DIRECT TAX

BY CA SWATI GODBOLE

MEANING

• DIRECT TAX

• Charged directly on an individual, firm, company etc.

• Tax on earning

• INDIRECT TAX

• Charged indirectly on everybody, whether rich or poor

• Tax on purchases

QUESTIONS

• Whose income is charged to tax?• What is charged to tax?• When is liability for tax is computed?• Income earned during what period is

taxed?• Who is liable to pay tax?• How is income & tax computed?

PERSON – Section 2(31)

• Includes– An Individual– A H.U.F.– A Company– A Firm– An A.O.P/ B.O.I– A Local Authority– Every other artificial juridical person

Problems

INCOME – Section 2(24)• Includes

– Profit– Dividends– Perquisites– Allowance such as D.A– Profit on sale of Import License– Export Cash Assistance– Refund of Excise or Customs duty– Remuneration received by partner of a

firm

Contd.• Capital Gain• Profit of any business of insurance• Winning from lotteries, crossword

puzzles, horse race, card games etc.

Important Points

• Periodical Return

• Illegal Income

• Cash or Kind

• Real Income (Remittance)

• Mutual Activity- from outside source

Problems

ASSESSMENT YEAR

• The period of Twelve months

• Commencing on the first day of April every year

• Ending on March

• Year in which income is taxed

PREVIOUS YEAR

• A Financial year • Immediately preceding the

assessment year• Newly started business

– Period beginning with date of setting up the business till March

ASSESSEE• A person

– by whom any tax, interest, penalty is due

– Whose assessment of income, loss or refund is pending

– A deemed assessee – a representative assessee

– An assessee in default

Problems

ASSESSMENT

• A PROCESS– Determining, Computing

– Amount of Income

– Fixing the tax dues

Capital and revenue expenditure

• Not defined under the act, but one has to follow the natural meaning & decided cases.

• Acquisition of fixed asset against routine expenditure– Capital expenditure means expenses

incurred while purchasing a fixed assets, as against revenue expenditure is recurring or incurred during the normal course of business

Contd.• Benefit over several years against

one year– Capital expenditure benefits us for

several years (life of the asset) as against revenue expenditure is consumed within a year.

• Improvement as against maintenance– Capital expenditure leads to increasing

the efficiency or earning capacity of the fixed asset. Whereas revenue expenditure helps in running the business smoothly.

Contd.• Lump sum payment as against

periodic payments– To decide whether Capital expenditure

or revenue expenditure, whether payment was made in lump sum or periodic cannot be deciding factor.

Company• Section 2(17) defines Company to

mean– An Indian company or– A body Corporate incorporated under

the laws of a foreign country– Any institution, association or a body,

whether incorporated or not and whether Indian or non Indian, which is declared by general or special order of the CBDT to be a Company

Indian Company

• Indian Company – Section 2(26)– A company formed and registered

under the Indian Companies act of 1956– A company formed and registered

under any law in force in the state of Jammu and Kashmir

– Any institution , association or body which is declared by the board to be a Company under section 2(17)

Dividend Section 2(22)• Under Section 2(22) – following

payments or distribution by a company to its shareholders are deemed as dividend to the extent of accumulated profits of the company– Any distribution entailing the release of

company’s assets.– Any distribution of debentures,

debenture stock, deposit certificates and bonus to preference share holders

– Distribution on liquidation of company

Contd.

– Distribution on reduction of Capital– Any payment by way of loan or advance

by a closely held company to a shareholder, holding substantial interest; provided the loan should not have been made in the ordinary course of business and money lending should not be substantial part of the company’s business

Total Income & its computation• It is-

– Gross total Income *****– Less: Permissible deduction u/s.80 *****( section 80 C to 80 U)– Net taxable income *****

• Tax is calculated on the Net taxable income as per the applicable rates.

