CA Jasmeet Singh Arora 1

Deductions From Gross Total Income

Deductions from Gross Total Income
Question 1 : Mr. Jain, a resident individual, aged 40 years, suffers from severe
disability as certified by medical authority. He gives the following information for
the previous year 2023-24 -

(i) He has paid life insurance premium by cheque ` 27,000 to insure his life. The
insurance policy was taken on 27.8.2018 and the sum assured is ` 2,20,000.
(ii) He had written a literary book for Rochak Publication. A lump sum amount of
royalty income earned in the previous year 2022-23 amounted to ` 9,00,000.
Expenses incurred for writing the book amounted to ` 40,000.
(iii) His friends gifted a statue of Goddess Saraswati to his daughter Ms. Diya (aged
14 years) on the successful completion of her secondary school. Fair market
value of the statue is ` 65,000.
(iv) He received a gold chain worth ` 68,000 from his in-laws on the occasion of his
marriage anniversary
(v) He had deposited ` 70,000 in fixed deposit with SBI in the name of his minor son
in September 2023. Interest earned on such deposit ` 5,500.
(vi) He donated ` 5,000 in cash to a NGO (the NGO was registered under section 80G
of the Income-tax Act, 1961).
(vii) He had taken a loan of ` 38,00,000 for the purchase of a house property valuing
` 45,00,000 for self-occupation from a financial institution on 1st May 2021. He
repaid ` 1,80,000 during the P.Y. 2023-24 out of which ` 1,05,000 is towards
principal payment and the balance is for interest on loan.
Compute the total income of Mr. Jain for the A.Y. 2024-25 if he does not opt for
the provisions of section 115BAC.
(RTP NOV 23)
Solution 1 : Computation of total income of Mr. Jain for the A.Y.2024-25

Particulars Amount Amount

Income from house property

NAV Nil
Less: Interest on loan 75,000 (75,000)
(75,000)
Income from Other Sources
 CA Jasmeet Singh Arora 2

Royalty 9,00,000
Less: Expenses incurred for writing book 40,000 8,60,000
Value of statue of Goddess Saraswati 65,000
[The fair market value of the statue (sculpture)
received by his minor daughter as gift (not on account
of her skill) from his friends would be taxable, since its
value exceeds
` 50,000. It would be included in the hands of Mr. Jain,
assuming his income before considering clubbing
provisions is higher than his wife].
Less: Exemption under section 10(32) 1,500 63,500
Value of Gold Chain NIL
[The Fair market value of ` 68,000 of gold chain
received on occasion of his marriage anniversary
would be exempt, since it is received from a relative.]
Interest on fixed deposit in the name of his son 5,500
[It would be included in the hands of Mr. Jain,
assuming his income before considering clubbing
provisions is higher than his wife]
Less: Exemption under section 10(32) 1,500 4,000
Gross Total Income 8,52,500
Less: Deduction under Chapter VI-A
Deduction under section 80C
Life insurance premium [Since Mr. Jain suffers from 27,000
severe disability, premium upto 15% of the sum assured
` 2,20,000 would be allowed, as the policy is taken after
31.3.2012]
Repayment of principal amount for housing loan 1,05,000 1,32,000
Deduction under section 80G
Donation to an NGO registered under section 80G [Not -
allowable since the donation is made in cash of a sum
exceeding ` 2,000]
Deduction under section 80QQB

Royalty income of a resident from literary book 3,00,000

Deduction under section 80U [Since Mr. Jain suffers 1,25,000

from severe disability]
Total income 2,95,500

Question : 2 For the A.Y. 2024-25 , the Gross Total Income of Mr. Raja, a resident in
India, was Rs 8,00,000 which includes long-term capital gain of ` 2,50,000 and Short-
 CA Jasmeet Singh Arora 3

term capital gain of ` 50,000. The Gross Total Income also includes interest income of `
15,000 from savings bank deposits with banks. Mr. Raja has invested in PPF ` 1,40,000
and also paid a medical insurance premium ` 35,000 for self. Mr. Raja also contributed
` 50,000 to Public Charitable Trust eligible for deduction under section 80G by way of
an account payee cheque. Compute the total income and tax thereon of Mr. Raja, who
is 65 years old as on 31.3.2024.
(RTP May 18)
Solution 2 Computation of total income and tax payable by Mr. Raja for the A.Y. 2024-
25

