Latest income tax rates and important provisions

Income Tax Slabs and Rates for FY 2013-14 and AS 2014-15

by Rajesh Goyal     The following INCOME TAX RATES ARE applicable for the Financial Year ending March 31, 2014 (Financial Year 2013-14)-Assessment Year 2014-15): Every year the income tax rates are changed and it is important to get the latest income tax rates.  We give below the Income Tax Rates and Slabs applilcable for the FY 2013-14 or AS 2014-15.   The income rates and slabs for FY 2013-14 are the same as it was during FY 2012-13, except the following two major changes (frankly speaking this affects only a limited number of assesses) :- (a)  As per Finance Act, 2013 section 87A of the Income Tax Act, 1961 additional rebate of Rs.2000/- will be given to the individual tax payer whose total does NOT  exceed Rs 5 lakhs Thus, we can say that a benefit of Rs 2000/- tax credit has been given to persons having an annual income upto Rs 5 lakh. (b) There is a surcharge of 10% on persons whose taxable income exceeds Rs 1 crore per year. This will apply to individuals, HUFs, firms and entities with similar tax status. Income Range General (non-senior citizens) Category Women (Below 60 years of age) (This category is abolished from this year and is thus is same as that of  General Category Senior Citizens (Men and Women above 60 years of age), but below 80 years Very Senior Citizens (Men and Women above 80 years of age) Upto Rs. 2,00,000 Nil Nil Nil Nil Rs. 2,00,001 to Rs. 2,50,000 10% * 10% * Nil Nil Rs. 2,50,001 to Rs. 5,00,000 10% * 10% * 10% * Nil Rs. 5,00,001 to Rs. 10,00,000 20% 20% 20% 20% Above Rs. 10,00,000 30% ** 30% ** 30% ** 30%**           * A tax rebate of Rs 2,000 from tax calculated will be available for people having an annual income upto Rs 5 lakh.   However, this benefit of Rs2,000 tax credit will not be available if you cross the income range of Rs 5 lakh.  Thus we can say that tax payable in 10% slab will be maximum Rs28,000 (taking into account Rs 2000 tax credit), but for people who fall in income range of Rs5 lakh and above, the tax will be Rs30,000 + 20% tax on income above Rs 5 lakh; ** Surcharge of 10% will be payable, if income is above Rs 1 crore [Click Here to see the Income Tax Slab Rates for FY 2012-13 or AS 2013-14] Important Rules for filing of Tax Return 1. Filing of income tax is compulsory for all individuals whose gross annual income exceeds the maximum amount which is not charageble to income tax (e.g. Rs.2,50,000 for Senior citizens, Rs.200000/- for resident individuals 2. The last date for filing of income tax return is usually July 31 for individuals (sometimes the same is extended). 3. The penalty for non filing of income tax return is Rs.5,000/- (1) Deductions from Taxable Income (Section 80C) :- Ads by Google VARIOUS INVESTMENTS OPTIONS AVAILABLE TO INDIVIDUALS AND TAX BENEFITS AVAILABLE UNDER EACH OF THEM - Financial Year 2012-13 A new section 80C was introduced (replacing section 88) from the financial year 2005-06.  Under this Section, a deduction of upto Rs.1,00,000/- is allowed from Taxable Income in respect of the investments made in some specified schemes.   The schemes are  similar as were available in Section 88 earlier.  Now there are no sectoral caps and individuals can save in any of the schemes upto Rs.1,00,000/- (now even in PPF it is allowed upto Rs. 1 lac as against only Rs.70,000/- upto November, 2011).  The tax payers can plan their investments / savings so as to achieve their financial goals.   The details of such schemes alongwith some major features of each of these are given below : - (last reviewed  in February 2013) Saving Scheme Sec. under which Tax Benefit available Return Tax benefits for earnings (i.e. interest received / dividend received) Lock in Period and other Remarks National Saving Certificates -  ( NSC scheme  ) Section 80C 8.50% for VIII Series 5 Year NSCs; and  8.80% for 10 year NSCs for FY 2013-14 Taxable 5 years (reduced wef  Dec 2011 from 6 years to 5 years for new investments).  