ASSESSMENT YEAR 2005-2006
RELEVANT TO FINANCIAL YEAR 2004-2005
Tax Rates for Individuals:
Upto 50,000 - NIL
50,000 to 60,000 - 10% of the amt exceeding 50,000
60,000 to 1,50,000 - Rs.1000 + 20% of the amt exceeding 60,000
1,50,000 & above - Rs.19000+ 30% of the amt exceeding 1,5,0000
Surcharge on income-tax:
In the case of every Individual, Hindu undivided family, Association of person and body of individuals, Surcharge on income-tax is calculated @10% if the total taxable income exceeds Rs.8,50,000. The Surcharge is calculated on the net tax. (Tax as reduced by rebate u/s.88, 88B, 88C & 88D but before giving relief u/s.89(1).
Education Cess:
The amount of Income-tax and Surcharge shall be further increased by Education Cess of 2% on Income-tax plus Surcharge.

EXEMPTIONS / DEDUCTIONS FROM SALARY:

1) Standard Deduction:
a) Rs.30,000 or 40% of Salary whichever is less for Gross Salary Rs.5,00,000 or below.
b) Rs.20,000 for Gross Salary exceeding Rs.5,00,000 .

2) House Rent Allowance Exempt u/s. 10 (13A)
a) Actual HRA received                                   : Rs. xxxx
b) Rent paid in excess of 10% of Salary        : Rs. xxxx
c) 50% of Salary in Metro Cities or
    40% of Salary in other Cities                     : Rs. xxxx
Least of a), b), c) is excempt
Note: Here Salary means Basic Salary as well as DA if the terms of employment so provide.
3) Conveyance Allowance:
Any allowance granted to meet the expenditure incurred wholly, necessarily and exclusively on conveyance in performance of the duties of office and so certified by the employer is exempt u/s.10(14).
4) Transport Allowance:
Any allowance granted to an employee to meet the expenditure for the purpose of commuting between the place of his residence and the place of his duty to the extent upto Rs.800/- per month is exempt u/s.10(14).
5) Medical Reimbursement:
An amount of Rs.15,000 or the actual amount reimbursed by the employer whichever is less is exempt u/s.17(2)(v).

DEDUCTIONS FROM HOUSE PROPERTY:

1) Deduction u/s.24(a):
For let out property, deduction of 30% of the Net Annual Value is allowed. No separate deduction for Repairs, Collection Charges, Insurance Premium, Annual Charge and Ground Rent.
2)INTEREST ON BORROWED LOAN(U/S.24(b)):

FOR SELF OCCUPIED PROPERTY
a) If Property is acquired or constructed with loan taken after 01/04/99 and construction is completed within 3 years from date of loan – Rs.1,50,000 or actual whichever is less is deductible.
b) If new housing loan is taken for repayment of old loan (old loan taken after 1/4/99) – Rs.1,50,000 or actual interest payable whichever is less is allowed as deduction.
c) If Property is acquired or constructed with loan taken before 01/04/99, Rs.30,000 or actual interest payable whichever is less is allowed as deduction.
d) If loan taken for Repairs, renewal, reconstruction of property, Rs.30,000 or actual interest payable which ever is less is allowed as deduction.
FOR LET OUT PROPERTY, interest paid/payable can be claimed as deduction.

EXEMPTION FROM CAPITAL GAINS:

Exemption u/s.54 EC
The Capital Gain arising out of sale of long term capital asset can be invested in National Bank for Agriculture and Rural Development, National Highways Authority of India, Rural Electrification Corporation Limited, National Housing Bank or Small Industries Development Bank of India within six months from the date of sale. (Lock-in period is 3 years)
The Cost Inflation Index for the Financial Year 2004-05 is 480
Standard Deduction For Family Pension u/s.57(iia):
An amount of Rs.15,000 or 331/3% of family pension whichever is less is allowed as deduction. If an assessee receives arrears of family pension, then Relief u/s.89(1) can be claimed by him.
Family Pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces(including para-military forces) of the union, where the death of such member has occurred in the course of operation is exempt.

