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Deductions under Chapter VIA DAY 4 Session I –IV Slide 4.1

Deductions under Chapter VIA DAY 4 Session I –IV Slide 4.1. An Overview. 1] General provisions 2] Deduction in respect of certain payments 3] Deduction in respect of certain incomes 4]Other deductions. Slide 4.1. Gross Total Income.

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Deductions under Chapter VIA DAY 4 Session I –IV Slide 4.1

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  1. Deductions under Chapter VIADAY 4Session I –IVSlide 4.1

  2. An Overview • 1] General provisions • 2] Deduction in respect of certain payments • 3] Deduction in respect of certain incomes • 4]Other deductions. Slide 4.1

  3. Gross Total Income • Total income computed as per the provisions of the Act before deductions under Chapter VIA & after reducing LTCG [S 80B(5) & 112(2)]. • Unabsorbed loss or depreciation carried forward from earlier years should be adjusted for determining GTI. Slide 4.1

  4. Limitation on deduction • Deductions under this chapter are available from GTI. • Total deductions cannot exceed the GTI. • If AOP or BOI is allowed certain deductions, such deductions cannot be allowed to the members out of the share income. Slide 4.1

  5. Limitation on deduction • Section 80AB provides that for the purpose of calculating the deductions specified in sections 80HH to 80TT, the net income as computed in accordance with the provisions of the Act (before making any deduction under Chapter VIA, i.e., sections 80CCC to 80U) shall alone be regarded as the income which is received by the assessee and which is included in his gross total income. Accordingly, the deductions specified in the aforesaid sections will be calculated with reference to the net income as computed in accordance with the provisions of the Act (viz., after deducting expenses under sections 30 to 43B and 57 and after adjusting losses but before making any deduction under sections 80CCC to 80U) and not with reference to the gross amount of such income, subject, however, to the other requirements of the respective sections Slide 4.1

  6. Contribution under annuity plan of LIC for Pension [Sec. 80CCC] • Individual assessee only • Deduction allowable upto Rs.10,000/-. • Contribution out of assessee’s income chargeable to tax. • Pension or amount received on surrender of the plan along with interest & bonus taxable in the year of receipt. • No deduction u/s 88.. Slide 4.1

  7. Medical insurance premium[Sec 80D] • Individual :- Self, wife, dependent parents & dependent children. • HUF :- Any member • Limit :- Rs.10,000/- • Senior citizens :- Rs.15,000/- [From AY 2000-2001] • Payment by cheque out of income chargeable to tax. Slide 4.1

  8. Handicapped dependent Medical treatment [Sec.80DD] • Individual & HUF • Permanent physical disability, blindness or mental retardation. • Limit :- Rs.40,000/- from AY 1999-2000 to AY 2003-2004 • Rs.50000/- from AY 2004-2005 • Higher deduction of Rs.75000/- for severe disabilities (i.e. disability over 80 per cent) • Exp. on medical treatment [including nursing], training & rehabilitation of handicapped dependent. Slide 4.1

  9. Handicapped dependent Medical treatment [Sec.80DD] • Deposit under approved scheme of LIC or UTI for the purpose. • Annuity or lump sum amount should go to the benefit of such dependent on the death of the Ind. or concerned member of HUF. • Sum deposited will be taxed in assessee’s hands if such dependent predeceases the Ind.or member of HUF in the year of receipt. Slide 4.1

  10. Handicapped assessee [Sec.80U] • Individual only. • Permanent physical disability, blindness or mental retardation at the end of the previous year. • Limit :- Rs.40,000/- from AY 1999-2000 to AY 2003-2004 • Rs.50000/- from AY 2004-2005 • Higher deduction of Rs.75000/- for severe disabilities (i.e. disability over 80 per cent) • Medical certificate should be filed in the I year. • Deduction not subject to expenditure. Slide 4.1

  11. Certain disease or ailment Medical treatment [Sec.80DDB] • Individual - Self or dependent relative HUF - Any member. • Expenditure actually incurred on the treatment of specified disease or ailment as reduced by sum received under medical insurance. Slide 4.1

  12. Certain disease or ailment Medical treatment [Sec.80DDB] • Limit - Rs. 40,000/- upto AY 2003-04 • Senior citizens - Rs. 60,000/- upto AY 2003-04 • From AY 2004-05 the allowance would be also be limited to the amount actually incurred by the assessee on the treatment. That is to say if the amount incurred is less than the aforesaid limits the allowance would be restricted to the expenditure incurred. • Specified disease or ailment - Rule 11DD Slide 4.1

  13. Higher educationRepayment of loan [Sec.80E] • Individual • Repayment of loan (with interest) taken for pursuing own higher education [engg, med, management etc] from financial institution or approved charitable institution. • Repayment out of income chargeable to tax • Limit :- Rs.25,000/- per year.[Rs.40,000/- w.e.f. A Y 2001-02] • Maximum for 8 consecutive years. Slide 4.1

  14. Donations [Sec.80G] • Certain donations - 100% deduction. • Some other donations - 50% deduction. • Limit on certain donations - 10% of Gross Total Income. • Only monetary donation is eligible for deduction. Slide 4.1

  15. Rent [Sec.80GG] • Non - salaried Individual. • Rent for own residence paid in excess of 10% of Total Income. • Limit of deduction :- Rs.2,000/- per month or 25 % of Total Income whichever is lower. • From AY 1998-99. Slide 4.1

  16. Donation for scientific research etc. [Sec. 80GGA] • Person having no income from business or profession. • Deduction : Any amount paid to approved association, institution, university or college. • Purpose : Scientific research, social science, statistical research, rural development, conservation of natural resources, afforestation etc. Slide 4.1

