How can we calculate Adjusted total income when the assesse eligible for 80Gand 80GG deduction...?
15 Replies
Amir
(Learner)
(4016 Points)
Replied 07 January 2010
Dear Shafaf,
I think u want to know that which deduction is to be claimed first, since both sections requies Adjusted Total Income which is computed after reducing all other deductions..
It is simple Law has not prescribed which deduction is to be computed first, therefore best thing would be to make a caculation in both cases and claim the one which is beneficial to the assessee..
Case 1 - First 80G & then 80GG
Case 2 - First 80GG & then 80G
It;s like the game of Cricket, "Benefit of Doubts - ALWAYS GOES TO BATSMEN"...Assessees are batsmen since they have face the bouncers of law makers.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 07 January 2010
Mr Amir can u give a live numeric example and enumerate them as to how it should be computed please
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 07 January 2010
Section 80G provides for deduction from Gross Total Income on account of Donations There are donations which are eligible for Dedction subject to a Qualifying amount (i.e. 10% of (GTI (-) STCG u/s 111A (-) LTCG (-) Deductions of Chapter VI excluding 80G)
Similarly :
Section 80GG provides for Deduction on Account Rent paid which also requires Calculation of Adjusted Gross Total Income (Adj. GTI = GTI (-) STCG u/s 111A (-) LTCG (-) Deductions of Chapter VI excluding deduction u/s 80GG)
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 07 January 2010
Thanks Dhiraj but can u simulate a numeric example invilving a simultaneous equation as to how this works
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 07 January 2010
EXAMPLE FOR 80 G
Step 1: Find out the qualifying amount
The qualifying amount under this category will be lower of the following two amounts:
a) The amount of donation
b) 10 per cent of the gross total income as reduced by all other deductions under Chapter VI-A of the Income Tax Act such as 80C (PPF, LIC etc.), 80D (mediclaim), 80CCC (pension schemes etc.).
For example, a taxpayer named Laxmi Arcelor has taxable salary of Rs 500,000. He has deposited Rs 70,000 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:
|
Gross salary
|
Rs 500,000
|
|
Less: Deduction under section 80C to 80U
(escluding deduction u/s 80G)
|
Rs 100,000
|
|
Gross total income (before 80G)
|
Rs 400,000
|
After making donation to CRY, his qualifying amount for 80G will be:
|
Actual amount of donation
|
Rs 45,000
|
|
10% of Gross total income as computed above
|
Rs 40,000 whichever is lower
|
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.
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.
So,
|
Gross total income (Before 80G)
|
Rs 400,000
|
|
Less: deduction under section 80G
|
Rs 20,000
|
|
Total income (taxable income)
|
Rs 380,000
|
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.
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.
ii) 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 21 funds/institutions/purposes for which donations given would qualify for 100 per cent eligibility. Notable among this list are:
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 21 funds/institutions/purposes for which donations given would qualify for 100 per cent eligibility. Notable among this list are:
- The National Defence Fund
- The Prime Minister’s National Relief Fund
- Any fund set up by the State Government of Gujarat for earthquake relief
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:
|
Gross Total Income (Before 80G)
|
Rs 400,000
|
|
Less: Deduction under section 80G
|
Rs 45,000
|
|
Total Income (Taxable Income)
|
Rs 355,000
|
MITU....
(ARTICLE Assistant)
(210 Points)
Replied 07 January 2010
Amir frm my pont of view u should consider all other deduction for adj total inc
Venkat M
(FCA)
(133 Points)
Replied 07 January 2010
In my view, all other deductions should be considered for adjusted total income
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 08 January 2010
Mr Dhiraj many Thanks for explaining 80G in Detail but I asked if 80G and 80 GG Deductions both are avaialable how the computation should be done by means of simultaneous equation is my question?
Rajendra Nath Datta
(0)
(101 Points)
Replied 12 April 2010
yes my question is if both 80G and 80GG are there is a single sum then plz show me how to calculate
CA Diwakar
(CA)
(33 Points)
Replied 15 October 2011
@ Dheeraj will u pls give one illustration which includes donations as well as rent paid
means both 80g and 80gg
IF u can then pls solve this question
An Assessee has a gross total income of Rs. 200000. (no capital gain and no income from lottery, crossword puzzles etc). He paid Life insurance premium for himself amounts to Rs. 20000, repay house building loan amounts to Rs80000. He also paid medical Insurance premium for his wife amounts to Rs. 12000.He donated Rs. 15000 to Prime Minister’s National Relief Fund, Rs. 3000 to National Children fund, Rs. 9000 to govt. for family planning and Rs. 4000 to local temple notified by the Central Govt.
He also pays rent @ Rs. 1500p.m. for a house occupied for the purpose of his own residence.(Neither he nor his family, owns any accommodation).
Calculate the amount of deduction allowable u/s 80G and 80GG.
Plz help me how to calculate the deduction if a sum like above have both 80G and 80GG together
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