• The net taxable income is rounded off as per the provisions of section 288A and the tax payable is rounded off to as per provisions of section 288B

RESIDENTIAL STATUS

BASIC CONDITIONS

• STAY IN INDIA IN PREVIOUS YEAR

• 182 DAYS OR MORE

• OR

• 60 DAYS IN PREVIOUS YEAR & PRECEDING PREVIOUS 4 YEARS 365

DAYS

EXCEPTIONS• An Individual

– Indian citizen, leaves India in previous year, as a crew member of an Indian Ship

– OR– For employment

• An Individual– Who is person of an Indian Origin or

Who is an Indian Citizen– Stayed outside India – Comes on a visit to India

Does not mean leaving India for taking employment outside India, need not be an unemployed person who leaves India

CONDITIONS FOR R & OR

• Preceding previous 10 years, Resident at-least for two years

• AND

• Stay in India in preceding previous seven years 730 days.

Problems

HUF & RESIDENTIAL STATUS

• Resident– Control & Management of affairs is

exercised– Either completely or partially from

India

• R & OR– Status of Karta of HUF?– R & OR

– OR– NR or R but NOR

Control & Management

• Refers to Head and Brain – which direct the affairs of the business i.e. the policies, finance, disposal of profits, vital things concerning the management of the business

Problems

COMPANY/AOP/BOI/FIRMAND

RESIDENTIAL STATUS• AOP/BOI/FIRM/Local

authority/Artificial person• R & OR

– Control & Management of affairs is exercised

– Either completely or partially from India

• COMPANY• Indian always R & OR• Any other company

– R & OR– Control & Management of affairs is

exercised– Completely in India

Relationship between residential status &

incidence of tax• Incidence of tax on a tax payer

depends – on his residential status and – also on the place & time of accrual or

receipt of income.

Indian Income & Foreign Income

• Indian Income– If income is received in India & also

accrues in India (deemed to received & accrues in India)

– If Income is received in India but accrues outside India

– If Income is received outside India but accrues in India

• Foreign Income– Income is not received in India ( not

deemed to receive in India)– Income does not accrue or arise in

India.

INCOME DEEMED TO RECEIVE AND ACCRUE IN INDIA

• Examples of Income deemed to receive– Contribution by the employer to the

EPF account in excess of 12% of employee’s salary

– Annual interest credited to the employee’s PF account in excess of 9.5%

• Examples of Income deemed to Accrue– All income accruing or arising whether

directly or indirectly through / from • Any business connection in India or

Property in India or Asset or source of income in India or Transfer of Capital asset in India

Contd.– Salary payable for services rendered in

India– Salary received by Indian national from

Government in respect of services rendered outside India is deemed to accrue or arise in India

– Any dividend paid by an Indian Company outside India

– Etc.

SCOPE OF INCOMEParticulars R & OR R but

NORNRI

Income received in India

TAXABLE

TAXABLE TAXABLE

Accrues in India

TAXABLE

TAXABLE TAXABLE

Deemed to receive or accrue in India

TAXABLE

TAXABLE TAXABLE

Contd.

Business income controlled wholly or partly from India

Taxable Taxable Not Taxable

Business / Profession controlled from outside of India

Taxable Not Taxable

Not Taxable

Any Other Taxpayer

Type of Income

Resident in India

Non-resident In India

Indian Income

Taxable in India

Taxable in India

Foreign Income

Taxable in India

Not taxable in India

Problems

HEADS OF INCOME

• Income from Salary• Income from House Property• Profits & gains from Business &

Profession• Capital Gain• Income from other sources

INCOME FROM HOUSE PROPERTY

• Basic Conditions– There should be a House Property

– Should be owned by the assessee

– Should not be used for the business of the assessee, the income from which is taxable

HOUSE PROPERTY

• Meaning– Building

And / or Land attached to or connected

to the building • Commercial as well as Residential

OWNERSHIP

• Actual

• Deemed – Transfer by Husband to wife without

adequate consideration (except to leave apart)

