As announced Indian
Union Budget-2014 which placed by Finance Minter for Asstt. Year 2015-16. In this Budget many important amendments are made for benefit to Salaried Employee with Tax Exemptions, Perquisite and deductions. For all these a simple method to calculate Income Tax for
salaried employee including all exemptions, Perquisites and Deductions
for Asstt. Year 2015-16 are as under :
Some Exempted Receipts /Special allowances & Perquisite which are not chargeable to tax are -
Exempted Receipts -
- Medical Reimbursement (Max Rs. 15000/- Per annum)
- L.T.A (as per Rule)
Special allowances Exempted u/s 10(14)
- Uniform Allowance (granted to meet the expenditure incurred on
purchase or maintenance of uniform to be worn during performance of
Official Duty)
- Helper Allowance (granted to meet expenditure incurred on helper for performance of official duty)
- Academic Allowance (granted for encouraging academic, research & training pursuits) including Newspaper, Generals etc.)
- Children Education Allowance (Rs. 100/- P.M. Per Child / (Rs. 300/- for Hostel Expenditure) Max of 2 Children)
- Conveyance allowance ( granted to meet the expenditure incurred on
conveyance, while performing official duty. ( Expenditure incurred for
covering journey between office and residence is not treated as
expenditure in performance of official duty. )
Deduction available u/s -16
- Entertainment allowance (for Govt Employees) Max Rs. 5000/-
- Professional tax - Professional tax paid by employee is deducted. If
employee pays the professional tax on behalf of employee, It is first
added in gross salary as taxable perquisite and thereafter deduction is
provided from gross salary
Perquisite not chargeable to tax Free food and beverage
- Food and non-alcoholic beverages provided in working hours in remote area or an off shore installation are exempted to tax.
- Tea, coffee or non-alcoholic beverages and snakes in working hours are tax free perquisites.
- Meals (Lunch and / or dinner) in office hours is not taxable. If cost to the employer is * 50 (or Less) per meal.
Some Exempted Income are ( to be shown while Return filing)
- Withdrawal / Maturity received from PF, PPF, Insurance Co., Agriculture. (Max up to 5000/-)
- Long Term Capital Gain From Shares
- Dividend on shares in companies
- Interest on Saving Bank & Post Office A/c up to Rs. 10,000/- ( Sec-80TTE)
Please Note :
- Interest earned from all sources is to be included. All interest
(including saving Bank A/C (above Rs. 10,000) (FD) income is fully
taxable.
- As per clarification from IT department, all perquisites such as
rent-free accommodation, company provided car, free or concessional
education facilities, employee stock option plan, free club membership,
company provided credit card, gift vouchers, meal coupons, hotel stay
beyond 15 days, are fully taxable.
Tax Calculation Method:
Download Tax Calculation Software for Salaried Employee
HRA exemption = Least of (40% (50% for metros) of Basic+DA or HRA or rent paid - 10% of Basic+DA)
Transport allowance
is exempt up to Rs.800/- per month during the month. (Expenditure
incurred for covering journey between office and residence.) For people
having permanent physical disability, the exemption is 1,600/- per
month.
Reimbursement of Medical
bills are exempt for self and dependent family, up to Rs.15,000/- per
annum u/s(5) LTA is exempt to the tune of economy class Train/ Air
/Recognised public Transport fare for the family to any destination in
India, by the shortest route.
LTA
can be claimed twice in a block of 4 calendar years. The current block
is from 01.01.2010 to 31.12.2013. For claim, it is must to provide
originals tickets etc.
U/s 24 There is an Exemption for interest on housing loan.
(for Self occupied Residence). If the loan was taken before Apr 1, 1999
exemption is limited to Rs. 30,000/- per year. If the loan was taken
after Apr 1, 1999 exemption is limited to Rs. 2,00,000/- per year if the
house is self-occupied; There is no limit if the house is rented out.
This
exemption is available on accrual basis, which means if interest has
accrued, you can claim exemption, irrespective of whether you've paid it
or not.. "
If
you have rented out your house, enter the total income / loss from the
house (after deducting property tax and standard maintenance expenses).
