Deductions from Total Income

Exemption v/s Deduction

Exemption means exclusion. A particular income, exempted from tax shall not enter into the
computation of taxable income.

However, Deduction in relation to Chapter VI- A and section 10AA refers to the amount that is
reduced from gross total income to arrive at Total Income.

There are incomes which are included in gross total income but are wholly or partially allowed as
deduction under chapter VI-A to arrive at the total income, if the assessee has exercised the option
of shifting out of default tax regime provided u/s 115BAC and pays tax as per optional tax regime.

Manner of treatment of deduction: First included in Gross Total Income and then the deductions will
be allowed from Gross total income.
Deduction under section 10AA

> Section 10AA of the Income Tax Act, 1961, provides deductions for enterprises operating in Special Economic
Zones (SEZs) in India.
> This section aims to promote exports and attract foreign investment by offering tax concessions to businesses
located in SEZs.
> It became fully functional in 2006, granting income tax exemptions and holidays to eligible new businesses or
units within SEZs.

Eligibility For Section 10AA Deduction

1) Entrepreneurial status: The assessee must qualify as an entrepreneur under Section 2(j) of the Special
Economic Zone Act, 2005
2) Commencement of operation: The SEZ unit must commence its production on or after April 1, 2006.
3) Non splitting or reconstruction: The SEZ unit should not have been established through the splitting up
or reconstruction of business.
4) Non transfer of Plant and Machinery: The SEZ unit should not be formed by transfer of plant and
machinery previously used for any purpose to a new business.

Note: In case of an Individual, HUF, AoP, BoI, or an AJP, deductions would only be available only if they
have exercised the option of old tax regime
Deduction allowed u/s 10AA
The amount of deduction available under this existing section is as follows:
> 100% of the profit coming from export is entitled to a tax deduction for the first 5 consecutive years (1st to 5th
year).
> 50% of the export profit is entitled to a deduction for the next 5 years (6th to 10th year).
> 50% of Export Profits (or) the amount credited to the SEZ Reinvestment Allowance reserve, whichever is lower
(11th to 15th year)

NOTE: The existing provision of Section 10AA of the Income Tax provides 15 years of tax benefit to units located in
SEZs. However, the deduction claimed under this section is time-bound. For instance, it is only available if the SEZ
unit began operation on or after 1 April 2005 but before 1 April 2021.

Calculation of Deduction based on the formuala:

Export Profit = (Profit of business of SEZ unit * Export turnover of SEZ unit)
Total turnover of SEZ unit
Calculation of Deduction based on the formuala:

Export Profit = (Profit of business of SEZ unit * Export turnover of SEZ unit)
Total turnover of SEZ unit

Question M/s Sunrise Exports, an SEZ unit engaged in the export of garments, was set up in the financial year
2019-20 and commenced manufacturing during the same year. The following details are available for the
Assessment Year 2025-26.
Profit of SEZ unit: Rs 80,00,000
Export Turnover: Rs 6,00,00,000
Total Turnover: Rs 7,50,00,000
Compute the amount of deduction available to the assessee under Section 10AA of the Income-tax Act, 1961 for
AY 2025-26.
Solution:

Export Profit = (Profit of business of SEZ unit * Export turnover of SEZ unit)
Total turnover of SEZ unit

80,00,000* 6,00,00,000 = 64,00,000

7,50,00,000

50% of the export profit is entitled to a deduction for the next 5 years (6th to 10th year). Since FY 2024-25 is 6th
year commencing from the year of manufacture by the SEZ unit.
Deduction available is 50% of 6400,000 in FY 2024-25
i.e 32,00,000
Deduction under section 80C
Eligible Assessee: Individual or HUF
Deduction allowed upto Rs 1,50,000 (As per section 80CCE , maximum permissible deduction under Section 80C, 80CCC and
80CCD(1) is Rs. 1,50,000 )

