This article talks about Income Tax Return for AY 2016-17 or FY 2015-16. This article talks about Tax slabs for Financial year 2015-16 or Assessment Year 2016-17, gives Overview of Income Tax,Focuses on Income Tax for a Salaried Employee on HRA,LTA , Medical exemptions and submission of proof to employer.
Table of Contents
ITR For AY 2016-17 or FY 2015-16
The Income Tax Department has released the ITR (Income Tax Return) Forms for Financial Year 2015-2016 (i.e. Assessment Year 2016-2017). Filing for the new forms begins with the onset of the new Financial Year 1 Apr 2016. Taxpayers can file their ITRs till the stipulated deadline of
July 31 5 Aug 2016.
The tax rates are applicable on the income earned during 1 April 2015-31 march 2016. The assessment of income tax according to this slab rate will be done in the year 2016-17 by filing Income Tax Return or ITR by 5 Aug 2016. Your total income shall be taxed according to the income tax slabs applicable for this year FY 2015-16
- New ITR Forms can be downloaded from www.incometaxindia.gov.in/Pages/downloads/income-tax-return.aspx
Changes in the ITR
There are no changes in structure of ITRs. The following features introduced in FY 2015-16 have been retained.
- columns seeking declaration of foreign assets and income by entities and individuals
- one needs to provide details like Aadhaar number, personal mobile phone number and email id
- Furnishing of Passport details has not been made mandatory this time too.
- One needs to furnish total number of savings and current bank accounts held by the individual or entity, at any time during the previous year, (excluding dormant accounts)
- E-verification of Income Tax Returns and Generating EVC through Aadhaar, Net Banking
Tax Collected at Source (TCS)
ITRs feature an additional column to mention the Tax Collected at Source (TCS) .
Assets and Liability in ITR for those with income above 50 lakhs
Income Tax Department has introduced a fresh reporting column in the new ITRs called Asset and Liability at the end of the year which is applicable in cases where the total income exceeds Rs 50 lakhs. Individuals and entities coming under this income bracket will also have to mention the total cost of such assets. So, while immovable assets like land and building have to be furnished under the new ITR regime, movable assets like cash in hand, jewellery, bullion, vehicles, yachts, boats and aircraft will also have to be disclosed .
The entity reporting these high-value possessions will also have to describe their “Liability in relation” to these items.
ITR-2A and Pass Through Income (PTI)
The ITR-2A, to be filled by those individuals and HUFs who do not have income from either business, profession or by way of capital gains and do not hold foreign assets, has the new column called Pass Through Income (PTI) and seeks details from business trust or investment fund as per section 115UA and 115UB of the Income Tax Act (investments made in a venture capital company) which pertains to emerging companies or startup firms.
ITR for AY 2016-17 or FY 2015-16
There are 9 types of ITR or income tax return forms. Which income tax return form a taxpayer should file depends on the taxpayer’s income and sometimes on the disclosure requirements applicable to the taxpayer, where he/she may be a resident with foreign income or assets. ITRs for Individual / Hindu Undivided Family are given below
|ITR-1 SAHAJ||Individual||1. Income from salary/pension: or
2. Income from one house property
3. Income from other sources( excluding winnings from lottery and income from races horses)
|Individual/HUF||Newly introduced Form applicable from AY 2015-16.1. Income from salary/pension
2. Income from more than 1 house properties
3. Income from other sources( excluding winnings from lottery and income from races horses)
|ITR-2||Individual/HUF||1. Income from salary/pension 2. Income from house property(s) 3. Income from other sources( excluding winnings from lottery and income from races horses)
4.Income from Capital Gains. 5. Income from foreign assets.
They should not have Income from Business or Profession.
|ITR-3||Individual/HUF||Being partners in firms and not carrying out business or profession under any proprietorship.|
|ITR-4S SUGAM||Individual/HUF||It is applicable for small businessmen and professionals from business or profession and gross receipts upto Rs. 60 lacs a year|
|ITR-4||Individual/HUF||having income from business or profession (such as insurance agent, doctor, CA, lawyer etc.) with gross receipts of more than RS. 60 lacs a year|
Tax slabs for Financial year 2015-16 or Assessment Year 2016-17
Every individual whose total income before allowing deductions under Chapter VI-A of the Income-tax Act, exceeds the maximum amount which is not chargeable to income tax is obligated to furnish his return of income. The maximum amount not chargeable to income tax in case of different categories of individuals is given below. Other than increase of Surcharge from 10% to 12% for income tax when taxable income is more than 1 crore there is no change in the tax slabs compared to FY 2014 or 2015-16. The tax calculator can be used to find your tax liability.
|TAX||MEN and WOMEN||SENIOR CITIZEN(Between 60 yrs to 80 yrs)||For Very Senior Citizens(Above 80 years)|
|10% tax||250001 to 500000||300001 to 500000||–|
|20% tax||500001 to 1000000||500001 to 1000000||500001 to 1000000|
|30% tax||above 1000000||above 1000000||above 1000000|
|Surcharge||12% of the Income Tax, where total taxable income is more than Rs. 1 crore|
|Education Cess||3% on Income-tax plus Surcharge.|
Some changes in deductions in FY 2015-16
- Exemption of transport allowance increased from Rs 800 pm to 1600 pm
- Investment in Sukanya Samriddhi Scheme will be eligible for deduction u/s 80C and any payment from the scheme shall not be liable to tax.
