Tax Treatment of Specified Savings

The Act has modified the law relating to taxability of certain specified savings completely, by deleting the existing section 88, and replacing it with S.80C. Changes at the point of accrual of income are also made by deleting S.80L. Consequential amendments have also been made in Ss.10, 54EC, 54ED, 80CCC, 80CCD, 295, and a new section 80CCE has been inserted.

• The new S.80C:
  

  The new Section provides a deduction not exceeding Rs One lakh to an individual and an HUF, in respect of the following payments:

  1. payment of life insurance premium (including payment made in respect of spouse and children of the assessee and, in respect of HUF, any member of the family);

  2. payment made for a contract of deferred annuity (including payment made in respect of spouse and children of the assessee);

  3. payment by way of deduction from salary by the Govt. of an amount not exceeding 1/5th of the salary for the purpose of securing a deferred annuity to the employee;

  4. contribution to provident fund to which the Provident Funds Act, 1925 applies;

  5. contribution to any provident fund set up by the Central Govt and notified in the Official Gazette (including payment made in respect of spouse and children of the assessee and, in respect of HUF, any member of the family);

  6. employee's contribution to a recognised provident fund;

  7. employee's contribution to an approved superannuation fund;

  8. subscription to specified securities;

  9. subscription to savings certificates under Govt. Savings Certificates Act, 1959;

  10. contribution to ULIP (including payment made in respect of spouse and children of the assessee and, in respect of HUF, any member of the family);

  11. contribution to unit-linked insurance plan of the LIC Mutual Funds (including payment made in respect of spouse and children of the assessee and, in respect of HUF, any member of the family);

  12. annuity plans of LIC or other insurers;

  13. subscription to units of mutual funds notified u/s 10(23D);

  14. contribution to pension funds notified u/s 10(23D);

  15. subscription to deposit schemes and contribution to mutual funds set up by National Housing Bank;

  16. subscription to the deposit schemes of notified public sector housing finance companies, or authorities dealing with housing accommodation;

  17. tuition fees paid to any university, college or other educational institution situated within India ( in respect of any two children of the assessee);

  18. any payment by way of the following payments in respect of house property:

      1. loan repayment of a housing development board or similar a housing authorities;

      2. repayment of loan to any company or a co-operative society of which the assessee is a member;

      3. repayment of loan borrowed from Central Govt, any State Govt, banks, LIC, or National Housing Banks, housing finance companies, housing finance societies, assessee's employer in case of employees of the Govt, public companies, public sector companies, universities, colleges or local authorities;

      4. stamp duties, registration fee and other expenses incurred for transfer of the house property to the assessee.

      However such eligible amount shall not include the following payments, namely,

      1. membership fee of a co-operative society or a company;

      2. the cost of repairs and renovation incurred after the completion of the house property, or its occupation;

      3. any expenditure in respect of which a deduction is allowed under the provisions of taxability of income from house property;

      
      

  19. subscription to eligible issues of capital by public companies;

  Where an assessee terminates his life insurance policy within 2 years (clause (i)), or terminates his participation to unit-linked insurance plan within 5 years (clause (x)), or transfers his house within 5 years of obtaining possession (clause (xviii)), then no deduction shall be allowed under the relevant clauses, and the deduction so allowed in the preceding years shall be deemed to be the income of the previous year. Similarly when the equity shares or debentures on which the deduction has been allowed under this section are sold within a period of three years from the date of acquisition, the amount of deduction allowed earlier shall be deemed to be the income of the year of sale.

  Ss. (7) clarifies that for the purpose of this section, investments referred to in S. 88(2) shall be eligible for deduction in the manner specified in this section.

  A Section 80CCE is inserted to clarify that the aggregate amount of deduction under sections 80C, 80CCC, and 80CCD shall not exceed Rs One lakh.

  Section 80L of the Act stands omitted.