Income Tax 2015-16 - Deductions and Exemptions For Salaried Employees

Income Tax 2015-16 - Deductions and Exemptions for Salaried Employees
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Income Tax 2015-16 Deductions and Exemptions for

Salaried Employees
SEPTEMBER 7, 2015 BY GCONNECT TEAM
Income Tax 2015-16 Deductions and Exemptions for Salaried Employees with
regard to payment of Income Tax for the !nancial year 2014-15 (Assessment
Year 2016-17)
Salaried Employees are a relieved lot now after ful!ling all
the formalities for Income Tax 2014-15. But, by that time six
months in the new !nancial year 2015-16 is already over.
So, preparation of statement for salary income, deductions
and saving under various clauses of Income Tax Act in
respect of Financial year 2015-16 is already due for
http://www.gconnect.in/personal-income-tax/income-tax-2015-16-deductions-and-exemptions.html#
Page 1 of 17
05/12/2016, 10:48
submission to the employer.

Tax Planning and submission of statement to that e"ect to the employer would be mainly useful to
avoid additional deduction of Income Tax by the employer over and above income tax estimated by an
individual on the basis of his / her savings or deductions.
This article summarises Income Tax Structure for the year 2015-16 (Assessment Year 2016-17) and also
the Tax exemptions available to salaried class employees in the form of Exempt Income, Deductions
and Savings.
Rates of Income Tax 2015-16 (Assessment Year 2016-17)

A.
Normal Rates of tax:
Sl
Total Income
Rate of tax
No
1
Where the total income does not exceed Rs.
Nil
2,50,000/-.
2
Where the total income exceeds

but does not exceed
Rs. 2,50,000
Rs. 5,00,000/-.
Rs.
10 per cent of the amount by which the

total income exceeds Rs. 2,50,000/Rs. 25,000/- plus 20 per cent of the
5,00,000/- but does not exceed Rs. 10,00,000/- amount by which the total income exceeds
.
4
Rs. 5,00,000/-.
Rs.
10,00,000/-.
Rs. 1,25,000/- plus 30 per cent of the

amount by which the total income exceeds
Rs. 10,00,000/-
B. Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less
than eighty years at any time during the !nancial year:
Sl
Total Income
Rate of tax
Nil
No
1
Page 2 of 17
05/12/2016, 10:48
3,00,000/-
Where the total income exceeds Rs. 3,00,000
but does not exceed Rs. 5,00,000/-
total income exceeds Rs. 3,00,000/-
Where the total income exceeds Rs. 5,00,000/-
Rs. 20,000/- plus 20 per cent of the
amount by which the total income exceeds

Rs. 5,00,000/-.
Where the total income exceeds Rs. 10,00,000/-

amount by which the total income
exceeds Rs. 10,00,000/-
C. In case of every individual being a resident in India, who is of the age of eighty years or more at any
time during the !nancial year:
Sl
Total Income
Rate of tax
Nil
No
1
5,00,000/-
Rs. 5,00,000

10,00,000/-
Rs.

total income exceeds Rs. 5,00,000/-

amount by which the total income
exceeds Rs. 10,00,000/-
Education Cess on Income tax:
Page 3 of 17
05/12/2016, 10:48
The amount of income-tax including the surcharge if any, shall be increased by Education Cess on
Income Tax at the rate of two percent of the income-tax.
Secondary and Higher Education Cess on Income-tax:
An additional education cess is chargeable at the rate of one percent of income-tax including the
surcharge if any, but not including the education cess on income-tax.
Tax exemptions in the form of Exempt Income, Deductions and

Savings
1. Exempt Income under Chapter 10 of Income Tax Act, such as House Rent allowance, Tranport
Allowance, LTC etc.
2. Savings which are eligible for Tax Exemption up to Rs. 1.5 lakh under Section 80C, Section 80CCC
and Section 80CCD(1)
3. Additional Savings eligible for Tax Exemption up to Rs. 50,000/- under Section 80 CCD (1B) over and
above Savings Cap of Rs. Rs. 1.5 lakh, if the amount is invested in NPS (Govt run Contributory Pension
System which is known as National Pension System)
4. Deduction (up to 10% of salary) towards Contribution made by Employer in any of Pension fund such
as NPS, approved by Central Government, under Section 80CCD(2), which will be over and above
savings value cap of Rs. 1.5 lakh under Section 80CCE plus additional savings of Rs.50,000 under
Section 80CCD(1B)
5. Eligible deductions from Income from Section 80 D to 80 U towards amount spent on health
insurance, medical treatment for disabled dependents, interest on higher education loan etc.
6. Deduction of up to Rs. 2 lakh in respect of loss (interest) incurred on self-occupied House Property
(and unlimited interest in respect of rented property) under Section 24 of Income Tax Act.
7. Relief Under Section 89(1)
1. Exempt Income and Allowances under Section 10 of Income Tax

