Taxexcel: Tax Rebate U/s 87A for F.Y.2017-18

Income Tax 2017-18 (A.Year 2018-19) Rate, Exemptions, Deductions and Rebate for Salaried Employees under Section 10, Section 24, Section 89(1), Chapter VIA, and Section 87A

Income Tax Rate 2017-18

Section 10 (13A) – Exemption in respect of HRA:

Under Sec. 10(13A), an employee who is in receipt of House Rent Allowance (HRA) can claim exemption, if he does not live in his own house, and pays rent in excess of 10% of his salary for his residential accommodation.

Exemption u/s 10(13A) is the least of the following

1. Actual amount of HRA received

2. 50% (for Chennai, Mumbai, Kolkata and Delhi) / 40% (for other places) of the Salary for the relevant period

3. Rent paid Less 10% of Salary for the relevant period. Free Download H.R.A. Exemption Calculator U/s 10(13A)

Section 87A – Rebate of Income Tax for Taxable income up to Rs. 5 Lakh

Finance Act 2016 provides for rebate of Income up to Rs. 5000/- in respect of Persons who have Taxable not exceeding Rs. 5 lakh.

Section 10(14) – Transport Allowance and Children Education Allowance (CEA)

Under Section 10(14), the Budget FY 2016-17 lets you claim Rs. 19,200 tax exemption as transport allowance

And Rs. 2,400 tax exemption as Children Education Allowance (CEA) in a financial year.

Section 24(b) – Home Loan

If you have taken a Home Loan, then you can claim a tax deduction on the interest component of the loan under Section 24(b). For self-occupied properties, you can benefit from deductions of up to Rs. 2,00,000.

Section 89(1) – Income Tax relief in respect of Arrears of Salary pertaining to previous years

If arrears of salary has been received in Financial year 2016-17 related to previous years then Relief of Income Tax can be claimed u/s 89(1) by accounting income from arrears in respective years on notional basis. Download Automatic Arrears Relief Calculator with Form 10E from F.Y.2001-02 to F.Y. 2016-17

Deductions allowed under Chapter VI A of Income Tax Act

Deduction Limit – Sec 80CCE. As per Section 80CCE, deduction can be claimed upto Rs. 1,50,000 for the payments / contributions made under Sections 80C, 80CCC and 80CCD[ Additional deduction U/s 80CCD(2) & 80CCD(1B) deduction out of U/s 80C 1.5 Lakh]

Section 80C – Subject to overall limit of Rs. 1,50,000 under Section 80CCE

For investments in specified schemes, saving instruments etc.

1. Life insurance premium for policy:
a) in case of individual, on life of assessee, assessee’s spouse and any child of assessee
b) in case of HUF, on life of any member of the HUF

2. Sum paid under a contract for a deferred annuity:
a) in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity)
b) in case of HUF, on life of any member of the HU

3. Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary]

4. Contributions by an individual made under Employees’ Provident Fund Scheme

5. Contribution to Public Provident Fund Account in the name of:
a) in case of individual, such individual or his spouse or any child of such individual
b) in case of HUF, in the name of any member there of

6. Contribution by an employee to a recognized provident fund

7. Contribution by an employee to an approved superannuation fund

8. Subscription to any notified security or notified deposit scheme of the Central Government.
For this purpose, Sukanya Samriddhi Account Scheme has been notified vide Notification No. 9/2015, dated 21/1/2015. Any sum deposited during the year in Sukanya Samriddhi Account by an individual would be eligible for deduction. Amount can be deposited by an individual in the name of her girl child or any girl child for whom such an individual is the legal guardian.

9. Subscription to notified savings certificates [National Savings Certificates (VIII Issue)]

10. Contribution for participation in unit-linked Insurance Plan of UTI:
a) in case of an individual, in the name of the individual, his spouse or any child of such individual
b) in case of a HUF, in the name of any member thereof

11. Contribution to notified unit-linked insurance plan of LIC Mutual Fund:
a) in the case of an individual, in the name of the individual, his spouse or any child of such individual
b) in the case of a HUF, in the name of any member thereof

12. Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]

13. Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children

14. Certain payments for purchase/construction of residential house property

15. Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/(b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both

16. Sum paid towards notified annuity plan of LIC or other insurer

17. Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005)

18. Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund)

19. Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions

20. Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above. 21. Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme framed and notified.

21. Subscription to notified bonds issued by the NABARD.

22. Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions)

23. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions)

Section 80CCC – Subject to overall limit of Rs. 1,50,000 under Section 80CCE

Contribution to certain specified Pension Funds such as LIC or other authorised Insurance Companies

Section 80CCD(1) – – Subject to overall limit of Rs. 1,50,000 under Section 80CCE

Deduction in respect of contributions to National Pension Scheme / System (NPS) notified by Central Government

Limit : 10% of salary in case of employees, 10% of gross total income in case of others

Section 80CCD(1B)

Deduction in respect of the deposit under a pension scheme notified by Central Government (NPS) up to Rs. 50,000/-

Section 80CCD(2)

Deduction in respect of employer contributions to NPS – National Pension Scheme / System – This deduction is available over and above the Rs. 1.5 lakh limit

Section 80D

Amount invested in Health Insurance

In case of Individual, amount paid: a) For self, spouse and dependent children: Up to Rs. 25,000 (Rs. 30,000 if specified person is a senior citizen or very senior citizen) b) For parents: additional deduction of Rs. 25,000 shall be allowed (Rs. 30,000 if parent is a senior citizen or very super senior citizen) In case of HUF, up to Rs. 25,000 (Rs. 30,000 if specified person is a senior citizen or very senior citizen).
The aggregate amount of deduction cannot exceed Rs. 60,000/- in case of an individual.

