Chapter VIII

96[R1] [Rebates and Relief’s]

97[R2] [A.—Rebate of income-tax

 

Rebate to be allowed in computing income-tax.

87.(1)               In computing the amount of income-tax on the total income of an assessee with which he is chargeable for any assessment year, there shall be allowed from the amount of income-tax (as computed before allowing the deductions under this Chapter), in accordance with and subject to the provisions of 98[R3] [sections 88, 88A and 88B], the deductions specified in those sections.

 

(2)              The aggregate amount of the deductions under section 88 or section 88A 99[R4] [or section 88B] shall not, in any case, exceed the amount of income-tax (as computed before allowing the deductions under this Chapter) on the total income of the assessee with which he is chargeable for any assessment year.

 

Rebate on life insurance premia, contribution to provident fund, etc.

88.       (1)        Subject to the provisions of this section, an assessee, being—

           

(a)        an individual, or

(b)        a Hindu undivided family, or

(c)        an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu,shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assess­ment year, of an amount equal to twenty per cent of the aggregate of the sums referred to in sub-section (2):

 

99[R5] [Provided that in the case of an individual, whose income, derived from the exercise of his profession as an author, play­wright, artist, musician, actor or sportsman (including an ath­lete), is twenty-five per cent or more of his total income, the provisions of this sub-section shall have effect as if for the words “twenty per cent”, the words ‘twenty-five per cent” had been substituted.]

 

(2)        The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee out of his income chargeable to tax—

           

(i)               to effect or to keep in force an insurance on the life of persons specified in sub-section (4);

(ii)              to effect or to keep in force a contract for a deferred annuity, 1[R6] [not being an annuity plan referred to in clause (xiia)], on the life of persons specified in sub-section (4):

            Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash pay­ment in lieu of the payment of the annuity;

(iii)             by way of deduction from the salary payable by or on behalf of the Government to any individual being a sum deduct­ed in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his wife or children, in so far as the sum so deducted does not exceed one-fifth of the salary;

(iv)             as a contribution by an individual to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), ap­plies;

(v)              as a contribution to any provident fund set up by the Central Government and notified*[R7]  by it in this behalf in the Official Gazette, where such contribution is to an account stand­ing in the name of any person specified in sub-section (4);

(vi)             as a contribution by an employee to a recognised provi­dent fund;

(vii)            as a contribution by an employee to an approved superannuation fund;

(viii)            in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time, where such sums are deposited in an account standing in the name of the persons specified in sub-section (4);

(ix)             as subscription to any such security of the Central Government 2[R8] [or any such deposit scheme] as that Government may, by notification2a[R9] in the Official Gazette, specify in this be­half;

(x)              as subscription to the National Savings Certificates (VI Issue) and National Savings Certificates (VII Issue) issued under the Government Savings Certificates Act, 1959 (46 of 1959);

(xi)             as subscription to any such 2b[R10] savings certificate as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by notification† [R11] in the Official Gazette, specify in this behalf;

(xii)            as a contribution, by any person specified in sub-section (4), for participation in the Unit-linked Insurance Plan, 1971 (hereafter in this section referred to as the Unit-linked Insurance Plan) deemed to have been made under sub-clause (a) of clause (8) of section 19 of the Unit Trust of India Act, 1963 (52 of 1963);

(xiii)            as a contribution by an individual for participa­tion in any such unit-linked insurance plan of the LIC Mutual Fund notified under clause (23D) of section 10, as the Central Government may, by notification*[R12]  in the Official Gazette, specify in this behalf;

3[R13] [(xiiia)      to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may, by notification3a[R14] in the Official Gazette, speci­fy;

(xiiib)          as subscription, not exceeding ten thousand rupees, to any units of any Mutual Fund notified under clause (23D) of section 10 or the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), under any plan formulated in accordance with such scheme as the Central Govern­ment may, by notification in the Official Gazette, specify in this behalf;

(xiiic)          as a contribution by an individual to any pension fund set up by any Mutual Fund notified under clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf;]

(xiv)           as subscription to any such deposit scheme of 3[R15] [, or as a contribution to any such pension fund set up by,] the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) (hereafter in this section referred to as the National Housing Bank), as the Central Govern­ment may, by notification† [R16] in the Official Gazette, specify in this behalf;

4[R17] [(xiva)      as subscription to any such deposit scheme of—

(a)        a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or

(b)        any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both, not being a scheme the interest on deposits where under qualifies for the purposes of computing the deduction under section 80L, as the Central Government may, by notification in the Official Gazette, specify in this behalf;]

