Income Tax Deduction from Salaries during FY 2014-15

Income Tax Deduction from Salaries during FY 2014-15 under Section 192 of Income Tax 1961 – Circular No: 17 / 2014 issued by Income Tax Departmant

Income Tax Department has issued Circular No: 17/2014 dated 10.12.2014 for Income Tax Deduction from Salaries during the Financial Year 2014-15 (Assessment Year 2015-16) under Section 192 of Income Tax Act 1961. This detailed Circular contains all instructions and guidelines to be followed by persons responsible for payment of Salary, for deducting income Tax if necessary from the salary of an individual and pay the same to the Government.

As this circular also contains all the definitions and details of Income which are subjected to Income tax, and all Deductions allowed from the total income (exemptions), apart from DDO / Employer, employees can also refer this for calculating the income tax to be payable by them this year.

We provide here a summary of Circular No: 17 / 2014 – The entire circular as a pdf file can be download using the link given below.

Also click here to use GConnect Income Tax Calculator 2014-15 to calculate your income tax liability this year

Circular No: 17 / 2014 dated 10.12.2014

1. Introduction

2. Rates of Income Tax

Total Income	Rate of tax
Where the total income does not exceed Rs.2,50,000/-.	Nil
Where the total income exceeds Rs. 2,50,000but does not exceed Rs. 5,00,000/-.	10 per cent of the amount by which thetotal income exceeds Rs. 2,50,000/-
Where the total income exceeds Rs.5,00,000/- but does not exceed Rs. 10,00,000/-.	Rs. 25,000/- plus 20 per cent of theamount by which the total income exceeds Rs. 5,00,000/-.
Where the total income exceeds Rs.10,00,000/-.	Rs. 1,25,000/- plus 30 per cent of theamount by which the total income exceeds Rs. 10,00,000/-

Rates of Income Tax for Seniors (60 years and above)

SlNo	Total Income	Rate of tax
1	Where the total income does not exceed Rs. 3,00,000/-	Nil
2	Where the total income exceeds Rs. 3,00,000 but does not exceed Rs. 5,00,000/-	10 per cent of the amount by which the total income exceeds Rs. 3,00,000/-
3	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-	Rs. 20,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.
4	Where the total income exceeds Rs. 10,00,000/-	Rs. 1,20,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-

Rates of Income Tax for Very Seniors (80 years and above)

Total Income	Rate of tax
Where the total income does not exceed Rs. 5,00,000/-	Nil
Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000/-	20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-
Where the total income exceeds Rs. 10,00,000/-	Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-

Surcharge on Income Tax:

10% of Income Tax if Total Income exceeds Rs. 1 Crore

Education Cess on Income tax:

2% of Income Tax and Surcharge if any

Secondary and Higher Education Cess on Income-tax:

1% of Income Tax and Surcharge

3 and 4. Explanations on Section 192 of Income Tax 1961 – (Applicable to Persons responsible for deducting Income Tax from the salary of employees)

5. Computation of Income under the head Salaries

Type of Income chargeable to Income Tax under the head Salaries

1. Salary Income

2. Arrears of Salary Income

5.1 Definition of Salary:

1. Salary, wages, fees, commissions, perquisites, profits in lieu of salary, annuity or pension, gratuity, encashment of leave etc.

2. contributions made by the employer provident fund in excess of 12% of the salary of the employee,

3. interest credited by employer in excess of 9.5%

4. Contribution made by Employer in NPS

5.3 Income Not included under the head Salaries:

1. Amount by the employer as Leave Travel Concession (LTC) is exempted if journey is performed. However, amount paid by employer as LTC for foreign Tours is not exempted.

2. Death-cum-retirement gratuity

3. Commuted portion of Pension

4. Leave Salary

5. Retrenchment compensation

6. Payment under Schemes of voluntary retirement up Rs. 5 lakh

7. Amount out of Life Insurance Policies

8. Amount received from provident fund

9. House Rent Allowance (Expenses towards payment of Rent) which is restricted to least of the following

(a) the actual amount of HRA

(b) Actual Rent in excess of one-tenth of the salary

Madras, 50% of the salary or in other places, 40% of the salary

“Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

10. Reimbursement of expenses incurred by the employee in discharging official duties (Travelling Allowances etc). Transport Allowance is exempted up to Rs. 800 and Rs. 1600 in respect blind persons

11. Any scholarship granted to meet the cost of education

12. Any income by way of pension to Gallantary Awardee (Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry award as may be specifically notified)

13. Cost of Medical Treatment provided by employer and Reimbursement of medical expenses restricted to Rs. 15000/-

5.4 Deductions allowed from Salary :

Deduction allowed under Section 16 of IT Act

1. Entertainment Allowance

2. Professional Tax

Deduction under Chapter VIA of IT Act:

1. Amount allowed to be deducted under Section 80, Section 80 CCC and Section 80 CCD(1)

a) Payment of insurance premium in the name of the individual, the spouse or any child of the individual.

b) Payment of premium / contribution for deferred annuity, pension fund, provident fund, superannuation fund.

c) Deposits made in saving certificates such as NSS etc.,

d) Amount towards purchase of ULIP by LIC or other approved Insurance Companies

e) Amount towards purchase of units in ELSS of an approved Mutual fund Companies

f) Contribution of Employees in NPS

g) Deposits made in National Housing Bank

h) Principal repaid for purchase or construction of House property

.i) Tuition Fees paid in university, college, school or other educational institution situated in India for education of any two children of employee

j) Term deposit in a Nationalised / Scheduled Bank

Note 1.: As per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. At the same time, deduction under Section 80 CCD(1) in respect of contribution of individial for NPS shall not exceed Rs. 1,00,000

Note 2: As per Section 80 CCD(2) of Income Tax Act, contribution of Government or any employeer in NPS can be deducted from total income and the same is excluded from limit of Rs.1,50,000 under Section CCE and the same is allowed to be deducted up to 10% of Salary of the individual

2. Rajiv Gandhi Equity Savings Scheme 2012

An amount of 50% of investment made under Rajiv Gandhi Equity Savings Scheme 2012 with the total deduction not exceeding Rs. 25,000.

3. Deduction of premium paid for Health Insurance under Section 80 D

Persons for

whom payment made

Allowable

Deduction

(in Rs)

Employee

or his family

Aggregate of premium, CGHS and health check-up cost allowed to deducted isRs 15,000/{For Senior Citizens it is Rs 20000/-}.

Parent orParents of employee

Aggregate of premium, and health check-upallowable isRs 15,000/{For Senior Citizens it is Rs 20000/-}

4. Section 80 DD – Deduction for medical treatment of disabled dependent

Deduction of amount not exceeding Rs.50,000 which is the cost of medical treatment / maintenance of dependent who is a person with disability. In the case of dependent with severe disability, deduction is allowed up to Rs. 1 lakh

5. Section 80 U –

Deduction allowed up to Rs. 50,000 in the case of individual who is disabled. In the case of person with severe disability higher deduction up to Rs. 1 lakh is allowed

6. Section 80 DDB :

Deduction up to Rs. 40,000 for the amount spent for medical treatment of individual or his / her dependants. In the case of senior citizen (60 years and above), deduction allowed under this section is Rs. 60,000

7. Section 80 EE :

Deduction up to Rs 1,00,000 paid as interest on housing loan sanctioned during the period 01-04-
2013 to 31-03-2014 (loan not to exceed Rs 25 lakhs) for acquisition of a residential house whose value does not exceed Rs 40 lakhs. However the deduction is available if the assessee does not own any residential house property on the date of sanction of the loan.