Highlights of Changes announced in Budget 2014 and Finance Bill 2014 as far as Income Tax Provisions relating to Salaried Employees
Income Tax 2014-15 (Assessment year 2015-16)
In case of individual (other than II and III below) and HUF
| Income Level | Income Tax Rate |
|---|
| i. | Where the total income does not exceed Rs.2,50,000/-. | NIL |
| ii. | Where the total income exceeds Rs.2,50,000/- but does not exceed Rs.5,00,000/-. | 10% of amount by which the totalincome exceeds Rs. 2,50,000/-*** |
| iii. | Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.10,00,000/-. | Rs. 25,000/- + 20% of the amount by which the total income exceeds Rs.5,00,000/-. |
| iv. | Where the total income exceeds Rs.10,00,000/-. | Rs. 1,25,000/- + 30% of the amount by which the total incomeexceeds Rs.10,00,000/-. |
II. In case of an individual resident who is of the age of 60 years or more at any time during the previous year:-
| Income Level | Income Tax Rate |
|---|
| i. | Where the total income does not exceed Rs.3,00,000/-. | NIL |
| ii. | Where the total income exceeds Rs.3,00,000/- but does not exceed Rs.5,00,000/- | 10% of the amount by which the total income exceeds Rs.3,00,000/-. |
| iii. | Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.10,00,000/- | Rs.20,000/- + 20% of the amount by which the total income exceeds Rs.5,00,000/-. |
| iv. | Where the total income exceeds Rs.10,00,000/- | Rs.1,20,000/- + 30% of the amount by which the total incomeexceeds Rs.10,00,000/-. |
III. In case of an individual resident who is of the age of 80 years or more at any time during the previous year:-
| Income Level | Income Tax Rate |
|---|
| i. | Where the total income does not exceed Rs.2,50,000/-. | NIL |
| ii. | Where the total income exceeds Rs.2,50,000/- but does not exceed Rs.5,00,000/- | Nil |
| iii. | Where the total income exceeds Rs.5,00,000/- but does not exceed Rs.10,00,000/- | 20% of the amount by which the total income exceeds Rs.5,00,000/- |
| iv. | Where the total income exceeds Rs.10,00,000/- | Rs.1,00,000/- + 30% of the amount by which the total incomeexceeds Rs.10,00,000/-. |
Income-tax Act relating to deductions from income from house property (section 24)
The existing provisions contained in section 24 provide that in case of a self-occupied property where the acquisition or construction of the property is completed within three years from the end of financial year in which the capital is borrowed, the amount of deduction under that clause shall not exceed one lakh fifty thousand rupees.
It is proposed to amend the second proviso to clause (b) of section 24, so as to increase the limit of deduction on account of interest in respect of property referred to in sub-section (2) of section 23 to two lakh rupees.
Income Tax Exemption under Section 80 C in respect of Savings / Insurance Premium / Housing Loan Principal etc
Clause 27 of the Bill seeks to amend section 80C of the Income-tax Act relating to deduction inrespect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.
The existing provisions of sub-section (1) of section 80C provide for deduction of Rs.one lakh rupees.
Now, It is proposed to amend sub-section (1) so as to raise the limit of deduction from one lakh rupees to Rs. One Lakh and Fifty Thousand rupees.
Income-tax Act relating to deduction in respect of contribution to pension scheme of Central Government under Section 80 CCD
Clause 28 of the Bill seeks to amend section 80CCD of the Income-tax Act relating to deduction in respect of contribution to pension scheme of Central Government.
The existing provisions contained in sub-section (1) of section 80CCD, inter alia, provide that in the case of an individual, employed by the Central Government or any other employer on or after 1st January, 2004, who has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, a deduction of such amount not exceeding ten per cent. of salary is allowed. This is subject to a limit of one lakh rupees provided under section 80CCE.
It is proposed to amend sub-section (1) of the said section so as to provide that an individual employed by the Central Government on or after 1st January, 2004 or, being an individual employed by any other employer shall be allowed a deduction of the amount deposited by him in his account under a pension scheme notified or as may be notified by the Central Government to the extent it does not exceed ten per cent. of his salary.
