Income Tax 2013-14 – Assessment Year 2014-15 – Complete Guide to determine Income Tax for Salaried Class Employees
we have provided here a detailed guide for Income Tax 2013-14 – Assessment Year 2014-15 applicable to Salaried Class Employees. Government has brought three important changes this year which are relevant to Salaried Class Employees in the finance bill 2013-14. Those are
1. Income Tax Rebate of Rs.2000 for individuals having total income up to Rs. 5 lakhs
2. Deduction of interest on housing loan up to Rs.2.5 lakhs in respect of housing loan up to Rs.25 lakhs obtained during the year 2013-14, as against the deduction allowed up to Rs. 1.5 lakh in normal Total Cost of construction shall not exceed Rs. 40 lakhs in this case. (Click here for detailed discussion on additional deduction
3. Deduction of Premium up to 15% of sum assured in respect of Life Insurance Policies covering the life of persons with disabilities defined in Section 80U and Section 80 DDB
Rates of income-tax in respect of income liable to tax for the year 2013-14 – Assessment Year 2014-15
Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:-
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association of persons or body of individuals , whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act (not being a case to which any other Paragraph of Part III applies) are as under :-
| Upto Rs. 2,00,000 | Nil. |
| Rs. 2,00,001 to Rs. 5,00,000 | 10 per cent. |
| Rs. 5,00,001 to Rs. 10,00,000 | 20 per cent. |
| Above Rs. 10,00,000 | 30 per cent. |
(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,-
| Upto Rs. 2,50,000 | Nil. |
| Rs. 2,50,001 to Rs. 5,00,000 | 10 per cent. |
| Rs. 5,00,001 to Rs.10,00,000 | 20 per cent. |
| Above Rs. 10,00,000 | 30 per cent. |
(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at anytime during the previous year,-
| Upto Rs. 5,00,000 | Nil. |
| Rs. 5,00,001 to Rs. 10,00,000 | 20 per cent. |
| Above Rs. 10,00,000 | 30 per cent. |
- Education Cess: 3% of the Income-tax.
- SALARY INCOME INCLUDES :- PAY, DP, Band pay, Grade pay, DA, OTA, BONUS, CCA, Honorarium, Children Education Allowance Received, Pension, Subsistence Allowance, Government’s Contribution in New Pension Scheme, Transport Allowance above Rs.800/- per month.
- House Rent Allowance to the extent not exempted under Section 10 (13A) of Income Tax Act.
- Agricultural Income.
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.
Changes in the Budget 2012-13 relating to deductions under Chapter VI A
Deduction for life insurance premium
Deduction in respect of premium paid on life insurance policy issued on or after 1 April 2012 is proposed to be allowed provided premium payable for any of the years does not exceed 10% (presently 20%) of actual capital sum assured (Section 80C). Corresponding amendment brought in Section 10D
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.
Deduction for interest on savings account
Deduction upto Rs 10,000 proposed to be allowed in respect of interest on deposits (not being time deposit) in a savings account with a banking company, co-operative society engaged in banking business and post office (Section 80TTA).
Deductions under Chapter VIA in relation to donation payment
Deduction in respect donation (Section 80G and 80GGA) in excess of Rs 10,000 is proposed to be allowed only if such sum is paid by any mode other than cash.
Apart from the above, there are no much changes in the Tax exemptions / Deductions allowed under Chapter VI A compared to last year.
Applicable deductions under Chapter VI A for year 2012-13 (A.Year 2013-14)
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 Savings Certificate 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 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. 1,00,000/- | 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 | 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.1,00,000/-, 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 of one lakh rupees provided under section 80CCE.
Deductions which are not coming under Rs. 1 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 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 dependant 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 dependant handicapped relative. | The handicapped dependant should be a dependant 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 dependant 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 upto 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 selfoccupied 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:
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,
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).
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