DEDUCTIONS FROM GROSS TOTAL INCOME (CHAPTER VIA):

Deduction u/s.80 D:
Any sum paid by cheque to keep in force an insurance on health of the assessee or his dependants in accordance with the scheme framed by the General Insurance Corporation of India or any other insurer and approved by the Insurance Regulatory and Development Authority, upto Rs.10,000 is allowed as deduction. Where the premium is paid in respect of a Senior Citizen, the permissible deduction will be Rs.15,000.
Deduction u/s.80DD:
The amount a) of expenditure incurred by way of medical treatment, training and rehabilitation of a handicapped dependant or b) paid or deposited under any scheme framed in this behalf by the LIC or UTI or any other insurer and approved by the Board for the maintenance of the handicapped dependant, shall be allowed as a deduction up to Rs.50,000 either under (a) or (b) or aggregate of (a) & (b) on the production of a certificate from the Government hospital in the prescribed form and manner, along with the return of income u/s.139 in respect of the assessment year for which the deduction is claimed. Where such dependant is a person with severe disability, a deduction of Rs.75,000 can be claimed.
Deductioin u/s.80 DDB:
If any amount is actually paid for the medical treatment of specified diseases or ailments of the assessee or his dependants, then, a deduction of the amount actually paid or Rs.40,000 whichever is less is allowable on the production of a certificate in Form No.10-I, issued by a Neurologist, an Oncologist, a Urologist, a Hematologist, an Immunologist or such other specialist as may be prescribed, working in a Government Hospital, while filing the Return of Income. If the expenditure is incurred in respect of Senior Citizen, the limit of deduction is Rs.60,000. The deduction shall be reduced by the amount received, if any, under any insurance.
Deductioin u/s.80 E:
Applicable to Individuals only. Any amount paid by the assessee in the previous year out of his income chargeable to tax by way of repayment of loan, taken by him from any financial/approved Charitable Institution for the purpose of pursuing his higher education or interest on such loan is eligible for a deduction not exceeding Rs.40,000.
Deduction u/s.80 GG:
An assessee not in receipt of HRA incurs any expenditure on rent, is allowed a deduction of least of the following :
a) Rent paid in excess of 10% of the total income
b) 25% of the total income
c) Rs.2,000 per month
Note: Total Income means Total Income before allowing deduction under this section.
The above deduction is allowable only if the assessee or spouse or minor child does not own a house in the place of employment/business. To claim such a deduction, the assessee should file a declaration in Form No.10BA.
Deduction u/s.80L:
Applicable to Individual and HUF. A deduction of up to Rs.12,000 is available in respect of certain interest incomes, Post office MIS etc. An additional deduction of Rs. 3000/- is available if income includes interest on Government Securities.
Any income by way of Dividends from company, Income received in respect of units from the Unit Trust of India, Income received in respect of the units of a mutual fund are exempt.

Deduction u/s.80 U:
Any assessee suffering from a permanent physical disability (including blindness) or is subject to mental retardation, on the production of medical certificate from Government Hospital in the prescribed form and manner, along with a Return of Income, shall be allowed a deduction of Rs.50,000. Where such assessee is a person with severe disability, a deduction of Rs.75,000 can be claimed.

