Income Tax - Some Common Rules & Regulations

In the last post I posted a spreadsheet to calculate Personal Income Tax fr FY 2009-10. To add to the same I am posting some useful Information & Rules on Income Tax which would help you to further understand the intricasies of taxes.

HRA Exemption = Least of

40% (50% for metros) of Basic + DA or

HRA Receive or

Rent paid (-)10% of Basic

Some Exempted Receipts/allowances are

Medical Reimbursement (Max Rs.15000/- Per annum)

L.T.A (as per Rule)

Leave Encashment/Leave Salary

Vehicle Maintenance allowance

Entertainment allowance

Academic Allowance
Uniform Allowance

Children Education Allowance (Rs.100/ month per Child (Rs.300 for Hostel Expenditure) Max of 2 Children)

Newspaper Allowance etc.

All incomes are fully taxable except in following cases

Agricultural Income

Withdrawal/Maturity received from PF, PPF, Insurance Co.

Long Term Capital Gain

Dividend on shares in companies

Interest on Post Office & PPF A/C

Transport allowance is exempt up to Rs.800/- per month provided the person is in India during the month. For people having permanent physical disability, the exemption is Rs.1,600/- per month

Vehicle maintenance exemption can be claimed if you use a car for travel to the workplace. In such case, exemption can be claimed for the petrol and vehicle maintenance amounts. The exemption is available to the tune of Rs.1,200/- per month if the engine capacity is less than 1600cc and Rs.1,600/- per month if the engine capacity is more than 1600cc. In case the amount includes driver's salary, there is an additional exemption of Rs.600/- per month. When this exemption is claimed, transport allowance exemption is not available.

Medical bills are exempt for self and dependent family, up to Rs.15,000/- per annum

LTA is exempt to the tune of ecomony class Train/ Air /Recognized public Transport fare for the family to any destination in India, by the shortest route.

LTA can be claimed twice in a block of 4 calendar years. The current block is from 01.01.2006 to 31.12.2009. For claim, it is must to provide originals tickets etc.

u/s 24 There is an Exemption for interest on housing loan.(for Self occupied Residence). If the loan was taken before Apr 1, 1999 exemption is limited to Rs.30,000/- per year. If the loan was taken after Apr 1, 1999 exemption is limited to Rs.1,50,000/- per year if the house is self-occupied; There is no limit if the house is rented out

This exemption is available on accrual basis, which means if interest has accrued, you can claim exemption, irrespective of whether you've paid it or not.

If you have rented out your house, enter the total income/loss from the house (after deducting property tax and standard maintenance expenses).

u/s 80D Medical Insurance (such as Mediclaim & Critical illness Cover) premium is exempt upto (Rs 10,000/- for 2006-07) Rs.15,000/- (for 2007-08) per year. If the premium includes that for a dependent who is above 65 years of age, an extra Rs.5000/- can be claimed ( for 2007-08 ) & Rs.15,000/- (for 2007-08 ) per year.

u/s 80DD Deduction in respect of medical treatment of handicapped dependents is limited to Rs.50,000/- per year if the disability is less than 80% and Rs.75,000/- per year if the disability is more than 80%

80DDB Deduction in respect of medical treatment for specified ailments or diseases for the assesse or dependent can be claimed upto Rs.40,000/- per year. If the person being treated is a senior citizen, the exemption can go up to Rs.60,000/-

u/s 80E Interest repayment on education loan (taken for higher education from a university of self & dependents) is completely tax exempt

u/s 80G Donations given for certain charities are tax exempt. Some are exempt to the tune of 50%, whereas others are 100%.

u/s 80GG If you do not get HRA, but have rented a house, an exemption is available. This will be calculated as minimum of (25% of total income or rent paid - 10% of total income or Rs.24,000/- per year)

u/s 80U If you have a permanent physical disability (including blindness), you can take an exemption (subject to maximum of Rs.75,000/- per year)

u/s 80C Investments up to 1 lac in PF, VPF, PPF, Insurance Premium, Housing loan principal repayment, NSC, ELSS, etc. are deductible from the total income (there is no limit on individual items, for example 1 lac can be invested in Insurance, )