Particulars Amount Amount

Gross total income including long term capital gain 8,00,000

Less: Long term capital gain 2,50,000
5,50,000
Less: Deductions under Chapter VI-A:
Under section 80C in respect of PPF deposit 1,40,000
Under section 80D (it is assumed that premium of ` 35,000
35,000 is paid by otherwise than by cash. The
deduction would be restricted to ` 50,000, since Mr.
Raja is a resident senior citizen)
Under section 80G (See Notes 1 & 2 below) 18,250
Under section 80TTA (See Note 3 below) 10,000 2,03,250
Total income (excluding long term capital gains) 3,46,750
Total income (including long term capital gains) 5,96,750
Tax on total income (including long-term capital gains
of
` 2,50,000)
LTCG ` 2,50,000 x 20% 50,000

Balance total income ` 3,46,750: Tax @5% on ` 46750

(` 3,46,750 – ` 3,00,000, being the basic exemption limit 2338
for senior citizen)
52338
Add: EC& SHEC @ 4 % 2,094

Total tax liability 54,432

Total tax liability (rounded off) 54,430

Notes 1 : Computation of Deduction u/s 80 G

 CA Jasmeet Singh Arora 4

Gross total income (excluding long term capital gains) 5,50,000

Less: Deduction under section 80C, 80D & 80TTA 1,85,000
3,65,000
10% of the above 36,500
Contribution made to Public Charitable Trust 50,000
Lower of the two eligible for deduction under section 36,500
80G
Deduction under section 80G – 50% of ` 36,500 18,250
1. Deduction under section 80G is allowed only if amount is paid by any mode other
than cash, in case of amount exceeding ` 2,000. Therefore, the contribution made
to public charitable trust is eligible for deduction since it is made by way of an
account payee cheque.
2. Deduction of upto ` 10,000 under section 80TTA is allowed, inter alia, to an
individual assessee if gross total income includes interest income from deposits
in a saving account with bank. Since Gross Total Income of Mr. Raja includes
interest income of Rs 15,000 on savings bank deposit, he is eligible for deduction
of ` 10,000 under section 80TTA.
Question : 3 Mr. Anay manufactures toys in a factory located in Noida. His profit
from the manufacture of toys for Assessment year 2024-25 is ` 1.85 crore and total
turnover is ` 18.70 crore

On 1st April 2023 , there were 100 employees engaged in his factory. Due to
increase in demand of his products, he employed 140 additional employees during
the previous year 2023-24 comprises of:

(a) 15 casual employees employed on 15th April 2023 till 31st January 2024 on monthly
emolument of ` 22,000 per month
(b) 40 regular employees employed on 1st May, 2023 on monthly emolument of `
22,000 per month
(c) 25 contractual employees employed on 1st July 2023 for 2 years on monthly
emolument of ` 15,000 per month
(d) 35 regular employees employed on 1st August, 2023 on monthly emolument of `
30,000 per month
(e) 25 regular employees employed on 1st October, 2023 on monthly emolument of `
22,000 per month
Compute the deduction under Section 80JJAA, if available to Mr. Anay for
Assessment year 2024-25 , assuming that monthly emoluments were paid by use of
ECS. The regular and contractual employees participate in the recognised provident
fund while casual employees do not.
 CA Jasmeet Singh Arora 5

Would your answer be different if Mr. Anay is engaged in the manufacture of apparel?
Examine.
[Note - Ignore the amount of deduction available under section 80JJAA to Mr. Anay, for
the employees employed in preceding previous years, while computing the deduction
under 80JJAA for the assessment year 2024-25] ( RTP NOV 2018)

Solution 3

Computation of deduction under section 80JJAA

Mr. Anay is eligible for deduction under section 80JJAA since he is subject to tax
audit under section 44AB for A.Y.2024-25, as his total turnover from business
exceeds ` 1 crore and he has employed “additional employees” during the P.Y.2023
-24.
Additional employee cost = [` 22,000 × 40 new regular employees × 11 months] + [`
15,000 per month × 9 months × 25 new contractual employees]
= ` 96,80,000 + ` 33,75,000 = ` 1,30,55,000
Deduction under section 80JJAA = 30% of ` 1,30,55,000 = ` 39,16,500.

