Income Tax Deductions Not Allowed Against Certain Incomes
Chapter VI-A of the Income-tax Act, 1961 provides deductions from gross total income, including deductions under sections 80C to 80U. However, special provisions restrict deductions against certain categories of income taxed at prescribed rates.
Income against which deductions are restricted
| Income category | Relevant provision and treatment |
|---|---|
| Long-term capital gains | Section 112 and section 112A provide special tax computation rules. Chapter VI-A deductions cannot be used to reduce the long-term capital gains component subject to these provisions. |
| Specified short-term capital gains | Short-term capital gains on eligible equity shares, equity-oriented mutual fund units or business trust units covered by section 111A are excluded when determining the income against which Chapter VI-A deductions may be claimed. |
| Lottery, gambling and race winnings | Income covered by section 115BB, including lottery and specified betting or gambling winnings, is subject to special taxation without Chapter VI-A deductions against that income. Online gaming winnings are separately governed by section 115BBJ. |
| Specified non-resident and investment income | Special provisions including sections 115A, 115AB, 115AC, 115ACA, 115AD and 115D contain restrictions or special computations for eligible categories of income. Their application depends on the taxpayer and income involved. |
| Certain other special-rate incomes | Separate restrictions can apply under provisions such as sections 115BBE, 115BBH and other specific sections. Eligibility must be assessed under the relevant provision. |
How the deduction restriction works
Gross total income is computed before deductions under Chapter VI-A. For specified special-rate income, the Act generally requires the taxpayer to exclude that income when determining the amount eligible for Chapter VI-A deductions. Therefore, the presence of capital gains or winnings in gross total income does not automatically make those amounts available for deductions under sections 80C to 80U.
For example, a taxpayer with salary income and long-term capital gains may be able to claim eligible deductions against the qualifying salary-related portion of gross total income under the old tax regime, but not against long-term capital gains taxable under section 112 or 112A.
Effect of the new tax regime
For individuals and certain other eligible taxpayers, section 115BAC provides the default new tax regime under the Income-tax Act, 1961. Most commonly claimed Chapter VI-A deductions, including sections 80C and 80D, are unavailable under that regime, subject to specific statutory exceptions such as eligible employer contributions under section 80CCD(2). Taxpayers eligible to choose the old regime should compare the applicable rules before claiming deductions.
Key conditions for Chapter VI-A deductions
Even where income is not subject to a special-rate restriction, deductions depend on the conditions of the relevant section, the taxpayer's eligibility, documentary support, prescribed limits and any applicable return-filing requirements. The aggregate deduction ordinarily cannot exceed gross total income under section 80A.
Related income tax deduction guides
For the basic framework, read the rules under sections 80A, 80AB and 80C. For common investments and payments, see section 80C deductions, section 80D medical insurance deductions, section 80DD disability-related deductions, section 80DDB specified-disease deductions, section 80E education loan interest and section 80EE housing loan interest.
This article explains the Income-tax Act, 1961 framework, including provisions relevant to recent assessment years. The Income-tax Act, 2025 comes into effect from 1 April 2026; for tax year 2026-27 onwards, consult the corresponding provisions and transition rules under the new Act. Confirm the law applicable to the relevant tax year before filing.