CHAPTER VIII

 

38[R1] [REBATES AND RELIEFS]

 

39[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 40[R3] [sections 88, 88A, 88B, 88C, 88D and 88E], the deductions specified in those sections.

 

(2)        The aggregate amount of the deductions under section 88 or section 88A 41[R4] [or section 88B] 42[R5] [or section 88C] 43[R6] [or section 88D or section 88E] 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 educational expenses in certain cases.

 

87A.    [Omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.]

  

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

 

44[R7] 88.           45[R8] [(1)           Subject to the provisions of this section, an assessee, being an individual, or a Hindu undivided family, 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—

 

(i)         in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, is one lakh fifty thousand rupees or less, twenty per cent of the aggregate of the sums referred to in sub-section (2):

 

Provided that an individual shall be entitled to a deduction of an amount equal to thirty per cent of the aggregate of the sums referred to in sub-section (2) if his income under the head “Salaries”—

 

(a)        does not exceed one lakh rupees during the previous year before allowing the deduction under section 16; and

 

(b)        is not less than ninety per cent of his gross total income, as defined in sub-section (5) of section 80B;

 

(ii)        in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, is more than one lakh fifty thousand rupees but does not exceed five lakh rupees, fifteen per cent of the aggregate of the sums referred to in sub-section (2);

 

(iii)       in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, exceeds five lakh rupees, nil.]

 

(2)        The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee 46[R9] [***]—

 

(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, 47[R10] [not being an annuity plan referred to in clause (xiiia)], 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 notified48[R11]  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 49[R12] [or any such deposit scheme] as that Government may, by notification50[R13]  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 savings certificate51[R14]  as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by notification52[R15]  in the Official Gazette, specify in this behalf;

           

(xii)      as a contribution, 53[R16] [in the name of 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 54[R17] [in the name of any person specified in sub-section (4)] 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 notification55[R18]  in the Official Gazette, specify in this behalf;

               

56[R19] [(xiiia)     to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation 57[R20] [or any other insurer] as the Central Government may, by notification58[R21]  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 59[R22] [or by the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963)], as the Central Government may, by notification60[R23]  in the Official Gazette, specify in this behalf;]

           

(xiv)     as subscription to any such deposit scheme of 61[R24] [, 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 notification62[R25]  in the Official Gazette, specify in this behalf;

 

63[R26] [(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 whereunder 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;]

 

64[R27] [(xivb)     as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,—

 

(a)        to any university, college, school or other educational institution situated within India;

 

(b)        for the purpose of full-time education of any of the persons specified in sub-section (4);]

 

(xv)      for the purposes of purchase or construction of a residential house property the 65[R28] [* * *] 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 66[R29] [which is eligible for deduction under 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

 

67[R30] [(6A)      the assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, 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 68[R31] [or a co-operative society];

 

(d)        stamp duty, registration fee and other expenses for the purpose 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

 

(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;

 

69[R32] [(xvi)       as subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company 70[R33] [or as subscription to any eligible issue of capital by any public financial institution] in the prescribed form71[R34] :

 

Provided that where a deduction is claimed and allowed under this clause with reference to the cost of any equity shares or debentures, the cost of such shares or debentures shall not be taken into account for the purposes of sections 54EA and 54EB.

           

72[R35] [Explanation.—For the purposes of this clause,—

 

(i)         “eligible issue of capital” means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue are utilised wholly and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA;

 

(ii)        “public company”73[R36]  shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);

 

(iii)       “public financial institution”74[R37]  shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);]

 

(xvii)     as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form75[R38] :

 

Provided that where a deduction is claimed and allowed under this clause with reference to the cost of units, the cost of such units shall not be taken into account for the purposes of sections 54EA and 54EB:

 

Provided further that this clause shall apply if the amount of subscription to such units is subscribed only in the eligible issue of capital of any company.

 

Explanation.—For the purposes of this clause “eligible issue of capital” means an issue referred to in clause (i) of the Explanation  to clause (xvi) of sub-section (2) of section 88.]

 

76[R39] [(2A)      The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy other than a contract for a deferred annuity as is not in excess of twenty per cent of the actual capital sum assured.

 

Explanation.—In calculating any such actual 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.]

 

77[R40] [(3)         The sums referred to in sub-section (2) shall be paid or deposited at any time during the previous year, and the assessee, being an individual or a Hindu undivided family, shall be entitled to a deduction under sub-section (1) on so much of the aggregate of such sums paid or deposited as does not exceed the total income of the assessee, chargeable to tax during the relevant previous year.]