Working Note: Number of Additional employees employed during the P.Y.2023 -24

Particulars No. of
additional
employees
Total number of additional employees employed during the 140
year
Less: Casual workmen employed on 15th April 2023, who do 15
not participate in the recognised provident fund
Regular employees employed on 1st August 2023, since 35
their total monthly emoluments exceed ` 25,000
Regular employees employed on 1st October 2023, for a
period of less than 240 days during the P.Y.2023-24 25 75
Total number of additional employees employed during the 65
P.Y.2023-24
Yes, the answer would be different, if Mr. Anay is engaged in the business of
manufacture of apparel. Since the number of days of employment in a year has
been relaxed from 240 days to 150 days in case of apparel industry, wages paid to
regular employees employed on 1.10.2023 would also qualify for deduction under
section 80JJAA for A.Y. 2024-25.
Additional employee cost = ` 1,30,55,000 + ` 33,00,000 (` 22,000 x 6 x 25)
= ` 1,63,55,000
 CA Jasmeet Singh Arora 6

Deduction under section 80JJAA = 30% of ` 1,63,55,000 = ` 49,06,500

Question : 4 Mr. Arihant, a resident individual aged 40 years, has Gross Total Income
of ` 7,50,000 comprising of income from Salary and income from house property for
the assessment year 2024-25. He provides the following information:

Paid Rs `70,000 towards premium for life insurance policy of his handicapped son
(section 80U disability). Sum assured `Rs 4,00,000; and date of issue of policy 1-8-
2017.
Deposited Rs 90,000 in tax saver deposit in the name of his major son in Punjab
National Bank of India.
Paid `Rs 78,000 towards medical insurance for the term of 3 years as a lumpsum
payment for himself and his spouse. Also, incurred
` 54,000 on medical expenditure of his father, a resident aged 68 years. No medical
insurance policy is taken in the name of his father. His father earned ` 4,50,000
interest from fixed deposit.
Contributed ` 25,000 to The Clean Ganga Fund, set up by the Central Government.
Compute the Total Income and deduction under Chapter VI-A for the Assessment
year 2024-25 ( RTP NOV 2019)

Solution 4 Computation of Total Income of Mr. Arihant for A.Y. 2024-25

Particulars ` `
Gross Total Income 7,50,000
Less: Deduction under Chapter VI-A
60,000
Under section 80C
- Life insurance premium of ` 70,000
(restricted to ` 60,000 i.e., 15% of `
4,00,000, being the sum assured, since
the policy has
been taken on or after 01.04.2013, in respect
of his handicapped son suffering from
disability u/s 80U)

- Tax saver deposit of ` 90,000 in the name

of his major son does not qualify for
deduction under section 80C, since such Nil
deposit has to be made in the name of the 60,000
assessee himself to qualify for deduction u/s
80C
 CA Jasmeet Singh Arora 7

Under section 80D

- Medical insurance premium for self and his
wife, pertaining to the previous year 2023-
24 is ` 26,000, being 1/3rd of ` 78,000, the
lumpsum premium, since the policy would
be in force for three previous years. The 25,000
said deduction would be restricted to
- Deduction in respect of medical
expenditure of ` 54,000 for his father, being
a senior citizen would be allowable, since no
50,000 75,000
insurance policy is taken in his name, to the
extent of
Under section 80G

1,60,000
- Contribution by a resident towards the
Clean Ganga Fund, set up by the Central
Government would be eligible for 100%
25,000
deduction without any qualifying limit.
Total Income 5,90,000
 CA Jasmeet Singh Arora 8

Question : 5 Mr. Darshan aged 65 years, working with G Ltd., submits the following
particulars of investments and payments made by him during the previous year 2024-
25:
- Deposit of ` 1,50,000 in public provident fund
- Payment of life insurance premium of ` 62,000 on the policy taken on 01.4.2017 to
insure his life (Sum assured – ` 4,00,000).
- Deposit of ` 45,000 in a five year term deposit with bank.
- Contributed ` Rs 2,10,000, being 15% of his salary (basic salary plus dearness allowance,
which forms part of retirement benefits) to the NPS of the Central Government. A
matching contribution was made by G Ltd.
- On 1.4.2023 , mediclaim premium of ` 1,08,000 and ` 80,000 paid as lumpsum to insure
his and his wife (aged 58 years) health, respectively for four years :
- incurred ` 46,000 towards medical expenditure of his father, aged 85 years, not
dependent on him. No insurance policy taken for his father.
- He spent ` 6,000 for the preventive health-check up of his wife.
- He has incurred an expenditure of ` 90,000 for the medical treatment of his mother,
being a person with severe disability.
- His income comprises of income from salary of ` 18,50,000 and interest on fixed
deposits of ` 75,000.
Compute the deduction available to Mr. Darshan under Chapter VI-A for A.Y.2024-25.
( RTP MAY 19)

