Income Tax Slabs 2009-10-resident Indians, Huf-vrk100-03092009
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FINANCIAL YEAR 2009-10 PERSONAL INCOME TAX SLABS Rama Krishna Vadlamudi MUMBAI September 3rd, 2009
[email protected]
IT PROVISIONS AS APPLICABLE TO RESIDENT INDIVIDUALS, HUFs, WOMEN AND SENIOR CITIZENS HIGHLIGHTS OF UNION BUDGET 2009-10 (Announced by India’s Finance Minister on July 6, 2009)
• •
•
• •
•
• •
Personal income tax exemption limit raised by Rs 10,000 for Individuals, HUFs, and women; and by Rs 15,000 for senior citizens Surcharge, of 10 per cent on income tax (for individual, HUF and others) with taxable income of more than Rs 10 lakh, has now been scrapped – benefitting high income groups Fringe Benefit Tax, introduced in 2005 and payable by employers, has now been abolished. Now, with the abolition of FBT, employees have to instead pay a perquisite tax on ESOPs at the time of the shares getting vested in addition to the capital gains tax when he/she divests the shares. FBT which had reduced the take-home-pay of employees will revisit employees in the form of a perquisite tax to be paid by each employee. For example, contribution paid to an approved superannuation fund by the employer in excess of Rs 1 lakh will be treated as a perquisite and the individual employee has to pay tax as per his/her slab. IT returns will be made simple Wealth tax exemption limit has been raised to Rs 30 lakh from Rs 15 lakh which was last revised in 1992 (the new proposal will apply on the valuation of net wealth as on March 31, 2010). Currently, it is individuals, HUFs and companies which come under the purview of wealth tax. Wealth tax is payable at the rate of one per cent of net wealth. Under Section 80DD, deduction is increased to Rs 1 lakh from Rs 75,000 for medical treatment of a dependant with severe disability (however, for ordinary disability the deduction is kept unchanged at Rs 50,000) Donations to electoral trusts (political parties) shall be allowed 100% deduction Under Section 80E, deduction for interest paid on higher education loans has been extended to cover all fields of study including vocational studies post-schooling
•
•
•
•
Expenditures in excess of Rs 20,000 are to be routed through an account payee cheque or a bank draft in term of section 40A(3) of the IT Act. This monetary limit has now been raised to Rs 35,000 applicable only in respect of freight charges paid to goods carriers. This will be effective from October 1, 2009. Gift tax: Earlier, gifts in the form of cash from non-relatives were exempted up to a limit of Rs 50,000 per year (if sum exceeds Rs 50,000, then entire amount is eligible for being taxed). While this limit remains unchanged, the latest budget proposes to bring non-cash gifts into the tax ambit. Now gifts of both movable and immovable assets are proposed to be taxed as income where the value exceeds Rs 50,000. Earlier, gifts in non-cash form (like jewellery, archaeological collections, paintings and gold), even if they were in excess of Rs 50,000 were exempt from any tax in the hands of the recipient. However, as a consolation, any expenditure incurred for obtaining that gift up to 50% of the value is eligible for deduction. Voluntary Retirement Scheme (VRS): As per VRS, employees enjoyed tax exemption of up to Rs 5 lakh on the lump sum received by them as per section 10(10C). They were also allowed the benefits of spreading arrears backwards or carrying advances forwards, under section 89, so that they can reduce their tax burden. Now, the latest budget has proposed to do away with this double benefit – whereby the benefits under section 10(10C) will not be allowed if the benefits under section 89 are availed. (It is a negative for salaried class) Tax Deduction at Source: It is now proposed to make amendments in the Income Tax Act to provide that any person whose receipts (for example, interest on bank fixed deposits or others) are subject to deduction of tax at source, i.e. the deductee, shall mandatorily furnish his PAN to the deductor (like bank, etc) failing which the deductor shall deduct tax at source at higher of the following rates: i. the rate prescribed in the Act; ii. at the rate in force i.e., the rate mentioned in the Finance Act; or iii. at the rate of 20 per cent TDS would be deductible at the above mentioned rates and it will also apply in cases where the taxpayer files a declaration in form 15G or 15H (under section 197A) but does not provide his PAN. Further, no certificate under section 197 will be granted by the Assessing Officer unless the application contains the PAN of the applicant. This amendment will take effect from 1st April, 2010 (This is a negative for senior citizens and individuals with low income)
