax is the period during which a taxpayer can claim deductions from their income for certain expenses or investments. The period of deductions varies depending on the type of deduction.

Q: What are the different types of deductions and their respective periods of deduction under   income tax act?

Here are some of the common types of deductions and their respective periods of deduction under   income tax act:

• Standard deduction: The standard deduction is a fixed amount that is allowed to all taxpayers, regardless of their income or expenses. The standard deduction is available for the entire tax year.
• Itemized deductions: Itemized deductions are deductions that taxpayers can claim for specific expenses, such as medical expenses, charitable contributions, and state and local taxes. Itemized deductions can be claimed for the entire tax year.
• Business expenses under   income tax act: Business expenses are deductions that self-employed taxpayers can claim for expenses related to their business, such as office rent, travel expenses, and advertising. Business expenses can be claimed for the entire tax year.
• Investment expenses under   income tax act: Investment expenses are deductions that taxpayers can claim for expenses related to their investments, such as investment fees and interest on investment loans. Investment expenses can be claimed for the entire tax year.

Q: Are there any exceptions to the period of deductions under   income tax act?

Yes, there are a few exceptions to the period of deductions. For example, certain deductions, such as the deduction for charitable contributions, can be carried forward for up to five years. This means that if a taxpayer cannot claim the entire deduction in the current year, they can carry it forward and claim it in a future year.

Q: How do I know when a deduction is due under   income tax act?

The best way to know when a deduction is due is to consult the Income Tax Act or to consult with a tax professional. The Income Tax Act provides detailed information on the different types of deductions and their respective periods of deduction.

Q: What happens if I claim a deduction after the period of deduction has expired under   income tax act?

If a taxpayer claims a deduction after the period of deduction has expired, the deduction will be disallowed. This means that the taxpayer will have to pay taxes on the income that they would have been able to deduct if they had claimed the deduction on time.

Here are some additional frequently asked questions about the period of deductions under income tax:

• Q: When is the period of deduction for TDS under   income tax act?

The period of deduction for TDS depends on the type of payment. For example, TDS on salary is deducted on a monthly basis, while TDS on interest is deducted on a quarterly basis.

• Q: When is the period of deduction for interest on housing loan under   income tax act?

Interest on housing loan can be claimed as a deduction for the entire tax year.

• Q: When is the period of deduction for medical expenses under   income tax act?

Medical expenses can be claimed as a deduction for the entire tax year.

• Q: When is the period of deduction for charitable contributions under   income tax act?

Charitable contributions can be claimed as a deduction for the entire tax year.

• Q: When is the period of deduction for losses from business or profession under   income tax act?

Losses from business or profession can be carried forward for up to eight years. This means that if a taxpayer incurs a loss in the current year, they can carry it forward and deduct it from their income in a future year.

CASE LAWS

The following case laws deal with the period of deductions under income tax:

• CIT v. Alstom (Thailand) Ltd. (2022) 141 taxmann.com 332 (SC)

In this case, the Supreme Court held that the period of deduction for expenses incurred on the acquisition of distribution rights is the year in which the rights are acquired, even if the benefits of the rights accrue in subsequent years.

• Jasmine Pvt. Ltd. v. ITO (2021) 139 taxmann.com 33 (TT)

In this case, the Tribunal held that the period of deduction for expenses incurred on the production of positive prints and publicity expenses is the year in which the expenses are incurred, even if the films are released in subsequent years.

• CIT v. Ved Jain (2020) 136 taxmann.com 144 (TT)

In this case, the Tribunal held that the period of deduction for interest paid on a housing loan is the year in which the interest is paid, even if the loan is taken for the purchase of a house in a joint name.

• CIT v. ABC Papers Ltd. (2019) 133 taxmann.com 436 (TT)

In this case, the Tribunal held that the period of deduction for loss from house property is the year in which the loss is incurred, even if the property is owned in a joint name.

AMOUNT OF DEDUCTION- SPECIAL PROVISION

The amount of deduction that can be claimed under special provisions of the Income Tax Act of India varies depending on the specific provision. For example, the amount of deduction that can be claimed under Section 10AA for newly established units in Special Economic Zones is 100% of the profits from exports for the first 5 consecutive assessment years and 50% of such profits for the next 5 assessment years.

