Deduction from Total Income of Individual and HUF under DTC, 2009 Bill
‘Deduction for Savings’ under proposed DTC have been allowed under EET scheme as against EEE scheme under IT Act, 1961.
Under EET scheme all amount deposited under specified schemes will be Exempted for tax, i.e. it will be allowed as deduction from Total Income. All amount of accumulation/accretions to the scheme will be Exempted form tax, i.e. it will not be included in total income in the year in which the income is accumulated. These amount will be Taxed only when these amount, original contribution and accumulation are withdrawn form the scheme, or the assessee receives back these payment in any other form. The amount which remains invested in the scheme will be exempted. This scheme is thus called EET as amount is Exempted at first two stage and Taxed at third stage. All withdrawal made, or amount received, under whatever circumstances, from this account will be included in the income of the assessee under the head 'income from residuary sources', in the year in which the withdrawal is made or the amount is received. Accordingly, it will be subject to tax at the appropriate personal marginal rate.
Under the present scheme (under ITAct) this amount is also Exempted from tax when the amount is withdrawn for the scheme. Hence it is called EEE as the amount is Exempted at all three stages
Under DTC, deduction in respect of saving/expenditure is available to Individuals and HUF under
Section 66. Deductions for savings,
Section 67. Deductions in respect of children education,
Section 68. Deduction in respect of interest on loan taken for higher education, available to Individuals only and not to HUF
Section 69. Deduction in respect of health insurance premia,
Section 70. Deduction in respect of medical treatment, etc.
Section 71. Deduction in respect of maintenance of disabled
Dependent, available to individual only
Section 72. Deduction in respect of donations to certain funds,
non-profit organisations, available to all persons
73. Deduction in respect of political contributions available to all persons
Deduction is allowed only to extend of gross total income form ordinary sources. Deduction is not the be allowed against gross total income from special sources. Deduction u/s65 & 66 shall be allowed to the extend of Rs.3,00,000/- only. Under Section 65, the amount eligible for deduction will be amount deposited in any accounted maintained with “Permitted Saving Intermediary”. Any amount withdrawn from one account and deposited in other account will not be eligible for deduction. The central government will frame the scheme for Permitted Saving Intermediary. The permitted savings intermediaries will be approved provident funds, approved superannuation funds, life insurer and New Pension System Trust.
The permitted savings intermediaries will be approved by the Pension Fund Regulatory and Development Authority (PFRDA). These intermediaries will, in turn, invest the amounts deposited with them in government securities, term deposits of banks, unit-linked insurance plans, annuity plans, bonds and securities of public sector companies, banks and financial institutions, bonds of other companies enjoying prescribed investment grade rating, equity linked schemes of mutual funds, debt oriented mutual funds, equity and debt instruments. The choice of instruments will, in some schemes, be with the investor and in some others with the trustees of the schemes. The pattern of investment by the latter will be as prescribed.
Further, the rollover of any amount received, or withdrawn, from one account with the permitted savings intermediary to any other account with the same or any other permitted savings intermediary will not be treated as withdrawal. Hence, such rollover will not be subject to tax.
The Government will also design a system of central record keeping (CRA) by an independent agency which will serve as a depository of all information relating to investment and withdrawal from the various accounts maintained by the assessee with the permitted savings intermediaries. NSDL has been appointed as Central Record-keeping Agency.
An individual or HUF will also be allowed deduction for amount actually paid during the financial year towards tuition fees for any two children.
Tuition fees include any amount paid as tuition fee to any university, college, school or other educational institution situated within India; and for the purpose of full-time education of any two children of such individual or Hindu undivided family.
Tuition fee shall not include any payment towards any development fees or donation or payment of similar nature; and full time education shall include play schooling or pre-schooling.
Under Section 68, An individual will be allowed a deduction in respect of any amount actually paid by him in the financial year by way of interest on loan taken by him from any financial institution for the purpose of his higher education; or higher education of his relatives.
The deduction will be allowed in respect of the initial financial year and seven financial years immediately succeeding the initial financial year or until the interest is paid by the person in full, whichever is earlier.
Higher education means any course of study pursued after passing the senior secondary examination, or its equivalent.
"Initial financial year" will be the financial year in which the person begins to pay the interest on the loan;and
“relative” will mean
(i) the spouse of the individual;
(ii) the child of the individual; or
(iii) the student for whom the individual is the legal guardian.
HUF will not be allowed deduction under Section 68
Deduction in respect of health insurance premium.
Under section 69, An individual or a Hindu undivided family, will be allowed a deduction in respect of any sum actually paid to keep in force, an insurance on the health of any individual, his/her spouse, and dependent children of Individual specified person. In case of HUF any premium paid on health insurance of member will also be allowed
The deduction will be allowed up to Rs.20,000/- in case of senior citizen and Rs.15,000/- in other cases.
An individual shall be allowed further deduction towards premium on health insurance of any of his parents. If any of he parent is senior citizen then the amount allowed will be maximum Rs.20,000/- and if any of the parent is not a senior citizen the maximum amount allowed will be Rs.20,000/-
The premium should be paid only for scheme of health insurance approved by the Government.
Deduction in respect of medical treatment, etc.
Section 70. An individual will be allowed a deduction in respect of any amount actually paid during the financial year for medical treatment of the prescribed disease or ailment of any specified person.
The amount of deduction shall not exceed in the aggregate - (a) sixty thousand rupees, if the amount is paid in respect of any specified person, who is a senior citizen; and (b) forty thousand rupees, in any other case.
The deduction under this section shall not be allowed unless the person obtains a certificate in the prescribed form from a prescribed specialist working in a Government hospital.
