Budget 2014-15 is over. Finance Minister has proposed many changes in taxation, investments and various other areas. But, let us concentrate only on the tax changes in this article. Let’s take a look into what has changed and what remains same in income tax.
(Also see: Eight important tax changes)
Changes in Income Tax for FY 2014-15
- Basic Exemption Limit – The basic exemption limits have been hiked for individuals as well as senior citizens by Rs. 50,000 each. The latest limits stand at Rs. 2.5 lakh and Rs. 3 lakh respectively. Hence, income earners from these categories stand to gain by about Rs. 5,000 in the current financial year i.e. FY 2014-15 or AY 2015-16.
- Section 80C Deduction – This is another change eagerly awaited by the common man. Earlier, the deduction limit under this section was Rs. 1 lakh which was fixed a decade ago. The new deduction limit now stands at Rs. 1.5 lakh. The additional deduction saves another Rs. 5,000 for the burdened tax payer.
- Housing Loan Deduction Limit – In order to encourage all the prospective home buyers, especially the young population, the housing loan deduction limit u/s 24 has been hiked by Rs. 50,000. This has been done taking into account the huge interest amounts being paid annually by a lot of home loan takers. The latest limit is Rs. 2 lakh.
- Income Tax Commission – The scope of income tax commission has been increased for the benefit of millions of tax payers in the country. Tax payers may now approach this commission for settlement of various tax related disputes. It would continue to be a once in a lifetime opportunity for a tax payer.
- Capital Gains Tax on Debt Funds – This could be a dent to all debt mutual fund lovers. Debt funds, which did amazingly well in the past 2 years, will now attract a long term capital gains tax of 20%. Also, the holding period for consideration will be 36 months instead of 12 months. This would lower the tax advantage of debt funds in comparison with fixed deposits or recurring deposits.
- DTC – The long pending Direct Tax Code or DTC will be reviewed in its present shape and appropriate decision will be taken upon the implementation soon.
- Additional Tax Incentive on Home Loans – This was introduced as a onetime incentive for prospective home loan buyers in the previous year’s budget. An additional deduction of Rs. 1 lakh was allowed on the interest paid on home loans. This does not form part of section 24 limit. This incentive has been extended to FY 2014-15 as well. Hence, the total deduction limit on home loan interest for a first time home buyer will be Rs. 3 lakh for this year.
- Rebate of Rs. 2000 – Tax rebate of Rs. 2000 for all tax payers who have total income up to Rs. 5 lakhs was announced in the budget 2013. This has now been extended to this financial year as well.
(Also see: Changes in ITR forms for AY 2014-15)
What did not change?
- Tax Rate – The tax rates have not been tinkered with. There was speculation that the basic exemption limit will be raised to Rs. 5 lakh and the tax rates will be changed. However, the tax rates have remained the same with the exception of minor hike in the exemption limit.
- Education Cess – Education Cess of 3% on income tax remains the same. It is deposited towards corpus fund for secondary and higher education in the country.
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