INCOME TAX SLABS AND EXEMPTIONS AVAILABLE

A. Individuals and HUFs FY 2012-2013(AY2013-2014)

I. Individual (other than II and III below) and HUF

	Income Level / Slabs	Income Tax Rate
i.	Where the total income does not exceed Rs. 2,00,000/-.	NIL
ii.	Where the total income exceeds Rs. 2,00,000/- but does not exceed Rs. 5,00,000/-.	10% of amount by which the total income exceeds Rs. 2,00,000/-
iii.	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-.	Rs. 30,000/- + 20% of the amount by which  the total income exceeds Rs. 5,00,000/-.
iv.	Where the total income exceeds Rs. 10,00,000/-.	Rs. 130,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.

Education Cess: 3% of the Income-tax.

II. Individual resident who is of the age of 60 years or more but below the age of 80 years at any time during the previous year

	Income Level / Slabs	Income Tax Rate
i.	Where the total income does not exceed Rs. 2,50,000/-.	NIL
ii.	Where the total income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-	10% of the amount by which the total income exceeds Rs. 2,50,000/-.
iii.	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-	Rs. 25,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.
iv.	Where the total income exceeds Rs. 10,00,000/-	Rs. 125,000/- + 30% of the amount by which  the total income exceeds Rs. 10,00,000/-.

Education Cess: 3% of the Income-tax.

III. Individual resident who is of the age of 80 years or more at any time during the previous year

	Income Level / Slabs	Income Tax Rate
i.	Where the total income does not exceed Rs. 5,00,000/-.	NIL
ii.	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-	20% of the amount by which the total income exceeds Rs. 5,00,000/-.
iii.	Where the total income exceeds Rs. 10,00,000/-	Rs. 100,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.

Education Cess: 3% of the Income-tax.

Tax Benefit of Home Loan Repayment

Section 24: Tax Benefit on the Interest On Home Loan

The interest on the home loan is treated differently, and Section 24 deals with the tax aspect of the interest on house loan repayment.

The maximum limit under this section is Rs. 1,50,000 and you don’t have to actually live in the house to claim this benefit.

The interest payment is deducted from your taxable income and thus reduces your tax liability. There is no limit on the number of houses you can claim this as well as the location of the houses. The only limit is Rs. 1,50,000 on the whole amount.

 The Income Tax Act, 1961 provides for exemptions from income tax liability under specific conditions. These criterions are outlined in the various sections of the Act described below:

1) Section 80 C (Limit: Rs. 1,00,000)

1.       Income tax deductions is availed under Section 80C. Section 80C is the most popular because it encourages taxpayers to save a portion of their income. If a taxpayer’s taxable income lies in the highest tax bracket, he/she can take advantage of Section 80C to reduce his/her taxable income by Rs.1 lakh. This leads to a saving of around Rs. 33,000 in taxes by provisions of Section 80C. The following is a list of important ways in which a taxpayer can get benefit of section 80C of Indian Income Tax Act :

1.       Provident Fund (PF): Any contributions to Provident Fund, Voluntary provident Fund (VPF) or savings made in Public Provident Fund (PPF Account) are eligible for income tax deduction under section 80C of Indian Income Tax Act.

2.      Life Insurance Premiums: Any Life Insurance premiums (for one or more insurance policies) paid by the individual for himself/herself, his/her spouse or children are eligible under income tax deduction under section 80C of Indian Income Tax Act.

3.      ELSS Equity Linked Saving Schemes: Any investment made in certain Mutual Funds called equity linked saving schemes qualifies for section 80C deduction. It is to be noted thatnot all mutual fund investments are eligible for this deduction.

4.      ULIP (Unit Linked Insurance Plan): Investments made in certain ULIPs of Unit Trust of India and LIC of India are eligible for 80C deduction.

5.       Bank Fixed deposits or Term deposits of more than 5 years: According to a relatively new provision amount saved in fixed deposits of term at least five years is eligible for income tax deduction under section 80C of Indian Income Tax Act.

6.      Principal part of EMI on Housing Loan: If an assessee is making EMI payments on a housing loan, the principal part of the EMI is eligible for income tax deduction under section 80C. Note that the interest part is also eligible for tax deduction, but under Section 24 and not Section 80C (please refer below). If one doesn’t own a house but pays rent for it, deduction can be availed under section 80GG of Indian Income Tax Act which is described below.

7.       Tuition Fees: Amount paid as tuition fee for the education of up to two children of the assessee is eligible for deduction under section 80C of Indian Income Tax Act.

8.      Other 80C deductions: Amount saved in National Saving Certificate (NSC), Infrastructure Bonds or Infra Bonds, amount paid as stamp duty and registration charges while buying a new home are eligible for income tax deductions under section 80C of Indian Income Tax Act.

2) Section 80 CCF – Additional Rs. 20,000 on investments towards approved Infrastructure bonds

1.       Section 80CCF allows an individual to invest an additional Rs. 20,000 in infrastructure bonds, and have that amount deducted from his/her taxable income in addition to the Rs. 100,000 deduction assesse gets from other tax saving instruments.

2.      These infrastructure bonds are listed on a stock exchange, however they come with a lock in period, and an individual can’t sell them before the lock in period expires. For example, the IDFC bond has a lock in period of 5 years, so one can’t sell these bonds within 5 years.

3) Section 80CCD

1.       Where the Central Government or any other employer makes any contribution to the account of employee for the pension scheme, the assessee shall also be allowed a deduction in the computation of his/her total income of the whole of the amount contributed by the Central Govt. or any other employer not exceeding 10% of his salary in the previous year. Contribution to NPS and returns on NPS are tax free, but withdrawals are still taxable.