Common investments or expenditures for which the deduction under Section 80C is allowed are as under:
1. Payment for life insurance premium
2. Sum paid under a contract for a deferred annuity
3. Contributions to the Employees’ or Recognised Provident Fund
4. Contribution to Public Provident Fund Account
5. Contribution to an approved superannuation fund
6. Subscription to any notified security or notified deposit scheme (Sukanya Samriddhi Account Scheme)
7. Subscription to notified savings certificates
8. Contribution to notified unit-linked insurance plan
9. Tuition fees for the full-time education of any 2 children
10. Certain payments for the purchase/construction of residential house property (principal payment)
11. Notified annuity plan of LIC or other insurers
12. Investment in Equity Linked Saving Scheme
13. Term deposits for a fixed period of not less than 5 years with a scheduled bank
14. Deposit in Senior Citizen Savings Scheme
15. Contribution to Tier-II NPS account by central government’s employees.
Note: Deduction u/s 80C would be available only if individual/HUF exercises the option of shifting out of the default tax regime
u/s 115BAC. It means deduction available under old scheme only
Deduction under section 80CCC
Eligible Assessee: Individual
Deduction allowed upto Rs 1,50,000 (As per section 80CCE , maximum permissible deduction under Section
80C, 80CCC and 80CCD(1) is Rs. 1,50,000 )

Contribution to certain pension funds

Section 80CCC allows individuals to claim a deduction up to a specific limit on the sum invested in purchasing or
paying a premium on a pension plan offered by the Life Insurance Corporation (LIC) or other insurers approved
by the Insurance Regulatory and Development Authority (IRDA).

This is done to help individuals save money (lump sum or annuity) for their retirement.

Note: Deduction u/s 80C would be available only if individual/HUF exercises the option of shifting out of the
default tax regime u/s 115BAC. It means deduction available under old scheme only
Deduction under section 80CCD
Eligible assessee: Individuals employed by the central government or any other employer, any other individual
assessee
Section 80CCD allows tax deductions for contributions to the National Pension System (NPS) and Atal Pension Yojana.
80CCD is divided into three main sub sections - section 80CCD(1), 80CCD(1B) and 80CCD(2).
> 80CCD(1) - Deduction on taxpayer's own contribution to pension schemes - Up to Rs. 1.5 lakhs.
The deduction limits for section 80CCD (1) are as follows:

This deduction is not available under the new tax regime. Only taxpayers opting for the old regime can claim this deduction.

> Section 80CCD(1B) provides an additional deduction of up to Rs 50,000 for contributions made to NPS over and above the
deductions available under Section 80CCD(1), if they opt for the old tax regime.

As per section 80CCE, maximum deduction under Sections 80C + 80CCC + 80CCD(1) is Rs 1.5 lakh

Thus, the maximum deduction available under Section 80CCD is Rs 2 lakhs (Rs 1.5 lakh + Rs 50,000)

This deduction is not available under the new tax regime. Only taxpayers opting for the old regime can claim this deduction
> Section 80CCD(2) - Deduction is allowed on employer's contribution to pension scheme. Assessee can be
government employee or non government employee.
Self employed individuals cannot claim deductions.
This deduction is available under both old regime and new regime.

The deduction limit is lower of:

1) Employers Contribution or
2) Employee if employment is with
• Central / State Government Employer - 14% of salary (Basic + DA)
• Other Employer
- Old Regime - 10% of salary (Basic + DA)
- New Regime - 14% of salary (Basic + DA)

As per section 80CCE, maximum deduction under Sections 80C + 80CCC + 80CCD(1) is Rs 1.5 lakh. However, the
limit of Rs 1.5 lakh does not apply to deduction u/s 80CCD (2) and 80CCD (1B).
Question:
Mr. Mayank is a central government employee, and the government contributes Rs 70,000 to the NPS
account. His salary structure is as below:
Basic Salary – Rs 2,20,000
Dearness allowance – Rs 80,000
Other Allowances and Perquisites – Rs. 1,00,000

What if he is employed with private sector and employer's NPS Contribution - Rs 70,000

Calculate deduction under new and old regime both.

Solution
Tax Deduction under the New Regime:
Now, he can claim under section 80CCD(2), i.e. lower of the following-
a. NPS contribution- Rs 70,000
b. 14% of basic and dearness allowance- Rs 42,000
Rs. 42,000 can be claimed as a deduction under section 80CCD(2).