– Part performance of an agreement

TYPES OF H.P• FLOP

• PLOP

• VLOP

• DLOP

• SOP/UOP

CALCULATION OF INCOME

• GAV– LESS MUNICIPAL TAX

• NAV– LESS DEDUCTION U/S. 24– ADD ADDITION U/S. 25

G.A.V

• FLOP/ PLOP/DLOP• R.L.V

– FAIR RENT– MUNCIPAL VALUTION– STANDARD RENT

• ACTUAL RENT

• S.O.P/ U. O. P– Nil

• VLOP– If A.R lower than R.L.V. due to Vacancy

EXAMPLE FOR RLV

• FAIR RENT

– OR• MUNCIPAL VALUTION

• WHICH EVER IS

• HIGHER

SECTION 24

• Standard Deduction– 30% of G.A.V.

• Interest on Loan borrowed for the H.P.– Pre-construction

– Post-construction

EXAMPLE FOR PRE-CONSTRUCTION

INTEREST• Loan taken on 1st April 2000

Rs.10,00,000 @ 12%• Construction completed on 2nd July

2002• Pre construction period=1/4/2000 to

31/3/2002• Pre construction interest = 2,40,000• Deduction over next five years

starting from 1/4/2002 to 31/3/2007 (20% each year) in addition of the annual interest

EXAMPLE FOR POST-CONSTRUCTION

INTEREST• FLOP/PLOP/VLOP/ DLOP

– Loan taken for construction/ purchase of the property

– No Limit

• SOP/ UOP– Loan taken for construction/purchase of

the property– Rs.1,50,000 (Loan taken after 1-4.99)– Rs.30000 (For prior period)– Limit incl. repair loan repayment

SECTION 25

• Unrealized Rent

• Arrears of Rent

CAPITAL GAINS

• Basic Conditions– There must be a Capital Asset.

– There must be Transfer of the asset.

– Transfer During the previous year.

– Due to transfer Gain/ Profit arises.

CAPITAL ASSET

• Meaning Section 2 (14)– Property of any kind

• Tangible or Intangible– Whether connected to business or not– Held by Assessee

• Subject to certain exceptions

Exceptions• Stock in trade, consumables or raw

material held for business.

• Agricultural Land in rural area

• Special bearer bonds 1991

• 6.5 % Gold Bonds 1977, 7% Gold Bonds 1980, National Defence gold bonds

Contd.

• Personal effects of the assessee i.e.– Movable property including furniture,

wearing apparel , held for personal use of assessee or his dependents

– Excluding Gold, Silver, Semi Precious Stone, Real Stone, Metal Jewellery, Ornaments

TRANSFER 2(47)• Sale or Exchange or Relinquishment• Extinguishment (like due to fire,

theft etc.)• Compulsory Acquisition• Conversion into stock• Transfer of capital asset by a person

to a firm in which he is a partner• Distribution of capital assets on

dissolution of firm

PREVIOUS YEAR

• To decide the previous year Date of Transfer is Important except– In case of receipt of insurance claim –

Date of Receipt– In case of conversion of Capital asset

into stock – Date of sale of Stock– In case of Compulsory Acquisition –

Date of receipt of compensation.

TYPES OF ASSETS

• Short term asset– Asset held for less than 36 months– Subject to exception

• Long term asset– Asset held for more than 36 months– Subject to exception

EXCEPTION

– With respect to • Equity shares/ Pref. shares any Co.• Securities such as Deb. & others of Govt.

listed on Stock Exchange• Units of Unit Trust of India (Quoted or not)• Units of Mutual Funds specified U/s.10

(23D) (Quoted or not)– Held for a period less than 12 months-

Short Term otherwise Long Term

Problems

Computation of Gain

• Short Term Gain– Full value of consideration– Less: Transfer Exp.– Less: Cost of Acquisition– Less: Cost of Improvement

• Long term Gain– Full value of consideration– Less: Transfer Exp.– Less: Indexed Cost of Acquisition– Less: Indexed Cost of Improvement

Full Consideration• Full = Gross• Means Sale consideration / Sale

price / Value received or receivable on transfer.