(xv)      for the purposes of purchase or construction of a residential house property the 5[R18] [* * *] income from which is chargeable to tax under the head “Income from house property” (or which would, if it had not been used for the assessee’s own residence, have been chargeable to tax under that head), where such payments are made towards or by way of—

 

(a)        any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

 

(b)        any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a share­holder or member towards the cost of the house property allotted to him; or

 

(c)        repayment of the amount borrowed by the assessee from—

           

(1)  the Central Government or any State Government, or

(2)  any bank, including a co-operative bank, or

(3)  the Life Insurance Corporation, or

(4)  the National Housing Bank, or

(5)  any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is approved for the purposes of clause (viii) of sub-section (1) of section 36, or

(6)  any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or

(7)  the assessee’s employer where such employer is a public company or a public sector company or a University established by law or a college affiliated to such University or a local author­ity 6[R19] [or a co-operative society];

(d)        stamp duty, registration fee and other expenses for the purposes of transfer of such house property to the assessee,but shall not include any payment towards or by way of—

           

(A)       the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

7[R20] (B)    [Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.]

(C)       the cost of any addition or alteration to, or renova­tion or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

(D)       any expenditure in respect of which deduction is allow­able under the provisions of section 24.

 

(3)        The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on a policy other than a contract for a deferred annuity as is not in excess of ten per cent of the actual capital sum assured.

 

Explanation.—In calculating any such capital sum, no account shall be taken—

           

(i)         of the value of any premiums agreed to be returned, or

(ii)        of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

 

(4)        The persons referred to in sub-section (2) shall be the following, namely:—

           

(a)        for the purposes of clause (i) of that sub-section,—

(i)         in the case of an individual, the individual, the wife or husband and any child of such individual, and

(ii)        in any other case, any member of the Hindu undivided family or association of persons or body of individuals and any child of any of the members of such association or body;

 

(b)        for the purposes of clause (ii) of that sub-section,—

           

(i)         in the case of an individual, the individual, the wife or husband and any child of such individual, and

(ii)        in the case of an association of persons or body of individuals, any member and any child of any of the members of such association or body;

 

(c)        for the purposes of clauses (v) and (viii) of that sub-section,—

(i)         in the case of an individual, such individual or a minor of whom he is the guardian;

(ii)        in the case of a Hindu undivided family, any member of the family;

(iii)       in the case of an association of persons or body of individuals, such association or body;

           

(d)        for the purposes of clause (xii) of that sub-section,—

 

(i)         in the case of an individual, such individual;

(ii)        in the case of an association of persons or body of individuals, any one member of such association or body.

 

(5)        Where the aggregate of any sums specified in clause (xv) of sub-section (2) exceeds an amount of ten thousand rupees, a deduction under sub-section (1) shall be allowed with reference to so much of the aggregate as does not exceed an amount of ten thousand rupees.

 

(6)        The deduction from the amount of income-tax under sub-section (1) shall not exceed—

           

(i)         in the case of an individual, 8[R21] [whose income, derived from the exercise of his profession as an author, playwright, artist, musician, actor or sportsman (including an athlete), is twenty-five per cent or more of his total income, seventeen thousand five hundred] rupees;

(ii)        in any other case, 9[R22] [twelve] thousand rupees.

 

(7)        Where, in any previous year, an assessee—

           

(i)         terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance, before premi­ums have been paid for two years; or

(ii)        terminates his participation in any unit-linked insur­ance plan referred to in clause (xii) or clause (xiii) of sub-section (2), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or

(iii)       transfers the house property referred to in clause (xv) of sub-section (2) before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,then,—

           

(a)        no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, referred to in clauses (i), (xii), (xiii) and (xv) of sub-section (2), paid in such previous year; and

(b)        the aggregate amount of the deductions of income-tax so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be tax payable by the assessee in the assessment year relevant to such previous year and shall be added to the tax on the total income of the assessee with which he is chargeable for such assessment year.

(8)        In this section,—

 

(i)         “contribution” to any fund shall not include any sums in repayment of loan;

(ii)        “insurance” shall include—

           

(a)        a policy of insurance on the life of an individual or the spouse or the child of such individual or a member of a Hindu undivided family securing the payment of specified sum on the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest there­on) in the event of such person dying before the said stipulated date;

(b)        a policy of insurance effected by an individual or a member of a Hindu undivided family for the benefit of a minor with the object of enabling the minor, after he has attained majority to secure insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf;

           

(iii)       “Life Insurance Corporation” means the Life Insur­ance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956);

(iv)       “public company”9a[R23] shall have the same meaning as in section 3 of the Companies Act, 1956 (1 of 1956);

(v)        “security” means a Government security as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);

(vi)       “transfer” shall be deemed to include also the transac­tions referred to in clause (f) of section 269UA.

