Deductions from Gross Total Income and Computation of Total Income
This domain tests Chapter VI-A deductions, their limits and conditions, and the final aggregation of income under the correct regime.
Core rules
- Gross total income is the sum of the five heads after intra-head adjustments and set-off of losses. Chapter VI-A deductions are then allowed, but only if eligible and within limits.
- Section 80C covers specified investments and payments, capped at ₹1,50,000, including life insurance premium, PPF, principal repayment of housing loan and tuition fees. Section 80D allows health insurance premia and preventive health checks subject to age-based limits. Section 80E allows interest on an education loan without a monetary cap for the specified period.
- Section 80G governs donations; the eligible amount depends on the fund and the 10% of adjusted gross total income limit. Sections 80TTA and 80TTB give interest deductions for individuals, with different limits for senior citizens.
- The default new regime under section 115BAC denies most Chapter VI-A deductions, including 80C and 80D. The old regime allows them if the assessee opts correctly and satisfies conditions.
Worked example
Gross total income is ₹9,00,000. Under the old regime, the assessee claims ₹1,50,000 under 80C and ₹25,000 under 80D. Total income is ₹9,00,000 − ₹1,75,000 = ₹7,25,000. Under the new regime, these deductions are generally unavailable, so the computation must be redone; the final tax comparison should use the correct slab regime.
Traps
Do not claim a deduction before checking the regime; respect sub-limits within 80C and 80D; donations need eligible receipts and qualifying limits; 80E is interest-only; deductions cannot exceed gross total income unless expressly allowed.