India Income Tax Slabs, Rates And Useful Deductions

January 31, 2018

January 31, 2018

In Budget 2018, Finance Minister Arun Jaitley is expected to announce some income tax relief for the middle class. The government may tweak income tax slabs and rates to bring down the burden on individuals, according to a survey by tax and advisory firm EY. Standard deduction for salaried individuals could make a comeback: The government may bring in standard deduction in Budget 2018 to reduce the tax burden of salaried individuals, according to majority of respondents in a pre-Budget survey by EY. Standard deduction allows for a flat deduction from income of a salaried individual towards expenses an employee would incur in relation to his or her employment.

In Budget 2017, the government did not change income tax slabs/rates but gave a rebate of up to Rs. 2,500 for taxable salary up to Rs. 3.5 lakh. Under the Income Tax Act, there are many exemptions that can reduce your tax liability. Here are the income tax rates and other details. 

Income tax slabs for taxpayers for FY 2017-18

Surcharge: The amount of income tax is increased by a surcharge at the rate of 10 per cent of such tax, where total income exceeds fifty lakh rupees but does not exceed one crore rupees. However, the surcharge is subject to marginal relief (where income exceeds fifty lakh rupees, the total amount payable as income tax and surcharge does not exceed the total amount payable as income tax on total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees).

 ii)  The amount of income tax is increased by a surcharge at the rate of 15 per cent of such tax, where total income exceeds one crore rupees. However, the surcharge is subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

Some of the deductions available for FY2017-18: 

House Rent Allowance under Section 10 (13A) of the Income Tax Act

HRA or House Rent Allowance is partly exempted from tax. 

The amount which is allowed for exemption under HRA is calculated as minimum of:

1) Rent paid annually minus 10 per cent of basic salary plus dearness allowance

2) Actual HRA received

3) 40 per cent of basic and dearness allowance (50 per cent in case of metro cities) 

Deductions under Section 80C

Section 80C of the Income Tax Act provides various provisions under which an individual can get deduction benefits up to Rs 1.5 lakh. Tax-saving mutual funds (ELSS), Employees' Provident Fund (EPF), Public Provident Fund (PPF), Sukanya Samriddhi Account, National Savings Certificate and tax-saving fixed deposits are some of the investment options that offer benefits under Section 80C. Further, one can claim tuition fees paid for up to two children, principal repayment on home loan, stamp duty and registration cost on the house bought as deduction under Section 80C. 

Deductions under Section 80CCD(1B)

It provides deduction up to Rs 50,000 for investment in an NPS Tier 1 account. This deduction is over and above the deduction available in Section 80C. 

Deduction of interest on housing loan

Under Section 24B of the Income Tax Act, interest paid up to Rs 2 lakh on housing loan is allowed as deduction from your taxable income. On rented properties, the borrower can only claim deduction of up to Rs 2 lakh per year after adjusting for the rental income. And the amount above Rs 2 lakh can be carried forward for eight assessment years. 

Deduction under Section 80EE

Under Section 80EE, an additional deduction of Rs 50,000 is available over and above the limit of Section 24B on interest paid on home loans if the person is buying a house for the first time (the person must not own any other residential property on the date of sanction of loan).

Deduction under Section 80D 

Those below 60 years of age can claim deduction of Rs 25,000, and those above 60 years of age can claim and Rs 30,000, towards medical insurance premium paid for self, spouse and children. Further, additional deduction of Rs 25,000 is available if one has bought medical insurance for his or her parents. This deduction can go up to Rs 30,000 if the parents are above the age of 60 years.

Deduction under Section 80E

A taxpayer can claim deduction for interest paid on education loan for him, spouse or children. There is no upper limit on the amount of deduction.

Courtesy/Source: PTI / NDTV