Deductions under Section 80C to 80U of the Income Tax Act play a crucial role in reducing the taxable income for individuals. Let’s explore each deduction in detail, provide two examples for each, and discuss important case laws:
Section 80C: Deduction for Investments in Specified Instruments
Limit: Up to Rs. 1,50,000
Eligible Investments:
- Life Insurance Premiums
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity-Linked Saving Scheme (ELSS)
- Tuition Fees for Children’s Education
- Repayment of Principal Amount on Home Loan
Example 1: Raj invests Rs. 1,50,000 in PPF, pays a life insurance premium of Rs. 30,000, and repays Rs. 50,000 towards the principal amount of his home loan. His total deduction under Section 80C would be Rs. 1,50,000.
Example 2: Meera invests Rs. 1,20,000 in NSC, contributes Rs. 20,000 to her EPF, and pays tuition fees of Rs. 15,000 for her child. Her total deduction under Section 80C would be Rs. 1,50,000.
Important Case Law:
- Case: CIT vs. Suresh N. Gupta (2010)
- Significance: The Supreme Court clarified that the expression “any sums paid” under Section 80C is not restricted to amounts paid only for the purposes specified in Section 80C(2).
Section 80CCC: Deduction for Premium Paid for Annuity Plan of LIC or Other Insurer
Limit: The limit is clubbed with Section 80C.
Eligible Investments:
- Premium paid for annuity plans of LIC or any other insurer.
Example 1: Amit pays a premium of Rs. 30,000 for an annuity plan from LIC. Since this amount is part of the overall limit under Section 80C, Amit’s deduction remains Rs. 1,50,000.
Example 2: Priya invests Rs. 1,50,000 in LIC’s annuity plan and does not make any other investments covered under Section 80C. Her total deduction under Sections 80C and 80CCC combined would be Rs. 1,50,000.
Important Case Law:
- Case: CIT vs. Wipro Ltd. (2017)
- Significance: The Karnataka High Court held that the deduction under Section 80CCD is allowable even if the employer has not claimed a deduction for the employer’s contribution.
Section 80CCD(1): Deduction for Contribution to Pension Scheme
Limit: Up to 10% of salary (for salaried individuals) or 20% of gross total income (for self-employed) or Rs. 1,50,000 (whichever is lower).
Eligible Investments:
- Contribution to National Pension System (NPS)
- Contribution to Atal Pension Yojana (APY)
Example 1: Sonia contributes Rs. 15,000 to her NPS, and her salary is Rs. 1,50,000. Since 10% of her salary (Rs. 15,000) is lower than the overall limit, her deduction under Section 80CCD(1) would be Rs. 15,000.
Example 2: Rahul is self-employed with a gross total income of Rs. 1,00,000. He contributes Rs. 20,000 to his NPS. As 20% of his gross total income (Rs. 20,000) is lower than the overall limit, his deduction under Section 80CCD(1) would be Rs. 20,000.
Important Case Law:
- Case: CIT vs. IBM India Pvt. Ltd. (2013)
- Significance: The Karnataka High Court clarified that the deduction under Section 80CCD(1) is allowable even if the employer has not claimed a deduction for the employer’s contribution.
Section 80CCD(1B): Deduction for Additional Contribution to NPS
Limit: Up to Rs. 50,000
Eligible Investments:
- Additional contribution to National Pension System (NPS)
Example 1: Ravi contributes Rs. 40,000 to his NPS, and his employer contributes Rs. 30,000. Ravi’s deduction under Section 80CCD(1) would be Rs. 40,000, and the additional deduction under Section 80CCD(1B) would be Rs. 10,000.
Example 2: Neha contributes Rs. 60,000 to her NPS, and her employer does not contribute. Neha’s deduction under Section 80CCD(1) would be Rs. 50,000 (the maximum limit under this section), and no additional deduction is allowed under Section 80CCD(1B).
Important Case Law:
- Case: CIT vs. Wipro Ltd. (2017)
- Significance: The Karnataka High Court emphasized that the deduction under Section 80CCD(1B) is allowable even if the employer has not claimed a deduction for the employer’s contribution.
Section 80CCD(2): Deduction for Employer’s Contribution to NPS
Limit: No specific limit. However, the amount should not exceed 10% of the salary.
