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How do the Changes in Income Tax Slabs and Deductions in 2014-15 Affect You?





Income tax slabs for the financial year 2013-14 for an Indian citizen below 60 years of age

Annual Income Tax Rate
0- INR 2 Lakhs NIL
INR 2 Lakhs-INR 5 Lakhs 10%
INR 5 Lakhs - INR 10 Lakhs 20%
INR 10 Lakhs and above 30%

Mr Diwakar aged 36 years married and working in an IT firm earns INR 8 Lakhs per annum. He makes use of the Section 80 C deductions of INR 1 Lakh and pays INR 50000 per annum as premium on his endowment life insurance policy. This amount is tax deductible when calculating income taxes under Section 80 C of the income tax act. If you want to learn more on Section 80 C of the income tax act please read He also invests INR 50000 per annum in a public provident fund (PPF). This amount is tax deductible when calculating income taxes under Section 80 C.

Mr Diwakar has a family floater health insurance plan for himself and his wife and he claims a deduction of INR 15000 per annum on the health premium paid under Section 80 D of the income tax act. A deduction of INR 20000 is also claimed on the premium paid for the health insurance policy of his parents who are senior citizens over 60 years of age under Section 80 D. The total income tax deductions claimed by Mr Diwakar under Section 80 D of the income tax act is INR 35000.

Table 1

Heads Amount
Gross taxable salary INR 800000 (A)
Less : Premium on the life insurance policy under Section 80 C INR 50000 (B)
Less : Amount invested in the PPF under Section 80 C INR 50000 (C)
Less : Tax deductions under Section 80 D INR 35000 (D)
Total taxable income INR 665000(A) – (B+C+D)

Mr Diwakar’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 200000 Nil Nil
INR 200001– INR 500000
Income tax is paid on
INR 3 Lakhs.
(INR 500000 – INR 200000)
10% INR 30000 (A)
INR 500001– INR 665000
Income tax is paid on
INR 1.65 Lakhs
(INR 665000– INR 500000)
20% INR 33000 (B)
Total tax INR 63000 (A+B)
Education cess @ 3 % 3% of INR 63000 INR 1890 (C)
Net tax payable INR 64890 (A+B+C)

Mr Diwakar pays an income tax of INR 64890 on his salary after availing deductions under Section 80 C and Section 80 D of the income tax act.

Income tax slabs changed under the Union Budget 2014-15

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

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%

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.
  • PPF (Public Provident Fund) deposit ceiling (Maximum amount that can be deposited per year) has been raised to INR 1.5 lakh from the existing INR 1 lakh.

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

  • There are no changes in the salary Mr Diwakar earns in the financial year 2014-15.He continues to earn INR 8 Lakhs per annum.
  • Mr Diwakar now increases his investments in the PPF (Public Provident Fund) from INR 50000 to INR 1 Lakh.
  • He continues to pay a premium of INR 50000 on the endowment life insurance policy and avails a deduction under Section 80 C of the income tax act.
  • The total deduction Mr Diwakar now avails is INR 1.5 Lakhs under the Section 80 C of the income tax act as this section is now raised to INR 1.5 Lakhs.
  • The total income tax deductions claimed by Mr Diwakar under Section 80 D of the income tax act is INR 35000 just as before. There are no changes here.

Table 3

Heads Amount
Gross taxable salary INR 800000 (A)
Less : Premium on the life insurance policy under Section 80 C INR 50000 (B)
Less : Amount invested in the PPF under Section 80 C INR 100000 (C)
Less : Tax deductions under Section 80 D INR 35000 (D)
Total taxable income INR 615000 (A) – (B+C+D)

Mr Diwakar’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 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 615000
Income tax is paid on
INR 1.15 Lakhs
(INR 615000– INR 500000)
20% INR 23000 (B)
Total tax INR 48000 (A+B)
Education cess @ 3% 3% of INR 48000 INR 1440 (C)
Net tax payable INR 49440 (A+B+C)

Conclusion :

  • Mr Diwakar paid an income tax of INR 64890 in the financial year 2013-14 (Table 2).
  • Mr Diwakar now pays INR 49440 as income tax liability in the financial year 2014-15 (Table 4).
  • Mr Diwakar saves INR 15450 (Difference between INR 64890- INR 49440) due to the change in the income tax laws in the new Union Budget 2014-15.
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