Act
Income given below are exempt income and hence these need not included while calculating Total
Income of a Salaried Employee
Agricultural Income [Section 10(1)]
Page 4 of 17
05/12/2016, 10:48
The sum received (including the bonus) under a life insurance policy (other than any sum
received under sub-section (3) of section 80DDA or under a Keyman insurance policy).[Section
(10)(10)(D)]
Amount of LTC or LTA actually incurred. [Section 10(5)]
Any allowances or perquisites paid or allowed as such outside India by the Government to a
citizen of India for rendering service outside India. [Section 10(7)]
Any special allowance or bene!t, such as Travelling Allowance, Uniform Allowance etc which are
incurred for the performance of the duties of an o#ce or employment . [Section 10(13A)]
The transport allowance granted to an employee to meet his expenditure for the purpose of
commuting between the place of his residence and the place of duty is exempt to the extent of
Rs. 1,600/- per month or Rs. 3200 per month (for a visually challenged person) [Section 10 (14)]
Scholarships granted to meet the cost of education.[Section 10(16)]
Children Education allowance:
Rs. 100/- per month per child up to a maximum of 2 children.
Hostel Subsidy: Rs. 300/- per month per child upto a maximum of two children.
Other Allowances exempted under Section 10 of IT Act are Tour TA, Tour Daily Allowance,
Academic, research or training allowance, uniform Allowance, Special Compensatory Allowance,
High Altitude Allowance, Climate Allowance, allowances applicable to North East, Hilly areas of
U.P., H.P. and J & K, border area allowance, Compensatory Field Area Allowance, Counter
Insurgency Allowance, High Active Field Area Allowance, island duty allowance, tribal allowance
etc.
Exemption under Section 10 (13A) in respect of HRA Calculation Method:
Least of the following amount is to be treated as exempt from Income Tax.
Actual House Rent Allowance Received, or
Rent paid in excess of 10% of Pay in Pay band and Grade Pay or
50% of Pay in Pay band and Grade Pay if the employee is in Chennai/Mumbai/Kolkatta/Delhi
and 40% of Pay in Pay Band and Grade Pay for the employees is in other places.
If the employees resides in his/her own house or in a house for which he/she does not pay any
rent, no HRA exemption is available.
2. Savings which are eligible for Tax Exemption Section 80C,

Section 80CCC and Section 80CCD
Section 80C, CCC and CCD(1) allow deduction from total income. The total deduction under this
section (alongwith section 80CCC and 80CCD(1) is limited to Rs. 1.50 lakh only.
Page 5 of 17
05/12/2016, 10:48
Section 80C:
Life Insurance Premium For individual, policy must be in self or spouses or any childs name. For
HUF, it may be on life of any member of HUF.
Sum paid under contract for deferred annuity for individual, on life of self, spouse or any child .
Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self-spouse
or child Payment limited to 20% of salary.
Investment in Senior Citizens Savings Scheme 2004 for 5 year by resident individuals.
Contribution made under Employees Provident Fund Scheme.
Contribution to PPF For resident individual, can be in the name of self/spouse, any child & for
HUF, it can be in the name of any member of the family.
Deposit in Sukanya Samriddhi Account as natural / legal guardian of girl child.
Contribution by employee to a Recognised Provident Fund.
Sum deposited in 10 year/15 year account of Post O#ce Saving Bank
Subscription to any noti!ed securities/noti!ed deposits scheme. e.g. NSS
Subscription to any noti!ed savings certi!cate, Unit Linked Savings certi!cates. e.g. NSC VIII issue.
Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanrakhsa 1989
Contribution to noti!ed deposit scheme/Pension fund set up by the National Housing Scheme.
Payment made by way of instalment or part payment of loan taken for purchase/construction of
residential house property.
Subscription to units of a Mutual Fund noti!ed u/s 10(23D).
Subscription to deposit scheme of a public sector, company engaged in providing housing
!nance.
Subscription to equity shares/ debentures forming part of any approved eligible issue of capital
made by a public company or public !nancial institutions.
Tuition fees paid at the time of admission or otherwise to any school, college, university or other
educational institution situated within India for the purpose of full time education of any two
children. Available in respect of any two children.
Section 80CCC:
Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurer. Payment of premium for
annuity plan of LIC or any other insurer Deduction is available upto a maximum of Rs. 150,000/-.
The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other
insurer for receiving pension from the fund.
Section 80CCD (1):
Deduction in respect of Contribution to Pension Account (by Assessee). Deduction available for the
Page 6 of 17
05/12/2016, 10:48
amount paid or deposited in a pension scheme noti!ed or as may be noti!ed by the Central
Government subject to a maximum of :
(a) 10% of salary in the previous year in the case of an employee
(b) 10% of gross total income in any other case.
Section 80CCD(1A):
The maximum deduction allowable under this section is Rs. 1.00 lakh. in case of contribution to New
Pension Scheme (NPS), it is Rs. 1.50 lakh w.e.f. 01.04.2015
3. Additional Savings eligible for Tax Exemption up to Rs. 50,000/under Section 80 CCD (1B)
Section 80CCD(1B):
Contribution in NPS has been given more tax concession in the budget 2015. As per Section
80CCD(1B), an additional deduction of up to Rs. 50,000 over and above the Section 80C, 80CCC and
80CCD savings cap of Rs. 1.5 lakh, is allowed if such amount is contributed by the employee. So,
overall tax savings of Rs. 2 lakh can be availed under Section 80C, 80CCC and 80CCD(1).
4. Deduction in respect of Contribution to Pension Account by

