Chapter VIA (Section 80C) Deduction under IT Act, 1961

DEDUCTIONS UNDER SECTION 80

1. Section 80C, Section 80CCC and Section 80CCD (1)

Deduction in respect of life insurance premium, contributions to provident fund, sukanya samriddhi yojana, NSC, NPS, APY etc. Deduction under this section is permitted to the following categories of persons

1. An individual; or
2. A Hindu Undivided Family (HUF).

The collective maximum allowable deduction under section 80C, section 80CCC and section 80CCD (1) cannot exceed INR 1.50 Lakhs. Resident Indian as well as NRI is eligible to claim deduction under section 80C.

2. Section 80CCD (1B) and Section 80CCD (2)

Deduction in respect of contribution to pension scheme of Central Government. Deduction under this section is permitted to an individual

Section 80 CCD

1. Where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004 or, being an individual employed by any other employer, or any other assessee, being an individual has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed,—

1. in the case of an employee, ten per cent of his salary in the previous year; and
2. in any other case, twenty per cent of his gross total income in the previous year.

(1B) An assessee referred to in sub-section (1), shall be allowed a deduction in computation of his total income, whether or not any deductions is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:

Provided that no deduction under this sub-section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1).

2. Where, in the case of an assessee referred to in sub-section (1), the Central Government or any other employer makes any contribution to his account referred to in that sub-section, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government or any other employer [does not exceed—

1. fourteen per cent, where such contribution is made by the Central Government;
2. ten per cent, where such contribution is made by any other employer,

of his salary in the previous year.]

Notes

An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act, 1961.

Tax Benefits under the Corporate Sector

Corporate Subscriber

Additional Tax Benefit is available to Subscribers under Corporate Sector, u/s 80CCD (2) of Income Tax Act. Employer's NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, without any monetary limit.

Corporates Employer's Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as 'Business Expense' from their Profit & Loss Account.

Let's illustrate the benefits of NPS through an example

Suppose a corporate employee earns Rs 6 lakh as the basic salary and another Rs 3 lakh as Dearness Allowance. So, he can claim Rs 90,000 (10 percent of Basic + DA) on his employer's contribution. Besides, if he adds the deductions under Section 80C and Section 80CCD (1B), he can claim deductions up to Rs 2.9 lakh.

NPS Tax Deductions for A Salaried Individual

Types of NPS Accounts

1. Tier 1 Account - This has a fixed lock-in period until the subscriber reaches the age of 60 years. Only partial withdrawal is allowed, with certain conditions. Contributions made towards Tier 1 are tax deductible and qualify for deductions under Section 80CCD (1) and Section 80CCD(1B). This means you can invest up to Rs. 2 lakh in an NPS Tier 1 account and claim a deduction for the full amount, i.e. Rs. 1.50 lakh under Sec 80CCD (1) and Rs. 50,000 under Section 80CCD(1B).
2. Tier 2 Account - This is necessarily a voluntary savings account which allows the subscribers to make withdrawals as and when they like. But the contribution made to a Tier 2 account is not eligible for tax deduction. There is no tax benefit on investment towards Tier II NPS Account. To open a Tier 2 account, you must open a Tier 1 account first.

As per the latest guidelines, you can withdraw up to 40% of the amount on maturity and need to reinvest the remaining 60% to purchase an annuity that gives you a regular monthly income. After Subscriber attain the age of 60, up to 40 percent of the total corpus withdrawn in lump sum is exempt from tax.

For example: If total corpus at the age of 60 is 10 lakhs, then 40% of the total corpus i.e. 4 lakhs, you can withdraw without paying any tax. So, if you use 40% of NPS corpus for lump sum withdrawal and remaining 60% for annuity purchase at the time of retirement, you do not pay any tax at that time. Only the annuity income that you receive in the subsequent years will be subject to income tax. Amount invested in purchase of Annuity, is fully exempt from tax. However, annuity income that you receive in the subsequent years will be subject to income tax.

A recent addition to section 80C list, the contributions made to Tier-II NPS account will become eligible for deductions u/s 80C of the Income Tax Act provided that the amount deposited is not withdrawn before completion of three years from the date of deposit. Further, please note that for other NPS subscribers (other than Central Government employees), there will not be any 80C benefits on contribution made to Tier-II account.