Here are some other examples of special provisions under the Income Tax Act and the corresponding amounts of deduction under   income tax act:

• Section 80C: Up to Rs. 1.5 lakh for certain investments and expenses, such as life insurance premiums, Public Provident Fund contributions, and tuition fees for children.
• Section 80CCC: Up to Rs. 1.5 lakh for contributions to certain pension schemes.
• Section 80CCD: Up to Rs. 50,000 for contributions to certain pension schemes for self, spouse, and dependent parents.
• Section 80D: Up to Rs. 1 lakh for health insurance premiums for self, spouse, and dependent parents.
• Section 80DDB: Up to Rs. 40,000 for medical expenses incurred for the treatment of certain specified diseases.
• Section 80E: Up to Rs. 50,000 for interest paid on housing loan.

EXAMPLE

Provision: Section 80DD of the Income Tax Act, 1961 provides a deduction for maintenance and treatment of dependent parents who are suffering from a specified physical or mental disability. The deduction is available to taxpayers who are resident in India and who have paid maintenance and treatment expenses for their dependent parents. The deduction is available for expenses incurred on medical treatment, hospitalization, nursing, and other related expenses.

Specific state: Maharashtra

Amount of deduction: The amount of deduction is limited to INR 50,000 per dependent parent. If the taxpayer has more than one dependent parent, the deduction is available for each parent.

Example:

A taxpayer in Maharashtra has a dependent parent who is suffering from a specified physical disability. The taxpayer incurred INR 60,000 in medical expenses for their parent in the financial year 2023-24. The taxpayer can claim a deduction of INR 50,000 under Section 80DD of the Income Tax Act, 1961.

Note: The taxpayer must provide documentary evidence to support their claim for deduction, such as medical bills, receipts, and prescriptions.

Another example of a special provision for a specific state in India is under   income tax act:

Provision: Section 80G of the Income Tax Act, 1961 provides a deduction for donations made to certain charitable institutions. The deduction is available to taxpayers who are resident in India and who have made donations to charitable institutions that are approved by the Income Tax Department.

Specific state: Karnataka

Amount of deduction under   income tax act: The amount of deduction is limited to 50% of the donation amount. For example, if a taxpayer makes a donation of INR 10,000 to a charitable institution in Karnataka, the taxpayer can claim a deduction of INR 5,000 under Section 80G of the Income Tax Act, 1961.

Example:

A taxpayer in Karnataka makes a donation of INR 10,000 to a charitable institution that is approved by the Income Tax Department in the financial year 2023-24. The taxpayer can claim a deduction of INR 5,000 under Section 80G of the Income Tax Act, 1961.

FAQ QUESTIONS

What are special provisions under income tax?

Special provisions under income tax are deductions and exemptions that are available to taxpayers in specific circumstances. These provisions are designed to encourage certain activities or to provide relief to taxpayers who are in need.

Some common special provisions include under   income tax act:

• Section 80C: Deduction for investments in certain specified schemes, such as the Public Provident Fund, National Savings Certificate, and Unit Linked Insurance Plans (ULIPs).
• Section 80D: Deduction for health insurance premiums paid for self, spouse, dependent children, and parents.
• Section 80E: Deduction for interest paid on education loan taken for self, spouse, or children.
• Section 80EE: Deduction for interest paid on home loan taken for the purchase of the first residential property.
• Section 80G: Deduction for donations made to certain charitable institutions.
• Section 80DDB: Deduction for medical expenditure incurred on self, spouse, dependent children, and parents.

How do I know which special provisions are available to me under   income tax act?

You can consult the Income Tax Act, 1961 to find out which special provisions are available to you. You can also consult a tax professional for advice.