• Special cases– Transfer of asset between firm and

partners (amount in firm’s book)– Conversion of capital asset into stock

(F.M.V. on date of conversion)– Compulsory acquisition (Amount of

compensation)

Cost of Acquisition

• Actual Cost • Deemed Cost

– Transfer of asset under will/gift/inheritance holding & subsidiary etc. [49(1)]

– Amalgamation of companies- cost for amalgamated company

– Conversion of Debentures (Cost of Debentures)

– Assets received by a member on liquidation (F.M.V.)

Cost of Improvement 55(1)(b)

• Intangible Assets– Nil

• Tangible Asset– Exp. Which are Capital in nature– Incurred to do additions or alterations

to the asset – Allowed only if incurred after1st April

1981.

Indexing

• Formula– Cost of acq.* index no. of year of

transfer/ index no of year of acquisition

• No indexing possible– Short term gain– Transfer of Debentures or bonds– Transfer by NRI

Problems

Shares & Capital Gain

• Initial Shares

• Right Shares

• Bonus Share

• Sale of Right to Right Shares

Depreciable Assets (Sec.50)

• Depreciation under Income tax

• Previous year last day , W.D.V. of block zero [50(1)]

• Block of the assets is empty on last day of previous year [50(2)]

Problems

Conversion of assets into stock

• Date of sale of Stock = year of taxability of gain

• Full consideration on conversation = Fair market value as on conversation

• For indexing year of conversation to be considered

• Actual sale of Stock = Business income

Income from Salary

• Basic Conditions– Master And servant or employer and

employee relationship– Contract of employment is important

BASIS OF CHARGE

• Either accrual or receipt (which ever is earlier)

• Salary due from an existing and/or former employer

• Salary paid or allowed by the employer though not due

• Arrears of salary paid or allowed

SALARY COMPONENTS

• Basic salary• Advance salary• Arrears of salary• Bonus• Allowances• Leave encashment on retirement

COMPONENTS

• Retrenchment compensation• Pension• Gratuity• Voluntary retirement payments • Perquisites• Provident fund payments

CONCEPT

• Gross salary• Deductions such as G.P.F., P.T.• Net salary

COMPUTATION• Gross salary• Less:- exemption us. 10• Less:-deduction us. 16• Net salary• Deduction under chapter VI-A• Net taxable salary

EXEMPTION UNDER SECTION 10 FOR SALARY

• LEAVE ENCASHMENT 10(10AA)• GRATUITY 10(10)• PENSION 10(10A)• HOUSE RENT PAID 10(13A)• TRANSPORT ALLOWANCE 10(14) –

RULE 2BB• LEAVE TRAVEL CONCESSION 10(5)

Leave Encashment Sec.10(10AA)

• Meaning – Leave Salary– Salary standing / accumulated to the

credit of an employee at the time of retirement is Leave Salary

– Encashment of the same at the time of retirement is referred to as leave encashment

– Tax treatment for the same – next slide

Leave encashment – tax treatment

Nature of Leave encashment

Status of the employee

Tax treatment

Leave encashment during continuity of employment

Government/ Non- government

Taxable

Leave encashment at the time of retirement or leaving of job

Government

Fully Exempt

Leave encashment at the time of retirement or leaving of job

Non-government

Fully or partly exempt

Non government Employee exemption - detail

• In case of non-government employee (including an employee of local authority or public sector undertaking – exemption is least of the followings.

1 Period of earned leave to the credit of the employee * average monthly salary

2 10 * average monthly salary

3 Rs.300000 (specified amount by government)

4 Leave encashment actually received

Gratuity – Section 10 (10)

• It is a retirement benefit.• Payable at the time of cessation of

employment & on the duration of service.