4) Section 80 D

1.       Section 80D of Indian Income Tax Act is especially useful if the employer does not cover their employee’s health or medical expenses. It is a good idea to get medical insurance or health insurance for the individual, his/her spouse, dependent children or dependent parents, as one can claim a deduction of up to Rs. 15000/- per annum for the premium paid on this insurance. For senior citizen this limit is Rs. 20000. With effect from 1-4-2009, one can claim the total of the following items for deduction under section 80D:

Mediclaim Premium on the Health of	Investment limit
a) Self Spouse and Children	Rs. 15,000
b) Parent/Parents	Rs. 15,000
c) If Parent/ Parents Senior citizen	Rs. 20,000

5) Section 80DD

1.       Section 80DD of Indian Income Tax Act provides provision for tax deduction if an individual (assessee) incurs medical expenditure for the dependents who are disabled. Here dependent means spouse, children, brothers, sisters or any one of them.

2.      Exemption given for Expenditure made for a disabled dependent towards Medical Treatment/Training/Rehabilitation also includes the LIC/Insurance premium paid towards maintenance of such dependant.

3.      Maximum deduction allowed is Rs. 50,000/- in case of normal disability and Rs. 1 Lakh in case of severe disability.

6) Section 80DDB

1.       Costs incurred for treatment of specified illnesses, could fetch one a tax benefit under section 80DDB.

2.      Available Deduction – For individual assesses less than 65 years of age, a deduction limit of Rs. 40,000 is applicable. For a senior citizen, the limit is Rs. 60,000.

3.      Scope of Deduction – Deduction is applicable for treatment of self, spouse, children, siblings, and parents, wholly dependent on assessee.

1.       Diseases covered
- Neurological Diseases (where the disability level has been certified as 40% or more).
- Parkinson’s Disease
- Malignant Cancers
- Acquired Immune Deficiency Syndrome (AIDS)
- Chronic Renal failure
- Hemophilia
- Thalassaemia

7) Section 80E

1.       Under section 80E of Indian Income Tax Act, any amount of interest paid on educational loan taken for assessee’s higher education or higher education of assessee’s husband / wife or children is deductible from assessee’s taxable income. Here higher education means – studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics.

2.      Deduction is allowed for repayment of interest component of Higher Education loan. All education after Class XII is considered, either vocational or Fulltime given that the school/institute/university is recognized by the government.

 8) Section 80G

1.       Donations made to funds like Prime Minister’s Relief Fund, National Children Foundation, any University or educational institution of ‘national eminence’, etc. are deductible from assessee’s taxable income according to section 80G of Indian Income Tax Act.

2.      Contribution to exempt charities – 25/50/75/100% depending on the charity and as per approval

9) Section 80U

1.       It is deduction in the case of a person with disability. An individual who is suffering from a permanent disability or mental retardation as specified in the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability the deduction is Rs. 1,00,000.

2.      The assessee should furnish a certificate from a medical board constituted by either the Central or the State Government, along with the return of income for the year for which the deduction is claimed.

10) Section 24(1)(vi)

1.       Housing loan interest. Maximum Investment Limit – Rs. 1,50,000 (for loans taken after 1 April 1999. For loans before that date, Maximum Investment Limit is Rs.30,000).

Let us look at an example to see how
Suppose assessee’s total taxable income is Rs. 5,00,000.
Total Repayment of Home loan is 3,30,000 in current financial year.
Principal repayment = Rs 1,50,000
Interest Payable = Rs 1,80,000.
But the total deductions allowed are calculated as follows:
Deduction on Principal repayment = 1,00,000 (Section 80C)
Deduction on interest component = 1,50,000 (Section 24b)
Thus the total deduction allowed = 2,50,000

Hence now assesee’s total taxable income becomes only Rs. 2,50,000 (5-2.5Lacs)

11) Superannuation

Any contribution made by a company to a superannuation fund uptoRs. 1,00,000 is tax free in the hands of the employee.

12) Conveyance/Transport Allowance

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

13) Medical Allowance

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

14) HRA

Any House Rent Allowance given to an employee is tax free up to 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)

15) Professional Tax

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

Tuition Fees under Section 80C:

Tuition fees under income tax act is full time education of any two children in any university, college, school or other educational institution, subject to over-all limit of tax deduction under section 80C. Deduction for tuition Fees is valid for Rs. 1,00,000. The total amount of deduction under section 80C, 80CCC and 80CCD should not exceed Rs. 1,00,000/-.

Payment allowed for deduction u/s 80C on Tuition Fees

- Fees paid to regular educational institution irrespective of the class attended by the child.

- Payment of fees to play schools or crèches will be allowed as deduction.

- Fees for admission are excluded from amounts eligible for deduction.

- The deduction is allowed only for two children.

- Deduction is available of paid basis.

- Adopted Child’s tuition fees is also eligible for deduction

Tuition Fees which is allowed for deduction u/s 80C

- Deduction is not allowed for private tuition, coaching center.

- University College School or other educational institution must be situated in India. It can be affiliate to any foreign university.

- A late fee is not eligible for deduction.

- Development fees or donation is not eligible.

- Payment of fees for overseas education is not allowed.

- Fees for admission are excluded from amounts eligible for deduction.

- Transport charges, hostel charges, Mess charges, library fees charges incurred for education are not allowed.

- Spouse’s tuition fees are not allowed for deduction.