TAX PLANNING- INDIVIDUALS PERSPECTIVE- PART 3

Deductions under Chapter VI A

1.    Section 80C

• Eligible assesses are individuals and HUF.

Benefits	Members for whom it can be claimed
Contribution to PPF Contribution to PPF LIC premium paid Contribution to deferred annuity scheme Contribution to ULIP scheme	Contribution can be in name of self, spouse or children

• Deductions that can be claimed u/s 80C are

§  Contribution to recognized provident fund/ statutory provident fund

§  Contribution to approved mutual fund/ superannuation fund

§  Subscription to units of NABARD

§  Contribution to NSC and interest accrued thereon reinvested. However 6^th year interest cannot be claimed as deduction

§  5 year post office deposit

§   Subscription to units of NHB or PSU providing long term finance

§  Subscription to post office senior citizens deposits scheme

§   Tution fees for full time education in India of any two children of individual

§   Repayment of housing loan principle taken from approved institutions.

§   Subscription to 5 year notified fixed deposit with banks.

LIC

§  For claiming deduction for LIC, it should have a minimum surrender period of two years.

§   Aggregate LIC premium shall not exceed 10% of capital sum assured

Section 10(10D)- LIC income

·         Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than

o   Under the scheme referred to in section 80DD or 80DDA.

o   Under a keyman insurance policy including bonus thereon.

Where premium paid for any year exceeds 10% of actual capital sum assured

         5 year time deposit/ Fixed Deposit

§  If investment is in notified FD, it is eligible for deduction.

§  If the amount is withdrawn before the expiry of 5 years, it is taxable in the year of withdrawal. However there is no taxability for legal heir. Only the interest portion will be taxable in the hands of legal heir.

§  No loan can be taken against these deposits.

Repayment of Housing loan principle

§  Housing loan shall be taken from approved institutions

§  Loan repayment is towards acquisition or construction of property and not towards renovation/ repairs of property.

§  House for which loan is taken must be chargeable to income from house property and must be a residential house.

§  House property should not be transferred for a period of 5 years. If transferred, prior deductions will be taxed in the year of transfer.

§  Stamp duty and registration charges can also be claimed as deduction for building.

Maximum deduction u/s 80 C is the aggregate of amount contributed or Rs 1,00,000 whichever is less.

Deduction can be claimed on actual payment basis and not on due basis.

2.    Section 80 CCC

•  It can be claimed by individuals in respect of contribution made to approved pension scheme.
• Contribution shall be out of income chargeable to tax.
• Premium paid for Section 80CCC out of agricultural income cannot be claimed as deduction.
• Amount paid or Rs 1,00,000, whichever is lower can be claimed as deduction.
• Pension subsequently received is fully taxable in the hands of assessee or legal heir under income from other source.

3.    Section 80 CCD

• It can be claimed by individuals.
• Deduction u/s 80CCD can be claimed if contribution is made to approved pension scheme of central government.
• Maximum deduction shall be 10% of salary or amount of contribution whichever is lower.
• If employer is contributing on behalf of employee, it can also be claimed as deduction. (contribution 10% of salary)
• 10% of salary or contribution is separate for both employee contribution and employer contribution.
•  Contribution shall be out of income chargeable to tax.
•  Salary means basic + DA in terms of employment.
•  For others, deduction shall be 10% of GTI or contribution whichever is lower.
•  If any amount is matured and reinvested, it will not be taxable

4.    Section 80 CCE

• Aggregate deduction u/s 80C, 80CCc or 80CCD shall not exceed Rs 1,00,000.

5.    Section 80 D

• Deduction can be claimed for medical insurance premium paid for self, spouse, parents and dependent children. ( for HUF- any member of HUF)
• Medical insurance can be paid to approved insurance companies or government held insurance scheme.
• Premium shall be paid out of income chargeable to tax.
• Premium shall be paid by any mode other than cash.
•  Deduction is amount of premium paid or Rs 15,000 whichever is less. (self, spouse, children) and Rs 15,000 for parents. ( Rs 20,000 of senior citizens)

·         Deduction for expenditure on preventive health checkups is allowable on payments aggregating upto Rs 5,000 for self, spouse, dependent parents and children. It is a deduction u/s 80D and is within the limits of Rs 15,000.( Rs 20,000 for senior citizens.) It is an amendment.

6.    Section 80DD Medical treatment of dependent with Disability

• Eligible assesse are individuals and HUF
• Deduction can be claimed in respect of medical expenditure incurred for treatment of handicapped dependent.
• Deduction is lump sum of Rs 50,000.
• In case of severe disability (Rs 1,00,000 or more) with 80% disability.
• Handicapped dependent could be spouse, dependent children, dependent parents, dependent brothers and sisters.
• Medical treatment also includes home nursing.
• Disability shall be certified by medical board in Form 10IA.
• Dependent cannot claim deduction u/s 80U
•  If there are two disabled person, separate deduction can be claimed for both.

7.    Section 80DDB Medical treatment for certain specified disease.

• Deduction can be claimed by individuals and HUF resident in India.
• Deduction is in respect of treatment of specified disease.
•  Expenditure shall be incurred for self, spouse, parents, children and dependent brothers and sisters.
• It shall be certified by doctor registered with IMA
•  Deduction is amount of expenditure or Rs 40, 000 whichever is lower. ( For senior citizens Rs 60,000)

8.    Section 80E interest on loan for higher education

• Deduction can be claimed by individual on repayment of interest on loan taken for higher education for self, spouse, children and for individual whom assessee is legal guardian.
• Repayment shall be out of income chargeable to tax.
•  Deduction is allowed for initial year and immediately succeeding 7 assessment years. ( total- 8 years)
• Loan should be from any financial institution or approved charitable institution
•  Only interest amount qualifies for deduction.
•  Education can be full time or part time. Education can even be in abroad.