U/s 80CCE-
Maximum Exemption up to Rs. 150000/- Investments up to Rs. 1.5 lac in
PF, VPF, PPF, Employee contribution in NPS,Insurance Premium, Housing
loan principal repayment, NSC, ELSS, long term bank Fixed Deposit, Post
Office Term Deposit, etc. are deductible from the taxable income. There
is no limit on individual items, (for example) all 1 lac can be invested
in NSC or PPF etc.
U/s 80CCD -The
Finance Act, 2011 provides that contribution made by the Central
Government or any other employer to NPS (up to 10 per cent of the salary
of the employee in the previous year)shall be excluded while computing
the limit of Rs. 1,50,000.The contribution by the employee to the NPS
will be subject to the limit of Rs. 1,00,000.
U/s 80CCG -
Rajiv Gandhi Equity Savings Scheme is a new exemption available for
investment in stock markets (direct equity). Avaialble only for those
with gross income less than 12 lacs and only for first time investors in
stock market. Exemption available at 50% of investment subject to
maximum of Rs.50,000/- invested. Investments are locked-in for three
years
U/s 80D
Medical Insurance Premium (such as Mediclaim & Critical illness
Cover)& Health Check up Upto Rs. 5000, premium is exempt up to
Rs. 30,000/ per year (Rs.15,000/- for self,spouse and children ) (Rs.
15000/- for Parents. If the premium includes for a dependent who is
(Senior Citizen) above 60 years of age, an extra Rs. 5,000//- can be
claimed.
U/s 80DD
Deduction in respect of medical treatment of handicapped dependents is
limited to Rs. 50,000/- per year if the disability is less than 80% and
Rs. 1,00,000/- per year if the disability is more than 80%
U/s 80DDB
Deduction in respect of medical treatment for specified ailments or
diseases for the assesse or dependent can be claimed up to Rs. 40,000/-
per year. If the person being treated is a senior citizen, the exemption
can go up to Rs. 60,000/-. but any amount received under Medical
Insurance Policy will be reduced from the amount of deduction allowed.
The Diseases and ailments specified under rule 11DD are.
- neurological diseases being demetia, dystonia musculorum deformans,
motor neuron disease, ataxia, chorea, hemiballismus, aphasia and
parkisons disease,
- cancer,
- AIDS,
- Chronic renal failure,
- hemophilia, and
- thalassaemia.
U/s 80E Interest
repayment on education loan (taken for higher education from a
university of self & dependents) is completely tax exempt
U/s 80G
Donations given for certain charities are tax exempt. Some(NGO,Trust
etc.) are exempt to the tune of 50%, whereas Govt funds are 100%.
U/s 80GG
If you are not getting HRA, but living in rented house, an exemption
is available. This will be calculated as minimum of (25% of total income
or rent paid - 10% of total income or Rs. 24,000/- per year)
U/s 80U
who suffers from not less than 40 per cent of any disability is
eligible for deduction to the extent of Rs. 50,000/- and in case of
severe disability to the extent of Rs. 100,000/-
U/s 80TTA
introduced through Finance Act, 2012. Section 80TTA provides a
deduction of up to Rs. 10,000 on your income from interest on saving
bank accounts.
DEDUCTION u/s. 80C and chapter VIA
U/s. 80C
of the Income Tax Act allows certain investments and expenditure to be
deduct from total income. One must plan investments well and spread it
out across the various instruments specified under this section to avail
maximum tax benefit. There are no sub-limits and is irrespective of how
much you earn and under which tax bracket you fall. Most of the Income
Tax payee try to save tax by saving under Section 80C of the Income Tax
Act. However, it is important to know the Section in total. so that one
can make best use of the options available for deduction under income
tax Act. One important point to note that one can not only save tax by
undertaking the specified investments, but some expenditure which you
normally incur can also give you the tax exemptions.
Qualifying Investments u/s 80CCE
- Provident Fund (PF) & Voluntary Provident Fund (VPF)
PF is automatically deducted from your salary. your contribution [12% of
Basic] (i.e., employee’s contribution) is counted towards section 80C
investments. You also have the option to contribute additional amounts
through voluntary contributions (VPF). Current rate of interest is 8.5%
per annum (p.a.) and is tax-free.
