SUBMITTED TO: MS.

KRITI
SUBMITTED BY: TANYA (18/18) B.A.LL.B. SECTION A

PRINCIPLES OF
TAXATION LAW
Main Deductions under Chapter VI A of Income Tax Act, 1961
 TABLE OF CONTENTS

ACKNOWLEDGEMENT.........................................................................................................2
INTRODUCTION......................................................................................................................3
TAX DEDUCTION...................................................................................................................3
Meaning..................................................................................................................................3
Benefits of Tax Deduction.....................................................................................................3
Chapter VI A of Income Tax Act, 1961.................................................................................4
DEDUCTIONS UNDER SECTION 80C..................................................................................4
Investments/Savings covered under Section 80C..................................................................4
Other Important Points Relating to Section 80C....................................................................7
DEDUCTIONS UNDER SECTION 80CCC.............................................................................8
Essentials for the Application of Section 80CCC..................................................................8
DEDUCTIONS UNDER SECTION 80CCD..........................................................................10
Conditions for the Application of Section 80CCD..............................................................10
Amount received from Notified Pension Scheme (NSP) Section 80CCD (3).....................11
Amount used for purchasing an annuity plan Section 80CCD (5).......................................11
DEDUCTIONS UNDER SECTION 80U................................................................................11
Conditions for Application of Section 80U.........................................................................11
Person with a Disability.......................................................................................................11
Meaning of person with severe disability............................................................................12
Amount of Deduction...........................................................................................................12
Certificate by Medical Authority.........................................................................................13
REFERENCES.........................................................................................................................14

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ACKNOWLEDGEMENT
The success and outcome of this project required a lot of guidance, assistance, and
supervision and I am extremely privileged to have got all this along the completion of my
project. All I have done is due to such direction and assistance.

I respect and thank Ms. Kriti for giving me all guidance and motivation which made me
complete it duly. I am thankful to her for providing the necessary information and support
and guidance till the completion of my presentation providing all the necessary information.

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INTRODUCTION
To run a nation judiciously, the government needs to collect tax from the eligible citizens;
paying taxes to the local government is an integral part of everyone’s life, no matter where
we live in the world. To define, a tax is a mandatory fee or financial charge levied by any
government on an individual or an organization to collect revenue for public works providing
the best facilities and infrastructure. The collected fund is then used to fund different public
expenditure programs.

Income tax, of all taxes, is the most common type of tax that eligible citizens must pay to the
government. A part of your income is paid to the government every year and the government
uses this money to fund support the growth and development activities across the country.1

The tax system in India is progressive which means that not all individuals pay the same
amount of tax. The general rule is – the higher one’s income, the higher amount of tax one
will have to pay. This also implies that the taxation system in India is fair rather than being
uniform.

TAX DEDUCTION

Meaning

Tax deduction refers to claims made to reduce your taxable income, arising from various
investments and expenses incurred by a taxpayer. (Gross Total Income which is the sum total
of Income from Salary, from House Property, from Capital Gain, from Profits and Gains
from Business or Professions, from Other Sources is considered to be the taxable income.)
Thus, income tax deduction reduces your overall tax liability. It is a kind of tax benefit which
helps you save tax.

Benefits of Tax Deduction

There are several benefits associated with tax deduction which include:

 Tax deductions help you reduce an amount from your taxable income and save tax.
When you claim an income tax deduction, it reduces the amount of your income that
is subject to tax.
 Reduced taxable income helps you save and invest money in other areas.
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https://groww.in/p/tax, accessed at February 13, 2023 at 12:15 pm.

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  Tax deduction first reduces the income subject to the highest tax brackets. So, you can
claim deduction for the amounts spent in tuition fees, medical expenses, and
charitable contributions.2

Chapter VI A of Income Tax Act, 1961

As per Chapter VIA of the Income Tax Act, a taxpayer can claim deductions from income
based on various tax-saving investments, permitted expenditures, donations, etc. The
deductions under Chapter VIA are designed to benefit the taxpayer so that the tax burden is
reduced.

Chapter VI A has various sub sections that you can use to claim deductions so as to reduce
your taxable income.

For instance, deductions can be claimed under Sections 80C, 80CCC, 80CCD,

80CCE, 80D to 80U of the Income Tax Act.