Solution 5 : Deduction available to Mr. Darshan under Chapter VI -A for A.Y.2024-25

Section Particulars ` `
80C Deposit in public provident fund 1,50,000
Life insurance premium paid ` 62,000 40,000
(deduction restricted to ` 40,000, being 10%
of
` 4,00,000, which is the sum assured, since
the policy was taken on or after 01.04.2012)
Five year term deposit with bank 45,000
2,35,000
Restricted to 1,50,000
80CCD(1) Contribution to NPS of the Central
Government,
` 1,60,000 [` 2,10,000 – ` 50,000, being
deduction under section 80CCD(1B)], 1,40,000
restricted to 10% of salary [` 1,95,000 x 10/15]
 CA Jasmeet Singh Arora 9

[See Note 1]

2,90,000
80CCE Aggregate deduction under section 80C
and 80CCD(1), ` 2,90,000, but restricted to 1,50,000
80CCD(1B) ` 50,000 would be eligible for deduction in
respect of contribution to NPS of the 50,000
Central Government
80CCD(2) Employer contribution to NPS, restricted to
10% of salary [See Note 2] 1,40,000
80D (i) (a) Medical insurance premium for self 47,000
and his wife, deduction would be
equal to ` 47,000 (` 27,000 +
` 20,000), being 1/4th of lumpsum
premium, since policies would be in
force for four previous years.
(b) Preventive health check up ` 6,000 for
wife restricted to ` 3,000 (` 50,000 - `
47,000, since maximum allowable
deduction is ` 50,000 in case assessee
or one of the family member is 3,000
senior citizen)
50,000
(ii) Medical Expenditure for his father would
be fully allowed as deduction, since no
insurance policy is taken on his name 46,000
Total of (i) and (ii) 96,000
80DD Deduction of ` 1,25,000 in respect of
expenditure on medical treatment of his 1,25,000
mother, being a person with severe
disability would be allowed irrespective of
the fact that amount of expenditure
incurred is ` 90,000
80TTB Interest on fixed deposits with 50,000
bank of
` 75,000, deduction restricted to
Deduction under Chapter VI-A 6,11,000
Notes:
(1) The deduction under section 80CCD(1B) would not be subject to overall limit of ` 1.50
lakh under section 80CCE. Therefore, it is more beneficial for Mr. Darshan to claim
deduction under section 80CCD(1B) first in respect of contribution to NPS. Thereafter,
 CA Jasmeet Singh Arora 10

the remaining amount of ` 1,60,000 can be claimed as deduction under section 80CCD(1),
subject to a maximum limit of 10% of salary i.e. ` 1,40,000.
(2) The entire employer’s contribution to notified pension scheme has to be first included
under the head “Salaries” while computing gross total income and thereafter,
deduction under section 80CCD(2) would be allowed, subject to a maximum of 10% of
salary. Deduction under section 80CCD(2) is also not subject to the overall limit of
Rs1,50,000 under section 80CCE

Question 6 Mr. Ray, a resident individual, aged 37 years gives the following information
with respect to various loans taken by him from scheduled banks for various purposes-
(i) A housing loan of ` 36,00,000/- taken on 15th March, 2023 for the purchase of a house
to be used for self-residence at a cost of ` 47,00,000/-. The stamp duty value of the
house was ` 42,00,000/- at the time of purchase. Amount of re-payment of loan during
P.Y.2023-24 was:
(A) towards principal - ` 1,25,000/-
(B) towards interest - ` 3,65,000/-
This is the first and only residential house owned by Mr. Ray.
(ii) A vehicle loan of ` 16,00,000/- taken on 31st October, 2021 for the purchase of electric
vehicle for personal use. Amount of re-payment of loan during P.Y.2023-24 was:
(A) towards principal - ` 75,000/-
(B) towards interest - ` 1,90,000/-
Besides these loans, he has also paid a sum of ` 15,000 to a political party as contribution.
The entire amount was paid in cash.
You are required to compute the amount of deduction(s) available to Mr. Ray under
various provisions of Income-tax Act for A.Y.2024-25 so that he gets the maximum
benefits assuming that he does not opt to pay tax under section 115BAC
(PYP MAY 23)

