How you will save more Income Tax compared to last year due to Budget 2014 (Download Calculator)

POSTED BY manish ON July 11, 2014 COMMENTS (90)

Budget 2014 was a big event this year as the expectations from BJP govt was very high. Here are some of the income tax rules which were changed int his budget and impact a common man directly.

1. Income Tax Exemption Increased from 2 lacs to 2.5 lacs

The basic exemption limit was raised by Rs 50,000 in this budget and now the new limit is Rs 2.5 lacs . So there is no tax to be paid upto income of Rs 2.5 lacs. For senior citizens, the new limit will be Rs 3 lacs. So the new tax slabs looks something like this

new income tax slab 2014 2015

3% education cess is extra on income tax
2. 80C limit raised from 1 lacs to 1.5 lacs

This was a big relief for most of the people, as the old limit of Rs 1 lac in 80C was not enough for most of the people. There are too many things like EPF, PPF, Home Loan Principle amount, tuition fees, Life Insurance Premium, Tax Saving Mutual Funds and Tax saving FD and many more things, which gets 80C exemption.

Now with this exemption increase to 1.5 lacs, more motivation will be there for people to utilize this 80C limit. So if a person earns Rs 4 lacs, he/she can invest upto Rs 1.5 lacs in 80C, which lowers the taxable income to 2.5 lacs , which does not attract any income tax. So in best case, a person do not have to pay income tax upto Rs 4 lacs income with help of 80C investments done.

3. PPF limit raised from 1 lacs to 1.5 lacs

The limit for PPF investments was increase from 1 lacs to 1.5 lacs. This is going to be a great news for PPF fans and especially those who are investing in PPF in their children names, as the overall limit would increase for their family.

4. Home Loan Interest exemption raised from 1.5 lacs to 2 lacs

This was again a big relief for salaried class, as a lot of people who have taken home loan pay much more than 1.5 lacs of interest per year. With the increase of limit from 1.5 lacs to 2 lacs, the extra saving is of tax on Rs 50,000 , which turns out to be around Rs 15,000 for those who are in 30% tax slab. Note that this is only applicable for self occupied house taken on home loan.

5. Capital Gains Tax on Debt funds raised from 10% to 20%

The capital gains tax on debt funds has been raised from 10% to 20% and the minimum holding period to get benefit has been raised from 12 months to 36 months. So what happened was that earlier, people in 20%-30% tax slab rate used to invest in debt fund for 12 months and got it taxed at 10%, which was a great alternative to fixed deposits (where you pay 30% tax , if you are in higher tax slab) . But now this cant be done . Those who are interest to understand this part, please read this analysis on Deepak Shenoy Blog.

Then vs Now – An example calculation of a person earning Rs 10 lacs

Below I have given an example of a person who earns Rs 10 lacs, and takes full benefit under 80C , Home loan Interest and other basic exemptions like HRA, Medical Bills, Medical Insurance premium etc and compared his situation from past year rules vs the new rules which came in new budget. It has been seen that he can save approximmately Rs 30,000 additional tax. Have a look below

income tax calculation example

Download the Income Tax Calculator

I have created an excel calculator which you can use for calculating your new income tax and also compare with past year and see how much saving you will make with new rules.

Click Here to Download the Income Tax Calculator

Some Other Changes and Points from Budget

  • There is a proposal for introducing a single demat account for all the financial products
  • The EPFO will launch a unified EPF account, which will be a single account and there wont be headache to transfer or merge them every-time you change the job.
  • There will be uniform KYC across all financial institutions so that you don’t have to update your KYC at all the places

Please share how do you see this budget and the benefits ? Do you think its really going to help bring the “acche din” or not ? Please share your thoughts in comments section below.

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90 replies on this article “How you will save more Income Tax compared to last year due to Budget 2014 (Download Calculator)”

  1. spguptahyd says:

    My house owner does not want to give his PAN for claiming HRA exemption of the full amount of rent i am paying.
    In the absence of PAN details of my house owner can I claim upto Rs 8000/ (less than Rs one lakh per anum) per month
    as rent paid and claim exemption in IT form. Will HRA claimed be allowed?

    1. I guess yes, it will be allowed !

  2. ahmed says:

    How the CESs and surtax(new 12%) is calculated?

  3. Chetan says:

    I am a self employed professional earning around 7.25 lakh per annum I have made investment of 1.5 lakh under Sec 80c, 15ooo under Sec 80d for myself, 20000 under sec 80d for my parent (above 60 yrs) and donation of 18000 under sec 80g. I have also taken home loan for which interest is around 1.1 lakh. what will be income tax for the year 2014-2015.

