Income Tax Rate AY 2019-20 | FY 2018-19 – Individuals less than 60 years
Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 5 %
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Income Tax Rate AY 2019-20 | FY 2018-19 – Individuals betwen 60 years and 80 years
Taxable income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 to Rs. 5,00,000 5 %
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Income Tax Rate AY 2019-20 | FY 2018-19 – Individuals above 80 years
Taxable income Tax Rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000 – Rs. 10,00,000 20 %
Above Rs. 10,00,000 30%

In addition to the Income Tax amount calculated, based on the above-mentioned tax slabs, individuals are required to pay Surcharge and Cess.

  • Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore. Health & Education Cess: 4% of Income Tax. (Newly introduced through 2018 Budget)

    Total income is divided into 5 heads of income. They are:
  • Income from salaries
  • Income from house property
  • Profit and gains of business or profession
  • Capital gains
  • Income from other sources

    Income from Salary

    Salaried employees form the major chunk of the overall taxpayers in the country and the contribution they make to the tax collection is quite significant. Income tax deductions offer a gamut of opportunities for saving tax for the salaried class. With the help of these deductions and exemptions and, one could reduce his/her tax substantially.

    In this article, we try to list some of the major deductions and allowances, available to the salaried persons, using which one can reduce their income tax liability.

    (Salary includes wages, pension, gratuity, fees, commission, perquisites, provident fund contribution, leave encashment, Central Governments contribution to pension and compensation received for a service)

  • Exemption of House Rent Allowance A salaried individual having a rented accommodation can get the benefit of HRA (House Rent Allowance). This could be totally or partially exempted from income tax. However, if you aren’t living in any rented accommodation and still continue to receive HRA, it will be taxable.

    If you couldn’t submit rent receipts to your employer as proof to claim HRA, you can still claim the exemption while filing your income tax return. So, please keep rent receipts and evidence of any payment made towards rent. You may claim the least of the following as HRA exemption.

    a. Total HRA received from your employer
    b. Rent paid less 10% of (Basic salary +DA)
    c.40% of salary (Basic+DA) for non-metros and 50% of salary (Basic+DA) for metros

  • Standard Deduction The Indian Finance Minister, while presenting the Union Budget 2018, announced a standard deduction amounting to Rs. 40,000 for salaried employees. This was in the place of the transport allowance (Rs. 19,200) and medical reimbursement (Rs. 15,000). As a result, salaried people could avail an additional income tax exemption of Rs. 5,800 in FY 2018-19. The limit of Rs. 40,000 has been increased to Rs. 50,000 in the Interim Budget 2019.

    Note:- From FY 18-19, deduction in respect of transport allowance of Rs19,200 per annum and medical reimbursement of Rs 15,000 per year have been withdrawn. Further, a standard deduction of Rs 40,000 a year will be allowed from your gross salary. 

    Income from House Property (HP)

    The annual value of property, consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him, the profits of which are chargeable to income tax, shall be chargeable to income tax under the head "Income from House Property".

          The annual value of any property you own is taxable under the head ‘income from house property’. While there are a few deductions available from this income, income from a property is not taxable under the head ‘income from house property’ when...

  • The property is used for one’s own business or profession.
  • The property is self-occupied.
  • It is income from a farmhouse.
  • It is the property income of a local authority.
  • It is the property income of a university or an educational institution.
  • It is the property income of a trade union.
  • It is property held for charitable or religious purposes.
  • It is the property income of a political party.
  • It is the property income of an approved scientific research association.
  • Annual value of the house property:

    The annual value of house property has been defined as ‘the amount for which the property may reasonably be expected to be let out for a year’.
    However, if your property is let out for the whole or a part of the financial year, the gross annual value will be the amount received during the year as a result of the letting out of the house property. This shall also exclude the rent that the taxpayer is unable to realize in the financial year.

    The following four factors have to be taken into consideration while determining the annual value:

  • Rent payable by the tenant.
  • Municipal valuation of the property.
  • Fair rental value (market value of a similar property in the same area) of the property.
  • Standard rent payable under the Rent Control Act.

  • Gross Annual Value:

    In the case of self-occupied property, the annual value is taken to be ‘nil’. In the case of property that is rented out, the gross annual value is the municipal value, the ‘de facto rent’ (whether received or receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property, the gross value cannot exceed the ‘de facto rent’ or the standard rent under the Rent Control Act, whichever is higher.

  • Deduction under Section 24B This section allows individuals to claim a deduction for the loss under the head ‘Income from House Property’. It allows a tax benefit on the repayment of the loan of a second house up to INR 2 lakh. The unclaimed amount of loss may be carried forward for 8 years and set off against house property income. Additionally, any interest paid on the housing loan is eligible for a tax benefit. Municipal taxes, interest paid on the loan taken for the house, and 30% of the net annual income is allowed as a deduction

    Income from Capital Gains

    Capital assets can be a house property, building, land, vehicles, trademarks, patents, machinery, leasehold rights, and jewellery. Any legal rights including the rights of control or management are also considered as capital rights.

