Permissible Deductions from Gross Total Income

1. General Points :
(i) Sec. 80A In computing the total Income of an assessee, shall be allowed certain deductions from Gross Total Income (GTI) u/s 80CCC to 80U. It is computed as under :
Note : Sec. 80B “Gross Total Income” means the total income computed in accordance with the provision of this Act before making any deduction under this chapter.
(ii) These deductions are however not allowed from the following incomes although these are part of GTI :
(a) Long term capital gain
(b) Winning of Lotteries, races
(c) Income referred to in section 115A, 115AB, 115AC, 115 ACA, 115 AD, 115 BBA and 115D
(iii) Deductions can not exceed GTI as above.
(iv) Deductions not allowed to members if allowed to AOP/BOI
(v) Assessee should be claimed deductions.
(vi) Sec. 80AB Deduction to be allowed in respect of net income computed in accordance with provision of the IT Act (As indicated in Point (1) above) included in GTI.
 It means eligible amount of deduction is restricted upto income computed under the provision of the Act i.e. income calculated after giving all eligible deductions and adjustment for set-off and carry forward of losses.
(vii) Total No. of deduction are 25 and it may be classified as under :
Deductions in respect of Payments :
1. 80C : New Undertakings engaged in infrastructure development.
2. 80 CCC  : Contribution to certain pension funds
3. 80CCD : Contribution to pension scheme of Central Govt.
4. 80 D : Medical insurance Premium
5. 80 DD : Medical treatment and maintenance of dependant who is a person with disability.
6. 80 DDB  : Medical treatment for specified disease
7. 80 E : Interest paid on loan taken for higher education.
8. 80 G : Donation to certain
9. 80 GG : Rent paid
10. 80 GGA : Donation – Scientific research, rural development
11. 80GGB  : Contribution given by companies to political parties w.e.f. 11.9.2003
12. 80GGC  : Contribution given to political parties by another person

Deductions in respect of Incomes :
1. 80 IA : Payment of Life Insurance Premium, contribution to provident fund etc.
2. 80 IAB : New Undertaking engaged in development of special economic zone.
3. 80 IB : New Undertakings (other than infrastructure development etc).
4. 80 IC : New undertakings in certain special category states
5. 80 ID : Business of Hotels in specified area or world heritage site & convention centers in specified area
6. 80 IE : Certain undertakings in north eastern states.
7. 80 JJA : Collecting and processing of bio-degradable waste
8. 80 JJAA : Employment of new workmen funds, charitable institutions, etc.
9. 80LA : Income of offshore Banking Units.
10. 80 P : Co-operative Societies
11. 80 QQB : Royalty income of authors
12. 80RRB : Royalty on patents
13. 80 U : Person with disability

What ? (Describe title and section)
To Whom ? (Describe type of eligible persons)
How Much ? (Mention formula)
When ? (Describe all essential conditions)
ix. Deductions in respect of Payments :
These deductions are allowed on payment basis and not due basis. Further payment should be made out of income chargeable to tax.
3. Deduction in Respect of Earnings
3.1 Sec. 80IA-Deduction in respect of profit and gains from Infrastructure Development Undertakings
Notes :
 The deduction can be claimed, at the option of the assesee, for any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise develops and begins to operate.
 Conditions to be complied are :
(i) The Industrial undertaking is not formed by splitting up or reconstruction of existing unit.
(ii) The undertaking is not formed by transfer of machinery or plant previously used for any purpose. (up to 20% of total value of plant and machinery can be plant and machinery earlier used).
 Following conditions should be fulfilled for availing deduction with reference to the profits of the business relating to infrastructure facility :
(i)  The enterprise should be owned by a company registered in India or a consortium of such companies;
(ii) The enterprise should enter into an agreement with Central Governemnt or a State Government or a Local Authority or any other statutory body.
 The deduction shall be allowed only if the accounts are audited by a Chartered Accountant and audit report thereof is furnished along with the return of income.
 Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred before the expiry of the period of deduction to another Indian company in a scheme of amalgamation or demerger, then the deduction shall be given to amalgamated or the resulting company.

3.2 Sec. 80-IAB—Deduction in respect of profits and gains by an undertaking or  an enterprise engaged in development of Special Economic Zone.
 The deduction under the new section is available where the GTI of an assessee, being a developer, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a SEZ, notified on or after 01-04-2005 under the Special Economic Zones Act, 2005.
 Quantum of Deduction :
 = 100% of profits and gains derived from such business for 10 consecutive assessment years.
 The deduction may be claimed by the assessee for any 10 consecutive assessment years, out of 15 yrs. beginning from the year in which a SEZ has been notified by the CG.
 Conditions :
 (i) Audit of accounts.
 (ii) Inter unit transfer of goods or services.
 (iii) Restriction of double deduction.
 (iv) Restriction of excessive profits.
 (v) Power of Central Govt. to notify undertakings to which section 80IAB shall   not apply.
 (vi) Deduction not to be allowed where return is not filed with in the time limit   specifited under section 139 (1).
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