The yield on these NSCs will now be revised every year and will be 25 bps above the 5 year government bond yields Equity Linked Savings Schemes (ELSS) Section 80C Varies from year to year  (Market linked) Dividend is tax free 3 years Life Insurance Policies Section 80C Varies from year to year Varies from scheme to scheme Varies from scheme to scheme Unit Linked Insurance Plan (ULIP) Section 80C Varies from year to year Varies from scheme to scheme Varies from scheme to scheme (15 to 20 years) Infrastructure Bonds Section 80C Varies from issue to issue. These were around 8%+ in Dec 2011.   These have lost their charm as Additional Tax rebate of Rs 20,000 is NOT given now from FY 2012-13 onwards.  Taxable 3 to 5 years Contribution to EPF / GPF / Voluntary PF Section 80C 8.50% Interest earned is tax free Till retirement (loans are permitted only after 5 years) Insurance Policies Section 80C 6 to 7% only Earnings are tax free in most of the cases Locked till maturity ULIPS Section 80C Market linked Earnngs are tax free Partiail withdrawal allowed Public Provident Fund (PPF) Section 80C Decreased to 8.70% for FY 2013--14 Interest earned is tax free 15 years and extendable.  Withdrawals allowed after 7 years.  Yield on PPF will vary and will be fixed at 25 basis point above the 10 year government bonds. NPS Section 80C Market Linked Interest earned is tax free Withdrawal not permitted before maturity Tuition Fees including admission fees or college fees paid for full time education of any two children of the assessee. Section 80C Not applicable Not applicable Not applicable Repayment of Housing Loan (Principal) Section 80C Not applicable Not applicable Not applicable Bank Fixed Deposits - 5 Years Section 80C Varies  from bank to bank (around 8.00% - 9.00%) Nil 5 Years Senior Citizens Savings Scheme 2004 (from financial year 2007-08) Section 80C 9.20% for FY 2013-14 Taxable As per the guidelines issued in December 2011, there will be spread of 100 basis points above the 5 year bonds yields for this scheme. Post Office Time Deposit Account (from financial 2007-08) Section 80C         PS Note : Now some of the above investments (like PPF and  5 Year Senior Citizens Saving Schemes etc.) are linked to the benchmark of 10 year / 5 Year  government bond yields, and thus the return on these investments will vary as and when the yield on government bonds changes.    Therefore, now remember that you will not have fixed rate of return on these investments.    On the other hand, for other Small Saving schemes GoI will advise before 1st April every year, the rates applicable for those schemes for the next FY.  Such instruments will continue to have same return for the whole tenure of the investment.  [For clarification see below the notification which is self explanatory] HOW TO MAKE BEST USE OF SECTION 80C   OR   BACKGROUND AND KNOW ALL ABOUT SECTION 80C (2) Deductions Under Section 80CCC(1) : Under this section, the contributions by individuals towards "Pension" schemes of LIC or any othr Insurance company, is allowed as deduction of Rs.10,000/-.  However, as provided under section 80CCE, the aggregate deduction u/s 80C, and u/s 80CCC and 80CCD can not exceed Rs.1,00,000/-.  Thus effectively, now these are covered under the maximum limit of  Rs.1,00,000/- under section 80C. (3) Deductions Under Section 80 D : Basic Deduction under Section 80D,   Mediclaim premium paid for Self, Spouse or dependant children is allowed upto Rs 15,000.  In case any of the persons specified above is a senior citizen (i.e. 65 years or more as of end of the year) and Mediclaim insurance premium is also paid for such senior citizen, deduction amount is enhanced to Rs. 20,000. Additional deduction: Mediclaim premium paid for parents. Maximum deduction Rs 15,000. In case any of the parents covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000. Thus, in a net shell we can say that  health insurance premium that you pay for yourself, your dependents (spouse and children) and your parents, are all considered for tax benefit under Section 80D of the Income Tax Act 1961. Therefore, you can claim a deduction up to Rs.30000 on your taxable income, and if your parents are senior citizens, the deductible amount goes up to Rs.35000.  However, there are a few conditions: You can not claim tax benefit on health insurance premium paid for your in-laws; Proof of payment of premium has to be furnished, in order to avail the tax benefit The health insurance premium must be paid from taxable income of that year only if you want to claim a deduction.   