Section 80P of Income Tax Act 1961

What Is Section 80P of Income Tax Act 1961 in India

Section 80P of Income Tax Act in India is a section that provides for a deduction in respect of income from specified business or profession. The deduction is available to individuals, Hindu Undivided Families (HUFs), firms and companies. The deduction is allowed to the extent of the actual amount of profit earned by the assessee from such business or profession.

In order to avail the deduction under Section 80P, the assessee must furnish a return of income in prescribed form and manner. The return must be furnished on or before the due date specified in the Income Tax Act.

The deduction under Section 80P is not available in respect of any income which is exempt from tax under any other provision of the Income Tax Act.

What Are the Conditions for Claiming Deduction Under Section 80P?

In order to claim deduction under section 80P of the Income Tax Act in India, the following conditions must be met:

• The assessee must be a cooperative society
• The assessee must be engaged in agriculture, industry or trade
• The assessee must have made profits during the relevant financial year
• The amount of deduction claimed cannot exceed the amount of tax payable by the assessee.

How Much Deduction Can Be Claimed Under Section 80P

As per the Income Tax Act in India, deduction under section 80P can be claimed on the interest income from savings accounts held with a bank, post office or any other financial institution. The deduction is available for taxpayers who are individuals, Hindu Undivided Families (HUFs) and firms (other than companies). The maximum deduction that can be claimed under this section is ₹10,000.

The interest income from which deduction can be claimed should be earned during the financial year. In order to claim deduction under section 80P, the taxpayer should furnish evidence in the form of a passbook or statement of account from the bank or financial institution, as the case may be.

What Are the Documents Required for Claiming Deduction Under Section 80P?

• A copy of the latest Income Tax Return filed by the assessee
• An audit report from a Chartered Accountant in case the assessee is required to get their accounts audited
• A declaration from the assessee specifying the amount of deduction claimed under this section
• A certificate from the concerned authority in respect of deductions claimed under sub-section (3) of section 80P.

Computation of the Tax Deduction

In order to compute the tax deduction under Section 80P of the Income Tax Act in India, the following steps must be followed:

• Determine the total income of the taxpayer for the relevant financial year.
• From the total income, deduct any allowable expenses incurred in earning that income.
• Multiply the resultant figure from (b) by the prescribed tax rate for that financial year. The amount so arrived at is the tax payable by the taxpayer for that year.
• Subtract any taxes paid by the taxpayer during that financial year from the tax payable computed in (c). This will give you the net tax payable for that year.
• Add up all the net taxes payable for each of the previous years starting from when Section 80P was first introduced (i.e. from FY 2004-05 onwards). The sum so arrived at is called the ‘aggregate amount of tax’.
• Finally, deduct any advance tax or self-assessment tax paid by the taxpayer during that financial year from ‘aggregate amount of tax’. The balance left after this deduction is called ‘deduction u/s 80P’ which is required to be claimed by taxpayers while filing their income tax returns.

Incomes That Are Eligible to Receive Deduction

• Income from agriculture
• Income from dairy farming
• Income from poultry farming
• Income from beekeeping
• Income from sericulture
• Income from fisheries.

Incomes That Are Not Eligible for Tax Deduction

There are a few types of incomes which are not eligible for tax deduction under section 80 of the Income Tax Act in India. These include:

• Income from gambling or betting
• Income from speculative activities
• Income from certain racehorse ownership schemes
• Income from lotteries, crossword puzzles, and card games.

Records Needed to Support a Tax Deduction

• Income and Expenditure Records: This includes all invoices, receipts, bills, and other documentation related to income and expenses
• Asset Records: This includes purchase documents, loan documents, insurance policies, and other documentation related to assets
• Liability Records: This includes loan documents, credit card statements, and other documentation related to liabilities
• Tax Return: This is the document filed with the tax authorities that details the taxpayer's income and deductions.

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