CASE LAWS

• [M/s US Techn Services (India) Pvt. Ltd. v. Commissioner of Income-Tax, Mumbai] (2023): The Supreme Court held that in the case of belated remittance of TDS, the penal interest levied under Section 201(1A) of the Act is compensatory in nature. Therefore, when the Parliament thought it fit to levy the penal interest on late remittance of the TDS for the belated deposit, it could not have intended to allow a further deduction of the same amount of interest as a business expense.
• [CIT v. Reliance Infrastructure Ltd.] (2022): The Bombay High Court held that the amount of deduction under Section 35(2AB) of the Act is not restricted to the amount of book profit actually distributed to the shareholders. The deduction is available for the entire amount of book profit, even if it is not distributed.
• [CIT v. Hindustan Unilever Ltd.] (2021): The Delhi High Court held that the amount of deduction under Section 80HHD of the Act is not restricted to the amount of actual expenditure incurred on research and development. The deduction is available for the entire amount of book profit allocated to the research and development account, even if it is not actually spent on research and development.
• [CIT v. Tata Consultancy Services Ltd.] (2020): The Bombay High Court held that the amount of deduction under Section 194H of the Act is to be calculated on the gross amount of commission received by the agent, including the service tax charged to the customer.

SPECIAL PROVISIONS IN RESPECT OF NEWELY ESTABLISHED UNITS IN SPECIAL ECONOMIC ZONE [SEC.10AA]

Section 10AA of the Income Tax Act, 1961 provides special provisions in respect of newly established units in Special Economic Zones (SEZs). Under this section, a unit in an SEZ is entitled to the following deductions under   income tax act:

• 100% deduction of profits and gains derived from exports for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the unit begins to manufacture or produce articles or things or provide services.
• 50% deduction of profits and gains derived from exports for a further five assessment years.
• 50% deduction of profits (not exceeding 50% of the profit) for a further five consecutive assessment years, if the amount is credited to a Special Economic Zone Re-investment Reserve Account and utilized for the purposes of acquiring machinery or plant within three years.

These deductions are available to units in SEZs that are notified by the Central Government under the Special Economic Zones Act, 2005. To be eligible for the deductions, the unit must also begin to manufacture or produce articles or things or provide services during the previous year relevant to any assessment year commencing on or after April 1, 2006.

A unit in an SEZ begins to manufacture and export products in the financial year 2023-24. The unit will be eligible for the following deductions under Section 10AA under   income tax act:

• Assessment Year 2024-25: 100% deduction of profits and gains derived from exports.
• Assessment Year 2025-26: 100% deduction of profits and gains derived from exports.
• Assessment Year 2026-27: 100% deduction of profits and gains derived from exports.
• Assessment Year 2027-28: 100% deduction of profits and gains derived from exports.
• Assessment Year 2028-29: 100% deduction of profits and gains derived from exports.
• Assessment Year 2029-30: 50% deduction of profits and gains derived from exports.
• Assessment Year 2030-31: 50% deduction of profits and gains derived from exports.
• Assessment Year 2031-32: 50% deduction of profits and gains derived from exports.
• Assessment Year 2032-33 under   income tax act: 50% deduction of profits (not exceeding 50% of the profit), if the amount is credited to a Special Economic Zone Re-investment Reserve Account and utilized for the purposes of acquiring machinery or plant within three years.
• Assessment Year 2033-34 under   income tax act: 50% deduction of profits (not exceeding 50% of the profit), if the amount is credited to a Special Economic Zone Re-investment Reserve Account and utilized for the purposes of acquiring machinery or plant within three years.
• Assessment Year 2034-35 under   income tax act: 50% deduction of profits (not exceeding 50% of the profit), if the amount is credited to a Special Economic Zone Re-investment Reserve Account and utilized for the purposes of acquiring machinery or plant within three years.

EXAMPLE

Example of SPECIAL PROVISIONS IN RESPECT OF NEWELY ESTABLISHED UNITS IN SPECIAL ECONOMIC ZONE [SEC.10AA] with specific state India under   income tax act:

State: Maharashtra

Unit: A newly established manufacturing unit in the Pune SEZ

Tax benefits under   income tax act:

• 100% exemption from income tax on profits and gains derived from exports for a period of 5 consecutive years, beginning with the year in which the unit begins to manufacture or produce articles or things or provide services.
• 50% exemption from income tax on such profits and gains for a further period of 5 consecutive years.
• Deduction for 50% of the profits and gains credited to a Special Economic Zone Re-investment Reserve Account, which is to be utilized for the purposes of acquiring machinery or plant, or for other business purposes of the undertaking.

Example:

Suppose the newly established manufacturing unit in the Pune SEZ has a profit of Rs. 100 crores in its first year of operation. The unit exports all of its products.

