by

AllBankingSolutions.com Team

1st Feb 2017 Update: The Budget for FY 2017-18 has a lot of new provisions. We are currently working on updating this page with every section of the budget announcement soon. To see all the Tax provisions of this budget, please Click here !

The following INCOME TAX RATES ARE applicable for the Financial Year ending March 31, 2017 (i.e. Financial Year 2016-17) - Assessment Year 2017-18)

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 applicable for the FY 2016-17 or AY 2017-18.   [As there was no change in Income Tax slabs for FY 2016-17 (i.e. AY 2017-18), the following rates were also applicable for FY 2015-16 (AY 2016-17) & FY 2014-15 (AY 2015-16)

Thus, we can say :-

1. The basic exemption limit for individuals (i.e. below 60 years of age) is Rs 2.50 lakhs
2. The basic exemption limit for Senior citizens (60 years to below 80 years) is : Rs 3.00 lakhs
3. The basic exemption limit for Very Senior Citizens(80 years and above)  is Rs3.50 lakhs

* A tax rebate of Rs. 5000 from tax calculated will be available for people having an annual income upto Rs 5 lakh (for FY 2015-16, the tax rebate in this category used to be Rs. 2000). However, this benefit of Rs. 5000 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 Rs20,000 (taking into account Rs 5000 tax credit), but for people who fall in income range of Rs5 lakh and above, the tax will be Rs25,000 + 20% tax on income above Rs 5 lakh. Due to this provision, those who earn below Rs. 3 lakhs are not required to pay any tax.

** The education cess to continue at 3 percent.

*** The Surcharge @15% for the FY 2016-17 or AS 2017-18 will be payable if the income is above Rs 1 crores).    For the FY 2015-16 it was 12%.

However, some tax relief has been given in FY 2016-17 through the following rebates:

• As mentioned above, the income tax rebate is increased to Rs 5000 for taxable income below Rs. 5 lakhs
• The tax deduction for rent payment (section 80GG) is increased from Rs. 24000 to Rs. 60000. This deduction is available to those, who live in rented house, and do not get House Rent Allowance from their employer.
• First time home buyers can claim an additional Tax deduction of upto Rs. 50,000 on home loan interest payment under section 80EE. This extra deduction of Rs. 50,000 would be available over & above the 80C limit of Rs. 1.5 lakhs. It means that total tax deduction under Section 80C can go upto Rs. 2 lakhs provided atleast Rs 50,000 is paid as home loan interest within the financial year. This extra tax deduction is available to only those homebuyers, who meet ALL the following criteria - (i) who have home loan sanctioned in FY 2016-17 (ii) whose loan amount is less than 35 lakhs (iii) value of house should not be more than Rs. 50 lakhs
• There would be no capital gains tax on redemption of the Sovereign Gold Bond. The long term capital gains arising from transfer of Gold Bond would be eligible for Indexation benefit. The Sovereign Gold bond scheme is launched to discourage the purchase of physical gold for the investment purpose.
• The government would not charge any capital gains tax on the interest income of gold monetization scheme. The gold monetization scheme was launched to channelize the idle household gold
• The 40% withdrawal of NPS (National Pension System) would be exempted from the tax. Along with this the NPS, wealth give to the nominee after the death of the subscriber would be 100% exempt from the tax.
• If an employer invests into the pension fund of an employee, the invested amount is exempt from tax. This year's budget (2016) has increased the exemption limit from Rs. 1 lakh to Rs. 1.5 lakh.

Other Important Links :

Download FREE Major ITR Forms for Financial Year 2014-15 - ITR1, ITR2, ITR2A, ITR4S - pdf files, Fillable files AND Instructions

HOW TO MAKE BEST USE OF SECTION 80C  OR Saving Tax By Investing Under  Section 80C

How to Avoid TDS  Deduction by Banks - HOT TIPS FOR TDS in Banks

 SOME VERY POPULAR SCHEMES FOR INVESTMENTS (INCLUDING FOR TAX SAVINGS)

Download PDF files for Form 15G, Form 15H, Form 60, Form 61

Major Changes in Budget for FY 2016-17

Wealth Tax Has been Abolished in the Budget for 2015-16

Changes that were effected from earlier years, i.e., the FY 2014-15 (AY 2015-16)

•        Investment limit under section 80C of the Income-Tax Act raised from Rs.1 lakh to Rs. 1.5 lakh.

