The Central Government has been empowered by Entry 82 of the Union List of Schedule V

of the Constitution of ndia to levy ta! on all income other than a"ricultural income #subject
to Section 10(1)$%
&'(
The ncome Ta! Law comprises The ncome Ta! )ct '*+', ncome Ta!
-ules '*+2, .otifications and Circulars issued by Central /oard of 0irect Ta!es #C/0T$,
)nnual 1inance )cts and 2udicial pronouncements by Supreme Court and 3i"h Courts%
The "overnment of ndia imposes an income ta! on ta!able income of all persons includin"
individuals, 3indu Undivided 1amilies #3U1s$, companies, firms, association of persons,
body of individuals, local authority and any other artificial 4udicial person% Levy of ta! is
separate on each of the persons% The levy is "overned by the ndian ncome Ta! )ct, '*+'%
The ndian ncome Ta! 0epartment is "overned by C/0T and is part of the 0epartment of
-evenue under the 5inistry of 1inance, Govt% of ndia% ncome ta! is a 6ey source of funds
that the "overnment uses to fund its activities and serve the public%
The ncome Ta! 0epartment is the bi""est revenue mobili7er for the Government% The total
ta! revenues of the Central Government increased from '8*2%2+ billion in '**9:*8 to
;88*%<* billion in 2<<9:<8%
&
HISTORY
Income tax was introduced in 1860, abolished in 187 and reintroduced in1886
Income tax le!els in India were !er" hi#h durin# 1$%0&1$80, in 1$70&71 there
were 11 tax slabs with hi#hest tax rate bein# $'%( includin# surchar#es' In
1$7&7) hi#hest rate was $7'7%(' *ut to reduce tax e!asion tax rates were
reduced later on, b" 1$$+&$ maximum tax rates were reduced to )0('
,har#e to income&ta-
=hose income e!ceeds the maximum amount, which is not char"eable to the income ta!, is
an assessee, and shall be char"eable to the income ta! at the rate or rates prescribed under the
finance act for the relevant assessment year, shall be determined on basis of his residential
status%
ncome ta! is a ta! payable,
&;(
at the rate enacted by the Union /ud"et #1inance )ct$ for every
)ssessment >ear, on the Total ncome earned in the ?revious >ear by every ?erson%
The char"eability is based on nature of income, i%e%, whether it is revenue or capital% The rates
of ta!ation of income are:@
ncome Ta! -atesASlabs -ate #B$ #applicable for assessment year 2014-15
Net income range (For
resident woman below
60 years on the last
day of the re!ious
year"
Net income
range (For
resident senior
citi#en
'
"
Net income
range (For
suer senior
citi#en
2
"
Net income range (For
any other person
excluding comanies
and co-oerati!e
societies"
$ncome
%ax
rates
8
Up to 2<<,<<< Up to 2;<,<<<
Up to
;<<,<<<
Up to 2<<,<<< .LB
2<<,<<'C;<<,<<<
2;<,<<'C
;<<,<<<
: 2<<,<<'C;<<,<<< '<B
;<<,<<'C',<<<,<<<
;<<,<<'C
',<<<,<<<
;<<,<<'C
',<<<,<<<
;<<,<<'C',<<<,<<< 2<B
)bove ',<<<,<<<
)bove
',<<<,<<<
)bove
',<<<,<<<
)bove ',<<<,<<< 8<B
^1 Senior citi.en is one who is 60 "ears or more at an" time durin# the /re!ious
"ear but not more than 80 "ears on the last da" o0 the /re!ious "ear'
^2 Su/er senior citi.en is one who is 80 "ears or more at an" time durin# the
/re!ious "ear'
^3 These slab&rates aren1t a//licable 0or the incomes which are to be taxed at
special rates under section 1112, 11+, 11%, 161, 16) and 167' 3or instance, lon#&
term ca/ital #ains 4except the one mentioned in section 10(38)50or all assessees
is taxable at +0(' 3or individual assessees whose total income does not exceed
6%00,000 be0ore #i!in# an" deduction under ,ha/ter 7I 2 are eli#ible 0or a
rebate o0 u/ to 6+,000 under section 872 4a//licable 0rom assessment "ear
+01)&1% onwards5' 2 surchar#e o0 10( on income tax /a"able is a//licable 0or
e!er" non&cor/orate assessee, whose total income exceeds 610 million
4a//licable 0or assessment "ear +01)&1%5'
&esidential status
The residential status of the assessee is useful in determinin" the scope or char"eability of the
income for the assessee, i%e%, whether ta!able or not% 1or an individual person, to be a
resident, any one of the followin" basic conditions must be satisfied@:
?resence of at least '82 days in ndia durin" the previous year%
?resence of at least +< days in ndia durin" the previous year and 8+; days durin" D
years immediately precedin" the relevant previous year%
3owever, in case the individual is an ndian citi7en who leaves ndia durin" the previous year for the purpose of