DEDUCTIONS UNDER SECTION 80C

Section 80C of the Income Tax Act is basically allows certain expenditures and investments
to be exempt from tax. The foremost thing to note under Section 80C is that the beneficiaries
under this section are the individuals and the Hindu Undivided Families (HUFs). Another
important point is that it allows for deductions up to Rs.1.5 lakh p.a. Under this section,
individuals can invest in several savings schemes to claim deductions on their taxable
income.

Investments/Savings covered under Section 80C3

Following are the investments/savings on which the tax deduction can be claimed by a
taxpayer under Section 80C:

1. Life Insurance Premium: If an individual has purchased a Life Insurance Policy for

one’s own self, or for the spouse or children of such individual and in case of a Hindu
Undivided Family, for the member of any such family, the premium paid towards it is
eligible for deductions under Section 80C of the Income Tax Act. In case he has

2
https://www.bankbazaar.com/tax/tax-deduction-and-types.html, accessed at February 13, 2023 at 12:20 pm.
3
https://www.bankbazaar.com/tax/deductions-under-80c.html, accessed at February 13, 2023 at 02:25 pm.

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 multiple life insurance policies from different insurance providers, he can club all the
premiums and claim deductions up to Rs.1.5 lakh p.a.
2. Payment in respect of Non-Commutable Deferred Annuity: Any plan of non-
commutable deferred annuity taken in the name of individual or spouse or any child
of such individual is eligible for Section 80C deduction.
3. Amount deducted from salary for deferred annuity: Any sum deducted from the
salary payable by or on behalf of the government to an individual for the purpose of
securing to him the deferred annuity is eligible for Section 80C deductions. Such plan
may be for the benefit of individual or his spouse or children.
4. Contribution to Recognised Employee Provident Fund: Provident Fund is
automatically subtracted from the monthly salary of an employee. An employee and
his/her employer both contribute towards PF. The contribution made by the employee
is eligible for deductions under Section 80C of the Income Tax Act. Employees are
also allowed to make voluntary contributions towards the Provident Fund Account.
Voluntary Provident Fund or VPF as it is called, is also eligible for tax deductions
under Section 80C of the Income Tax Act.
5. Contribution towards 15 years Public Provident Fund: Public Provident Fund is a
popular investment instrument as it offers assured returns. Interest is compounded on
an annual basis and the maturity period of the scheme is 15 years. The least that one
can contribute towards PPF is Rs.500 and the maximum contribution allowed is
Rs.1.5 lakh. The amount one contributes towards PPF is eligible for tax deductions
under Section 80C of the Income Tax Act. An assessee may open PPF Account in his
own name or in the name of spouse or child.
6. Contribution towards approved superannuation fund.
7. Investment in National Savings Certificate: National Savings Certificate or NSC as
it is known in its abbreviated form, is one of the most popular tax-saving instruments
available to Indian citizens. The amount one invests in National Savings Certificate is
eligible for tax deductions under Section 80C of the Income Tax Act, subject to a
maximum of Rs.1.5 lakh per financial year. As per Rule 15 of the NSC (VII Issue)
Rules, 1989, the accrued interest is deemed to be reinvested and is also qualified for
deduction for first five years.
8. Investment in Unit linked Insurance Plan: Section 80C provides for the deductions
for contributions for participation in Unit-linked Insurance plans of both Unit Trust of
India and LIC Mutual Fund. Minimum period of holding should be 5 years.
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9. Payment for notified Annuity Plan of LIC (commonly known as New Jeevan
Dhara, New Jeevan Akshay, New Jeevan Aksha I, New Jeevan Akshay II, New
Jeevan Akshay III) or any other insurer.
10. Subscription towards notified units of Mutual Fund or Unit Trust of India.
11. Contribution to notified pension fund set up by Mutual Fund or Unit Trust of
India (i.e., Retirement Benefit Pension Fund of UTI)
12. Any sum paid as subscription to Home Loan Account Scheme of National
Housing Bank or contribution towards any notified pension fund set up by the
National Housing Bank. However, the sum also includes the accrued interest.
13. Any sum paid as subscription to any such deposit scheme of:
a) Public Sector Company engaged in providing long term finance for purchase or
construction of residential houses in India;
b) Housing Board constituted in India for the purpose of planning, development or
improvement of cities or towns and villages.
14. Tuition Fees whether at the time of admission or later on, paid to any school, college,
university, or other educational institutions within India for full-time education for
any 2 children of the assessee.
15. Repayment of Home Loan Principal Amount: The EMI amount that goes towards
the repayment of the principal amount on your home loan is also eligible for tax
deductions under Section 80C of the Income Tax Act. The repayment of the home
loan amount has two components, viz. the principal amount and the interest. While
the interest part of the repayment cannot be claimed as deduction under Section 80C
of the Income Tax Act, the repayment of the principal amount certainly can be.
16. Registration Charges and Stamp Duty for a Home/Property: In case a taxpayer
has purchased a home or a property and paid for stamp duty and registration, these
amounts can be claimed as tax deductions under Section 80C of the Income Tax Act.
17. Infrastructure Bonds: Infra bonds as they are commonly called, Infrastructure bonds
are issued not by the government but by infrastructure companies. In case you invest
in these bonds, you can claim tax deductions up to Rs.1.5 lakh under Section 80C of
the Income Tax Act.
18. Amount deposited as term deposit for a period of 5 years or more in accordance
with Government Scheme.
19. NABARD Rural Bonds: NABARD, or the National Bank for Agriculture and Rural
Development, offers two kinds of bonds, viz. Bhavishya Nirman Bonds and
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 NABARD Rural Bonds. However, only the latter qualifies for tax deductions under
Section 80C of the Income Tax Act, and the maximum amount that you can claim as
deductions is Rs.1.5 lakh.
20. Senior Citizen Savings Scheme: The Senior Citizen Savings Scheme is the best
possible investment scheme for senior citizens. The returns are relatively lucrative in
comparison with other schemes, and the interest is paid on a quarterly basis.
Individuals who are above 60 years of age can invest in this scheme and claim tax
benefits up to Rs.1.5 lakh under Section 80C of the Income Tax Act.
21. Investment Tax Saving Fixed Deposit (five-year fixed deposit (FD) of Scheduled
Bank or Post Office): Post office deposit schemes are a lot like fixed deposits offered
by banks. The duration of these schemes could range from one year to five years, but
only the interest earned on five-year post office time deposit schemes are eligible for
tax deductions under Section 80C of the Income Tax Act.
22. Sukanya Samriddhi Scheme: Individuals can open a Sukanya Samriddhi account for
a girl child anytime from the date of her birth to the day she turns 10 years old. The
minimum amount that one can invest in the Sukanya Samriddhi scheme is Rs.1,000
and the maximum is limited to Rs.1.5 lakh in a financial year. The interest in this
account is calculated on an annual basis and compounded on an annual basis too. The
interest accrued through this scheme is eligible for tax deductions under Section 80C
of the Income Tax Act.4