3. Section 80D

Deduction in respect of health insurance premium . Deduction under this section is permitted to the following categories of persons

1. An individual; or
2. A Hindu Undivided Family (HUF).

Every individual or HUF can claim a deduction under Section 80D for their medical insurance which is taken from their total income in any given year. Not only can you take benefit by purchasing a health plan for yourself but also you can take advantage of buying the policy to cover your spouse, or your dependent children or parent. An individual can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and dependent children. An additional deduction for the insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age, or Rs 50,000 (as per the Budget 2018) if your parents are aged above 60. If both the taxpayer and the parent whom the medical covers have been taken for are aged more than 60 years, the maximum deduction that can be availed under this section is to the extent of Rs 1,00,000. The below table captures the quantum of deduction available to an individual taxpayer under various scenarios

Preventive Health Check-up

Any payments made towards preventive health check-ups will entitle a taxpayer to a deduction of up to Rs 5,000, which is within the overall limit of Rs 25,000/Rs 50,000/Rs. 1,00,000 as the case may be. This deduction can also be claimed either by the individual for himself, spouse, dependent children or parents. The payment for preventive health check-up can be made in cash.

NOTE | Deduction in respect of health insurance premium paid in cash is not allowed, paid any mode other than cash is allowed deduction. However, payments of preventive health checkup are made by cash.

Example

1. Rahul has paid a health insurance premium of Rs 23,000 for the insurance of the health of his wife and dependent children in the financial year 2017-18. He also got a health check-up done for himself and paid Rs 5,000. Rahul can claim a maximum deduction of Rs 25,000 under Section 80D of the Income Tax Act. Rs 23,000 has been allowed towards insurance premium paid, and Rs 2,000 has been allowed for a health check-up. The deduction towards preventive health check-up has been restricted to Rs 2,000 as the overall deduction cannot exceed Rs 25,000 in this case.
2. Nitin is 45 years old and is covered by medical insurance for self, spouse and dependent children, paying Rs 18,000 as annual premium. He has also incurred Rs 4,000 for preventive health check-ups towards his family. Tax deduction under Section 80D: Rs 22,000
3. Sanjeev is 35 and is paying Rs 12,000 as medical insurance for self, spouse and their only child. He has also taken health insurance for his parents (aged 56 and 54) for which he pays Rs 22,000 annual premium. He has also incurred Rs 5,000 for preventive health check-ups towards his family. Tax deduction under Section 80D: Rs 47,000 (Rs 12,000 + Rs 22,000 + Rs 5,000)
4. Ramesh is 47 years old and is covered by medical insurance for self, spouse and dependent children, paying Rs 27,000 as annual premium. He also pays Rs 60,000 towards medical treatment of his parents (aged 72 and 70) who do not have medical insurance. Tax deduction under Section 80D: Rs 75,000 (Rs 25,000 + Rs 50,000) even though his expenses are Rs 87,000.

4. Section 80DD

Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability. Deduction under this section is permitted to the following categories of resident persons

1. An individual; or
2. A Hindu Undivided Family (HUF).

Following types of amount/ expenditure are covered as a deduction under section 80DD –

1. Any expenditure incurred towards the medical treatment, training and rehabilitation of a 'dependant', where a dependant is a person with a disability.
2. paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions given below, for the maintenance of a dependant, being a person with disability.

• It is mandatory that the scheme should provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made;

(in a case where, death of a dependant, annuity or lump sum amount received from insurance company is chargeable to income tax)

• the assessee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability.

Below are the conditions you must meet to avail this deduction

1. The dependant should not have claimed deduction under section 80U in respect of the same amount / expenditure for which the assessee is claiming deduction under section 80DD.
2. In case the dependant suffering from Cerebal Palsy or Autism or multiple disability, it is required to submit Form no. 10-IA.
3. The assessee claiming deduction under section 80DD is mandatorily required to furnish a copy of the certificate from the medical authority certifying therein the disability of the dependant.
4. Disability is as defined under section 2(i) of the Persons of Disabilities Act, 1995. "disability" means—

• blindness;
• low vision;
• leprosy-cured;
• hearing impairment;
• locomotor disability;
• mental retardation;
• mental illness;

'Dependant' here means the following –

5. Section 80DDB

Deduction in respect of medical treatment. Deduction under this section is permitted to the following categories of resident persons

1. An individual; or
2. A Hindu Undivided Family (HUF).

For claiming deduction under section 80DDB, it is mandatory to obtain a prescription of the medical treatment from an oncologist or a neurologist or a haematologist or a urologist or an immunologist or such other specialist.

The deduction shall not be allowed under section 80DDB for the amount which has either been received under an insurance from an insurer.

