Income Tax – Slabs,Deductions and Calculation

As the financial year nears its end,every individual needs to submit his Income Tax statement on or before March 31.There are certain deductions and exemptions notified by the Government which you can avail to get the tax relief.For salaried class,they have to submit it in the month of February itself as required by their DDO’s although they can do their savings till March 31as per the guidelines of Indian Income Tax Act 1961.

Graphs and Charts Report,Income Tax Calculation

Their are certain sections in the Act under which the tax payer can avail deductions and exemptions from his gross income and thus save tax.These are revised by the Government from time to time.For the Financial year 2014-15,we summarize these deductions to make tax calculations easy for the individuals who face any confusion regarding this.

Method of Income Tax Calculations (Tax Slabs) :-

Tax calculation has been categorised on the basis of Sex ( female or male ) and Age ( less than & more than 60 years ) of the tax payers.

The payable tax also includes Education Cess at the rate of 3% on taxable income.

Individual Female or Male ( Age less than 60 years )

Annual IncomeRate of Income Tax
Up to ₹ 2,50,000Exempted ( No Tax Payable )
₹ 2,50,001 to ₹ 5,00,00010%
₹ 5,00,001 to ₹ 10,00,00020%
Above ₹ 10,00,00030%

 

All Senior Citizen ( Age 60-80 years )

Annual IncomeRate of Income Tax
Up to ₹ 3,00,000Exempted ( No Tax Payable )
₹ 3,00,001 to ₹ 5,00,00010%
₹ 5,00,001 to ₹ 10,00,00020%
Above ₹ 10,00,00030%

 

All Senior Citizen ( Age 80 years and above )

Annual IncomeRate of Income Tax
Up to ₹ 5,00,000Exempted ( No Tax Payable )
₹ 5,00,001 to ₹ 10,00,00020%
Above ₹ 10,00,00030%

 

Deductions under various Sections : –

Under SectionType of DeductionRemarks
Section 80CDeposits in :–GPF of Government employees-Public Provident Funds (PPF)-Equity Linked Savings Scheme (ELSS)-Unit Linked Insurance Plans (ULIP-National Savings Certificate (NSC)

-Tuition Fee of two children

-Senior Citizen Deposits Schemes

-10% amount contributed by employee under National pension Scheme (After 01/01/2004)

-Home Loan Payments including Registration and Stamp Fee

-Premium paid for Life Insurance Policy, for self/spouse/children (even adopted)

-Any notified Pension Fund Payments

The exemption under these payments was limited to ₹ 1,00,000 earlier.From the financial year 2015-16,the limit for savings under 80C has been raised to ₹ 1,50,000.
Section 80CCDEmployer contribution under New Pension System (NPS)-Above the limit of ₹ 1,00,000-10% contribution
Section 80 CCGDeposit under Rajiv Gandhi Equity Saving Scheme-Above the limit of ₹ 1,00,000-Benefit on 50% of the deposit
Section 80DPremium Paid for Health Insurance for self/spouse/children-Above the limit of ₹ 1,00,000-Limited to ₹ 15,000.For Senior Citizen ₹ 20,000-Additional ₹ 15000-20000 for parents
Section 80DDExpenditure on Treatment, rehabilitation and training of a dependent handicapped relative.-Above the limit of ₹ 1,00,000-Deduction of ₹ 50,000 if Handicap of above 40%-Deduction of ₹ 1,00,000 if Handicap of above 80%
Section 80DDBDeduction up to ₹ 40,000 for expenditure on medical treatment of self or dependent relative.-Above the limit of ₹ 1,00,000-Diseases specified in Rule HDD like Haemophilias, Thalassemias, AIDS, other neurological disorders.
Section 80EDeduction on all the Interest paid on loan for higher studies-Above the limit of ₹ 1,00,000-Applicable up to 8 years
Section 80GDonation to certain Funds and Charitable Institutions-Above the limit of ₹ 1,00,000-Charitable Donations ; Tax Relief only after filing the return and not to be deducted by the DDOFollowing Funds allow 50% deduction by the DDO :–The Jawahar Lal Nehru Memorial Fund-The Prime Minister Relief Fund-The National Children’s Fund

