Important Keyword: Chapter VI-A, Interest, Section 80E.
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Section 80E: Deduction for Interest on Education Loan
Inflation and rising prices have become persistent challenges recently, affecting even essential services like education. As the demand for education grows, so do the costs, particularly for higher education. Many students choose to study abroad, and their parents often have to take out education loans to fund these studies. However, there is a positive aspect: the Income Tax Department (ITD) provides a deduction for the interest paid on education loans under Section 80E.
Section 80E offers significant financial relief by allowing a deduction on the interest paid on education loans. This provision helps reduce the taxable income, making it easier for families to manage the high costs of higher education. The loan must be taken from a recognized financial or charitable institution to qualify for this benefit.
The deduction applies for a maximum of eight years, starting from the year repayment begins. This extended period can lead to substantial savings, easing the financial burden over time.
Section 80E of the Income Tax Act
Section 80E of the Income Tax Act is a tax-saving provision designed to provide financial relief to individuals who have taken education loans to pursue higher studies. This section allows taxpayers to claim a deduction on the interest paid on these loans, thereby reducing their taxable income and helping manage the costs of education. It is important to note that this deduction applies only to the interest portion of the loan, not the principal amount.
However, under the new tax regime, taxpayers cannot claim the interest on the education loan deduction.
Eligibility Criteria to Claim 80E Deduction
Individual Claimants: Only individuals can claim the 80E deduction. Hindu Undivided Families (HUF), companies, or partnership firms are not eligible for this deduction.
Source of Loan: The loan must be taken from a recognized financial institution or an approved charitable institution. Loans taken from relatives or friends do not qualify for this deduction.
Purpose of Loan: The loan must be for the purpose of pursuing higher education. This includes higher education for oneself or for a relative. Relatives, in this context, include spouses, children, or students for whom the individual is a legal guardian.
Loan Under Taxpayer’s Name: The loan should be taken in the name of the taxpayer claiming the deduction.
Repayment: The repayment of the education loan must be made by the taxpayer.
Key Points to Remember
The deduction is available for a maximum of eight years, starting from the year repayment begins.
The benefit is limited to the interest paid on the education loan.
The new tax regime does not allow this deduction.
Section 80E Deduction Limit and Timeframe of Deduction
Section 80E of the Income Tax Act provides a valuable deduction for individuals who have taken loans for higher education. Unlike many other sections, there is no upper limit on the amount that can be claimed under this provision. This means that you can claim the entire interest amount paid on the education loan as a deduction from your taxable income.
However, there are specific conditions to keep in mind. The deduction period is limited to 8 consecutive years starting from the year in which the repayment of the loan begins. For instance, if you start repaying your education loan in a particular financial year, you can claim the deduction on the interest paid for up to 8 subsequent years.
Let’s illustrate this with an example: Suppose Rahul commenced repayment of his education loan in the financial year 2022-23, and the annual interest payable on the loan amounts to INR 1 lakh. If Rahul completes the repayment of the loan over 5 years, he can avail of the deduction under Section 80E for the interest paid on the loan amounting to INR 1 lakh each year during those 5 years.
It’s essential to note that this deduction applies only to the interest portion of the loan repayment and not to the principal amount. Furthermore, the loan must have been taken from a recognized financial institution or approved charitable institution for the higher education of the individual, their spouse, or their children.
ITR Form Applicable
When filing your Income Tax Return (ITR) and claiming deductions under Section 80E for interest paid on education loans, it’s important to choose the correct ITR form based on your income sources. This deduction can be claimed in various ITR forms such as ITR 1, ITR 2, ITR 3, and ITR 4, depending on the complexity and nature of your income.
To support your claim under Section 80E, you’ll need to gather the following documents:
Loan Certificate: This should be issued by the bank, financial institution, or an approved charitable institution from where you obtained the education loan. The certificate should specify the amount of interest paid during the financial year.
Interest Certificate: Along with the loan certificate, it’s advisable to have a separate interest certificate detailing the interest paid on the education loan during the financial year. This helps in accurate reporting while filing your ITR.
