Tax Laws and Practice · Deductions

Deductions from Gross Total Income under the Income-tax Act, 2025

Updated 11 October 2026 · Fact-checked

Total income is gross total income minus the deductions the Act allows. You first compute income under each head, set off losses and apply clubbing to get gross total income. Then you subtract eligible deductions, never more than gross total income. Section 93 is different: it gives deductions within the head Income from other sources.

Understand Deductions under Income-tax Act 2025: Framework

Tax is charged on total income. You reach it in two stages. Stage one: compute income under each of the five heads, after the deductions that each head allows. Add them, apply clubbing and set off or carry forward losses. The result is gross total income (GTI). Stage two: subtract the deductions allowed from GTI. The result is total income, rounded as the Act requires.

This gives you a simple line to remember: Total income = GTI − eligible deductions. The deductions in the second stage are for savings, investments, specified payments, disability, medical cost, housing loan interest and business incentives. They are given as policy benefits. They are separate from the expense deductions inside a head, such as depreciation under business income.

Be careful with section 93. Many students search it as the "deductions" section. It is not the GTI deductions section. Section 93 allows deductions while computing income under the head Income from other sources. It sits in stage one. For example, it allows a reasonable commission paid to a banker for realising interest on securities. It also allows a deduction on family pension, and any other expenditure that is not capital and is laid out wholly and exclusively to earn that income.

The Finance Act, 2026 changed section 93 from 1 April 2026. Clause (a) now covers only interest on securities, not dividends. Sub-section (2) now says that for dividend income, and for income from units of the Mutual Funds and the specified company named in it, no deduction is allowed. The earlier allowance of interest expense up to 20% of such income no longer applies.

Three ideas run through every GTI deduction. The deduction must be claimed in the way and form the Act asks for. The total of the deductions cannot take total income below zero. The same amount cannot be deducted twice. Also, the choice of tax regime matters. Under the default regime taxed under section 202(1), most of these deductions are not available. Always check the regime before you apply a deduction.

Key rules to remember

Total income: Total income = Gross total income − Deductions allowed; Deductions are applied after the five heads, clubbing and set off of losses.
Overall ceiling: Aggregate of deductions ≤ Gross total income; Deductions cannot create a negative total income. Some special-rate incomes are excluded from the base against which deductions are claimed, so read the Act for those exclusions.
Family pension deduction, section 93(1)(d): Lower of (1/3 × family pension) and ₹25,000 where tax is computed under section 202(1); lower of (1/3 × family pension) and ₹15,000 in any other case; Family pension is a regular monthly amount paid by the employer to a family member after the employee's death.
Dividend and specified fund units, section 93(2): Deduction allowed = Nil; Applies to dividend income and to income from units of a Mutual Fund specified in Schedule VII (Sl. No. 20 or 21) or of the specified company under the UTI repeal Act, from 1-4-2026.
Interest on securities, section 93(1)(a): Deduction = Reasonable commission or remuneration paid to realise the interest; After the 2026 amendment, this clause no longer covers dividends.
Residuary deduction, section 93(1)(e): Revenue expenditure laid out wholly and exclusively to earn the income; Capital expenditure is excluded.

How to solve Deductions under Income-tax Act 2025: Framework questions

Use this order for any question that asks you to compute total income or to claim a deduction.

1Compute income under each head separately, applying the deductions inside each head. For other sources, apply section 93.
2Apply clubbing, then set off and carry forward of losses, to reach gross total income.
3Check which tax regime applies. If the question is under the default regime taxed under section 202(1), most GTI deductions are not available.
4List each possible deduction and test its conditions: who qualifies, the payment or investment made in the year, the mode of payment, and the limit.
5Apply each limit and cap each deduction at what is actually eligible, not what is merely paid.
6Add the deductions and check the total against GTI. Restrict it to the ceiling where required.
7Subtract to get total income, and state the answer with a one-line conclusion.

Quickest way: Two-stage check for total income questions

When to use it: Use this when the question gives many figures and you have little time.

Write two labels: Stage 1 (inside the head) and Stage 2 (from GTI).
Put every item into one of the two stages before calculating anything.
For other sources, run the section 93 list: banker commission on interest, family pension, other revenue expense. Mark dividend and fund units as no deduction.
For stage two, write each deduction with its limit beside it and take the lower of paid and limit.
Subtract and tick: total income is not negative and the deductions do not exceed GTI.

