Income Tax : FY 2018-19

This page provides all the details you need to know about the Income Tax for the Financial Year 2018-19.

Income Tax

If you earn an income or receive salary from your Employer, then you have to pay income tax.

Income tax is a percentage of your income that you pay to the Government of India to fund various development activities in the country.

Financial Year & Assessment Year

As you know, a calendar year is from January to December.

For income tax purposes, the financial year concept is taken into consideration. A financial year is from 1^st April to 31^st March. For example, financial year 2018-19 means it is from 01-Apr-2018 to 31-Mar-2019.

Any income earned during a financial year is taxed in the next financial year. So, the financial year in which the tax is assessed or calculated is called the Assessment Year.

For example, any income earned during the financial year 2018-19 will be taxed in the financial year 2019-20. So, 2019-20 is the Assessment year.

How to Calculate Income Tax?

To calculate income tax, we need the following details.

• Income from Salary

• Income from Property

• Income from capital gains

• Income from Business or Profession

• Income from Agriculture

• Income from any other Sources

• Various Exemptions availed

• Deductions under various sections

• Tax that is paid already

The details about the income, exemptions and deductions are given in the upcoming sections.

Income from Salary

Any amount that you receive from your Employer as a part of your salary or in addition to your salary will fall under this category.

Various components of the Salary are given below.

• Basic Pay

• DA (Dearness Allowance)

• HRA (House Rent Allowance)

• LTA (Leave Travel Allowance)

• Medical Allowance

• Travel allowances

• Conveyance allowance

• Children Education Allowance

• Uniform Allowance

• Any other allowances

• Perquisites

Income from Property

Any income that you receive by renting out your property will fall under this category. The income from the property can be positive (gain) or negative (loss).

Gain:

If the rent received is more than the expenses you paid to maintain the property, then it is a gain.

Example: In a financial year, if the rent received is Rs. 60,000/- and the expenses you incurred is Rs. 50,000/-, then you get a gain of Rs. 10,000/-

Loss:

If the rent received is lesser than the expenses you paid to maintain the property, then it is a loss.

Example: In a financial year, if the rent received is Rs. 60,000/- and the expenses you incurred is Rs. 1 Lakh, then you incur a loss of Rs. 40,000.

Calculate Income:

To calculate the income from the rental property, we need the following details.

• rent received from the property

• Interest amount paid towards the property loan. Note that only Interest amount will be considered. Principal amount will not be considered

• municipal taxes paid for the property

• Standard deduction of 30%

Limit on Loss:

There is a limit on the "loss" amount that can be shown under this category. The limit is Rs. 2 Lakhs for the financial year.
If you incur loss from the property and the loss amount is more than Rs. 2 Lakhs, then any amount above Rs. 2 Lakhs needs to be carried forward for the next 8 financial years.

For example, if you incur a loss of Rs. 4 Lakhs, then you can show only Rs. 2 Lakhs as "loss" under this category for the current financial year. The remaining loss of Rs. 2 Lakh amount can be shown in the next financial year or during the next 8 financial years.

But, there is no limit on the "gain" amount that can be shown under this category. You have to list the entire gain.

Income from Capital Gains

Any income that you receive by selling your capital asset will fall under this category.

Examples of capital assets are given below.

• Listed Shares

• Unlisted Shares

• Equity Mutual Funds

• Debt Mutual Funds

• Real Estate

• Gold

• Listed Bonds

• Zero Coupon Bonds

• Other capital assets, if any 

The income that you receive by selling the capital asset can be positive (gain) or negative (loss).

Depending upon the holding period of the capital asset, the gain or loss can be categorised as below

1. Short term capital gain (STCG)

2. Short term capital loss (STCL)

3. Long term capital gain (LTCG)

4. Long term capital loss (LTCL)

Depending upon the capital asset, the tax charged on the capital gain will fall under one of the following categories.

1. Short term capital gain (STCG) added to your Income and it will be taxed as per the Income tax Slab (under Section 111A)

2. Short term capital gain (STCG) charged at 15%

3. Long term capital gain (LTCG) charged at 10%

4. Long term capital gain (LTCG) charged at 20%

For more details about capital gains tax, please check the Capital Gains Tax page present in this website.

Income from Business or Profession

Any income that you earn as a self-employed or through your business will fall under this category.

Examples for this kind of income are

• Self employed

• Freelancer

• Contractor

• LIC Agents

• Chartered Accountants

• Tuition income for Teachers

• Doctor's own practice

• Lawyer's own practice

Income from Other Sources

Any income that you receive from the sources other than the ones mentioned in the above sections will fall under this category.