Thus, if one has paid the premium from ones savings or from gifts of money received, then one is not eligible for tax benefits under this section.     However, you have to remember that the premium paid by any mode of other than cash is eligible. Note prior to 1st April 2009, premium payment was required to be paid only by cheque.  However, now even the payments through Credit card or other on line  mechanism are allowed.  Thus, now all payment modes except cash payment are accepted (3A) Deductions Under Section 80 E :    Under this section, deduction is available for payment of interest on a loan taken for higher education from any financial institution or an approved charitable institution. The loan should be taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or management, or a post-graduate course in applied science or pure science. The deduction is available for the first year when the interest is paid and for the subsequent seven years. Up to March 2005, deduction was available for the repayment of principal and interest aggregating to Rs 40,000 a year.    (4) Deductions Under Section 24(b) : Under this section, interest on borrowed capital for the purpose of house purchase or construction is deductible from taxable income upto Rs.1,50,000/- is deductible from income.  (certain conditions are to be fulfilled) PS  : 1A) Section 80CCF  : Infrastructure Bonds  :  (NOT PERMITTED FROM FY 2012-13) onwards) : Section 80CCF allowsed you to invest an additional Rs. 20,000 in infrastructure bonds, and such an investment was  reduced from your taxable income in addition to the Rs.100,000 deduction you get from the other instruments listed above.   You were to get the tax benefit only in the year in which you have invested in these instruments.  TAX FREE INCOMES : Some of the incomes are completely exempted from income tax and that too without any upper limit.   The following incomes which are tax free :- (a) Interest on EPF / GPF / PPF (b) Interest on GOI Tax Free Bonds / Tax Free Bonds issued with specific stipulation to this effect (c) Dividends on Shares and Mutual Funds.  Dividend income from companies / Equity Oriented Mutual funds is completely exempt in the hands of investors.  Dividend is also tax free in the hands of investors in case of debt-oriented Mutual Fund schemes.  (However, the Asset Management Company is liable to deduct 22.44% distribution tax in case of non individuals / non HUF investors and 14.025% in case of individuals or HUF investors.) (d) Capital receipts from Life Insurance policies i.e. sums received either on death of the insured or on maturity of Life insurance plans.  However, in case of life insurance policies issued after March 31, 2004, exemption on maturity payment u/s 10(10D) is available only if premium paid in any year does not exceed 20% of the sum asssured; e) Interest on Saving Bank accounts in banks upto Rs10,000/- per year (from FY 2012-13) (f) Interest earned was Tax Free up to INR 3500/- per year in single and INR 7000/- in Joint account up to 2011-12.  From 2012-13 FY, interest up to INR 10,000/- per year either in single or joint account (f) Long term capial gains on sale of  shares and equity mutual funds after 01/10/2004, if security transaction is paid / imposed on such transactions. GIFT TAX : Gift tax was abolished with effect from October 1, 1998.  The gifts are no longer taxable in the hands of donor or donee.   However, w.e.f. September 1, 2004, any gift received by an individual or HUF will be included in taxable income, if the amount of tax exceeds Rs.25,000/-.   However,  gifts received from any of the following will continue to remain tax free :- (i) Spouse; (ii) Brother or sister; (iii) Brother or sister of the spouse; (iv) Brother or sister of either of the parents of the individual; (v) Any lineal ascendant or descendant of the individual (vi) Any lineal ascendant or descendant of the spouse of the individual (vii) spouse of the person referred to in (2) or (6) or received on the occasion of marriage or under a will by way of inheritance  Capital Gains : Capital gains arise when an individual sells at a profit  certain assets like property or shares or mutual funds or bonds etc  The treatment of such income is not the same as income from other sources.    