    Capital assets do not include the following: 
  • Stock in trade. 
  • Consumable stores or raw materials held for the purpose of business or profession. 
  • Items held for personal use such as clothes and furniture. 
  • Agricultural land in rural areas. 
  • 6.5 percent Gold Bonds, National Defence Gold Bonds, and Special Bearer Bonds. 
  • Gold Deposit bonds under Gold Deposit Scheme. 

  • Capital Gains Tax and Types: Capital gains tax is a tax that is charged on the profits that he has made by selling his capital asset. For making it easy for taxation, the capital assets are classified to ‘Short-Term Capital Asset; and ‘Long-Term Capital Asset’.

  • Short-Term Capital Asset: If the shares and securities are held by the taxpayer for a period not more than 36 months preceding the date of its transfer will be treated as a short-term capital asset.

  • Long- Term Capital Asset: If the taxpayer holds the shares and securities for a period exceeding 36 months before the transfer will be treated as a long-term capital asset.Equity shares which are listed in a recognised stock exchange, units of equity oriented mutual funds, listed debentures and Government securities, units of UTI and Zero Coupon Bonds’ period of holding will be considered for 12 months instead of 36 months. Transfer is giving up your right on an asset it includes sale, exchange, compulsory acquisition under any law and relinquishment.

  • Capital Gains Tax in India: In India, the long-term capital gains on sale of listed securities exceeding Rs.1 lakh are taxed at 10% as per the Union Budget 2018. The short-term gains will be taxed at 15 percent. In case of debt mutual funds, both short and long term capital gains are taxed. The short-term capital gain on debt mutual fund is added to the income and taxed as per the individual’s Income Tax Slab and the long-term capital gains on debt mutual funds are taxed at 20 percent with indexation and 10 percent without indexation. Indexation is adjusting the purchase value for inflation. The indexation increases the purchase cost and lowers the gain.

    Income from Business/Profession

    The third head of Income Tax heads is Income from Profits of Business in which the computation of the total income will be attributed from the income earned from the profits of business or profession. The difference between the expenses and revenue earned will be chargeable. Here is a list of the income chargeable under the head:

  • Profits earned by the assessee during the assessment year
  • Profits on income by an organization
  • Profits on sale of a certain license
  • Cash received by an individual on export under a government scheme
  • Profit, salary or bonus received as a result of a partnership in a firm
  • Benefits received in a business

    Income from other sources

    Income from Other Sources is one of the heads of income chargeable to tax under the Income tax Act. 1961. Any income that is not covered in the other four heads of income is taxable under income from other sources, because of this, it is known as residuary head of income. All the incomes excluded from salary, capital gains, house property or business & profession (PGBP) are included in IFOS, except those which are exempt under the Income Tax Act.

  • Section 56- Incomes taxable only in Income from Other Sources are Dividend Income;
  • Income earned from winning lotteries, crossword puzzles, races (including horse race), gambling or betting of any kind;
  • Money or movable/immovable property received without consideration or inadequate consideration during previous year;
  • Interest on compensation or enhanced compensation received;
  • Advance money received or money received in negotiation for transfer of a capital asset (only if the money is forfeited and it doesn't result in the transfer of such asset).

  • Section 57- Expenditures allowed as deductions
  • Expenses incurred for realisation of dividend or interest income;
  • Deductions to the extent amount remitted within due date are authorised in respect to contribution towards funds for the welfare of employees;
  • Family Pension- deduction is allowed to the extent of 33-1/3% of pension or Rs. 15000 whichever is less;
  • Deductions for current repairs, insurance and depreciation, will be allowed for income earned by way of lease rental;
  • A deduction equal to 50% will be allowed for interest received on compensation or enhanced compensation.

  • Section 58- Sum not allowed as deductions while computing taxable income
  • Personal expenditure;
  • Interest or salary payable outside India without TDS deduction;
  • Wealth tax;
  • Expenditure concerning winnings from lotteries, crossword puzzles, races, and gambling, etc.; and
  • Expenses specified in Section 40A

    Deductions under chapter VI-A

  • Section 80C This is the most important section for deductions for every taxpayer. The maximum exemption limit in the section is INR 1.5 lakh. There are various avenues like PPF, EPF, term insurance, NPS, etc that could be claimed under section 80C. Below is the complete list:
  • Public Provident Fund
  • National Savings Certificate
  • National Pension Scheme
  • Employees’ Provident Fund
  • Tuition fees
  • Post Office tax saving deposits of five year
  • Bank deposit
  • Life Insurance Premium
  • Equity Linked Saving Schemes
  • Principal repayment of home loan
  • Sukanya Samriddhi Account Deposit Scheme
  • Post Office Senior Citizens Savings Scheme

  • Section 80CCC This section allows a maximum deduction of INR 1.5 lakh and it includes the contribution made to annuity plan of a life insurance provider for the purpose of obtaining pension from the fund.