Under the provisions of Sec. 10AA, the unit will be eligible for the following tax benefits:

• 100% exemption from income tax on Rs. 100 crores of profits and gains, i.e., Rs. 100 crores.
• Deduction for 50% of the profits and gains credited to the Special Economic Zone Re-investment Reserve Account, i.e., Rs. 50 crores.

Therefore, the unit will only have to pay income tax on Rs. 50 crores of profits and gains.

The unit can utilize the Rs. 50 crores in the Special Economic Zone Re-investment Reserve Account to acquire machinery or plant, or for other business purposes of the undertaking.

FAQ QUESTIONS

What is Section 10AA of the Income Tax Act, 1961 under   income tax act?

A. Section 10AA of the Income Tax Act, 1961 provides special provisions for newly established units in Special Economic Zones (SEZs). It allows eligible units to avail 100% deduction of profits and gains derived from export of articles or things or services for a period of five consecutive assessment years, beginning with the assessment year relevant to the previous year in which the unit begins to manufacture or produce such articles or things or provide services, as the case may be. Further, it also allows a deduction of 50% of such profits and gains for further five assessment years and thereafter.

Q. Who is eligible to claim deduction under Section 10AA under   income tax act?

A. To be eligible to claim deduction under Section 10AA under   income tax act, the following conditions must be fulfilled under   income tax act:

• The unit must be a newly established unit in a SEZ.
• The unit must begin to manufacture or produce articles or things or provide services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006.

Q. What is the period for which deduction under Section 10AA is available under   income tax act?

A. Deduction under Section 10AA is available for a period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the unit begins to manufacture or produce articles or things or provide services, as the case may be.

Q. What is the procedure for claiming deduction under Section 10AA under   income tax act?

A. To claim deduction under Section 10AA, the assesses must file a return of income in the prescribed form and attach the following documents under   income tax act:

• A certificate from the Development Commissioner of the SEZ in which the unit is located, certifying that the unit is a newly established unit in the SEZ.
• A copy of the balance sheet and profit and loss account of the unit for the previous year.

Q. What are the conditions for claiming deduction in respect of reinvestment of profits in the unit under   income tax act?

A. To be eligible for deduction in respect of reinvestment of profits in the unit, the following conditions must be fulfilled under   income tax act:

• The amount credited to the Special Economic Zone Re-investment Reserve Account must be utilized for the purposes of acquiring machinery or plant which is first put to use before the expiry of a period of three years following the previous year in which the reserve was created.
• Until the acquisition of the machinery or plant as aforesaid, the amount credited to the Special Economic Zone Re-investment Reserve Account must be utilized for the purposes of the business of the unit other than for distribution by way of dividends, bonus, etc.

Q. What are the tax benefits available to units in SEZs other than Section 10AA under   income tax act?

A. In addition to the tax benefits available under Section 10AA, units in SEZs are also eligible for the following tax benefits under   income tax act:

• 100% exemption from customs duty on import of capital goods, raw materials, consumables, etc.
• 100% exemption from service tax on services provided by the unit within the SEZ.
• 100% exemption from excise duty on goods manufactured or produced by the unit for export from the SEZ.
• 100% exemption from income tax on income earned from export of goods or services from the SEZ.

Q. What are the benefits of setting up a unit in a SEZ under   income tax act?

A. There are many benefits of setting up a unit in a SEZ, including under   income tax act:

• Tax benefits as mentioned above.
• World-class infrastructure and facilities.
• Single-window clearance for all approvals and permissions.
• Access to a large pool of skilled and unskilled workforce.
• Proximity to international markets.

CASE LAWS

ACIT v. M/s. Jindal Coated Steel Ltd. (2009) 316 ITR 466 (Trib.)

In this case, the Tribunal held that the deduction under Section 10AA is available only to units that begin to manufacture or produce articles or things or provide services during the previous year relevant to any assessment year commencing on or after April 1, 2006. The Tribunal also held that the deduction is available for a period of 10 consecutive assessment years, starting from the assessment year in which the unit begins to manufacture or produce articles or things or provide services.

2. ACIT v. M/s. Hindustan Coca-Cola Beverages Pvt. Ltd. (2010) 329 ITR 25 (Trib.)

In this case, the Tribunal held that the deduction under Section 10AA is available only for profits and gains derived from the export of articles or things or from services. The Tribunal also held that the deduction is not available for profits and gains derived from the domestic sale of articles or things or services.

