In Respect of exemptions, deduction etc Income Tax imposes various threshold limit. Like in respsect of Tax Rates or in respect of deduction under section 80C, 80D, 80U etc. Some of the Popular Limits are Tax Rates , Conveyance Allowance, HRA, Home Loan Interest, Deduction Under Section 80C, Leave Encashment, Gratuity, Medical Reimbursement etc.
Income Tax Act Specifies Threshold Limits for Ascertainment of Basic Exemption , For Various Allowance Available Under the Head Salary Income, House Property Income, For allowability of Expenses against Business Income, Exemption Against Capital Gain, Calculation of Capital Gain, Deduction available under various section of Income Tax Act,1961, TDS deductible, For Filing of Appeal, For Imposition of Penalty and Prosecution etc.
In this article we have discussed section wise Various Threshold Limits under the Income Tax Act
Various Threshold Limits under the Income Tax Act [AY 2015-16]
S.N.
Particulars
Threshold Limits
A.
Basic Exemption
1.
Maximum amount of income which is not chargeable to Income-tax in case of Individual, HUF/ AOP/ BOI/ Artificial Juridical Person
Rs. 2,50,000
2.
Maximum amount of income which is not chargeable to Income-tax in the hands of a resident senior citizen (who is at least 60 Years of age at any time during the previous year but less than 80 Years of age on the last day of the previous year)
Rs. 3,00,000
3.
Maximum amount of income which is not chargeable to Income-tax in the hands of a resident super senior citizen
(who is at least 80 Years of age at any time during the previous year)
Rs. 5,00,000
4.
Surcharge shall be charged at the rate of 10% of income-tax if net income exceeds Rs. 1 Crore in case of Individual, HUF, AOP, BOI, Firms, Co-operative Societies, Local Authorities (Subject to Marginal relief)
Rs. 1 Crore
5.
Surcharge shall be charged at the rate of 5% of income-tax if net income exceeds Rs. 1 Crore and at the rate of 10% if net income exceeds Rs. 10 Crores in case of domestic company (Subject to Marginal relief)
Rs. 1 Crore / Rs. 10 Crore
6.
Surcharge shall be charged at the rate of 2% of income-tax if net income exceeds Rs. 1 Crore and at the rate of 5% if net income exceeds Rs. 10 Crores in case of foreign company (Subject to Marginal relief)
Rs. 1 Crore / Rs. 10 Crore
S.N.
Particulars
Section
Threshold Limits (for exemptions and others)
B.
Under the head Salaries
1.
Entertainment Allowance (Exempt in case of Government employee only)
16(ii)
Least of the following is exempt from tax:
a) Rs 5,000
b) 1/5th of salary (excluding any allowance, benefit or perquisite)
c) Actual entertainment allowance received
2.
Encashment of unutilized earned leave at the time of retirement by an employee (other than Government employee)(Subject to certain conditions)
10(10AA)
Least of the following shall be exempt from tax:
a) Amount actually received
b) Unutilized earned leave** X Average monthly salary
c) 10 months Average Salary**
d) Rs. 3,00,000
*While computing unutilized earned leave, earned leave entitlements cannot exceed 30 days for each year of service rendered to the current employer
**Average salary = Average Salary*** of last 10 months immediately preceding the retirement
***Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission
3.
Retrenchment Compensation received by a workman under the Industrial Dispute Act, 1947 (Subject to certain conditions).
10(10B)
Least of the following shall be exempt from tax:
a) an amount calculated as per 10(10B)of the Industrial Disputes Act, 1947;
b) Rs. 5,00,000; or
c) Amount actually received.
4.
Death -cum-Retirement Gratuity received by other employees who are covered under Gratuity Act, 1972 (other than Government employee) (Subject to certain conditions).
10(10)
Least of following amount is exempt from tax:
1. (*15/26) X Last drawn salary** X completed year of service or part thereof in excess of 6 months.
2. Rs. 10,00,000
3. Gratuity actually received.
*7 days in case of employee of seasonal establishment.
** Salary = Last drawn salary including DA but excluding any bonus, commission, HRA, overtime and any other allowance, benefits or perquisite
5.
Death -cum-Retirement Gratuity received by other employees who are not covered under Gratuity Act, 1972 (other than Government employee)(Subject to certain conditions).
10(10)
Least of following amount is exempt from tax:
1. 1/2 X Average Salary* X Completed years of service
2. Rs. 10,00,000
3. Gratuity actually received.
*Average salary = Average Salary of last 10 months immediately preceding the month of retirement
**Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission
6.