Common mistakes in Deductions under Income-tax Act 2025: Framework

Treating section 93 as the section for deductions from gross total income.
The word "Deductions" is in its heading, and students search it with the chapter name.
Fix: Remember that section 93 works inside the head Income from other sources, before GTI is reached.
Deducting interest or other expenses against dividend income.
Older law allowed interest up to 20% of dividend, and many guides still show it.
Fix: From 1 April 2026 section 93(2) allows no deduction against dividend or the specified fund units.
Claiming the same ₹25,000 family pension deduction in every case.
Students remember the figure but not that the limit depends on whether tax is computed under section 202(1).
Fix: Use the lower of one-third of the pension and ₹25,000 under section 202(1), or ₹15,000 in any other case.
Allowing deductions that exceed gross total income.
Students add all the eligible amounts and subtract without a check.
Fix: Compare the total of deductions with GTI. Total income cannot go below zero through these deductions.
Claiming GTI deductions under the default regime without checking.
The deduction list is learnt as a fixed list, regardless of the regime.
Fix: Identify the regime first. If it is the default regime, claim only the deductions the Act still permits.
Deducting capital expenditure under the residuary clause of section 93.
The phrase wholly and exclusively sounds broad.
Fix: Section 93(1)(e) excludes capital expenditure. Only revenue expenses linked to earning the income qualify.

Worked examples

Example 1

Ms. Anita Sharma has gross total income of ₹6,40,000 for the year. Assume she is under the regime where GTI deductions are allowed and she has eligible deductions of ₹1,50,000, ₹25,000 and ₹50,000 under the relevant provisions. Compute her total income.

Show the solution

Total deductions = ₹1,50,000 + ₹25,000 + ₹50,000 = ₹2,25,000.
Check the ceiling: ₹2,25,000 is less than the GTI of ₹6,40,000, so no restriction applies.
Total income = ₹6,40,000 − ₹2,25,000 = ₹4,15,000.

Answer: Total income is ₹4,15,000.

Example 2

Mr. Rao receives family pension of ₹90,000 and dividend of ₹40,000 in the year. He paid ₹10,000 interest on a loan taken to buy the shares. Compute his income from other sources (a) if tax is computed under section 202(1) and (b) in any other case.

Show the solution

Family pension: one-third of ₹90,000 = ₹30,000.
(a) Under section 202(1), the cap is ₹25,000. The deduction is the lower, ₹25,000. Pension taxable = ₹90,000 − ₹25,000 = ₹65,000.
(b) In any other case, the cap is ₹15,000. The deduction is ₹15,000. Pension taxable = ₹90,000 − ₹15,000 = ₹75,000.
Dividend: section 93(2) allows no deduction, so the ₹10,000 interest is not deductible. Dividend taxable = ₹40,000.
(a) Income from other sources = ₹65,000 + ₹40,000 = ₹1,05,000.
(b) Income from other sources = ₹75,000 + ₹40,000 = ₹1,15,000.

Answer: Income from other sources is ₹1,05,000 under section 202(1) and ₹1,15,000 in any other case. The interest of ₹10,000 is not allowed.

Exam tips

Begin your answer by stating that total income is GTI less deductions, then name the stage each item belongs to. This shows structure and earns marks.
When a question cites section 93, check whether it is about other sources. Quote the clause number, such as section 93(1)(d) for family pension.
Learn the 2026 changes to section 93 well. Dividend deductions are removed, and examiners like questions that test current law.
Always end with a conclusion line giving the figure of total income or the amount allowed, and the reason for any disallowance.
Show the cap comparison as lower of two figures. Marks are often given for the working, not only the answer.

Practice questions from Deductions

Deductions under Income-tax Act 2025: Framework in other exams

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

Deductions under Income-tax Act 2025: Framework: frequently asked questions

What is the difference between deductions in a head and deductions from gross total income?

Deductions in a head, such as those in section 93 for other sources, are used to compute the income of that head. Deductions from gross total income are subtracted after all heads are added and losses are adjusted. They are two different stages.

What does section 93 of the Income-tax Act, 2025 allow?

It allows deductions in computing income from other sources. These include commission paid to realise interest on securities, a deduction on family pension, and other revenue expenditure laid out wholly and exclusively to earn the income. It also states that no deduction is allowed against dividend income.

Can I claim any deduction against dividend income now?

No. Section 93(2), as substituted from 1 April 2026, says no deduction is allowed for dividend income or for income from the specified fund units. The earlier 20% interest allowance has gone.

Can deductions reduce total income below zero?

No. The aggregate of the deductions from gross total income cannot exceed the gross total income. Read the Act for the special-rate incomes that are excluded from the base.