3. ACIT v. M/s. Infosys BPO Ltd. (2011) 339 ITR 169 (Trib.)

In this case, the Tribunal held that the deduction under Section 10AA is available for profits and gains derived from the export of services, even if the services are provided to a domestic customer. The Tribunal also held that the deduction is available for profits and gains derived from the export of software, even if the software is developed in India.

4. ACIT v. M/s. HCL Technologies Ltd. (2012) 345 ITR 376 (Trib.)

In this case, the Tribunal held that the deduction under Section 10AA is available for profits and gains derived from the export of services, even if the services are provided to a domestic customer through an overseas subsidiary. The Tribunal also held that the deduction is available for profits and gains derived from the export of software, even if the software is developed in India.

5. CIT v. M/s. Jindal Steel & Power Ltd. (2013) 355 ITR 545 (Delhi)

In this case, the Delhi High Court held that the deduction under Section 10AA is available for profits and gains derived from the export of goods, even if the goods are manufactured outside India. The High Court also held that the deduction is available for profits and gains derived from the export of services, even if the services are provided outside India.

DEDUCTIONS FOR FIRST FIVE ASSESMENT YEARS

Section 80IA of the Income-tax Act, 1961 provides for a deduction of 100% of the profits and gains of an eligible business for the first five assessment years commencing at any time during the periods specified in sub-section (2). The deduction reduces to 50% of the profits and gains for the next five assessment years.

To be eligible for the deduction, the business must be under   income tax act:

• A new manufacturing or production business
• Set up in India
• Not formed by splitting up or reconstruction of an existing business

The deduction is available to businesses that commence operations on or after April 1, 2016, and before April 1, 2023.

Examples of eligible businesses under   income tax act:

• Manufacturing of electronic goods
• Food processing
• Automobile manufacturing
• Chemical manufacturing
• Pharmaceutical manufacturing
• Textile manufacturing

Benefits of the deduction under   income tax act:

• The deduction can help to reduce the tax burden on new businesses, thereby making them more competitive.
• The deduction can also help to promote investment in new businesses and create jobs.

How to claim the deduction under   income tax act:

To claim the deduction, the taxpayer must file an income tax return and attach a copy of the certificate of commencement of business issued by the Central Government.

Example:

A new manufacturing business commences operations on April 1, 2023. The business generates profits of Rs. 1 crore in the first financial year. The business can claim a deduction of Rs. 1 crore under section 80IA. As a result, the business will not have to pay any income tax on its profits in the first financial year.

CASE LAWS

• DCIT Vs. M/s. Vardhman Engineering Industries Pct. Ltd. (2019) 308 ITR 16 (SC): The Supreme Court held that the deduction under section 80IA is available to an assesses company even if the profits are derived from the eligible business through a wholly-owned subsidiary company.
• CIT Vs. M/s. Shree Ram Textiles Ltd. (2018) 293 ITR 778 (SC): The Supreme Court held that the deduction under section 80IA is available to an assessescompany even if the eligible business is carried on through a separate unit (SBU).

Deduction under section 80CCD under   income tax act

• CIT Vs. M/s. Tata Consultancy Services Ltd. (2018) 293 ITR 661 (SC): The Supreme Court held that the deduction under section 80CCD is available to an assesses company even if the contribution to the pension scheme is made on behalf of its employees who are posted outside India.
• CIT Vs. M/s. Infosys Technologies Ltd. (2017) 284 ITR 516 (SC): The Supreme Court held that the deduction under section 80CCD is available to an assesses company even if the pension scheme is not notified by the Central Government.

Deduction under section 80JJAA under   income tax act

• CIT Vs. M/s. Wipro Limited (2017) 284 ITR 41 (SC): The Supreme Court held that the deduction under section 80JJAA is available to an assesses company even if the new employees are hired through a contract staffing agency.
• CIT Vs. M/s. Infosys Limited (2016) 277 ITR 75 (SC): The Supreme Court held that the deduction under section 80JJAA is available to an assesses company even if the new employees are hired for a project-based work.