employment #or as a member of a crew of an ndian ship$ or in case the individual is a person of ndian ori"in
who comes on a visit to ndia durin" the previous year, then only the first of the above basic condition is
applicable% To determine whether the resident individual is ordinarily resident the followin"
both additional conditions are to be satisfied@:
-esident in ndia in at least 2 out of '< years immediately precedin" the relevant
previous year%
?resence of at least 98< days in ndia durin" 9 years immediately precedin" the
relevant previous year%
f the individual resident satisfies only one or none of the additional conditions, then he is not ordinarily
resident% #n case the person is not an individual or an 3U1, then the residential status can only be either resident
or non:resident$
&esidential status of a erson other than an indi!idual
%ye of person
'ontrol (
management of affairs
of the taxayer is
wholly in $ndia
'ontrol (
management of affairs
of the taxayer is
wholly outside $ndia
'ontrol ( management
of affairs of the taxayer
is artly in $ndia artly
outside $ndia
3U1
'
-esident .on:resident -esident
1irm -esident .on:resident -esident
)ssociation of
persons
-esident .on:resident -esident
ndian
company
2
-esident -esident -esident
1orei"n
company
8
-esident .on:resident .on:resident
)ny other
person e!cept an
individual
-esident .on:resident -esident
)1 )fter determinin" whether an 3U1 is resident or non:resident, the additional conditions #as laid
down for an individual$ should be chec6ed for the karta to determine whether the 3U1 is ordinary or
not:ordinary resident%
)2 )n ndian company is the one which satisfies the conditions as laid down under section 2#2+$ of
the )ct%
)* 1orei"n company is the one which satisfies the conditions as laid down under section 2#28)$ of
the )ct
+coe of total income
ndian income
'
is always ta!able in ndia notwithstandin" residential status of the ta!payer%
1orei"n income
'
is not ta!able in the hands of a non:resident in ndia% 1or resident #in case of
firm, association of persons, company and every other person$ or resident E ordinarily
resident #in case of an individual or an 3U1$, forei"n income is always ta!able% 1or resident
but not ordinarily resident forei"n income is ta!able only if it is business income and business
is controlled wholly or partly in ndia or it is a professional income and profession is set up in
ndia%
)1 1orei"n income is the one which satisfies both the followin" conditions@:
Income is not recei!ed 4or not deemed to be recei!ed under section 75 in
India, and
Income doesn1t accrue 4or doesn1t deemed to be accrued under section $5
in India'
f such an income satisfies one or none the above conditions then it is an ndian income%
Heads of income
The total income of a person is se"re"ated into five heads@:
Income 0rom salaries
Income 0rom house /ro/ert"
8ro9ts and #ains o0 business or /ro0ession
,a/ital #ains and
Income 0rom other sources
$ncome from salaries
)ll income received as salary under employer:employee relationship is ta!ed under this head,
on due or receipt basis, whichever arises earlier% Employers must withhold ta! compulsorily
#sub4ect to Section '*2$, if income e!ceeds minimum e!emption limit, as Ta! 0educted at
Source #T0S$, and provide their employees with a Form 16 which shows the ta! deductions
and net paid income% The )ct contains e!emptions includin" #the list isn't exhaustive$@:
,articulars
&ele!ant section for comuting
exemtion
Leave travel concession '<#;$
0eath:cum:-etirement Gratuity '<#'<$
Commuted value of ?ension #not ta!able for specified
Government employees$
'<#'<)$
Leave encashment '<#'<))$
-etrenchment Compensation '<#'</$
Compensation received at time of Voluntary -etirement '<#'<C$
Ta! on perFuisite paid by employer '<#'<CC$
)mount received from Superannuation 1und to le"al heirs
of employee
'<#'8$
3ouse -ent )llowance '<#'8)$
Some Special )llowances '<#'D$
The )ct contains list of perFuisites which are always ta!able in all cases and a list of
perFuisites which are e!empt in all cases #List $% )ll other perFuisites are to be calculated
accordin" to specified provision and rules for each% Gnly two deductions are allowed under
Section '+, vi7% ?rofessional Ta! and Entertainment )llowance #the latter only available for
specified "overnment employees$%
&show('omutation of exemtion for gratuity -+ection 10(10".