Examples of some of the other sources are given below.

• Interest earned from Savings Bank (SB) account

• Interest earned from Fixed Deposit (FD) or Recurring Deposit (RD) accounts

• Pension received from a Pension Fund

• Any winning from Lottery, Puzzle, Race, Game, Gambling, etc

All the above mentioned income will be taxed as per the income tax slabs except the winning from lottery, puzzle, game.

Winning from Lottery, Puzzle, Race, Game, Gambling:

Any income received from the winning of lottery, puzzle, race, game or gambling are taxed at a flat rate of 30%. They don't get any benefit of exemptions, deductions or income tax slab rates.

Exemptions

Exemption means exclusion. If an income component is exempt from tax, then it need not be included in the calculation of total income. Please note that exemptions will always be lesser than the income.

Examples of exemptions are given below.

• HRA (House Rent Allowance) exemption

• LTA (Leave Travel Allowance) exemption

• Medical Allowance Exemption

• Transport Allowance Exemption

• Conveyance Allowance Exemption

• Children Education Allowance Exemption

The details of each exemption is given below.

HRA (House Rent Allowance) Exemption

If you receive "House Rent Allowance" from your salary and you live in a rental property, then you can claim HRA exemption.

It is calculated as the lowest of the following 3 items.

1. Actual HRA received

2. 40% of (Basic Pay + DA) if you live in Non-Metro cities. 50% of (Basic Pay + DA) if you live in Metro cities

3. Rent paid minus 10% of (Basic Pay + DA)

Note:

For this purpose, the Metro cities are Chennai, Mumbai, Kolkata and New Delhi. All other places will be considered as non-metro.

LTA (Leave Travel Allowance) Exemption

If you receive "Leave Travel Allowance" from your salary and if you travel for your holiday trip in India, then you can claim LTA exemption.

Please note that you can claim LTA exemption twice in a block of 4 years. The 4 years block is determined by the Government. The current block is 2018 to 2021. That is, from 01-Jan-2018 to 31-Dec-2021.

The amount spent on travel tickets can be exempted. But, you can't claim food, accommodation and shopping expenses.

Medical Allowance Exemption

Medical allowance is paid to the employee for the medical treatment bills of employee and his/her family.

From 01-Apr-2018 onwards, medical allowance exemption will be removed for all category of people. The medical allowance that you receive from your employer is fully taxable.

Before 01-Apr-2018, all category of tax payers could get exemption on medical bills of up to Rs. 15,000/- spent on self and family.

Transport Allowance Exemption

Transport Allowance is paid to the employee to cover transportation expenses between home and work place.

From 01-Apr-2018 onwards, transport allowance exemption will be removed for all category of people. The transport allowance that you receive from your employer is fully taxable.

Before 01-Apr-2018, all category of tax payers could get exemption of Rs. 19,200/- spent on transportation expenses between home and work place.

Conveyance Allowance Exemption

Conveyance Allowance is different to transport allowance. It is paid to the employee to cover transportation expenses to carry out the official duties.

There is no limit on the exemption. Any amount spent on travel expenses can be exempted.

Children Education Allowance Exemption

If you receive "Children Education Allowance" from your salary, then you can claim this exemption for a maximum of 2 children.

The exemption amount is Rs.100 per month per child. So, you can claim a maximum of Rs. 200 per month for 2 children. This comes up to Rs. 2400 for 2 children for the whole financial year.

Hostel Expenditure Allowance:

If you receive "Hostel Expenditure Allowance" from your salary, then you can claim this exemption for a maximum of 2 children.

The exemption amount is Rs.300 per month per child. So, you can claim a maximum of Rs. 600 per month for 2 children. This comes up to Rs. 7200 for 2 children for the whole financial year.

Deductions

Deduction means subtraction. A deduction is a component eligible to reduce the taxable income and hence it reduces the amount of tax to be paid.

Deduction amount can be higher than the income.

Deductions are available under the following categories.

• Standard deduction

• Deductions under Section 80C

• National Pension System (NPS) deductions (Other than the ones available under Section 80C)

• Other Deductions (Deductions available under various other categories)

The details about each of the deductions are given in the following sections.

Standard Deduction

Standard Deduction was introduced in Budget 2018 and it will be effective from 01-Apr-2018 onwards.

This will replace the existing medical allowance exemption and transport allowance exemption. It means you will not get medical allowance exemption of Rs. 15,000 and transport allowance exemption of Rs. 19,200.

Standard deduction amount is a maximum of Rs. 40,000. It means you can deduct Rs. 40,000 from your taxable income directly.

