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RATES OF INCOME-TAX AS PER FINANCE ACT, 2015: As per the Finance Act, 2015, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head “Salaries” for the financial year 2015-16 (i.e. Assessment Year 2016-17) at the following rates:

Rates of tax : A. Normal Rates of tax:

Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less than eighty years at any time during the financial year:

In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year:

Education Cess on Income tax:

The amount of income-tax including the surcharge if any, shall be increased by Education Cess on Income Tax at the rate of two percent of the income-tax.

Secondary and Higher Education Cess on Income-tax:

An additional education cess is chargeable at the rate of one percent of income-tax including the surcharge if any, but not including the Education Cess on income tax.

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Source: http://7thpaycommissionnews.in/

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Finance Minister Mr.Arun Jaitley recently informed in the Parliament that Section 80E of Income Tax 1961, allows deduction of interest paid in respect of Education Loan availed for completing higher education of self, spouse, children or a student for which the income tax assessee is a guardian, from the income of assessee. This provision therefore provides income tax exemption on the Education Loan Interest for 7 years.

Text of press release issued by Finance Ministry in this regard and extract of Section 80E of Income Tax 1961 are given below

Tax Concession on Interest Paid on Education Loan

Press Information Bureau
Government Of India
Ministry of Finance

05-May, 2015

Section 80E of the Income-tax Act, 1961 provides that in computing the total income of an individual, their shall be allowed a deduction of the amount paid by way of interest on loan taken by him from any financial institution or approved charitable institution for the purpose of pursuing his own higher education or higher education of his spouse, or children, or the student for whom he is the legal guardian. The deduction is available for eight assessment years beginning with the assessment year in which the payment of interest on such loan is first made or until the interest is paid in full, whichever is earlier. This deduction is available to every individual who is liable to income-tax. No specific funds are earmarked for the purposes of extending tax concession against interest paid on education loan.

This was stated by Shri Arun Jaitley, Union Finance Minister in written reply to a question in the Rajya Sabha today.

Extract of Section 80E of Income Tax Act 1961

Under Section 80E of the Act a deduction will be allowed in respect of repayment of interest on loan taken for higher education, subject to the following conditions:

(i)In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of interest on loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his spouse or children.

(ii) The deduction specified above shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest referred to above is paid in full by the assessee , whichever is earlier. For this purpose –

(a) “approved charitable institution” means an institution established for charitable purposes and approved by the prescribed authority under clause (2C) of section 10, or, an institution referred to in clause (a) of sub-section (2) of Section 80G. Section 80E 35

(b) “financial institution” means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf;

(c) “higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so;

(d) “initial assessment year” means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan.

(e) relative”, in relation to an individual, means the spouse and children of that individual or the student for whom the individual is the legal guardian

Source: PIB

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Income Tax Exemption on LTC – Income Tax provision relating to Leave Travel Concession under Section 10 (5)

Leave Travel Concession applicable to Central Government Employees and other Salaried Class Employees is exempted under Section 10 (13A) of Income Tax Act as a prequisite to an employee. However, Income Tax Exemption on LTC is not blanket one and involves many conditions such as spending of amount received under LTC for purpose of preforming holiday travel declared, restriction of exemption to economy fare of the national carrier by the shortest route to the place of destination in the case of Air Travel etc.

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Budget 2015 may be yet another one, but financial comfort and rising hopes on growing Indian Economy, may provide room for the finance minister Mr. Arun Jaitley to announce more exemptions or reliefs in the income tax front in this Budget. More than additional exemptions these measures can be called as updating of Income Tax Exemption limit for various allowances which were fixed very long ago which unrealistic to present date.

Budget 2015 Wish List of Salaried Employees on Income Tax :

Basic Income Tax Exemption Limit :

Increase of Basic Income Tax Exemption Limit to Rs. 3 lakhs to meet out inflationary Trend.

Transport Allowance:

Transport Allowance is exempted to an extent of Rs. 800 per month. However, the lowest amount of Transport Allowance of Rs. 400 (plus dearness allowance) received by the employees in the Group C and MTS cadres itself is taxable. So there is a very high need for increasing exemption limit for Transport Allowance payable Government Employees.