    1. Hi Chetan

      Its not that easy that we can do calculation like that. you better get in touch with a CA for this.

  4. vinod kesar says:

    whether a senior citizen can save income tax on rupees fifteen thousands in addition to 150000

  5. Kamati says:

    Hi Manish,

    Can you please thorw some information on 80EE as i want to cliam it this year as i have not claimed it last FY 2013-14 and i have not found any question or info on this in articl. Hence requesting you to please provide the inform please.

  6. Ashwini says:

    Hi Manish,

    Very interesting piece of information. My annual salary is Rs. 797,000.00. I would like to go for tax savings scheme and other savings options. It would be great if you can give me some directions.

    Thanks in advance.
    Ashwini

    1. You can go for some options like Canara Rebeco Tax Saver

  7. Santosh says:

    Hi Manish,

    Greetings. I am a regular at your wonderful blog. Over the years, my financial situation has improved largely due to following your suggestions. Thanks a lot.

    I have noticed some unethical behavior from credit card companies .. and would like your help to inform the readers about such practices so that they do not fall into a trap.

    I own HDFC credit card. The initial limit was 80,000, which was later increased to 1, 20,000 and then again to 1,60,000.

    Each time, after a period of about a month, i received a call from HDFC card representatives and she would inquire general things like if the card was working properly. Then she would move on to say that, as a part of your card, company is providing some great insurance plan and bla bla. When i politely asked them that i don’t need it, they mention that this is compulsory and if i do not subscribe, the enhanced limit on the card would be reduced to earlier limit. Since i knew 100% that this is not going to be case, i rejected offer each time .. but many credit card holders may fall into this trap. Even if they get less than 1% success, they may be making a killing considering the total number of card holders.

    If you could do a small article on this, i think everyone will be helped.

    Thanks,
    Santosh Thapliyal

    1. Thanks for sharing that .. I will make a post on this .

  8. kuhankumar says:

    At all times, you have been taking the initiative. Thanks for the calculator and crunchy information! Many tax payer will get benefits from your post

    Kuhankumar
    bizbilla B2B portal

  9. surfraz says:

    Hi,

    I am staying in Rented house in Hyderbad and purchased one house recently in my hometown by taking home loan .Currently i am claiming tax benefit on Interest (LOH) & Principle amount (80C) and HRA .I am planning to buy new house in HYD by taking another home loan.I want to know if i can claim tax benefit on the interest & Principle amount paid for the 2nd home loan also ?
    I want to give this new house purchased in HYD for Rent so that i claim my HRA benefit as well.

    I know that Rent which i get from 2nd house will be used in calculating tax exception .

    in summary i want to claim tax benefit on ( HRA + 1st house interest & principal +2nd house interest & principal ) …..

    1. surfraz says:

      Any update on my query plzzzzz…

      1. Suraj says:

        Hi Surfraz,

        For the house which you give on rent – the interest will be taken as actual (it can exceed 2lacs)
        The principal instalment of the house on rent will not be considered for Sec 80C

        Hope this helps !
        Suraj

        1. surfraz says:

          Suraj,

          Thanks for the response .

          can you please clarify that i can claim tax benefit on HRA ( for house in Hyderabad where i am staying currently) + 1st Home loan Interest + 2nd Home Loan Interest ??

          1. Bharani says:

            I don’t think you can include 2nd home for any tax purposes. If it generates any income (thru rent), you have to show that as additional income. Rest (with rented house + 1st loan) stays the same.

  10. avramesh says:

    My wife is earning Rs45000 per month. She is not having house loan and saves upto
    150000 under sec 80c. what will be income tax for the year 2014-2015.

  11. shobha ganesh says:

    Dear Mr Manish,
    Please confirm if a senior citizen/very senior citizen is allowed to open a PPF account.
    Thanks
    Shobha Ganesh

    1. Hemanth Chandra says:

      Yes…. any indian citizen can open PPF account. but it is not advised to open a PPF account by senior citizens as the lockin period is 15 years….

    2. Yes, any one can open a PPF account

  12. Revathy Dasan says:

    Hi Manish,
    I have started visiting the site recently and find it very iseful.. I have one query, you have shown both Medical reimbursement and Medical Insurance seperately.
    Can you let me know whether we can claim medical insurance seperately? My understanding is that both comes under Sec 80D and max total limit including both is 15k. Please clarify.
    Thanks in advance
    Revathy Dasan

    1. Nirjhar says:

      Hi Madam,
      The difference between claiming medical re-imbursement and medical insurance are as below .

