Tax Structure in India
The Republic of India has got a tax structure, which is quite simplified as well as developed. The taxation system in India is featured with a 3 tier federal structure that comprises of the following: The Union Government The State Governments The Rural and Urban Local Bodies or Municipal Jurisdictions According to the provisions of the Constitution of India, these three tiers are empowered with the imposition of the different duties and taxes, which are prevalent in the country. The Central Government is mainly responsible for levying Income Tax. However, they do not impose taxes on the income that is earned from agriculture. The agricultural income tax can be imposed by the government of a respective state. The other taxes that are levied by the Indian Government are mentioned below: Central Excise Duty Customs Duty Sales Tax Service Tax However, the major taxes that are computed and imposed by the different State Governments within the boundary of the respective states in the nation are as follows: Calling Tax Entertainment Duty Land Revenue (Generally levied on land, which is used for non-agricultural and agricultural purposes) Profession Tax Sales Tax (For intra-state goods' sale) Stamp Duty (Duty levied on property transfer) State Excise (Duty imposed on alcohol manufacturing) The local bodies are vested with the power of levying the below mentioned taxes: Consumption Tax Octroi Tax Property Tax
Changes in Tax Structure in India
Since the year 1991, the Indian tax system has undergone some significant changes. These changes were made in accordance with the country's W. T. O. commitments as well as the liberal financial policies. Some of the major changes in the structure of taxation in the nation are as follows: Lowering the tax on corporate income Custom duty rate varies from 0% to 150% with an average duty rate is 11.9%. Toning up the administration of taxation Widening the base of tax Tax Structure for Different Taxes in India Following are the structure of taxes for some of the main taxes in the Republic of India: Structure of Personal Income Tax The below mentioned table provides information about the different slabs for the imposition of income tax:
Section 80CCC: Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurer
This section provides deduction to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer for receiving pension from a fund referred to in Section 10(23AAB). In case the annuity is surrendered before the date of its maturity, the surrender value is taxable in the year of receipt.
Section 80CCD: Deduction in respect of Contribution to Pension Account
For FY 2014-15 (assessment year 2015-16) Total Deduction under Section 80C, 80CCC and 80CCD(1) cannot exceed Rs 1,50,000. For FY 2015-16 (assessment year 2016-17) A new section 80CCD(1B) has been introduced to provide for additional deduction for amount contributed to NPS of up to Rs 50,000. Therefore for financial year 2015-16, Total Deduction under Section 80C, 80CCC, 80CCD(1) and 80 CCD(1B) cannot exceed Rs 2,00,000. From assessment year 2012-13, employer's contribution under section 80CCD(2) towards NPS is outside the monetary ceiling mentioned above.
Deductions on Savings Bank Account
Section 80 TTA: Deduction from gross total income with respect to any Income by way of Interest on Savings accountDeduction from gross total income of an individual or HUF, up to a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account with a bank, co-operative society or post office. Section 80TTA deduction is not available on interest income from fixed deposits.
Deductions on House Rent
Section 80GG: Deduction with respect to House Rent Paid This deduction is available for rent paid when HRA is not received. Assessee or his spouse or minor child should not own residential accommodation at the place of employment. Assessee should not be in receipt of house rent allowance. He should not have self occupied residential premises in any other place. Deduction available is the least of Rent paid minus 10% of total income Rs. 2000/- per month 25% of total income
Deductions on Loan for Higher Studies
Section 80E: Deduction with respect to Interest on Loan for Higher Studies Deduction in respect of interest on loan taken for pursuing higher education. This loan is taken for higher education for the assessee, spouse or children or for a student for whom the assessee is a legal guardian.
Deduction for First Time Home Owners
Section 80EE: Deductions on Home Loan Interest for First Time Home Owners
This section provided deduction on the Home Loan Interest paid and is valid for financial years 2013-14 & 2014-15 (Assessment year 2014-15 and 2015-16) only. The deduction under this section is available only to Individuals for first house purchased where the value of the house is Rs 40lakhs or less and loan taken for the house is Rs 25lakhs or less. And the Loan has been sanctioned between 01.04.2013 to 31.03.2014. The total deduction allowed under this section is Rs 1,00,000.
Deductions on 80CCG: Rajiv Gandhi Equity Saving Scheme (RGESS)
The Rajiv Gandhi Equity Saving Scheme (RGESS) was launched after the 2012 Budget. Investors whose gross total income is less than Rs. 12 lakhs can invest in this scheme. Upon fulfillment of conditions laid down in the section, the deduction is lower of - 50% of amount invested in equity shares or Rs 25,000.
Deductions on Medical Insurance
Section 80D: Deduction in respect of Medical Insurance For financial year 2014-15 - Deduction is available up to Rs. 15,000/- to an assessee for insurance of self, spouse and dependent children. If individual or spouse is more than 60 years old the deduction available is Rs 20,000. An additional deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 15,000/- if less than 60 years old and Rs 20,000 if parents are more than 60 years old. Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/-. (From AY 2013-14, within the existing limit a deduction of up to Rs. 5,000 for preventive health check-up is available).