 

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

  

78[R41] [(a)         for the purposes of clauses (i), (v), (xii) and (xiii) 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 a Hindu undivided family, any member thereof;]

 

(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)        79[R42] [***]

 

(c)        for the purposes of 80[R43] [clause (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)       81[R44] [***]

 

82[R45] [(d)         for the purpose of clause (xivb) of that sub-section, in the case of an individual, any two children of such individual.]

 

83[R46] [(5)         Where the aggregate of any sums specified in clause (i) to clause (xvii) of sub-section (2) exceeds an amount of one hundred 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 one hundred thousand rupees:

 

Provided that where the aggregate of any sums specified in clause (i) to clause (xv) of sub-section (2) exceeds an amount of seventy thousand rupees, a deduction under sub-section (1) in respect of such sums shall be allowed with reference to so much of the aggregate as does not exceed an amount of seventy thousand rupees:

 

Provided further that where the aggregate of any sums specified in clause (xv) of sub-section (2) exceeds an amount of twenty thousand rupees, a deduction under sub-section (1) in respect of such sums shall be allowed with reference to so much of the aggregate as does not exceed an amount of twenty thousand rupees:

 

84[R47] [Provided also that where the aggregate of any sum specified in clause (xivb) of sub-section (2) exceeds an amount of twelve thousand rupees in respect of a child, a deduction under sub-section (1) in respect of such sum shall be allowed with reference to so much of the aggregate as does not exceed an amount of twelve thousand rupees in respect of such child.]

 

85[R48] [(5A)      [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003.]

 

86[R49] [(6)         [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003.]

 

(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 87[R50] [contract of insurance,—

 

(a)        in case of any single premium policy, within two years after the date of commencement of insurance; or

 

(b)        in any other case, 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.

 

88[R51] [(7A)      If any equity shares or debentures, 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 debentures 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 debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.]

 

(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”89[R52]  shall have the same meaning as in section 3 of the Companies Act, 1956 (1 of 1956);

           

(v)        “security” means a Government security90[R53]  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.

 

The following sub-section (9) shall be inserted after sub-section (8) of section 88 by the Finance Act, 2005, w.e.f. 1-4-2006:

 

(9)        No deduction from the amount of income-tax shall be allowed under this section to an assessee, being an individual or a Hindu undivided family for the assessment year beginning on the 1st day of April, 2006 and subsequent years.

 

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

 

88A.    91[R54] [Omitted by the Finance (No. 2) Act, 1996, w.r.e.f. 1-4-1994.]

 

92[R55] [93[R56] [Rebate of income-tax in case of individuals of sixty-five years or 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 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 hundred per cent of such income-tax or an amount of 94[R57] [twenty] thousand rupees, whichever is less.]]

 

95[R58] [96[R59] [Rebate of income-tax in case of women below sixty-five years.

 

88C.    An assessee,—

 

(a)        being a woman resident in India; and

           

(b)        below the age of sixty-five years, at any time during the previous year, shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on her total income, with which she is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of five thousand rupees, whichever is less.]]

 

97[R60] [97a[R61] [Rebate of income-tax in case of certain individuals.

 

88D.    An assessee, being an individual resident in India,—

 

(a)        whose total income does not exceed one hundred 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 hundred per cent of such income-tax;

 

(b)        whose total income exceeds one hundred thousand rupees and the income-tax payable on such total income (as computed before allowing the deductions under this Chapter) exceeds the amount by which such total income is in excess of one hundred thousand rupees, shall be entitled to a deduction from the amount of income-tax on his total income, of an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds one hundred thousand rupees.]]

 

97b[R62]  [Rebate in respect of securities transaction tax.

 

88E.     (1)        Where the total income of an assessee in a previous year includes any income, chargeable under the head “Profits and gains of business or profession”, arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions, computed in the manner provided in sub-section (2), of an amount equal to the securities transaction tax paid by him in respect of the taxable securities transactions entered into in the course of his business during that previous year:

 

Provided that no deduction under this sub-section shall be allowed unless the assessee furnishes alongwith the return of income, evidence of payment of securities transaction tax in the prescribed form97c[R63] :

 

Provided further that the amount of deduction under this sub-section shall not exceed the amount of income-tax on such income computed in the manner provided in sub-section (2).

