Hardly any new exemptions in Rs 4,44,200 that FM spoke of

Our FM had delivered his bag of tax goodies last year in the form of a higher exemption limit and a higher Section 80C limit. In this budget while there were no big ticket direct tax items – the FM announced that the tax payers will now enjoy tax exemptions worth Rs 4,44,200 from their income. That sounded like a whole lot of exemptions during the Budget speech!

A close look at the FM’s break up of Rs 4,44,200 reveals that most of these exemptions are not new. Neither is this list of exemptions exhaustive (a plethora of deductions are available under section 80) and several deductions have not been considered – and for all purposes this is a loose number. The only increase in these is deduction of Rs 50,000 for NPS contributions as well as a doubling of exemption for transport allowance.

Here’s what he meant by this number for financial year 2015-16, and a comparative of financial 2014-15 against them.

FY 2015-16 FY-2014-15
Deduction u/s 80C 1,50,000 1,50,000
Deduction u/s 80CCD 50,000
Deduction u/s 24 on home loan interest 2,00,000 2,00,000
Deduction u/s 80D 25,000 15,000
Transport allowance Exemption 19,200 9,600
Total 4,44,200 3,74,600

 

While these announcements and other tax measures FM spoke of shall bring some tax relief, there are many smart ways to maximize your savings and make the most of what you earn. Find out how these changes will bring you tax relief here.

4 Responses to Hardly any new exemptions in Rs 4,44,200 that FM spoke of

  1. David March 2, 2015 at 12:15 pm #

    I have total investment if 150,000 . That includes my PF contribution, Life Insurance , ULIPS. Can I invest another 50,000 towards NPS to avail full 200,000 deduction?

    • cleartax-team March 2, 2015 at 1:33 pm #

      The deduction under section 80CCD(1) when you make deposits in your NPS account falls within the total overall limit of Section 80C + 80CCC + 80CCD (1) which is Rs 1,50,000.

      However, you can claim additional deduction of Rs 50,000 for a Pension Fund under a new 80CCD sub section (1B). So yes if you invest in NPS you will be able to raise your deduction limit to Rs 2,00,000.

      Keep watching out for more as we will bring a series of posts to explain all the benefits that this Budget of 2015 has brought.

  2. Sumit March 4, 2015 at 8:31 pm #

    New Rs 50,000 deduction in case 80CCD sub section (1B). does it have any restrictions in terms of tire 1 or tire 2 account of NPS.

    As I understand 80CCD(1) has this restriction. we need to invest in Tire 1 account.

    • cleartax-team March 9, 2015 at 1:53 pm #

      Yes, only tier 1 accounts are eligible for tax benefits.
      Further details on 80CCD(1B) are awaited from the government.