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Income Tax 2013-14 – A.Year 2014-15 – Guide for Salaried Class Employees

Income Tax 2013-14 – Assessment Year 2014-15 – Complete Guide to determine Income Tax for Salaried Class Employees

Update : Click here for Income Tax 2014-15 (Assessment year 2015-16) – Guide to Salaried Class Employees – Exemptions available

Income Tax 2013-14 : Click here to go to GConnect Income Tax Calculator to calculate Income Tax 2014-15 – Assessment Year 2015-16 with save option

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 (click here for detailed discussion on Total Income)

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. Click here for more details

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.

For detailed Calculation of Exemption on HRA use this HRA Calculator provided by GConnect

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.

Check this previous GConnect article and Calculator for exact details on Income or Loss on 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:

(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).

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