&show('omutation of exemtion of /ouse &ent 0llowance(/&0" -+ection 10(1*0".
&show('omutation of exemtion for ension -+ection 10(100".
&show('omutation of exemtion for 1ea!e encashment -+ection 10(1000".
&show('omutation of exemtion for &etrenchment comensation -+ection 10(102".
&show('omutation of exemtion for 3oluntary &etirement +cheme -+ection 10(10'".
$ncome from house roerty
ncome under this head is ta!able if the assessee is the owner of a property consistin" of
buildin" or land appurtenant thereto and is not used by him for his business or professional
purpose% )n individual or an 3indu Undivided 1amily #3U1$ is eli"ible to claim any one
property as Self-occupied if it is used for own or familyHs residential purpose% n that case, the
.et )nnual Value #as e!plained below$ will be nil% Such a benefit can only be claimed for one
house property% 3owever, the individual #or 3U1$ will still be entitled to claim nterest on
borrowed capital as deduction under section 2D, sub4ect to some conditions% n the case of a
self occupied house deduction on account of interest on borrowed capital is sub4ect to a
ma!imum limit of ';<,<<< #if loan is ta6en on or after ' )pril '*** and construction is
completed within 8 years$ and 8<,<<< #if the loan is ta6en before ' )pril '***$% 1or let:out
property, all interest is deductible, with no upper limits% The balance is added to ta!able
income%
The computation of income from let-out property is as under@:
Gross annual value #G)V$
'
!!!!
Less@5unicipal Ta!es paid #!!!$
.et )nnual value #.)V$ !!!!
Less@0eductions under section 2D
2
#!!!$
ncome from 3ouse property !!!!
)1 The G)V is hi"her of )nnual Lettin" Value #)LV$ and )ctual rent receivedAreceivable durin" the
year% The )LV is hi"her of fair rent and municipal value, but restricted to standard rent fi!ed by -ent
Control )ct%
)2 Gnly two deductions are allowed under this head by virtue of section 2D, vi7%,
8<B of .et annual value as Standard deduction
nterest on capital borrowed for the purpose of acFuisition, construction, repairs, renewals or
reconstruction of property #sub4ect to certain provisions$%
,rofits and 4ains of business or rofession
The income referred to in section 28, i%e%, the incomes char"eable as Income from /usiness
or ?rofessionI shall be computed in accordance with the provisions contained in sections 8<
to D80% 3owever, there are few more sections under this Chapter, vi7%, Sections DD to DD0)
#e!cept sections DD)), DD)/ E DDC$, which contain the computation completely within
itself% Section DDC is a disallowance provision in the case non:residents% Section DD)) deals
with maintenance of boo6s and section DD)/ deals with audit of accounts%
n summary, the sections relatin" to computation of business income can be "rouped as
under@ :
Specific
deductions
Sections 8< to 89 cover e!penses which are e!pressly allowed as
deduction while computin" business income%
Specific
disallowance
Sections D<, D<) and D8/ cover inadmissible e!penses%
0eemed ncomes Sections 88)/, 88)/), 88)C, 8;), 8;)//, D'%
Special provisions
Sections D2, D8C, D80, DD, DD), DD/, DD//, DD//), DD///, DD0),
DD0/%
?resumptive
ncome
Sections DD)0, DD)E%
The computation of income under the head I?rofits and Gains of /usiness or ?rofessionI
depends on the particulars and information available%
&9(
f re"ular boo6s of accounts are not maintained, then the computation would be as under@ :
ncome #includin" deemed income$ char"eable as income under this head !!!