- Limit of deduction u/s 80D of the Incometax Act increased from Rs 15,000 to Rs 25,000 on health insurance premium (in case of senior citizen from Rs 20,000 to Rs 30,000).
- The limit of deduction increased in case of very senior citizens u/s 80DDB of the Income-tax Act on expenditure on account of specified diseases from Rs 60,000 to Rs 80,000.
- The limit of deduction increased u/s 80DD of the Incometax Act in respect of maintenance, including medical treatment of a dependant who is a person with disability, from Rs 50,000 to Rs 75,000.
- The limit of deduction increased from Rs 1 lakh to Rs 1.25 lakh in case of severe disability
- the limit of deduction increased u/s 80CCC of the Incometax Act on account of contribution to a pension fund of LIC or IRDA approved insurer from Rs 1 lakh to Rs 1.5 lakh.
- the limit of deduction increased u/s 80CCD of the Incometax Act on account of contribution by the employee to National Pension Scheme (NPS) from Rs 1 lakh to Rs 1.50 lakh.
- Also a deduction of upto Rs 50000, under new section 80CCD(1B), over and above the limit of Rs 1.50 lakh in respect of contributions made to NPS is provided for. Therefore for financial year 2015-16, Total Deduction under Section 80C, 80CCC, 80CCD(1) and 80 CCD(1B) is Rs 2,00,000. From assessment year 2012-13, Employer’s contribution under section 80CCD(2) towards NPS is outside the monetary ceiling mentioned above. Our article Should you Invest in NPS the National Pension Scheme for additional 50,000 and save tax talks about it in detail.
Information about the ITRS would be made available in April once the new Forms are released.
Overview of Income Tax
Time period for earning the income is between 1 Apr to 31 Mar of next year. So here we will be focussing on Income earned between 1 Apr 2015 to 31 Mar 2016, which is called FY 2015-16, PY 2015-16 or Assessment Year 2016-17. The return for income earned will be filed by
31 st July 5 Aug 2016.
Who pays the income tax: Income-tax is to be paid by every person. The term ‘person’ as defined under the Income-tax Act covers natural as well as artificial persons. For the purpose of charging Income-tax, the term ‘person’ includes Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, Companies, Local authority and any artificial juridical person not covered under any of the above.
As per Income tax laws, there are five kinds of Income:
- Salary by working for someone or Pension having worked for someone, comes under category of Income From Salary. Proof is Form 16 and Form 12BA
- Selling items like gold, house comes under category of Income from capital gain
- Having a house or many houses comes under category of Income from House Property
- Having a business or profession ex shop, doctor, consultant comes under category of Income from Business or Profession
- Having income which does not fit into any of above category,comes under the category of Income From Other Sources. Such as interest on Bank Account, Interest on Fixed Deposits, Dividends from companies, Family pension ,Insurance commission,Income from royalty,gift amount etc.
The Income Tax Act, 1960 allows you to save tax by investing your income. Depending on where you invest , the maximum amount, section of Income tax act which governs it changes For example :
- Under Section 80C,80CCD, 80CCC, 80CCCE etc one can save tax by investing upto 1 lakh in different options, each suited to a different need. One can choose a combination of fixed income, life insurance and market-linked investments depending on one’s financial goals and investment horizon.
- Under Section 80D one can save tax by paying Premium for health insurance of youself, your spouse, children or dependent parents
- Under Section 80E one can save tax if one has taken Education Loan
- Under Section 80G one can save tax if one has donated money to charity.
|Income Tax Section||Gross Annual Salary||How Much Tax Can You Save?|
|Sec. 80C||Across all income slabs||Upto Rs 46,350 saved on investment of Rs. 1,50,000|
|Sec. 80CCC||Across all income slabs||Upto Rs 30,900 saved on Investment of Rs 1,50,000|
|Sec. 80 D||Across all income slabs||Upto Rs 10,815 saved on investment of Rs 35,000
(Inclusive of Rs. 20,000/- towards health insurance of parents who are senior citizens)
Everyone does not have to pay same tax. Income tax depends on the
- Income earned, more the income, more the tax.