‘Deduction for Savings’ under proposed DTC have been allowed under EET scheme as against EEE scheme under IT Act, 1961.
Under EET scheme all amount deposited under specified schemes will be Exempted for tax, i.e. it will be allowed as deduction from Total Income. All amount of accumulation/accretions to the scheme will be Exempted form tax, i.e. it will not be included in total income in the year in which the income is accumulated. These amount will be Taxed only when these amount, original contribution and accumulation are withdrawn form the scheme, or the assessee receives back these payment in any other form. The amount which remains invested in the scheme will be exempted. This scheme is thus called EET as amount is Exempted at first two stage and Taxed at third stage. All withdrawal made, or amount received, under whatever circumstances, from this account will be included in the income of the assessee under the head 'income from residuary sources', in the year in which the withdrawal is made or the amount is received. Accordingly, it will be subject to tax at the appropriate personal marginal rate.
Under the present scheme (under ITAct) this amount is also Exempted from tax when the amount is withdrawn for the scheme. Hence it is called EEE as the amount is Exempted at all three stages
Under DTC, deduction in respect of saving/expenditure is available to Individuals and HUF under
Section 66. Deductions for savings,
Section 67. Deductions in respect of children education,
Section 68. Deduction in respect of interest on loan taken for higher education, available to Individuals only and not to HUF
Section 69. Deduction in respect of health insurance premia,
Section 70. Deduction in respect of medical treatment, etc.
Section 71. Deduction in respect of maintenance of disabled
Dependent, available to individual only
Section 72. Deduction in respect of donations to certain funds,
non-profit organisations, available to all persons
73. Deduction in respect of political contributions available to all persons
Deduction is allowed only to extend of gross total income form ordinary sources. Deduction is not the be allowed against gross total income from special sources. Deduction u/s65 & 66 shall be allowed to the extend of Rs.3,00,000/- only. Under Section 65, the amount eligible for deduction will be amount deposited in any accounted maintained with “Permitted Saving Intermediary”. Any amount withdrawn from one account and deposited in other account will not be eligible for deduction. The central government will frame the scheme for Permitted Saving Intermediary. The permitted savings intermediaries will be approved provident funds, approved superannuation funds, life insurer and New Pension System Trust.
The permitted savings intermediaries will be approved by the Pension Fund Regulatory and Development Authority (PFRDA). These intermediaries will, in turn, invest the amounts deposited with them in government securities, term deposits of banks, unit-linked insurance plans, annuity plans, bonds and securities of public sector companies, banks and financial institutions, bonds of other companies enjoying prescribed investment grade rating, equity linked schemes of mutual funds, debt oriented mutual funds, equity and debt instruments. The choice of instruments will, in some schemes, be with the investor and in some others with the trustees of the schemes. The pattern of investment by the latter will be as prescribed.
Further, the rollover of any amount received, or withdrawn, from one account with the permitted savings intermediary to any other account with the same or any other permitted savings intermediary will not be treated as withdrawal. Hence, such rollover will not be subject to tax.
The Government will also design a system of central record keeping (CRA) by an independent agency which will serve as a depository of all information relating to investment and withdrawal from the various accounts maintained by the assessee with the permitted savings intermediaries. NSDL has been appointed as Central Record-keeping Agency.
An individual or HUF will also be allowed deduction for amount actually paid during the financial year towards tuition fees for any two children.
Tuition fees include any amount paid as tuition fee to any university, college, school or other educational institution situated within India; and for the purpose of full-time education of any two children of such individual or Hindu undivided family.
Tuition fee shall not include any payment towards any development fees or donation or payment of similar nature; and full time education shall include play schooling or pre-schooling.
Under Section 68, An individual will be allowed a deduction in respect of any amount actually paid by him in the financial year by way of interest on loan taken by him from any financial institution for the purpose of his higher education; or higher education of his relatives.
The deduction will be allowed in respect of the initial financial year and seven financial years immediately succeeding the initial financial year or until the interest is paid by the person in full, whichever is earlier.
Higher education means any course of study pursued after passing the senior secondary examination, or its equivalent.
"Initial financial year" will be the financial year in which the person begins to pay the interest on the loan;and
“relative” will mean
(i) the spouse of the individual;
(ii) the child of the individual; or
(iii) the student for whom the individual is the legal guardian.
HUF will not be allowed deduction under Section 68
Deduction in respect of health insurance premium.
Under section 69, An individual or a Hindu undivided family, will be allowed a deduction in respect of any sum actually paid to keep in force, an insurance on the health of any individual, his/her spouse, and dependent children of Individual specified person. In case of HUF any premium paid on health insurance of member will also be allowed
The deduction will be allowed up to Rs.20,000/- in case of senior citizen and Rs.15,000/- in other cases.
An individual shall be allowed further deduction towards premium on health insurance of any of his parents. If any of he parent is senior citizen then the amount allowed will be maximum Rs.20,000/- and if any of the parent is not a senior citizen the maximum amount allowed will be Rs.20,000/-
The premium should be paid only for scheme of health insurance approved by the Government.
Deduction in respect of medical treatment, etc.
Section 70. An individual will be allowed a deduction in respect of any amount actually paid during the financial year for medical treatment of the prescribed disease or ailment of any specified person.
The amount of deduction shall not exceed in the aggregate - (a) sixty thousand rupees, if the amount is paid in respect of any specified person, who is a senior citizen; and (b) forty thousand rupees, in any other case.
The deduction under this section shall not be allowed unless the person obtains a certificate in the prescribed form from a prescribed specialist working in a Government hospital.