Other Important Points Relating to Section 80C

 Where assessee has claimed deduction under section 80C, no deduction can be
claimed with regard to that amount under Section 80CCC or section 80CCD.
 The total amount of deduction under sections 80C, 80CCC and 80CCD cannot exceed
rupees 1 lac.
 In case of ULIP, LIC and Residential House Property, where period of holding is
fixed and assessee terminates its participation before making contribution for five
years then:
4
https://life.futuregenerali.in/life-insurance-made-simple/tax-hacks/blogs/deductions-under-chapter-vi-a/
#:~:text=What%20is%20Chapter%20VIA%20of,the%20tax%20burden%20is%20reduced, accessed on
February 13, 2023 at 02:35 pm.

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 a) Any contribution made towards the above plan in the said previous year will not
be qualified for deduction under section 80C,
b) The quantum of deduction already allowed in the preceding years shall be deemed
as income of assessee for the previous year in which the contribution to the plan is
terminated.
 In case of Time Deposit Scheme in post office or Senior Citizens’ Saving Scheme, if
amount is withdrawn before expiry of holding period then the amount withdrawn
shall be taxable in the year of withdrawal. However, such amount does not include
interest which has already been taxed in earlier year.
 Deduction is allowed on paid basis therefore where any amount of past previous year
is paid in current previous year under Section 80C then it is eligible for deduction.
 In Commissioner of Income Tax v. Abraham George5, the honourable Kerala High
Court held that only where payment comes out of the income chargeable to tax, it
would qualify for deduction under Section 80C. The exemption granted is from
charging the specified sums to tax. The question of exempting any sum from being
charged to tax arises only when that sum could or would possibly enter the field of
that particular taxation. Similar view has also been expressed by the honourable
Orissa High Court in CIT v. Dr. Usharani Panda6.