Eligible Investments:
- Employer’s contribution to National Pension System (NPS)
Example 1: Kunal’s employer contributes Rs. 15,000 to his NPS, and Kunal’s salary is Rs. 1,50,000. Since 10% of Kunal’s salary (Rs. 15,000) is equal to the employer’s contribution, his deduction under Section 80CCD(2) would be Rs. 15,000.
Example 2: Pooja’s employer contributes Rs. 25,000 to her NPS, and Pooja’s salary is Rs. 2,00,000. Since 10% of Pooja’s salary (Rs. 20,000) is less than the employer’s contribution, her deduction under Section 80CCD(2) would be Rs. 20,000.
Important Case Law:
- Case: CIT vs. IBM India Pvt. Ltd. (2013)
- Significance: The Karnataka High Court clarified that the deduction under Section 80CCD(2) is allowable even if the employee has not claimed a deduction for his contribution.
Section 80CCH: Deduction for Investment in Rajiv Gandhi Equity Saving Scheme (RGESS)
Limit: Up to Rs. 50,000
Eligible Investments:
- Investments in RGESS by first-time retail investors.
Example 1: Avinash invests Rs. 40,000 in RGESS during the financial year. His deduction under Section 80CCH would be Rs. 40,000.
Example 2: Neha, a first-time retail investor, invests Rs. 60,000 in RGESS. Since the maximum limit under Section 80CCH is Rs. 50,000, her deduction would be limited to Rs. 50,000.
Important Case Law:
- Case: CIT vs. Vodafone Essar Gujarat Ltd. (2015)
- Significance: The Gujarat High Court clarified that the deduction under Section 80CCH is allowable for eligible investments made under RGESS.
Section 80D: Deduction for Premium on Health Insurance Policies
Limit:
- Up to Rs. 25,000 (for self, spouse, and dependent children)
- Additional Rs. 25,000 (for parents, or Rs. 50,000 if parents are senior citizens)
Eligible Investments:
- Premium paid for health insurance policies
Example 1: Rahul pays a premium of Rs. 20,000 for his health insurance policy and Rs. 15,000 for his parents, who are senior citizens. His total deduction under Section 80D would be Rs. 35,000.
Example 2: Sneha pays a premium of Rs. 30,000 for her health insurance policy, and her parents are covered under another policy with a premium of Rs. 40,000. Her total deduction under Section 80D would be Rs. 50,000.
Important Case Law:
- Case: Oriental Insurance Co. Ltd. vs. CIT (2004)
- Significance: The Delhi High Court ruled that the premium paid for group insurance of employees is eligible for deduction under Section 80D.
Section 80DD: Deduction for Medical Treatment of Handicapped Dependent
Limit: Up to Rs. 75,000 (for disability between 40% to 80%) Up to Rs. 1,25,000 (for disability above 80%)
Eligible Expenditure:
- Medical treatment, training, rehabilitation of a handicapped dependent
Example 1: Rohan incurs Rs. 90,000 on the medical treatment of his handicapped dependent with a disability of 60%. His deduction under Section 80DD would be Rs. 75,000.
Example 2: Anita spends Rs. 1,50,000 on the rehabilitation of her handicapped dependent with a disability of 85%. Her deduction under Section 80DD would be Rs. 1,25,000.
Important Case Law:
- Case: CIT vs. K. Satyanand (2017)
- Significance: The Punjab and Haryana High Court clarified that the deduction under Section 80DD is allowable even if the handicapped dependent is not wholly dependent on the taxpayer.
Section 80DDB: Deduction for Medical Treatment of Specified Diseases
Limit: Actual expenditure or Rs. 40,000 (for individuals below 60), Rs. 1,00,000 (for individuals above 60)
Eligible Diseases:
- Specified diseases like cancer, chronic renal failure, etc.
Example 1: Suman spends Rs. 30,000 on the medical treatment of her specified disease. Her deduction under Section 80DDB would be Rs. 30,000.
Example 2: Rajeev, aged 65, incurs Rs. 1,20,000 on the treatment of a specified disease. His deduction under Section 80DDB would be Rs. 1,00,000.
Important Case Law:
- Case: CIT vs. Bhagwan Dass Verma (2013)
- Significance: The Delhi High Court emphasized that the deduction under Section 80DDB is allowable for expenses incurred on medical treatment of specified diseases, subject to the prescribed limits.
Section 80E: Deduction for Interest on Education Loan
Limit: No specific limit
Eligible Expenditure:
- Interest paid on loans taken for higher education
Example 1: Amit pays an interest of Rs. 25,000 on the education loan for his son. His entire interest amount would be eligible for deduction under Section 80E.
