Taxexcel: Tax Limit Changes in F.Y.2015-16

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Budget 2015 has been introduced in Parliament. The Finance Minister has kept the Personal Income Tax rates unchanged for the Financial Year 2015 /2016 (Assessment Year 2016-2017).

He has to introduce or extend the Tax Deduction limits Under few Sections of the Income Tax Act.

Let us understand all the important sections and new introduce with respect to ‘Income Tax Deductions 2015′. This list will help you in planning your taxes.

Income Tax Deductions 2015

Section 80c

The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The various investment avenues under this section are;

PPF (Public Provident Fund)
EPF (Employees’ Provident Fund)
Five year Bank or Post office Tax saving Deposits
NSC (National Savings Certificates)
ELSS Mutual Funds (Equity Linked Savings Schemes)
Kid’s Tuition Fees
SCSS (Post office Senior Citizen Savings Scheme)
Principal repayment of Home Loan
NPS (National Pension System)
Life Insurance Premium
Sukanya Samriddhi Account Deposit Scheme

Section 80CCC

Contribution to annuity plan of LIC (Life Insurance Corporation of India) or any other Life Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum allowable Tax deduction under this section is Rs 1.5 Lakh.

Section 80CCD

Employee can contribute to Government notified Pension Schemes (like National Pension Scheme – NPS). The contributions can be upto 10% of the salary (or) Gross Income and Rs 50,000 additional tax benefit u/s 80CCD (1b) is proposed in Budget 2015. In FY 2014-2015, the maximum tax exemption allowed under Section 80CCD is Rs 1 Lakh only. In Financial Year 2015-2016 or Assessment Year (2016-2017), this will be Rs 1.5 Lakh (u/s 80 CCD 1 ) and additional exemption of Rs 50,000 u/s 80CCD (1b) will be allowed. ( To claim this deduction, the employee has to contribute to Govt recognized Pension schemes like NPS)

(10% of salary is applicable for salaried individuals and Gross income is applicable for non-slaried. The definition of Salary is only ‘Dearness Allowance.’ If your employer also contributes to Pension Scheme, the whole contribution amount (10% of salary) can be claimed as tax deduction under Section 80CCD (2). The ceiling limit of 1.5 Lakh u/s 80CCD is not applicable on employer’s contribution.)

Section 80D

Deduction u/s 80D on health insurance premium will be Rs 25,000, increased from Rs 15000. For Senior Citizens it has been increased to Rs 30,000 from the existing Rs 20,000. For very senior citizen above the age of 80 years who are not eligible to take health insurance, deduction is allowed for Rs 30,000 toward medical expenditure.

Section 80DDB

An individual (less than 60 years of age) can claim upto Rs 40,000 for the treatment of specified critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under this section for Senior Citizens is proposed as Rs 60,000 and for very Senior Citizens (above 80 years) the limit is Rs 80,000

Section 24 (B)

You can claim upto Rs 2 Lakh as tax deduction on the home loan interest payment. If your property is a let-out one then the entire interest amount can be claimed as tax deduction.

Section 80U

You can claim up to Rs 75,000 (increased from the existing Rs 50,000) for spending who have up to 80% disability. It is also been Introduce to increase the limit of deduction from Rs 1 lakh to Rs 1.25 lakh in case of above 80% severe disability.

The other sections are – Section 80E (tax deduction benefit on the interest payment of an education loan), Section 80 G (Donations), Section 80GG (when HRA is not paid by the company but you incur rental expenses) and 100% TAX DEDUCTION on contributions made to SWACHH BHARAT & CLEAN GANGA initiatives have also been proposed.

The above ‘Income Tax Deductions 2015′ are applicable for Financial year 2015-2016 (or Assessment Year 2016-2017).

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Allowances Exempted Under Section 10 of Income Tax Act

1. House Rent Allowance (HRA)

You get a job and shift to another city. Because of your job, you live in a different place. You are forced to live in a rented accommodation. The rented flat is not by choice but because of the duty. Hence, the expense on rent is because of your job. You can’t avoid this, even if you wish. Therefore, government exempt the rent from income tax. However, your employer must pay the house rent allowance.

Exemption of HRA is a minimum of these three.

a. Actual HRA received.

b. Rent paid less 10% of salary.

c. 40% of Salary (50% in case of Mumbai, Chennai, Kolkata, Delhi). In this case, salary is basic plus dearness allowance (basic+DA).

Click here to downloadAutomatic HRA Calculator

Leave Travel Allowance

LTC or LTA is exempted if the same is actually spent

Transport Allowance

You daily go to your office or workplace from you house. You also spend on the local transport. This expenditure is also forced upon you. Therefore, the government has exempted transport allowance from the income tax, provided your employer gives you the transport allowance.