• Government employees i.e. Central Government employees, State government employees, employees of local authority but not of statutory corporations

• Tax treatment - next slide

Tax treatment

Status of the employee

Whether Gratuity is taxable

Government employee

Fully exempt U/s. 10(10)(i)

Non Government employee covered by Payment of Gratuity Act , 1972

Fully or partly exempt from tax U/s. 10(10)(ii)

Non Government employee not covered by Payment of Gratuity Act , 1972

Fully or partly exempt from tax U/s. 10(10)(iii)

Employees covered by Payment of Gratuity Act,

1972• Any gratuity received is exempt to the

least of the following:

1. 15 days salary (7 days in case of seasonal establishment) based on salary last drawn for each year of service.(15 days salary * length of service) (6 months & above = full year) (Salary= last drawn salary =Basic + D.A.) (days in month=26)

2. Rs.350000

3. Gratuity actually received

Employees not covered by Payment of Gratuity Act, 1972

• In case of other employee gratuity received is exempt to the least of the following:

1. Rs.3500002. Half month’s Salary for each

completed year of service ( only complete year, part of the year to be ignored; salary based on average salary for last 10 months immediately preceding; Salary=Basic + D.A.)

3. Gratuity actually received

Pension

• Pension received from UNO by an employee or his family members is not chargeable to tax.

• Family pension received by the family members of armed forces is exempt under section 10(19).

• Family pension received by others (not covered in 2 above) after the death of the employee is taxable in their hands under section 56 – income from other sources.

Contd.• Un-commuted Pension – It is periodical payment

of pension- i.e. monthly pension• Commuted Pension – It is the lump sum

payment in lieu of periodical payment.

Pension Status of the employee

Is it chargeable to tax?

Un-commuted

Government / non government

It is chargeable to tax

Commuted Government

It is fully exempt from tax under 10(10A)(i)

Commuted Non government

It is fully or partly exempt from tax under 10(10A)(ii)

Commuted pension & non government employee

Non government employee

Gratuity is received

1/3rd of the pension received is exempt

Non government employee

Gratuity is not received

½ of the pension received is exempt.

HRA Section 10(13A) & Rule 2A• Least of the following is exempt

• Salary = Basic + D.A.( if terms of employment so provide)

1 An amount equal to 50% of Salary (For Metro cities) and 40% of Salary ( For non- Metro cities)

2 The HRA received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year

3 The excess of rent paid over 10% of Salary

Transport Allowance –10(14) Rule 2BB

• Allowance is granted to an employee to meet his expenditure for the purposes of commuting between the place of his residence and the place of his duty

• It is exempt up to Rs.800 per month • In case of blind or orthopaedically

handicapped it is Rs.1600 per month.

Leave Travel Concession 10(5)• Leave Travel assistance extended by

an employer for going anywhere in India along with his family is exempt on the basis of the provisions given in table.

• Family includes spouse, children, parents , brothers and sisters (who are dependent on the employee)

• Only two journeys in a Block of Four years is exempt.

• Amount of exemption is limited to the actual expenditure

Contd.Where journey is performed by air

Amount of economy class air fare of the national carrier by the shortest route or the amount spent whichever is less

Where journey is performed by rail

Amount of air conditioned first class rail fare by the shortest route or amount spent whichever is less

Where the places of origin & destination of journey are connected by rail and the journey is performed by any other mode of transport

Amount of air conditioned first class rail fare by the shortest route or amount spent whichever is less

Where the places are not connected by rail & recognized public transport system exist

First class or deluxe class fare by the shortest route or amount spent which ever is less

Perquisites - Taxable• Any residential accommodation

given to the employee without charging any rent or at a concessional rate

• Free supply of gas , electricity or water for household consumption

• Wages paid by the employer for the domestic servants employed by the employee

• Value of free boarding & lodging expenses.

• Free educational facilities to the children

Contd.• Subscription & Bills paid to the club

houses by the employer• Vacation at the holiday homes or

holiday trips at the cost of the employer

• Income tax due on salary but paid by employer

• Use of motor car with or without a driver at the cost of the employer for personal use.

