Specified Payment Deductible Under Income Tax

Specified Payment Deductible Under Income Tax

(A part from Section 80C) As the aspect discussed in the previous article there is the some other but important section under which assesse get the benefit of deduction out of contribution made by them. This article helps you to plan the investment wisely to save future as well as get exemption in income tax. This article helps you to make tax planning regarding the investment decision making before jump in to it. Specified Payment Under Deductible Income Tax Eligible For Deduction.

Deduction in respect of interest payable on loan taken for acquisition of residential house property [ Section 80EEA]

Under this section resident individual assesse who has taken loan for acquisition for residential house from any financial institution. Interest payable on such loan would be qualify for deduction under this act.

The following are the condition for the deduction:

  • The Individual not own any resident house at the time loan sanction.
  • The stamp duty value of the house is less or equal to 45 Lakh.
  • The individual should not be eligible to claim deduction u/s 80EE
  • Loan must be sanction by the financial institution during the period 01.04.2019 and 31.03.2022.

The deduction allowed under this section is Rs. 1,50,000. This deduction is over and above deduction available under the section 24(b) of income under house property.

Note: In case of self-occupied property, interest deduction is restricted to 2 Lakh. However, in case of let out or deemed let out property, even though there is no limit under house property income for claim interest on loan but section 71(3) restrict the amount of loss from house property to be set off against any other head of income to 2 lakhs. Accordingly, if interest payable in respect of acquisition of eligible house property is more than 2 lakhs the excess can be claim as deduction under section 80EEA, subject to fulfill the condition. Specified Payment Deductible Under Income Tax

Deduction in respect of interest payable on loan taken for purchase of electric vehicle [ Section 80 EEB] 

An individual who has taken a loan for purpose of an electric vehicle from any financial institution. Interest payable on such loan would qualify for deduction under this act. The condition to be satisfied for availing this deduction are the follows:

  • The assesse should be an individual.
  • Loan should be taken for purchase of an electrical vehicle.
  • Loan should be sanction by FI.
  • Loan should be sanction between 01.04.2019 and 31.3.2023

The quantum of deduction is subject to maximum limit of Rs. 1,50,000.

Deduction in respect of donation to certain funds, charitable institution [ Section 80G]

In income tax deduction is allowed to assesse for payment of any sum paid as donation to eligible funds or institution, he is eligible to claim deduction, subject to certain limitation, from the gross total income.

There are four category of deduction

1. Donation Qualify for 100% deduction, without any qualifying limit

National Defense fund, PM relief fund, PM earthquake relief fund, National children fund, approved university or educational institution of national eminence, national sports fund, national cultural fund, clean ganga fund, swachh bharat kosh and other various government fund organization.

2. Donation qualify for 50% deduction, without any qualification limit

Jawahar lal Nehru Memorial fund, Prime minister drought relief fund, Indira Gandhi Memorial trust, Rajiv Gandhi Foundation

3. Donation qualifying for 100% deduction, subject to qualification limit

  • The government or to any approved local authority, institution or association as may be approved for promotion of family planning
  • Sum paid by a company as donation to the Indian Olympic Association or any other association/institution established in India, as may be notified by the Govt established:
  • For the development of infrastructure for sports or games, or
  • The sponsorship of sports and games in india.

4. Donation qualifying for 50% deduction, subject to qualifying limit

Qualifying Limit

The eligible donation under 3 and 4 should be aggregated and the sum total should be limited to 10% of the adjusted gross total income. This would be the maximum permissible deduction. The donation qualifying for 100% deduction would be first adjusted from the maximum permissible deduction would be first adjusted from maximum permissible deduction and thereafter 50% deduction of the balance would be allowed.

Steps for computing qualifying limit

Step 1: Compute adjusted Total Income that is gross total income after taking deduction from following:

  • Deduction under Chapter vi-A, excluding 80G
  • Taxable income under Short term Capital gain
  • Taxable income under long term capital gain
  • Any income on which income tax is not payable

Step 2: Calculate 10% of adjusted total income.

Step 3: Calculate actual donation which is attract qualifying limit.

Step 4: Lower of step 2 or step 3 is the maximum permissible deduction.

Step 5: The deduction is first adjusted against donation qualify for 100% deduction and thereafter 50% of balance qualifies for deduction under 80G.

Important Note:

  1. Donation in kind shall not qualify for deduction.
  2. No deduction shall be allowed in respect of donation of any sum exceeds Rs. 2,000 unless such sum is paid by any mode other than cash.
  3. The deduction under section 80G can be claimed whether it has any nexus with the business of the assesse or not.

Deduction in respect of Rent Paid [ Section 80GG]

Assessee who is not in receipt of HRA qualifying for exemption under income from salaries from employer and who pays rent for accommodation occupied by him for residential purpose.

Quantum of deduction allowed I this section is as follows:

  • Actual rent paid – 10% of total income of assesse before allowing deduction
  • 25% of total income after claim deduction under chapter vi-A but before making any deduction under this section 5000 p.m

Deduction in respect of donation for scientific research or rural development [ Section 80GGA]

This deduction is available to assesse who has not taxable income from PGBP. Any person can donate sum under that specified development trust to claim the deduction. The donation should be paid in made other than cash.  Cash payment up to Rs. 2000 is allowed.

Deduction in respect of contribution given by companies to political parties [ Section 80GGB]      

Under this section Indian company make donation to political party or electoral trust is allowed to take deduction in the previous year in which deduction is made. However, no deduction shall be allowed in respect of any sum contributed by way of cash.

Specified Payment Under Deductible Income Tax or claiming exemption.

Deduction in respect of contribution given by any person to political parties [ Section 80GGC] 

This section provides for deduction of any sum contributed in the previous year by any person to a political party or an electoral trust. However, no deduction shall be allowed in respect of any sum contributed by way of cash. This deduction will not have allowed to local authority, artificial juridical person, wholly or partly funded by government. Specified Payment Under Deductible Income Tax

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