- Life Insurance Premiums: Any amount that you pay towards life
insurance premium in Life Insurance Corporation (LIC) or any other
Insurance CO.for yourself, your spouse or your children can also be
included in Section 80C deduction. If you are paying premium for more
than one insurance policy, all the premiums will be included. also
premium paid for ULIP will also be treated as Premium paid for Life
Insurance Policies.
- Unit linked Insurance Plan : ULIP stands for Unit linked
Saving Schemes. ULIPs cover Life insurance with benefits of equity
investments.They have attracted the attention of investors and
tax-savers not only because they help us save tax but they also perform
well to give decent returns in the long-term.
IMP : Total
Amount Received at Maturity, Survival Benefits, Withdrawal in Insurance
Policies is Tax Free and fully exempted u/s 10(10D).
- Public Provident Fund (PPF): Among all the assured returns small saving schemes,
- Public Provident Fund (PPF) is
one of the best. Current rate of interest is 8% tax-free and the normal
maturity period is 15 years. Minimum amount of contribution is Rs. 500
and maximum is Rs. 1,50,000.(New Change) from Budget 2014
- National Savings Certificate (NSC):
National Savings Certificate (NSC) is a 5-Yr small savings instrument
eligible for section 80C tax benefit. Rate of interest is 8.58%
compounded half-yearly, i.e. If you invest Rs.100, it becomes Rs.150.90
after five years. The interest accrued every year is liable to tax (i.e.
to be included in your taxable income) but the interest is also deemed
to be reinvested and thus eligible for section 80C deduction.
- Home Loan Principal Repayment
& Stamp Duty and Registration Charges for a home Loan The
Equated Monthly Installment (EMI) that you pay every month to repay your
home loan consists of two components – Principal and Interest.The
principal component of the EMI qualifies for deduction under Sec 80C.
Even the interest component can save you significant income tax – but
that would be under Section 24 of the Income Tax Act. The amount you pay
as stamp duty when you buy a house, and the amount you pay for the
registration of the documents of the house can be claimed as deduction
under section 80C in the year of purchase of the house.
- Tuition fees for 2 children
Apart form the above major investments expenses for children’s education
(Only Tution Fee (for which you need receipts)), can be claimed as
deductions under Sec 80C.
- Equity Linked Savings Scheme
(ELSS): There are some mutual fund (MF) schemes specially created for
offering you tax savings, and these are called Equity Linked Savings
Scheme, or ELSS. The investments that you make in ELSS are eligible for
deduction under Sec 80C.
- 5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.
- 5-Yr post office time deposit (POTD) scheme:
POTDs are similar to bank fixed deposits. Although available for
varying time duration like one year, two year, three year and five year,
only 5-Yr post-office time deposit (POTD) – which currently offers 7.5
per cent rate of interest –qualifies for tax saving under section 80C.
Effective rate works out to be 7.71% per annum (p.a.) as the rate of
interest is compounded quarterly but paid annually. The Interest is
entirely taxable.
- Pension Funds or Pension Policies –
Section 80CCC: This section – Sec 80CCC – stipulates that an investment
in pension funds is eligible for deduction from your income. Section
80CCC investment limit is clubbed with the limit of Section 80C – it
means that the total deduction available for 80CCC and 80C is Rs 1.5
Lakh.This also means that your investment in pension funds upto Rs.1.5
Lakh can be claimed as deduction u/s 80CCC. However, as mentioned
earlier, the total deduction u/s 80C and 80CCC can not exceed Rs.1.5
Lakh.
- Infrastructure Bonds: These are
also popularly called Infra Bonds. These are issued by infrastructure
companies, and not the government. The amount that you invest in these
bonds can also be included in Sec 80C deductions.
- NABARD rural bonds: There are
two types of Bonds issued by NABARD (National Bank for Agriculture and
Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB).
Out of these two, only NABARD Rural Bonds qualify under section 80C.
- Senior Citizen Savings Scheme 2004 (SCSS):
A recent addition to section 80C list, Senior Citizen Savings Scheme
(SCSS) is the most lucrative scheme among all the small savings schemes
but is meant only for senior citizens. Current rate of interest is 9%
per annum payable quarterly. Please note that the interest is payable
quarterly instead of compounded quarterly. Thus, unclaimed interest on
these deposits won’t earn any further interest. Interest income is
chargeable to tax.