These documents are crucial as they provide evidence of the interest paid on the education loan, which is necessary for claiming the deduction under Section 80E. Ensuring you have these documents in order will facilitate smooth and accurate filing of your income tax return.
Important Keyword: Chapter VI-A, Interest, Section 80EE.
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Section 80EE: Deduction for Interest on Home loan
Buying a home for the first time can be a challenging process. It begins with finding the right house that fits your needs and desires and ends with the more complex steps of applying for a home loan. To help ease this financial burden, Section 80EE of the Income Tax Act was introduced. This section offers a special benefit for first-time home buyers, allowing them to claim an additional tax deduction on the interest paid on their home loans.
This extra deduction is available up to INR 50,000 for loans taken between April 1, 2016, and March 31, 2017. However, to qualify for this benefit, certain conditions must be met. This provision aims to provide some financial relief to new homeowners by reducing the overall cost of borrowing.
What is Section 80EE?
Section 80EE of the Income Tax Act provides a tax benefit to individuals on the interest paid on home loans for purchasing a property. This section aims to offer some financial relief to first-time homebuyers by allowing them to claim a deduction on their home loan interest.
What are the Eligibility Criteria?
First-Time Homeowners Only: This deduction is available only to individuals buying their first home. If two individuals jointly own the home and are paying the loan, both can claim the deduction.
Exclusions: Hindu Undivided Families (HUFs), companies, and partnership firms cannot claim this deduction. Additionally, the deduction is available only on the interest paid, not on the principal repayment.
Conditions to Claim the 80EE Deduction
First-Time Home Buyer: The individual must be purchasing their first residential property.
Value of the House: The cost of the house should not exceed INR 50 lakh.
Loan Sanction Period: The loan must be sanctioned between April 1, 2016, and March 31, 2017.
Loan Source: The loan should be from a financial institution or a housing finance company.
Loan Amount: The loan amount should not exceed INR 35 lakh.
Ownership of Other Property: The taxpayer should not own any other residential property on the date of the loan sanction.
Property Type: The deduction is applicable only for residential properties, not commercial ones.
Deduction Limit for Section 80EE
Initial Introduction: Section 80EE was first introduced in the Budget 2014 for FY 2013-14 and FY 2014-15 with a maximum deduction limit of INR 1 lakh.
Reintroduction: It was reintroduced in the Budget 2017, effective from FY 2016-17 (AY 2017-18), allowing a deduction of up to INR 50,000 per year until the loan is fully repaid.
Cumulative Benefit: This INR 50,000 deduction is in addition to the INR 2,00,000 deduction allowed under Section 24 for home loan interest. Thus, if eligible, a taxpayer can claim a total deduction of INR 2,50,000 on home loan interest in a financial year.
Section 80EE vs 80EEA
The below table states the major difference between 80EE & 80EEA deduction:
PARAMETER
SECTION 80EE
SECTION 80EEA
Eligibility
Only Individual Taxpayers
Only Individual Taxpayers
Deduction Limit
INR 50,000
INR 1,50,000
Applicability of Section 24
Can be claimed up to INR 2,50,000 (INR 2lakh + INR 50,000)
Can be claimed up to INR 3,50,000 (INR 2lakh + INR 150,000)
Date of Loan Sanctioned
Taxpayers get the deduction if their loans are sanctioned from 1st April 2016 to 31st March 2017
Taxpayers get the deduction if their loans are sanctioned from1st April 2019 to 31st March 2022
Stamp Duty
The stamp duty value of the house should not exceed INR 50 Lakh
The stamp duty value of the house should not exceed INR 45 Lakh
Loan Amount
The amount of the loan should not exceed INR 35 Lakh
There is no such limit on loan amount
Condition
The taxpayer has to be a first-time home-buyer
The taxpayer has to be a first-time home buyer and shouldn’t have availed of any deductions under 80EE
Differences between Section 80EE and Section 24(b)
Section 24(b):
Deduction Limit: Allows a deduction of up to INR 2 lakh for interest paid on a home loan for a self-occupied property.