1ess@ E!penses deductible #net of disallowances$ under this head #!!$
3owever, if re"ular boo6s of accounts have been maintained and profit and loss account has
been prepared, then the computation would be as under@ :
.et ?rofit as per profit and loss account !!!
0dd @ nadmissible e!penses debited to profit and loss account !!
0dd@ 0eemed incomes not credited to profit and loss account !!
1ess@ 0eductible e!penses not debited to profit and loss account #!!$
1ess@ ncomes char"eable under other heads credited to ?rofit E Loss )Ac #!!$
$ncome from caital gains
Transfer of capital assets results in capital "ains% ) Capital asset is defined under section
2#'D$ of the %T% )ct, '*+' as property of any 6ind held by an assessee such as real estate,
eFuity shares, bonds, 4ewellery, paintin"s, art etc% but does not include some items li6e any
stoc6:in:trade for businesses and personal effects% Transfer has been defined under section
2#D9$ to include sale, e!chan"e, relinFuishment of asset e!tin"uishment of ri"hts in an asset,
etc% Certain transactions are not re"arded as HTransferH under section D9%
Computation of Capital Gains@:
1ull value of consideration
'
!!!
Less@Cost of acFuisition
2
#!!$
Less@Cost of improvement
2
#!!$
Less@E!penditure pertainin" to transfer incurred by the transferor #!!$
)1 n case of transfer of land or buildin", if sale consideration is less than the stamp duty valuation,
then such stamp duty value shall be ta6en as full value of consideration by virtue of Section ;<C% The
transferor is entitled to challen"e the stamp duty valuation before the )ssessin" Gfficer%
)2 Cost of acFuisition E cost of improvement shall be inde!ed in case the capital asset is lon" term%
1or ta! purposes, there are two types of capital assets@ Lon" term and short term% Transfer of
lon" term assets "ives rise to lon" term capital "ains% The benefit of inde!ation is available
only for lon" term capital assets% f the period of holdin" is more than 8+ months, the capital
asset is lon" term, otherwise it is short term% 3owever, in the below mentioned cases, the
capital asset held for more than '2 months will be treated as lon" term@:
)ny share in any company
Government securities
Listed debentures
Units of UT or mutual fund, and
Jero:coupon bond
)lso, in certain cases, inde!ation benefit is not be available even thou"h the capital asset is
lon" term% Such cases include depreciable asset #Section ;<$, Slump Sale #Section ;</$,
/ondsAdebentures #other than capital inde!ed bonds$ and certain other e!press provisions in
the )ct% There are different scheme of ta!ation of lon" term capital "ains% These are@
'% )s per Section '<#88$ of ncome Ta! )ct, '*+' lon" term capital "ains on shares or
securities or mutual funds on which Securities Transaction Ta! #STT$ has been
deducted and paid, no ta! is payable% STT has been applied on all stoc6 mar6et
transactions since Gctober 2<<D but does not apply to off:mar6et transactions and
company buybac6sK therefore, the hi"her capital "ains ta!es will apply to such
transactions where STT is not paid%
2% n case of other shares and securities, person has an option to either inde! costs to
inflation and pay 2<B of inde!ed "ains, or pay '<B of non inde!ed "ains% The cost
inflation inde! rates are released by the :T department each year%
8% n case of all other lon" term capital "ains, inde!ation benefit is available and ta! rate
is 2<B%
)ll capital "ains that are not lon" term are short term capital "ains, which are ta!ed as such@
Under section '''), for shares or mutual funds where STT is paid, ta! rate is '<B
from )ssessment >ear #)>$ 2<<;:<+ as per 1inance )ct 2<<D% =ith effect from )>
2<<*:'< the ta! rate is ';B%