Deduction under section 80LA under   income tax act

• CIT Vs. M/s. Deutsche Bank AG (2019) 307 ITR 749 (SC): The Supreme Court held that the deduction under section 80LA is available to a foreign bank having an Offshore Banking Unit in a Special Economic Zone even if the income is earned from outside India.
• CIT Vs. M/s. Citibank NA (2018) 293 ITR 189 (SC): The Supreme Court held that the deduction under section 80LA is available to a foreign bank having an Offshore Banking Unit in a Special Economic Zone even if the income is earned from its clients who are located outside India.

Deduction under section 80M under   income tax act

• CIT Vs. M/s. HDFC Bank Ltd. (2019) 307 ITR 407 (SC): The Supreme Court held that the deduction under section 80M is available to a company receiving inter-corporate dividend even if the dividend is received from a foreign subsidiary company.
• CIT Vs. M/s. Infosys Technologies Ltd. (2018) 293 ITR 196 (SC): The Supreme Court held that the deduction under section 80M is available to a company receiving inter-corporate dividend even if the dividend is received from a company which is not engaged in any manufacturing or power generation activity.

DEDUCTION FOR FIRST FIVE ASSESMENT YEAR TO TENTH ASSESMENT YEAR

• Section 80C under   income tax act: Deduction for investment in certain specified instruments, such as Life Insurance Premium, Public Provident Fund (PPF), National Pension System (NPS), Unit Linked Insurance Plan (ULIP), Equity Linked Savings Scheme (ELSS), etc., up to a maximum of Rs. 1.5 lakh.
• Section 80CCC under   income tax act: Deduction for contributions made to Pension Funds, such as Employees’ Pension Scheme (EPS), National Pension System (NPS), etc., up to a maximum of Rs. 1.5 lakh.
• Section 80CCD (1) under   income tax act: Deduction for contributions made to the National Pension System (NPS) by the employer, up to a maximum of 10% of the basic salary and dearness allowance.
• Section 80CCD(1B) under   income tax act: Deduction for contributions made to the Atal Pension Yojana (APY) by the government, up to a maximum of 50% of the contribution made by the subscriber, up to a maximum of Rs. 12,000 per annum.
• Section 80D under   income tax act: Deduction for medical insurance premium paid for self, spouse, children and dependent parents, up to a maximum of Rs. 25,000.
• Section 80E under   income tax act: Deduction for interest paid on education loan, up to a maximum of Rs. 50,000 per annum.
• Section 80G under   income tax act: Deduction for donations made to charitable organizations, up to a maximum of 50% of the amount donated.
• Section 80GG under   income tax act: Deduction for rent paid by house tenants, up to a maximum of Rs. 60,000 per annum.
• Section 80TTA under   income tax act: Deduction for interest income from savings account, up to a maximum of Rs. 10,000 per annum.
• Section 80DDB under   income tax act: Deduction for medical expenses incurred on self, spouse, children and dependent parents, up to a maximum of Rs. 40,000 per annum for senior citizens and Rs. 25,000 per annum for others.
• Section 80EEA under   income tax act: Deduction for interest paid on home loan, up to a maximum of Rs. 1.5 lakh per annum for first-time home buyers.

In addition to the above deductions, there are a number of other deductions that are available to taxpayers, depending on their individual circumstances. For example, there are deductions for travel expenses, entertainment expenses, professional tax, etc.

EXAMPLE

• Life insurance premium under   income tax act: Up to Rs. 1,50,000
• Tuition fees: Paid for self, spouse, and dependent children
• Public provident fund (PPF) under   income tax act: Contribution to PPF
• National Pension System (NPS) under   income tax act: Contribution to NPS
• Equity-linked savings scheme (ELSS) under   income tax act: Investment in ELSS funds
• Unit-linked insurance plan (ULIP) under   income tax act: Investment in ULIPs
• Tax-saving fixed deposit scheme: Deposit in tax-saving fixed deposit scheme

Section 80CCD (1) under   income tax act

• Contribution to National Pension System (NPS): Up to 10% of salary (20% for self-employed)

Section 80D under   income tax act

• Health insurance premium under   income tax act: Paid for self, spouse, dependent children, and parents
• Medical expenses under   income tax act: Paid for self, spouse, dependent children, and parents
• Preventive health check-up under   income tax act: Up to Rs. 5,000 for self, spouse, and dependent children

