Certain Important Provisions UNDER Income Tax ACT, 1961

 

Salary income

 

Allowance exempt partly irrespective of expenditure –

if OLD scheme of taxation opted

Allowance	Quantum
Children Education Allowance	Rs. 100 per month per child upto a maximum of 2 children
Hostel expenditure allowance	Rs. 300 per month per child upto a maximum of two children
Leave Travel Concession	Fare two times in four years can be given. (Block 2025-28)
Medical Reimbursement	Expenditure actually incurred by employee on medical treatment of any   member of family in any hospital maintained/ approved by the Govt.
Standard Deduction	Rs. 50000/-  (Rs. 75000/- in new regime)
House Rent Allowance	House rent allowance is exempt as under: Amount of House Rent Allowance received Rent paid in excess of 10% of salary 50% of salary in the case of Metropolitan City and 40% in other case  The least of above will be exempt as House Rent Allowance and balance   is taxable.

 

Deduction under Old Scheme from gross total income

U/s 80C- Deduction for Investment made by Individual and HUF

Deduction is available for investment like LIC, PPF, NSC, Pension Plan, Mutual Fund, Child education tuition fee for two children, Repayment of Housing Loan, Infrastructure Bonds & notified bonds of NABARD, 5 Year time deposits in post office/ Tax Saving FDR with scheduled Bank & Deposit in an account under the Senior Citizens Saving Scheme Rules Deduction under this section is available up to investment of Rs. 150000/- out of total income.

U/s 80CCA- Deduction in respect of deposits under National Savings Scheme or payment to a deferred annuity plan

Total amount of deduction is restricted to limit prescribed under section – 80C. This deduction is allowable for:-

• any amount in relation to any schemes that central government may notify.
• any amount to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may, by notification in the Official Gazette, specify.

Such amount, along with any interest related to it, will be taxable as income in the year of withdrawal.

 

U/s 80CCD (1B) – Contribution to New Pension Scheme by individual

New sub section (1B) has been inserted in section 80CCD w.e.f. AY 2016-17 so as to provide for an additional deduction in respect of any amount paid upto Rs.50000/- for contribution made by any individual assessee under the NPS.

U/s 80 D – Medical Insurance premium & Medical Expenditure (Otherwise than cash except preventive health check upto Rs. 5000) - In case of Individual & HUF  

 

Health Insurance Policy Premium & Section 80D Tax benefits for FY-2025-26/ AY-2026-27

Scenarios	Self, Spouse   & Dependent   Children	Parents   (whether   dependent or   not)	Total Deduction   under section   80D
No one In your family   has attained 60         years of age.	Upto Rs. 25000	Upto   Rs. 25000	Upto Rs. 50000
The eldest member   In your family   (yourself, spouse   and dependent   children) is less than   60 years & Your   Parents ( either   mother or father) are   above 60 years of   age.	Upto Rs.   25000	Upto Rs.   50000	Upto Rs. 75000
The eldest member   In your family (   yourself, spouse and   dependent children)   has attained 60   years  & Yours   Parents ( either   mother or father) are   above 60 years of   age.	Upto Rs. 50000	Upto Rs.   50000	Upto Rs.100000

 

Section 80 DD – Deduction for maintenance of a dependent with disability

In case of resident Individual or a HUF if during the year any amount has been incurred for medical treatment, training, rehabilitation of a dependent (including parents ) with disability or deposited under a scheme of LIC framed in this behalf, the assessee shall be allowed  a deduction of Rs. 75000/- and Rs. 125000/- in case of severe disability.

