Income Tax on Salaries Budget Impact for FY 2013-14

0
3772
Income Tax on Salaries Budget

Salaries Budget Impact

Following are the Budget changes during 2013-14, which would impact the Income-tax computations under Salary income.

1.No change in Income tax slab – Tax credit for income up to Rs.5 Lakhs

Even though there is no change in the Income-tax Slab, there has been a tax credit of Rs.2,000/- for income up to Rs.5 lakhs to be shown as Rebate u/s 87A.

Example
a) If an employee taxable income is said Rs.2,30,000/-. In such a case, the tax liability for the employee would Rs.3,000/- on the income of Rs.30,000/-. Out of the tax liability of Rs.3,000/-, since this employee income is less than Rs.5 lakh, an additional rebate of Rs.2,000/- will be reduced from the total tax liability u/s 87A
b) If an employee taxable income is said Rs.6,00,000/-, in such case employee will get no rebate as his total taxable income is above Rs.5 lakhs.

2. Surcharge of 10% on the taxable income above Rs.1 crore

Employees whose taxable income is above Rs.1 crore now need to pay additional tax as Surcharge which is at 10% on the tax which is higher when computed above Rs.1 Crore.

3. Additional deduction u/s 80EE – Interest on Housing Loan for First-time buyers

Good news for first-time house buyers during the Financial year 2013-14. Employees who are planning to buy House during the current FY will get an additional deduction of Rs.1,00,00/- in addition to the Interest on housing Loan u/s 24 (b).

Read More Blog, A triple whammy! Income Tax & Delay in Statutory Payments

However, employees need to full fill the following conditions

  • The loan has to be taken from the Financial Institutes only
  • Date of Loan sanction should be between current Financial year i.e., 1st April 2013 to 31st March 14.
  • Loan sanctioned amount for purchase of House Property should not be above Rs.25 lakhs
  • The total value of the House property should not cross Rs.40 lakhs
  • Employees should not be owning any other Residential property as on the date of loan sanction.

If the employee fails to fulfill any one of the above condition, he/she would not be eligible for the above additional deduction.

4. Life Insurance Premium:

Section 80C of the Income Tax Act currently allows a deduction on premium paid on Life Insurance Policy only if the annual premium paid is less than 10% of the sum assured.

Budget Impact – For persons with disability or severe disability or suffering from diseases or ailments specified in the Income Tax Act, the limit of 10% has been increased to 15%. Therefore, for such persons, if the annual premium paid is up to 15% of the sum assured, the same can be availed as a deduction under the Rs.1 lakh tax limit under section 80C.

5. Rajiv Gandhi Equity Savings Scheme (RGESS):

Section 80CCG allows for a tax deduction of a maximum of Rs 25,000 on the amount invested in equity shares under the Rajiv Gandhi Equity Savings Scheme (RGESS) provided the taxable income of the person is less than Rs 10 lakh

Also Read, Should you invest in RGESS for tax saving?

Budget Impact – Now those earning income up to Rs.12 lakh will be eligible for deduction under RGESS. Also, the new provision will allow the investor exemption for notan only direct investment in equity shares but also if the investment is made in the scheme of participating equity mutual fund schemes.

Also, the tax deduction of 50% of the amount invested, subject to a maximum of Rs 25,000, has been extended to three years instead of the current one-year.

Read Blog, A tricky journey – Claiming Leave Travel Concession in India

This means that those eligible for deduction under this scheme can continue to invest up to Rs.50,000 per annum in equity or equity mutual funds for three consecutive years and avail an additional deduction of Rs.25,000 each year over and above the Rs.1 lakh deduction available under section 80C

6.Donation:

Section 80G of the Income-tax Act that provides for exemption of any amount given as a donation to specified institutions will now also include National Children Fund. Any amount donated to this fund will result in 100% reduction of the amount so donated.

Also read, Taxing agricultural income – The age-old conundrum

LEAVE A REPLY

Please enter your comment!
Please enter your name here