Tax Deduction under the Old Regime:

Now, he can claim under section 80CCD(2), i.e. lower of the following-
a. NPS contribution- Rs 70,000
b. 10% of basic and dearness allowance- Rs 30,000
Rs. 30,000 can be claimed as a deduction under section 80CCD(1)
Deduction under section 80CCH
This deduction was introduced to honor and empower Agniveers, who serve the nation for a short term but
make a significant contribution. It is a tailor-made benefit, not open to other taxpayers.

Section 80CCH provides deduction in respect of contribution made in the Agniveer corpus fund by
i) the individual enrolled in the Agnipath scheme and
ii) the Central Government

Agnipath scheme: Launched by the Central Government in 2022 for enrollment of Indian youth in the Indian
Armed force. Individuals aged between 17.5 years to 21 years will be eligible to apply for it.

In this scheme individuals would be commissioned as soldiers into the three segments of the armed forces.
After a job tenure of 4 years, 25% of "Agniveers" will get a chance to get converted to a regular armed forces
cadre.

The entire principal will accumulate interest over 4 years, and applicants will get a maturity amount along
with interest. To ensure all income under this scheme remains tax-free, the authorities introduced Section
80CCH deduction.
Quantum of deduction under section 80CCH
a) Section 80CCH (1) provides a deduction in respect of amount paid by the individual enrolled in Agnipath
scheme and subscribing to Agniveer Corpus Fund on or after 1st November 2022. (available under old
scheme)
b) Under section 80CCH (2), the whole amount of contribution made by the Central government to the said
account of assessee in the contribution made in the Agniveer corpus Fund. The central government
contribution would be first included in the assessee’s salary and further, deduction u/s 80CCH(2) would
be available for the same. (available under both old and new scheme)
Deduction under section 80D
Section 80D of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs)
to claim a tax deduction for
a) health insurance premiums paid,
b) any contribution made to the Central Government Health scheme (CGHS) or
c) such other health scheme as may be notified by the government.

The deduction is available for insurance taken for self, spouse, children, and parents.
Deduction shall also be available for preventive health check-ups, top-up health plans,
medical expenditure for senior citizen subject to specified limits.
Deduction limit:
>A deduction ranging from Rs25,000 to Rs1,00,000 can be claimed under Section 80D, depending on the age of the
taxpayer and their parents.
> Health insurance premiums to be paid in any mode other than cash.

>Taxpayers can claim up to Rs. 5,000 for preventive health check-up for self, spouse, dependent children or parents,
which is included within the overall limit. The payment for preventive health check-ups can be made in cash.

>Individuals can claim a tax deduction of up to Rs. 25,000 for contributions made to the Central Government Health
Scheme (CGHS) or any other notified scheme. However, any contribution made on behalf of parents is not eligible
for this deduction.

>As a welfare towards senior citizen, who are unable to get health insurance plan, deduction upto Rs 50,000 would
be available on account of medical expenditure, if no payment has been made for health insurance of such person

>This deduction can be claimed only if an individual or HUF chooses to pay taxes under the old tax regime.
Different situations to claim deduction u/s 80D

Please note that 'family' under this section includes only the spouse and dependent children.
If any senior citizen is a non-resident or the assessee is a non-resident, the extended limit of Rs.50,000 is not applicable.
Question 1
Aman is aged 34 years, and his father is aged 65 years. Aman has taken medical
cover for himself and his father, for which he pays insurance premiums of Rs
30,000 and Rs 35,000, respectively. What would be the maximum amount he can
claim by way of a deduction under Section 80D?
Solution
Aman can claim up to Rs 25,000 for the premium paid on his policy. As for the policy taken
for his father, a senior citizen, Aman can claim up to Rs 50,000.
In the given case, the deduction allowed is Rs 25,000 and Rs 35,000. Therefore, the total
deduction he can claim for the year is Rs 60,000.
Question 2
Mr. X aged 40 years, paid medical insurance for his health, his spouse and
dependent children of Rs 22,000 during the FY 2024-25.
He also paid medical insurance premium of Rs 33,000 for his mother, aged 67
years.
He incurred medical expenses of Rs 20,000 for his father aged 72 years, who is not
covered under medical insurance policy.
He contributed Rs 6,000 towards Central Government Health scheme during the
year
Calculate the eligible deduction u/s 80D if he exercise the old tax regime.

