The maximum deduction under Section 80C, 80CCC and 80CCD (1) put together is Rs 1.5 lakhs. However, you may claim an additional deduction of Rs 50,000 allowed u/s 80CCD(1B)
What deductions and exemptions are allowed under the new tax regime?
Here is a comparison between the deductions and exemptions available under the new and the old tax regime:
| Particulars | Old Tax Regime | New tax Regime (until 31st March 2023) | New Tax Regime (From 1st April 2023) |
| Income level for rebate eligibility | ₹ 5 lakhs | ₹ 5 lakhs | ₹ 7 lakhs |
| Standard Deduction | ₹ 50,000 | - | ₹ 50,000 |
| Effective Tax-Free Salary income | ₹ 5.5 lakhs | ₹ 5 lakhs | ₹ 7.5 lakhs |
| Rebate u/s 87A | ₹12,500 | ₹12,500 | ₹25,000 |
| HRA Exemption | ✓ | X | X |
| Leave Travel Allowance (LTA) | ✓ | X | X |
| Other allowances including food allowance of Rs 50/meal subject to 2 meals a day | ✓ | X | X |
| Standard Deduction (Rs 50,000) | ✓ | X | ✓ |
| Entertainment Allowance and Professional Tax | ✓ | X | X |
| Perquisites for official purposes | ✓ | ✓ | ✓ |
| Interest on Home Loan u/s 24b on: Self-occupied or vacant property | ✓ | X | X |
| Interest on Home Loan u/s 24b on: Let-out property | ✓ | ✓ | ✓ |
| Deduction u/s 80C (EPF | LIC | ELSS | PPF | FD | Children's tuition fee etc) | ✓ | X | X |
| Employee's (own) contribution to NPS | ✓ | X | X |
| Employer's contribution to NPS | ✓ | ✓ | ✓ |
| Medical insurance premium - 80D | ✓ | X | X |
| Disabled Individual - 80U | ✓ | X | X |
| Interest on education loan - 80E | ✓ | X | X |
| Interest on Electric vehicle loan - 80EEB | ✓ | X | X |
| Donation to Political party/trust etc - 80G | ✓ | X | X |
| Savings Bank Interest u/s 80TTA and 80TTB | ✓ | X | X |
| Other Chapter VI-A deductions | ✓ | X | X |
| All contributions to Agniveer Corpus Fund - 80CCH | ✓ | Did not exist | ✓ |
| Deduction on Family Pension Income | ✓ | ✓ | ✓ |
| Gifts upto Rs 5,000 | ✓ | ✓ | ✓ |
| Exemption on voluntary retirement 10(10C) | ✓ | ✓ | ✓ |
| Exemption on gratuity u/s 10(10) | ✓ | ✓ | ✓ |
| Exemption on Leave encashment u/s 10(10AA) | ✓ | ✓ | ✓ |
| Daily Allowance | ✓ | ✓ | ✓ |
| Conveyance Allowance | ✓ | ✓ | ✓ |
| Transport Allowance for a specially-abled person | ✓ | ✓ | ✓ |
Health and Education Cess : Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.
Note: The rates of Surcharge and Health & Education cess are same under both the tax regimes
Mutual funds, also known as Equity Linked Savings Scheme (ELSS), are great tax-saving instruments under Section 80C of the Income Tax Act, 1961
EPF NPS and VPF is best option for TAX
Rebate u/s 87A can be claimed by only by Resident Individual having Total income of less than or equal to Rs. 7,00,000
Total income should be the difference between "Gross total income" and "Total deductions" OR zero if the gross total income minus Ch VI-A deductions is negative
The amount of "Tax after Rebate " should be equal to "Tax payable on total income" Minus "Rebate u/s 87A"
FAQs on Salary Income
- My employer reimburses to me all my expenses on grocery and children’s education. Would these be considered as my income?
Yes, these are in the nature of perquisites and should be valued as per the rules prescribed in this behalf.
Are retirement benefits like PF and Gratuity taxable?
In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.
No exemption shall be available for the interest income accrued during the previous year in the recognised and statutory provident fund to the extent it relates to the contribution made by the employees over Rs. 2,50,000 in the previous year.
- Are arrears of salary taxable?
Yes. However, the benefit of spread over of income to the years to which it relates to can be availed for lower incidence of tax. This is called as relief u/s 89 of the Income-tax Act.
- Can my employer consider relief u/s 89 for the purposes of calculating the TDS from salary?
Yes, if you are a Government employee or an employee of a PSU or company or co-operative society or local authority or university or institution or association or body. In such a case you need to furnish Form No. 10E to your employer.
Is leave encashment taxable as salary?
It is taxable if received while in service. Leave encashment received at the time of retirement is exempt in the hands of the Government employee. In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.
Are receipts from life insurance policies on maturity along with bonus taxable?
As per section 10(10D), any amount received under a life insurance policy, including bonus is exempt from tax.
Amount received on the death of the person will continue to be exempt without any condition.
Where is House Rent allowance (HRA) to be reflected while filing income-tax return (ITR)?
