Deductions and Exemptions for Salaried Employees Income Tax F.Y.2015-16 and A.Y.2016-17, With All in One TDS on Salary for Govt and Non-Govt employees for F.Y.2015-16 + Arrears Relief Calculator + HRA Calculator

Salaried Employees
are a relieved lot now after fulfilling all the formalities for Income Tax
2014-15. But, by that time six months in the new financial year 2015-16 is
already over.
So, preparation of
statement for salary income, deductions and saving under various clauses of
Income Tax Act in respect of Financial year 2015-16 is already due for
submission to the employer.
Tax Planning and
submission of statement to that effect to the employer would be mainly useful
to avoid additional deduction of Income Tax
by the employer over and above income tax estimated by an individual on the basis of his / her savings or
deductions.
As per the Finance
Budget 2015-16 the Income Tax Structure for the year 2015-16 (Assessment Year
2016-17) and also the Tax exemptions available to salaried class employees in
the form of Exempt Income, Deductions and Savings.

Download All in One TDS on Salary for Govt & Non-Govt employees for Financial Year 2015-16 [ This Excel Based Utility
can prepare at a time Govt and Non-Govt employees Tax Compute Sheet + Individual
Salary Structure + Individual Salary Sheet + Automated Arrears Relief
Calculator with Form 10E + Automated HRA Exemption Calculation + Automated Form
16 Part A&B and Form 16 Part B ]

Tax exemptions in the form of
Exempt Income, Deductions and Savings

 1. Exempt Income and Allowances
under Section 10 of Income Tax Act

Income given below
are exempt income and hence these need not included while calculating Total
Income of a Salaried Employee
  • Amount of LTC or LTA actually
    incurred. [Section 10(5)]
  • Any special
    allowance or benefit, such as Travelling Allowance, Uniform Allowance etc
    which are incurred for the performance of the duties of an office or
    employment . [Section 10(13A)]
  • The transport
    allowance granted  to  an  employee to meet his expenditure
     for  the purpose of commuting between the place of his residence and the place
     of  duty is exempt to the extent of  Rs. 1,600/- per month
    or Rs. 3200 per month (for a visually challenged person) [Section 10 (14)]
  • Children Education allowance:
    Rs. 100/- per month per
    child up to a maximum of 2 children.
  • Hostel Subsidy: Rs. 300/- per
    month per child upto a maximum of two children.
  • Other
    Allowances exempted under Section 10 of IT Act are Tour TA, Tour Daily
    Allowance, Academic, research or training allowance, uniform Allowance,
    Special Compensatory Allowance, High Altitude Allowance, Climate
    Allowance, allowances applicable to North East, Hilly areas of U.P., H.P.
    and J & K, border area allowance, Compensatory Field Area Allowance,
    Counter Insurgency Allowance, High Active Field Area Allowance, island
    duty allowance, tribal allowance etc.
Exemption under Section 10 (13A) in respect of HRA – Calculation Method:
Least
of the following amount is to be treated as exempt from Income Tax.
  • Actual House Rent Allowance
    Received, or
  • Rent paid in excess of 10% of
    Pay in Pay band and Grade Pay or
  • 50% of Pay in Pay band and Grade
    Pay  if the employee is in Chennai/Mumbai/Kolkatta/Delhi and 40% of
    Pay in Pay Band and Grade Pay for the employees is in other places.
  • If the employees resides in
    his/her own house or in a house for which he/she does not pay any rent, no
    HRA exemption is available.

Download Automatic HRA Exemption Calculator U/s 10(13A) in Excel.

2. Savings which are eligible for Tax
Exemption Section 80C, Section 80CCC and Section 80CCD

Section 80C, CCC
and CCD(1) allow deduction from total income. The total deduction under this
section (alongwith section 80CCC and 80CCD(1) is limited to Rs. 1.50 lakh only.

Section 80C:

  • Life Insurance
    Premium For individual, policy must be in self or spouse’s or any child’s
    name. For HUF, it may be on life of any member of HUF.
  • Sum paid under
    contract for deferred annuity for individual, on life of self, spouse or
    any child .
  • Contribution
    made under Employee’s Provident Fund Scheme.
  • Contribution to
    PPF For resident individual, can be in the name of
    self/spouse, any child & for HUF, it can be in the name of any member
    of the family.
  • Deposit in
    Sukanya Samriddhi Account as natural / legal guardian of girl child.
  • Contribution by
    employee to a Recognised Provident Fund.
  • Sum deposited
    in 10 year/15 year account of Post Office Saving Bank
  • Subscription to
    any notified savings certificate, Unit Linked Savings certificates. e.g.
    NSC VIII issue.
  • Contribution to
    Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanrakhsa 1989
  • Payment made by
    way of installment or part payment of loan taken for purchase/construction
    of residential house property.
  • Subscription to
    equity shares/ debentures forming part of any approved eligible issue of
    capital made by a public company or public financial institutions.
  • Tuition fees
    paid at the time of admission or otherwise to any school, college,
    university or other educational institution situated within India for
    the purpose of full time education of any two children. Available in
    respect of any two children.
  • Registration
    and Stamp Duty for purchase the house property

Section 80CCC:

Deduction in
respect of Premium Paid for Annuity Plan of LIC or Other Insurer. Payment of
premium for annuity plan of LIC or any other insurer Deduction is available
upto a maximum of Rs. 150,000/-.
The premium must
be deposited to keep in force a contract for an annuity plan of the LIC or any
other insurer for receiving pension from the fund.