DEDUCTIONS UNDER SECTION 80CCC

Under Section 80CCC, the eligible taxpayer is only the individual. Hindu Undivided Families
(HUFs) are not eligible for tax deductions under Section 80CCC. This section provides tax
deductions for any amount paid or deposited by an individual for any annuity plan of Life
Insurance Corporation of India or other specified insurers, for receiving pension.

Essentials for the Application of Section 80CCC

1. Assess must be an individual.

2. During the relevant previous year he must have paid or deposited a sum under annuity
plan of LIC or any other insurer for receiving pension.
3. Amount must be paid out of taxable income which may be of current previous year or
earlier previous years.

5
ITR No. 89 of 1997
6
(1995) 212 ITR 119

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 4. No deductions can be claimed under Section 80C if the deduction had been claimed
under this section.
5. Section 80CCC allows the deduction up to rupees 150,000 subject to the provisions of
Section 80CCE.
6. The following amounts are taxable during the year they are received:
 Income from an annuity or pension.
 The amount received when surrendering an annuity, including any accrued bonus or
interest.

In the case of Ami Ashish Shah v. Income Tax Officer7, the honourable Gujarat High Court
summarised the essentials of Section 80CCC of the Income Tax as follows:

“The Section 80CCC exemption limit includes the money spent on the purchase of a new
policy or payments made towards the renewal or continuation of an existing policy. The
primary condition for availing this exemption is that the policy for which the money has been
spent must be providing for pension or a periodical annuity. Section 80CCC is read along
with Section 80C and Section 80CCD (1), thereby limiting the total exemption limit to
Rs.1,50,000/ per annum.”

Following are the terms and conditions applicable under the Act:

(i) Available to those individuals who have paid the sum for renewal or purchase of a life
insurance policy from their taxable income.

(ii) The payment of funds from the policy should be made as per the terms of Section
10(23AAB) from the accumulated funds.

(iii) If any bonus is received or interest is accrued, it is not eligible for deduction
under Section 80CCC.

(iv) Any amount received from the policy as a monthly pension is liable for taxation as per
the prevailing rates.

(v) If the policy is surrendered, the amount would also be subject to taxation.

(vi) Any rebates that were available on investment in annuity plans before April 2006 are not
allowed under Section 88.

(vii) Any amount deposited before April 2006 is not eligible for deduction.
7
(2022) 440 ITR 417

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DEDUCTIONS UNDER SECTION 80CCD
Section 80 CCD deals with the deductions relating to contributions to Notified Pension
Scheme. Section 80CCD deductions are divided into two subsections: Section 80CCD (1)
and Section 80CCD (2). This categorization is to distinguish pension fund contributions made
by the taxpayer (self) and contributions made by employers on behalf of an employee.
Currently, an individual can claim a deduction of up to ₹1.5 lakh under Section 80CCD (1)
and an additional deduction of ₹50,000 under Section 80CCD (1B) in a financial year.

Conditions for the Application of Section 80CCD

1. Assessee must be an individual.

2. Assessee must be an employee of Central Government or any other employer or he
may be self-employed individual.
3. He must have joined his employer on or after January 1, 2004.
4. He has paid or deposited any amount in his account under pension scheme notified by
Central Government.
5. the amount paid or deposited by the employee (or self-employee) eligible for
deduction:
a) in the case of an employee:
 Employer's contribution up to 10% of salary of employee. Therefore,
employer's is deductible in the hands of employee in the year in which
contribution is made provided it is up to 10% of salary of employee.
Hence, employer's contribution in excess of 10% of salary of employee
would not be eligible for deduction and hence taxable in the hands of
employee;
 Employee's contribution up to 10% of his salary. Therefore, employee's
contribution to a notified pension scheme is deductible in the year in which
contribution is made provided it is up to 10% of his salary. Hence,
employee's contribution in excess of 10% of salary of employee would not
be eligible for deduction.
b) in any other case, ten per cent of his gross total income in the previous year.
Earlier section 80CCD was not applicable to the self-employed person. However,
by the Finance Act, 2009, (w.e.f. 01.04.2009) section 80CCD has been amended
to extend the benefit under this Section to self-employed individual. However, this

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 benefit is up to 10% of his GTI and where contribution made by such assessee
exceeds 10% of his Gross Total Income (GTI) then excess shall not be taken into
consideration for the purpose of section 80CCD.