·        Deduction limit on account of interest on loan in respect of self occupied house property raised from Rs.1.5 lakh to Rs. 2 lakh.

• Personal Income-tax exemption limit raised by Rs 50,000/- that is, from Rs. 2 lakh to Rs. 2.5 lakh in the case of individual taxpayers, below the age of 60 years.   

[Click Here to see the Income Tax Slab Rates for FY 2015-16 or AY 2016-17]

[Click Here to see the Income Tax Slab Rates for FY 2013-14 or AY 2014-15]

[Click Here to see the Income Tax Slab Rates for FY 2012-13 or AY 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 chargeable to income tax (e.g. Rs.3,00,000 for Senior citizens, Rs.2,50,000/- 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. Consequences for non-filing income tax return: (i) You will be issued notice u/s 142(1) for non-filing of income tax return if the income tax dept. (ii) Losses if any during the year, would not be allowed to carry forward. Normally, if you file your return on time losses of this year can be set-off against gain of forthcoming years. (iii) A Penalty of Rs. 5,000/- may be imposed under section 271F if belated return is submitted. (iv) Interest u/s 234A at the rate of 1% per month/part of the month would be charged.

(1) Deductions from Taxable Income (Section 80C) :-

VARIOUS INVESTMENTS OPTIONS AVAILABLE TO INDIVIDUALS AND TAX BENEFITS AVAILABLE UNDER EACH OF THEM - Financial Year 2016-17

A new section 80C was introduced (replacing section 88) from the financial year 2005-06.  Under this Section, a deduction of upto Rs.1,50,000/- (wef FY 2014-15)  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.1,50,000/- (now even in PPF it is allowed upto Rs. 1.50 lac as against only Rs.1 lakh upto March 2014)..  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 April, 2016)

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]

Deductions Allowed In Sections Beyond 80 C :

(1) Deductions Under Section 80CCC(1) :

Under this section, the contributions by individuals towards "Pension" schemes of LIC or any other 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.1,50,000/-.  Thus effectively, now these are covered under the maximum limit of  Rs.1,50,000/- under section 80C.

(2) Deductions Under Section 80 D :

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

(3) 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. 

Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian.  Education loan taken for siblings (brother / sister) or other relatives (in-laws, nephew, niece, etc.) would not qualify for section 80E benefit.

(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.2,00,000/- is deductible from income.  (certain conditions are to be fulfilled)

We have seen that the principal amount in the repayment of a home loan can be added to the 80C limit of Rs1.5 lakh for tax savings.    However, the interest component of home loans is allowed as deduction under Section 24 B for up to Rs2 lakh in case of a self-occupied house. In case the house is in the joint name of your spouse and you (joint loan), each one can avail of Rs2 lakh interest component deduction.   This limit is only for self-occupied house. If you have property which is rented out, you can deduct the full interest paid on the home loan. The rent on the property does become part of your income. If the rent is lesser than the loan interest, it will lower your overall tax liability.

PS  : 1A) Section 80CCF  : Infrastructure Bonds  :  (NOT PERMITTED FROM FY 2012-13) onwards) :

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 onwards)

(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 

Click Here to View Previous Years (Last 10 years)  Income Tax Slab / Rates in India

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Latest Circulars Regarding Rate of Interest on Small Savings etc.

RBI  CIRCULAR  FOR  RATE OF INTEREST ON PPF and SCSS 2004 Schemes

Other Important Links :

What is e-filing? Procedure for E-filing of Income Tax Returns  

Rules for Filing of Income Tax Returns  

Basics of Income Tax in India