- Residence(india/non-resident India) : You’re considered a Resident in a financial year if you satisfy one of the conditions below. You are an NRI or Non Resident Indian, if you do not meet any of these conditions.An exception is made for Indian citizens working abroad and members of a crew of an Indian ship or a PIO visiting India, where 60 days is replaced with 182 days.
- You are in India for 182 days or more during that financial year OR
- You are in India for 60 days or more during that financial year AND you are in India for at least 365 days during the 4 years preceding that financial year.
- It also varies with with age: Based on Age there are three categories, Ordinary(below 60 years),Senior Citizen(age between 60 years to 80 years), Super Senior Citzien(above 80 years). If an Individual attains the age of 60 years or 80 years during the financial year, his age shall be regarded as 60/80 (as the case may be), for that whole Financial Year. For the purpose of ascertainment of the applicable tax slab, For FY 2015-16 or AY 2016-17 an individual can be classified as follows:
- Ordinary: Resident individual below the age of 60 years. i.e. born on or after 1.4.1956
- Senior Citizen: Resident individual of the age of 60 years or above at any time during the year but below the age of 80 years. (i.e. born during 1-4-1936 to 3 1-3-1956)
- Super Senior Citzien(above 80 years) : Resident individual of the age of 80 years or above at any time during the year. i.e. born before 1.4.1936
- Non-resident individual irrespective of the age.
How to compute Income Tax
Steps involved in Computation of Income Tax are as follows. The tax calculator can be used to find your tax liability.
- Computation of total income.
- Subtract the exemptions of HRA, Conveyance and Medical expense from the gross salary.
- Add the extra income of interest, commission and bonuses, if any.
- Add the rental income, if any.
- Add the capital gains, if any.
- Add Interest from all Saving bank accounts. Subtract 10,000 from the sum.
- Add Income from other sources: Interest on FD, RD etc.
- Deducting valid deductions.
- Determination of the tax payable thereon.
- Deducting TDS. Verifying Tax already paid such as TDS deducted from Salary income, From FD.
- Paying the tax.
- Filling Income Tax Return Form
Image below shows the tax calculation for an employee with salary of 12 lakh for FY 2014-15 and FY 2015-16. By paying Medical Insurance of Rs 25,000 and Investing in NPS under 80CCD he is able to save around 15,000 Rs tax more.
Income Tax for Salaried Employee
An overview for income tax Salaried employee is given here. Money earned by working for someone or by receiving Pension after having worked for someone, comes under category of Income From Salary.
- Money that is received under Employer-Employee relationship is called as Salary. If one is freelancer or is hired by an organization on contract basis, their income would not be treated as salary income. In such case the income is treated as income from business and profession.
- The salary consists of Basic Salary, Allowances and Perquisite.
- Employer deducts TDS on the income every month.
- There are various Kinds of Allowances that one can get under the Head Salary some of which are exempt partially or fully. Some popular Allowances are House Rent Allowance or HRA, Conveyance allowance,Leave Travel Allowance.
- One can also claim benefit of Interest on Home Loan , Income Tax Deductions from Sec 80C to 80U. One needs to submit proof to the employer to claim these deductions.
- Proof of Income from Salary,TDS, Allowances and Deductions claimed is Form 16 and Form 12BA which is given by the employer sometime in May 2016 . You must verify Form 26AS.
Exemptions a salaried employee can claim
- HRA Exemption for Salaried Employees : House Rent Allowance or HRA is given by the employer to the employee to meet the expenses of rent of the accommodation which the employee has taken for his residential purpose. A portion of the House Rent Allowance is exempted from the levy of the Income Tax. To claim HRA exemption, If you are paying rent of more than Rs 8,333 per month you need to provide landlord’s PAN Landlords without a PAN must be willing to give you a declaration. If you pay house rent to your spouse, this does not qualify for exemption. But you can claim exemption on rent paid to others including parents, brother, sister in-laws etc. Our article HRA Exemption for Salaried Employees discusses it in detail.
- Leave Travel Allowance :Many employers also give allowance, called as Leave Travel Allowance, to their employees to go on a vacation in India with their family which is exempted from tax. Only the travel costs are covered so expenses on hotel rooms, sightseeing, food, etc, cannot be included. You can claim exemption for up to two journeys in a block of four calendar years. The new block started on January 1, 2014 and will end on December 31, 2017. This amount can only be claimed through the employer, if the employee actually goes on a vacation in India and bills for the same has to be furnished. Our article What is Leave Travel Allowance or LTA discusses it in detail.
- Medical Bills: You can claim income tax relief for your medical expense depending on whether the employer pays medical allowance or reimburses the bills. For the purpose of medical expenses a family is defined as the spouse and children of the employee. The employee’s parents and siblings of the employee can also be considered for such benefits but the condition is that they need to be completely dependent on the employee. Please claim these by submitting bills to your employer.