MATRIX SHOWING PERSONAL INCOME TAX SLABS (FY 2009-10) For Women below age of 65 years # Total Annual Income Rate of (Rs.) Income Tax Up to 1,90,000 1,90,001 to 3,00,000 3,00,001 to 5,00,000 5,00,001 and above
NIL 10% 20% 30%
For resident individuals, HUFs, etc # Total Annual Income Rate of (Rs.) Income Tax Up to 1,60,000 1,60,001 to 3,00,000 3,00,001 to 5,00,000 5,00,001 and above
NIL 10% 20% 30%
# For senior citizens of 65 years and above, the exemption limit is Rs 2.40 lakh Cess for Education: At three per cent on income tax payable
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 2 of 5
Deductions allowed under Section 80 C (Aggregate amount of deduction under this section shall not exceed Rs one lakh) (Read with section 80CCE) In 2005-06, section 80C replaced old section 88. Under section 80 C, individuals and HUFs are allowed deductions of up to a maximum Rs. 1,00,000/- from taxable income for payments and contributions as given below; without any sectoral caps. 1
Life Insurance premia. Annual premium of any policy shall not be more than 20 per cent of the sum assured. 2 Contribution to a recognised provident fund 3 Voluntary contribution by employee to a recognised provident fund 4 Contribution to Public Provident Fund account (PPF scheme allows interest on annual contributions of up to Rs 70,000 only) 5 Contribution by an employee to an approved superannuation fund 6 Contribution to National Savings Certificate (NSC) VIII issue 7 Interest accrued on NSC VIII issue during the current year except interest for the sixth year 8 Contribution to Unit Linked Insurance Plans 9 Contribution to annuity plan of a life insurance company 10 Equity Linked Savings Scheme (ELSS) of a mutual fund 11 Contribution to pension schemes of two mutual funds, namely Templeton India Pension Plan and UTI Retirement Benefit Pension Fund 12
13 14 15 16
Tuition fee paid to a college, school, etc, for education of any two children of an assessee. However, the eligible amount shall not include any payment towards any development fees or donation. Instalments paid in a year towards Housing Loans Bank fixed deposits for a period of not less than five years (wef April 1, 2006) Deposits in a Senior Citizens Savings Scheme (SCSS) (wef April 1, 2007) Sums deposited in a Five-year time deposit scheme of a Post Office (wef April 1, 2007)
SECTION 80CCC (Aggregate amount of deduction under this section shall not exceed Rs one lakh) (Read with Section 80CCE) Section 80CCC allows for a deduction from income of an amount of Rs one lakh deposited by an individual towards any annuity plan of the Life Insurance Corporation or any other insurer for receiving pension. (Prior to April 1, 2006, only Rs 10,000 was allowed).
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 3 of 5
SECTION 80CCD (Aggregate amount of deduction under this section shall not exceed Rs one lakh) (Read with Section 80CCE) Section 80CCD allows for a deduction in respect of contribution to New Pension System as notified by the Central Government. Individuals, including public/private sector employees and self-employed individuals, can avail this tax benefit. In respect of employees, the deduction shall not exceed 10 per cent of their salary. For employees, this section is applicable from January 1, 2004 and for self-employed individuals from April 1, 2008 (FY 2008-09). SECTION 80CCE (VERY IMPORTANT – INTRODUCED IN 2005-06) Section 80CCE states that the aggregate amount of deductions under section 80C, section 80CCC and section 80CCD shall not, in any case, exceed Rs one lakh
DEDUCTIONS THAT ARE ALLOWED IN ADDITION TO DEDUCTIONS UNDER SECTIONS 80C, 80CCC & 80CCD SEC.
