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8 Important Tax Changes for Individuals in 2014

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tax changesThere have been a few changes in income tax for individuals as well as companies for 2014. Some of these are significant ones, especially for individuals. Let us now look into some of these tax changes.

Tax credit of Rs. 2000

As per Section 87/A, Individuals with total income up to Rs. 5 lakh p.a will receive tax credit of Rs. 2000 for the year 2014. This will virtually raise the tax exemption limit from Rs. 2 lakh to Rs 2.20 lakh. The benefit is available for all individuals who are eligible for it. The move will benefit more than 1.8 crore tax payers.

Additional deduction of Rs. 1 lakh

An additional deduction of Rs.1 lakh will be available for those who have opted for a first time home loan up to Rs. 25 lakh. The value of the property should not exceed Rs. 40 lakh. This is exclusively valid for first time home buyers and only for AY 2014-15 i.e. until March 31st, 2014. This is to encourage property purchase in tier-2 cities.

RGESS eligibility

For the previous financial year, only people with total income up to Rs. 10 lakh p.a were eligible to invest in RGESS for saving tax. This will be extended to individuals with income up to Rs. 12 lakh p.a. Investment limit has remained the same i.e. Rs. 50,000. Deduction will be allowed up to 50% of the invested amount. There is a lock-in period of 3 years for the scheme. Another change is that deduction was only given for one time. Deduction will now be valid for 3 years. Investment can be also be done through selected mutual funds.

TDS on Immovable property

For a transfer of a property which exceeds Rs. 50,00,000 TDS of 1% will be charged on the total amount. This is a major setback to a lot of property buyers in the country especially those in the metros and urban areas where property prices are sky high. However, this rule will not be applicable to agricultural lands.

Increase in DDT for debt funds

Dividend distribution tax (DDT) paid by debt mutual funds has been increased from 12.5% to 25%. A lot of individuals have been preferring debt funds to equity mutual funds on account of safety of capital. Equity mutual funds are tax free if held for 1 year. The DDT rise will indirectly affect the NAV’s of debt funds and hence discourage investors.

Decrease in STT

Securities transaction tax (STT) has been significantly reduced compared to the previous year. For purchase of units in recognized stock exchange, there will not be any STT. For sale in such exchanges, STT has been reduced from 0.1% to 0.001%. STT for equity funds has also been reduced from 0.25% to 0.001%. This move is to encourage trading in equities.

Life Insurance Policies

Deduction under section 80C is available for life insurance policies provided the premium is up to 10% of sum assured.  However, this limit has been increased to 15% for policies applicable to disabled or those suffering with diseases. This is as per section 80DDB.

Modification to Section 80D

Previously, only CGHS of govt. was eligible for deduction under section 80D for govt. employees. Now, other schemes of central and state governments are also eligible for this deduction.

  • rajiv ahuja

    Thanks for this information.

  • shivaraj katti

    The Home loan part: Is the facility available till March 31st, 2014. or March 31st 2015?

    Life Insurance Policies: The 10% premium norm, is it applicable to term insurances(pure) also, where there is no sum assured.

    • Av Suresh

      Home loan part is eligible only till March 31st, 2014. However, if you cannot use the entire part, it can be carried forward for next year. Term insurance has sum assured, which is nothing but the death benefit from it. 10% norm is applicable for term insurance also.

  • Urvin

    Regarding RGESS I have query. I have an Trading acount before 3 years and i have opened another account in last year. In this year when I went to register my account for this scheme they are saying me that its possible only if you haven’t account before this and you haven’t traded in the Equity market, so you are not eligible, is it so?

    Please clarify on this kind of eligibility criteria for RGESS.

    • Av Suresh

      Yes Urvin. This facility is only for the stock market beginners. If you have an account already, you would not be eligible.

  • r v rao

    good. but pl. note the tax rebate of Rs 2000 is available for all income brackets upto Rs5 lacs. age of 60 years as stated is not limiting factor.

    • Sudhanshu Varma

      So people above 60 years will also get the benefit of Rs. 2000/-. Please clarify.
      Sudhanshu Varma

      • Av Suresh

        Yes, it is applicable for all individuals whose income is up to Rs. 5 lakh p.a.

  • rahul

    Thanks for the information. I didnt know that there is no tax if equity mutual funds are held for more than one year. Is the same true for debt mutual funds also? And if held for less than one year, what is the tax rate applicable on equity and debt mutual fund

    • Av Suresh

      Rahul, the taxation for equities (stocks and mutual funds) is different from debt funds. Tax on debt funds will be in this manner: As per tax slab, if held for less than 1 year, 20% with indexation or 10% without indexation if held for more than 1 year.

  • Satish Shahapurkar

    pl. let me know if the tax credit of Rs 2000 is available for all income brackets upto Rs5 lacs. age of 60 years as stated is not limiting factor as per my understanding.

    • Av Suresh

      Yes, Satish. The tax exemption limit has virtually been raised to Rs. 2,20,000. If this is the case, senior citizens anyways have an exemption limit of Rs. 2,50,000. Hence, this would not apply to them. Finance Minister in his budget speech has stated that the tax slabs for senior and super senior citizens would remain the same.

      • Suresh Chandra Rawal

        The exemption of rebate of Rs. 2000 is applicable to all ir respective of age. The virtual limit for senior citizen will be 270000/-.

        • Av Suresh

          You are right. However, for a super senior citizen who’s income is exempt up to Rs. 5 lakh already, this section does not make much sense.

  • preethi

    will medical insurance save tax

    • Av Suresh

      Yes, Preethi. You can claim up to Rs. 15,000 on the premium paid for health/medical insurance policy. For senior citizens, the limit is Rs. 20,000.This is as per section 80D.

  • Ghulam Nabi Shah

    if the employee claims rebate under 80 dd and 80ddb. does it has ceiling in combined mode. other wise the total claim can go upto 160000/- if the dependents have more than 80% disablity and other dependent who suffers from life consuming disease is senior citizen. pl guide whether there is any ceiling for both if combined together.

    • Av Suresh

      Yes, these are different sections independent of each other. You can claim these as separate.

  • Ghulam Nabi Shah

    does interest on education loan has any ceiling. what are the other factors to keep in mind while claiming the rebate.

    • Av Suresh

      There is no cap for claiming interest loan deduction. You just need to declare the amount.

  • Ghulam Nabi Shah


  • sandeep

    HI Suresh ,

    Thanks for the iNFO

    Individuals with total income up to Rs. 5 lakh p.a will receive tax
    credit of Rs. 2000 for the year 2014. This will virtually raise the tax
    exemption limit from Rs. 2 lakh to Rs 2.20 lakh.

    I think it will be 2.02 lakh not 2.20 :)

    • #@$#@

      wrong math buddy

      • RajendraPrasad

        Correct. Its wrong math. 10% of tax on 20000 is 2000. So the exemption will work out to 2.20 lakhs.

  • Nand

    In one reply you have agreed that the limit for senior citizen will increase to 270000 and in the other reply you have said that since the senior citizens are already having a limit of 250000 this will not apply to them. Which one is correct? Kindly clarify.

    • Av Suresh

      These are only the virtual limits that we were talking about. It will apply to all individuals with income of Rs. 5 lakh p.a. It has also been corrected in the article.

  • harsha

    if any one has two property .one to his name and another to wife name then he is liable to show rent in return.

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