What would your answer if he exercise new tax regime u/s 115BAC
Solution
Deduction allowable u/s 80D
1) medical insurance for his health, his spouse
and dependent children Rs 22,000
2) contribution towards Central Government
Health scheme Rs 6,000
Restricted to Rs 28,000 25,000

3) Medical insurance premium for his mother

(Her age is over 60 years) Rs 33,000

4) Medical expenses for his father, not covered

Under insurance (His age is over 60 years) Rs 20,000

Restricted to Rs 53,000 50,000

75,000
Deduction under section 80DD
Section 80DD allows tax deductions for expenses incurred on the medical treatment and maintenance of a
dependant with a disability, with a maximum deduction of Rs75,000 or Rs1,25,000 depending on the severity of
the disability.
Eligible assessee: Resident Individuals or HUFs

Conditions to Avail of Section 80DD Deduction

➢ Deduction is allowed for a dependant of the taxpayer and not the taxpayer himself.
➢ The taxpayer is not allowed this deduction if the dependant has claimed a deduction under section 80U for
himself/herself
➢ Dependant in case of an individual taxpayer means spouse, children, parents, brothers & sisters of the
taxpayer. In case of a HUF means a member of the HUF
➢ The taxpayer has incurred expenses for medical treatment (including nursing), training & rehabilitation of the
differently-abled dependant or the taxpayer may have deposited in a scheme of LIC or another insurer for
maintenance of the dependant.

Maximum Amount of Deduction allowed under Section 80DD

Where the disability is more than 40% and less than 80%: Rs 75,000.
Where the disability is 80% or more: Rs 1,25,000.
This deduction can be claimed only if an individual or HUFs choose to pay taxes under the old tax regime.
Deduction under section 80U
Section 80U of the Income Tax Act, 1961 allows resident individuals with disability to claim a flat
deduction of Rs 75,000 (Less than 80% disability) or Rs 1.25 lakh for severe disability (80% or more)
from their total income.
The disability has to be certified by the approved medical authorities at any time during the
financial year.

For the purpose of this section, disability has been defined as one of the following:

• Blindness
• Low vision
• Leprosy-cured
• Hearing impairment
• Locomotor disability
• Mental retardation
• Mental illness

This deduction can be claimed only if an individual chooses to pay taxes under the old tax regime
Deduction under section 80DDB
Section 80DDB of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim deduct
ions for medical expenses incurred for the treatment of specified diseases*.

Amount of deduction

The maximum deduction allowed under Section 80DDB is as follows:

• For individuals below 60 years: Up to Rs 40,000 or the actual amount spent, whichever is less.
• For senior citizen 60 years and above : Up to Rs 100,000 or the actual amount spent, whichever is less.
• If the taxpayer receives any reimbursement from an insurer or employer, that amount must be deducted
from the total eligible deduction.
*Neurological Diseases, Malignant Cancers, Acquired Immuno-Deficiency Syndrome (AIDS), Renel failure and others

This deduction can be claimed only if an individual and HUFs choose to pay taxes under the old tax regime
Section 80E: Education Loan Deduction

Section 80E provides tax benefits on education loans by allowing individuals to claim a deduction on the
interest paid, either for themselves or their relatives.
The entire interest amount paid in a financial year can be claimed, with no maximum cap.

It is available only for 8 years starting from the year in which you begin repaying the loan or until the interest
is fully repaid whichever is earlier.

The loan should be taken for the higher education of oneself, one's spouse, children, or a student for whom
the individual is a legal guardian. Parents can easily claim this deduction for the loan taken for their
children's higher studies

Deduction is eligible on interest paid on a loan taken only from any bank/financial institution or any
approved charitable institution. Loans taken from friends or relatives for higher education do not qualify for
this deduction.