-The Indira Gandhi Memorial Trust

The Rajiv Gandhi Foundation

100% Deductible Contribution :-

-The National Defence Fund/Prime Minister’s National Relief Fund

-The Prime Minister’s Armenia Earthquake Relief Fund

-The Africa (Public Contribution-India) Fund

-The National Foundation For Communal Harmony

-The Chief Minister’s Earthquake Relief Fund, Maharashtra

-The National Blood Transfusion Council

-The State Blood Transfusion Council

-The Army Central Welfare Fund

-The Indian Naval Benevolent Fund

-The Air force Central Welfare Fund

-The Andhra Pradesh chief Minister’s Cyclone Relief fund,1996

-The National Illness Assistance Fund

-The Chief Minister’s Relief Fund Lieutenant Governor’s Relief fund, in respect of any state or Union Territory, as the case may be, subject to certain conditions

-The University or Educational Institution of National Eminence approved by the prescribed authority.

-The National Sports Fund to be set up by the central Government.

-The National Cultural Fund set up by the central Government

-The Fund for Technology Development and Application set up by the central Government.

-The national trust for Welfare of persons with Autism, Cerebral palsy, Mental retardation And multiple Disabilities.

Section 80GGDeduction of Rent Free Accommodation whichever is less-Rent Paid above the 10% of salary-₹ 2000 per month-25% of total income– Above the limit of ₹ 1,00,000-Employee/spouse should not be owning the accommodation-Should not be in receipt of House Rent Allowance.
Section 80LInterest,Dividend,Income from-Any Government Security ( Central/State)-NSC’s ,VI,VII,VIII issues-Notified Debentures of PSU’s,Cooperative Societies-Notified National Deposit Scheme-Deposit under Post Office Monthly Income Account Rules,1987₹ 9000 deduction plus additional ₹ 3000 allowed.
Section 80UDeduction for physically or mentally handicap individual-Above the limit of ₹ 1,00,000-Deduction of ₹ 50,000 if Handicap above 40%-Deduction of ₹75000 if Handicap above 80%

Income which is not to be included in Gross Income : –

  • Income From Agriculture
  • Leave Travel Concession
  • Gratuity
  • Leave Encashment
  • Commuted Pension
  • House Rent Allowance (HRA)
  • Provident Funds like PPFs
  • Interest or Redemption of Government Bonds,Securities,Savings Certificates like NSCs
  • Amount received under Hindu United Families (HUF)

Taxable Allowances : –

  • Dearness Allowance (DA)
  • Rural Allowance
  • Medical Allowance
  • Non Practice Allowance (NPA) for Doctors
  • Academic Allowance
  • Child Education Allowance

Computation Of Income Tax : –

Suppose a person XYZ has monthly income of ₹ 40,000.He contributes ₹ 3500 per month towards New Pension System,has PPF savings of ₹ 50,000, ELSS savings of ₹ 30,000,pays health insurance premium of ₹ 5000 annually.

Gross income = 40000 * 12 = ₹ 4,80,000

Deduction under section 80C – NPS = 3500 * 12 = ₹ 42000

PPF= ₹ 50,000

ELSS = ₹ 30,000

Total Savings = 42000 + 50000+30000= ₹ 1,22,000

New Taxable Income = 4,80,000 – 1,00,000 = ₹ 3,80,000 ( Though saved ₹ 1,22,000 but limit of deduction is ₹ 1,00,000 )

Deduction under section 80D (Health Insurance) = ₹ 5000

Now Taxable Income is 3,80,000 – 5000 = ₹ 3,75,000

Income Tax Slabs –

Income Tax up to ₹ 2,00,000 is NIL

Income Tax from ₹ 2,00,001 to ₹ 5,00,000 is 10%

Hence,income Tax = 3,75,000 – 2,00,000 = 1,75,000 * 10/100

= ₹1 7,500

Education Cess @ 3% = 17,500 * 3/100

= ₹ 525

Total Tax to be Paid = 17500 + 225 = ₹  18025.

Tax Rebate of ₹ 2000 : – According to new provision announced by the Finance Minister during Budget session of 2013, a tax credit of ₹ 2000 has been given to the individuals with income up to ₹ 5,00,000 per annum.So this is a small but appreciable relief for tax payer in lower income group.

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