NEW TAX STRUCTURE OF A.Y.2015-2016 : A RELIEF FOR SALARIED CLASS!!

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The new Indian government announced its tax rules for the current financial year. But very few announcements were made by new government which could provide relief to salaried class people. The first and the most important amendment was in the tax slab. Although there is no change in the existing tax rate yet new Government had increased the minimum limit from Rs.2,00,000 to Rs.2,50,000. There were no changes in the tax slab from last 2 years in tax slabs. In the past, this limit was never increased by Rs. 50000 or more amount.   So definitely, this is one of the very important announcements in new finance bill. Many Indian employees were expecting this change. Although other subsequent slabs remains the same. Following are the tax slabs of Assessment Year 2014-15 & 2015-16.


Tax Slabs 2014-15Tax Slabs 2015-16
IncomeTax RateIncomeTax Rate
Upto Rs. 2 Lacs0Upto Rs. 2 Lacs0
Rs. 2 Lacs to Rs. 5 Lacs10%Rs. 2 Lacs to Rs. 5 Lacs10%
Rs. 5 Lacs to Rs. 10 lacs20%Rs. 5 Lacs to Rs. 10 lacs20%
Above Rs. 10 Lacs30%Above Rs. 10 Lacs30%

Second important amendment is under section 80C and 80CCC. Earlier, the maximum qualifying investments for deduction from total income was Rs. 1, 00,000 (even more amount was investment in specified schemes) which was raised to Rs. 1, 50,000So if no loan is taken by the employee to construct or renovate the house & having total salary income Rs. 5 lacs  than his total taxable income will decline by Rs. 50,000 (after availing this deduction) which is 12.5 % of earlier base income.

Net change in Total tax Structure having gross income Rs.5 lacs.

Total Tax liability before budgetRs. 20600
Total Tax liability after budgetRs.-10300
Net BenefitRs. 10300

Net change in Total tax Structure having gross income Rs. 10 lacs.

Total Tax liability before budgetRs. 1,13,300
Total Tax liability after budgetRs. -97850
Net BenefitRs. 15450

So after availing these two amendments in new finance bill the person with gross income of Rs. 5 lacs can save tax of Rs. 10300 and in that case his total tax liability will decline by 50 %. Similarly, the person who will have gross income Rs. 10 lacs during financial year 2014-15, he can save a tax of Rs. 15450. In such a case his tax liability will decline by 13.6 % as compare to tax rules in the assessment year 2014-15. If higher gross income will be there than percentage saving in tax will be less as compare to low income.

In the new finance bill, there is an important amendment under section 24(1). In this section the person can claim for deduction for the interest on loan taken for construction or renovation of house property. In this case, self-occupied property the entire amount of interest shall be considered as loss from the house property and same can be adjusted from other person’s income. So in this way, the person can minimise his taxable income as well as the tax liability. In the assessment year 2014-15, the maximum limit under this section was Rs. 1,50,000 which is now raised to Rs. 200,000 in the new finance bill of 2015-2016. This was also a very important amendment in the tax rules. This was one of the most awaited changes in the finance bill as it was consistent for past many years. This change has given great relief to all those assesses who have taken loan for construction or renovation of house property. Below tables analyse the benefit of this amendment to assessee.

With optimum tax planning, person having gross income of Rs. 5 lacs, in the assessment year 2015-16 his or her tax liability will be zero as his taxable income will be less than Rs..2,50,000. While in previous tax rules, his tax liability will be Rs. 5150 (i..e., 10 % on 50,000 + 3% surcharge).

Net change in Total tax Structure having gross income Rs. 10 lacs.

Total Tax liability before budgetRs. 82400
Total Tax liability after budgetRs.-56650
Net BenefitRs.25750


With proper tax planning and by taking the benefits of all these three important amendments, the person having gross income of Rs.10 lacs can minimize his gross total income to Rs.6.5 lacs from Rs. 7.5 lacs. In this way his gross total income will decline by 13.33%. While, in this case his or her net tax liability will diminish by Rs. 25,750 and percentage decrease in this shall be 31.25%.

Conclusion

The new tax rules are indeed a great tax relief for salaried class people in the new finance bill 2014-15 announced as on 10th July, 2014 by Hon. union cabinet finance minister Mr Arun Jetly of government of India. Now, with optimum tax planning under Section 80C & 80CCC , people having income up to Rs. 5 lacs will have maximum tax relief of Rs. 10,300 (if no loan is taken for construction or renovation) otherwise Rs. 15000+ Surcharge. Whereas if income is between RS. 5 to Rs. 10 lacs than you will have relief ranging from Rs. 10000 to Rs. 15000 + Surcharge. If assesse   also pays interest Rs. 2 Lacs or more on home loan than he can get maximum benefit of Rs. 25750.

As per new tax rule, with optimum tax planning and getting the benefit of deduction under section 24(1), assesse can minimise his net taxable income as well as net tax liability. Assesse with higher income or higher tax slab can get maximum benefits of all amendments made in new finance bill 2014-15.

Whereas, if income is between Rs. 5 to Rs. 10 lacs than you will have relief ranging from Rs. 10000 to Rs. 15000 + Surcharge. If assesse   also pays interest Rs. 2 Lacs or more on home loan than you can get maximum benefit of Rs.25750.

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