A homemaker, salary earner, self-employed, the rich or the poor – all eyes are on the Finance Minister during the budget each year expecting tax relief. Although Budget 2015 did not offer any changes in the income tax threshold limit – Rs 2.5 lakh for individuals, Rs 3 lakh for senior citizens and Rs 5 lakh for very senior citizens, there were many other additional deductions added to the tax deductions kitty.
To retain the smile on the taxpayers’ face finance minister Arun Jaitley remarked “…today an individual tax payer will get tax benefit of Rs 4,44,200.” He was here referring to the total savings, aggregating reliefs granted earlier and during the current Budget 2015. The total tax benefit of upto Rs 4,44,200 includes the savings under enhancement of health insurance exemption limit, doubling the transport allowance exemption limit to Rs 1600 per month and the additional savings under New Pension Scheme.
However, the actual tax benefit wouldn’t be to the extent of Rs 4.44 lakh as specified by the finance minister. The total tax savings would be between Rs 2,000 to Rs 19,800 depending on the tax bracket that one falls in.
Though the moderate income segment has limited gains and not much to lose, the uber rich who have a taxable income above Rs 1 crore would be liable to pay an additional 2% surcharge. The good news for them is that the wealth tax, presently levied if the net wealth exceeds Rs 30 lakh has been abolished. Around 1.15 lakh individuals were under the wealth tax net.
Here are the areas that will impact your personal tax outgo
To lure investments into pension funds the limit on deduction for contribution to a pension fund and the New Pension Scheme (NPS) was increased to Rs 1.5 lakh from the existing Rs 1 lakh, in an effort to streamline the deductions as per the Section 80 C investment avenues.
An additional deduction under Section 80CCD sub section 1B of Rs 50,000 has been announced for contribution to the NPS. Hence the total deduction under section 80C and 80CCD will now be Rs 200,000.
Employees now also have an option of choosing between Employees Provident Fund or the NPS for their retirement benefits. A reason to cheer for the small wage earners is that they wouldn’t be required to mandatorily invest in EPF, until their salary crosses a limit (to be announced later).
An impetus has been given to social security net by offering the Atal Pension Yojana, a defined benefit pension scheme where the government would contribute 50% of the amount invested (maximum Rs 1000) by beneficiaries for five years, in accounts opened before 31st December 2015.
An individual can claim a tax benefit of upto Rs 55,000 under the Section 80 D if he pays the premium for self and family including senior-citizen dependant parents. The enhanced limit for health insurance tax exemption is Rs 25,000 for individuals and upto Rs 30,000 for senior citizens.
In a move to offer a tax breather to very senior citizens (above 80 years), they have been allowed to claim a deduction of upto Rs 30,000 for amount spent on medical treatment, as no health covers are available for them.
Similar to the option for retirement savings, employees can also opt between Employee State Insurance (ESI) or health insurance scheme offered by insurers regulated by Insurance Regulatory Development Authority.
Senior citizens can also rejoice the abolition of service-tax on premium payments for Varishtha Bima Yojana.
Disabled and disease victims
The Budget 2015 has shown sympathy toward those who have been suffering from severe diseases or are taking care of the differently-abled. The tax exemption limit for amount spent on treatment of diseases such as Cancer, full blown AIDS, Thalassaemia, Haemophilia etc by senior citizen has been increased to Rs 80,000 from Rs 60,000 earlier.
Similarly additional deduction of Rs 25,000 has been allowed for differently-abled persons.
New tax-saving instrument
The Sukanya Samriddhi Account scheme has found its space among the tax-saving instruments under the Section 80 C basket, where one can invest and claim deduction of upto a maximum of Rs 1.5 lakh. Just like the Public Provident Fund the interest accruing on deposits in The Sukanya Samriddhi Account will be exempt from income tax. “Any withdrawal from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 shall not be included in the total income of the assessee,” the finance minister announced.
Saving for cleanliness
Three more funds have been added to the list of funds where one can claim for philanthropic purposes. Contributions to Swachh Bharat Kosh, Clean Ganga Fund and National Fund for Control of Drug Abuse would be deductible upto 100% under the Section 80 G.
Taxation at source
So far the interest earned on fixed deposits was taxed at source (TDS). Starting the financial year 2015-16 interest above Rs 10,000 earned on recurring deposits too would be taxed before the payments are made to you. The elaborate Budget document specifies that all the deposits opened at various branches of a bank would be taken into account while calculating the threshold interest limit. Your co-operative bank deposits which weren’t subjected to TDS so far would now come under the realm of TDS for interest payments exceeding Rs 10,000.
Those who aren’t liable to pay any tax yet have been subjected to TDS deduction on payments made under life insurance can submit Form 15H/ 15G for exemption from deduction at source, similar to that offered under bank deposits.
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