CS Executive · Tax Laws and Practice

Deductions under the Income-tax Act, 2025 for CS Executive

Deductions are amounts the Income-tax Act, 2025 lets you subtract from gross total income to reach total income. Each deduction has its own conditions, limit and proof. To solve a question, identify the section, check who is eligible, test every condition, apply the limit, then deduct.

What this chapter covers

This chapter covers the deductions an assessee can claim from gross total income. They fall into groups: savings and investments, payments such as medical insurance and donations, disability and medical expenses, rent, housing and loan interest, and incentives for specified business profits. A last group deals with overall limits and the procedure for claiming.

Every deduction follows the same pattern. There is an eligible person, a qualifying payment or income, a ceiling, and a condition or proof. For example, the deduction for a dependant with disability is open to a resident individual or HUF, and the limit is ₹75,000. It rises to ₹1,25,000 if the dependant has severe disability. A medical certificate must go with the return of income.

This chapter sits between computing income under the various heads and computing tax. You first arrive at gross total income. You then apply deductions to get total income. Tax is calculated on that figure. An error here carries into every later step of a computation, so the chapter links directly to the tax-computation questions in Paper 7 Part I.

Paper 7 is a written paper, and a computation question usually ends with a deduction step. If you get that step wrong, the total income and the tax are both wrong. The chapter is also rule-heavy, with conditions that examiners like to test through short facts. Students who learn the conditions, limits and procedure for each deduction can score steadily here, because the answers follow a fixed pattern: the provision, the facts, then a clear conclusion.

Deductions: topics in the order to study them

1Deductions under Income-tax Act 2025: FrameworkStart here to learn how deductions fit between gross total income and total income, so every later section has a place to sit.
2Deductions for Savings, Investments and PaymentsThese are the most commonly claimed deductions, so they build your habit of checking eligibility, limit and condition.
3Deductions for Persons with Disability and Medical ExpensesThese have precise conditions, such as the dependant definition, the severe disability limit and the certificate, which suit careful section-wise learning.
4Deductions for Rent, Housing and Interest on LoansLearn these after the basic deductions, as questions often combine them with income from house property and salary.
5Deductions for Incentives and Business ProfitsThese apply to narrower cases, such as housing projects, and need the earlier framework to be clear.
6Limits, Restrictions and Procedure for Claiming DeductionsFinish with the overall limits and filing procedure, which tie all the deductions together and help you revise them as a set.

How to prepare Deductions

Treat each deduction as a small checklist, and practise applying it to facts. Reading alone will not hold the conditions in memory.

Read the framework topic first and write one line on where deductions sit in the computation of total income.
For every deduction, make a card with four items: who can claim, what qualifies, the limit, and the proof or condition.
Read the section text of the Income-tax Act, 2025 for the key deductions, and note exact words such as resident, wholly or mainly dependent, and severe disability.
Solve one short computation for each deduction, applying the limit and showing the working step by step.
Practise writing answers in ICSI style: state the provision, apply it to the facts, then give a clear conclusion with the section.
Make a one-page table of limits and conditions in your own notes, and revise it every week.
Do a mixed computation at the end, from income under the heads down to total income, so deductions are tested in context.

Common mistakes in Deductions

Claiming a deduction without checking who is eligible.
Fix: Begin every answer by writing the eligible person, such as resident individual or HUF, and compare it with the facts.
Using the lower limit when the case is one of severe disability.
Fix: Check the disability percentage in the facts. If it is 80% or more, use ₹1,25,000.
Ignoring the certificate and procedure conditions.
Fix: Add the filing requirement, such as the medical certificate with the return, to each answer. It carries marks.
Deducting more than the amount actually paid or incurred.
Fix: Deduct the lower of the actual qualifying amount and the limit, where the section says so.
Quoting old section numbers from the Income-tax Act, 1961.
Fix: Use the Income-tax Act, 2025 numbering for June 2027. Mention the old Act only where the new section refers to it, as section 142 does with section 80-IBA.
Missing the later tax effect of a deduction.
Fix: Learn the reversal rules too. For example, if the disabled dependant dies first, the amount paid under the scheme becomes the assessee's income.

Last-day revision: Deductions

Deductions are subtracted from gross total income to arrive at total income.
Always check who is eligible: individual, HUF, resident or any assessee.
Dependant disability deduction: ₹75,000 under section 127, and ₹1,25,000 if the dependant has severe disability.
Section 127 is open to a resident individual or HUF only.
Severe disability means 80% or more of one or more disabilities, or severe disability under the National Trust Act.
A copy of the medical certificate must be filed with the return of income.
If the certificate needs reassessment, a new one is needed after it expires to keep claiming.
Under section 127, a dependant who has claimed a deduction under section 154 cannot be counted.
If the disabled dependant dies before the subscriber, amounts paid under the insurer scheme are treated as income of the assessee in the year received.
Section 142 allows a deduction for housing project profits as computed under old section 80-IBA, for the years it would have applied.
Check each deduction's limit before you deduct, and never deduct more than the amount actually paid.
Finish each answer with a clear conclusion on the amount allowed.

Deductions practice questions

Deductions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Deductions: frequently asked questions

What is a deduction under the Income-tax Act, 2025?

It is an amount the Act allows you to subtract from gross total income to get total income. Each deduction has its own conditions and limit. Tax is then computed on the total income.

How much deduction is allowed for a dependant with disability?

A resident individual or HUF can claim up to ₹75,000 under section 127. If the dependant has severe disability, the limit is ₹1,25,000. A medical certificate must be filed with the return.

Who counts as a dependant for the disability deduction?

For an individual, it means the spouse, children, parents, brothers and sisters, who depend wholly or mainly on the individual for support and maintenance. For an HUF, it means a member of the HUF.

Do I need to learn the old section 80-IBA?

You should know that section 142 of the 2025 Act allows a deduction for housing project profits, calculated as under section 80-IBA of the 1961 Act. It applies only for the years that would have been allowed had that Act not been repealed.

How should I answer a deductions question in the exam?

State the provision first, then apply its conditions to the facts, and end with a clear conclusion. Cite the section and show each computation step.