  17. Profits of foreign projects[Sec. 80HHB] • 50 % of the profits & gains of the Indian company or resident Indian on a/c of foreign project taken on contract. • Conditions • Maintenance of separate a/c & submission of certificate of accountant with return of income. • 50 % of profit to be debited to P/L a/c & credited to F.P.R a/c for utilisation in assessee’s business in next 5 years, Slide 4.1

  18. Profits of foreign projects[Sec. 80HHB] • 50 % of profit to be brought in C.F.E. within 6 months from the end of the Previous Year or extended time allowed by RBI or other competent authority regulating FE. • If the amount deposited in F.P.R.a/c or brought in C.F.E. falls short of 50%, the deduction will be restricted to that amount. • In case of default in utilisation of sum deposited in F.P.R.a/c, action u/s 154. Slide 4.1

  19. Profits of housing projects[Sec. 80HHBA] • Execution of housing projects aided by World Bank awarded on the basis of Global Tender by Indian company or resident Indian. • Deduction :- 50 % of profits. • Conditions • 50 % of profit to be debited to P/L a/c & credited to H.P.R.A/c. for utilisation in assessee’s business in next 5 years, Slide 4.1

  20. Profits of housing projects[Sec. 80HHBA] • Maintenance of separate a/c & submission of audit report. • If the amount deposited in H.P.R.a/c falls short of 50%, the deduction will be restricted to that amount only. • In case of default in utilisation of sum deposited in H.P.R.a/c, action u/s 154. Slide 4.1

  21. Profits on exports[ Sec.80HHC ] • Deduction : 100 % profit of the business of export of any item excepting mineral oil & some minerals and ores by Indian company or resident Indian. • Conditions: • Sale proceeds to be brought in C.F.E. within 6 months from the end of the Previous Year or extended time allowed by RBI or other competent authority regulating FE. [Except for Supporting Manufacturer] • eport of accountant with return. Slide 4.1

  22. Profits on exports[ Sec.80HHC ] • Report of accountant with return. • Supporting Manufacturer: • Deduction: • Profit on sale of goods to Export House or Trade House • Conditions: • Report of accountant with return. • Certificate of House that it has not claimed deduction on that T.O. u/s 80HHC. Slide 4.1

  23. Export House or Trading House • If the supporting manufacturer gets deduction on certain T.O. on the basis of the certificate issued by the House, • Then profit not entitled to deduction in the case of the House • Said T.O. • = Total profit X -------------------- • Total Export T.O. Slide 4.1

  24. Part Export • Export of trading goods: • Eligible profit = Export turnover - Direct & indirect costs of such export. • Export of manufacturing goods: • Export T.O. • Eligible profit = -------------- X Total profit • Total T.O. Slide 4.1

  25. Part Export • Both trading & manufacturing goods: • Profit on trading goods: Export turnover - Direct & indirect costs of such export. • Profit on mfg. goods: • Adj. Export T.O. • = Adjusted profit X ------------------ • Adj. Total T.O. • Both Slide 4.1

  26. Earnings in C.F.E. by hotels etc[Sec. 80HHD] • Business of approved hotel, tour operator & travel agent. • Deduction : • 50 % of profit from the service of foreign tourists • + Amount credited to Reserve A/c out of remaining profit for specified business purpose in 5 years. • Receipts in CFE in 6 months or extended time as in 80HHC. Slide 4.1

  27. Export of computer software etc[ Sec. 80HHE ] • Business of export of computer software. • Technical service rendered outside India for development & production of computer software. • Deduction :- 100 % of profit. • Consideration in CFE in 6 months or extended time as in 80HHC. Slide 4.1

  28. Export of film software etc[ Sec. 80HHF ] • Business of export of • film software, • television software, • music software, • television news software including telecast rights. • Deduction :- 100 % of profit. • Receipts in CFE in 6 months or extended time as in 80HHC. Slide 4.1

  29. Phasing out the deduction on foreign exchange earnings • Deduction u/s 80HHB, 80HHBA, 80HHC, 80HHD, 80HHE & 80HHF will be phased out in 5 years. • Asst Year Reduction by • 2001-02 20% • 2002-03 40% • 2003-04 60% • 2004-05 80% • 2005-06 100% Slide 4.1

  30. Industrial undertakings etc[Sec. 80-IA] • Business of • industrial undertaking, • hotel, • infrastructural facility, • telecommunication service, • scientific & industrial research, • housing projects, • industrial park, • production & refining of mineral oil in NER Slide 4.1

  31. [Sec. 80-IA] • Deduction :- 25 % to 100 % of profit. • Period :- 5 to 12 A.Ys. • Conditions :- • Not formed by splitting or reconstruction of existing business, • Not formed by transferring of old plants & machineries. • Not manufacturing an item of 11th Schedule [Except for SSIU, industry in backward area etc.] Slide 4.1

  32. Bifurcation of deduction between Sec. 80-1A & 80-1B • The Finance Act, 99 has split the deductions available u/s 80-1A into two sections. • Sec. 80-IA :- Infrastructural facility, telecommunication service, power etc. • Sec. 80-IB :- Other industrial undertaking, hotel etc. • W.E.F. AY 2000-01. Slide 4.1

  33. Deduction from certain income[Sec. 80L] • Individual & HUF • Deduction of Rs. 12,000/- on interest on deposit with bank, financial corporation, post office, NSC etc. • Additional deduction of Rs. 3,000/- on interest on Govt. security, income from UTI & income from specified M.F. Slide 4.1

  34. Certain income received from foreign party [ Sec.80-O ] • Income from use of patent, invention, design & registered trade mark outside India • Condition: Income received from foreign state or foreign enterprise in C.F.E. in 6 months from the end of the P.Y. or extended time as in 80HHC. • Deduction :- 50 % of income.[To be phased out in 5 years] • Expl. 3 :- Service rendered in India. Slide 4.1

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