6. Section 80E

Deduction in respect of interest on loan taken for higher education. Deduction under this section is permitted only to an individual

Deduction under section 80E is available only in respect of interest paid on the educational loan. Such educational loan should have been taken for the purpose of 'Higher Education' of the assessee himself or for the 'relative' of the assessee.

In order to understand deduction under section 80E, as explained above, it is important to understand two terms, namely, 'Higher Education' and 'Relative'.

'Higher Education' has been defined under section 80E as any course of study pursued after passing the Senior Secondary Examination (HSC-12th) or its equivalent. Such course can be pursued from any school or university or board recognized by the State or Central Government or any local authority or any other authority which is authorized by the State or Central Government.

'Relative' has also been defined under section 80E, which means spouse and children of the individual. It also includes the students for which the individual is the legal guardian.

Deduction under section 80E is available for the year in which the individual begins to pay interest on the educational loan and continues till 7 succeeding year. In short, deduction under section 80E is available totally for 8 years beginning from the year in which the individual begins paying interest on the educational loan.

Below are the conditions you must meet to avail this deduction

1. Deduction under section 80E is available only to an individual.
2. Deduction of only 'interest' paid on the educational loan taken for higher education is available under section 80E.
3. The educational loan should have been taken for the higher education of the assessee himself or the spouse or the children (including adopted children and students for whom the assessee is a legal guardian).
4. The educational loan should be taken from any financial institution or any approved charitable institution.
5. For claiming deduction under section 80E, it is mandatory to obtain a certificate from the bank certifying the interest payment on the educational loan taken by the assessee.
6. There is no maximum limit under section 80E. In other words, the entire interest paid towards the education loan for higher education is available as a deduction under section 80E.

7. Section 80EEB

Deduction in respect of purchase of electric vehicle. Deduction under this section is permitted only to an individual

Newly introduced section 80EEB provides deduction in respect of interest paid on loan taken from the financial institution for purchasing of an electric vehicle.

Below are the conditions you must meet to avail this deduction

1. Deduction under section 80EEB is available only to an individual. Accordingly, the deduction is not available to any other assessee like AOP, HUF, company, firm etc.
2. In the absence of any specification, deduction under section 80EEB is available to both resident as well as a non-resident individual.
3. The deduction is available only if the loan is taken from the financial institution for the purpose of acquiring/ buying an electric vehicle.
4. The loan should have been approved during the period 1st April 2019 to 31st March 2023.
5. The maximum amount of deduction available under section 80EEB is INR 1.50 Lakhs.
6. The deduction of interest amount shall be available under section 80EEB from 1st April 2020 till the repayment of a loan.
7. Once the deduction with respect to interest has been claimed under section 80EEB, no further deduction can be claimed for such interest payment under any other provisions of the Act for the same or any other assessment year.

8. Section 80G

Deduction in respect of donations to certain funds, charitable institutions, etc. Deduction under this section is permitted to all assessees

Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Income Tax Act. All donations, however, are not eligible for deductions under section 80G. Only donations made to prescribed funds qualify as a deduction. Any donations made in cash exceeding Rs 2,000 will not be allowed as deduction. The donations above Rs 2,000 should be made in any mode other than cash to qualify as a deduction under section 80G. To be able to claim this deduction the following details have to be submitted in your Income Tax Return

1. Name of the Donee
2. PAN of the Donee
3. Address of the Donee
4. Amount of Contribution

Donations to private trusts

Step 1: Find out the qualifying amount

The qualifying amount under this category will be lower of the following two amounts:

1. The amount of donation
2. 10 per cent of the adjusted gross total income.

Adjusted gross total income can be calculated by applying the following formula –

For example, a taxpayer named Laxmi Sharma has taxable salary of Rs 500,000. He has deposited Rs 40,000 in Public Provident Fund and Rs 60,000 in his company provident fund. He donates Rs 45,000 to CRY (Child Relief & You) trust. Presuming he has no other income, his taxable income will be computed as under.

After making donation to CRY, his qualifying amount for 80G will be.

Since 40,000 is lower, the qualifying amount will be Rs 40,000

Step 2: Find out actual deduction

The next question that arises is how much would be the actual deduction? In the case of donations to private trusts, the actual amount of donation would be 50 per cent of the qualifying amount.

Therefore, in the example given above, since the donation is made to a private trust, the deduction will be 50 per cent of the qualifying amount ie 50 per cent of Rs 40,000 = Rs 20,000.