Children Education Allowance:

Children Education Allowance is the other allowance, which is exempted to an extent of Rs. 100 per month. Of course this exemption limit was decided more than a decade ago when tuition fees of Rs. 100 was reimbursed to Central Government Employees. On implementation of sixth Pay commission recommendations, Children Education Allowance has been raised to Rs. 1000 and incremented when DA crosses 50% each time. So, there is no point in keeping the slab on IT Exemption for CEA at this low level. It is widely expected that Childen Education Allowance is to be fully exempted from Income Tax.

Medical Reimbursement by Employer:

The present Exemption Limit of Rs.15,000 as far as medical reimbursement is concerned provided by an employer needs to revised to Rs. 50,000 considering the cost of medical treatment presently.

Health Insurance premium under Section 80 D:

Salaried Employees also expect an increase of exemption limit for Health Insurance Premium paid to Rs. 50, 000 from the current level of Rs. 35,000 (Rs. 15,000 for family and Rs. 20,000 to Parents)

Re-Introduction of Standard Deduction:

As of now, Salaried Employees are treated at part with Tax Payers who are self employed and doing business of their own, as far as Income Tax is concerned. But this was not the case 10 years ago (until 2004-05). Just like Self Employed and Business related tax payers enjoy deduction of expenses made from the income, a fixed amount was exempted from total income of Salaried Employees which was termed as Standard Deduction. One of the expectations of Salaried Employees now is re-introduction of Standard Deduction for their income tax assessment.

Exemption Limit of Rs. 1.5 lakh for Savings under Section 80 C:

Also, Salaried Employees feel that Exemption of Rs. 1.5 lakh available for Savings and Insurance Insruments as wells as retirement plans is too low considering the number of investments allowed to be exempted under this category. It is expected that this Exemption limit has to be increased to Rs. 2 lakh at least.

Exemption limit on Rent Paid when no HRA is received :

Further, Rent paid by an individual is exempted now to an extent of Rs. 2000 per month if no House Rent Allowance is received. This limit was fixed in the year 1998. Needless to say house rent cost has increased enormously since 1998. So, this exemption limit needs immediate revision to match the current rental cost.

Source: moneycontrol.com

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It is learnt that Finance Ministry is considering to put up a proposal for discontinuing Exemption of Rs. 1.5 lakh presently available under Section 80C for Savings and Insurnace such as premium paid, investment in NSS, Mutual funds, Pension funds etc. Alternatively, the basic income tax exemption limit of Rs. 2.5 lakh would be raised to Rs. 4 lakh. Reasons behind such a bold move by Finance Ministry as per sources are:

1. Income Tax Department could not verify whether the Investments declared to be have been made to avail exemption under Section 80 C were actually made

2. To make Income Tax Law simple by raising basic Income Tax Exemption Limit and avoid complexities involved in providing Income Tax Exemption to promote savings.

As per Finance Ministry proposals, the current system allows individuals to avail of the Section 80C benefit without having made the required investments.

Most of the tax returns by individuals are processed by what is called a ‘summary assessment’, under which an adjustment in the reported income is made only in cases of arithmetic error or of a wrong claim that is apparent from the return filed. Officials do not ask questions or insist on proof of investment while processing returns. Only in cases of ‘scrutiny assessment’ and ‘assessment of income that has earlier escaped assessment’, which are done in very few cases, more information or evidence is sought to ensure that the reported income is correct.

Even in the case of salaried individuals, where the employer may insist on proof of investments, the tax authorities do not. Besides, if a salaried individual wrongly claims in his return that Section 80C investments have been made, the TDS by the employer and paid to the department is refunded by the tax authorities without asking any questions. In the case of self-employed, there is no check either by the employer or the taxman.
So the ministry feels that any individual who is actually interested in saving would anyway do it and there is really no need to incentivise the same through the tax policy.

Savings entitled to tax benefit under Section 80C include payments towards life insurance, deferred annuity, provident funds, National Savings Certificates, unit-linked investment plans of LIC Mutual Fund, pension funds set up by mutual funds, equity-linked savings plans, deposits with National Housing Bank and tuition free paid for education of children.

Source: Financial Express

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