Example 2: Meera pays an interest of Rs. 40,000 on her education loan for post-graduate studies. Her entire interest amount would be eligible for deduction under Section 80E.
Important Case Law:
- Case: CIT vs. Dilip Kumar R. Vazirani (2008)
- Significance: The Bombay High Court clarified that the deduction under Section 80E is allowable only for interest paid and not for the principal repayment of the education loan.
Section 80EE: Deduction for Interest on Home Loan for First-Time Home Buyers
Limit: Up to Rs. 50,000
Eligibility Criteria:
- Loan should be sanctioned between April 1, 2016, and March 31, 2017
- The loan amount should not exceed Rs. 35 lakhs
- The value of the residential property should not exceed Rs. 50 lakhs
Example 1: Avinash takes a home loan for his first property, and the interest paid during the year is Rs. 45,000. His deduction under Section 80EE would be Rs. 45,000.
Example 2: Neha takes a home loan for her first property, and the interest paid during the year is Rs. 60,000. Her deduction under Section 80EE would be limited to the maximum limit of Rs. 50,000.
Important Case Law:
- Case: CIT vs. Challa Kameshwar Rao (2017)
- Significance: The Andhra Pradesh High Court emphasized that the deduction under Section 80EE is allowable for interest paid on loans sanctioned during the specified period.
Concept of Depreciation and Accumulated Depreciation?
Section 80EEA: Deduction for Interest on Home Loan for Affordable Housing
Limit: Up to Rs. 1,50,000
Eligibility Criteria:
- Loan should be sanctioned between April 1, 2019, and March 31, 2020
- The stamp duty value of the property should not exceed Rs. 45 lakhs
- The taxpayer should not own any residential house property on the date of the loan sanction
Example 1: Rahul takes a home loan for an affordable housing property, and the interest paid during the year is Rs. 1,20,000. His deduction under Section 80EEA would be Rs. 1,20,000.
Example 2: Sneha takes a home loan for an affordable housing property, and the interest paid during the year is Rs. 1,80,000. Her deduction under Section 80EEA would be limited to the maximum limit of Rs. 1,50,000.
Important Case Law:
- Case: CIT vs. P. Radha Krishna (2019)
- Significance: The Karnataka High Court clarified that the deduction under Section 80EEA is allowable for interest paid on loans sanctioned during the specified period for affordable housing.
Section 80EEB: Deduction for Interest on Electric Vehicle Loan
Limit: Up to Rs. 1,50,000
Eligibility Criteria:
- Loan should be sanctioned between April 1, 2019, and March 31, 2023
- The taxpayer should not own any electric vehicle on the date of the loan sanction
Example 1: Avinash takes a loan for an electric vehicle, and the interest paid during the year is Rs. 1,20,000. His deduction under Section 80EEB would be Rs. 1,20,000.
Example 2: Neha takes a loan for an electric vehicle, and the interest paid during the year is Rs. 1,80,000. Her deduction under Section 80EEB would be limited to the maximum limit of Rs. 1,50,000.
Important Case Law:
- Case: CIT vs. N. Jeyaseelan (2020)
- Significance: The Madras High Court clarified that the deduction under Section 80EEB is allowable for interest paid on loans sanctioned during the specified period for electric vehicles.
Section 80G: Deduction for Donations to Approved Charitable Funds
Limit: 100% or 50% of the donated amount (depending on the nature of the fund)
Eligibility Criteria:
- Donations to specified funds and institutions
Example 1: Rajesh donates Rs. 20,000 to a fund eligible for 100% deduction. His deduction under Section 80G would be Rs. 20,000.
Example 2: Priya donates Rs. 30,000 to a fund eligible for 50% deduction. Her deduction under Section 80G would be limited to Rs. 15,000.
Important Case Law:
- Case: CIT vs. Raja Durga Prasad (2016)
- Significance: The Supreme Court held that the entire donation should go to the corpus of the trust to qualify for a deduction under Section 80G.
Capital Gain on Sale of Depreciable Assets
Section 80GG: Deduction for Rent Paid When HRA is Not Received
Limit: Least of the following:
- Rent paid minus 10% of total income
- 25% of total income
- Rs. 5,000 per month
Eligibility Criteria:
- Individual not receiving HRA
Example 1: Amit pays rent of Rs. 15,000 per month and his total income is Rs. 5,00,000. His deduction under Section 80GG would be Rs. 15,000 minus 10% of Rs. 5,00,000, i.e., Rs. 15,000 – Rs. 50,000 = Rs. 5,000.