Amount received on Voluntary Retirement or Voluntary Separation (Subject to certain conditions
10(10C)
Least of the following is exempt from tax:
1) Actual amount received as per the guidelines i.e. least of the following
(a) 3 months salary for each completed year of services
(b) Salary at the time of retirement X No. of months of services left for retirement; or
2) Rs. 5,00,000
7.
Children Education Allowance
10(14)
Up to Rs. 100 per month per child up to a maximum of 2 children.
8.
Hostel Expenditure Allowance
10(14)
Up to Rs. 300 per month per child up to a maximum of 2 children.
9.
Transport Allowance granted to an employee to meet expenditure on commuting between place of residence and place of duty
10(14)
Up to Rs. 800 per month (Rs. 1,600 per month for blind and handicapped employees)
10.
Medical Reimbursement
17(2)proviso
Up to Rs. 15,000 in aggregate in a year
11.
Transport Allowance to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance.
Sec. 10(14)read withRule 2BB
Amount of exemption shall be lower of following:
a) 70% of such allowance; or
b) Rs. 10,000 per month.
12.
Allowances to Retired Chairman/Members of UPSC (Subject to certain conditions)
10(45)
Up to Rs.14,000 per month for defraying the service of an orderly and for meeting expenses incurred to wards secretarial assistance an contract basis.
13.
Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month.
14.
Border area, Remote Locality or Disturbed Area or Difficult Area Allowance (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Amount exempt from tax varies from Rs. 200 to Rs. 1,300 per month.
15.
Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa
Sec. 10(14)read withRule 2BB
Up to Rs. 200 per month
16.
Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Up to Rs. 2,600 per month
17.
Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Up to Rs. 1,000 per month
18.
Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Up to Rs. 3,900 per month
19.
Underground Allowance to employees working in uncongenial, unnatural climate in underground mines (Subject to certain conditions)
Sec. 10(14)read withRule 2BB
Up to Rs. 800 per month
20.
High Altitude Allowance granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)
b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)
21.
Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Up to Rs. 4,200 per month
22.
Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations)
Sec. 10(14)read withRule 2BB
Up to Rs. 3,250 per month
23.
Tax on contribution to an approved superannuation fund by the employer in respect of the employee
17(2)(vii)
To the extent it exceeds Rs.1,00,000 per year (not taxable if employer’s contribution is Rs. 1 lakh or less per year)
24.
Expense incurred by employer on providing educational facility to the children of the employee shall be exempt in the hands of an employee
Rule 3
Up to Rs.1,000 per month per child
25.
Interest on loan received from employer at concessional rate of interest couldn’t be taxed as perquisite in the hands of the employee
Rule 3
If aggregate amount of such loan during the relevant previous year does not exceed Rs.20,000
26.
Free meal provided to employees during office hours by the employer couldn’t be taxed as perquisite in the hands of the employees
Rule 3
If cost of such meal does not exceed Rs.50 per meal
27.
Value of any gift received by the employee or by member of his household from employer is exempt in the hands of the employee
Rule 3
Up to the extent of Rs.5,000 if received in kind
C.
Under the head Income from House Property
1.
Standard deductions
24(a)
30% of annual value
2.
Interest incurred on borrowed capital for construction/ acquisition of self-occupied house property (Subject to certain conditions)
24(b)
Up to Rs. 2,00,000
3.
Interest incurred on borrowed capital for re-construction, repair or renewal of self-occupied house property (Subject to certain conditions)
24(b)
Up to Rs. 30,000
D.
Under the head Profits and Gains of Business or Profession
1.
Deduction under section 32AC is available if actual cost of new plant and machinery acquired and installed by a manufacturing company after 31-03-2013 but before 01-04-2015 exceeds Rs. 25/100 Crores, as the case may be (Subject to certain conditions).
32AC
15% of actual cost of new asset acquired and installed (if it exceeds Rs. 25 Crores/100 Crores, as the case may be)
2.
The agricultural extension project shall be considered for approval under section 35CCC if expenditure (not being expenditure in the nature of cost of any land or building) expected to be incurred on such project exceeds the threshold limit (Subject to certain conditions)
Rule 6AADread withsection 35CCC
Rs. 25,00,000
3.
Compulsory maintenance of prescribed books of account – Specified Profession (Subject to certain conditions and circumstances)
44AA
Persons carrying on specified profession and their gross receipts exceed Rs. 1,50,000 in all the three years immediately preceding the previous year
4.
Compulsory maintenance of books of account – Other business or profession
(Subject to certain conditions and circumstances)
44AA
1) If total sales, turnover or gross receipts exceeds Rs. 10,00,000 in any one of the three years immediately preceding the previous year; or
2) If income from business or profession exceeds Rs. 1,20,000 in any one of the three years immediately preceding the previous year
5.
