Amendment in Deductions for FY 2017-18 (AY 2018-19)

The Finance Bill 2017, has made certain amendments in Deductions. It is important to know these amendments for tax planning and saving purpose. Let’s understand these amendments.

• Rationalisation of deduction in respect of contribution to pension scheme u/s 80CCD:

Section 80CCD (1) provides for contribution made to National Pension Scheme (NPS) by an employee to the extent of 10% of his salary in the previous year or to any other taxpayer to the extent of 10% of his Gross Total Income in the previous year. Further, section 80CCD (2) provides for additional deduction to the employee to the extent of 10% of his salary in relation to the contribution made by the employer.

Thus, salaried people could claim a total deduction of 20% of their salary (employee & employer) contribution and non-salaried people could claim only 10% of their Gross Total Income. In order to remove this disparity and to rationalize this deduction, now, non-salaried persons can claim deduction under section 80CCD(1), up to 20% of their Gross Total Income. However, the overall deduction under section 80C, 80CCC and 80CCD(1) continues to be Rs 1,50,000 in aggregate.

• Removal of deduction under section 80CCG in respect of Investments made under Equity Saving Scheme:

Deduction under section 80CCG is phased out from AY 2018-19 onwards. However, for taxpayers who have claimed deduction under the said section for AY 2017-18 and earlier shall be eligible for claiming deduction upto AY 2019-20. 

• Restriction on deduction under section 80G in respect of cash donations:

Section 80G states that no deduction shall be allowed under section 80G in case donations exceeding an amount of Rs 10,000 paid in cash.

In line with the recent vision of the Government of having a cashless economy, an
amendment to section 80G of the act has been made to provide that no deduction shall be allowed in case of donations exceeding Rs.2000/- made in cash.