 

U/s 80 DDB– Deduction in respect of Medical treatment

In case of an individual and HUF if during the year any amount is actually paid for medical treatment of a specified disease then deduction will be allowed for amount actually paid or upto maximum deduction allowable whichever is lower for assessee or his dependent ( including parent)  or any member of HUF  

                  AY 2026-27         

Senior Citizen-                 1,00,000

Super Senior Citizen-       1,00,000

Others-                             40,000    

U/s 80E - Interest on loan Taken For higher Education (For Individual only)

Deduction is allowed for 100% of interest amount on education loan paid during the year to any financial institution for pursuing full time studies of self, spouse or children for a period upto eight years succeeding the initial assessment year. Higher education means any course pursued after passing Senior Secondary Exams or its equivalent from any school, board or university recognised by Central Govt or State Govt or local authority or by any other authority authorised by the Central Govt/State Govt/ Local Authority. Initial assessment year means AY relevant to PY in which Assessee starts paying the interest on the loan.

 

U/s 80 G (DONATIONS)

Deduction is available for donations out of total income:

Deduction amount: 50% of net qualifying amount or

   100% of net qualifying amount in case of Chief Minister/ Prime Minister  

   Relief fund/Clean Ganga Fund/National Fund for Control of Drug

   Abuse/Swachh Bharat Kosh. PM Care fund

Eligible amount: Qualifying amount is restricted to 10% of total income of the assessee before Such donation

No deduction shall be allowed u/s 80G in respect of donation in cash of an amount exceeding Rs.2000

Interest on Saving Bank Account ( U/s 80TTA )

In case of individual or a HUF in respect of any income by way of interest on deposits (not being time deposits) in saving account with Banking Company/ Post Office - General Deduction available upto Rs.10000/-( Senior Citizen upto 50000)

INCOME FROM HOUSE PROPERTY

 

Standard Deduction: 30% of rent receipts after municipal taxes irrespective of actual Expenditure.     

Municipal Taxes:  Actual amount paid (only by the owner, not by tenant)

 Interest on Housing Loan :   Actual amount of interest due or paid   (In case of self occupied property, deduction of interest on Housing loan is available upto Rs. 200000/-*  If construction is completed within Five years of borrow Otherwise Rs. 30000/-)                

   

*In default (new) tax regime interest deduction under Section 24(b) (Rs. 200000) is only available for let-out (rented) properties.

INCOME UNDER THE HEAD BUSINESS

Rates of Depreciation

 

Building		Furniture		Plant & Machinery
Residential	5%	Including  Electrical  Fittings	10%	Plant & Machinery	15%
Other than  Residential	10%			Vehicles     Car/Jeep/Scooter	15%
Temporary  Wooden  Structure	40%			Motor buses/lorries/   taxies used in   business of running   on hire	30%
				Computers including   computer software	40%
				Life saving medical   equipment	40%

Tax Audit

Accounts are required to be audited u/s 44AB, and a Tax Audit report has to be obtained up to 30th September after the end of the financial year in the following cases (otherwise, a penalty equal to 0.5% of turnover/gross receipts or Rs. 1.5 Lakhs, whichever is less).

In case of  Business:

1. If turnover or gross receipts exceed Rs 1 Crores in that financial year  or
2.  If assessee is an Individual, HUF or Firm and turnover does not exceed Rs. 2 Crore –
3. If taxable net profit from the business is less than 8% of turnover/gross receipts (otherwise than by A/c payee cheque) or 6% of turnover (by a/c payee cheque) and total income is above taxable limit, then Tax audit is required to be done.
4. If taxable net profit from the business is 8%  or more of turnover/gross receipts (otherwise than by A/c payee cheque) or 6% of turnover (by a/c payee cheque) than  the assessee will not be required to maintain books of account as required in section 44AA and no Tax Audit is required in such case.. Once this option is opted, It cannot be  withdrawn in next five years
5. However, from AY 2021-22 onwards, Tax Audit Limit has been increased from 1 crore to 10 crores provided:
6. Aggregate of all receipts in cash during the previous year does not exceed 5% of  total receipt
7. Aggregate of all payments in cash during the previous year does not exceed 5% of total payment.