DEDUCTIONS FROM SALARY

• ENTERTAINMENT ALLOWANCE [16(2)]– If granted by the employer it is included

in the Salary income – From A.Y. 2002-03 the allowance

deduction is allowed only to Government employees.

– The least of the following is exempt• Actual amount received• Rs.5000 per year• 1/5th of the basic salary

DEDUCTIONS FROM SALARY

• PROFESSIONAL TAX [16(3)]– Tax deducted from the Salary under

Maharashtra State Tax on professions, trade, callings and Employment Act 1975.

Income from Business & Profession

• Basic conditions– Any activity carried out with the

intention of profit – Not necessary to carry on business

continuously– Activity may be in the nature of

business i.e Trade or Commerce or profession or Vocation

– An adventure in the nature of Trade , commerce or manufacture

Basis of Charge (Section 28)• Deals with the classes of Income to

be included in the profits and gains of business.

• For e.g.– Profits and gains of any business or

profession– Any compensation or other payment

received or due for loss of agency– Any profit on sale of a license granted

under Imports (Control) Order, 1955 etc.

– Any interest, salary, bonus, commission or remuneration due to or received by a partner of a firm

Contd.– Any sum received under Key-man

Insurance Policy including the sum allocated by way of bonus on such policy.

– The value of any benefit or perquisite whether convertible into money or not, arising from business or the exercise of profession like present received by a doctor.

•

Business income – computation (Section 29)

• 1. Determine the profit or loss from business & profession

• 2. Do adjustments related to expenses – allowable or not allowable (as per section 30 to 43D)

• 3. Do the adjustments related to income - to be considered separately etc.

3 Statements for Profitability Calculation

• Income and Expenditure Account {Income and Expenditure Format.xlsx}

• Profit & Loss Account {Profit and Loss account format.xlsx}

• Receipts and Payment Account {Receipt and Payment Format.xlsx}

Section 37 – General Expenditure• Any expenditure other than

mentioned in Section 30 – 36 = General expenditure

• Allowed as deduction so long as Revenue in nature

• Incurred for the business of the assessee

• Should not be personal in nature• Should not be prohibited by law

• E.g. Purchase of raw Material, Wages, Salaries etc.

Expenses expressly disallowed

• Donations , Charity , Presents• Income Tax , advance Tax, Wealth

Tax, Estate Duty• Legal expenses incurred to defend

criminal liability• Fines , penalty resulting from

contravention of law• Drawings by the proprietor • Expenses of capital nature• Any kind of provision or reserves not

allowed

Contd.• Any expenditure incurred by an

assessee on the advertisement in any souvenir, brochure, tract, pamphlet etc published by apolitical party will not be allowed as deduction -Section 37(2B)

• Payments made to the relatives of the assessee who is an individual or Director , Partner or a person having substantial interest in the business, which is unreasonable or in excess in the opinion of the I.T.O , will be disallowed.- Section 40A(2)

Contd.• Payment made in excess of Rs.20000

otherwise than by a crossed cheque or Draft – Section 40A(3) & 40A (4)– Payment made to a person in a day in

excess of Rs.20000 otherwise than by a crossed cheque or draft than such expenditure is fully disallowed.

• Any provision made for the future liability towards Gratuity is disallowed , however any gratuity that becomes payable during the previous year is allowed

Deductions allowed only on payment Section 43B

• Any sum payable by way of Tax, Cess, Duty or fee under any law for the time being in force.

• Any sum payable by way of contribution to any provident fund or superannuation fund for the welfare of the employee.

• Any sum payable as bonus or commission to employee for services rendered.

• Any sum payable as interest on loans & advances taken from a schedule Bank, Public financial institution, State financial corporation

Contd.• Any sum payable by an employer in

lieu of leave at the credit of his employee.

Approach to solve the problem• Which statement of account is

given ?