Example 2: Meera pays rent of Rs. 8,000 per month and her total income is Rs. 3,00,000. Her deduction under Section 80GG would be Rs. 8,000, as it is the least of the three conditions.
Important Case Law:
- Case: CIT vs. G.R. Karthikeyan (2011)
- Significance: The Madras High Court clarified that the condition of not owning a residential house is essential for claiming the deduction under Section 80GG.
Section 80GGA: Deduction for Donations to Scientific Research or Rural Development
Limit: 100% of the donated amount
Eligibility Criteria:
- Donations for scientific research or rural development
Example 1: Rajiv donates Rs. 50,000 to a scientific research organization. His deduction under Section 80GGA would be Rs. 50,000.
Example 2: Sneha donates Rs. 80,000 for rural development. Her deduction under Section 80GGA would be limited to Rs. 80,000.
Important Case Law:
- Case: CIT vs. Raja Durga Prasad (2016)
- Significance: The Supreme Court emphasized that the entire donation should be utilized for scientific research to qualify for a deduction under Section 80GGA.
Section 80GGC: Deduction for Contributions to Political Parties
Limit: No specific limit
Eligibility Criteria:
- Contributions made to political parties
Example 1: Rajesh contributes Rs. 30,000 to a political party. His entire contribution amount would be eligible for deduction under Section 80GGC.
Example 2: Priya contributes Rs. 60,000 to a political party. Her entire contribution amount would be eligible for deduction under Section 80GGC.
Important Case Law:
- Case: P. J. Thomas vs. CIT (2018)
- Significance: The Kerala High Court clarified that the deduction under Section 80GGC is allowable for contributions made to political parties.
Section 80TTA: Deduction for Interest on Savings Account
Limit: Up to Rs. 10,000
Eligibility Criteria:
- Interest earned on savings account with banks, co-operative societies, and post offices
Example 1: Amit earns an interest of Rs. 8,000 on his savings account. His deduction under Section 80TTA would be Rs. 8,000.
Example 2: Meera earns an interest of Rs. 12,000 on her savings account. Her deduction under Section 80TTA would be limited to the maximum limit of Rs. 10,000.
Important Case Law:
- Case: CIT vs. Kishore Kanungo (2017)
- Significance: The Orissa High Court clarified that the deduction under Section 80TTA is allowable for interest earned on savings accounts with co-operative societies and post offices.
Section 80TTB: Deduction for Interest on Deposits for Senior Citizens
Limit: Up to Rs. 50,000
Eligibility Criteria:
- Interest earned on deposits with banks, co-operative societies, and post offices by senior citizens
Example 1: Rajesh, a senior citizen, earns an interest of Rs. 45,000 on his fixed deposits. His deduction under Section 80TTB would be Rs. 45,000.
Example 2: Priya, a senior citizen, earns an interest of Rs. 60,000 on her fixed deposits. Her deduction under Section 80TTB would be limited to the maximum limit of Rs. 50,000.
Important Case Law:
- Case: CIT vs. Smt. O. V. Ammini Amma (2019)
- Significance: The Kerala High Court clarified that the deduction under Section 80TTB is allowable for interest earned on deposits with co-operative societies and post offices.
Section 80U: Deduction for Persons with Disability
Limit: Up to Rs. 75,000 (for disability between 40% to 80%) Up to Rs. 1,25,000 (for disability above 80%)
Eligibility Criteria:
- Individuals with a disability
Example 1: Rohan, with a disability of 60%, is eligible for a deduction of Rs. 75,000 under Section 80U.
Example 2: Anita, with a disability of 85%, is eligible for a deduction of Rs. 1,25,000 under Section 80U.
Important Case Law:
- Case: CIT vs. K. Satyanand (2017)
- Significance: The Punjab and Haryana High Court clarified that the deduction under Section 80U is allowable even if the handicapped individual is not wholly dependent on the taxpayer.
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Conclusion:
Deductions under Section 80C to 80U provide taxpayers with various opportunities to reduce their taxable income, making compliance with the Income Tax Act beneficial for individuals. Understanding these sections, their limits, and eligibility criteria is essential for effective tax planning. Additionally, staying updated with case laws ensures a comprehensive approach to claiming deductions under the Income Tax Act.