This deduction can be claimed only if an individual chooses to pay taxes under the old tax regime
Section 80EE: Deduction for Interest on Home Loan
Section 80EE allows first-time homebuyers to claim deduction of up to Rs. 50,000 per year on interest paid on
home loans, over section 24 (b).

Conditions to claim Section 80EE deduction are given below:

• Eligible assessee: Available only to individual taxpayers (resident or NRI). HUFs, AOPs, BOIs, firms, companies,
and other entities are not eligible.

• Loan Criteria: The loan must be sanctioned between 1st April 2016 and 31st March 2017

• Property Value Limit: The property value should not exceed Rs 50 lakh.

• Loan Amount Limit: The loan amount must not exceed Rs 35 lakh.

Note: Deduction is eligible on interest paid on a loan borrowed only from any bank/financial institution for
acquisition of residential house property.

This deduction can be claimed only if an individual chooses to pay taxes under the old tax regime
Section 80EEA: Deduction for Interest on Home Loan
Section 80EEA allows an additional deduction of up to Rs. 1.5 lakh per annum on home loan interest, over
and above benefits under Sections 24 (b). This section was mainly introduced for promoting Prime Minister's
Housing for all mission.

Conditions to claim Section 80EE deduction are given below:

• Eligible assessee: Available only to individual taxpayers (resident or NRI). HUFs, AOPs, BOIs, firms,
companies, and other entities are not eligible.

• It is available to individual, first-time homebuyers who do not own any other residential property at the
time of loan sanction.

• It can be claimed against loan obtained from 1st April 2019 to 31st March 2022.

• The stamp duty of the property shall not exceed Rs. 45 lakhs.

• The individual should not be eligible to claim deduction u/s 80EE

This deduction can be claimed only if an individual chooses to pay taxes under the old tax regime
Section 80EEB: Deduction for Interest on Electric Vehicle
Section 80EEB allows deduction of up to Rs. 1.5 lakh on interest paid on a loan made specifically to purchase
electric vehicle. This section was mainly introduced for promoting sustainable growth.

Conditions to claim Section 80EEB deduction are given below:

• Eligible assessee: Available only to individual taxpayers (resident or NRI). HUFs, AOPs, BOIs, firms,
companies, and other entities are not eligible.

• It can be claimed against loan obtained from 1st April 2019 to 31st March 2023.

• The loan must be taken from a financial institution or a non-banking financial company for buying an electric vehicle.

This deduction can be claimed only if an individual chooses to pay taxes under the old tax regime
Section 80G
Section 80G of the Income Tax Act, 1961 allows taxpayers to claim deductions on donations made to specified
funds, charitable institutions, and relief organisations.

• A deduction can be claimed up to 100% of the donation or 50% of the donation, subject to the applicable
restrictions.

• Eligible assessee: ALL (Individuals, Companies, Firms, Hindu Undivided Firm (HUF), Non-Resident Indian (NRI),
Any other person)

• Even full donations paid to certain funds can be claimed as a deduction under this section (without maximum
limits), thus significantly reducing the overall tax liability.

• Donors must ensure they obtain a valid receipt containing details such as the name, PAN, and 80G registration
number of the institution.

• This section helps promote philanthropy by reducing the effective cost of charitable contributions while
ensuring transparency in donations.

Deductions under this section are allowed only under the old tax regime.
Mode of Payment Under Section 80G
Section 80G deductions can be claimed by taxpayers when they make donations through the following modes:

• Cheque
• Demand draft
• Cash (for donations up to Rs 2,000)
Note: Donations above Rs 2,000 should be made in any mode other than cash to qualify under Section 80G.