 In case of Profession

• If gross receipt in profession exceeds Rs.50 Lacs in that financial year: or
• if assessee is an Individual, HUF or Firm and turnover does not exceeds Rs. 50 Lacs but taxable net profit from the profession is less than 50% of total gross receipts .

RESTRICTION ON CASH TRANSACTIONS

Unsecured Loans/ Deposits / Specified sum (Property Transactions)

No  person shall take or accept / repay such amount otherwise than by account payee cheque/draft or use of electronic clearing system through a bank account and IMPS/UPI/BHIM  from any person having accumulated balance of Rs. 20000/- or more otherwise penalty is equal to amount of such  acceptance/repayment.

No Cash Transaction of Rs. 2 Lacs or more (Sec 269ST)

No person shall receive an amount of Rs. 200000/- or more otherwise than by account payee cheque/draft or use of electronic clearing system through a bank account and  IMPS/UPI/BHIM  in following cases otherwise penalty for such acceptance is equal to the amount accepted.

• The aggregate amount received shall not be from the same person in a day
• The amount received shall not be Rs. 200000/- or more in cash in respect of single transaction
• The amount received shall not be Rs. 200000/- or more in cash in respect of transaction relating to one event/occasion from a person.

1. Payment in Cash for Revenue/Capital Expenditure

No  payment  either for Revenue or Capital expenditure shall be made otherwise than by account payee cheque/draft or use of electronic clearing system through a bank account and IMPS/UPI/BHIM to the same person in a day more than Rs.10000/- (Rs. 35000/- in case of plying, hiring or leasing goods carriages). 

Moreover any payment in connection to expenditure claimed as deduction in earlier years is more than Rs. 10000/- in cash such payment will be treated as business income of the previous year in which the payment is made

 In case of default entire (100%) such payment/receipt in case of Loan/Deposit and 100% expenditure/ depreciation on payment for fixed assets will be disallowed and added back to your income.   

Above restriction on cash transactions are not applicable if the recipients are a Government, any banking company, post office saving bank or co-operative bank or any recipients notified by central govt.  

1. Payment Of Statutory Liabilities

GST, VAT, other statutory liabilities, Bonus or commission to staff and interest on long term borrowing of public financial institutions Provident fund/ESI (of employer contribution) and Interest on loan & borrowings from scheduled banks for that financial year shall be paid before the last date of filing of Income Tax Return of that financial year

ESI/PF (Employee Contribution) has to be deposited within specified time mentioned in relevant Act

In case of default amount in default will be added to total income of assessee in that financial year.

 INTEREST/REMUNERATION TO PARTNER IN A FIRM/LLP

1. Interest on capital of partners (also of partners in case of LLP) can be maximum of 12% subject to such clause in partnership deed.
2. Remuneration allowable ( Maximum ) to all partners is as under:

 

Book Profit	Remuneration allowable
On first Rs. 600000 of book profit   or in case of loss	Rs. 300000 or 90%  of profits which -   ever is  more
On the balance book profit	60%

 

CAPITAL GAINS

 

Capital Gain
Long Term	12.5% ( If capital gain is more than Rs. 1.25 Lac otherwise exempt in case of listed equity shares and equity oriented funds) 12.5% (without indexation) other than equity shares & equity oriented funds.	Only for Land,   Building or both if   acquired before   23/07/2024 would be   taxable - @12.5%   (without indexation)   or 20% ( with   indexation)   whichever   is   beneficial.
Short Term	20% (Listed Equity)	Slab rate ( Other   Assets)

 

 

Capital Asset	STCG, if held for	LTCG, I held for
Security listed in a   recognized stock   exchange including   listed units of a   business trust.  Unit of equity oriented   fund/ unit of UTI.  Zero Coupon bond.	≤12 months   immediately preceding   the date of its transfer	>12 months   immediately preceding   the date of its transfer
Other capital assets	≤24 months   immediately preceding   the date of its transfer	>24 months   immediately preceding   the date of its transfer

 

INCOME FROM OTHER SOURCES

Sale of immovable property on price less than stamp duty value.