For financial year 2015-16 – Deduction is raised from Rs 15,000 to Rs 25,000. The deduction for senior citizens is raised from Rs 20,000 to Rs 30,000. For uninsured super senior citizens (more than 80 years old) medical expenditure incurred up to Rs 30,000 shall be allowed as a deduction under section 80D. However, total deduction for health insurance premium and medical expenses for parents shall be limited to Rs 30,000.
Deductions on Medical Expenditure for a Handicapped Relative
Section 80DD: Deduction in respect of Rehabilitation of Handicapped Dependent Relative
Deduction is available on:
- expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependent relative
- Payment or deposit to specified scheme for maintenance of dependent handicapped relative.
- Where disability is 40% or more but less than 80% - fixed deduction of Rs 50,000. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,00,000.A certificate of disability is required from prescribed medical authority.
Note: A person with 'severe disability' means a person with 80% or more of one or more disabilities as outlined in section 56(4) of the 'Persons with disabilities (Equal opportunities, protection of rights and full participation)' Act. For financial year 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.
Deductions on Medical Expenditure on Self or Dependent Relative
Section 80DDB: Deduction in respect of Medical Expenditure on Self or Dependent Relative A deduction to the extent of Rs. 40,000/- or the amount actually paid, whichever is less is available for expenditure actually incurred by resident assessee on himself or dependent relative for medical treatment of specified disease or ailment. The diseases have been specified in Rule 11DD. A certificate in form 10 I is to be furnished by the assessee from any Registered Doctor. In case of senior citizen the deduction can be claimed up to Rs 60,000 or amount actually paid, whichever is less. For financial year 2015-16 – for very senior citizens Rs 80,000 is the maximum deduction that can be claimed.
Deductions on Person suffering from Physical Disability
Section 80U: Deduction with respect to Person suffering from Physical Disability
Deduction of Rs. 50,000/- to an individual who suffers from a physical disability (including blindness) or mental retardation. Further, if the individual is a person with severe disability, deduction of Rs. 100,000/- shall be available u/s 80U. Certificate should be obtained from a Govt. Doctor. The relevant rule is Rule 11D. For financial year 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.
Deduction for donations towards Social Causes
Section 80G: Deduction for donations towards Social Causes The various donations specified in Sec. 80G are eligible for deduction up to either 100% or 50% with or without restriction as provided in Sec. 80G. 80G deduction not applicable in case donation is done in form of cash for amount over Rs 10,000.
Donations with 100% deduction without any qualifying limit:
- National Defence Fund set up by the Central Government
- Prime Minister's National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a State Government for the medical relief to the poor
- National Illness Assistance Fund
- National Blood Transfusion Council or to any State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children's Fund
- Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to any State or Union Territory
- the Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996
- The Maharashtra Chief Minister's Relief Fund during October 1, 1993 and October 6,1993
- Chief Minister's Earthquake Relief Fund, Maharashtra
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat
- Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of earthquake in Gujarat (contribution made during January 26, 2001 and September 30, 2001) or
- Prime Minister's Armenia Earthquake Relief Fund
- Africa (Public Contributions — India) Fund
- Swachh Bharat Kosh (applicable from financial year 2014-15)
- Clean Ganga Fund (applicable from financial year 2014-15)
- National Fund for Control of Drug Abuse (applicable from financial year 2015-16)
Donations with 50% deduction without any qualifying limit.
- Jawaharlal Nehru Memorial Fund
- Prime Minister's Drought Relief Fund
- Indira Gandhi Memorial Trust
- The Rajiv Gandhi Foundation
- Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
- Government or any approved local authority, institution or association to be utilised for the purpose of promoting family planning
- Donation by a Company to the Indian Olympic Association or to any other notified association or institution established in India for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India.
- Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
- Any other fund or any institution which satisfies conditions mentioned in Section 80G(5)
- Government or any local authority to be utilised for any charitable purpose other than the purpose of promoting family planning
- Any authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns, villages or both
- Any corporation referred in Section 10(26BB) for promoting interest of minority community
- For repairs or renovation of any notified temple, mosque, gurudwara, church or other place.
Deductions on Contribution by Companies to Political Parties
Section 80GGB: Deduction in respect of contributions given by companies to Political Parties Deduction is allowed to an Indian company for amount contributed by it to any political party or an electoral trust. Deduction is allowed for contribution done by any way other than cash. Political party means any political party registered under section 29A of the Representation of the People Act. Contribution is defined as per section 293A of the Companies Act, 1956.
Deductions on Contribution by Individuals to Political Parties
Section 80GGC: Deduction in respect of contributions given by any person to Political Parties Deduction is allowed to an assessee for any amount contributed to any political party or an electoral trust. Deduction is allowed for contribution done by any way other than cash. Political party means any political party registered under section 29A of the Representation of the People Act.
Deductions on Income by way of Royalty of a Patent
Section 80RRB: Deduction with respect to any Income by way of Royalty of a Patent Deduction in respect of any income by way of royalty is respect of a patent registered on or after 01.04.2003 under the Patents Act 1970 shall be available up to Rs. 3 lacs or the income received, whichever is less. The assessee must be an individual resident of India who is a patentee. The assessee must furnish a certificate in the prescribed form duly signed by the prescribed authority.