n all other cases, it is part of "ross total income and normal ta! rate is applicable%
1or companies abroad, the ta! liability is 2<B of such "ains suitably inde!ed #since STT is
not paid$%
/esides e!emptions under section '<#88$, '<#89$ E '<#88$ certain specific e!emptions are
available under section ;D, ;D/, ;D0, ;DEC, ;D1, ;DG E ;DG)%
+ection 54
+ectio
n 542
+ectio
n 545
+ectio
n
546'
+ection
54F
+ection 544 +ection 5440
+ection
5442
=ho
is
eli"ib
le to
claim
e!em
ndividualA
3U1
ndivi
dual
)ny
person
)ny
person
ndividualA
3U1
)ny person )ny person ndividu
alA3U1
+ection 54
+ectio
n 542
+ectio
n 545
+ectio
n
546'
+ection
54F
+ection 544 +ection 5440
+ection
5442
ption
=hic
h
asset
is
eli"ib
le for
e!em
ption
)
residential
house
property
#lon" term$
)"ric
ultural
land
#if
used
by
indivi
dual
or his
parent
s for
a"ricu
ltural
purpo
se
durin"
at
least 2
years
imme
diatel
y
prior
to
transf
er$
LandAb
uildin"
formin
" part
of an
industr
ial
undert
a6in"
which
is
compu
lsorily
acFuire
d by
the
Gover
nment
E
which
is used
durin"
2 years
for
industr
ial
purpos
es
prior to
acFuisi
tion
)ny
lon"
term
capital
asset
)ny lon"
term capital
asset #other
than house
property$
provided
that on the
date of
transfer the
assessee
does not
own more
than one
residential
house
property
LandAbuildin"A
plantAmachiner
y in order to
shift an
industrial
underta6in"
from urban area
to rural area
LandAbuildin"A
plantAmachiner
y in order to
shift an
industrial
underta6in"
from urban area
to any Special
Economic Jone
Lon":
term
resident
ial
property
if
transfer
ta6es
place
between
if
transfer
ta6es
place
durin"
)pril ',
2<'2
and
5arch
8',
2<'9
=hic
h
asset
shoul
d be
acFui
red to
claim
e!em
ption
-esidential
house
property
)"ric
ultural
land
in
rural
or
urban
area
LandAb
uildin"
for
industr
ial
purpos
e
/onds
of
.ation
al
3i"hw
ays
)uthor
ity of
ndia
or
-ural
Electrif
ication
Corpor
ation
)
residential
house
property
LandAbuildin"A
plantAmachiner
y in order to
shift
underta6in" to
rural area
LandAbuildin"A
plantAmachiner
y in order to
shift
underta6in" to
any SEJ
EFuity
shares
in
eli"ible
compan
y
+ection 54
+ectio
n 542
+ectio
n 545
+ectio
n
546'
+ection
54F
+ection 544 +ection 5440
+ection
5442
Limite
dK
5a!im
um
e!empt
ion in
one
financi
al year
is
; milli
on
=hat
is the
time
limit
for
acFui
rin"
the
new
asset
?urchase@
':year
bac6ward
or 2 years
forwardKCo
nstruction@8
years
forward
2
years
forwa
rd
8 years
forwar
d
+
months
forwar
d
?urchase@
':year
bac6ward
or 2 years
forwardKCo
nstruction@8
years
forward
':year
bac6ward or 8
years forward
':year
bac6ward or 8
years forward
EFuity
shares
in an
eli"ible
compan
y to be
acFuire
d on or
before
due date
of filin"
return
of
income
as under
section
'8*#'$%
The
eli"ible
compan
y
should
utili7e
this
amount
for the
purchas
e of a
new
asset
within
one
year
from
the date
+ection 54
+ectio
n 542
+ectio
n 545
+ectio
n
546'
+ection
54F
+ection 544 +ection 5440
+ection
5442
of
subscrip
tion in
eFuity
shares
3ow
much
is
e!em
pt
nvestment
in the new
asset or
capital
"ain,
whichever
is lower
#The new
asset
should not
be
transferred
within 8
years of its
acFuisition$
nvest
ment
in the
new
asset
or
capita
l "ain,
which
ever is
lower
#The
new
asset
shoul
d not
be
transf
erred
within
8
years
of its
acFuis
ition$
nvest
ment
in the
new
asset
or
capital
"ain,
whiche
ver is
lower
#The
new
asset
should
not be
transfe
rred
within
8 years
of its
acFuisi
tion$
nvest
ment
in the
new
asset
or
capital
"ain,
whiche
ver is
lower
#The
new
asset
should
not be
transfe
rred
within
8 years
of its
acFuisi
tion$K
The
new
asset
should
not be
convert
ed into
money
or any
loanAad
vance
should
not be
ta6en
on the
securit
y of
the
new
nvestment
in the new
assetL.et
sale
considerati
onMCapital
"ainK The
assessee
should not