Let-Out Property: For let-out (rented) properties, the entire interest amount paid on the home loan is deductible.
Scope: Applies to both first-time and repeat homebuyers.
Eligibility: No restrictions on the value of the property or the loan amount.
Section 80EE:
Additional Deduction: Offers an additional deduction of up to INR 50,000 over and above the limit under Section 24(b).
First-Time Homebuyers: Exclusively available for first-time homebuyers.
Conditions:
The value of the residential property should not exceed INR 50 lakh.
The home loan should be sanctioned between April 1, 2016, and March 31, 2017.
The loan amount should not exceed INR 35 lakh.
The taxpayer should not own any other residential property at the time of loan sanction.
Residential Property Only: The deduction is only for residential properties and not for commercial properties.
ITR Forms Applicable for Section 80EE
Taxpayers who meet the conditions for Section 80EE can claim the deduction while filing their Income Tax Return (ITR). The deduction can be claimed in any of the following ITR forms, depending on the individual’s income sources:
ITR 1: For individuals with income from salary, one house property, and other sources (excluding lottery winnings and income from racehorses).
ITR 2: For individuals and HUFs not having income from business or profession.
ITR 3: For individuals and HUFs having income from business or profession.
ITR 4: For individuals, HUFs, and firms (other than LLP) having presumptive income from business or profession.
Supporting Documents
To claim the deduction under Section 80EE, taxpayers should have:
Home Loan Repayment Certificate: A statement from the lender detailing the interest paid during the financial year.
Interest Certificate: A certificate from the lender showing the interest component of the home loan repayment.
Important Keyword: Chapter VI-A, HUF, ITR-1, Section 80G.
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Section 80G: Tax Deduction on Donations
Section 80G of the Income Tax Act provides an opportunity for taxpayers to claim deductions on donations made to specified charitable organizations and relief funds. This provision not only incentivizes donations but also allows taxpayers to contribute towards societal welfare while reducing their tax liability.
What is the Eligible Mode of Payment?
The method of payment plays a crucial role in determining eligibility for claiming deductions under Section 80G of the Income Tax Act. To qualify for these deductions, contributions must be made via cash, cheque, or demand draft.
Effective from the financial year 2017-18, donations made in cash exceeding INR 2,000 are not eligible for tax deductions. Previously, this limit stood at INR 10,000. Therefore, to avail of the deduction, contributions exceeding INR 2,000 should be made via cheque or demand draft.
It’s important to note that donations in the form of food, clothes, or medicines do not qualify for tax deductions under Section 80G of the Income Tax Act. To maximize your tax benefits while supporting charitable causes, ensure your contributions adhere to these guidelines regarding payment methods and eligible donations.
How to Claim Deduction:
When filing your income tax return, provide details such as:
Name, PAN, and address of the charitable institution.
Amount donated.
Type of donation (whether to a specific fund or institution).
Limits and Eligible Institutions:
Not all donations qualify for full deduction. Here’s a breakdown:
100% Deduction: Donations to funds like the National Defense Fund, Prime Minister’s National Relief Fund, and various educational and cultural institutions.
50% Deduction: Donations to funds like the Jawaharlal Nehru Memorial Fund and Prime Minister’s Drought Relief Fund.
Donations with 100% Income Tax Deduction without any qualifying limit:
National Defense Fund set up by the Central Government
Prime Minister’s National Relief Fund
National Foundation for Communal Harmony
An approved university/educational institution of National Eminence
Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
Fund set up by a State Government for medical relief to the poor
National Illness Assistance Fund
National Blood Transfusion Council or any State Blood Transfusion Council
Fund for Technology Development and Application
National Sports Fund
National Cultural Fund
The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund
Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
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)
Prime Minister’s Armenia Earthquake Relief Fund
Africa (Public Contributions — India) Fund
Swachh Bharat Kosh (applicable from the financial year 2014-15)
Clean Ganga Fund (applicable from the financial year 2014-15)
National Fund for Control of Drug Abuse (applicable from the financial year 2015-16)
Donations with 50% Income Tax Deduction without any qualifying limit:
Jawaharlal Nehru Memorial Fund
Prime Minister’s Drought Relief Fund
Indira Gandhi Memorial Trust
The Rajiv Gandhi Foundation
Donations with 100% Income Tax Deduction subject to qualifying limit of 10% of adjusted gross total income:
Government or any approved local authority, institution, or association for promoting family planning.