  • Section 80CCD This section includes the contribution to the Atal Pension Yojana and allows a deduction of a contribution up to10% of the total salary of salaried employees and 20% of the gross income of non-salaried to the government-notified pension schemes. The contribution can be deducted from the taxable income under Section 80 CCD (1). In case the employer contributes to the scheme as well, the entire contribution amount can be claimed as a tax deduction under Section 80CCD (2). It is important to remember that the complete deduction under Section 80C, Section 80CCC and Section 80CCD (1) cannot exceed INR 1.5 lakh in aggregate. The additional tax deduction amounting to INR 50,000 under the Section 80CCD (1B) is above this limit.

  • Section 80D This section allows deductions on the health insurance premium paid by the taxpayer. The limit for the same is INR 25,000 for self, spouse, and children and an additional INR 25,000 for parents. The limit for senior citizens is INR 30,000. Senior citizens above the age of 80 can seek a deduction of INR 30,000 towards their medical expenditure. An amount of INR 5,000 per family can be claimed as preventive health checkup expenses. However, this is not over and above the individual limits specified.

  • Section 80DD An amount of INR 75,000 may be claimed as a deduction for spending on medical treatments of dependents with a 40% disability. This limit is INR 1.25 lakh in case of severe disability.

  • Section 80DDB Under this section, individuals who are below the age of 60 years may claim INR 40,000 for the treatment for specified critical ailments for self and dependents. The same limit is INR 60,000 for senior citizens and INR 80,000 for very senior citizens.

  • Section 80CCG This section which offered the tax benefits of Rajiv Gandhi Equity Savings Scheme has been withdrawn but if an individual has claimed a deduction in FY 2016-17, you are eligible to continue with the same for the next two financial years.

  • Section 80E Interest on loan paid for education is eligible for deduction. Please note that principal repayment on the loan cannot be claimed as a deduction. The loan should have been taken for yourself, your children, and spouse or for an individual for whom you are a legal guardian. There is no limit on the amount of interest that can be claimed as a deduction.

  • Section 80EE Individuals who are buying a home for the first time may claim an additional deduction of INR 50,000 on the home loan interest paid. This includes a clause that the loan should be sanctioned in or after FY 2016-17 and the amount of loan should be less than INR 35 lakh. Furthermore, the value of the house should not exceed INR 50 lakh and the individual should not own any other residential house under his name.

  • Section 80G This section includes all the contributions made to charitable institutions as well as relief funds. The contribution should be made through cheque, cash or in draft. The amount of deduction eligible is INR 2,000. Moreover, for donations made to political parties, the same deduction could be claimed under 80GGC.

  • Section 80GG The deduction amount for this section is INR 60,000 per annum and the section is applicable to only those who neither have the ownership of a residential house nor receive a house rent allowance. The amount of deduction will be the least of the following:
  • 25% of the total income
  • INR 5,000 per month
  • An amount of 10% of the adjusted total income deducted from the rent paid

  • Section 80TTA This section allows a deduction of INR 10,000 from the gross total income of individuals or Hindu Undivided Family. The deduction is allowed for the interest earned on the deposits made in a savings account in a bank, cooperative society or a post office. However, the deduction will not be application for the interest earned from fixed deposits in the bank.

  • Section 80U This section allows deduction to individuals who are physically and mentally challenged. It is advisable to plan the investment in advance in order to avoid the last-minute hassles. In case you are unable to invest in the right products, you would have to pay the entire tax depending on your income. The above list of income tax deductions will help you in tax planning and achieving your financial goals.

    Penalty for Not Filing Income Tax Return

    Not filing your Income Tax Return would result in:
  • Receiving a notice from Income Tax department
  • Not being able to obtain refund of excess TDS Deducted.
  • Penalty interest of  1% per month or part thereof will be charged until the date of payment of taxes. For returns of FY 2017-18 and onwards, penalty of Rs 5,000 will be charged for returns filed after due date but before 31st December. If returns are filed after 31st December, a penalty of Rs 10,000 shall apply. However, penalty will be Rs 1,000 for those with income upto Rs 5 Lakhs.
  • Not being able to set off Losses. Losses incurred (other than house property loss) will not be allowed to be carried forward to subsequent years,  to be set off against the future gains.
  • Note: Financial year starts from 1st April and ends on 31st March. For example, the financial year 2018 – 19 would be 1st April 2018 to 31st March 2019. Assessment year is the year immediately following the financial year wherein the income of the financial year is assessed. Hence, in the assessment year 2019 – 20 the income tax for the period from 1st April 2018 to 31st March 2019 would be assessed.