NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

Deductions under Chapter VI-A and Rebates Explained

Updated 11 October 2026 · Fact-checked

Chapter VI-A deductions, such as 80C and 80D, are subtracted from gross total income to arrive at total income. A rebate, such as section 87A, is subtracted from the tax computed on that income. To solve questions, compute gross total income, apply capped deductions, find the tax, then apply the rebate.

Understand Deductions under Chapter VI-A and Rebates

Income tax is worked out in a fixed order. First you add income under the five heads to get gross total income. Then you subtract deductions under Chapter VI-A to get total income. You apply slab rates to total income to get tax. Finally you subtract any rebate and add cess.

A deduction reduces income. Its value to you depends on your tax rate. A ₹1,00,000 deduction saves more tax for a person in the 30% slab than for one in the 10% slab. A rebate reduces the tax itself, rupee for rupee. Exam questions often test this difference.

The common Chapter VI-A deductions are these. 80C covers PPF, EPF, ELSS, life insurance premium, tax-saver fixed deposits, home loan principal and tuition fees, up to ₹1,50,000 in total. 80CCD(1B) gives an extra ₹50,000 for your own NPS contribution. 80D covers health insurance premiums. 80E covers interest on an education loan, with no rupee cap. 80G covers donations. 80TTA allows up to ₹10,000 of savings account interest, and 80TTB allows up to ₹50,000 of interest for senior citizens.

The regime matters. Under the old regime you can claim most Chapter VI-A deductions. Under the new regime (the default for individuals) most are not allowed. The main ones that survive are the employer's NPS contribution under 80CCD(2) and a few others, such as 80CCH(2) for Agniveer Corpus Fund contributions. Always check which regime the question uses.

Section 87A is a rebate for resident individuals whose total income is below a set limit. Under the old regime the limit is ₹5,00,000 and the rebate is up to ₹12,500. Under the new regime for FY 2025-26 the limit is ₹12,00,000 and the rebate is up to ₹60,000. It is not allowed against tax on special-rate capital gains such as those under sections 111A and 112A. Check the rates in your latest workbook edition, because limits change with each Finance Act.

Key formulas to remember

Total income: Total income = Gross total income − Chapter VI-A deductions; Deductions cannot exceed gross total income. Most are not allowed against special-rate capital gains.
Tax payable: Tax payable = (Tax on total income − Rebate u/s 87A) + Cess; The rebate comes before cess. Cess is charged on tax after rebate (and surcharge, if any).
Section 80C overall limit: 80C + 80CCC + 80CCD(1) ≤ ₹1,50,000; 80CCD(1B) gives a separate additional ₹50,000 for NPS.
Section 80D limits: Self, spouse, children: ₹25,000 (₹50,000 if senior citizen). Parents: another ₹25,000 (₹50,000 if senior citizen).; Preventive health check-up of ₹5,000 sits within these limits. Payment must not be in cash, except for the check-up.
Section 87A rebate: Old regime: income ≤ ₹5,00,000, rebate up to ₹12,500. New regime FY 2025-26: income ≤ ₹12,00,000, rebate up to ₹60,000.; Only for resident individuals. Not against special-rate capital gains tax.
Interest deductions: 80TTA: ₹10,000 (non-seniors, savings account). 80TTB: ₹50,000 (senior citizens, deposit interest).; A senior citizen claims 80TTB, not 80TTA.

How to solve Deductions under Chapter VI-A and Rebates questions

Follow the same order every time. It keeps you from mixing up deductions and rebates.

1Note the regime (old or new), the assessee's age and residential status.
2Add income under all heads to get gross total income.
3List each investment or payment and match it to its section.
4Apply each limit. Cap 80C at ₹1,50,000 in total, then add 80CCD(1B), 80D and others separately.
5Drop deductions the new regime does not allow, except those such as 80CCD(2).
6Subtract the capped deductions from gross total income to get total income.
7Compute tax on total income using the slabs, then subtract the 87A rebate if eligible.
8Add health and education cess and read the answer carefully against the options.

Quickest way: Cap, add, subtract

When to use it: Use this for MCQs that ask for total income or the maximum deduction, where tax slabs are not needed.

Group items by section first. Do not add them all together.
Cap each group at its limit: 80C at ₹1,50,000, 80D by age of person covered.
Add the capped amounts and subtract once from gross total income.
If the question asks about tax, check the 87A condition before doing slab work. Total income within the limit may mean nil tax.
Eliminate options that show an uncapped amount.