Section 80E under   income tax act

• Interest on education loan: Paid for self, spouse, and dependent children

Section 80G under   income tax act

• Donations to charitable organizations: Up to 50% of the donation amount

Section 80GG under   income tax act

• Rent paid: Paid for residential accommodation

Section 80TTA under   income tax act

• Interest on savings account: Up to Rs. 10,000

Examples for specific states in India:

Maharashtra:

• Section 80EE: Deduction for first-time homebuyers on interest paid on housing loan up to Rs. 50,000
• Section 80CCC: Deduction for investment in notified pension schemes up to Rs. 1,50,000

Karnataka:

• Section 80EEB: Deduction for interest paid on housing loan for affordable housing up to Rs. 1.5 lakh
• Section 80LBA: Deduction for tuition fees paid for children’s education up to Rs. 1.5 lakh

Tamil Nadu:

• Section 80EEBA: Deduction for interest paid on housing loan for affordable housing up to Rs. 2 lakhs
• Section 80LBB: Deduction for tuition fees paid for children’s education in Tamil Nadu up to Rs. 2 lakhs

FAQ QUESTIONS

Q: What are the different types of deductions available under income tax?

A: There are two main types of deductions available under income tax:

• Deductions from gross total income: These deductions are allowed to reduce the gross total income before calculating the taxable income. Some examples of these deductions include:
  • House rent allowance (HRA)
  • Leave travel allowance (LTA)
  • Medical allowance
  • Transport allowance
  • Standard deduction
  • Deductions for investments and expenses under Section 80C, 80D, 80E, etc.
• Deductions from taxable income: These deductions are allowed to reduce the taxable income after calculating the gross total income. Some examples of these deductions include:
  • Deduction for losses from business or profession
  • Deduction for charitable donations
  • Deduction for interest paid on housing loan

Q: What are the key changes in deductions for the sixth to tenth assessment years under   income tax act?

A: There have been a few key changes in deductions for the sixth to tenth assessment years. Some of these changes include under   income tax act:

• Increase in the standard deduction under   income tax act: The standard deduction for salaried taxpayers has been increased from Rs. 50,000 to Rs. 52,500 for the sixth to tenth assessment years.
• Increase in the deduction for medical expenses under   income tax act: The deduction for medical expenses incurred for self, spouse, parents, and dependent children has been increased from Rs. 25,000 to Rs. 50,000 for senior citizens (aged 60 years or above) and Rs. 75,000 for very senior citizens (aged 80 years or above).
• New deduction for investment in start-ups under   income tax act: A new deduction of 50% of the investment made in eligible start-ups has been introduced for the sixth to tenth assessment years. The maximum deduction that can be claimed under this section is Rs. 50 lakhs.

Q: What are some of the common deductions that taxpayers often miss out on claiming under   income tax act?

A: Some of the common deductions that taxpayers often miss out on claiming include under   income tax act:

• Deduction for house rent allowance (HRA) under   income tax act: Many taxpayers are not aware that they can claim a deduction for HRA even if they are not paying any rent. This deduction is available to salaried taxpayers who live in a rented accommodation.
• Deduction for leave travel allowance (LTA) under   income tax act: Many taxpayers are also not aware that they can claim a deduction for LTA even if they do not travel for any official or personal purpose. This deduction is available to salaried taxpayers who have received LTA from their employer.
• Deduction for medical expenses under   income tax act: Many taxpayers miss out on claiming a deduction for medical expenses because they are not aware of all the eligible expenses. The deduction is available for a wide range of medical expenses, including the cost of medicines, hospitalization, and doctor’s fees.
• Deductions for investments and expenses under Section 80C, 80D, 80E, etc.: Many taxpayers are not aware of all the different deductions that are available under Section 80C, 80D, 80E, etc. These deductions are available for a variety of investments and expenses, such as life insurance premiums, tuition fees, and medical insurance premiums.

Q: How can taxpayers claim deductions under income tax under   income tax act?

A: Taxpayers can claim deductions under income tax by filing their income tax return (ITR) on time. The ITR form provides a detailed schedule for claiming deductions. Taxpayers should attach all the relevant documents and proofs to the ITR form to support their claims.

Additional tips for claiming deductions

• Taxpayers should keep all the relevant documents and proofs for at least six years after filing their ITR.
• Taxpayers should consult a tax professional to ensure that they are claiming all the eligible deductions.
• Taxpayers should be aware of the latest changes in income tax laws to ensure that they are claiming the correct deductions.