It is further proposed to insert new sub-section (1A) so as to provide that the amount of deductions shall not exceed One Lakh rupees.
Income-tax Act relating to limit on deductions under sections 80C, 80CCC and 80CCD under Section 80 CCE
Clause 29 of the Bill seeks to amend section 80CCE of the Income-tax Act relating to limit on deductions under sections 80C, 80CCC and 80CCD.
The existing provisions contained in the aforesaid section provide that the aggregate amount of deduction under section 80C, section 80CCC and section 80CCD shall not exceed one lakh rupees.
It is proposed to amend section 80CCE so as to raise the limit of deduction from one lakh rupees to one lakh and fifty thousand rupees.
Exemption under Section 10 (13A) in respect of HRA – Calculation Method:
Least of the following amount is to be treated as exempt from Income Tax.
- Actual House Rent Allowance Received, or
- Rent paid in excess of 10% of Pay in Pay band and Grade Pay or
- 50% of Pay in Pay band and Grade Pay if the employee is in Chennai/Mumbai/Kolkatta/Delhi and 40% of Pay in Pay Band and Grade Pay for the employees is in other places.
- If the employees resides in his/her own house or in a house for which he/she does not pay any rent, no HRA exemption is available.
Income or Loss on House Property:
Interest paid on Loan obtained for constructing house property can not be deducted as such. It should be treated as loss on house property and income if any such as rent recived from the house property should be treated as an income from House property.
Section 80 D of Income Tax Act:
There is no change in the income Tax Exemption available in respect of Health Insurance Premium which can be deducted at source.
As such, with a maximum limit of Rs.15,000, an individual can deduct at source the HealthInsurance premium paid by him / her in a financial year (2014-15)
In addition to Income tax exemption availed for Health Insurance relating to individual and his / her family, health Insurance Premium paid by the individual for covering health of his / her parents can also be deducted from the total income subject to a maximum of Rs. 15,000. In the case of Health Insurance cover in these cases pertains to Senior Citizen then maximum limit of deduction under Section 80D would be Rs. 20,000
Deduction for preventive health check-up
Under Section 80D, a deduction of Rs 5,000 is allowed for expenditure incurred during the year by a tax payer on account of preventive health check-up of self, spouse, dependent children or parents
The above deduction to be within the overall limits of Rs 15,000 / Rs 20,000 prescribed under the said Section of the Act.
Applicable deductions under Chapter VI A for year 2014-15 (A.Year 2015-16)
A. Eligible deductions u/s 80C as per section 80C deduction eligible u/s 80C
| NATURE OF INVESTMENT | REMARKS |
|---|
| Life Insurance Premium | For individual, policy must be in self or spouse’s or any child’s name. For HUF, it may be on life of any member of HUF |
Sum paid under contract for
deferred annuity. | For individual, on life of self, spouse or any child. |
Contribution made under
Employee’s Provident Fund, a Recognized Provident Fund or
a superannuation fund | – |
| Contribution to PPF | For individual, can be in the name of self/spouse, any child & for HUF, it can be in the name of any member of the family |
Sum deposited in 10 year/15year
account of Post Office Saving
Bank, NSS, Unit linked SavingsCertificate of Post office, ULIP of LIC, UTI or other approved Insurance companies | – |
Contribution to notified deposit
scheme/Pension fund set up by
the National Housing Scheme | |
Certain payment made by way
of instalment or part payment of
loan taken for purchase/
construction of residential house
property. | Condition has been laid that in case the property is transferred before the expiry of 5 years
from the end of the Financial year in which possession of such property is obtained by him,
the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year. |
Contribution to notified annuity
Plan of LIC(e.g. Jeevan Dhara)
or Units of UTI/notified Mutual
Fund. | Contribution to notified annuity Plan of LIC(e.g. Jeevan Dhara) or Units of UTI/notified Mutual
Fund. |
Subscription to units of a Mutual
Fund notified u/s 10(23D) | – |
Subscription to deposit scheme
of a public sector, company