Donation by a Company to the Indian Olympic Association or any other notified association or institution in India for sports infrastructure development or sponsorship.
Donations with 50% Income Tax Deduction subject to qualifying limit of 10% of adjusted gross total income:
Donation to any public charitable trust.
Authority constituted in India for housing accommodation needs or urban planning and development.
Corporation referred in Section 10(26BB) for promoting minority community interests.
Repairs or renovation of notified temples, Mosques, Gurudwaras, Churches, or other places of worship.
Any other fund or institution meeting conditions under Section 80G(5).
What is Adjusted Gross Total Income for 80G?
It begins with computing your total income from all sources and then making adjustments as specified by tax regulations.
To determine your Adjusted Gross Total Income, start with your gross total income, which encompasses earnings from employment, business, property, and other sources. Next, deduct allowable expenses such as interest payments on loans, certain taxes paid, and investments in specified savings schemes. These deductions help lower your taxable income, thereby reducing the amount of tax you owe.
In the context of donations made to charitable organizations or trusts, Section 80G of the Income Tax Act provides incentives for philanthropy. When you contribute to eligible entities, you can claim deductions on the donated amount from your total income. This reduces your taxable income, resulting in lower tax liability.
Gross Total Income
xxx
Less: Chapter VI-A Deductions except 80G
(xxx)
Less: Exempt Income
(xxx)
Less: Income chargeable to tax at special rate
(xxx)
Less: Income referred to in Sections 115A, 115AB, 115AC, and 115AD relating to non-residents and foreign companies.
(xxx)
Adjusted Total Income
xxx
Let us take an example to understand the calculation better:
Raj contributed INR 25,000 to a government-approved institution for promoting family planning. (100% tax deduction allowed to a qualifying limit of 10% ATI)
Further, he contributed INR 40,000 towards the renovation of a temple (50% tax deduction allowed to a qualifying limit of 10% ATI)
He calculated his adjusted total income as INR 4,50,000.
Particulars
Amount (INR)
Donation with 100% tax deduction qualifying limit
25,000
Donation with 50% tax deduction qualifying limit
40,000
Total Donation
65,000
10% of ATI
45,000 (25,000*100% + 20,000*50%)
ITR Form Applicable for Section 80G
When filing your Income Tax Return (ITR) and claiming deductions under Section 80G, it’s essential to choose the appropriate ITR form based on your income sources. The available options include ITR 1, ITR 2, ITR 3, and ITR 4, each catering to different types of taxpayers. Here’s a breakdown to help you understand which form applies to you:
ITR 1 (Sahaj): This form is suitable for individuals with income from salaries, one house property, other sources (like interest income), and having total income up to Rs. 50 lakh. If you have made donations under Section 80G and your income sources fall within the scope of ITR 1, you can claim deductions accordingly.
ITR 2: If you have income from more than one house property, income from capital gains, or foreign assets/income, ITR 2 is applicable. You can still claim deductions under Section 80G while using this form, provided it matches your income profile.
ITR 3: This form is for individuals and HUFs (Hindu Undivided Families) having income from business or profession. If you fall under this category and have made donations eligible under Section 80G, use ITR 3 to file your return.
ITR 4 (Sugam): For individuals, HUFs, and firms (other than LLPs) opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE, ITR 4 is appropriate. You can claim Section 80G deductions if your income is computed under these presumptive schemes.
Supporting Documents for Claiming Section 80G Deductions
Apart from the basic documents like PAN card and Form 16, you will need specific documents related to your donations:
Stamped Receipt: Obtain a receipt from the organization to which you made the donation. This receipt should bear the stamp of the organization, details of your donation including amount, date, and PAN of the organization.
