Guideline to fill form c for Income Tax

General Rules to be followed while checking Form C for the financial year 2011-2012 for giving deduction/tax rebate.

1.   House Rent Allowance – u/s 10 (13A) : Original rent receipts from the landlord to be kept along with Form C.  Employee who is residing in his own accommodation is not eligible for the deduction.  The amount of exemption will be restricted to least of
the following:

•    The actual HRA received or
•    Excess of rent paid over 10% of salary (Basic+ DA+ADA)
•    50% of salary(Basic+ DA+ADA) if accommodation located at Calcutta, New Delhi, Mumbai & Madras otherwise 40% of salary (Basic+DA+ADA)

Relationship of the owner of the employee should be noted in the Form C.
Employee  should  submit  PAN  of  Landlord  if  the  rent  for  the  year  exceeds  Rs 180000/-

2.   Children Education Allowance – u/s 10 (14) : Education Allowance is exempted to the extent of Rs.100 per child per month up to a maximum of two children.

3.   Deductions from Gross Total Income :

•    Medical Insurance Premia (Section 80D) :

  The premium should be paid by any mode other than cash by the employee on his  health  or  on  the  health  of  his  spouse  or  dependent  parents  or  dependent
children.

  This insurance scheme should  be in accordance with a scheme framed  by the General Insurance Corporation of India and approved by the Central Government.
In the case of a scheme framed by any other insurer, it should be approved by Insurance Regulatory and Development Authority.

o   Deduction is restricted to the actual insurance premium paid for insurance of Self, Spouse and dependent children or Rs.15,000, (Rs. 20000 in case any person insured is Senior Citizen) whichever is lower.
o   For insurance on health of any parent or parents- Maximum Rs 15000 (Rs 20000 in case any person insured is a Senior Citizen)

  Original receipt  regarding  the payment  should  be verified  and  a copy of the receipt retained on record.

•    Medical treatment of handicapped dependents (Section 80DD):

  Deductions in respect of :-

    any expenditure incurred on medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or
    an amount paid or deposited by the employee under any scheme framed in this behalf by the LIC or any other insurer and approved by the Board.

  The term “dependent” means – the spouse, children, parents, brothers and sisters of the individual or any of them.

  The  term  “disability”  means  –  blindness,  low  vision,  leprosy-cured,  hearing impairment, locomotor disability, mental retardation and mental illness.

  The term “person with disability” means – a person suffering from not less than forty percent of any disability aforementioned as certified by a medical authority,being a hospital or institution notified by the Government.

  The term “severe disability” means – a person with eighty percent or more of one or more of the aforementioned disabilities.

  Original certificate certifying the disability, obtained from a hospital or institution notified by the government for this purpose should be verified and a copy of it to be retained for records.

  A flat deduction of Rs.50,000 or Rs 1,00,000 (for persons with severe disability), on  the    basis  of  a  declaration  by  employee  certifying  the  actual  amount  of expenditure  on  account  of  medical  treatment  including  nursing,  training  and rehabilitation  of  the  aforesaid  dependant  and  receipt/acknowledgment  of  the
amount paid or deposited in the specified schemes of LIC or any other insurer .

•    Medical treatment, etc for specified disease or ailment (Section 80DDB):

  Deduction of actual expenditure incurred by the assessee for self or dependent for the medical treatment of diseases or ailments prescribed in rule 11DD (1) of the Income tax rules, 1962. The specified diseases are Neurological diseases, Cancer, Full blown AIDS, Chronic Renal failure, Hemophilia and Thalassaemia.

  The assessee is required to furnish a certificate in prescribed Form No. 10I from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist as may be prescribed, working in a Government Hospital.

  The term dependent means the spouse, children, parents, brothers and sisters of the individual or any of them dependent mainly on such individual for his support or maintenance.

  Copies of the bills and medical certificate as aforementioned should be kept along with Form C after verifying with the originals.

  Actual  expenditure  restricted  to  a  maximum  of  Rs.  40,000  is  allowed  as  a deduction. Where the expenditure is incurred in respect of a dependent parent who is a senior citizen, an increased limit of Rs.  60,000 will be applicable.

•    Deduction in respect of person with disability (self) u/s 80 U :

  The deduction can be availed by an employee, being a person with disability, on basis of the certificate from a medical authority.

  A flat deduction of Rs. 50,000 is allowed in case of a person with disability and a deduction of Rs. 75,000 is allowed in the case of person with severe disability.

  The terms – person with disability, medical authority and severe disability will have the same meaning as given for the purposes of Section 80DD above.

  Original certificate certifying the disability, obtained from a hospital or institution notified by the government for this purpose should be verified and a copy of it to be retained for records.