The various donations specified in Section 80G are eligible for a deduction of up to 100% or 50% with or without
restriction, as provided in Section 80G.
List of Donations Eligible for 100% Deduction without Qualifying Limit

• National Defence Fund set up by the Central Government

• Prime Minister’s National Relief Fund and PM CARES fund
• National Foundation for Communal Harmony
• An approved university/educational institution of National eminence
• Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
• Fund set up by a state government for medical relief to the poor
• National Illness Assistance Fund
• National Blood Transfusion Council or any State Blood Transfusion Council
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple
Disabilities
• National Sports Fund
• National Cultural Fund
• Fund for Technology Development and Application
• National Children’s Fund
• Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union
Territory
• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare
Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
• The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of
the earthquake in Gujarat
• Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the
earthquake in Gujarat (contribution made between January 26, 2001, and September 30, 2001)
• Prime Minister’s Armenia Earthquake Relief Fund
• Africa (Public Contributions – India) Fund
• Swachh Bharat Kosh (applicable from FY 2014-15)
• Clean Ganga Fund (applicable from FY 2014-15)
• National Fund for Control of Drug Abuse (applicable from FY 2015-16)

List of Donations Eligible for 50% Deduction without Qualifying Limit

• Prime Minister’s Drought Relief Fund

List of Donations Eligible for 100% Deduction Subject to 10% of Adjusted Gross Total Income
• Donations to the government or any approved local authority, institution or association to be utilised
to promote family planning
• Donation by a company to the Indian Olympic Association or any other notified association or
institution established in India to develop infrastructure for sports and games in India or sponsor
sports and games in India.

List of Donations Eligible for 50% Deduction Subject to 10% of Adjusted Gross Total Income
• Government or any local authority, to be utilised for any charitable purpose other than promoting
family planning.
• Any authority constituted in India to deal with and satisfy the need for housing accommodation or the
purpose of planning, development or improvement of cities, towns, villages or both.
• Any corporation referred to in Section 10(26BB) for promoting the interest of the minority
community.
• For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.
Adjusted Gross Total Income
Adjusted gross total income is the gross total income (sum of income under all heads) reduced by the total of the
following:

• Amount deductible under Sections 80C to 80U (but not Section 80G)

• Exempt income

• Long-term capital gains

• Short-term capital gains u/s 111A

• Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D

How to Calculate the Deduction under section 80G?
Step 1: Compute your total income before claiming any deductions under Chapter VI-A (including 80G).
Step 2: Calculate Adjusted Total Income -
Step 3: Calculate 10% of Adjusted Total Income. This is known as the Qualifying Limit. It applies to
donations subject to a limit.
Step 4: Categorise Donations into the following categories:
100% deduction without limit (a)
50% deduction without limit (b)
100% deduction subject to qualifying limit (c)
50% deduction subject to the qualifying limit (d)
Step 5: Allow full deduction for donations in categories (a) and (b).
Step 6: Apply Qualifying Limit to Remaining Donations
For donations in categories (c) and (d):
a. Total donations eligible under the qualifying limit = the lower of actual donations or 10% of adjusted
total income
b. Set off donations under 100% (qualifying limit) first
c. Any balance remaining is considered for 50% (qualifying limit) deduction
d. Deduction for 50% donations = 50% of the remaining eligible donation
Step 7: Compute Total Deduction under Section 80G by adding:
Full deductions (from step 5)
Deductions under the qualifying limit (from step 6)
Example, Mr. A (resident individual) has a Gross Total Income of Rs 7,00,000. He donated
Rs 60,000 to the PM CARES Fund. Compute the deduction under section 80G.
Example, Mr X is an individual, gives Rs 1,60,000 to an NGO (eligible for 50% deduction
subject to qualifying limit). The total income for the AY 2025-26 of Mr. X and is Rs
7,00,000. Calculate the tax benefit
Example, Mr X is an individual, gives Rs 1,60,000 to an NGO (eligible for 50% deduction
subject to qualifying limit). He donated Rs 60,000 to the PM CARES Fund. The total income
for the AY 2025-26 of Mr. X and is Rs 7,00,000. Calculate total income and tax liability.
Section 80GGA
Section 80GGA allows deductions for donations made towards scientific research or rural development. This deduction is
allowed to all assessees except those who have an income (or loss) from a business and/or a profession.

Eligible assessee: An assessee not having income chargeable under “Profit and gains of business or profession”

Deductions under this section are allowed only under the old tax regime.

