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Changes in the Union Budget 2014-15 and their Effects on Senior Citizens -Tax Planning in India

    IndianMoney.com Research Team | Wednesday, July 23,2014, 04:39 PM
 

union budget and their effects on senior citizen

Tax Planning in India:

Income tax slabs for the financial year 2013-14 for a senior citizen
between 60-80 years of age

Annual Income

Tax Rate

0- INR 2.5 Lakhs

NIL

INR 2.5 Lakhs-INR 5 Lakhs

10%

INR 5 Lakhs - INR 10 Lakhs

20%

INR 10 Lakhs and above

30%

Let us consider Mr Gaurav a 62 year old gentleman earns INR 9 Lakhs working in the quality control department of a garment firm. He makes use of the Section 80 C deductions of INR 1 Lakh and invests INR 1.5 Lakh per annum in the senior citizens saving scheme. This amount is tax deductible only up to INR 1 Lakh and he has to pay taxes on the amount exceeding this when calculating his income taxes under Section 80 C of the income tax act.

Mr Gaurav takes up a health insurance policy for himself and gets a deduction of INR 20000 on the premium paid for this policy under Section 80 D of the income tax act as he is a senior citizen.

Mr Gaurav has a dependent brother and he claims a deduction of INR 60000 for his treatment under Section 80 DDB of the income tax act by virtue of being a senior citizen.

Learn more about income tax deductions from A free handbook on tax

Table 1



Heads

Amount

Gross taxable salary

INR 900000 (A)

Less : Amount invested in the senior citizen
savings scheme under Section 80 C

INR 100000 (B)

Less : Amount paid as premium on the health
insurance policy under Section 80 D

INR 20000 (C)

Less : Amount claimed as a deduction
under Section 80 DDB

INR 60000 (D)

Total taxable income

INR 720000 (A)–(B+C+D)


Mr Gaurav’s income tax liability is calculated as per the income tax slab he falls under.

Table 2



Heads

% of Income Tax

Income Tax

Up to INR 250000

Nil

Nil

INR 250001 – INR 500000

Income tax is paid on
INR 2.5 Lakhs.

(INR 500000 – INR 250000)

10%

INR 25000 (A)

INR 500001– INR 720000

Income tax is paid on
INR 2.20 Lakhs

(INR 720000– INR 500000)

20%

INR 44000 (B)

Total tax

 

INR 69000 (A+B)

Education cess @ 3 %

3% of INR 69000

INR 2070 (C)

Net tax payable

 

INR 71070 (A+B+C)


Mr Gaurav pays an income tax of INR 71070 on his salary after availing deductions under Section 80 C , Section 80 D and Section 80 DDB of the income tax act.


union budgetof india 2014-15

Income tax slabs changed under the Union Budget 2014-15 -Tax Planning

Income tax slabs for the financial year 2014-15 for an Indian citizen between 60-80 years of age:
(A free guide on how to calculate your income tax under the changed tax structure)

Annual Income

Tax Rate

0-INR 3 Lakhs

NIL

INR 3 Lakhs-INR 5 Lakhs

10%

INR 5 Lakhs-INR 10 Lakhs

20%

INR 10 Lakhs and above

30%


Section 80 C exemption limits have been raised to INR 1.5 Lakhs in the Union Budget 2014-15

  • A maximum deduction under Section 80C, 80CCC and 80CCD combined has been revised to INR 1.5 Lakhs from INR 1 Lakh.

Mr Gaurav avails deductions under Section 80 C , Section 80 D and Section 80 DDB of the income tax act just as in the previous year

  • There are no changes in the salary Mr Gaurav earns in the financial year 2014-15.He continues to earn INR 9 Lakhs per annum.
  • Mr Gaurav continues to invest INR 1.5 Lakhs under the senior citizens saving scheme but this time gets a deduction of INR 1.5 Lakhs on the full amount he invests under Section 80 C of the income tax act.
  • The total income tax deductions claimed by Mr Gaurav under Section 80 D of the income tax act is INR 20000 just as before. There are no changes here.
  • Mr Gaurav has a dependent brother and he claims a deduction of INR 60000 for his treatment by virtue of being a senior citizen under Section 80 DDB of the income tax act. There are no changes here.

Table 3

Heads

Amount

Gross taxable salary

INR 900000 (A)

Less : Amount invested in the senior citizen
savings scheme under Section 80 C

INR 150000 (B)

Less : Amount paid as premium on the health
insurance policy under Section 80 D

INR 20000 (C)

Less : Amount claimed as a deduction
under Section 80 DDB

INR 60000 (D)

Total taxable income

INR 670000(A)–(B+C+D)


  • Mr Gaurav’s income tax liability is calculated as per the newly introduced income tax slabs in the Union budget 2014-15.


Table : 4

Heads

% of Income Tax

Income Tax

Up to INR 300000

Nil

Nil

INR 300001-INR 500000

Income tax is paid on
INR 2.0 Lakhs.

(INR 500000-INR 300000)

10%

INR 20000 (A)

INR 500001-INR 670000

Income tax is paid on
INR 1.70 Lakhs

(INR 670000–INR 500000)

20%

INR 34000 (B)

Total tax

 

INR 54000 (A+B)

Education cess @ 3%

3% of INR 54000

INR 1620 (C)

Net tax payable

 

INR 55620 (A+B+C)


Conclusion

  • Mr Gaurav paid an income tax of INR 71070 in the financial year 2013-14 (Table 2).
  • Mr Gaurav now pays INR 55620 as income tax liability in the financial year 2014-15 (Table 4).
  • Mr Gaurav saves INR 15450 (Difference between INR 71070 - INR 55620) due to the change in the income tax laws in the new Union Budget 2014-15.
  • Tax planning done at the right time and moment can save you a lot of money.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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