Amount received from Notified Pension Scheme (NSP) Section 80CCD (3)

The amount standing to the credit of assessee in the pension account for which a deduction
has already been claimed by him, then accretion to such account shall be taxed as income in
the year in which such amounts are received by assessee or his nominee on closure of account
or his opting out of the pension scheme or on receipt of pension from annuity plan.

Amount used for purchasing an annuity plan Section 80CCD (5)

Where assessee has used such amount for purchase of an annuity plan in the same previous
year then assessee shall be deemed not to have received any amount in the previous year.

DEDUCTIONS UNDER SECTION 80U

Section 80U of the Income Tax Act, 1961 includes provisions for tax deduction benefit to
individual taxpayers suffering from a disability. In order to claim tax deduction under section
80U, the individual must be certified as a person with a disability by appropriate medical
authority.

Conditions for Application of Section 80U

1. Assessee must be an individual.

2. He must be a person with disability.

Person with a Disability

As per Section 2 (i) of the Persons with Disability (Equal Opportunities, Protection of Rights
and Full Participation) Act, 1955, individuals suffering from any of the following ailments
with minimum 40% impairment will be considered as disabled:

a) Blindness: It refers to a condition where a person suffers from any of the following
conditions namely:
- Total absence of sight; or
- Visual acuity not exceeding 6/60 or 20/200 in the better eye with correcting
lenses; or
- Limitation of the field of visions subtending an angle of 20 degrees or worse.

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 b) Person with low vision: It means a person with impairment of visual functioning even
after treatment or standard refractive correction but who uses or is potentially capable
of using vision for the planning or execution of a task with appropriate assistive
device.
c) Leprosy-cured person means any person who has been cured of leprosy but in the eye
from:
-loss of sensation in hands or feet as well as loss of sensation and paresis in the eye
and eye lid but with no manifest deformity;
-manifest deformity and paresis but having sufficient mobility in their hands and feet
to enable from to engage in normal economic activity;
-extreme physical deformity as well as advanced age which prevents him from
undertaking any gainful occupation.
d) Hearing Impairment: It means loss of sixty decibels or more in the better ear in the
conversational range of frequencies.
e) Locomotor Disability: It means disability of the bones, joints or muscles leading to
substantial restriction of the movement of the limbs or any form of cerebral palsy.
f) Mental retardation: It means a condition of arrested or incomplete development of
mind of a person which is specially characterized by sub-normality of intelligence.
g) Mental illness: It means any mental disorder other than mental retardation.

Meaning of person with severe disability

It means a person with more than 80% of one or more disabilities as mentioned under
section 56(4) of the Persons with Disabilities (Equal Opportunities, Protection of Rights
and Full Participation) Act, 1995.

Amount of Deduction

a) Where disability is normal, i.e., more than 40% but up to 80% the deduction amount
is up to rupees 75,000.
b) Where disability is severe, i.e., more than 80% the deduction amount is up to rupees
120,000.

Certificate by Medical Authority

For claiming deduction assessee must attach a certificate issued by the Medical Authority in
the prescribed form (Form No. 10-IA) and manner along with the return of the income.

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Further, after expiry of a period stipulated in that certificate assessee must apply for new
certificate otherwise no deduction shall be allowed to assessee.

In the case of Sardar Harpreet Singh v. CIT8, the honourable Allahabad High Court held that
where assessee is earning income from business, deduction under section 80U of Income Act,
1961 shall not be disallowed because it is not a condition precedent under this Act that
assessee should be unemployed or not earning anything.

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(1991) 187 ITR 679 (All)

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REFERENCES
1. https://life.futuregenerali.in/life-insurance-made-simple/tax-hacks/blogs/deductions-
under-chapter-vi-a/#:~:text=What%20is%20Chapter%20VIA%20of,the%20tax
%20burden%20is%20reduced, accessed on February 13, 2023 at 02:35 pm.
2. https://www.bankbazaar.com/tax/tax-deduction-and-types.html, accessed at February
13, 2023 at 12:20 pm.
3. https://www.bankbazaar.com/tax/deductions-under-80c.html, accessed at February 13,
2023 at 02:25 pm.
4. https://groww.in/p/tax, accessed at February 13, 2023 at 12:15 pm.

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