To start with, let the explain what exactly has changed in terms of taxation from last year (i.e. 2014-15):

Click here to download All in One TDS on Salary for Govt & Non-Govt employees for the Financial Year 2014-15 [ This Excel Utility can prepare at a time Tax Compute Sheet + Arrears Relief Calculation + HRA Exemption Calculation + Form 16 Part A&B and Part B ]

  1. Tax slabs have been changed
  2. Deduction limit under sec. 80C increased to 1,50,000 from earlier 1,00,000. PPF investment limit under sec. 80C also increased to 1,50,000
  3. Exemption for interest paid on your housing loan has been raised to 2,00,000 from 1,50,000 earlier
All changes this budget have been beneficial for the tax payer. If you are already aware of all the provision for saving income tax, you can skip the remaining part and go directly to the income taxcalculator for FY 2014-15 to compute your income tax liability (or TDS) basis your salary or business income. Others, do read on to know all the different tactics you can use to save on income tax.

Income Tax Slabs

Income tax slabs have been changed this year. Standard deduction limit has been raised to Rs. 2,50,000 for both Male and Female assesses.
1) In Case of General Assesses (Both Male & Female):
Income Bracket
Rate
0 to Rs. 2,50,000
0   %
Rs. 2,50,001 to Rs. 5,00,000
10 %
Rs. 5,00,001 to Rs. 10,00,000
20 %
Above Rs. 10,00,000
30 %
2) In Case of Senior Citizens (Age above 60 years but below 80 years):
Income Bracket
Rate
0 to Rs. 3,00,000
0   %
Rs. 3,00,001 to Rs. 5,00,000
10 %
Rs. 5,00,001 to Rs. 10,00,000
20 %
Above Rs. 10,00,000
30 %
3) In Case of Very Senior Citizens (Age 80 years and above):
Income Bracket
Rate
0 to Rs. 5,00,000
0   %
Rs. 5,00,001 to Rs. 10,00,000
20 %
Above Rs. 10,00,000
30 %
* On final tax amount, a surcharge of 3 %
**No surcharge above 10 lacs.
***An additional surcharge of 10% will be applicable on persons whose annual income is above Rs. 1 crore. This surcharge will be applicable for only one year

Income Tax Exemptions: 

1) Section 80 C Limit  – Raised this year (to Rs. 1,50,000)

  • Deduction on premium paid for a life insurance policy, taken after 1 April 2012, will be allowed only if yearly premium is less than 10% of sum assured.  If its more than 10% then it will be not eligible for deduction u/sec. 80C
  • ELSS (Mutual Fund)
  • PPF (upto Rs. 1,50,000)
  • EPF
  • FD for 5 years
  • Pension Plans
  • NSC
  • Post Office SB
  • Infrastructure Bonds
  • Expenditure on Children Education (For upto 2 children only for full time education)
  • Tuition fees (Only Tuition fees excluding Development Fees, Donations, etc.)
  • Housing loan principal
  • K.V.P ( Newly Added )

2) Section 80CCD - Unchanged this year

Deduction under this section can be claimed only if the contribution to your NPS account is made by your employer and the deduction is limited to a maximum of 10% of your basic salary. Returns on NPS are tax free, but withdrawal is still taxable. The deduction under sec 80CCD is over and above the deduction available under sec 80C.

3) Section 80 D – Unchanged this year

  • Deduction of Rs. 15000/- is allowed if the same is paid as premium for Medical Insurance taken for self / dependents or towards preventive health check-up (max Rs. 5000). In case any of self / dependents is a senior citizen, the deduction allowed is Rs. 20000/-
  • Additional Rs. 15000/- is allowed as deduction if the same is paid as premium for Medical Insurance taken for parents. In case the parent is a senior citizen, the deduction allowed is Rs. 20000/-
                Age profiles
Premium paid for medical insurance
Total Deduction under Sec. 80D
Yourself, your spouse and kids, if any
Parents
Every one is under 60 years
15,000
15,000
30,000
You and your family are less than 60 years & parents are above 60 years
15,000
20,000
35,000
You and your parents are of 60 years and above
20,000
20,000
40,000

4) Section 80DD – Unchanged this year

Deduction under section 80DD
  • Exemption given for expenditure made for a disabled dependant towards Medical Treatment/Training/Rehabilitation. It also includes the LIC/Insurance premium paid towards maintenance of such dependant.
  • Maximum deduction allowed is Rs. 50,000/- in case of normal disability and Rs. 1 Lakh in case of severe disability.