The amount of HRA is required to be disclosed in the ITR under the column allowances to the extent exempt under section 10. section 10(3A) is the relevant section under which the amount of exempt HRA to be shown.
- What is the taxability of House Rent allowance (HRA)?
Least/minimum of the following is exempt (Not taxable/deducted from total HRA received)
(a) Actual amount of HRA received
(b) Rent paid Less 10% of salary
(c) 50% of salary if house taken on rent is situated in Kolkata, Chennai, Mumbai and Delhi
or
40 % of salary if the house is taken on rent is NOT situated in Kolkata, Chennai, Mumbai and Delhi.
Click here to calculate taxability of House Rent Allowance
- What is the taxability of Fixed Medical allowance?
Medical allowance is a fixed allowance paid to the employees of a company on a monthly basis, irrespective of whether they submit the bills to substantiate the expenditure or not. It is fully taxable in the hands of employee.
What is the taxability of Conveyance allowance?
As per section 10(14) read with Rule 2BB Conveyance allowance is exempt to the extent of amount received or amount spent, whichever is less. For e.g., If amount received is Rs. 100 and amount spent is Rs. 80, then only Rs. 20 is taxable. However, if amount actually spent is Rs. 100; then nothing is taxable.
The standard deduction is allowed while computing income chargeable under the head salaries. It is available to all class of employees irrespective of the nature of employer. Standard Deduction is also available to pensioners. Amount of Standard Deduction is Rs. 50,000 or amount of salary/pension, whichever is lower.
- Is Family pension taxed as salary income?
No, it is taxable as income from other sources.
- What is a return of income?
ITR stands for Income Tax Return. It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department. It also allows carry -forward of loss and claim refund from income tax department.Different forms of returns of income are prescribed for filing of returns for different Status and Nature of income. These forms can be downloaded from https://www.incometax.gov.in/iec/foportal
- What are the forms of return prescribed under the Income-tax Law?
Under the Income-tax Law, different forms of returns are prescribed for different classes of taxpayers. The return forms are known as ITR forms (Income Tax Return Forms). The forms of return prescribed under the Income-tax Law for filing of return of income for the assessment year 2022-23 (i.e., financial year 2021-22) are as follows:
Return Form Brief Description ITR - 1 Also known as SAHAJ is applicable to an individual having salary or pension income or income from one house property (not a case of brought forward loss) or income from other sources (not being lottery winnings and income from race horses, income taxable under section 115BBDA or income reffered in section 115BBDA or income referred in section 115BBE). ITR - 2 It is applicable to an individual or an Hindu Undivided Family not having income chargeable to income-tax under the head “Profits or gains of business or profession” ITR - 3 It is applicable to an individual or a Hindu Undivided Family who has any income chargeable to tax under the head business or profession ITR - 4 Also known as SUGAM is applicable to individuals or Hindu Undivided Family or partnership firm who have opted for the presumptive taxation scheme of section 44AD/ 44ADA/44AE. ITR - 5 This Form can be used by a person being a firm, LLP, AOP, BOI, artificial juridical person referred to in section 2(31)(vii), cooperative society and local authority. However, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4C) or 139(4D) shall not use this form (i.e., trusts, political parties, institutions, colleges) ITR - 6 It is applicable to a company, other than a company claiming exemption under section 11 (exemption under section 11 can be claimed by charitable/religious trust). ITR - 7 It is applicable to a persons including companies who are required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) (i.e., trusts, political parties, institutions, colleges). ITR - V It is the acknowledgement of filing the return of income.
- What is a return of income?
- What is the taxability of Fixed Medical allowance?
- What is the taxability of House Rent allowance (HRA)?
What are the different modes of filing the return of income?
The Return Form can be filed with the Income-tax Department in any of the following ways, -(i) by furnishing the return in a paper form;
(ii) by furnishing the return electronically under digital signature;
Is it necessary to attach any documents along with the return of income?
ITR return forms are attachment less forms and, hence, the taxpayer is not required to attach any document (like proof of investment, TDS certificates, etc.) along with the return of income (whether filed manually or filed electronically). However, these documents should be retained by the taxpayer and should be produced before the tax authorities when demanded in situations like assessment, inquiry, etc.
As discussed above, no documents are to be attached along with the return of income, however, in case of a taxpayer who is required to furnish a report of audit under section 10(23C)(iv), 10(23C)(v), 10(23C)(vi), 10(23C)via), 10A, 10AA, 12A(1)(b), 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115VW or to give a notice under section 11(2)(a) shall furnish it electronically on or before the date of filing the return of income.
- Is there any e-filing help desk established by the Income-tax Department?
In case of queries on e-filing of return, the taxpayer can contact 1800 180 1961.
- If I have paid excess tax how will it be refunded to me?
The excess tax can be claimed as refund by filing your Income-tax return. It will be refunded to you by crediting it in your bank account through ECS transfer. The department has been making efforts to settle refund claims at the earliest.
- If I have committed any mistake in my original return, am I permitted to file a revised return to correct the mistake?
A return of income can be revised at any time 3 months before the end of the assessment year or before the assessment whichever is earlier.
- Am I required to keep a copy of the return filed as proof and for how long?