Step 3: Check upper limit

Finally, the deduction under section 80G cannot exceed your taxable income. For example, if your income before deduction is Rs 3 lakh and if you have given donation of Rs 5 lakh to the Prime Minister's National Relief Fund, please do not expect to claim a loss of Rs 2 lakhs. Your income will be NIL (Rs 3 lakh – Rs 3 lakh). The deduction will be restricted to the amount of your income.

Donations to trusts/funds set up by the Government

In this category, the entire amount donated i.e. 100 per cent of the donation amount is eligible for deduction. There is a long list of 25 funds/institutions/purposes for which donations given would qualify for 100 per cent eligibility.

The funds that figure in this long list are all set up by the Government. Private Trusts do not figure in this list.

Thus, in this category of donations, the ceiling of 10 per cent of the gross total income as reduced by all other deductions under Chapter VI-A of the Income Tax Act does not apply.

In the above example, if instead of donating to CRY, had the donation been given to say, The Prime Minister's National Relief Fund, then the calculations would have different as shown below:

Donations Eligible for 100% Deduction Without Qualifying Limit

1. National Defence Fund set up by the Central Government
2. Prime Minister's National Relief Fund
3. National Foundation for Communal Harmony
4. An approved university/educational institution of National eminence
5. Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
6. Fund set up by a State Government for the medical relief to the poor
7. National Illness Assistance Fund
8. National Blood Transfusion Council or to any State Blood Transfusion Council
9. National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
10. National Sports Fund
11. National Cultural Fund
12. Fund for Technology Development and Application
13. National Children's Fund
14. Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to any State or Union Territory
15. 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
16. The Maharashtra Chief Minister's Relief Fund during October 1, 1993 and October 6, 1993
17. Chief Minister's Earthquake Relief Fund, Maharashtra
18. Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
19. Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made during January 26, 2001, and September 30, 2001) or
20. Prime Minister's Armenia Earthquake Relief Fund
21. Africa (Public Contributions – India) Fund
22. Swachh Bharat Kosh (applicable from FY 2014-15)
23. Clean Ganga Fund (applicable from FY 2014-15)
24. National Fund for Control of Drug Abuse (applicable from FY 2015-16)

Donations Eligible for 50% Deduction Without Qualifying Limit

1. Jawaharlal Nehru Memorial Fund
2. Prime Minister's Drought Relief Fund
3. Indira Gandhi Memorial Trust
4. Rajiv Gandhi Foundation

Donations Eligible for 100% Deduction Subject to 10% of Adjusted Gross Total Income

1. Donations to the government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning
2. Donation by a Company to the Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India, or the sponsorship of sports and games in India.

Donations Eligible for 50% Deduction Subject to 10% of Adjusted Gross Total Income

1. Any other fund or any institution which satisfies the conditions mentioned in Section 80G (5)
2. Government or any local authority, to be utilized for any charitable purpose other than the purpose of promoting family planning
3. Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both
4. Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community
5. For repairs or renovation of any notified temple, mosque, gurudwara, church or other places.

9. Section 80GG

Deduction in respect of rents paid. Deduction under this section is permitted to all assesses (except who receives HRA referred to in clause 13A of section 10)

Usually HRA forms part of your salary and you can claim deduction for HRA. If you do not receive HRA from your employer and make payments towards rent for any furnished or unfurnished accommodation occupied by you for your own residence, you can claim deduction under section 80GG towards rent that you pay. Here are a few conditions that must be fulfilled.

1. You are self-employed or salaried
2. You have not received HRA at any time during the year for which you are claiming 80GG HRA component should not form part of your salary to claim 80GG.
3. You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of the office, or employment or carry on business or profession.
4. In case you own any residential property at any place, for which your Income from house property is calculated under applicable sections (as a self-occupied property), no deduction under section 80GG is allowed.

You will be required to file Form 10BA with details of payment of rent.

Deduction –the lowest of these will be considered as the deduction under this section.

1. Total rent paid minus 10% of basic salary.
2. Rs 60,000 per year (Rs 5,000 per month).
3. 25% of the adjusted gross total income.

Adjusted gross total income can be calculated by applying the following formula –

10. Section 80GGA

Deduction in respect of certain donations for scientific research or rural development. Deduction under this section is permitted to all assesses (except who is received profit and gains from business or profession.)