REBATES DEDUCTIBLE FROM GROSS TAX (CHAPTER VIII A):

Rebate u/s.88 Applicable For Individual & HUF:
The qualifying amount for calculation of Rebate to be deducted from gross tax is Rs.70,000 comprising of contributions toward PF, PPF, LIC Premium, NSC, Repayment towards Principal on Housing loan upto Rs.20,000, Tuition fees of Rs.12,000 per child to the maximum of two children etc. An additional amount of Rs.30,000 is available when such sum is invested in specified investments.

a) Gross Total Income less than or equal to Rs.1,50,000/-, a Rebate of 20% of qualifying amount.
b) Gross Total Income more than Rs.1,50,000/- and less than or equal to Rs.5,00,000/-, a Rebate of 15% of qualifying amount.
c) Gross Total Income exceeds more than Rs.5,00,000/-, Rebate is NIL

* Gross Total Income means Income before giving effect to deduction under Chapter VIA.
Rebate u/s. 88B for Senior Citizens:
For a resident individual who has attained the age of 65 years or more, at any time during the previous year is entitled to a deduction of 100% of the income-tax or Rs.20,000 whichever is less from the tax payable.
Rebate u/s. 88C for women below the age of 65years
A resident woman individual below the age of 65 years is entitled to a deduction of Rs.5,000 or actual tax payable whichever is less from the tax payable.
Rebate u/s. 88D:
A resident individual whose total income does not exceed Rs.1,00,000 before allowing any other Rebate is eligible for Rebate of 100% of Income-tax. However, where the total income exceeds Rs.1,00,000, Rebate u/s.88D will be available as calculated under if total income is below Rs.111,250.

A) Calculate tax on Total Income before Rebate
B) Calculate the difference between total income and Rs.1,00,000
C) Rebate u/s.88D = A - B
Penalty u/s.271F:
If a person who is required to furnish a return of income as required under section 139(1) or by the proviso to sub-section, fails to furnish such return before the end of the relevant assessment year, shall be liable to pay by way of penalty a sum of Rs.5,000.
Interest u/s.234A:
Where the return of Income of any assessment year u/s.139(1) or 139(4) or in response to a notice u/s.142(1), is furnished after the due date as specified in sub-section 1 of section 139, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one percent for every month or part of a month comprised in the period commencing on the date immediately following the due date.
Interest u/s.234B:
Where an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one percent for every month or part of a month comprised in the period from the 1st day of April following the financial year.
Interest u/s.234C:
Where an assessee other than a Company, who is liable to pay advance tax under section 208 has failed to pay such tax or,
1) The advance tax paid by the assessee on his current income on or before the 15th day of September is less than 30% of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than 60% of the tax due on the returned income, then, the assessee shall be iable to pay simple interest at the rate of one percent per month for a period of three months on the amount of the shortfall from 30% or, as the case may be, 60% of the tax due on the returned income.

2) The advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one percent on the amount of the shortfall from the tax due on the returned income.

Due Dates for Filing Return of Income:
All Individuals/HUF/Firms deriving Income from Salary, House Property, Capital Gains, Business or Other Sources and not covered under section 44AB are required to file the Return of Income by 31st July. All Tax Audit Cases covered under section 44AB, Company returns and persons satisfying any one of the Six Economic Criteria (2C) are required to file the Return of Income by 31st October.

Permanent Account Number:
Every assessee is required to obtain 10 Alpha numeric Permanent Account Number (PAN) and quote the same in his returns, challans & correspondence. PAN can be obtained by applying in new Form No.49A at the designated Service Centres of UTIISL OR NSDL(Log on to our website). PAN is essential for processing the Return of Income and for giving credit for taxes paid. If a person who is required to quote his Permanent Account Number fails to do so or intimates false number, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of Rs.10,000.

Tax Payments:
Advance tax payments and Self-assessment tax payments have to be made in Challan No.280. Please obtain counterfoil of challan containing Challan Identification Number (CIN) from the Bank and enclose copy of the same with the return or quote CIN in the return.

This brochure should not be construed as an exhaustive statement of law. In case of doubt, reference should always be made to the relevant provisions of Income Tax Act, Rules or Notifications.

For further information, please contact:

The Public Relations Officer
Income-tax Department, C.R.Building, Queen's Road,
Bangalore-560 001. e-mail : itpro@bgl.vsnl.net.in
Website : www.incometaxbangalore.in