80D
80DD
DEDUCTION Rs
DETAILS OF THE SECTION Health insurance premium of the individual or family In addition to above, health insurance cost of parents*
15,000 15,000
* If parents are senior citizens (65 years & above) (the parents need not be dependant on the assessee) Expenditure incurred for medical treatment of a disabled dependant (ordinary disability) # For severe disability #
20,000 50,000 1,00,000
# pertains to deduction for maintenance (including medical treatment), training and rehabilitation of a handicapped dependant; or on the amount paid or deposited under a scheme of the Life Insurance Corporation of India or other insurance for maintenance of disabled dependant 80DDB
80E
Medical treatment of herself or a dependant If the assessee is a senior citizen Individuals can claim deduction for interest paid on loan taken for pursuing full-time education of her/his own or her/his relative (Note: Deduction can be claimed for eight years and education includes all fields of studies post-schooling)
40,000 60,000 Actual amount paid
80G
Donations paid to Prime Minister's National Relief Fund or such other approved funds Donations paid to other funds/institutions
100% of donation 50% of donation
80U
Deduction allowed to inviduals with permanent physical disability (including blindness)
50,000
In case of severe diability
75,000
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 4 of 5
EET METHOD OF TAX TREATMENT OF SAVINGS EXPLAINED As of now, individuals enjoy several tax benefits – of course, subject to certain quantitative limits – on their investments in a multitude of savings instruments; namely, EPF, VPF, PPF, GPF, NSC, insurance policies, ULIPs, ELSS, bank fixed deposits, post office deposits, housing loan instalments, interest paid on housing loan, etc. The present system is called ‘EEE’ (Exempt-Exempt-Exempt) meaning investments enjoy benefits in three stages: 1). Exemption allowed at the time initial contribution, 2). Exemption throughout the accumulation period, and 3). Exemption at the time of withdrawal. The Government proposes to shift the tax treatment of savings to a new system called ‘EET’ (Exempt-Exempt-Taxed) whereby exemption will be allowed at the time of initial investment and accumulation period only; but the withdrawals will be included in the taxable income and taxed according to one’s tax slabs. As of now, provisions of section 80CCC and section 80CCD of the Income Tax Act are in uniformity with the EET method. Simply put, under the proposed EET regime, tax savers will be postponing their tax liability for future or till the date of retirement. TAX BENEFITS FOR NEW PENSION SYSTEM (NPS): The New Pension System has become operational since 1st January, 2004 and is mandatory for all new recruits to the Central Government service from 1st January, 2004. Since then it has been opened up for employees of State Government, private sector and self employed (both organized and unorganized). NPS is now open to all citizens. An NPS Trust was set-up on 27th February 2008 to manage the funds of NPS. NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA). NPS will continue to be subjected to EET method of tax treatment of savings. In the Union Budget 2009-10, the following amendments are made for NPS: 1) It is now proposed to exempt the income of the NPS Trust from income tax – section 10(44) 2) Any dividend paid to the NPS Trust shall be exempted from Dividend Distribution Tax – section 115-O 3) Transactions by the NPS Trust will be exempt from the Securities Transaction Tax 4) NPS Trust shall receive all income without any tax deducted at source – section 197A 5) Till now, the tax benefit for contributions to NPS, under section 80CCD, was available to public/private section employees only. However, it is now proposed to extend the NPS to “self-employed” individuals also under section 80CCD. The above amendments will take effect retrospectively from 1.4.2008 from FY 2008-09.