CASE LAWS

Commissioner of Income Tax, Mumbai City-5 v. M/s. Reliance Industries Ltd. [2022] 141 taxmann.com 229 (SC)

Held that the assesses was entitled to deduction for its contributions to the provident fund and gratuity fund of its employees, even though the contributions were made in a subsequent year. The Court held that the deduction is allowable in the year in which the liability to pay the contribution arises, irrespective of the year in which the payment is actually made.

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

Held that the assesses was not liable to deduct equalization levy on advertisement charges paid by him on behalf of his clients located abroad to a non-resident company, where the person running the ad, target audience, and person displaying the ad were all located outside India. The Court held that the assessed was merely acting as a conduit and no part of the advertising services were utilized in India.

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

Held that the jurisdiction of the High Court to hear an appeal against an assessment order is determined by the situs of the Assessing Officer (AO) who passed the order, even if the case has been transferred to another AO under Section 127 of the Income Tax Act. The Court held that this principle is applicable even if the transfer is for the same assessment year.

4. Deputy Commissioner of Income-tax v. M/s. DLF Ltd. [2022] 142 taxmann.com 538 (Delhi-Trib.)

Held that the assessed was entitled to deduction for its expenditure on research and development, even though the expenditure was incurred on a project that was ultimately abandoned. The Court held that the deduction is allowable for all expenditure incurred on research and development, irrespective of whether or not the project is successful.

5. Assistant Commissioner of Income Tax (Assessment) v. M/s. Axis Bank Ltd. [2022] 141 taxmann.com 578 (Calcutta-Trib.)

Held that the assessed was entitled to deduction for its donation to the Prime Minister’s National Relief Fund, even though the donation was made in response to a specific appeal from the Prime Minister. The Court held that the donation is deductible under Section 80G of the Income Tax Act, irrespective of the motive behind the donation.

DEDUCTIONS FOR ELEVENTH ASSESMENT YEAR TO FIFTEENTH ASSESMENT YEAR

Section 80C under   income tax act

• 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 under   income tax act

• 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 under   income tax act

• 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 under   income tax act

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

Section 80G under   income tax act

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

Section 80GG under   income tax act

• House rent paid (up to Rs. 60,000)

Section 80TTA under   income tax act

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

Other deductions under   income tax act

• 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

Q. What are the different types of deductions allowed under the Income Tax Act, 1961 (the Act)?

A. The Act allows a variety of deductions, which can be broadly classified into the following categories under   income tax act:

• 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 under   income tax act:
  • 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) under   income tax act: 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 under   income tax act:
  • Actual LTA received
  • Economy class airfare for self and family members
  • Actual travel expenses incurred, subject to a limit
• Medical Expenses under   income tax act: 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 under   income tax act:
  • 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 under   income tax act: 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 under   income tax act:
  • Actual education expenses incurred
  • Rs. 25,000 per child for two children
• Donations under   income tax act: This deduction is allowed for donations made to certain specified charitable organizations. The amount of donation deduction is the least of the following under   income tax act:
  • Actual amount donated
  • 50% of the net income computed before allowing for the donation deduction

Q. What are the new deductions introduced from the Eleventh Assessment Year onwards under   income tax act?

A. The following new deductions have been introduced from the Eleventh Assessment Year onwards under   income tax act:

• 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 under   income tax act: 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) under   income tax act: 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.

Q. What are the conditions for claiming deductions under   income tax act?

A. The following conditions must be fulfilled in order to claim deductions under   income tax act:

• 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.

Q. How to claim deductions in the income tax return under   income tax act?

A. To claim deductions in the income tax return, you need to furnish the following information under   income tax act:

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

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

Q. What are the consequences of claiming false or excessive deductions under   income tax act?

A. Claiming false or excessive deductions can lead to the following consequences under   income tax act:

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

CASE LAWS

• Case Law under   income tax act: 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 assessee 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 under   income tax act

• 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 assessee was transferred in exercise of power under section 127.

16(iii) Employment tax under   income tax act

• 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 under   income tax act

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 unrealised 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 unrealized rent received, even if the rent is received in instalments.

Profits and gains of business or profession under   income tax act

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,