Form 58: If you have donated to funds that qualify for 100% exemption under Section 80G, ensure you obtain Form 58 from the organization. This form is necessary to claim such deductions.
Important Keyword: Chapter VI-A, Form 10BA, HRA, Section 80GG, Rent Paid.
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Section 80GG: Deduction for Rent Paid
Renting a house in major cities can pose a significant challenge due to the ever-rising rental prices. While receiving House Rent Allowance (HRA) from an employer or owning a house in the city offers convenience, individuals who rent without HRA face substantial financial strain. To alleviate this burden, the Income Tax Department provides relief through a deduction for rent paid under Section 80GG.
Section 80GG is designed to assist taxpayers, particularly those who do not receive HRA and thus bear the full cost of rent. This deduction helps mitigate the impact of high rental expenses on their finances. It is aimed at promoting fairness in tax treatment and supporting individuals in meeting their housing needs despite the absence of HRA benefits.
Section 80GG
Section 80GG of the Income Tax Act provides a deduction for individuals who pay rent for accommodation and do not receive House Rent Allowance (HRA) as part of their salary. Here are the key details and requirements related to claiming this deduction:
Conditions to Claim Deduction under Sec 80GG:
Eligibility: Only self-employed individuals or salaried individuals who do not receive HRA can claim this deduction.
Ownership of Residential Accommodation: The individual, their spouse, minor children, or Hindu Undivided Family (HUF) of which they are a member should not own any residential accommodation at the place where they are employed, reside, or carry on business/profession.
No Self-Occupied Property: The individual should not own a self-occupied residential property at any other location.
Filing Form 10BA: Before claiming the deduction, the taxpayer must file Form 10BA, declaring that they do not own any residential property for which they are claiming benefits under Section 80GG.
PAN of Landlord: If the annual rent exceeds ₹1,00,000, the taxpayer needs to provide the PAN details of the landlord.
Non-Claim of HRA: The taxpayer should not have received HRA at any time during the financial year. If HRA was received from a previous employer during the year, the taxpayer cannot claim deduction under Section 80GG.
Deduction Limit under Sec 80GG:
The deduction allowable under Section 80GG is the least of the following amounts:
Actual rent paid minus 10% of total income
25% of total income
₹5,000 per month (₹60,000 annually)
Example Calculation:
Let’s consider an example: Sharad, a salaried individual not receiving HRA, pays ₹20,000 per month as rent in Bangalore. His annual income is ₹12,00,000. In this case, the allowable deduction under Section 80GG would be ₹60,000 (which is the least of the three criteria mentioned above).
Exceptions to Sec 80GG:
The deduction cannot be claimed if the taxpayer owns a residential property at any location, including the place of employment or business.
The taxpayer cannot claim deduction under Section 80GG if they own a house in the city where they are employed or doing business.
ITR Form and Supporting Documents:
The deduction under Section 80GG can be claimed while filing Income Tax Returns using any applicable ITR form (ITR 1, ITR 2, ITR 3, or ITR 4) depending on the taxpayer’s income sources.
Along with standard documents like Form 16 and PAN card, Form 10BA needs to be filed with details of rent payment, landlord’s information, and PAN details if applicable.
Important Keyword: Chapter VI-A, Indian Resident, Section 80U.
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Section 80U: Deduction for Individuals with Disability
The government consistently endeavors to enhance the quality of life for differently-abled individuals through dedicated schemes and programs. These initiatives aim to provide financial assistance and support, including through the Income Tax Department’s (ITD) special provisions under Chapter VI-A of the Income Tax Act. One notable provision is found under Section 80U, specifically designed to offer deductions to individuals with certain disabilities.
What is Section 80U?
Section 80U of the Income Tax Act 1961 stands as a significant provision aimed at supporting individuals with disabilities in managing their financial affairs effectively. This incentive specifically targets residents who face physical or mental impairments, offering them vital tax benefits. These deductions can be claimed when filing Income Tax Returns (ITR) under Chapter VI-A.
Which disabilities fall under Section 80U deduction?
