Exemptions & Deductions :- Budget 2013

    Life Insurance policy for persons with disability or disease

Section	Existing Provision	Proposed Changes
10 (10D)	Any Sum received under Life Insurance policy is exempt subject to condition that ·  Premium does not exceed 10% of actual capital sum assured. Actual capital sum assured shall be minimum amount assured under the policy at any time during the term of policy not taking into amount -          Value of any premiums agreed to be returned -          Any benefit by way of bonus or otherwise over and above actual sum assured.	Proviso inserted: Where the policy, issued on or after the 1st day of April 2013, is for insurance on life of any person, With disability as per section 80U Suffering with disease as specified in 80DDB Exemption allowed if premium is not in excess of 15% of actual capital sum assured.
80C	·         A deduction is available ·         in respect of any premium or other payment made ·         on an insurance policy of ·         up to 10% of the ‘actual capital sum assured’.	-- Same proviso as above --

    Deduction under Chapter VI-A 

Existing Scenarios	Proposed Changes
Section 80D :-
·      Amount paid by assessee, being individual, out of his taxable income, ·      for taking an insurance on his health or the health of the family or ·      any contribution made towards the Central Government Health Scheme (CGHS) or ·      any payment made on account of preventive health check-up of the assessee or his family, ·      is allowed ad deduction (maximum Limit INR 15,000)	·      any contribution made towards the Central Government Health Scheme (CGHS) or such other scheme as may be notified by the Central government in this behalf.
Section 80CCG  :- Rajiv Gandhi Equity saving scheme (RGESS)
·         A resident individual ·         who has acquired Listed Equity shares in accordance with the scheme ·         shall be allowed ·         a deduction of 50% of the amount invested (maximum deduction INR 25,000)   ·         The deduction is a one-time deduction and is available only in one assessment year in respect of the amount so invested. ·         The deduction is available to a new retail investor whose GTI does not exceed INR 10 lakh. ·         Lock in period of the investment will be three years.	·         A resident individual ·         who has acquired Listed Equity shares or listed units of an equity oriented Mutual funds in accordance with the scheme ·         shall be allowed ·         a deduction of 50% of the amount invested (maximum deduction INR 25,000)   ·         The deduction shall be allowed for three consecutive assessment years related to previous year in which the listed Equity shares or listed units of equity oriented Mutual funds was first acquired. ·         The deduction is available to a new retail investor whose GTI does not exceed INR 12 lakh. ·         Lock in period of the investment will be three years.
Section :- 80G
·         Assessee is allowed a deduction of 50% ·         of amount contributed in ·         National Children’s Fund.	·         Deduction increased to 100%.
Section :-  80GGB
·         Any Sum ·         contributed by an Indian company ·         to any political party or an electoral trust in the previous year, ·         is allowed as deduction.	Proviso Inserted: No deduction shall be allowed for Donation in Cash.
Section :- 80 GGC
·         Any Sum ·         contributed by any person other than local authority or artificial judicial person   ·         to any political party or an electoral trust in the previous year, ·         is allowed as deduction.	Proviso Inserted: No deduction shall be allowed for Donation in Cash.
Section :- 87 (New Section)
·         An assessee, being an individual resident in India, ·         whose total income does not exceed INR 5 lakh ·         shall be entitled to a deduction of , ·         INR 2,000 or the tax payable, whichever is less.

Comment:

1. Increase in threshold limit of premium paid on account of insurance policy taken for persons with disability or suffering from specified disease, will enable them to get the benefit of section 10(10D).

2. Liberalisation of RGESS will likely to give a much needed boost to secondry market. Inclusion of equity oriented mutual funds in the scheme, deduction for three consecutive years and increase in eligibility limit to INR 12 lakh, is likely to bring back retail investors to stock market.

3. Cash Donation to political parties will not be eligible for deduction, which will curb the circulation of unaccounted money. However, a donation through bearer cheque is continued to be considered as valid

mode for getting deduction. A proper measure should be taken to restrict the deduction for contribution made by account payee cheque or through bank draft only, which will make transparency in political funding.