OTHER DEDUCTIONS THAT ARE ALLOWED: 1. Entertainment allowance (available only for Government employees) 2. Professional Tax 3. Interest paid on Housing loans, up to Rs 1.50 lakh, if the property is self occupied, is allowed as deduction from taxable income – section 24(1)(vi) Note: Tax slabs and deductions are as proposed by the Finance Minister in his Budget 2009-10 speech on July 6, 2009. Sources: Finance Bill 2009, Union Budgets and others. Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 5 of 5
[email protected]
IT PROVISIONS AS APPLICABLE TO RESIDENT INDIVIDUALS, HUFs, WOMEN AND SENIOR CITIZENS HIGHLIGHTS OF UNION BUDGET 2009-10 (Announced by India’s Finance Minister on July 6, 2009)
• •
•
• •
•
• •
Personal income tax exemption limit raised by Rs 10,000 for Individuals, HUFs, and women; and by Rs 15,000 for senior citizens Surcharge, of 10 per cent on income tax (for individual, HUF and others) with taxable income of more than Rs 10 lakh, has now been scrapped – benefitting high income groups Fringe Benefit Tax, introduced in 2005 and payable by employers, has now been abolished. Now, with the abolition of FBT, employees have to instead pay a perquisite tax on ESOPs at the time of the shares getting vested in addition to the capital gains tax when he/she divests the shares. FBT which had reduced the take-home-pay of employees will revisit employees in the form of a perquisite tax to be paid by each employee. For example, contribution paid to an approved superannuation fund by the employer in excess of Rs 1 lakh will be treated as a perquisite and the individual employee has to pay tax as per his/her slab. IT returns will be made simple Wealth tax exemption limit has been raised to Rs 30 lakh from Rs 15 lakh which was last revised in 1992 (the new proposal will apply on the valuation of net wealth as on March 31, 2010). Currently, it is individuals, HUFs and companies which come under the purview of wealth tax. Wealth tax is payable at the rate of one per cent of net wealth. Under Section 80DD, deduction is increased to Rs 1 lakh from Rs 75,000 for medical treatment of a dependant with severe disability (however, for ordinary disability the deduction is kept unchanged at Rs 50,000) Donations to electoral trusts (political parties) shall be allowed 100% deduction Under Section 80E, deduction for interest paid on higher education loans has been extended to cover all fields of study including vocational studies post-schooling
•
•
•
•
Expenditures in excess of Rs 20,000 are to be routed through an account payee cheque or a bank draft in term of section 40A(3) of the IT Act. This monetary limit has now been raised to Rs 35,000 applicable only in respect of freight charges paid to goods carriers. This will be effective from October 1, 2009. Gift tax: Earlier, gifts in the form of cash from non-relatives were exempted up to a limit of Rs 50,000 per year (if sum exceeds Rs 50,000, then entire amount is eligible for being taxed). While this limit remains unchanged, the latest budget proposes to bring non-cash gifts into the tax ambit. Now gifts of both movable and immovable assets are proposed to be taxed as income where the value exceeds Rs 50,000. Earlier, gifts in non-cash form (like jewellery, archaeological collections, paintings and gold), even if they were in excess of Rs 50,000 were exempt from any tax in the hands of the recipient. However, as a consolation, any expenditure incurred for obtaining that gift up to 50% of the value is eligible for deduction. Voluntary Retirement Scheme (VRS): As per VRS, employees enjoyed tax exemption of up to Rs 5 lakh on the lump sum received by them as per section 10(10C). They were also allowed the benefits of spreading arrears backwards or carrying advances forwards, under section 89, so that they can reduce their tax burden. Now, the latest budget has proposed to do away with this double benefit – whereby the benefits under section 10(10C) will not be allowed if the benefits under section 89 are availed. (It is a negative for salaried class) Tax Deduction at Source: It is now proposed to make amendments in the Income Tax Act to provide that any person whose receipts (for example, interest on bank fixed deposits or others) are subject to deduction of tax at source, i.e. the deductee, shall mandatorily furnish his PAN to the deductor (like