For example, if your taxable income is Rs. 3 Lakhs, then you can deduct Rs. 40,000 and your new taxable income will become Rs. 2,60,000.

If the taxable income is less than Rs. 40,000, then standard deduction will be limited to the taxable income. For example, if your taxable income is Rs. 30,000, then the standard deduction will be limited to Rs. 30,000 only.

You need not produce any bills to get this deduction.

This is available for all category of people like ordinary citizens, senior citizens and super senior citizens.

Deductions under Section 80C

This section provides deductions through various investment schemes. The maximum limit on deductions allowed under this section is Rs. 1.5 Lakhs.

Even if you have investments more than Rs. 1.5 Lakhs, only Rs. 1.5 Lakhs will be considered for income tax purposes. Any remaining amount will not get any tax deduction benefits.

Various investment that come under Section 80C are given below.

EPF:

EPF (Employees Provident Fund) contribution by the employee. That is, 12% of (Basic Pay + DA) deduced from salary.

VPF:

VPF (Voluntary Provident Fund) contribution by the employee. That is, a maximum of 88% of (Basic Pay + DA) contributed voluntarily by the employee. You can voluntarily contribute from 0% to 88% of (Basic Pay + DA).

PPF:

PPF (Public Provident Fund). Amount deposited in PPF scheme.

SSA:

Sukanya Samriddhi Account. Amount deposited in Sukanya Samriddhi scheme.

ELSS:

ELSS (Equity Linked Savings Scheme). Amount invested in ELSS scheme.

NSC:

NSC (National Savings Certificate). Amount invested to purchase NSC certificate from a Post Office.

SCSS:

SCSS (Senior Citizens Savings Scheme). Amount invested in SCSS scheme of Post Office or Bank.

Tax Saver FD:

Tax Saving FD (Fixed deposits). Amount invested in 5 years tax savings FD account from a Bank or Post Office. Please note that only 5 years Tax Saver FD is considered. Other Fixed Deposit accounts are not considered.

ULIP:

ULIP (Unit Linked Insurance Plan) Premium. Premium paid towards a ULIP policy.

LIC:

LIC Premium. Premium paid towards a LIC Life Insurance policy.

Pension Plan:

Pension Plan. Premium amount paid towards a Pension plan.

Tuition Fees:

Children Education Tuition Fees: Tuition fees paid to an Educational institution, School, College or University located within India. Maximum of 2 children can be considered.

NPS:

NPS (National Pension System) contribution. Contribution towards Tier-1 account of NPS by an employee, self-employed individual or general public.

Home Loan:

Self Occupied Home Loan. Principal component of the home loan paid towards the self occupied home. Note only principal amount is allowed. Interest amount is not allowed. Also, rental property loan is not allowed here.

Others:

Any other deductions other than the ones mentioned above.

NPS deductions (in addition to Section 80C)

The deduction benefits for investing in NPS (National Pension System) are given below. These deductions are over and above the limit of Rs. 1.5 Lakhs available under Section 80C.

Employer contribution - Section 80CCD (2):

The Employee will get tax deduction for the contribution made by the employer under this section.

The employee is eligible for tax deduction up to 10% of Salary (Basic Pay + DA) contributed by employer under Section 80CCD (2).

This contribution is over and above the limit of Rs. 1.5 Lakh provided under Section 80C.

Additional benefit of Rs.50,000 - Sec.80CCD 1(B):

An additional tax deduction benefit of Rs. 50,000 is available under section 80CCD (1B) per financial year for NPS investments.

This is over and above the limit of Rs. 1.5 Lakhs deductions available under Section 80C.

This deduction has been available since 01-Apr-2015 onwards.

Other Deductions

The deductions available under various other sections are listed below.

• Section 80D - Medical insurance premium paid for family and parents

• Section 80U - Self disability

• Section 80DD - Dependents with disability

• Section 80DDB - Treatment for critical diseases

• Section 24B - Home loan related

• Section 80EE - First home buyer

• Section 80E - Higher Education Loan

• Section 80G - Donations paid to charities

• Section 80GGC - Donations paid to Political parties

• Section 80TTA - Interest from Savings Bank (SB) Account

• Section 80TTB - Interest from FD and RD

• Section 80GG - Rent paid but no HRA

• Section 87A - Tax rebate

• Section 10 - Professional Tax

• Standard Deduction

The details about each of the deductions are given in the following sections. 

Section 80D - Medical Insurance Premium Paid for Family and Parents

This section provides deduction benefits for the following.

1. Medical insurance premium paid for the family

2. Medical insurance premium paid for parents

3. Preventive health checkup cost for the family

The details of each deduction is given below.