5) Section 80DDB - Unchanged this year

  • Exemption given for expenditure incurred on specified disease or ailments such as cancer/aids.
  • Maximum deduction allowed is Rs. 40,000/-. In case of Senior Citizens, maximum deduction allowed is Rs. 60,000/-
List of ailments covered:
(i) Neurological Diseases where the disability level has been certified to be of 40% and above,
  1. Dementia ;
  2. Dystonia Musculorum Deformans ;
  3. Motor Neuron Disease ;
  4. Ataxia ;
  5. Chorea ;
  6. Hemiballismus ;
  7. Aphasia ;
  8. Parkinsons Disease ;
(ii) Malignant Cancers ;
(iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
(iv) Chronic Renal failure ;
(v) Hematological disorders :
  1. Hemophilia ;
  2. Thalassaemia.

6) Section 80E - Unchanged this year

Deduction is allowed for repayment of interest component of Higher Education loan. All education after Class 12 is allowed, either vocational or Fulltime. But should be from a school/institute/university recognized by the government.

7) Section 80G - Unchanged this year

  • Contribution to exempt charities – 25/50/75/100% depending on the charity and as per approval
  • 100% exemption on donation to political parties

8) Section 80U - Unchanged this year

  • Deduction upto Rs. 50,000/- is allowed in case of Permanent Disability.
  • In case of Permanent Disability exceeding 80%, maximum deduction allowed is Rs. 1,00,000/-.

9) Section 24(1)(vi) & Section 80EE - Raised this year

  • Housing loan interest. Maximum allowed limit raised to – Rs. 2,00,000 (for loans taken after 1 April 1999. For loans before that Maximum Investment Limit was 30,000).

  • Additional deduction of Rs. 1 lac will be applicable to persons taking first home loan of up to Rs. 25 lacs for property worth upto Rs. 40 lac. For such persons, the total deduction will be Rs. 2.5 lacs (Rs. 1.5 lac available under section 24(1)(vi) and Rs. 1 lac available under this new section 80EE).

11) Conveyance/Transport Allowance - Unchanged this year

Any Conveyance / Transport Allowance given to an employee is tax free upto Rs. 9,600 /- (No Supporting Bills required).

12) Medical Allowance - Unchanged this year

Any Medical Allowance given to an employee is tax free upto Rs. 15,000 /- (Supporting Bills required).

13) HRA - Unchanged this year

Any House Rent Allowance given to an employee is tax free upto the minimum value of the following conditions (subject to – when an employee can produce rent paid receipts from landlord for the period and if the employee has not availed of tax exemptions for home loan interest / principal repayment):
  1. 50% of Annual Basic (40% of Annual Basic in case of non-metros)
  2. Actual HRA received
  3. Rent Paid – (10% of Annual Basic)
    Calculate HRA Exemption U/s 10(13A) with Excel utility

14) Professional Tax - Unchanged this year

Any Professional Tax deducted from an employee’s salary can be reduced from the annual salary income to arrive at taxable salary.

15) Provident Fund - Unchanged this year

Provident Fund contributions (under section 80 C and subject to an overall investment limit of Rs. 1,50,000 ) deducted from an employee’s salary are tax exempt.

16)80CCG – Direct Equity Investment - Unchanged this year

Under ‘Rajiv Gandhi Equity Savings Scheme‘ – a new equity investor will be able to claim 50% of his investment in direct equity as deduction subject to maximum investment of Rs. 50,000 and provided his taxable income is below Rs. 10 lacs. The investment will be subject to 3 years lock-in.  
Government has notified this scheme (RGESS). Mutual funds and ETFs that invest in BSE100 or CNX 100 stocks or PSUs which are Navratna, Maharatna and Miniratna will qualify under this scheme. These investments can be traded over stock exchange after 1 year of investment. New equity investor has been defined as someone who has opened a Demat account but has not bought any securities till date of notification of this scheme (22 Sep 2012).

17) Section 80TTA – Savings Bank Interest - Unchanged this year

No tax will be charged on interest earned on balance in savings bank account subject to a maximum of Rs. 10,000 per year.

18) Section 87 A [Tax Rebate Rs.2,000/-  - Unchanged this year