CHAPTER VIII
95[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 96[R3] [sections 88, 88A 97[R4] [, 88B and 88C]], the deductions specified in those sections.
(2) The aggregate amount of the deductions under section 88 or section 88A 98[R5] [or section 88B] 99[R6] [or section 88C] 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.
1[R7] 88. (1) Subject to the provisions of this section, an assessee, being—
(a) an individual,
or
(b) a Hindu undivided
family, 2[R8] [* * *]
(c) 3[R9] [*
* *] 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) :
4[R10] [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.]
The following second proviso shall be inserted after the existing proviso to sub-section (1) of section 88 by the Finance Act, 2001, w.e.f. 1-4-2002 :
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
(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, 5[R11] [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 notified6[R12] 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 7[R13] [or any such deposit scheme] as that Government may, by
notification8[R14] 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 9[R15] 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 notification10[R16] in the Official Gazette, specify in this behalf;
(xii) as a contribution, 11[R17] [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 12[R18] [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 notification13[R19] in the Official Gazette, specify in this behalf;
14[R20] [(xiiia) to effect or to keep in force a contract for
such annuity plan of the Life Insurance Corporation 14a[R21] [or any other insurer] as the Central Government
may, by notification15
[R22] 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 16[R23] [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
notification17[R24] in the Official Gazette, specify in this behalf;]
(xiv) as subscription to any such deposit scheme of 18[R25] [, 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 notification19[R26] in the Official Gazette, specify in this behalf;
20[R27] [(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;]
(xv) for the purposes of purchase or construction of a residential
house property the 21[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 22[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
(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 23[R30] [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;
24[R31] [(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 25[R32] [or as subscription to any eligible issue of capital by any
public financial institution] in the prescribed form26[R33] :
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.
Explanation.—For
the purposes of this clause,—
27[R34] [(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 28[R35] [the Explanation to
sub-section (4) of section 80-IA];
(iii) “public company”29[R36] shall have the meaning assigned to it in section
3 of the Companies Act, 1956 (1 of 1956);
30[R37] [(iv) “public financial institution” shall have the meaning
assigned to it in section 4A31[R38] 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 form32:[R39]
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.]
(4) The persons referred to in sub-section (2) shall be the following, namely :—
34[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
(c) for the purposes of 36[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;
(5) Where the aggregate of any sums specified in clause (xv) of sub-section (2) exceeds an amount of 39[R46] [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 39[R47] [twenty] thousand rupees.
40[R48] [(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.]
(6) The deduction from the amount of income-tax under sub-section (1) shall not exceed—
(i) in the case of
an individual, 41[R49] [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, 42[R50] [sixteen] 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 43[R51] [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.
44[R52] [(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”45[R53] shall have the same meaning as in section 3 of the
Companies Act, 1956 (1 of 1956);
(v) “security” means a Government
security46[R54] 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. 47[R55] [Omitted by the Finance (No. 2) Act, 1996, w.r.e.f. 1-4-1994.]
48[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 49[R57] [fifteen] thousand rupees, whichever is less.]
50[R58] [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.]
B.—Relief for income-tax]
Relief when salary, etc., is paid in
arrears or in advance.
51[R59] 89. (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, 52[R60] [the 53[R61] [Assessing] Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed54[R62] ].
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] Substituted
for “and 88B” by the Finance Act, 2000, w.e.f. 1-4-2001.
[R5]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R6]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R7]For
relevant case laws.
[R8]Word “or”
omitted by the Finance Act, 1994, w.r.e.f. 1-4-1991.
[R9]Omitted by the Finance Act, 1994,
w.r.e.f. 1-4-1991.
Prior to its omission, clause (c), as
inserted by the Finance Act, 1990, w.e.f. 1-4-1991, read as under:
“(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,”
[R10]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R11]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.
[R12]Public provident fund has been notified - Vide SO 55(E), dated 31-1-1991.
