The following INCOME TAX RATES ARE applicable for the Financial Year ending March 31, 2016 (i.e. Financial Year 2015-16) - Assessment Year 2016-17)
The basic exemption limit for individuals (i.e. below 60 years of age) is Rs 2.50 lakhsThe basic exemption limit for Senior citizens (60 years to below 80 years) is : Rs 3.00 lakhsThe basic exemption limit for Very Senior Citizens(80 years and above) is Rs3.50 lakhs
* A tax rebate of Rs 2,000 from tax calculated will be available for people having an annual income upto Rs 5 lakh.
Section 80D - Deduction for Health Insurance premium Rs. 25,000/-
Investment in Sukanya Samriddhi Scheme- Eligible for deduction u/s 80C and any payment from the scheme shall not be liable to tax.
Section 80DD - Maintenance, including medical treatment of a dependent who is a person with disability Rs. 75,000/-
Section 80DD - Maintenance, including medical treatment of a dependent who is a person with severe disability - Rs. 1,25,000/-
Section 80U - Person with disabilityRs. 75,000/-
Section 80U - Person with severe disability Rs. 1,25,000/-
Section 80CCC - Contribution to provident fund of LIC or IRDA approved insurerRs. 1,50,000/-
Section 80CCD - Contribution by the employee to National Pension Scheme (NPS)Rs. 1,50,000/-
Now under Section 80CCD, a deduction of upto Rs. 50,000 is allowed over and above the limit of Rs. 1.50 lakh under Section 80C in respect of contributions made to NPS is also allowed.
Thus, now the total deduction that can be claimed under Section 80C+Section 80CCD = Rs 2 lakh.
In case any employer contributes to the NPS scheme on behalf of the employee and the benefit of the same would be availed by the employee, the employee would also be allowed a deduction under Section 80CCD(2) for the amount of contribution made by the employer.
Investment limit under section 80C of the Income-Tax Act Rs. 1.5 lakh.
· Deduction limit on account of interest on loan in respect of self occupied house property raised from Rs.1.5 lakh to Rs. 2 lakh.
Deductions Allowed In Sections Beyond 80 C :
(1) Deductions Under Section 80CCC(1) :
Under this section, the contributions by individuals towards "Pension" schemes of LIC or any other Insurance company, is allowed as deduction of Rs.10,000/-. However, as provided under section 80CCE, the aggregate deduction u/s 80C, and u/s 80CCC and 80CCD can not exceed Rs.1,50,000/-. Thus effectively, now these are covered under the maximum limit of Rs.1,50,000/- under section 80C.
(2) Deductions Under Section 80 D :
Basic Deduction under Section 80D, Mediclaim premium paid for Self, Spouse or dependant children has now been raised to Rs 25,000 wef FY 2015-16.
The deduction for senior citizens is raised from Rs 20,000 to Rs 30,000. For uninsured super senior citizens (more than 80 years old) medical expenditure incurred up to Rs 30,000 shall be allowed as a deduction under section 80D. However, total deduction for health insurance premium and medical expenses for parents shall be limited to Rs 30,000.
However, there are a few conditions:
You can not claim tax benefit on health insurance premium paid for your in-laws;
Proof of payment of premium has to be furnished, in order to avail the tax benefit
The health insurance premium must be paid from taxable income of that year only if you want to claim a deduction. Thus, if one has paid the premium from ones savings or from gifts of money received, then one is not eligible for tax benefits under this section.
However, you have to remember that the premium paid by any mode of other than cash is eligible. Note prior to 1st April 2009, premium payment was required to be paid only by cheque. However, now even the payments through Credit card or other on line mechanism are allowed. Thus, now all payment modes except cash payment are accepted
(3) Deductions Under Section 80 E :
Under this section, deduction is available for payment of interest on a loan taken for higher education from any financial institution or an approved charitable institution. The loan should be taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or management, or a post-graduate course in applied science or pure science.
Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian. Education loan taken for siblings (brother / sister) or other relatives (in-laws, nephew, niece, etc.) would not qualify for section 80E benefit.
The amount of interest paid is eligible for deduction and moreover there is no cap on the amount to be deducted. You can deduct the entire interest amount from your taxable income. However there is no benefit available on the repayment of principal amount of the loan. Deduction shall be allowed in computing the total income in respect of the initial assessment year* and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by the assessee in full, whichever is earlier. The tax benefits on education loan are only valid once you start the repayment and moreover they are only available up to eight years. For instance if your loan tenure exceeds eight years, you cannot claim for deductions beyond eight years.