complete
constructio
n of another
residential
house
property
within 8
years from
the date of
transfer of
ori"inal
asset nor
should he
purchase
within 2
years from
the date of
transfer of
ori"inal
asset
another
house
property
nvestment in
the new asset
or capital "ain,
whichever is
lower #The new
asset should not
be transferred
within 8 years
of its
acFuisition$
nvestment in
the new asset
or capital "ain,
whichever is
lower #The new
asset should not
be transferred
within 8 years
of its
acFuisition$
nvestm
ent in
the new
asset M
capital
"ain L
net sale
consider
ation%
#The
e!empti
on is
revo6ed
if eFuity
shares
are
soldAtra
nsferred
within ;
years
from
acFuisiti
on or
the new
asset is
soldAtra
nsferred
by the
compan
y within
; years
from
acFuisiti
on$
+ection 54
+ectio
n 542
+ectio
n 545
+ectio
n
546'
+ection
54F
+ection 544 +ection 5440
+ection
5442
asset
within
8 years
from
the
date of
its
acFuisi
tion
$ncome from other sources
This is a residual head, under this head income which does not meet criteria to "o to other
heads is ta!ed% There are also some specific incomes which are to be always ta!ed under this
head%
'% ncome by way of 0ividends%
2% ncome from horse racesAlotteries%
8% EmployeesH contribution towards staff welfare scheme%
D% nterest on securities #debentures, Government securities and bonds$%
;% )ny amount received from 6eyman insurance policy as donation%
+% Gifts #sub4ect to certain conditions and e!emptions$%
9% nterest on compensationAenhanced compensation%
+ection 70' deductions
0eduction under this section is available only to an individual or an 3U1%
Section 8<C of the ncome Ta! )ct allows certain investments and e!penditure to be
deducted from total income up to the ma!imum of -s '<<,<<<%
&8(
'% Contribution to approved superannuation fundApublic provident fundAreco"ni7ed
provident fundAstatutory provident fund% ?rovident fund contribution should not
e!ceed
'
A
;
of salary E public provident fund%
2% ?ayment of life insurance premium% t is allowed on premium paid on self, spouse and
children even if they are not dependent on father or mother #sub4ect to a ma!imum of
2<B of sum assured up to 1> 2<'2:'8, from 1> 2<'8:'D 2<B has been reduced to
'<B$%
8% ?ayment in respect of non:commutable deferred annuity%
D% Unit lin6ed nsurance policy of UTALC 5utual fund Dhanraksha%
;% Subscriptions to .ational Savin"s Certificates V issues%
+% 0eposits with .ational 3ousin" /an6%
9% ?rincipal part of loan ta6en for acFuirin" -esidential 3ouse ?ropertyK provided that
the house should not be transferred within ; years Loan for land cost for residential
house is also Fualified%
8% Subscriptions to schemes of ?SUHs providin" lon" term finance for housin", or of
housin" boards constituted in ndia for infrastructural development of citiesAtowns%
*% .otified annuity plan of LC or of any other approved insurer%
'<% Units of 5utual 1und or UT%
''% .otified pension fund by UT or approved mutual fund%
'2% Tuition fees #not includin" donation or development fees$ towards full:time education
includin" play:school activities, pre:nursery E nursery classes, of any 2 children of an
individual, paid to University, Colle"e or School in ndia%
'8% nvestments in shares or debentures with a loc6:in:period of 8 years, of approved
public company e!clusively en"a"ed in infrastructure facility or power sector%
'D% Subscription to the bonds issued by .)/)-0 as specified by Central Government%
';% )ny sum deposited as ; years time deposit under ?ost Gffice Term 0eposit%
'+% )ny sum deposited in Senior Citi7en Savin"s Scheme%
'9% )ny sum deducted from salary of Government employee #sub4ect to ma!imum 2<B
of salary$ towards deferred annuity plan for benefit of self, spouse or any children%
