Income Tax Act, 1961
Section 88. REBATE ON LIFE INSURANCE PREMIA, CONTRIBUTION TO PROVIDENT FUND, ETC.
(1) Subject to the provisions of this section, an assessee, being – (a) An individual, or
(b) 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 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.
(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, 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 notified 1244 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 or any such deposit scheme as that Government may, by notification 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 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 in the Official Gazette, specify 1245 in this behalf;
(xii) As a contribution, 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 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 notification in the Official Gazette, specify in this behalf;
(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 notification 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, 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 notification in the Official Gazette, specify 1246aa in this behalf;
(xiv) As subscription to any such deposit scheme of, 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 in the Official Gazette, specify 1246c in this behalf;
(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 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 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
(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.
(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 or as subscription to any eligible issue of capital by any public financial institution in the prescribed form :
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, – (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 clause (ca) of sub-section (12) 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).
(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 form :
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 Explanation to clause (xvi) in sub-section (2) of section 88.
(4) The persons referred to in sub-section (2) shall be the following, namely :- (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 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 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.
(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, 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, fourteen 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, – (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.
(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 data 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” 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.
Related Judements
PARESH PREMJI RAJDA v. COMMISSIONER OF INCOME TAX.
DR. (MRs.) RENUKA DATLA v. COMMISSIONER OF INCOME-TAX & ANR