There are two types of capital gains, viz Short Term Capital Gains or Long Term Capital Gains. (a) Short Term Capital Gains :  Capital gain is considered as Short Term Capital Gain, if immovable property is sold / transferred within three years of acquiring the same.   Similarly, if shares or other financial securities such as mutual funds are sold within one year of purchase, the profit earned is treated as Short Term Capital Gain. Short term capital gain is included in the gross taxable income and normal tax rates are applicable.  However, w.e.f. 1st October, 2004, the short term capital gains from sale of equity shares or units of equity oriented mutual fund schemes are taxed only at a flat rate of 10%, irrespective of the tax slab on other sources of income, provided securities transaction tax is paid on such sale. (b) Long Term Capital Gains : Capital gain is considered as the Long Term, if the immovable property is sold after three years from purchse, or financial securties such as shares, deep discount bonds, units of open ended or close ended schemes of mutaula funds are disposed (i.e. sold / redeemed / transferred) after holding the same for more than twelve months, then the gain is considered to be long term capital gain. Long term capital gains on transfer of listed shares / units of equity oriented mutual funds schemes has been exempted from tax w.e.f. 1st October, 2004, provided securities transaction tax has been paid on such sale.  For assets other than the listed shares / units of mutual funds schemes, tax is payable in respect of long term capital gains at a flat rate of 20% and the amount of gain has to be adjusted for inflation through indexation benefit. Long term capital gains tax in respect of bonds and debt securities or debt oriented mutual fund schemes listed on stock exchanges is payable at a flat rate of 10% of the capital gains amount. In case an individual wishes to avail the benefits of indexation, then tax has to be paid at normal long term capital gains tax rate of 20%.   Section 54EC of the I-T Act, 1961 : Relief from Capital Gains Tax You can make good use of this Section to save Taxes specially when you sell some property.   The Income Tax laws provides for taxes on long-term capital gains at 20 per cent for individuals and foreign firms and 30 per cent for domestic companies. However, Section 54EC of the I-T Act, 1961, provides relief from capital gains tax.    Under this Section, gains on transfer of a long-term capital asset can be exempted from tax if the money is invested in bonds of specified institutions such as NABARD, the Rural Electrification Corporation (REC), SIDBI or the National Highway Authority of India.   Such bonds are redeemable after three years.  However,  to save tax, you have  to invest in these bonds within six months from the date of transfer of the original asset.  Thus investing in these bonds will effectively mean that your money is locked in for three years. If you want to buy a new property one or two years after transferring the original asset, you will have to either wait or look for alternative funds.   After the lock-in period or on the maturity of the bonds, the investor is free to put in his money in any kind of asset.   However, the interest on the bond is taxable. On the other hand, State Bank of India, offers  SBI Capgains Plus Scheme where  lock-in period is absent, a slightly higher interest rate compared to the capital gain tax saving bonds is offered.    The proceeds of the sale of the capital asset can be parked in the fixed deposit scheme under the Capgains Plus plan at an interest rate marginally higher than what bonds under Section 54 EC would fetch. The interest earned will be taxed at prevailing rates.  However, unlike the bonds under 54 EC, the depositor cannot put the money in a different kind of asset. The plan stipulates that re-investment should be made on the specified asset only.   Therefore, this scheme is a boon for people who have sold their property but haven't been able to purchase the property within the stipulated period.    Once a final decision is taken  on the property you want to reinvest in, you can opt for an exit from SBI Plan, but you will need to get a certificate of consent from the assessment officer.