Section 80DD

Expenditure incurred for the medical treatment of a dependent (spouse, children, parents, brothers and sisters of the individual) up to Rs. 75,000 (Rs. 1,25,000 in case of severe disability)

Section 80DDB

Expenditure incurred for medical treatment of specified diseases for self, or wholly dependent spouse, children, parents, brothers and sisters up to Rs. 40,000 (Rs. 60,000 in case of senior citizen and Rs. 80,000 in case of very senior citizen)

Section 80E

Interest paid on Educational Loan with no limit

Section 80EE

Interest on loan for acquiring residential house property, sanctioned during the financial year 2016-17. The Housing Loan availed should be up to Rs. 35 lakh and should have been availed in the year 2016-17

Section 80G

Deduction in respect of donations to certain funds, charitable institutions, etc.

Section 80GG

Rent paid for residential accommodation from the income of Tax Payer / assessee who is not in receipt of HRA

Least of the following shall be exempt from tax: a) Rent paid in excess of 10% of total income*;
b) 25% of the Total Income; or
c) Rs. 5,000 per month.

Section 80 TTA

Interest on Savings Bank accounts subject to maximum of Rs. 10,000

Section 80U

Exemption of income tax for an income up Rs. 75,000 for persons with disability (Rs. 1,25,000 in case of persons with severe disability)

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1) Income Tax Slab Rates for FY 2017-18 or AY 2018-19 changed

There is a slight change in Income Tax Slab Rates for FY 2017-18 or AY 2018-19. They are as below

# Earlier for individual the tax rate for the income range of Rs.2,50,000 to Rs.5,00,000 was 10%. Now it is reduced to 5%.

# Same way, for Senior Citizens (Age above 60 years but below 80 years) the tax rate for the income range of Rs.3,00,001 to Rs.5,00,000 was 10%. This now slashed to 5%.

2) Surcharge for super rich

Earlier the surcharge of 15% was applicable to those whose income is over and above Rs.1 Crore. However, now the if your income exceeds Rs.50 lakhs but below Rs.1 Crore then you have to pay 10% tax.

Therefore now the surcharges are as below for super rich individuals.

If the total income exceeds Rs.50 lakhs but below Rs.1 Cr0re, a surcharge of 10% will be levied.
15% surcharge on income tax if the total income is over and above Rs.1 Crore.

3) Rebate under Sec.87A reduced to Rs.2,500

An individual who is resident Indian and whose total income does not exceed Rs. 3,50,000 is entitled to claim rebate under section 87A.

Hence, HUF or NRIs are not eligible for this rebate. Also, do remember that this rebate is not available for super senior citizens.

Earlier the rebate was Rs.5,000 for those whose income is up to Rs.5,00,000. However, from FY 2017-18 it is now reduced to Rs.2,500 and income range to Rs.3,50,000.

Hence, now let us an individual earning’s taxable income is Rs.3,00,000. Now the tax on this at 5% will be Rs.2,500. He can easily claim rebate under Sec.87A and reduce his tax liability to ZERO.

4) Holding period of immovable property for long term capital gain reduced

Earlier holding period of immovable property for long term capital tax was 3 years. Now it reduced to 2 years. Hence, this is the biggest boost to property holders.

Because if you buy today and sell after 2 years, then it will be considered as long term holding and taxed accordingly. I think this is bit a relief to all real estate owners.

5) The base year for indexation calculation is changed from 1st April, 1981 to 1st April, 2001

For calculation of taxation on capital gains like debt funds or immovable properties, we consider indexation benefit. For this, earlier the base year was 1st April, 1981. But not the base year changed to 1st April, 2001.

This is one more good news to all those who has to pay tax based on indexation benefits. It will dramatically reduce the tax liability.

6) You can’t transact more than Rs.3,00,000 in cash

To promote the digital economy and also to curb black money, Government decided to bring in the new law where you are not allowed to transact above Rs.3 lakh in cash.

For this purpose, a new IT Section was introduced. This is Section.269ST. The highlights of IT Section.269ST are as below.

This Rs.3,00,000 limit is per person and per day.
Also, this is related to single transaction.
Provisions of this section will not apply to in case of receipt of money by Government, any banking company, post office savings bank or co-operative bank.

7) One-page Income Tax Return Form

In order to promote tax filing from all individuals, Government will introduce the one-page income tax return form. This form can be used by those whose income is less than Rs.5 lakh and also they must have other than business income.

Also a person of this category who files income tax return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high-value transaction.

8) Changes in National Pension Scheme from Budget 2017

If your NPS account is at least 10 years old, then you will be eligible for withdrawing 25% of contributions (without accrued income earned thereon). Employer contributions cannot be withdrawn. This 25% is tax-free during withdrawal but will be within the 40% overall tax tax-free withdrawal limit.

9) Service Charge on e-tickets booked through IRCTC removed

Earlier the service tax on e-tickets booked through IRCTC was removed after the demonetization. However, now this is permanently removed to improve the cashless economy.

The service tax was Rs.20 on Sleeper and Rs.40 on AC classes for booking tickets through IRCTC.

10) Limit in set off of loss from “Income from House Property”

In respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds Rs.2 lakhs, against income under the other head.

Earlier there was no such set-off limit. This I think the negative news for real estate owners (especially those who have more than one home).