1) Medical insurance premium paid for the family:

Medical insurance premium amount paid for the family can be deducted under this section. Family includes self, spouse and dependent children.

• the allowed deduction is Rs. 25,000 for the whole family if all the members of family are below 60 years of age

• the allowed deduction is Rs. 50,000 for the whole family if one of the family members is above 60 years of age

2) Medical insurance premium paid for parents:

Medical insurance premium amount paid for parents can be deducted under this section. Note this includes parents only. Parent-in-laws are not included. Parents may or may not be dependent. 

• Allowed deduction is Rs. 25,000 if both the parents are below 60 years of age

• Allowed deduction is Rs. 50,000 if one of the parents is above 60 years of age

3) Preventive Health Checkup cost:

Preventive health checkup is carried out to identify any diseases and take appropriate measures to prevent it.

Amount spent towards preventive health checkup of family members is allowed for deduction. A maximum deduction of Rs. 5,000 for the whole family is allowed.

Family includes self, spouse, dependent children and parents. Parents may or may not be dependent.

Preventive health checkup cost is inclusive of the above mentioned limits (not over and above).

Section 80U - Self Disability

If you are suffering from physical disability, then you can claim deduction under this section.

• If you are disabled (40% disability), you can claim deduction of Rs. 75,000/-

• If you are severely disabled (80% disability), then you can claim deduction of Rs. 1,25,000/-

You need not produce any document to claim deduction. But, you need to keep the certificate provided by the medical authority certifying your disability.

Section 80DD - Dependents with Disability

If any of your dependents is suffering from disability, then you can claim deduction under this section.

Dependents can be your spouse, children, parents, brothers or sisters. This deduction is given to provide medical treatment of the disabled.

• If your dependent is disabled (40% disability), you can claim deduction of Rs. 75,000/-

• If your dependent is severely disabled (80% disability), then you can claim deduction of Rs. 1,25,000/-

You should produce the medical certificate provided by the concerned medical authority certifying the disability of your dependent.

Section 80DDB - Treatment for Critical Diseases

You can claim deduction for the treatment of critical diseases. The treatment can be for either yourself or your dependents.

Dependents include spouse, children, parents, brothers and sisters.

The deduction amount will be as per the following.

• if the person undergoing the treatment is below 60 years of age, then you can claim Rs. 40,000 or the actual amount spent, whichever is less

• if the person undergoing the treatment is a senior citizen, then you can claim Rs. 1 Lakh or the actual amount spent, whichever is less

• if the person undergoing the treatment is a super senior citizen, then you can claim Rs. 1 Lakh or the actual amount spent, whichever is less

Section 24B - Home Loan Related

The interest amount paid towards the home loan can be claimed under this section.

• If the property is self occupied, then you can claim Rs. 2 Lakh or the actual interest paid, whichever is less

• If the property is rented out, then you can claim the entire interest paid as deduction. There is no upper limit for the interest amount

Section 80EE - First Home Buyer

First home buyers can get an additional deduction of Rs. 50,000 paid towards the interest amount of the home loan if they meet all the conditions mentioned below.

1. You should be a first home buyer and you should live in that property

2. The purchase price of the house should be less than Rs. 50 Lakhs

3. The loan amount borrowed (if any) should be less than Rs. 35 Lakhs

4. The loan should be taken during or after the financial year 2016-17. That is, from 01-Apr-2016 onwards

This deduction of Rs. 50,000 is in addition to Rs. 2 Lakh deduction available under Section 24B.

This additional deduction amount can be claimed every financial year until the loan amount is fully repaid.

Section 80E - Higher Education Loan

The interest amount paid towards the education loan can be claimed as deduction under this section.

Note that only interest amount can be claimed. The principal amount can't be claimed.

Any amount of interest payment can be claimed. There is no upper limit on the interest amount.

Educational loan should be for a Graduate or Post Graduate course in India or Overseas.

The education loan can be taken for yourself, spouse or children.

This deduction facility is available for 8 financial years or till the time the loan is paid off, whichever is earlier. For example, you have taken an educational loan with the term of 7 years. If you choose to repay in 5 years, then you can claim deduction for 5 years only.

The first financial year will be the year in which you started paying the loan. 

Section 80G - Donations Paid to Charities

Donations made to approved Charities, Trusts and Funds can be claimed as deduction under this section.

Donations can be made in the form on cash, cheque or demand draft.

There is no limit on the donation amount made by cheque or demand draft. But, there is a limit of Rs. 2,000 if the donation is made by cash.