Employer under Section 80CCD (2):
Deduction under Section 80CCD(2) is available for the amount paid or deposited by the employer of
the assessee in a pension scheme noti!ed or as may be noti!ed by the Central Government subject to
a maximum of 10% of salary in the !nancial year. This deduction is allowed over and above Savings
value cap of Rs. 1.5 lakh under Section 80CCE (in the case of investment in NPS, savings value cap
eligible for deduction will be Rs. 2 lakh).
5. Eligible deductions from Income from Section 80 D to 80 U

towards amount spent on health insurance, medical treatment
etc.
Section 80D: Deduction in respect of Medical Insurance:
Deduction is available upto Rs. 30,000/- for parents who are senior citizens and upto Rs. 25,000/- in
other cases for insurance of self, spouse and dependent children. Amount of up to Rs.5000/- spent on
preventive health check-up. So a maxium of Rs. 60,000 can be deducted which is spent towards
Health Insurance premium.
Page 7 of 17
05/12/2016, 10:48
Section 80DD: Deduction for medical treatment of physically challenged dependents:

In the case of salaried employee who is taking care of physically challanged Dependent Relative, an
amount with the maximum limit of Rs.75000/- spent towards medical treatment or rehabilitation can
be deducted from the income (In the case of severe disability maximum deduction would be Rs.
1,25,000).
Section 80DDB: Deduction in respect of speci!ed disease:
Deduction in respect of speci!ed disease for self or dependent relatives is allowed lower of Rs.60,000
or actual amount paid. This deduction amount increases to Rs.80,000 in case of senior citizen.
Section 80E: Deduction in respect of Interest on Loan for Higher Studies:
Deduction in respect of interest on loan taken for pursuing higher education. The deduction is also
available for the purpose of higher education of a relative.
Section 80G: Deduction for Donations
Noti!ed donations under Sec. 80G will be eligible for deduction ( 100% or 50% as per the noti!cation
condition)
Section 80GG: Deduction in respect of House Rent Paid
Deduction available is the least of
Rent paid less 10% of total income
Rs. 2000/- per month i.e. Maximum Deduction available is 24,000/25% of total income subject to
Employee or his/her spouse or minor child should not own residential accommodation at
the place of employment.
No HRA is received.
No self occupied residential premises in any other place.Section 80GGA: Deduction in
respect of certain donations for scienti!c research or rural development
Section 80GGC: Deduction on donation to political parties
Section 80 TTA: Deduction from gross total income in respect of any Income by way of Interest on
Savings account
Page 8 of 17
05/12/2016, 10:48
Maximum of Rs. 10,000/-, in respect of interest on deposits in savings account ( not time deposits )
with a bank, co-operative society or post o#ce
Section 80U: Deduction in respect of Person su"ering from Physical Disability
Deduction of Rs. 75,000/- in respect of tax payer su"ering from a physical disability. In the case of
severe disability, deduction of Rs. 125,000/- will be allowed. Certi!cate from the approved medical
authorities regarding the extent of disability will have to be produced (Rule 11D)
6. Deductions Allowable under Section 24 of Income Tax Act in

respect of interest on house property :
Housing Property bought or constructed on or after 01.04.99 (completed within 3 years from availment
of loan) and self occupied will be eligible for deduction of interest paid on housing loan with the
maximum limit Rs. 2,00,000/-. In other cases deduction in respect of interest paid up to Rs.30,000 will
be allowed. If the said house property is not self-occupied there is no limit in deduction in respect of
interest paid on housing loan subject to inclusion of rental income in respect of the house property.
Click here for GConnect Calculator for Income Tax Exemption for Housing Loan Interest
7. Relief Under Section 89(1)