4. A rebate of INR 2,000 to individuals having taxable income upto INR 5 lakh is below the expectations of ‘Aam Aadmi’ keeping in view of the high inflation rate.

5. Higher deduction @ 100% to National Children’s Fund will give much needed funding to overall development of Children’s in India. 

Extract of Memorandum:  

U/s 10(10D).......Some insurance policies for persons with disability or suffering from specified diseases provide for an annual premium of more than ten per cent of the actual capital sum assured. Due to the limit of ten per cent, these policies are ineligible for exemption under clause (10D) of section 10. Moreover, the deduction under section 80C is eligible only to an extent of the premium paid up to 10 % of the ‘actual capital sum assured’

“    With a view to liberalize the incentive available for investment in capital markets by the new retail investors, it is proposed to amend the provisions of section 80CCG so as to provide that investment in listed units of an equity oriented fund shall also be eligible for deduction in accordance with the provisions of section 80CCG.”

“ u/s 80GGB / 80GGC.......  There is no specific mode provided for making such contribution. ..With a view to discourage cash payments by the contributors, it is proposed to amend the provisions of aforesaid sections, so as to provide that no deduction shall be allowed under section 80GGB and 80GGC in respect of any sum contributed by way of cash.”

    Additional Tax Benefit to Home Buyers :-

Section 80EE : (new Section)

ü  An assessee, being an individual, ü  shall be allowed a deduction of INR 1 lakh for ü  Interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property. Conditions : F Loan should be sanctioned at any time in FY 2013-14.  F Maximum loan sanctioned should not exceed INR 25 lakh F The value of the residential house property should not exceed INR 40 lakh F Assessee does not own any residential house property on the date of sanction of the loan. ** The deduction of INR 1 lakh is over and above the deduction of INR 1.5 lakh provided in section 24.   ** If entire deduction has not been utilised in AY 2014-15, remaining can be utilised in AY 2015-06.

Comment:

1. The benefit is only available to first time home buyers who are planning to buy a residential house of INR 40 lakh or less. The loan amount should not exceed INR 25 lakh.

2. The word ‘Payable’ can be interpreted in a different way. If we take a literal interpretation, payment of actual interest is not necessary for claiming the deduction.

      Vizag ITAT (SB) in case of Marilyn Shipping & Transport (136 ITD 23), by interpreting the language of section 40(a)(ia) had held that TDS disallowance applies only to amounts payable as on 31^st March and not to amounts already paid during the year.

    Considering the principle given by Vizag ITAT (supra), one can claim deduction of interest payable.   

3. The threshold limit for property value and loan amount should be increased so that people living in Metropolitan cities can avail the same benefit. 

4. Can assessee, who had sold his residential house earlier, be also eligible for benefit, is a matter of interpretation as the wordings in Finance bill is the assessee does now own any residential house property on the date of the sanction of the loan. The same needs to be clarified, though as per memorandum explaining finance bill, the benefit is available to first home buyers.  

5. Loan from financial institutions has been covered in this section but loan from housing financial institutions has not been covered, which needs to be rectified. 

6. Loan for construction of residential house is seems to be not covered, which should be look into. 

7. Overall the proposed amendment will give home buyers a reason to smile.

Extract of Memorandum:  

“    Keeping in view the need for affordable housing, an additional benefit for first-home buyers is proposed to be provided by inserting a new section 80EE in the Income-tax Act relating to deduction in respect of interest on loan taken for residential house property.”

      Exemption to income of Investor Protection fund of depositories:- Section 10(23EA)

Existing Act

New Section

Section 10(23EA) ·        Any Income by way of ·        contributions from a recognised stock exchange ·        received by a Investor Protection Fund ·        set up by the recognised stock exchange ·        shall be exempt from taxation .

Similar New section 10(23ED): ·         Any income, by way of contributions received from a depository, of such Investor Protection Fund set up in accordance with the regulations by a depository, shall be exempt. ·         Where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with a depository, the entire amount so shared shall be treated as income and will taxed accordingly.