engaged in providing housing
finance | – |
Subscription to equity shares/
debentures forming part of any
approved eligible issue of capital
made by a public company or
public Financial institutions | – |
Tuition fees paid at the time of
admission or otherwise to any
school, college, university or other educational institution
situated within India for the
purpose of full time education of
any two children | Available in respect of any two children. Any payment towards any development fees or donation or payment of similar nature will not be eligible. |
| Bank fixed deposits | The term of the deposit should not be less than five years |
Payment made as five year
time deposit in an account under
the Post Office | – |
Other Deductions which are coming under Rs. 1.5 lakh limit as per Section 80 CCE:
| Section | Nature of Deduction | Remarks |
|---|
| 80 CCC | Payment of premia for annuity
plan of LIC or any other
insurer Deduction is available upto a maximum if
Rs. 1,50,000/- | The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund. |
| 80 CCD | Deposit made by an employee in the
pension account of employee to the extent
of 10% of his salary (New Pension Scheme (NPS) will come under this category with a maximum limit of Rs. 1 lakh | Further, in any year where any amount is received from the pension account such amount shall be charged to tax as income of
that previous year. |
The aggregate amount of deduction under sections 80C, 80CCC and sub section (1) of Section 80CCD shall not exceed Rs.1,50,000/-, except (Section 80CCE). However, contribution made by the Central Government or any other employer to a pension scheme under section 80CCD(2) shall be excluded from the limit provided under section 80CCE.
Deductions which are not coming under Rs. 1.5 lakh limit (Each deduction will have limit mentioned against each)
| Section | Nature of Deduction | Remarks |
|---|
| 80 CCD(2) | Deposit made by an employer in the
pension account of employee to the extent
of 10% of his salary (NPS employer contribution) | Section 80 CCE provides for the contribution made by the Central Government or any other employer to a pension scheme under section 80CCD(2) shall be excluded from the limit of one lakh Fifty Thousand rupees |
| 80 D | Payment of medical insurance
premium. Deduction is
available upto Rs. 15,000/- for
self/family and also upto to
Rs. 15,000/- for insurance in
respect of parent/parents of
the assessee. W.e.f.
1.4.2011(i.e. for A.Y. 2011-12
& F.Y. 2010-11 onwards).
The aforesaid will also
include contribution made
to the Central Government
Health Scheme(not
exceeding Rs. 15000/-) | The premium should be paid in respect of health insurance of the
assessee, his/her family members or his/her parents |
| 80 DD | Deduction of Rs. 50,000/- in
respect of a) expenditure
incurred on medical
t r e a t m e n t , ( i n c l u d i n g
nursing), training and
rehabilitation of a
handicapped dependent
relative. Further, if the
dependent is a person with
severe disability a deduction
of Rs.1,00,000/- shall be
available under this section.
b) Payment or deposit to
specified scheme for
maintenance of dependent
handicapped relative. | The handicapped dependent
should be a dependent
relative suffering a permanent
disability (including blindness)or mentally retarded, as certified by a specified physician or
psychiatrist. Note: A person with
severe disability means a
person with 80% or more
of one or more disabilities
as outlined in section 56(4)
of the persons with
disabilities (equal opportunities protection of rights and full participation )
Act. |
| 80 DDB | Deduction of Rs. 40,000/- in
respect of medical
expenditure actually paid.
Further, where the
expenditure is incurred in
respect of assessee or
dependent who is a senior
citizen a deduction of
Rs. 60,000/- or the amount
actually paid which ever is
less will be available. | Expenditure must be actually
incurred by resident assessee
on himself or dependent
relative for medical treatment
of specified decease or
ailment. The diseases have
been specified in Rule 11DD.
A certificate in form 10 I is to
be furnished by the assessee
from any Registered Doctor. |
| 80 E | Deduction in respect of
payment in the previous year of interest on loan taken from
a Financial institution or
approved charitable
institution for higher
education of self or higher
education of a relative.