      (1)Medical reimbursement (max limit : 15K ) can be claimed as an exemption under Under Section 17(2) Proviso (v)].
      (2)Medical insurance can be claimed as Deductions under Chapter VI- A,section 80D .Limits for this are as below :
      The Deduction that can be claimed under Sec. 80D at the time of filing of income tax return is the sum of the following:-
      1.In case the payment of medical insurance premium is paid by the assesse for himself, spouse, dependent children – Rs. 15000. In case, the person insured is a Senior Citizen, the deduction allowed should be Rs. 20,000
      2.In case the payment of medical insurance premium is paid by the assesse for parents, whether dependent or not – Rs. 15000. In case the parents of the Assessee are Senior Citizensthe deduction allowed under Section 80D should be Rs. 20,000

      Hope this clarifies the difference between the two.
      Rgds,
      Nirjhar

    2. No , Medical Insurance is for the premium you pay for the policies for health insurance . thats limit of 15k

      The other thing is Medical bills reimbursement which is also upto limit of 15k per year. You can give bills of medicines and doctor visits for yourself , spouse, children, parents etc and do not pay tax on that 15k amount

      Manish

  13. Surendar says:

    Hi,
    I need help with filing ITR-1. I’ve got a tax refund for AY2010-2011 and AY2012-2013. These refunds were credited in May and June 2013. Do i have to show this amount while filing the IT returns for this year. If yes, where do i have to mention this amount in ITR-1. I’m not sure whether this question should be posted here or not, but i’m kind of struck and don’t know where to get the help from.
    Thanks in Advance
    Surendar

    1. Bharani says:

      Per my limited knowledge, I don’t think they would be considered additional income unless they generate interest (if they are credited to your SB, then you may not know the interest for this component anyway!).

    2. No , you dont have to show them .. as they are refund only .. there is no explanation required for them

  14. T.S.Ashok says:

    Nice article.

  15. Swetank Saroj says:

    Hi Manish,

    Kudos to you for smmarising everything and presenting the things in such a great and lucid way.

    I have a concern, about the title chosen for this article, it is kind of misleading for many people.

    50% rebate is on this special case selected by you..in the similar fashion/logic someone may even prove that its 100%.

    Thanks,
    Swetank

    1. Yes Swetank, I think I made that mistake , I will change it !

  16. Vasu says:

    Dear Manish,

    Thanks for your informative Article. Just one doubt, Have they (post offices) started accepting additional 50K under PPF ? I have already made maximum allowable 1 lac deposit and wish to contribute additional 50k now.
    The Department of Post’s Indiapost website still showing max allowable as 1 lac.

    1. Yes, they have started accepting it now

      1. Vasu says:

        Thanks for the information.

  17. Vasu says:

    Dear Manish,

    Thanks for your informative Article. Just one doubt, Have they (post offices) started accepting additional 50K under PPF ? I have already made maximum allowable 1 lac deposit and wish to contribute additional 50k now.

    1. Jeearbi says:

      As per my understanding all the budgetary proposals will come into effect only after it is passed by the Parliament. After that concerned agencies such as PPF regulatory body etc will issue the concerned notification such as increased PPF subscription etc. After this only one can utilise this.

      1. Anjan says:

        I don’t understand the need for Parliament to pass the budgetary proposals. This is not a bill which has to be passed by Parliament before it comes into effect.

        As per my understanding, the changes in budget are final and not merely proposals. This means the changes in budget will have immediate effect. Can someone clarify on this front?

        I believe we are merely waiting for the circulars to be circulated to the Post offices and banks and the Software/system to implement to new 1.5 lac ceiling in the case of PPF.

  18. Shankar says:

    Hi Manish,

    Can you please throw some light on 80TTA. Can we claim 10K under it as interest on Savings A/c & FD interest?
    How do we plan for this better?

  19. Ankur says:

    Hi Manish, What’s the effective date of these deductions? Can I deposit 1.5 lacs in PPF this year?

  20. Rajesh Patil says:

    Can one avail both deductions on home loan and HRA?

    1. Yes , IN some cases it can happen

  21. Ajit says:

    Very good budget by BJP (Arun Jately). Government is trying its best to stabilize the economy – Its a starting of ache dine,…..