bank, etc) failing which the deductor shall deduct tax at source at higher of the following rates: i. the rate prescribed in the Act; ii. at the rate in force i.e., the rate mentioned in the Finance Act; or iii. at the rate of 20 per cent TDS would be deductible at the above mentioned rates and it will also apply in cases where the taxpayer files a declaration in form 15G or 15H (under section 197A) but does not provide his PAN. Further, no certificate under section 197 will be granted by the Assessing Officer unless the application contains the PAN of the applicant. This amendment will take effect from 1st April, 2010 (This is a negative for senior citizens and individuals with low income)
MATRIX SHOWING PERSONAL INCOME TAX SLABS (FY 2009-10) For Women below age of 65 years # Total Annual Income Rate of (Rs.) Income Tax Up to 1,90,000 1,90,001 to 3,00,000 3,00,001 to 5,00,000 5,00,001 and above
NIL 10% 20% 30%
For resident individuals, HUFs, etc # Total Annual Income Rate of (Rs.) Income Tax Up to 1,60,000 1,60,001 to 3,00,000 3,00,001 to 5,00,000 5,00,001 and above
NIL 10% 20% 30%
# For senior citizens of 65 years and above, the exemption limit is Rs 2.40 lakh Cess for Education: At three per cent on income tax payable
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 2 of 5
Deductions allowed under Section 80 C (Aggregate amount of deduction under this section shall not exceed Rs one lakh) (Read with section 80CCE) In 2005-06, section 80C replaced old section 88. Under section 80 C, individuals and HUFs are allowed deductions of up to a maximum Rs. 1,00,000/- from taxable income for payments and contributions as given below; without any sectoral caps. 1
Life Insurance premia. Annual premium of any policy shall not be more than 20 per cent of the sum assured. 2 Contribution to a recognised provident fund 3 Voluntary contribution by employee to a recognised provident fund 4 Contribution to Public Provident Fund account (PPF scheme allows interest on annual contributions of up to Rs 70,000 only) 5 Contribution by an employee to an approved superannuation fund 6 Contribution to National Savings Certificate (NSC) VIII issue 7 Interest accrued on NSC VIII issue during the current year except interest for the sixth year 8 Contribution to Unit Linked Insurance Plans 9 Contribution to annuity plan of a life insurance company 10 Equity Linked Savings Scheme (ELSS) of a mutual fund 11 Contribution to pension schemes of two mutual funds, namely Templeton India Pension Plan and UTI Retirement Benefit Pension Fund 12
13 14 15 16
Tuition fee paid to a college, school, etc, for education of any two children of an assessee. However, the eligible amount shall not include any payment towards any development fees or donation. Instalments paid in a year towards Housing Loans Bank fixed deposits for a period of not less than five years (wef April 1, 2006) Deposits in a Senior Citizens Savings Scheme (SCSS) (wef April 1, 2007) Sums deposited in a Five-year time deposit scheme of a Post Office (wef April 1, 2007)
SECTION 80CCC (Aggregate amount of deduction under this section shall not exceed Rs one lakh) (Read with Section 80CCE) Section 80CCC allows for a deduction from income of an amount of Rs one lakh deposited by an individual towards any annuity plan of the Life Insurance Corporation or any other insurer for receiving pension. (Prior to April 1, 2006, only Rs 10,000 was allowed).
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 3 of 5
SECTION 80CCD (Aggregate amount of deduction under this section shall not exceed Rs one lakh) (Read with Section 80CCE) Section 80CCD allows for a deduction in respect of contribution to New Pension System as notified by the Central Government. Individuals, including public/private sector employees and self-employed individuals, can avail this tax benefit. In respect of employees, the deduction shall not exceed 10 per cent of their salary. For employees, this section is applicable from January 1, 2004 and for self-employed individuals from April 1, 2008 (FY 2008-09). SECTION 80CCE (VERY IMPORTANT – INTRODUCED IN 2005-06) Section 80CCE states that the aggregate amount of deductions under section 80C, section 80CCC and section 80CCD shall not, in any case, exceed Rs one lakh
DEDUCTIONS THAT ARE ALLOWED IN ADDITION TO DEDUCTIONS UNDER SECTIONS 80C, 80CCC & 80CCD SEC.