Section 80U of the Income Tax Act 1961 provides an opportunity for individuals affected by specific disabilities to claim deductions. These disabilities include autism, cerebral palsy, blindness, low vision, cured leprosy, hearing impairment, locomotor disability, mental retardation, and mental illness. This provision aims to support and empower disabled individuals by offering financial relief through the tax system, thereby fostering greater financial inclusion and support across diverse communities.
What are the Conditions to Claim 80U Deduction?
To claim a deduction under Section 80U of the Income Tax Act 1961, several conditions must be met by the taxpayer:
Resident Indian: The taxpayer must be a resident of India as per the Income Tax Act provisions.
Minimum Disability Requirement: The taxpayer should be suffering from a disability of at least 40%, certified by medical authorities.
Independent Individual: Unlike Section 80DD which applies to dependents, Section 80U applies to individuals who are independent in managing their affairs.
Medical Certificate: The taxpayer needs to possess a valid medical certificate issued by competent medical authorities identifying them as a ‘person with disability’.
Flat Deduction: Unlike Section 80DD, which considers actual expenses incurred, Section 80U provides a flat deduction based on the severity of the disability. Therefore, the amount of expenses is not relevant for claiming this deduction.
These provisions aim to support disabled individuals financially, ensuring they receive necessary relief through the tax system, regardless of the specific expenses they may incur due to their disability. It promotes inclusivity and supports the financial independence of individuals with disabilities in India.
According to Section 80U of the Income Tax Act 1961, individuals with disabilities are categorized based on the severity of their condition:
Disabled Individual: An individual who is certified to have a disability of at least 40% by a competent medical authority.
Severely Disabled Individual: An individual who is certified to have a disability of at least 80% by a competent medical authority.
Deduction Limits:
For Disabled Individuals (40% or more disability): The deduction allowed is ₹75,000 per annum for each assessment year.
For Severely Disabled Individuals (80% or more disability): The deduction allowed is ₹1,25,000 per annum for each assessment year.
These deductions are subtracted from the individual’s gross total income, reducing their taxable income and thereby providing financial relief through the income tax system. It’s important for eligible individuals to obtain a disability certificate from designated medical authorities to avail of these deductions while filing their income tax returns.
Tax deduction under section 80U is as follows:
Category
Deduction Amount
Disabled Individual
INR 75,000
Severely Disabled Individual
INR 1,25,000
Note: If the taxpayer opts for the new tax regime, a deduction under section 80U is not allowed.
Let’s illustrate how Ankit can claim a deduction under Section 80U for the financial year 2021-22:
Example:
Ankit, who suffers from a hearing impairment, has been certified with a disability of 40% by a medical authority. During the financial year 2021-22, his earnings from salary amounted to ₹5,20,000.
Solution:
According to Section 80U:
Ankit, being a disabled individual (40% disability), is eligible for a deduction of ₹75,000.
Calculation:
Ankit’s taxable salary = ₹5,20,000
Deduction under Section 80U = ₹75,000
Revised Taxable Income:
Taxable Income = ₹5,20,000 – ₹75,000 = ₹4,45,000
Tax Benefit:
By claiming this deduction, Ankit reduces his taxable income from ₹5,20,000 to ₹4,45,000. This reduction in taxable income results in a lower tax liability, thereby providing financial relief.
ITR Form Applicability:
Ankit can claim the deduction under Section 80U while filing his Income Tax Return (ITR). He may use any of the applicable ITR forms (ITR 1, ITR 2, ITR 3, or ITR 4) based on his income sources and other relevant factors.
Supporting Documents:
Alongside the usual documents required for filing ITR (such as Form 16, PAN card), Ankit must also submit:
Form 10-IA (Certificate of Medical Authority) confirming his disability. This form can be obtained from the Income Tax Department’s website or from the medical authority that issued the disability certificate.
The certificate of disability that is provided by the Medical Authority has an expiry date. If the validity of the certificate expires within a financial year, deductions can be claimed by showing the expired certificate. However, one will need a new certificate to claim deductions for the next financial year.