 

(2)        For the purposes of sub-section (1), the amount of income-tax on the income arising from the taxable securities transactions, referred to in that sub-section, shall be equal to the amount calculated by applying the average rate of income-tax on such income.

 

Explanation.—For the purposes of this section, the expressions, “taxable securities transaction” and “securities transaction tax” shall have the same meanings respectively assigned to them under Chapter VII of the Finance (No. 2) Act, 2004.]

 

B.—Relief for income-tax

 

98[R64] [Relief when salary, etc., is paid in arrears or in advance.

 

89.       Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of 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, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (iia) of section 57, being paid in arrears, due to which his 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 prescribed99.[R65] ]

 

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 were later substituted by scheme contained in 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, 88A, 88B and 88C” by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Earlier the quoted portion was amended by the Finance Act, 1992, w.e.f. 1-4-1993 and Finance Act, 2000, w.e.f. 1-4-2001.

 [R4]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993

 [R5]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001

 [R6]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005

 [R7]For relevant case laws, see case laws

 [R8]Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its substitution, sub-section (1), as amended by the Finance Act, 1990, w.e.f. 1-4-1991, Finance Act, 1992, w.e.f. 1-4-1993, Finance Act, 1994, w.r.e.f. 1-4-1991 and Finance Act, 2001, w.e.f. 1-4-2002, read as under :

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

        (a)  an individual, or

        (b)  a Hindu undivided family, [***]

        (c)  [***]

      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) :

      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 :

      Provided further that an individual shall be entitled to a deduction of an amount equal to thirty per cent of the aggregate of the sums referred to in sub-section (2) if his income chargeable under the head “Salaries”—

        (a)  does not exceed one lakh rupees during the previous year before allowing deduction under section 16; and

                (b)           is not less than ninety per cent of his gross total income as defined in sub-section (5) of section 80B.

 [R9]Words “out of his income chargeable to tax” omitted by the Finance Act, 2002, w.e.f. 1-4-2003

 [R10]Substituted for “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.

 [R11]Public provident fund has been notified - Vide  SO 55(E), dated 31-1-1991

 [R12]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993

 [R13]National Savings Scheme has been notified—Vide  GSR 819(E), dated 21-10-1992.

 [R14]

 [R15]NSC (VIII Issue) has been notified - Vide  SO 54(E), dated 31-1-1991

 [R16]Substituted for “by any person” by the Finance Act, 1994, w.r.e.f. 1-4-1991.

 [R17]Substituted for “by any individual” by the Finance Act, 1994, w.r.e.f. 1-4-1991

 [R18]Dhanaraksha 1989 Plan of LIC Mutual Fund - Vide SO 56(E), dated 31-1-1991

 [R19]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R20]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002

 [R21]Jeevan Dhara and Jeevan Akshay Plans of LIC - Vide  Notification No. GSR 801(E), dated 7-10-1992. New Jeevan Dhara/New Jeevan Akshay Plans of LIC - Vide Notification No. 71/2002 [F. No. 174/9/2001-IT(A-I)], dated 2-4-2002. New Jeewan Dhara I and New Akshay Plan I of LIC - Vide Notification No. SO 306(E), dated 18-3-2003/New Jeewan Akshay-II - Vide Notification No. SO 569(E), dated 13-5-2004

 [R22]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.

 [R23]Retirement Benefit Unit Scheme of UTI - Vide  Notification No. 9598 [F. No. 149/100/94-TPL], dated 1-9-1994/Kothari Pioneer Pension Plan—Notification No. SO 76(E), dated 30-1-1997.

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

 [R25]Home Loan Account Scheme of National Housing Bank has been notified - Vide SO 57(E), dated 31-1-1991

 [R26]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992

 [R27]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.

 [R28]Words “construction of which is completed after the 31st day of March, 1987, and the” omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992

 [R29]Substituted for “which is approved for the purposes of clause (viii) of sub-section (1) of section 36” by the Finance Act, 2000, w.e.f. 1-4-2000

 [R30]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005

 [R31]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.

 [R32]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997

 [R33]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.

 [R34]See rule 20 and Form No. 59.