Section 80CCD (1):

Deduction in
respect of Contribution to Pension Account (by Assessee). Deduction available
for the amount paid or deposited in a pension scheme notified or as may be
notified by the Central Government subject to a maximum of :

(a) 10% of salary in the previous year in the
case of an employee

(b) 10% of gross total income in any other
case.

Section 80CCD(1A):

The maximum
deduction allowable under this section is Rs. 1.00 lakh. in case of
contribution to New Pension Scheme (NPS), it is Rs. 1.50 lakh w.e.f. 01.04.2015

3. Additional
Savings eligible for Tax Exemption up to Rs. 50,000/- under Section 80 CCD (1B)

Section 80CCD(1B):

Contribution in
NPS has been given more tax concession in the budget 2015. As per Section
80CCD(1B), an additional deduction of up to Rs. 50,000 over and above the
Section 80C, 80CCC and 80CCD savings cap of Rs. 1.5 lakh, is allowed if such
amount is contributed by the employee. So, overall tax savings of Rs. 2 lakh
can be availed under Section 80C, 80CCC and 80CCD(1).

4. Deduction in
respect of Contribution to Pension Account by Employer under Section 80CCD (2):

Deduction under
Section 80CCD(2) is available for the amount paid or deposited by the employer
of the assessee in a pension scheme notified or as may be notified by the
Central Government subject to a maximum of 10% of salary in the financial year.
This deduction is allowed over and above Savings value cap of Rs. 1.5 lakh
under Section 80CCE (in the case of investment in NPS, savings value cap
eligible for deduction will be Rs. 2 lakh).

5. Eligible
deductions from Income from Section 80 D to 80 U towards amount spent on health
insurance, medical treatment etc.

Section 80D: Deduction in respect of
Medical Insurance
:

Deduction is
available upto Rs. 30,000/- for parents who are senior citizens and upto Rs.
25,000/- in other cases for insurance of self, spouse and dependent children.
Amount of up to Rs.5000/- spent on preventive health check-up. So a maxium of
Rs. 60,000 can be deducted which is spent towards Health Insurance premium.

Section 80DD: Deduction for
medical treatment of physically challenged dependents:

In the case of
salaried employee who is taking care of physically challenged Dependent
Relative, an amount with the maximum limit of Rs.75000/- spent towards medical
treatment or rehabilitation can be deducted from the income (In the case of
severe disability maximum deduction would be Rs. 1,25,000).

Section 80DDB: Deduction in
respect of specified disease:

Deduction in
respect of specified disease for self or dependent relatives is deduction
amount Rs.80,000 in case of senior citizen.

Section 80E: Deduction in respect
of Interest on Loan for Higher Studies
:

Deduction in
respect of interest on loan taken for pursuing higher education. The deduction
is also available for the purpose of higher education of a relative.

Section 80G: Deduction for
Donations

Notified donations
under Sec. 80G will be eligible for deduction ( 100% or 50% as per the notification
condition)

Section 80GG: Deduction in respect
of House Rent Paid

Deduction available is the least of

  • Rs.
    2000/- per month i.e. Maximum Deduction available is 24,000/-

Section 80 TTA: Deduction from
gross total income in respect of any Income by way of Interest on Savings
account

Maximum of Rs.
10,000/-, in respect of interest on deposits in savings account ( not time
deposits ) with a bank, co-operative society or post office

Section 80U: Deduction in respect
of Person suffering from Physical Disability

Deduction of Rs.
75,000/- in respect of tax payer suffering from a physical disability. In the
case of severe disability, deduction of Rs. 125,000/- will be allowed.
Certificate from the approved medical authorities regarding the extent of
disability will have to be produced (Rule 11D)

6. Deductions
Allowable under Section 24 of Income Tax Act in respect of interest on house
property :

Housing Property
bought or constructed on or after 01.04.99 (completed within 3 years from a
ailment of loan) and self occupied will be eligible for deduction of interest
paid on housing loan with the maximum limit Rs. 2,00,000/-. In other cases
deduction in respect of interest paid up to Rs.30,000 will be allowed. If the
said house property is not self-occupied there is no limit in deduction in
respect of interest paid on housing loan subject to inclusion of rental income
in respect of the house property.
And additional
House Building Loan Interest can be relief U/s 80EE Max Rs.1 Lakh w.e.f.
1/4/2013 and onwards

7. Relief Under Section 89(1)

Relief
u/s 89(1) is available to an employee when he receives salary in advance or in
arrear or when in one financial year, he receives salary of more than 12
months, or receives ‘profit in lieu of salary’ covered u/s 17(3). Relief u/s
89(1) is also admissible on family pension, as the same has been allowed by
Finance Act, 2002 (with retrospective effect from 1/4/96). [Click here to Download the AutomaticArrears Relief Calculator U/s 89(1) with Form 10E ]

 
8. Deduction U/s 87A:- Tax Rebate Rs. 2000/- who’s Taxable Income less than 5 Lakhs.

Sum up of Total Deduction Exemption for F.Y.2015-16

Deductions under
80C
Rs. 1,50,000
Deductions under
80CCD (1B) for contribution to NPS
Rs. 50,000
Interest on house
property loan
Rs. 2,00,000
Exemption with new
transportation allowance of Rs. 1,600 per month
Rs. 19,200
New deductible
health insurance premium
Rs. 25,000
Total deductions / exemption
Rs. 4,44,200
Basic Income which
is exempted from Income Tax
Rs. 2,50,000
Gross Total Income
which can be tax free
Rs.6,94,200

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