Relief u/s 89(1) is available to an employee when he receives salary in advance or in arrear or when in
one !nancial year, he receives salary of more than 12 months, or receives pro!t in lieu of salary
covered u/s 17(3). Relief u/s 89(1) is also admissible on family pension, as the same has been allowed
by Finance Act, 2002 (with retrospective e"ect from 1/4/96).
To sum-up, over and above the Basic Income Tax Exemption limit of Rs. 2.5 lakh for the !nancial year
2015-16 available to Salaried Employees, maximum additional income tax exemption for income up to
Rs.4,44,200 can be availed. Maximum Amount that can be saved / deducted to avail this income tax
exemption bene!t are tabulated below. So, a salaried employee who earns gross total income of Rs.
6,94,200/- and avails income tax exemption bene!t by way of savings and deductions detailed below,
need not pay any income tax.
Deductions under 80C
Rs. 1,50,000
Deductions under 80CCD (1B) for contribution to NPS
Rs. 50,000
Interest on house property loan
Rs. 2,00,000
Exemption with new transportation allowance of Rs. 1,600 per month Rs. 19,200
Page 9 of 17
05/12/2016, 10:48
New deductible health insurance premium

21
Rs. 25,000
Total deductions / exemption
Rs. 4,44,200
Basic Income which is exempted from Income Tax
Rs. 2,50,000
Gross Total Income which can be tax free
Rs.6,94,200
Shares
It is also pertinent to note here that exemptions and deductions detailed above are common to a
salaried employee.
In addition to this, by way of other deductions provided by Section 80DD to Section 80U based on
speci!c nature of expenditure such as medical, higher studies related or physical status of employee
or his / her dependents, more income could be exempted from payment of Income Tax.
Source: Finance Bill 2015
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11 Comments
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Balwinder Singh
Allowances exempt under Section 10 for Salaried Employees ,fill in which colome of online income tax form
Like Reply Jul 29, 2016 8:17pm
Kanchan Krishna Sarkar Assistant teacher (TET) at I work in a school as an assistant teacher
can I apply to NPS as I am state govt. employee(govt. sponsored school)
Like Reply Jul 8, 2016 12:26am
Gaurav Taralkar SND College Of Engineering & RC, Yeola

please give information about 100% tax free housing
Like Reply
1 May 13, 2016 2:03pm
Somaraj Ktr Commerce (senior ) at Govt bhss chavara

please give information about exemption of hostel fees .which section mentioned this dedection.
Somarajan .V,HSST,GHSS,Chavara.
Like Reply Apr 2, 2016 8:30pm
Shravan Guduthur Secretary at Bangalore Branch of SIRC of The Institute of Chartered

Accountants of India
You can refer to Section 10(14)(ii), where it says Rs.300 per month per child can be claimed upto a
Page 11 of 17
05/12/2016, 10:48
maximum of 2 children
Rahul Raktate Student at MBA Student

i have open the RD Account, May Ared Decution In Income Tax, Which Section
Like Reply Mar 15, 2016 6:08pm
Sastry Tvpc Andhra University

I and my wife are both Senior Citizens and file our individual IT Reurns. My wife is an Insulin dependant
Diabetic and I am Hypertensive and we spend considerable amounts on our monthly medical bills, with bills for
check ups now and then. Can we claim these as deductions. What are the supporting proofs, we should
submit / preserve to claim these amounts.
Like Reply Feb 22, 2016 5:30pm
Chandra Nath Singha Lucknow university

5000/- is admissible on pathlogical bills individually, under sec 80D.
plus u should buy a health insurance plan rs 20000/- allowed for senior citizen which includes your
OPD bills , for medicines they are not reimbursible, but still i hope you can negotiate,
Chandra Nath Singha Lucknow university

even ayurvedic is reimbursible through medical insurance
Damodar Pawar Amravati

iknow more information onincome tax subject how to calculate it
Shrikant Yadav Valia College of Commerce and Arts

NYC POST
Ghulam Hassan Constable at Jammu and Kashmir Police

My gross salary is rs.833547 including govt.contributions amongst which nps subs towards tier ist rs.76407
kindly calculate my income tax for fin yr 2015_16
Like Reply Jan 18, 2016 4:09pm
Yedukondalu Narendra
my gross salary is 748404 how to deduct govt contribution whether it is to be added to salary received
or not to deduct under 80 ccd(2)
Muthuswami Annamalai Works at Retired

I know more informations on income tax subject.How to calculate IT relief for arrear salary
Like Reply
1 Jan 7, 2016 5:56pm
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