(4) Deductions Under Section 24(b) :
Under this section, interest on borrowed capital for the purpose of house purchase or construction is deductible from taxable income upto Rs.2,00,000/- is deductible from income. (certain conditions are to be fulfilled)
We have seen that the principal amount in the repayment of a home loan can be added to the 80C limit of Rs1.5 lakh for tax savings. However, the interest component of home loans is allowed as deduction under Section 24 B for up to Rs2 lakh in case of a self-occupied house. In case the house is in the joint name of your spouse and you (joint loan), each one can avail of Rs2 lakh interest component deduction. This limit is only for self-occupied house. If you have property which is rented out, you can deduct the full interest paid on the home loan. The rent on the property does become part of your income. If the rent is lesser than the loan interest, it will lower your overall tax liability.
PS : 1A) Section 80CCF : Infrastructure Bonds : (NOT PERMITTED FROM FY 2012-13) onwards) :
Section 80CCF allowed you to invest an additional Rs. 20,000 in infrastructure bonds, and such an investment was reduced from your taxable income in addition to the Rs.100,000 deduction you get from the other instruments listed above. You were to get the tax benefit only in the year in which you have invested in these instruments. NOW THIS IS NOT ALLOWED
TAX FREE INCOMES :
Some of the incomes are completely exempted from income tax and that too without any upper limit. The following incomes which are tax free :-
(a) Interest on EPF / GPF / PPF
(b) Interest on GOI Tax Free Bonds / Tax Free Bonds issued with specific stipulation to this effect
(c) Dividends on Shares and Mutual Funds. Dividend income from companies / Equity Oriented Mutual funds is completely exempt in the hands of investors. Dividend is also tax free in the hands of investors in case of debt-oriented Mutual Fund schemes. (However, the Asset Management Company is liable to deduct 22.44% distribution tax in case of non individuals / non HUF investors and 14.025% in case of individuals or HUF investors.)
(d) Capital receipts from Life Insurance policies i.e. sums received either on death of the insured or on maturity of Life insurance plans. However, in case of life insurance policies issued after March 31, 2004, exemption on maturity payment u/s 10(10D) is available only if premium paid in any year does not exceed 20% of the sum asssured;
e) Interest on Saving Bank accounts in banks upto Rs10,000/- per year (from FY 2012-13 onwards)
(f) Long term capial gains on sale of shares and equity mutual funds after 01/10/2004, if security transaction is paid / imposed on such transactions.
GIFT TAX :
Gift tax was abolished with effect from October 1, 1998. The gifts are no longer taxable in the hands of donor or donee. However, w.e.f. September 1, 2004, any gift received by an individual or HUF will be included in taxable income, if the amount of tax exceeds Rs.25,000/-. However, gifts received from any of the following will continue to remain tax free :-
(ii) Brother or sister;
(iii) Brother or sister of the spouse;
(iv) Brother or sister of either of the parents of the individual;
(v) Any lineal ascendant or descendant of the individual
(vi) Any lineal ascendant or descendant of the spouse of the individual
(vii) spouse of the person referred to in (2) or (6) or received on the occasion of marriage or under a will by way of inheritance
Capital Gains :
Capital gains arise when an individual sells at a profit certain assets like property or shares or mutual funds or bonds etc The treatment of such income is not the same as income from other sources. There are two types of capital gains, viz Short Term Capital Gains or Long Term Capital Gains.
(a) Short Term Capital Gains : Capital gain is considered as Short Term Capital Gain, if immovable property is sold / transferred within three years of acquiring the same. Similarly, if shares or other financial securities such as mutual funds are sold within one year of purchase, the profit earned is treated as Short Term Capital Gain.
Short term capital gain is included in the gross taxable income and normal tax rates are applicable. However, w.e.f. 1st October, 2004, the short term capital gains from sale of equity shares or units of equity oriented mutual fund schemes are taxed only at a flat rate of 10%, irrespective of the tax slab on other sources of income, provided securities transaction tax is paid on such sale.
(b) Long Term Capital Gains : Capital gain is considered as the Long Term, if the immovable property is sold after three years from purchse, or financial securties such as shares, deep discount bonds, units of open ended or close ended schemes of mutaula funds are disposed (i.e. sold / redeemed / transferred) after holding the same for more than twelve months, then the gain is considered to be long term capital gain.
Long term capital gains on transfer of listed shares / units of equity oriented mutual funds schemes has been exempted from tax w.e.f. 1st October, 2004, provided securities transaction tax has been paid on such sale. For assets other than the listed shares / units of mutual funds schemes, tax is payable in respect of long term capital gains at a flat rate of 20% and the amount of gain has to be adjusted for inflation through indexation benefit.
Long term capital gains tax in respect of bonds and debt securities or debt oriented mutual fund schemes listed on stock exchanges is payable at a flat rate of 10% of the capital gains amount. In case an individual wishes to avail the benefits of indexation, then tax has to be paid at normal long term capital gains tax rate of 20%.