Yes, since legal proceedings under the Income-tax Act can be initiated for past years, you must maintain copy of return. After the introduction of the e-filing facility, it is very easy and simple to maintain a copy of return of income.
- There are various deductions that are not reflected in the Form 16 issued by my employer. Can I claim them in my return?
Yes, it can be claimed if you are otherwise eligible to claim the same.
- Why is return filing mandatory, even though all my taxes and interests have been paid and there is no refund due to me?
Amounts paid as advance tax and withheld in the form of TDS or collected in the form of TCS will take the character of your tax due only on completion of self-assessment of your income. This self-assessment is intimated to the Department by way of filing of the return of income. Only then the Government assumes rights over the taxes paid by you. Filing of return is critical for this process and, hence, has been made mandatory. Failure will attract levy of penalty.
- If I fail to furnish my return within the due date, will I be fined or penalized?
As per section 234F, late filing fees of Rs. 5,000 shall be payable if return furnished after due date specified under section 139(1). However amount of late filing fees to be paid shall be Rs.1,000, if the total income of the person does not exceed Rs.5 lakhs.
What is the eligibility for claiming rebate u/s 87A?
For AY 2022-23, following are the conditions for claiming rebate under section 87A:
• An assessee is a resident Individual
• Total Income does not exceed Rs. 5,00,000
• Maximum rebate allowed is 100% of Income tax or Rs. 12,500
FAQs on Income Tax Refund
- If I have paid excessive tax, will it be refunded to me?
Yes, if you have paid excessive tax then it be refunded to you. In order to get your additional tax refunded you will have to first file your income tax, following which your return is processed.
- What is Form 26AS? In what forms can I pay my tax
Form 26AS is a credit statement which basically contains all the information regarding the details of the tax deducted on your income. You can pay your tax in the forms of Tax Deducted at Source (TDS), Tax Collected at Source (TCS) and Advance tax or self-assessment tax or payment of tax on regular assessment.
- Do I have to submit any documents or proofs while filing my income tax returns?
No, you are not required to provide any documents or investment proofs while filing your income tax returns. However, you will have to provide the details of your Aadhaar in order to successfully file your income tax returns.
- What is the difference between an income tax return and an income tax refund?
The income tax return refers to your income and tax information which is provided annually in the specified ITR forms. An income tax refund is the amount owed or received if excess taxes are paid. The refund is issued once the return has been successfully filed.
- When will I get my income tax refund?
You need to check your income tax return after you file it. The IT department will then process your request and issue a refund.
- How long does it take for the income tax refund to be credited to the account?
Usually, it takes 30-45 days for the income tax refund to reflect in the account.
- Will my income tax refund be subject to tax?
No, the income tax refund is not taxed. However, the interest will be subject to taxation and hence, it must be reported as ‘Income from other sources'.
- Can an income tax refund be transferred to another account?
Yes, in some situations, you may be able to transfer your return to another account. For this, you will have to file a revised return. In case you didn’t receive the refund amount even after the request was initiated, you will have to file a request for refund reissue.
- If I have paid excessive tax, will it be refunded to me?
- There are various deductions that are not reflected in the Form 16 issued by my employer. Can I claim them in my return?
- Am I required to keep a copy of the return filed as proof and for how long?
- If I have paid excess tax how will it be refunded to me?
- Is there any e-filing help desk established by the Income-tax Department?
- Are arrears of salary taxable?
- Why doesn’t TDS credit reflect in the Form 26AS?
TDS credit does not show in Form 26AS due to any of the following reasons:- TDS statement has not been filed by the payer
- Payer has not deposited the tax collected
- While filing the TDS statement, the payer might have incorrectly quoted payee’s PAN details
In case you do not see TDS credit details in Form 26AS, inform your payer immediately and request them to rectify any errors.
- Is there a way to know the amount of tax deducted by the payer from the income?
Yes. You can check Form 26AS under the ‘’View Your Tax Credit’’ facility on the Income Tax Portal. Alternatively, you can request the payer to provide a TDS certificate. - Does the payee face any penalties when the payer does not deduct TDS?
As the payee, while filing returns you must pay your tax liability. In other words, you are eligible to pay taxes even though the payer does not deduct. The responsibility of deducting TDS rests on the payer, so NO, you do not have to face any consequences if TDS is not deducted by the payer.
For example, let's consider the following scenario:
Raghu lives in Mumbai
He receives a HRA of Rs 1 lakh from his employer.
His basic salary per month is Rs 50,000.
Further, he has taken up an accomodation for which he pays a monthly rent of Rs 15,000.
What is the quantum of HRA exemption he can claim?
| Sl. No. | Head | Calculation | Amount |
|---|---|---|---|
| 1 | Actual HRA received from employer | 100000 | |
| 2 | Actual Rent Paid (-) 10% of salary | (15000*12) - 10% (50000*12) | 120000 |
| 3 | 50% of Basic Salary | 50% (50000*12) | 300000 |
| Least of the above | 100000 | ||
| Hence, Raghu would be eligible for a HRA exemption of Rs 1 Lakh. | |||
https://www.incometax.gov.in/
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