Donations can be made through a cheque, a draft, or cash.

However, cash donations over Rs 2,000 are not allowed as deductions.
100% of the amount donated or contributed is eligible for deductions.
Section 80GG
Section 80GG allows tax deduction on rent paid by individuals not receiving HRA. It benefits both salaried employees without
HRA and self-employed taxpayers.
Deductions under this section are allowed only under the old tax regime

80GG Deduction Limit

The lowest of these will be considered as the deduction under this section-

• Rs.5,000 per month or 60,000 per year

• 25% of the total income before allowing deduction for expenditure under this section

• Actual rent less 10% of income before allowing deduction for expenditure under this section
Section 80GGB- Contribution to political parties

To encourage more contributions to political parties, Section 80GGB provides an exemption from taxation. This
section mainly deals with donations and contributions made by Indian Companies to registered political parties or
electoral trusts.

Section 80GGC- Contribution to political parties

Section 80GGC provides for tax deductions with respect to donations made by taxpayers towards political parties
or any electoral trusts. Section 80GGC of the Income Tax Act was introduced to bring about transparency in
electoral funding and free it from corruption. It also encourages individuals to financially support the political
system and claim tax deductions against such donations to lower their tax liability.

Eligible assessee: any individual, Hindu Undivided Family (HUF), an AOP or BOI, a firm, and an artificial juridical
person which is not wholly or partly funded by the government are eligible to claim deduction under Section
80GGC.

Note: Political parties must be registered under section 29A of the Representation of the People Act, 1951. Any
donation/contribution made to any other political party would not qualify for deduction u/s 80GGC
Deductions under this section are allowed only under the old tax regime.
Section 80JJAA
• Section 80JJAA is a provision under the Indian Income Tax Act of 1961, which offers tax deductions to employers who
generate employment in the formal sector.

• Eligible assessee: Any assessee having income from business and required to get accounts audited u/s 44AB.

• This deduction is provided against Income From Business for an assessee who has hired additional employees during a fiscal
year.

• The purpose of Section 80JJAA is to encourage employers to generate new employment opportunities in the formal sector
and provide employment benefits to eligible employees.

• By providing a tax deduction, the government aims to incentivise employers to hire more people and thereby reduce the rate
of unemployment in the country

• The deduction available under Section 80JJA is 30% of additional employee costs incurred by a business

• It allows a deduction of 30% on employee recruitment costs incurred for three consecutive assessment years. It starts from
the year in which additional employment is created and continues till the third year.

Deductions under this section are allowed under both tax regime.
Meaning of additional employees as per section 80JJAA

The determination of additional employee costs should be based on the following parameters:

• The employee should earn a total salary of not more than Rs. 25,000 per month.

• He/she should be employed for more than 240 days in the previous year (150 days in case of manufacture of apparel or
footwear or leather products)

• The employee should have participated in a recognised Provident Fund like casual workers, etc.

• The Government shouldn’t have paid the entire contribution of the EPF scheme for the employee
Example
A company hires 20 new employees during FY 2024-25, each with a salary of Rs 20,000 per month. Out of these, 18
employees worked for more than 240 days.

Calculate

Additional employment cost

Deduction u/s 80JJAA
Section 80QQB- Royalty income
When authors provide their books to publishers for publication, the publishers generate profits through book sales.
As a form of compensation for the authors' content creation, the publishers agree to pay a portion of their profits or sales to the
authors. This compensation, known as royalty, is the authors' remuneration for their work in writing the book.

The components included in royalty income are as follows:

1. Income earned by the author for practising their profession.
2. Lump sum payments received for writing projects that have copyrights for books, whether they are artistic, literary, or
scientific in nature.
3. Copyright fees received for the author's book.
4. Non-refundable amounts received as advance payments for copyright fees or royalty.

While the Income tax department charges tax on this income under “Profit and Gains of Business or Profession” or “Other
Sources” head of Income, it also provides a deduction on the same that the authors can claim to save tax.

• Eligible assessee: resident individual, being an author

Deductions under this section are allowed only under old tax regime.