In case of Sale if immovable property on a price less than stamp duty value,  Income tax will be imposed on Stamp duty value considering it as sale price.

If difference between sale price and stamp-duty value is up to 10% of consideration received, difference will be ignored and income tax will be imposed on actual sale price.

 

DEDUCTIONS AVAILABLE UNDER DEFAULT (NEW) SCHEME FROM GROSS TOTAL INCOME

 

Employer's Contribution to NPS: Allowing a deduction of up to 14% of salary (Basic+DA)

 

 Family Pension Deduction: Deduction under Section 57(iia), Standard deduction from family pension income of either 1/3rd of the pension amount or ?25,000, whichever is lower.

Agniveer Corpus Fund: Deposits under Section 80CCH(2), For the matching contribution made by the Central Government to an Agniveer’s account in the Agniveer Corpus Fund. This applies to individuals enrolled in the Agnipath Scheme on or after November 1, 2022, ensuring both employee and government contributions are tax-exempt

Exemptions:

1. Gratuity Gratuity received under Section 10(10) remains tax-exempt up to ?20 lakh for private-sector employees, as it is classified as a retirement benefit rather than a deduction. For government employees, the full gratuity amount is exempt.

 

1. Leave Encashment: The exemption for leave encashment is distinct from gratuity and is capped at ?25 Lakhs for non-government employees as of 2026. Only applicable for leave encashment received at the time of retirement or resignation, not during service.

For government employees, the amount is fully exempt.

 

1. Voluntary Retirement Scheme (VRS): Compensation received on Voluntary Retirement Scheme (VRS) is exempt up to ?5 lakh under Section 10(10C). This exemption is available for employees of companies, authorities, universities, and government bodies, provided the scheme complies with Rule 2BA guidelines.
2. Conveyance Allowance: For expenditure in performance of duties.

PAN no.

Wrong mention of Pan No. attracts penalty of Rs. 10000/- u/s 272BB.

Linking of PAN with Aadhar is mandatory before Income Tax Return filing – Last Date 31st March 2023 (along with penalty of Rs. 1000).

Penalty for false entry, etc. in books of accounts. (AY 2021-22   onwards):    Now, penalty for false entry, etc. in books of accounts can be   imposed -Section 271AAD(1) states:    Without prejudice to any other provisions of this Act, if during any proceeding under this     Act, it is found that in the books of account maintained by any   person  there is— a false entry; or an omission of any entry which is relevant for computation of total income of such person, to evade tax liability,    The Assessing Officer may direct that such person shall pay by way   of penalty a sum equal to the aggregate amount of such false or   omitted entry.   Further, Section 271AAD (2) provides that the Assessing officer may also direct any other person, who causes the person referred to in sub-section (1) in any manner to make a false entry or omits or causes to omit any entry referred to in that sub-section, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.

 

IMPORTANT DATES (AY 2026-27)

 

Last date  of investment for   deduction	:	31st March 2026
Last date for Income Tax Return	:	31st July  31st August (Non audit cases)  31st October (Audit cases &   Companies)
Last Date for Tax Audit Report	:	30th September
Last date for TDS   Return (Quarterly)	:	31st July, 31st October,   31st January, 31st  May
Last date for TCS   Return (Quarterly)	:	15th July, 15th October,   15th January, 15th May
Advance Tax Deposit   ( If Tax payable is 10000/- or more)	:	15th June (15%), 15th Sept.   (45%),15th Dec.(75%),   15th March(100%)
Senior Citizen not having any   income from business/profession	:	Not Liable to Pay Advance Tax
Last Date of TDS deposition (each   month)	:	7th of next month  and in case of March 30th April   2026

 

DISCLAIMER

This article is for the persons to whom it is sent only. No information contained in this article should be construed as legal advice. It is for information and reader of this article should not act without seeking the appropriate legal or other professional advice on the particular facts and circumstances.