  22. sanfin says:

    wondering how a person with 10L annual income can have a home loan where the interest component is > 1.5L 😉

    1. Why cant it happen ? Whats so impossible in that ?

      If a person takes a 20 lacs loan also, then the EMI would be around 20-22k for a 20 yr loan, the total interest he will pay in this case will easily be more than 1.5k .

  23. Pratik says:

    @Sudha – please do not be so critical of Manish. He just wants us to be aware about good policies in this Budget with a simple example…. (Thanks Manish for that) … and for all those who think that budget wasnt good enough or could have been better .. just think that the new government had less than 2 months to prepare ofr this budget, in that context it was fantastic .. 🙂

    1. Sudha says:

      It is not being critical about Manish neither critical about the Government.

      It is just about presenting facts right as they are and not mislead.. by percentage or by showing houseloan as well as HRA, when it is not the case with majority.

      I was happy at the title only to later find it disappointing..
      I did say the new tax indeed brings relief, but not like 50%.

      Itz like what the news channels do, to catch the attention.

      1. Sudha says:

        I am a regular reader of this site of Manish and indeed have found many posts a good information.

  24. Alok says:

    A misleading article with the sole purpose of coming up with a catchy headline.

    I am interested to see if this comment gets published. Hat tip to you if it does.

    1. Surely it will get published .

      And I accept I did that in hurry . I have now changed the article headline . Thanks for reminding me

  25. Anjan says:

    Will these changes takes immediate effect or from next fiscal year?

    1. Next Fiscal year tax calculation

  26. ARUN says:

    What about the additional Rs.2000/- rebate, provided in the last year’s (2013-14) budget, in payable income tax for taxable incomes up to Rs.500000/-? Is it still available or abolished this year?

    1. Which rebate are you talking about ?

  27. jayaprakash says:

    Here is a detailed calculator if anybody want to try: http://www.ynithya.com/taxcalc/taxcalc.htm

  28. Amit Gupta says:

    Hi Manish,

    Nice article. I knew that you would write a blog post for your readers to explain recent changes in tax laws in simplest way. However, the example which you described missed an important exemption which all salaried employees get, i.e. conveyance allowance for Rs 9600. There might be different savings percentage for each individual depending on his investments and utilizing all exemptions fully.
    I am glad that the government has increased the minimum taxable income and also increased 80C limit. But I was disappointed that there are no changes in conveyance allowance and medical reimbursement exemptions. These components haven’t been changed for many years. Looking at the current inflation rate and rising petrol and diesel prices they should have changed it. I think that this might require changes in government employees salary structure hence they avoided the changes but atleast they should have increased the exemptions limit.

    1. Yea , I think that needs a revision now .. Lets see if something happens next year ?

  29. ddm says:

    Hi Manish Sir,
    I have one question about last year’s introduced Section 80TTA Interest received in Saving Bank Account Deduction Up to Rs 10,000. This section now available for FY 2014-15 or not. Or it will remain fore ever so not said anything about it in budget?

    1. Yes, its available for always now !

  30. Dhananjay says:

    Hi Manish,
    I have one question is last year’s Section 80TTA Interest received in Saving Bank Account Deduction Up to Rs 10,000 is continued for this year too or now canceled.
    Or it will be continued for all years ahead so not said anything about this section in budget ?

    1. Anjan says:

      Not said anything means, its still applicable. When a new budget is announced they don’t rewrite all existing rules. Only certain rules which have been changed are mentioned in budget speech, rest remain as they are unless otherwise specified.

  31. Amit Ranasubhe says:

    Very good budget by BJP (Arun Jately). Government is trying its best to stabilize the economy.
    Very useful article Manish. Looking forward for a article from you, on “Savings with respect to the new budget 2014”.

  32. Amit Ranasubhe says:

    Very good budget by BJP (Arun Jately). Government is trying its best to stabilize the ecenomy.
    Very useful article Manish. Looking forward for a article from you, on “Savings with respect to the new budget 2014”.

  33. bharat shah says:

    one more probable tax saving instrument is pension plan mutual funds in line with NPS deductible rs.1 lacs more under section 80CCD. please refer http://www.valueresearchonline.com/story/h2_storyview.asp?str=25637 last but one para.

  34. Sudha says:

    I would consider this calculation and title highly misleading.

    True it brings in relief. But You have taken all the Pro’s of it, to add Hype to it and shown it as Shining than the facts are.

    for a income of 10L with just Homeloan interest & 80C deduction..
    Your example considers it a self occupied one but you have considered still HRA exemption. I dont think that is the common case of Majority population.

