There 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.
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.