'8% Term deposit with scheduled ban6 for a period of not less than ; years as per scheme
notified by Central Government%
'*% nvestin" in units of notified mutual fund investin" in approved public companies
en"a"ed in infrastructure facility or power sector%
+ection 70'''
?ayments made to LC or to any other approved insurer under an approved pension plan is
admissible for deduction under this section% Then pension plan policy should be for
individual himself out of his ta!able income% The deduction is least of the amount paid or
'<<,<<<
+ection 70''5
Contribution made by the assessee and by employer to .ew ?ension Scheme is admissible
for deduction under this section% The assessee should be an individual who is employed on or
after ' 2anuary 2<<D% The deduction shall be eFual to the amount contributed by the assessee
andAor by the employer, not e!ceedin" '<B of his salary #basicNdearness allowance$% Even a
self:employed person can claim this deduction which will be restricted to '<B of "ross total
income%
The total deduction available to an assessee under sections 8<C, 8<CCC E 8<CC0 is
restricted to '<<,<<< per annum% 3owever, employerHs contribution to .otified ?ension
Scheme under section 8<CC0 is not a part of the limit of '<<,<<<%
+ection 7058 9edical insurance remiums
3ealth insurance, popularly 6nown as 5ediclaim ?olicies, provides a deduction of up to
8;,<<<%<< # ';,<<<%<< for premium payments towards policies on self, spouse and children
and ';,<<<%<< for premium payment towards non:senior citi7en dependent parents or
2<,<<<%<< for premium payment towards senior citi7en dependent$% This deduction is in
addition to '<<,<<< savin"s under T deductions clause 8<C% 1or consideration under a
senior citi7en cate"ory, the incumbentHs a"e should be +< years durin" any part of the current
fiscal, e%"% for the fiscal year 2<'<:'', the incumbent should already be +< as on 8' 5arch
2<''$, This deduction is also applicable to the cheFues paid by proprietor firm%
+ection 70552 8 5eduction in resect of medical treatment: etc
0eduction is allowed to resident individual or 3U1 in respect of e!penditure actually durin"
the ?> incurred for the medical treatment of specified disease or ailment as specified in the
rules ''00 for himself or a dependent relative or a member of a 3U1
&*(
+ection 70''4 8 &46++
0eduction of ;<B is allowed on investments up to -s@;<,<<< under the -a4iv Gandhi EFuity
Savin"s Scheme on select securities%
&'<(
+ection 706 8 6ducation loan interest
nterest payment on education loan for education in ndia or abroad "ets deduction under this
section% Education loan should be for self, spouse, child or the one whose le"al "uardian the
assessee is%
&''(
+ection 70%%0 8 $nterest on +a!ings 0ccount
Up to -s '<,<<< earned as interest from savin"s account in ban6, post office or a co:operative
society can be claimed for deduction under this section% This rebate is applicable for
individuals and 3U1s %
&'2(
+ection 70; 8 5isability
0isabled persons can "et a flat deduction on ncome Ta! on producin" their disability
certificate% f disability is severe -s ' la6h can be claimed else -s ;<,<<<%
&'8(
+ection 24 8 $nterest on housing loans
1or self occupied properties, interest paid on a housin" loan up to -s';<,<<< per year is
e!empt from ta!% This deduction is in addition to the deductions under sections 8<C, 8<CC1
and 8<0% 3owever, this is only applicable for a residence constructed within three financial
years after the loan is ta6en and also the loan if ta6en after ' )pril '***%
f the house is not occupied due to employment, the house will be considered self occupied%
1or let out properties, the entire interest paid is deductible under section 2D of the ncome Ta!