 [R35]Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its substitution, Explanation, as amended by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, Finance Act, 1997, w.e.f. 1-4-1998 and Finance Act, 1999, w.e.f. 1-4-2000, read as under:

      ‘Explanation.—For the purposes of this clause,—

         (i)  “eligible issue of capital” means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue is utilised wholly and exclusively either for the purposes of developing, maintaining and operating an infrastructure facility or for generating, or for generating and distributing, power or for providing telecommunication services whether basic or cellular ;

        (ii)  “infrastructure facility” shall have the meaning assigned to it in the  Explanation to sub-section (4) of section 80-IA;

       (iii)  “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);

                (iv)          “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

 [R36]Clause (iv) of section 3(1) of the Companies Act, 1956, defines “public company”. For text of section 3, see  Appendix One.

 [R37]For text of section 4A of the Companies Act, see Appendix One.

 [R38]See rule 20A and Form No. 59A

 [R39]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004

 [R40]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003. Earlier existing sub-section (3) was omitted by the Finance Act, 1995, w.e.f. 1-4-1996.

 [R41]Substituted by the Finance Act, 1994, w.r.e.f. 1-4-1991

 [R42]Omitted by the Finance Act, 1994, w.r.e.f. 1-4-1991

 [R43]Substituted for “clauses (v) and (viii)” by the Finance Act, 1994, w.r.e.f. 1-4-1991

 [R44]Omitted by the Finance Act, 1994, w.r.e.f. 1-4-1991

 [R45]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004. Earlier clause (d) was omitted by the Finance Act, 1994, w.r.e.f. 1-4-1991.

 [R46]Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Prior to its substitution, sub-section (5), as amended by the Finance Act, 2000, w.e.f. 1-4-2001, read as under :

“(5) Where the aggregate of any sums specified in clause (xv) of sub-section (2) exceeds an amount of twenty 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 twenty thousand rupees.”

 [R47]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004

 [R48]Prior to its omission, sub-section (5A), as inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, read as under:

‘(5A) Where the aggregate of any sums specified in clause (i) to clause (xv) of sub-section (2) exceeds an amount of sixty 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 sixty thousand rupees:

Provided that, in the case of an individual referred to in the proviso to sub-section (1), the provisions of this sub-section shall have effect as if for the words “sixty thousand rupees”, the words “seventy thousand rupees” had been substituted.

 [R49]Prior to its omission, sub-section (6), as amended by the Finance Act, 1992, w.e.f. 1-4-1993, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and Finance Act, 2000, w.e.f. 1-4-2001, read as under :

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

         (i)  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, seventeen thousand five hundred rupees;

                (ii)           in any other case, sixteen thousand rupees.”

 [R50]Substituted for “contract of insurance, before premiums have been paid for two years; or” by the Finance Act, 1995, w.e.f. 1-4-1996

 [R51]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

 [R52]Clause (iv) of section 3(1) of the Companies Act, 1956, defines “public company”. For text of section 3, see Appendix One.

 [R53]

 [R54]Prior to its omission, section 88A, as amended by the Finance Act, 1990, w.e.f. 1-4-1991 and Finance Act, 1994, w.r.e.f. 1-4-1991, read as under :

      ‘88A. Rebate in respect of investment in certain new shares or units.—(1) Where an assessee being—

        (a)  an individual; or

        (b)  a Hindu undivided family;

        (c)  [***]

      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 an 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.’

 [R55]Section 88B shall be omitted by the Finance Act, 2005, w.e.f. 1-4-2006.

 [R56]Substituted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its substitution, section 88B, was inserted by the Finance Act, 1992, w.e.f. 1-4-1993 and later on amended by the Finance Act, 1993, w.e.f. 1-4-1994, the Finance Act, 1994, w.e.f. 1-4-1995 and the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

 [R57]Substituted for “fifteen” by the Finance Act, 2003, w.e.f. 1-4-2004. Earlier “fifteen” was substituted for “ten” by the Finance Act, 2000, w.e.f. 1-4-2001.

 [R58]Section 88C shall be omitted by the Finance Act, 2005, w.e.f. 1-4-2006.

 [R59]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001

 [R60]Section 88D shall be omitted by the Finance Act, 2005, w.e.f. 1-4-2006.

 [R61]Section 88D inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005

 [R62]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.

 [R63]See rule 20AB and Form Nos. 10DB & 10DC

 [R64]Substituted by the Finance Act, 2002, w.r.e.f. 1-4-1996. Prior to its substitution, section 89 was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and the Finance Act, 1988, w.e.f. 1-4-1989.

 [R65]See rule 21A for rules for computation of relief. See rule 21AA and Form No. 10E for prescribed particulars for claiming relief under section 89. See also Appendix Two for an analysis of rule 21A.

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

For relevant case laws, see case laws