F.No. 275/192/2016-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
CIRCULAR NO : 01/2017
North Block, New Delhi
Dated the 2nd January, 2017
SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2016-17 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.
5.4 DEDUCTIONS U/S 16 OF THE ACT FROM THE INCOME FROM SALARIES
5.4.1 Entertainment Allowance [Section 16(ii)]:
A deduction is also allowed under section 16(ii) in respect of any allowance in the nature of an entertainment allowance specifically granted by an employer to the assessee, who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary(exclusive of any allowance, benefit or other perquisite) or five thousand rupees whichever is less. No deduction on account of entertainment allowance is available to non-government employees.
1) Download And prepare One by One Income Tax Form 16 Part A&B and Part B for F.Y.2016-17 [ This Excel Utility can prepare at a time Form 16 Part A&B and Part B which can prepare One by One]
2) ) Download And prepare One by One Income Tax Form 16 Part-B for F.Y.2016-17 [ This Excel Utility can prepare at a time Form 16-Part B which can prepare One by One]
5.4.2 Tax on Employment [Section 16(iii)]:
The tax on employment (Professional Tax) within the meaning of article 276(2) of the Constitution of India, leviable by or under any law, shall also be allowed as a deduction in computing the income under the head "Salaries".
5.5 DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT
In computing the taxable income of the employee, the following deductions under Chapter VI-A of the Act are to be allowed from his gross total income:
5.5.1 Deduction in respect of Life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. (section 80C)
A. Section 80C entitles an employee to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,50,000/-:
5.5.2 Deduction in respect of contribution to certain pension funds (Section 80CCC)
Section 80CCC allows an employee deduction of an amount paid or deposited out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving the pension from the Fund referred to in section 10(23AAB). However, the deduction shall exclude interest or bonus accrued or credited to the employee's account if any and shall not exceed Rs. 1,50,000.
5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD):
Section 80CCD(1) allows an employee, being an individual employed by the Central Government on or after 01.01.2004 or being an individual employed by any other employer, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR
dated 22.12.2003 National Pension System-NPS or as may be notified by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites).
As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed a deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed Rs. 50,000. The deduction of Rs. 50,000 shall be allowed whether or
not any deduction is allowed under sub-section(1). However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD.
As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-.
The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS up to Rs. 50,000/-.
However, the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under this section.
5.5.5 Deduction in respect of health insurance premia paid, etc. (Section 80D)
Section 80D provides for deduction available for health insurance premia paid, etc.
Aggregate allowable is Rs 25,000/- (Rs 30000/- for senior and very senior citizen)
5.5.6 Deductions in respect of expenditure on persons or dependants with disability
5.5.6.1 Deductions in respect of maintenance including medical treatment of a dependent who is a person with disability (section 80DD): incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; where a such dependant is a person with severe disability, an amount Rs 1,25,000/- shall be allowed
5.5.6.2 Deductions in respect of a person with a disability (section 80U):
Under section 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with the disability, there shall be allowed a deduction of a sum of Rs 75,000/-. However, where a such individual is a person with severe disability, a higher deduction of Rs 1,25,000/- shall be allowable.
5.5.7. Deduction in respect of medical treatment, etc. (Section 80DDB):
Section 80DDB allows a deduction in case of an employee, who is resident in India, during the previous year, of any amount actually paid for the medical treatment of such disease or ailment as may be specified in the rules 11DD (1) for himself or a dependant. The deduction allowed is equal to the amount actually paid is in respect of the employee or his dependent or Rs.40,000 /-whichever is less.
5.5.8 Deduction in respect of interest on the loan is taken for higher education (Section 80E):
Section 80E allows deduction in respect of payment of interest on loan taken from any financial institution or any approved charitable institution for higher education for the purpose of pursuing his higher education or for the purpose of higher education of his spouse or his children or the student for whom he is the legal guardian.
5.5.12 Deduction in respect of interest on deposits in savings account (Section 80TTA):
Section 80TTA has been introduced from the Financial Year 2012-13 and it allows to an employee from his gross total income if it includes any income by way of interest on deposits (not being time deposits) in a savings account. Max Limit Rs. 10,000/-
REBATE OF Rs 5000 FOR INDIVIDUALS HAVING TOTAL INCOME UPTO Rs 5 LAKH [SECTION 87A]
Finance Act 2013 provided relief in the form of a rebate to individual taxpayers, resident in India, who are in lower income bracket, i. e. having total income not exceeding Rs 5,00,000/-. The amount of rebate available under section 87A is Rs 5000/- or the amount of tax payable, whichever is less from AY 2017-18.