- Medical reimbursements are the actual amount that the employer’s gives to an employee when they submit bills for medical treatment availed. Medical reimbursements are exempt from taxes till the limit defined by the IT Act, which is Rs. 15,000.
- Medical Allowance: Many employers don’t provide reimbursements. They pay their employees a fixed amount, in their monthly salary, as medical allowance. This payment can be of Rs. 1,250 a month or Rs.15,000 a year. If the employee incurs medical expenses then the amount up to Rs 15,000 is exempt from taxes. . For example: An employee,whose company pays Medical allowance, suffers from Typhoid and is ill for a few weeks. His treatment and the medicines cost him Rs. 5,000. He retains all the bills relevant to his treatment and when he gets back to work he submits them to his company. In this case, since the medical allowance is already paid to him as a part of the salary, he will not have to claim the amount. He will instead get tax benefits for the Rs. 5,000 spent on the treatment. If he submits no other bills then the remaining Rs. 10,000 of the medical allowance will be liable for tax.
Investment Proof Submission to Employer
Please plan you tax liability at the beginning of financial year. Calculate how much tax you need to save under 80C and other sections like 80D for medical insurance premium. Don’t rush at last minute and buy Insurance policy just to save tax. Before Buying Insurance Policy to Save Income Tax Our article Income Tax Proof Submission to the Employer discusses it in detail.
- The employers asks employees for declaration of the their proposed investments for tax exemptions/deductions from employees in the beginning of the financial year (April itself) . Based on your declaration and the investments that qualify for deductions and exemptions, your employer deducts tax on your salary every month.
- E-filing : Excel File of Income Tax Return,
- By December or January employer asks for submission of the proofs for all proposed tax saving investments. If you submit proof to your employer for amount less that declared , employer will recompute your tax liability and deduct more tax in remaining months. If you submit proof to your employer for amount more than declared , employer will recompute your tax liability and deduct less tax in remaining months. If Your tax liability is not recomputed or somehow you still have extra tax paid you can claim it while filing income tax return.
- You can share your saving bank interest, FD/RD interest earned during year, any capital gains from shares or mutual fund, rental income and other kind of incomes with your employer, so that they get a complete picture of your taxable salary/Then your employer would recalculate your tax liability and also pay tax on your other investments like FD on your behalf. But if you don’t then you need to pay the tax due yourself through Challan 280 either as Advance Tax or Self Assessment Tax.
To calculate how much to save under 80C
80C has overall limit of 1.5 lakh. While calculating amount you need to save please consider your EPF contribution. If you have bought some life insurance policy, then you claim it too.
Amount you need to save : 1,50,000 – Employee EPF contribution – Tuition fees for two children – Principal of Home Loan – Life Insurance Premium -Stamp Duty , Registration charges of new House.
Income Tax on Leaving a Job
When a person switches the job in between the financial year i.e between 1 Apr 2015 to 31 Mar 2016, he would get two Form 16, one from previous employer and one from new employer. He might also get leaves encashed and Gratuity.
- Exemption on Encashment of Leaves for Salaried Employees : Most employers give all their employees a certain no. of days which can be claimed as leaves. However, in case a person does not claim these leaves, many employers also give their employees the option for en-cashing these leaves i.e. the employers pays extra to the employees for the leaves which were allowed to be taken but were not taken.This amount received as Leave Encashment is also allowed to be claimed as an exemption up to a certain extent. Our article Encashing Earned Leaves : Exemption and Tax covers it in detail.
- Income Tax Exemption on Gratuity for Salaried Employees : Gratuity is a gift made by the employer to his employee in appreciation of the past services rendered by the employee. Gratuity can either be received by The employee himself at the time of his retirement or leaving job a)after 5 years of working with the same employer or b) The legal heir at the time of the death of the employee. Our article What is Gratuity? covers it in great detail.
- Multiple Form 16: When you change job in a financial year you need to make sure that the deductions and exemptions regarding tax liability are made only once. Our article Changing Jobs and Tax, Form 12B talks about how basic exemption is accounted by two employers, correct way to calculate tax when one switches jobs, how Form 26AS will have multiple entries. It is better to give a copy of your full and final settlement from previous employer to new employer so that new employer can take care of tax liability and you have to refer to just one Form 16 while filing ITR. Else you will have to take care of it while filing ITR. Our article How to Fill ITR when you have multiple Form 16 talks about filling ITR with multiple Form 16.
- EPF: It is best if you submit your UAN number to your new Employer so that new Member ID is linked with it. And transfer your EPF account. If you withdraw before 5 years of contribution to EPF the withdrawal is taxed and you have reverse earlier 80C deductions.
A video (14 min) by bemoneyaware on Understanding what is income and Income slabs