Following is the list of donations that qualify for deduction under section 80GGA

1. Amount paid to a research association which carries out scientific research or any amount paid to a university, college or any other institution to be used for scientific research. Please note that the research association, university, college or institution should be approved as per section 35 (1) (ii).
2. Amount paid to a research association carrying out research in social science or statistical research or any amount paid to a university, college or any other institution to be used for research in social science or statistical research. Please note that the research association, university, college or institution should be approved as per section 35 (1) (iii).
3. Amount paid to an association / institution to be used for conducting any programme of rural development which is approved under section 35CCA.
4. Amount paid to an association / institution to be used for training of persons implementing a programme of rural development.
5. Amount paid to a local authority or a public sector company or an institution or an association which is approved by the National Committee for carrying out any eligible project or scheme.
6. Amount paid to a rural development fund which is set up and notified by the Central Government for the purpose of section 35CCA(1)(c).
7. Amount paid to the National Urban Poverty Eradication Fund, which is set up and notified by the Central Government for the purpose of section 35CCA (1) (d).

Manner of payment of donations

For claiming deduction under section 80GGA, a donation can be made through any manner i.e. cash or cheque or draft etc. However, in case of donation through cash, the maximum amount of INR 2000 would be allowed as deduction.

Amount of allowable deduction

100% of the amount paid to the specified institution or association or university or college is allowed as deduction.

11. Section 80GGB

Deduction in respect of contributions given by companies to political parties. Deduction under this section is only allowed to Indian company

In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party or an electoral trust:

Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.

12. Section 80GGC

Deduction in respect of contributions given by any person to political parties. Deduction under this section is allowed to assesses. (Indian company, local authority and artificial juridical person wholly or partly funded by the government)

In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust :

Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.

13. Section 80M

Deduction in respect of certain inter-corporate dividends. Deduction under this section is allowed to any domestic company

Section 80M permits a deduction from the dividend income received by a domestic company from another domestic company before calculating the tax payable on taxable dividend income.

14. Section 80P

Deduction in respect of income of co-operative societies. Deduction under this section is allowed to any co-operative societies

Under this section, a certain specified income of a co-operative society engaged in specific activities is considered as a deduction if such income is included in the gross total income of the society.

A co-operative society is not defined specifically for the purpose of Section 80P. However, Section 2(19) of the Income Tax Act, 1961, defines a co-operative society to be an entity registered under the Co-operative Societies Act, 1912 or under any other law governing the registration of co-operative societies in any state.

Activities and amount eligible for deduction under Section 80P

Consumers co-operative society means a society for the benefit of its members

Urban consumers co-operative society means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment.

Special exclusions

The Finance Act, 2006 introduced specific exclusions to the applicability of the benefit of deduction under Section 80P. Section 80P is made not applicable to any co-operative bank (including Regional Rural Banks) other than a primary agricultural credit society (as defined in the Banking Regulation Act) or a primary co-operative agricultural and rural development bank. Benefit of deduction is withdrawn with an intention to treat co-operative banks on par with commercial banks who do not enjoy any such tax benefit.

15. Section 80PA

Deduction in respect of income of producer companies. Deduction under this section is allowed to any producer companies

1. Where the gross total income of an assessee, being a Producer Company having a total turnover of less than one hundred crore rupees in any previous year, includes any profits and gains derived from eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains attributable to such business for the previous year relevant to an assessment year commencing on or after the 1st day of April, 2019, but before the 1st day of April, 2025.
2. In a case where the assessee is entitled also to deduction under any other provision of this Chapter, the deduction under this section shall be allowed with reference to the income, if any, as referred to in this section included in the gross total income as reduced by the deductions under such other provision of this Chapter.

Explanation—For the purposes of this section,—

1. "eligible business" means—

1. the marketing of agricultural produce grown by the members; or
2. the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the members; or
3. the processing of the agricultural produce of the members;

1. "member" shall have the meaning assigned to it in clause (d) of section 581A of the Companies Act, 1956 (1 of 1956);
2. "Producer Company" shall have the meaning assigned to it in clause (l) of section 581A of the Companies Act, 1956 (1 of 1956).]

16. Section 80QQB

Deduction in respect of royalty income, etc., of authors of certain books other than text-books. Deduction under this section is allowed only to resident individuals

Authors write books and give it to publishers. Publishers publish them and earn profit on selling those. They pay an agreed percentage of profit or sales made to the authors as a reward or compensation for writing books. This reward or compensation is called Royalty.

Books here doesn't include journals, guides, newspapers, magazines, textbooks for school students, pamphlets, brochures, diaries and other publications of similar nature.