 

Rebate in respect of investment in certain new shares or units.

88A.    (1)        Where an assessee being—

(a)        an individual; or

(b)        a Hindu undivided family; or

(c)        an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu,has acquired, in the previous year, out of his income chargeable to tax,—

 

(i)         equity shares forming part of any eligible issue of capital; or

 

(ii)        units issued under any scheme of any Mutual Fund speci­fied under clause (23D) of section 10 or of the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), if the amount of subscription to such units is subscribed, within a period of six months from the close of subscription under such scheme, only to eligible issue of capital,he shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chap­ter) on his total income with which he is chargeable for any assessment year, of an amount equal to twenty per cent of the cost of such shares or units to such assessee:

 

Provided that the amount of subscription to such units may be subscribed, for a period not exceeding six months from the close of subscription under any scheme referred to in clause (ii) in such securities of the Central Government, as may be approved by the Board in this behalf:

 

Provided further that no deduction shall be allowed in respect of units issued under any scheme referred to in clause (ii) where the subscription under such scheme closes after the 30th day of September, 1990.

 

Explanation.—Where in any previous year, the assessee has ac­quired any shares or units referred to in this sub-section and has, within a period of six months from the end of that previous year paid the whole or a part of the amount, if any, remaining unpaid on such shares or units, the amount so paid shall be deemed to have been paid by the assessee towards the cost of such shares or units in the previous year.

 

(2)        Where the aggregate cost to the assessee of the shares or units referred to in sub-section (1) which are acquired by him in the previous year exceeds twenty-five thousand rupees, the deduction under that sub-section shall be allowed only with reference to such of those shares or units (being shares or units the aggregate cost whereof to the assessee does not exceed twen­ty-five thousand rupees) as are specified by him in this behalf.

 

(3)        For the purposes of this section, “eligible issue of capital” means as issue of equity shares which satisfies the following conditions, namely:—

 

(a)        the issue is made by a public company formed and regis­tered in India and the issue is wholly and exclusively for the purposes of carrying on the business of—

 

(i)         construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule; or

(ii)        providing long-term finance for construction or pur­chase of houses in India for residential purposes:

 

Provided that in the case of a public company carrying on the business referred to in this sub-clause, such company is approved by the Central Government for the purposes of this section; or

 

(iii)       a hospital; or

(iv)       a hotel approved by the prescribed authority; or

(v)        operation of ships;(b) the issue is an issue of capital made by the company for the first time :

 

Provided that this clause shall not apply in the case of an issue of equity shares made by a public company formed and regis­tered in India with the main object of carrying on the business of operation of ships;

 

(c)        the shares forming part of the issue are offered for subscription to the public and such offer for subscription is made by the company before the 1st day of April, 1991;

 

(d)        such other conditions as may be prescribed:

 

Provided that in the case of a company which had originally been incorporated as a private company but has become a public company under the provisions of the Companies Act, 1956 (1 of 1956), an issue of equity shares made by it for the first time after it has become a public company shall not be regarded as an eligible issue of capital, if—

 

(i)         such company had declared, distributed or paid any dividend when it was a private company; or

 

(ii)        any of the shares forming part of such issue is offered for subscription at a premium.

 

Explanation 1.—If any question arises as to whether any issue of equity shares would constitute an eligible issue of capital for the purposes of this section, the question shall be referred to the Central Government whose decision thereon shall be final.

 

Explanation 2.—In this sub-section and sub-section (4), “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956).

 

(4)        The deduction under sub-section (1) shall not be allowed unless the assessee has—

 

(i)         subscribed to the shares in pursuance of an offer for subscription to the public made by the public company or in pursuance of a reservation or an option in his favour by reason of his being a promoter of the company; or

(ii)        purchased the shares from a person who is specified as an underwriter in respect of the issue of such shares in pursu­ance of clause 11 of Part I of Schedule II to the Companies Act, 1956 (1 of 1956) and who has acquired such shares by virtue of his obligation as such underwriter.

 

(5)        If any equity shares or units, with reference to the cost of which a deduction is allowed under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisi­tion, the aggregate amount of the deductions of income-tax so allowed in respect of such equity shares or units in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be tax payable by the assessee for the assessment year relevant to such previous year and shall be added to the amount of income-tax on the total income of the assessee with which he is chargeable for such assessment year.