Common mistakes in Deductions under Chapter VI-A and Rebates

Treating a rebate as a deduction from income, or the reverse.
Both reduce your tax burden, so they sound alike.
Fix: A deduction is subtracted before computing tax. A rebate is subtracted after computing tax.
Claiming 80C above ₹1,50,000 or counting 80CCD(1B) inside the 80C limit.
Students add all investments together without grouping them by section.
Fix: Cap 80C and its linked sections at ₹1,50,000. Treat the extra ₹50,000 for NPS under 80CCD(1B) as separate.
Allowing 80C or 80D under the new regime.
Students forget the regime when the question mentions investments.
Fix: Under the new regime, most Chapter VI-A deductions are not allowed. 80CCD(2) for the employer's NPS contribution is an exception.
Using ₹25,000 for 80D when the person covered is a senior citizen, or applying one limit to both self and parents.
Students remember one limit and ignore age.
Fix: Work out self-family and parents separately, each with its own limit based on age.
Applying the 87A rebate to a non-resident or against tax on special-rate capital gains.
Students see 'total income below the limit' and stop reading.
Fix: Check that the person is a resident individual. The rebate does not apply to tax on special-rate capital gains such as under sections 111A and 112A.
Allowing cash payment for a health insurance premium under 80D.
Students know the section but ignore the payment mode.
Fix: Premium must be paid by a mode other than cash. Only the preventive health check-up can be paid in cash.

Worked examples

Example 1

Under the old regime, Ravi, aged 40, has gross total income of ₹9,00,000. He paid PPF ₹80,000, life insurance premium ₹40,000 and ELSS ₹50,000. He also contributed ₹50,000 to his own NPS account and paid ₹22,000 by cheque as mediclaim premium for himself. Find his total income.

Show the solution

80C items: 80,000 + 40,000 + 50,000 = ₹1,70,000.
The 80C limit is ₹1,50,000, so the allowed amount is ₹1,50,000.
80CCD(1B) for NPS: ₹50,000 is within the separate ₹50,000 limit, so ₹50,000 is allowed.
80D: ₹22,000 is below the ₹25,000 limit, so ₹22,000 is allowed.
Total deductions = 1,50,000 + 50,000 + 22,000 = ₹2,22,000.
Total income = 9,00,000 − 2,22,000 = ₹6,78,000.

Answer: Total income is ₹6,78,000.

Example 2

Meera, aged 35, pays by cheque a health insurance premium of ₹30,000 for herself and her family, and ₹55,000 for her parents, both aged over 60. She is under the old regime. What is the maximum deduction under section 80D? Options: (a) ₹55,000 (b) ₹75,000 (c) ₹80,000 (d) ₹85,000

Show the solution

Self and family: no senior citizen, so the limit is ₹25,000. Premium paid is ₹30,000, so the deduction is ₹25,000.
Parents are senior citizens, so the limit is ₹50,000. Premium paid is ₹55,000, so the deduction is ₹50,000.
Total = 25,000 + 50,000 = ₹75,000.
Options (c) and (d) wrongly add the full premiums or ignore the limits. Option (a) counts only the parents' premium.

Answer: (b) ₹75,000.

Exam tips

Read the regime first. Many questions are decided by whether the deduction is allowed at all.
Memorise the limits in one list: 80C ₹1,50,000, 80CCD(1B) ₹50,000, 80D ₹25,000/₹50,000, 80TTA ₹10,000, 80TTB ₹50,000.
Look for a rebate trap: 87A is for resident individuals only, and it does not reduce tax on special-rate capital gains.
Compute the answer before reading the options. Negative marking is 25% of the marks for that question, so a guess on a 2-mark question costs more than on a 1-mark question.
Watch for words like 'maximum', 'eligible' and 'allowed'. They signal that you must apply a cap.

Practice questions from Concepts in Taxation

Deductions under Chapter VI-A and Rebates: frequently asked questions

What is the difference between a deduction and a rebate in income tax?

A deduction is subtracted from income before tax is computed, so its benefit depends on your slab. A rebate is subtracted from the computed tax, so it reduces tax rupee for rupee. Section 87A is the main rebate.

Which deductions are allowed in the old regime but not the new regime?

The old regime allows most Chapter VI-A deductions, such as 80C, 80D, 80E, 80G and 80TTA. The new regime does not allow most of them. An exception is 80CCD(2), which covers the employer's contribution to NPS.

Is 80CCD(1B) part of the ₹1,50,000 limit of 80C?

No. 80CCD(1B) gives an extra deduction of up to ₹50,000 for your own NPS contribution. It is over and above the combined limit of ₹1,50,000 for 80C, 80CCC and 80CCD(1).

Do I always get the 87A rebate if my income is below the limit?

No. You must be a resident individual. The rebate also does not apply against tax on special-rate capital gains such as those under sections 111A and 112A. The limit and the rebate amount depend on the regime.