Compulsory Audit of books of accounts (Subject to certain conditions and circumstances)
44AB
1) If total sales, turnover or gross receipts exceeds Rs. 1 Crore in any previous year, in case of business; or
2) If gross receipts exceeds Rs. 25 Lakhs in any previous year, in case of profession.
6.
Limit on payments in cash for expenses/ liability (Subject to certain conditions and exceptions)
40A(3)
1) Rs. 20,000 (total payment to a person in a day)
2) Rs. 35,000 (total payment to a person in a day) for payments made for plying, hiring or leasing of goods carriage.
7.
Computation of income from eligible business on presumptive basis under Section 44AD (Subject to certain conditions).
44AD
Presumptive income of eligible business shall be 8 % of gross receipt or total turnover (if turnover of eligible business does not exceed Rs. 1 crore).
8.
Presumptive income of business of plying, hiring or leasing of goods carriage if taxpayer does not own more than 10 goods carriage (Subject to certain conditions)
44AE
Rs. 7,500 for every month during which the goods carriage is owned by the taxpayer
9.
Alternate Minimum Tax (in case of Individual, HUF, AOP or BOI)
(Subject to certain conditions)
115JC
18.5% of adjusted total income (plus surcharge and education cess) provided adjusted total income exceeds Rs. 20,00,000.
10.
Applicability of Domestic Transfer Pricing, if aggregate value of transactions with associated enterprises during the previous year exceeds the threshold limit
92BA
Rs. 5 Crores
11.
Every person who has entered into an international transaction or a specified domestic transaction shall keep and maintain the specified information and documents
Rule 10Dread withsection 92D
If aggregate value, as recorded in the books of account, of international transactions entered into by him exceeds Rs.1,00,00,000
E.
Under the head Income from Capital Gains
1.
Limit on investment made by an assessee in bonds of NHAI or REC etc., from long term capital gains arising from transfer of one or more original assets during the financial year, for claiming exemption (Subject to certain conditions)
54EC
Rs. 50,00,000 during the financial year in which original asset is transferred and in subsequent financial year
F.
Under the head Income from Other Sources
1.
Gifts without consideration/ inadequate consideration from non-relatives (Subject to certain conditions)
56
Gift up to Rs. 50,000 is not chargeable to tax
2.
Standard Deduction for family pension
57(iia)
33.33% of Family Pension subject to maximum of Rs. 15,000
G.
Trust
1.
Activity for advancement of any other object of general public utility shall be considered as charitable activity
2(15)
If the aggregate value of the receipts from such activities does not exceed Rs. 25,00,000
2.
Anonymous donation to be taxed at the rate of 30%
115BBC
To the extent it exceeds 5% of total donations received by assessee or Rs.1,00,000, whichever is higher
3.
Annual receipts should not exceed the threshold limit for the purposes of claiming exemption under section 10(23C)(iiiad)/(iiiae)
Rule 2BC
Rs.1 Crore
4.
Maximum amount which an electoral trust can spend for managing its affairs
Rule 17CA
5% of the total contributions received in a year subject to an aggregate limit of Rs. 5,00,000 in the first year of incorporation and Rs.3,00,000 in subsequent year
H.
Deductions under Chapter VI-A
1.
Deduction to an individual and HUF for amount invested in following ways:
1. Life insurance premium for policy:
a) in case of individual, on life of assessee, assessee’s spouse and any child of assessee
b) in case of HUF, on life of any member of the HUF
2. Sum paid under a contract for a deferred annuity:
a) in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity)
3. Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary]
4. Contributions by an individual made under Employees’ Provident Fund Scheme
5. Contribution to Public Provident Fund Account in the name of:
a) in case of individual, such individual or his spouse or any child of such individual
b) in case of HUF, any member thereof
6. Contribution by an employee to a recognized provident fund
7. Contribution by an employee to an approved superannuation fund
8. Subscription to any notified security or notified deposit scheme of the Central Government
9. Subscription to notified savings certificates[National Savings Certificates(VIII Issue)]
10. Contribution for participation in unit-linked Insurance Plan of UTI:
a) in case of an individual, in the name of the individual, his spouse or any child of such individual
b) in case of a HUF, in the name of any member thereof
11. Contribution to notified unit-linked insurance plan of LIC Mutual Fund:
a) in the case of an individual, in the name of the individual, his spouse or any child of such individual
b) in the case of a HUF, in the name of any member thereof
12. Subscription to notified deposit scheme or notified pension fund setup by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]
13. Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children
14. Certain payments for purchase/construction of residential house property
15. Subscription to notified schemes of(a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/(b)authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both
16. Sum paid towards notified annuity plan of LIC or other insurer
17. Subscription to any units of any notified [u/s10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005)
18. Contribution by an individual to any pension fund set up by any mutual fund which is referred to insection 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund)
19. Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions
20. Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above.
21. Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme framed and notified.
22. Subscription to notified bonds issued by the NABARD.
23. Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions)
24. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions)
80C
Up to 1,50,000 (Subject to overall limit of Rs. 1,50,000 under Section 80C, 80CCCand 80CCD)
2.
Contribution to certain specified Pension Funds of LIC/other insurer by an Individual (Subject to certain conditions).
80CCC
Up to 1,00,000 (Subject to overall limit of Rs. 1,50,000 under Section 80C, 80CCCand 80CCD)
3.
Contribution to Pension Scheme (NPS) notified by the Central Government by an Individual (Subject to certain conditions).
80CCD
10% of salary/ gross total income[i] or Rs. 1,00,000[ii], whichever is less (Subject to overall limit of Rs. 1,50,000 under Section 80C, 80CCCand 80CCD)
4.
Amount invested by specified resident individuals, whose gross total income does not exceed Rs. 12 lakhs, in listed shares or listed units in accordance with notified scheme for a lock-in period of 3 years (Subject to certain conditions).
80CCG
Deduction of 50 % of total investment subject to maximum of Rs. 25,000 in 3 consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed shares or list units of equity oriented funds are first acquired
5.
Medical insurance premium paid by any mode other than cash to LIC or any other insurer by an Individual or HUF (Subject to certain conditions).
Notes:
• Deduction is available in respect of any payment made by an assessee on account of preventive health check-up of self, spouse, dependent children or parent during the previous year up to a limit of five thousand rupees within the existing prescribed limits
• The age for defining a senior citizen is reduced from sixty five years to sixty
Payment on account of preventive health check-up may be made in cash.
80D
1. In case of individuals, premium paid:
a) for self, spouse and dependent children: Rs. 15,000 (Rs. 20,000 if person insured is a senior citizen);and
b) for parents of the assessee: (Additional) Rs. 15,000 (Rs. 20,000 if person insured is a senior citizen)
2. In case of HUF, premium up to Rs.15,000 (Rs. 20,000 if person insured is a senior citizen) paid to insure any member of the family.
6.
Deduction allowed to resident Individual and HUF for:
a) Any expenditure incurred for the medical treatment (including nursing), training and rehabilitation of a dependent, being a person with disability
b) Any amount paid or deposited under an approved scheme framed in this behalf by the LIC or any other insurer or the Administrator or the specified company [as referred to in UTI (Transfer of Undertaking & Repeal) Act, 2002] for the maintenance of a dependent, being a person with disability
(Subject to certain conditions).
80DD
Rs. 50,000 (Rs. 1,00,000 in case of severe disability)
7.
Expenses actually paid by resident individual and HUF for medical treatment of specified diseases and ailments of:
a) In case of Individual: Assessee himself or wholly dependent spouse, children, parents, brothers and sisters
b) In case of HUF: Any member of the family who is wholly dependent upon the family
(Subject to certain conditions).
80DDB
Up to Rs. 40,000 (Rs. 60,000 in case of senior citizen)
8.
Interest payable on loan taken up to Rs. 25 lakhs by an individual taxpayer from any financial institution for the purpose of acquisition of a residential house property whose value does not exceed Rs. 40 lakhs (Subject to certain conditions).
[This deduction will be allowed only during Assessment Year 2014-15 and 2015-16]
80EE
One time deduction of up to Rs.1,00,000 towards interest on loan.
9.
Rent paid by an individual for furnished/unfurnished residential accommodation if he is not receiving any HRA (Subject to certain conditions)
80GG
Least of the following shall be exempt from tax:
a) Rent paid in excess of 10% of total income*;
b) 25% of the Total Income; or
c) Rs. 2,000 per month.
Total Income = Gross total income minus capital gains, short term capital gains undersection 111A, deductions under section 80C to 80U(other than 80GG) and income under section 115A
10.
Deduction in respect of certain donations for scientific, social or statistical research or rural development programme or for carrying out an eligible project or National Urban Poverty Eradication Fund shall be allowed (Subject to certain conditions)
80GGA
100% of donations or contributions made.
No deduction shall be allowed if contribution is paid in cash in excess of Rs.10,000
11.
Royalty income of resident individual – authors of certain specified category of books other than text books
80QQB
Least of the following shall be exempt from tax:
a) In case of Lump sum payment – Amount of royalty income subject to maximum of Rs. 3,00,000
b) In other cases – amount of such income subject to maximum of 15% of value of books sold during the previous year.
12.
Royalty in respect of patents registered on or after 01.04.2003 earned by resident individual (subject to certain conditions)
80RRB
100% of royalty subject to maximum of Rs. 3,00,000
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