Click to download All in One TDS on Salary for Private Employees for the Financial Year 2014-15 as per Finance Budget 2014.[ This Excel Utility can prepare at a time Tax Compute Sheet + Automated HRA Exemption Calculation + Automated Form 16 Part A&B and Part B ]

As you are aware, the Union Budget for FY 2014-15 was tabled in the Parliament by the Finance Minister of India on 10-Jul-2014. There are some changes to the computation of tax on salary which payroll managers need to consider for FY 2014-15.

1. Changes in tax rates

The revised tax rates for salaried employees (aged 60 years and below) for FY 2014-15 are as follows.
Total Income for the Year in Rs.
Tax Rate in %
Up to 2,50,000
Nil
2,50,001 to 5,00,000
10
5,00,001 to 10,00,000
20
Above 10,00,000
30
The revised tax rates for salaried employees (aged above 60 years but below 80 years) for FY 2014-15 are as follows.
Total Income for the Year in Rs.
Tax Rate in %
Up to 3,00,000
Nil
3,00,001 to 5,00,000
10
5,00,001 to 10,00,000
20
Above 10,00,000
30

2. Increase in deduction under Section 80C

The deduction under 80C (Life insurance premium, PPF, investment in National Savings Certificate, interest from notified bank deposits, principal repayment on housing loan, etc.) was restricted to Rs.1 lakh in 2013-14. The same has been increased to Rs. 1.5 lakh for 2014-15.
Consequent to the change in section 80C, section 80CCE has been amended so as to raise the

limit of aggregate deduction under sections 80C, 80CCC and 80CCD from Rs. 1 lakh to Rs.1.5 lakh.

3. Increase in deduction under Section 24 – Interest on housing loan

The tax deduction on housing loan interest payment (for a self occupied property) was restricted to Rs. 1.5 lakh per annum in FY 2013-14. For the year 2014-15, the limit has been increased to Rs. 2 lakh.
There is no reference to Section 80EE in the Finance Bill for FY 2014-15. Hence, the carry forward of unutilized tax deduction for first time owners of residential property, if applicable, is available for FY 2014-15.
Note:
1. The Education Cess stays at 3%.
2. In case the total taxable income goes beyond Rs. 1 crore in the year, a surcharge of 10% (subject to marginal relief) is to be deducted – as it was in FY 2013-14.

What about the tax credit of up to Rs. 2,000?

We have received queries from payroll managers regarding the availability of Rs. 2,000 tax credit in FY 2014-15. The Financial Bill tabled in the Parliament does not provide for the removal of tax credit under Section 87A. Hence, the tax credit of Rs. 2,000 is available for FY 2014-15 as long as the total income does not exceed Rs. 5 lakh for the year.

How about some reforms?

Now that the new government has presented the first budget of its term, it is probably time that the government turned its attention to simplifying the administration of tax on salary. The current procedures are needlessly complex and procedurally cumbersome for employers. Here are some suggestions:
a. Make TDS on salary similar to TDS on other payments. Employers could be asked to deduct a standard rate (say, 10%) and the primary responsibility of payment of tax on salary could be placed on employees.
b. Stop asking employers to verify the proof of investment while providing tax benefits to employees. Employers expend significant efforts each year in scrutinizing the documents submitted by employees. Surely, organizations are better off focussing on their business transactions rather than working as an extension of the Income Tax Department.
c. Do away with or simplify calculation of some of the tax exemptions. We have talked about the complexity related to calculation of exemptions such as those on Leave Travel Allowance in earlier posts.
d. Do away with quarterly return (Form 24Q) and instead ask employers to submit the break-up of TDS on salary along with the PAN of individual employees at the time of monthly TDS remittance (similar to providing employee-wise breakup of Provident Fund amounts in the PF challan).