    Different heads Earliar Now (2014-2015)
    A) Total Income 1,000,000 1,000,000
    B) 80C deduction 100,000 150,000
    C) Home Loan Interest 150,000 200,000
    D) Medical Insurance Premium 0 0
    E) Medical Reimbusement 0 0
    F) HRA 0 0
    G) Any Other Exemptions (Education loan interest, Donations etc..) 0 0
    H) Total Exemption (B+C+D+E+F+G) 250,000 350,000
    Taxable Income (A-H) 750,000 650,000
    How tax is calculated Nil upto Rs 2 lacs Nil upto Rs 2.5 lacs
    10% from 2 lacs to 5 lacs 10% from 2.5 lacs to 5 lacs
    20% from 5 lacs to 10 lacs 20% from 5 lacs to 10 lacs

    Income Tax 80,000 55,000
    Income Tax Saving Over Last Year 25,000

    % Reduction Over Last Year 31% (This would be a practical example)

    1. Pramod Kamble says:

      Sudha, I agree with calculations presented by you. In my personal case, I am getting 22% reductions in taxes over previous year.

    2. Thanks for sharing that. I have changed the article title . I agree it was misleading for some people !

  35. Sanjeev says:

    Hi Manish, Calculator is useful.
    However, All this discussion around 80CC tax savings confuses me about instruments like PPF,EPF etc…. as I always think that these are Exempt-Exempt-Exempt(EEE) category. So, when I don’t mention its detail in my IT return submission and later at the end of 15yrs (say) when I withdraw total amount… will these Organization be able to track which year I had shown it in my IT return or NOT ? In other words, if they are not going to deduct taxes ( irrespective of my showing it in my IT return), why it should be considered for 80CC ?? I rather utilize it for other tax savings scheme.
    Will be keen to hear your views.

    1. Ramesh says:

      80C, 10(10D)

    2. I am not sure what you want to ask here . You dont have to give any details to them ..

  36. Jitendra Nikumbh says:

    Hi Manish,

    I knew you would come with blog on very next day of Budget 🙂 . Thanks !
    Personally, I liked 80C limit increased to 1.5 lac, as it would make people to invest more atleast from tax saving point of view.

  37. Somnath says:

    If you are considering HRA along with Housing Loan Interest, you will need to consider notional rent too as additional income for the second house too. Above calculation is a little misleading in those terms

  38. chaitanya_krish says:

    but, no issues with above calc 🙂
    it works, as i checked with making HRA zero. 🙂
    i think, the post needs to be corrected.

  39. chaitanya_krish says:

    Hi Manish,

    Home Loan interest exemption raised to 2Lakhs for self-occupied Homes.
    so,how can HRA be claimed in that case? [ in above calc]

    1. Asha says:

      Even I have the same question.

      1. Ajay says:

        Hi Chaitanya/Asha

        You can claim both home loan and HRA if both are in different cities.

        1. manu says:

          Hi Ajay

          Please explain the scenario, how that can be possible. As deduction for interest is for self occupied house.

    2. DD says:

      I also have the same question how can someone take both advantages of HRA and Home loan interest for tax exemption.

  40. Abhay Taneja says:

    hi Manish,

    As always, you have been very proactive. Thanks for the calculator and crisp information!

    Rgds,
    Abhay

  41. Wriju Bharadwaj says:

    Hi Manish,

    Really summarizing it in a nutshell…

    Great article, thanks for sharing…

  42. Govarthanan says:

    Hi Manish,

    In TOI today, I seen that IT rates changed as below.
    0 – 2.5 Lakhs – Nil
    2.5 – 5 Lakhs – 10.3%
    5-10 Lakhs – 20.6%
    10 Lakhs – 1 Crore – 30.9%
    >1 Crore – 33.99%

    If that so, we wont save 50% of tax. Right?

    1. atul chapate says:

      hello govarthanan,
      the rates r same as shown in the artical. it just has ignored the EC and SHEC into calculations which are infact implied therefore not shown. consider this.
      its 10% tax and 2% Education Cess (of 10%) plus 1% secondary higher education cess (of 10%) which makes it 10.3% and same for the other rates too.

    2. THe article is not talking about saving 50% tax . Its talking about an example where a person saved 50% of what he paid last year . So if a person paid 1 lac tax, he is saving 50% of that this year and paying only 50k

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