Higher education means any
course of study pursued
after senior secondary
examination or its equivalent | This provision has been
introduced to provide relief to students taking loans for
higher studies. The payment
of the interest thereon will be
allowed as deduction over a
period of upto 8 years.
Further, by Finance Act, 2008
deduction under this section
shall be available not only in
respect of loan for pursuing
higher education by self but
also by spouse or children of
the assessee or a child where
assessee is a legal guardian |
| 80 G | Donations to certain funds,
charitable institutions etc. | The various donations
specified in Sec.80G are
eligible for deduction up to
either 100% or 50% with or
without restriction as
provided in Sec. 80G (see
para 6.4) |
| 80 GG | Deduction available is the
least of
(i) Rent paid less 10% of total
income
(ii) Rs.2000/- per month
(iii) 25% of total income | 1) Assessee or his spouse or
minor child should not own
residential accommodation at
the place of employment.
2) He should not be in receipt
of house rent allowance.
3) He should not have a self occupied
residential premises
in any other place. |
| 80 GG | Deduction of Rs. 50,000/- to
an individual who suffers
from a physical disability
(including blindness) or
mental retardation. Further, in case of individuals with
severe disability a deduction
of Rs.75,000/- permissible.
W.e.f. 1.4.2010 the amount
of Rs. 75,000/- shall be
enhanced to Rs. 1,00,000/- | Certificate should be
obtained from a Govt. Doctor.
The relevant rule is Rule 11D |
Deduction u/s 80 G : In respect of Section 80G, no deduction should be allowed by the employer/DDO, from the salary income in respect of any donations made for charitable purposes. The tax relief on such donations as admissible u/s 80G will have to be claimed by the taxpayer in the return of income. However, DDOs, on due verification, may allow donations to the following bodies to the extent of 50% of the contribution:
a. The Jawaharlal Nehru Memorial Fund,
b. The Prime Minister’s Drought Relief Fund,
c. The National Children’s Fund,
d. The Indira Gandhi Memorial Trust,
e. The Rajiv Gandhi Foundation, and to the following bodies to
the extent of 100% of the contribution:
(1) The National Defence Fund or the Prime Minister’s National Relief Fund,
(2) The Prime Minister’s Armenia Earthquake Relief Fund,
(3) The Africa(Public Contribution-India) Fund,
(4) The National Foundation for Communal Harmony,
(5) The Chief Minister’s Earthquake Relief Fund,
Maharashtra,
(6) The National Blood Transfusion Council,
(7) The State Blood Transfusion Council,
(8) The Army Central Welfare Fund,
(9) The Indian Naval Benevolent Fund,
(10) The Air Force Central Welfare Fund,
(11) The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996,
(12) The National Illness Assistance Fund,
(13) The Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund, in respect of any State or Union Territory, as the case may be, subject to certain conditions,
(14) The University or educational institution of national eminence approved by the prescribed authority,
(15) The National Sports Fund to be set up by the Central Government,
(16) The National Cultural Fund set up by the Central Government,
(17) The Fund for Technology Development and Application set up by the Central Government
(18) The national trust for welfare of persons with autism, cerebral palsy mental retardation and multiple disabilities. Subscription of long term infrastructure bonds. A new section 80 CCF has been introduced vide Finance Act, 2010. This provides that for F.Y. 2010-11(A.Y. 2011-12) and onwards a further deduction upto Rs. 20,000/- shall be available, for subscription to long term infrastructure bonds, notified by the Central Government.
RELIEF UNDER SECTION 89(1)
Relief u/s 89(1) is available to an employee when he receives salary in advance or in arrear or when in one financial year, he receives salary of more than 12 months, or receives ‘profit in lieu of salary’ covered u/s 17(3). Relief u/s 89(1) is also admissible on family pension, as the same has been allowed by Finance Act, 2002 (with retrospective effect from 1/4/96).