Amount of deduction
Deduction available will be lower of the following:
Rs 3 lakhs or
The amount of royalty income received
Exceptions for the deduction under section 80QQB

• Under Section 80QQB of the Income Tax Act, royalties earned from journals, diaries, guides, newspapers,
pamphlets, textbooks, or similar publications are not eligible for deductions.

• In addition, any royalty income received from abroad must be repatriated and brought into the country
within a specified time period in order to avail the benefits of deduction under Section 80QQB (6months)

Example1 Ms. Kumud is very passionate about writing. She is a resident of India and a recognized author who
writes books on Literature and art work. She earns Rs. 550,000 as her royalty income and she has a business
where her profits are Rs. 200,000 p.a. Compute her net income.

Example 2 Mr. Raj is a scientist and an author. He is a resident of India during the FY 2024-25 and earns
income from writing books on scientific facts from a publisher based in UK . He earned Rs. 600,000 on 22nd
April 2024 and received the foreign remittance after 6 months i.e 31st Oct 2024. Compute his net income
Section 80RRB- Royalty income
Section 80RRB was introduced to ensure that someone who has done exceptional work gets their
reward.
In order to encourage individuals to keep producing good work, this section allows them to claim
deductions in their income tax against payments received as royalty. Royalty is an amount paid to
a person by another party against the usage of certain work produced by the recipient

Eligible assessee: Resident individual, being a patentee

Deductions under this section are allowed only under old tax regime.

Amount of deduction
Deduction available will be lower of the following:
Rs 3 lakhs or
The amount of royalty income received
Example: Mr. A, a resident individual, is the inventor of a patent registered under the Patents Act,
1970. During FY 2024-25, he received royalty income of Rs 8,20,000. The individual's expenses
related to the patent are Rs. 20,000. Calculate his total income
Question on deduction:
Mr. X, a resident individual (age 35), provides you the following details of his income and
investments for the FY 2024-25 (AY 2025-26):
Salary Income: Rs 9,50,000
Other sources (Saving bank interest): Rs 12,000

Investments / Payments made during the year

Contribution to PPF: Rs 100,000
Life Insurance Premium (for self): Rs 30,000
Tuition Fees paid for 2 children: Rs 50,000

Health Insurance Premium:

Self & Family: Rs 22,000 (paid online)
Parents (age 62): Rs 32,000 (paid online)

Donation: ₹60,000 paid to a charitable institution eligible for 50% deduction subject to 10% of
adjusted GTI.

He has not opted for the new tax regime u/s 115BAC and all payments are made by banking
channels.
Compute the total income of Mr. X and his tax liability
Step 1: Gross Total Income (GTI)
•Salary Income = 9,50,000
•Income from Other Sources (SB Interest) = 12,000
GTI = Rs 9,62,000

Step 2: Deductions under Chapter VI-A

(i) Section 80C (max limit Rs 1,50,000)
•PPF = 100,000
•Life Insurance Premium = 30,000
•Tuition Fees (2 children) = 50,000
Total = ₹2,00,000 → Restricted to ₹1,50,000
(ii) Section 80D (Health Insurance)
•Self & Family = 22,000 (limit 25,000) → 22,000
•Parents (senior citizens, age 58) = 32,000 (limit ₹50,000) → ₹32,000
Total 80D deduction = 54,000
(iii) Section 80TTA (Savings Bank Interest)
•Max ₹10,000 → ₹10,000
(iv) Section 80G (Donation – 50% subject to qualifying limit)
•Adjusted GTI = 9,62,000 – (1,50,000 + 54,000 + 60,000 + 10,000) = ₹7,88,000
•10% of Adjusted GTI = ₹78,800
•Donation = ₹60,000 → fully within limit
•Eligible deduction = 50% of ₹60,000 = ₹30,000

Step 3: Total Deductions

80C = 1,50,000
80D = 54,000
80TTA = 10,000
80G = 30,000
Total = 2,44,000
Step 4: Total Income
GTI = 9,62,000
Less: Deductions = 244,000
Total Income = 7,18000