 

Explanation.—A person shall be treated as having acquired any shares or units on the date on which his name is entered in relation to those shares or units in the register of members of the company or in the relevant records of any Mutual Fund or Unit Trust of India, referred to in sub-section (1).

 

(6)        Where a deduction is claimed and allowed under sub-section (1) with reference to the cost of any equity shares, the cost of such shares shall not be taken into account for the purposes of section 54E.

 

10[R24] [ebate of income-tax in case of individuals of sixty-five years and above.

88B.    An assessee, being an individual resident in India, who is of the age of sixty-five years or more at any time during the previous year and whose gross total income does not exceed 10a[R25] [fifty] thousand rupees, shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deduc­tions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to 10b[R26] [ten] per cent of such income-tax.

 

Explanation.—For the purposes of this section, “gross total income” means the total income computed in accordance with the provisions of this Act, before making any deduction under Chapter VI-A.]

B.—Relief for income-tax]

Relief when salary, etc., is paid in arrears or in advance.

11[R27] 89. 12[R28] (1)    Where, by reason of any portion of an assessee’s salary being paid in arrears or in advance or by reason of his having received in any one financial year salary for more than twelve months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, his income is assessed at a rate higher than that at which it would otherwise have been assessed, 13[R29] [the 14[R30] [Assessing] Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed].

15[R31] (2)            [* * *].

 

Tax relief in relation to export turnover.

89A.    [Omitted by the Finance Act, 1983, w.e.f. 1-4-1983. The provisions of this section have now been substituted by a new scheme contained in a new section 80HHC inserted by the Finance Act, 1983, w.e.f. 1-4-1983. Originally section 89A was inserted by the Finance Act, 1982, w.e.f. 1-6-1982.]

 

 

 

 

 [R1]Substituted for “Relief in respect of income-tax” by the Finance Act, 1990, w.e.f. 1-4-1991. Earlier existing heading was amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.

 [R2]Inserted by the Finance Act, 1990, w.e.f. 1-4-1991.

 [R3]Substituted for “sections 88 and 88A” by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R4]Inserted, ibid.

 [R5]Inserted, ibid.

 [R6]Substituted for the words “not being an annuity plan referred to in clause (ii) of sub-section (1) of section 80CCA” by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R7]*Public provident fund has been notified - Vide SO 54(E), dated 31-1-1991, Refer, 1992.

 [R8]Inserted, ibid.

 [R9]For notified deposit scheme, see circular, 1993.

 [R10]

 [R11]†NSC (VIII Issue) has been notified - Vide SO 54(E), dated 31-1-1991. Refer, 1992.

 [R12]* Dhanaraksha 1989 Plan of LIC Mutual Fund – Vide SO 56(E), dated 31-3-1991, Refer, 1992.

 [R13]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R14]For notified annuity plans of LIC, see circular, 1993.

 [R15]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R16]†Home Loan Account Scheme of National Housing Bank has been notified - Vide SO 57(E), dated 31-1-1991. Refer, 1992.

 [R17]Inserted by the Finance (No. 2) Act, 1991, w.e.f 1-4-1992.

 [R18]Words “construction of which is completed after the 31st day of March, 1987, and the” omitted by the Finance (No. 2) Act, 1991, 1-4-1992.

 [R19]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.

 [R20]Prior to omission, sub-clause (B) read as under:

“(B) the cost of the land, except where the consideration for the purchase of the house property is a composite amount and the cost of the land alone cannot be separately ascertained; or”

 [R21]Substituted for “being an author, playwright, artist, musician, actor or sportsman (including an athlete), fourteen thousand” by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R22]Substituted for “ten”, ibid.

 [R23]

 [R24]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R25]Word “seventy-five” shall be substituted for “fifty” by the Finance Act, 1993, w.e.f. 1-4-1994.

 [R26]Word “twenty” shall be substituted for “ten”, ibid.

 [R27]See also Circular No. 331, dated 22-3-1982 and Circular No. 431, dated 12-9-1985.

 [R28]See rules 21A and 21AA and Form No. 10E.

 [R29]Substituted for “the Commissioner may, on an application made in this behalf by the assessee, grant such relief as he considers appropriate” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.

 [R30]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [R31]Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to its omission, sub-section (2), stood as under:

“(2) Where, by reason of any portion of income from interest on securities being received in arrears, an assessee’s total income is assessed at a rate higher than that at which it would other­wise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed.”