You don’t need to give any receipt of this local travel. However, the tax exemption is Rs 1600/month, and Phy.disable person Rs. 3200/- P.M.

Children Education Allowance

Children Education allowance in also exempted from income tax. Your employer must give this allowance for availing the tax exemptions. It is Rs. 100 per month per child up to a maximum of 2 children.

Hostel Subsidy

This is another tax exemption related to your child’s education. It is Rs. 300 per month per child up to a maximum of two children.

Other Allowance Eligible For Income Tax exemptions

Uniform Allowance, Special Compensatory Allowance, High Altitude Allowance, allowances applicable to North East, Compensatory Field Area Allowance, Counter Insurgency Allowance, High Active Field Area Allowance, island duty allowance, tribal allowance etc. These allowances are tax-free, but you need to produce the proof of the actual expense in some cases.

Income Tax Exemption on Interest Paid on Housing Loan

This Exemption is also related to your accommodation because of the job. After shifting to a different place, you may opt for your own house instead of rented accommodation. If you take home loan for the house, the interest payment is tax exempted. You can get maximum exemption of Rs 2 lakh on housing loan interest U/s 24B. There are some conditions for this exemption.

The house should be self-occupied. You may get this exemption if your home is under construction. however the construction should complete within 3 years.

Tax Deduction Under Section 80C

The Government wants to encourage some certain types of investments and expenses. To achieve this goal it gives the benefit of tax deductions. There are many investments and expenses under section 80C, 80CCC and 80CCD. However, the total deductions under this section are limited to Rs 1.5 lakh.

Deductions Under Chapter VIA of Income Tax Act

Section 80CCG: Rajiv Gandhi Equity Saving Scheme (RGESS)

This scheme also gives you the extra tax saving. To avail this benefit, you must be the first-time investor in the share market. Your annual income should not be more than Rs 10 lakh. You can invest up to Rs 50,000 under this scheme. However, the tax deduction would be available for the 50% of your investment. So, if you invest Rs 50,000, you will get the tax deduction of only Rs 25,000. There is some mutual fund scheme which is designed for RGESS. However, due to the complex rules, it could not become popular.

Section 80D: Medical Insurance Deduction

One must use this tax saving opportunity. In the budget 2015 the government does not change income tax slab, but it has increased the limit for section 80D.Section 80D can give you a tax deduction of up to Rs 55,000/- [ for below 60 years Rs. 25,000/- and above 60 years Rs.30,000/- ( Total Rs. 55,000/-)]. Medical insurance of self, family and parents are eligible for tax deduction under section 80D.

Section 80DD: Deduction For Maintenance of Disable Dependent

Under this section, one can get extra tax deduction of Rs 50,000. To avail this deduction, you must fulfill some conditions.

1. A person with a disability must be dependent upon you. The disability may be physical or mental.

2. You must produce a certificate from the doctor.

3. You must incur the expense of treatment, rehabilitation, nursing and training.

If you deposit any amount in any scheme for the disabled, it would be also eligible for tax deduction.

If dependent person is with severe disability, you can claim deduction up to Rs 1,00,000.

Section 80DDB: Serious Illness Deduction

This deduction is for the treatment of serious illness. An assessee can get an income tax deduction of Rs 80,000 under this section.

1. The deduction is for the expense of illness of self or dependent.

2. The illness should be within the prescribed list.

3. There should be real expense. Any reimbursements of insurance claims should be subtracted.

4. You must give a certificate from the government doctor.

5. For senior citizens this deduction limit is Rs 80,000.

Section 80E: Deduction on Loan for Higher Studies

Like the home loan interest, one can also claim income tax deduction for education loan interest.

1. You must take education loan from a financial institution.

2. You can avail this tax deduction maximum of 7 years.

3. You can take the benefit of this deduction only for the higher education.

4. You can take this benefit only for the education of self, spouse or children. If you are the legal guardian of a student, you can also take this benefit.

Section 80G: Deduction for Donations

The donations specified in Section 80G are eligible for deduction. The deduction may of 100% of donation or 50%, It depends upon the type of receiver.

Section 80GG: Deduction on House Rent Paid

This deduction is for those, who don’t get the house rent allowance from their employer. Such person can avail this deduction according the specified rules. Max Limit Rs. 24,000/- P.A.

Section 80TTA: Saving Account Interest Deduction

Interest earned on a saving account is not added in taxable income, if it is less than Rs 10,000 in a financial year.

Section 80U: Deduction For Disabled

Under section 80U a person with disability gets extra deduction from his/her taxable income. Such person can deduct Rs 75,000 from the taxable income. In case the disability is severe, the deduction is up to Rs 1,25,000. To avail this deduction one should obtain a certificate from the government doctor.

Section 87A: Tax Rebate Rs.2,000/- who’s taxable income less than 5 Lakh.