Amounts Included in Royalty Income

1. Any Income earned by an author for practicing his profession
2. Any Income earned as a lump sum payment for assignment (or grant) of any of his interests in the copyright of any book based on literary, artistic or scientific in nature or of royalty or copyright fees for author's book
3. Any Income received as advance payment of royalties/ copyright fees (amount which is non- refundable)

Amount of Deduction

Deduction available will be lower of the following

1. Rs 3 lakhs or
2. The amount of royalty income received

Conditions to avail the benefit of Sec 80QQB

Following are certain conditions to be satisfied for income earned in India and outside India

• Individual claiming the deduction must be a resident in India or resident but not ordinarily resident in India.
• Individual must have authored or co-authored a book that falls under the category of literary, artistic or scientific work.
• Individual must file his income tax return to claim the deduction.
• If an Individual has not received a lump sum amount , 15% of the value of the books sold during the year (before allowing any expenses) should be ignored.
• Individual must obtain FORM 10CCD from the person responsible for making the payment.

Additional requirement for Income Earned outside India

• Individual is allowed deduction on income earned outside India when the income is brought to India in convertible foreign exchange within 6 months from the end of the year or within the period allotted by RBI or other competent authority for this purpose. Individual must obtain a certificate in FORM 10H.

17. Section 80RRB

Deduction in respect of royalty on patents. Deduction under this section is allowed only to resident individuals

A patent is also known as an intellectual property right and ensures the innovator that their rights are protected. This allows the innovator to monetize his/her innovation and generate regular incomes from the same. When an innovator gives another person or entity the rights to use the patented innovation, in return they receive a regular payment.

This payment is known as a Royalty payment. Usually, what happens is that the innovators do not have the means to develop their idea into an effective offering. In such a situation, an individual or entity takes the rights to use that innovation and then develops it into an effective product. In such a situation, that entity will pay the innovator a royalty amount against the rights to use the innovation commercially. It might be a fixed amount every year or a certain percentage of sales for a given period of time.

One must satisfy the following criteria for claiming deductions against Section 80RRB

1. The individual claiming the deduction should be a resident of India.
2. Only those individuals that hold an original patent are eligible to apply for deduction under Section 80RRB. If any individual does not hold the original patent, he/she cannot apply for this deduction.
3. The patent against which the royalty has been received must be registered under the Patent Act, 1970. The said patent must have been registered on or after 1st April 2003.
4. If the royalty payments are received from a foreign country, then the deduction can be claimed only with respect to the royalty payments received within 6 months of the completion of the financial year in which the income is earned.

Amount of Deduction

Deduction available will be lower of the following

1. Rs 3 lakhs or
2. The amount of royalty income received

18. Section 80TTA

Deduction in respect of interest on deposits in savings account. Deduction under this section is permitted to the following categories of persons (excluding senior citizen and super senior citizen)

1. An individual; or
2. A Hindu Undivided Family (HUF).

1. Where the gross total income of an assessee (other than the assessee referred to in section 80TTB), being an individual or a Hindu undivided family, includes any income by way of interest on deposits (not being time deposits) in a savings account with—

1. a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
2. a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or
3. a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction as specified hereunder, namely :—

1. in a case where the amount of such income does not exceed in the aggregate ten thousand rupees, the whole of such amount; and
2. in any other case, ten thousand rupees.

1. Where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

Explanation —For the purposes of this section, "time deposits" means the deposits repayable on expiry of fixed periods.

19. Section 80TTB

Deduction in respect of interest on deposits in case of senior citizens. Deduction under this section is permitted to the following categories of persons (senior citizen only)

• An individual; or
• A Hindu Undivided Family (HUF).

1. Where the gross total income of an assessee, being a senior citizen, includes any income by way of interest on deposits with—

• a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
• a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or
• a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction—

1. in a case where the amount of such income does not exceed in the aggregate fifty thousand rupees, the whole of such amount; and
2. in any other case, fifty thousand rupees.

2. Where the income referred to in sub-section (1) is derived from any deposit held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

Explanation.—For the purposes of this section, "senior citizen" means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.

20. Section 80U

Deduction in case of person with disability. Deduction under this section is permitted to the following categories of resident individuals

• In computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of seventy-five thousand rupees:

Provided that where such individual is a person with severe disability, the provisions of this sub-section shall have effect as if for the words "seventy-five thousand rupees", the words "one hundred and twenty-five thousand rupees" had been substituted.

• Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the form and manner, as may be prescribed, along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed :

Provided that where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any assessment year relating to any previous year beginning after the expiry of the previous year during which the aforesaid certificate of disability had expired, unless a new certificate is obtained from the medical authority in the form and manner, as may be prescribed, and a copy thereof is furnished along with the return of income under section 139.