That is, the maximum deduction allowed is Rs. 2,000 if the donation amount is paid by cash, even if the amount is above Rs. 2,000.

Donations like clothes, food and other items are not allowed for deduction.

Deduction Types:

Depending upon the Charity and Trust Fund, the deduction allowed can be categorised in the following 4 types.

1. 100% of the donation is allowed for deduction

2. 50% of the donation is allowed for deduction

3. 100% of the donation subject to a maximum of 10% of the adjusted gross total income

4. 50% of the donation subject to a maximum of 10% of the adjusted gross total income

For the calculation purposes, the "Adjusted Gross Total Income" is calculated as follows.

Before you donate, make sure you check the type of the Charity or Trust and then donate.

Section 80TTA - Interest from Savings Bank (SB) Account

The interest earned from Savings Bank (SB) account can be claimed as deduction under this section.

A maximum of Rs. 10,000 can be claimed as deduction under this section.

For example, if you earn interest amount of Rs. 15,000/- from your SB account during the financial year, then Rs. 10,000 can be deducted and the remaining Rs. 5,000/- will be the taxable amount.

Savings Bank (SB) account of Bank, Post Office or Co-Operative Society will be considered. 

Note that this section only allows SB accounts. Interest earned from Fixed Deposit (FD) and Recurring Deposit (RD) are not allowed for deduction under this section.

Section 80TTB - Interest from FD and RD

This section is exclusively for Senior citizens.

This is a new section introduced in Budget-2018 and it will be effective from the Financial year 2018-19. That is, from 01-Apr-2018 onwards.

Senior citizens can use this section to claim deduction on the interest amount earned from Fixed Deposits (FD) and Recurring Deposits (RD) accounts.

A maximum of Rs. 50,000 can be claimed as deduction. 

For example, if the interest earned from FD and RD accounts in the financial year is Rs. 75,000/-, then Rs. 50,000 can be deducted and the remaining Rs. 25,000/- will be taxable amount

Please note that this section can't be used to claim deduction for interest earned from Savings Banks (SB) account.

Section 80 TTB and 80 TTA are exclusive for senior citizens. It means that if a senior citizen is utilising Section 80 TTB, then they can't utilise Section 80 TTA.

Section 80GG - Rent Paid but No HRA

You can use this section to claim deduction if you are living in a rented house but you are not receiving HRA (House Rent Allowance) from your Employer.

The deduction amount that you can claim is the lowest of the following 3 things.

1. Rs. 60,000 per financial year 

2. Total rent paid (minus) 10% of the total salary

3. 25% of total salary

To claim this deduction, you should meet the following conditions.

• You should not receive HRA (House Rent Allowance) from your Employer

• You, your spouse or your minor children should not own any property in the place where you are working

• If you own a property in a different place than where you are working, then you should rent that property out. You should not claim tax benefits against that property as "self occupied"

Section 87A - Tax Rebate

This section was introduced in financial year 2017-18 to provide tax rebate to the individuals whose income level is below a specific limit.

If the total taxable income (that is, income minus deductions) is less than or equal to Rs. 3.5 Lakhs, then you will get a tax rebate of a maximum of Rs. 2,500/-.

This rebate is applied on the income tax payable before applying health and education cess.

The rebate will be Rs. 2,500 or the income tax payable (before cess), whichever is less.

For example, if the tax payable is Rs. 1,000/- then the rebate applied will be Rs. 1,000/- only. So, the final tax to be paid will be Rs. 0/- (zero).

If the tax payable is Rs. 4,000/- then the rebate applied will be Rs. 2,500/-. So, the final tax to be paid will be Rs. 1,500/-.

Section 10 - Professional Tax

Professional tax is from the State Government of the state in which you are working. Hence, this amount will vary from one state to another state.

You can use this section to claim deduction on the professional tax paid. Any amount paid as a professional tax can be claimed as deduction.

For example, if you are paying Rs. 200 per month as professional tax, then you can claim Rs. 2,400/- (200 x 12) as deduction.

Tax Slabs

The income tax slabs for various category of people are given below.

Ordinary Citizen (Below 60 years of Age):

Senior Citizen (60 years to 80 years of Age):

Super Senior Citizen (Above 80 years of Age):

Surcharge

Surcharge is a tax applied on top of the "income tax" payable. Surcharge is based on the level of income earned.

The surcharge for the individuals are given below.

Health and Education Cess

Health and Education cess was introduced in Budget-2018. It will be effective from 01-Apr-2018 onwards.

This will replace the existing Primary Education Cess and Higher Education Cess.

Health and Education cess is a tax applied on top of the "income tax payable". It is charged at 4% of the income tax.