• If Profit and Loss account OR Income & Expenditure Account – Reverse Approach – Start from Net

Profit / Surplus– Add: Disallowed Expenditure– Less: Income to be considered

separately– Less: Depreciation as per Income Tax

Contd.• If Receipt and Payment Statement

given– Then Pick Up Approach – Pick Up Business Income from Receipts

side– Pick Up Business Expenses from

Payment side– Business Receipt Minus Business

Expenses – Depreciation as per Income Tax

INCOME FROM OTHER SOURCES (SECTION 56 TO

59)• Basis of charges

– Income of any kind which is not to be excluded from total income & not chargeable under any of the specified heads = income from other sources – Section 56(1)

Section 56 (2)• Income chargeable to tax – example:

– Dividend (except exempt u/s.10(34) & 10(35)

– Winnings from lotteries, crossword puzzles, races including horse races, card games & other games of any sort

– Income by way of interest on securities– Any sum of money exceeding Rs.50000

received without consideration i.e. Gift by an individual or HUF from any person on or after 1.4.2006 but before 1.10.2009 the whole of the amount = income from other sources

Contd.• A sum of money/ property is

received by an individual or HUF without consideration on after 1.10.2009 (i.e. Gift) then—– Any sum of money in cash/ cheque/

draft from one or more persons exceeding Rs.50000 then the entire total value will be chargeable to tax

– Immovable Property without consideration and the stamp duty value of which exceed Rs.50000, then Stamp duty value will be chargeable to tax.

– Movable property received without consideration Fair Market value of which is exceeding Rs.50000 – whole FMV of the Property = Income

Contd.• Interest on Bank deposit, NSC,

Loans, deposits with companies• Income from Royalty• Director’s fees• Income from sub letting of property• Examination remuneration received

by a teacher or lecturer from an university

• Rent of Plot of Land• Income from undisclosed sources.

CHAPTER VI-A• SECTION 80 C , 80CCC & 80CCD

(Limit of Rs.1,00,000)– Life insurance Premium Payment ,

Pension Funds– Contribution to statutory PF, PPF,

Recognized PF– Post office Term Deposit – 10 to 15

years account– NSS, NSC- VIII Issue , ULIP of UTI or

LIC– Annuity Plan – Jeevan Dhara & Jeevan

Akshay– Equity linked saving scheme of any

mutual fund– Tuition fees of any 2 children– Principal Repayment in case of housing

loan

80-D – Mediclaim• Medical Insurance Premium paid by

cheque or any mode other than Cash is allowed as deduction

• The premium is for the policy covering spouse, dependent childern . Even the premium of the policy of parents is also covered.

• In case of HUF – policy taken for the members of the HUF is allowedMaximum allowed is Rs.15000 – for

Assessee other than Senior citizenFor senior citizen it is Rs.20000

80 DD – Deduction in respect of maintenance including

medical treatment• Deduction available to Resident

Individual & HUF• Deduction for expenditure incurred

for medical treatment of a dependent person of disability

• A fixed amount of Rs.50000 / Rs.100000 ( Severe disability = 80% & above) is allowed

• A copy of certificate issued by medical authority along with return of income a must to claim.

80 E -Deduction for interest on loan taken for higher education• Deduction available to an individual

• Loan is taken for the purpose of his education or his relatives

• Amount of deduction = interest paid out of income chargeable to tax

• Period of deduction = from the start of the previous year + 7 assessment year or till interest is paid in full whichever is earlier.

80 G – Donations• Donations made to notified bodies or

institute or funds qualifies for deductions.• Four categories – A, B, C, D• For A categories – 100 % of amount

as deduction without any limit• For B categories – 50 % of amount

as deduction without any limit• For C categories – 100 % of amount

as deduction subject to qualifying limit

• For D categories – 50 % of amount as deduction subject to qualifying limit

80 U Disable Assessee• Deduction for individual – resident in

India• Individual suffering from disability –

action, cerebral palsy, multiple disability blindness etc

• Deduction = Rs. 50000 / Rs. 100000 (for severe disability = 80% and above disability) to the assessee

Computation of Total Income

Income

1st source - salary

2nd source - HP

3rd source - B&P

4th source - CG

5th source - OS

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