[R13]Inserted
by the Finance Act, 1992, w.e.f. 1-4-1993.
[R14]National
Savings Scheme has been notified—Vide GSR 819(E),
dated 21-10-1992..
[R15]For definition of “savings certificate
[R16]NSC (VIII Issue) has been notified - Vide SO 54(E), dated 31-1-1991..
[R17]Substituted
for “by any person” by the Finance Act, 1994, w.r.e.f. 1-4-1991.
[R18]Substituted for “by any individual” by the Finance Act, 1994, w.r.e.f. 1-4-1991.
[R19]Dhanaraksha 1989 Plan of LIC Mutual Fund - Vide SO 56(E), dated 31-1-1991
[R20]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R21]The italicised words shall be inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R22]Jeevan Dhara and Jeevan Akshay Plans of LIC - Vide
Notification No. GSR 801(E), dated 7-10-1992
[R23]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R24]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.—.
[R25] Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R26]Home Loan Account Scheme of National Housing Bank has been notified - Vide SO 57(E), dated 31-1-1991.
[R27]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
[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 Act, 1992, w.e.f. 1-4-1992.
[R31] Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R32] Inserted
by the Finance Act, 1997, w.e.f. 1-4-1998.
[R33] See rule 20 and Form No. 59.
[R34] Substituted
by the Finance Act, 1997, w.e.f. 1-4-1998.
Prior to its substitution, clause (i), as inserted by the Finance (No. 2) Act, 1996, w.e.f.
1-4-1997, read as under :
‘(i) “eligible issue of capital” means an
issue made by a public company formed and registered in
[R35]Substituted
for “clause (ca) of sub-section (12)
of section 80-IA” by the Finance Act, 1999, w.e.f. 1-4-2000.
[R36]Clause (iv) of section 3(1) of the Companies Act, 1956, defines “public company”. For text of section 3, see Appendix One.
[R37] Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R38]For text of section 4A of the Companies Act, see Appendix One.
[R39]See rule 20A and Form No. 59A.
[R40]Omitted by the Finance
Act, 1995, w.e.f. 1-4-1996. Prior to its omission, sub-section (3) read as under :
“(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.”
[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. Prior to its omission, sub-clause (ii) read as under :
“(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;”
[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. Prior to its
omission, sub-clause (iii) read as under :
“(iii) in the case of an association of persons or body of individuals, such association or body;”
[R45]Omitted by the Finance
Act, 1994, w.r.e.f. 1-4-1991. Prior to its omission, clause (d) read as under :
“(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.”
[R46] Substituted for “ten” by the Finance Act, 2000, w.e.f. 1-4-2001.
[R47] Substituted for “ten” by the
Finance Act, 2000, w.e.f. 1-4-2001.
[R48]Inserted
by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R49]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.
[R50] Substituted for “fourteen” by the Finance Act, 2000, w.e.f. 1-4-2001. Earlier “fourteen” was substituted for “twelve” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and “twelve” was substituted for “ten” by the Finance Act, 1992, w.e.f. 1-4-1993
[R51]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.
[R52]Inserted
by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R53]Clause (iv) of section 3(1) of the Companies
Act, 1956, defines “public company”. For
text of section 3, see Appendix One.
[R54]For definition of “Government security”
[R55]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
(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
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
(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.’
[R56]Substituted
by the Finance Act, 1997, w.e.f. 1-4-1998.
Prior to its substitution, section 88B, as 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, read as under :
‘88B. Rebate of income-tax in case of individuals
of sixty-five years and above.—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 one hundred and
twenty 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 forty 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.’
[R57] Substituted for “ten” by the Finance Act, 2000, w.e.f. 1-4-2001.
[R58] Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R59]See also Circular No. 331,
dated 22-3-1982 and Circular No. 431, dated 12-9-1985..
For relevant case laws.
[R60]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.
[R61]Substituted
for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R62]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(1). See also Appendix Two for an analysis of rule 21A.
[R63]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.”