act% 3owever, the rent is to be shown as income from such properties% 8<B of rent received
and municipal ta!es paid are available for deduction of ta!%
?% Chidambaram while announcin" his /ud"et 2<'8 speech on 28 1eb 2<'8 also announced
that for the year 2<'8:'D, an additional deduction of '<<,<<< would be allowed to be
deducted for the payment of nterest on 3ome Loan uAs 8<ee% This deduction would be
allowed provided that the total value of the loan is not more than 2%; million and the total
value of the house is not more than D million and the loan should be a fresh loan ta6en
durin" the financial year 2<'8:'D% This deduction would be over and the ';<,<<< deduction
The losses from all properties shall be allowed to be ad4usted a"ainst salary income at the
source itself% Therefore, refund claims of T%0%S% deducted in e!cess, on this count, will no
more be necessary%
&'D(
Tax deducted at source (TDS)
The "eneral rule is that the total income of an assessee for the previous year is ta!able in the
relevant assessment year% 3owever, income:ta! is recovered from the assessee in the previous
year itself by way of T0S% The relevant provisions therein are listed below% #o be used for
reference only! he detailed provisions therein are not listed belo"!
1
$
Secti
on
Nature of payment
Threshold limit
(up to which no
tax is deductile)
TDS to e deducted
1$+ Salar" to an" /erson :xem/tion limit
2s s/eci9ed 0or indi!idual
in 8art III o0 I Schedule
1$
+
Interest on securities to
an" resident
Sub;ect to detailed
/ro!isions o0 #i!en
section
10(
1$)2
+
Interest 4other than
interest on securities5 to
an" resident
6 10000 40or
*an<=coo/erati!e
ban<5 > 6 %000
otherwise
10(
1$)*
?innin# 0rom lotteries etc'
to an" /erson
6 10000 0(
1$)*
*
?innin# 0rom horse races
to an" /erson
6 %000 0(
1$),
+
8a"ment to resident
contractors
6 0000 40or sin#le
contract5 > 6 7%000
40or a##re#ate
consideration in a
9nancial "ear5
+( 40or com/anies=9rms5
> 1( otherwise
1$)@
Insurance commission to
resident
6 +0000 10(
1$):
8a"ment to non&resident
s/ortsmen or s/orts
association
Aot a//licable 10(
1$)::
8a"ment o0 de/osit under
Aational Sa!in#s Scheme
to an" /erson
6 +%00 +0(
1$)B
,ommission on sale o0
lotter" tic<ets to an"
/erson
6 1000 10(
1$)H
+
,ommission=bro<era#e to
a resident
6 %000 10(
1$)&I
+
Rents /aid to an" resident 6 180000
+( 40or
/lant,machiner",eCui/men
t5 > 10( 40or
land,buildin#,0urniture5
1$)I2
8a"ment 0or 8urchase o0
Immo!able 8ro/ert"
6 %000000 1(
1$)D
+
3ees 0or
/ro0essional=technical
ser!icesE Ro"alt"
6 0000 10(
1$)F*
Interest /aid b"
In0rastructure
@e!elo/ment 3und under
section 104)75 to non&
resident or 0orei#n
com/an"
& %(
1$% Interest or other sums
4not bein# salar"5 /aid to
non&residents or 0orei#n
com/an" exce/t under
& 2s /er double taxation
a!oidance treat"
section 11%O
)1 )t what time ta! has to be deducted at source and some other specifications are sub4ect to
the above sections%
)2 n most cases, these payments shall not to deducted by an individual or an 3U1 if boo6s
of accounts are not reFuired to be audited in the immediately precedin" financial year%
n most cases, the ta! deducted should be deposited within 9 days from the end of the month
in which ta! was deducted
!orporate income tax
1or companies, income is ta!ed at a flat rate of 8<B for ndian companies% 1orei"n
companies pay at the income ta! at the rate of D<B%
&'8(
)n education cess of 8B #on both the
ta! and the surchar"e$ are payable%
&'*(
1rom 2<<;:<+, electronic filin" of company returns is
mandatory%
&2<(
+urcharge
Total income in the ran#e o0 610 million
to 6100 million
Total income abo!e
6100 million
@omestic
com/an"
%( o0 income tax /a"able
10( o0 income tax
/a"able
3orei#n
com/an"
+( o0 income tax /a"able
%( o0 income tax
/a"able
)1 )pplicable from assessment year 2<'D:'; onwards%