Solution 6 Computation of amount of deductions available to Mr. Ray for A.Y. 2024 -25

Amount (`)
(i) Deduction allowable while computing income
under
the head “Income from house property”
 CA Jasmeet Singh Arora 11

Deduction under section 24(b) for interest on loan 2,00,000

of Rs 3,65,000 in respect of self-occupied property
restricted to
(ii) Deduction under Chapter VI-A from Gross Total
Income
Deduction under section 80C
For repayment of loan of ` 1,25,000 to bank 1,25,000
Deduction under section 80EEA
Since stamp duty value does not exceed ` 45 lakhs
and Mr. Ray does not own any residential house,
he is eligible for deduction of upto ` 1,50,000 in
respect of such interest on loan since loan is
sanctioned between 1.4.2019 and 31.3.2022.
` 3,65,000 – ` 2,00,000 [claimed as deduction u/s
24(b)] = 1,50,000
` 1,65,000 restricted to ` 1,50,000, being the
maximum permissible deduction
Deduction under section 80EEB
Deduction for interest on loan for purchase of
electric vehicle of ` 1,90,000 restricted to ` 1,50,000,
being the maximum permissible deduction, since
1,50,000
loan is sanctioned between 1.4.2019 and 31.3.2023.
No deduction in respect of principal repayment of
loan for purchase of electric vehicle is allowable
Deduction under section 80GGC
Contribution of ` 15,000 to political party not Nil
allowable since the sum is paid in cash
Deduction under Chapter VI-A from Gross Total 4,25,000
Income

Question 7 Vibha Gupta, a resident individual, is running a SEZ unit, as well as a unit in
Domestic Tariff Area (DTA). She furnishes the following details relating to the year ended
31-3-2024, pertaining to these two units

DTA Unit (` in SEZ Unit (` in lakhs)

lakhs)
Export turnover 100 1000
Total turnover 400 1100
Net profit 50 220
 CA Jasmeet Singh Arora 12

Compute the deduction available u/s 10AA:

i) When the SEZ unit had been set up on 12-3-2015, and
ii) When the SEZ unit had been set up on 12-8-2019. ( PYP NOV 2018)

Solution 7 : Computation of deduction under section 10AA

i) If Unit in SEZ was set up on 12.3.2015 :

Since AY 2024-25 is the 9th Assessment Year from AY 2015-16, relevant to the
previous year 2014-15 , in which the SEZ Unit was set up , it shall be eligible for
deduction of 50% of the profits derived from export , assuming all the other
conditions specified in Section 10 AA are fulfilled :
Export turnover of Unit in SEZ
= Profits of Unit in SEZ x x 50%
Total turnover of Unit in SEZ

1000 lakhs
= 220 lakhs x x 50% = ` 100 lakhs
1100 lakhs

ii) If Unit in SEZ was set up on 12.8.2019 :

Since AY 2024-25 is the 5th Assessment Year from AY 2020-21, relevant to the
previous year 2018-19 , in which the SEZ Unit was set up , it shall be eligible for
deduction of 100% of the profits derived from export , assuming all the other
conditions specified in Section 10 AA are fulfilled :

Export turnover of Unit in SEZ

= Profits of Unit in SEZ x x 100%
Total turnover of Unit in SEZ
1000 lakhs
= 220 lakhs x x 100% = ` 200 lakhs
1100 lakhs
 CA Jasmeet Singh Arora 13

The Unit Set up in DTA is not eligible for the benefit of deduction under 10AA in
respect of its export profits , in both the situations
Note:
As per section 10AA, in computing the total income of Mrs. Vibha Gupta from her
unit located in a Special Economic Zone (SEZ), which begins to manufacture or
produce articles or things or provide any services during the previous year
relevant to the assessment year commencing on or after 1.4.2006 but before
1.4.2021, a deduction of 100% of the profit and gains derived from export of such
articles or things or from services is allowable for a period of five consecutive
assessment years beginning with the assessment year relevant to the previous
year in which the Unit begins to manufacture or produce such articles or things
or provide services, as the case may be, and 50% of such profits for further five
assessment years subject to fulfillment of other
conditions specified in section 10AA. In this case, it is assumed that the
manufacturing or production commenced from the year in which the SEZ was set
up.