Income Tax 2014-15 – what are all the changes affecting Salaried Employees ?

Income Tax 2014-15 – what are all the changes affecting Salaried Employees ? – 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 total income 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 income exceeds 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 income exceeds 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 income exceeds 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 in respect 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.

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.

 

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 Health Insurance 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 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. 1.5 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).

 

Source : Finance Bill 2014 and Budget Speech