4.   Deduction (Section 80 C)

Gross qualifying amount under this section is the aggregate of the following:

•    Life Insurance Premium ( JEEVAN DHARA/JEEVAN AKSHAY) :

  The policy should be in the name of the employee, spouse, children or jointly.

  In case the amount of premium paid during the year on any insurance policy other than a contract for deferred annuity exceeds twenty percent of the actual capital sum assured, an amount of only twenty percent of the actual capital sum assured should be reckoned for the purpose of calculation of rebate.

  The  actual  capital  sum  assured  will  not  include  any  premiums  agreed  to  be returned  and  any  benefit  such as  bonus etc received  over  and  above the sum actually assured.

  Original  payments  receipts  should  be  verified  and  a  copy  to  be  retained  for records except in the case of salary saving scheme.

•    National Saving Certificate  :

  The certificate should be in the name of the employee or jointly with spouse or minor children.

  Original certificates to be verified and copy to be retained for records.

  Accrued interest on NSC VIII issue is also deemed as reinvestment in NSC. The factor to be applied per thousand is as under:

NSC’s Purchased

2005 – 2006    121
2006 – 2007    112
2007 – 2008    103
2008 – 2009    96
2009 – 2010    88
2010 – 2011    82

•    Public Provident Fund :

  The account should be in the name of the employee or spouse or minor children.

  Original receipts/Pass book to be verified and a copy to be retained for records.

•    Fixed Deposit :

  Fixed deposit should be with scheduled bank & for the term of 5 years and above.

  The Fixed Deposit should be in the name of the employee in case of the single holder type term deposit.

  In the case of joint holder type deposit, the deduction from income under section 80C of the Act shall be available only to the first holder of the deposit.

  Original FD receipt to be verified and a copy to be retained for records.

•   ULIP, 1971 of UTI/LIC Mutual Fund (Dhanaraksha) :

  The policy should be in the name of the employee, spouse, children or jointly.

  Original receipts regarding premium paid to be verified and a copy retained for records.

•   Equity Linked Savings Scheme :

  The investment should be only in the name of the employee.

  Original  receipts  for  the  payment  made  should  be  verified  and  a  copy to  be retained for records.

•    Any amount paid as subscription made to Home loan account scheme of the National housing bank (NHB).

•   Principal Repayment of Housing Loan :

  The deduction will be allowable in respect of payments made during the year for the purchase or construction of residential house. The following payments are eligible for the purpose of rebate :

o   Repayment of amount borrowed by the employee from Central or any State Government or any Bank including any co-operative bank or LIC or NHB or institutions  engaged  in  the  business  of  providing  long  term  finance  for construction or purchase of residential house in India or any public limited company or  co-operative society engaged  in  the  business of financing  the construction of houses or the Employer.

o   Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the employee.

  The payments made towards the following are not eligible for rebate:

o   The admission fee, cost of share and initial deposit to become a shareholder or member of the society.

o   The cost of addition or alteration to, or renovation or repair of, house property which is carried out after the issue of the completion certificate or after the house  property  or  part  thereof  is  occupied  by  the  employee  or  any  other person on his behalf.

o   Any expenditure in respect of which deduction is allowable u/s 24 of the Act (
i.e.  interest  on  loan  borrowed  for  the  purchase  or construction  of  house property ).

  The house has to be completed before 31st March of the respective financial year.
The house completion certificate should be annexed alongwith the Form C. The same  can   be   from  Municipal  Corporation  or  Architect   or  Society  Share Certificate.  If  jointly  owned,  the  first  name  of  the  property should  be  of the employee.

•    Tution fees

  Tution  fees  paid  to  school,  college,  university  or  other  educational  institutes situated in INDIA for full time education. This does not  include donation / development  fees  or  payment  of  similar  nature  such  as  bus  fees,  exam  fees, library fees-deposit, private tution fees etc.

  Original tution fee receipts are required to be verified and copy to be retained for records.

•    Long term Infrastructure Bonds  (Additional Rs 20000/-):

  Investment made in Long term Infrastructure Bonds issued by the company which are  gaged  in  developing,  maintaining  or  operating  infrastructure  facility  and approved by the Board.

  Original receipts and allotment letter to be verified and a copy to be retained for records. The first name, if jointly owned, should be in the name of the employee only.

•    Deduction in respect of interest on repayment of loan taken for higher education (U/S 80 E)

    Loan taken from any financial institution or an approved charitable institution.

  Loan should be for pursuing higher education for SELF  ( full time studies for any graduate or post graduate course in engineering , medicine, management, science , mathematics & statistics ).

  Deduction starts from the year from which employee start paying interest.

  Tax  benefit  available  for  maximum  of  8  years  or  till  loan  is  fully  repaid,whichever is earlier. Amount must be paid out of his income chargeable to tax.

  Certificate from financial institute or charitable trust, showing repayment of loan amount, principal amount & interest amount during the year.