80D
80DD
DEDUCTION Rs
DETAILS OF THE SECTION Health insurance premium of the individual or family In addition to above, health insurance cost of parents*
15,000 15,000
* If parents are senior citizens (65 years & above) (the parents need not be dependant on the assessee) Expenditure incurred for medical treatment of a disabled dependant (ordinary disability) # For severe disability #
20,000 50,000 1,00,000
# pertains to deduction for maintenance (including medical treatment), training and rehabilitation of a handicapped dependant; or on the amount paid or deposited under a scheme of the Life Insurance Corporation of India or other insurance for maintenance of disabled dependant 80DDB
80E
Medical treatment of herself or a dependant If the assessee is a senior citizen Individuals can claim deduction for interest paid on loan taken for pursuing full-time education of her/his own or her/his relative (Note: Deduction can be claimed for eight years and education includes all fields of studies post-schooling)
40,000 60,000 Actual amount paid
80G
Donations paid to Prime Minister's National Relief Fund or such other approved funds Donations paid to other funds/institutions
100% of donation 50% of donation
80U
Deduction allowed to inviduals with permanent physical disability (including blindness)
50,000
In case of severe diability
75,000
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 4 of 5
EET METHOD OF TAX TREATMENT OF SAVINGS EXPLAINED As of now, individuals enjoy several tax benefits – of course, subject to certain quantitative limits – on their investments in a multitude of savings instruments; namely, EPF, VPF, PPF, GPF, NSC, insurance policies, ULIPs, ELSS, bank fixed deposits, post office deposits, housing loan instalments, interest paid on housing loan, etc. The present system is called ‘EEE’ (Exempt-Exempt-Exempt) meaning investments enjoy benefits in three stages: 1). Exemption allowed at the time initial contribution, 2). Exemption throughout the accumulation period, and 3). Exemption at the time of withdrawal. The Government proposes to shift the tax treatment of savings to a new system called ‘EET’ (Exempt-Exempt-Taxed) whereby exemption will be allowed at the time of initial investment and accumulation period only; but the withdrawals will be included in the taxable income and taxed according to one’s tax slabs. As of now, provisions of section 80CCC and section 80CCD of the Income Tax Act are in uniformity with the EET method. Simply put, under the proposed EET regime, tax savers will be postponing their tax liability for future or till the date of retirement. TAX BENEFITS FOR NEW PENSION SYSTEM (NPS): The New Pension System has become operational since 1st January, 2004 and is mandatory for all new recruits to the Central Government service from 1st January, 2004. Since then it has been opened up for employees of State Government, private sector and self employed (both organized and unorganized). NPS is now open to all citizens. An NPS Trust was set-up on 27th February 2008 to manage the funds of NPS. NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA). NPS will continue to be subjected to EET method of tax treatment of savings. In the Union Budget 2009-10, the following amendments are made for NPS: 1) It is now proposed to exempt the income of the NPS Trust from income tax – section 10(44) 2) Any dividend paid to the NPS Trust shall be exempted from Dividend Distribution Tax – section 115-O 3) Transactions by the NPS Trust will be exempt from the Securities Transaction Tax 4) NPS Trust shall receive all income without any tax deducted at source – section 197A 5) Till now, the tax benefit for contributions to NPS, under section 80CCD, was available to public/private section employees only. However, it is now proposed to extend the NPS to “self-employed” individuals also under section 80CCD. The above amendments will take effect retrospectively from 1.4.2008 from FY 2008-09.
OTHER DEDUCTIONS THAT ARE ALLOWED: 1. Entertainment allowance (available only for Government employees) 2. Professional Tax 3. Interest paid on Housing loans, up to Rs 1.50 lakh, if the property is self occupied, is allowed as deduction from taxable income – section 24(1)(vi) Note: Tax slabs and deductions are as proposed by the Finance Minister in his Budget 2009-10 speech on July 6, 2009. Sources: Finance Bill 2009, Union Budgets and others. Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 3, 2009
Page 5 of 5
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