Facts of the Case:
The person in question, referred to as 'A', is a government employee with a monthly salary of Rs. 20,000. He also receives a House Rent Allowance (HRA) of Rs. 24,000 while residing in his own house. The other financial elements include:
Home Loan Principal: Rs. 15,000
Home Loan Interest: Rs. 60,000
Provident Fund (PF): Rs. 10,000
Life Insurance Corporation (LIC) Premium: Rs. 5,000
Tuition Fee: Rs. 30,000
Treatment for renal failure by a general physician in a private hospital (Claimed deduction u/s 80 DDB)
Issue:
The primary question revolves around computing 'A's taxable income, considering the facts mentioned above.
Rule of Law:
According to the Indian Income Tax Act, the taxable income is calculated by summing up income from various heads, reducing the deductions available, and applying the relevant slab rates. Here are the pertinent sections:
HRA Exemption: Under Section 10(13A), a person can claim an exemption on HRA. However, if a person resides in their own house, they can't claim this exemption.
Home Loan Deductions: Under Section 24(b), a person can claim up to Rs. 2 lakh per annum on interest paid on home loans. Under Section 80C, principal repayment up to Rs. 1.5 lakh is deductible.
Provident Fund & LIC Premium: Under Section 80C, the contributions towards PF and LIC premium up to Rs. 1.5 lakh per year are deductible.
Tuition Fee: The tuition fee paid for children's education can be claimed under Section 80C, up to Rs. 1.5 lakh per annum.
Exemptions under 80 DDB: This provides exemptions for expenditure on specified diseases.
Application of Law and Discussion:
The calculation of the taxable income for 'A' can be broken down as follows:
Gross Income: Salary: Rs. 2,40,000 HRA: Rs. 24,000 (fully taxable as 'A' resides in his own house)
Total Gross Income: Rs. 2,64,000
Standard Deduction: As per section 16(ia), a standard deduction of Rs. 50,000 is available for salaried individuals. So, the income after standard deduction becomes Rs. 2,14,000 (i.e., Rs. 2,64,000 - Rs. 50,000).
Section 80C Deductions: The total of principal repayment of home loan, PF, LIC premium, and tuition fees comes to Rs. 60,000, which is well within the limit of Rs. 1.5 lakh under Section 80C.
Section 80DDB Deduction: As per this section, 'A' is eligible for a deduction of Rs. 40,000 for treatment of renal failure.
So, the Total Deductions = Rs. 50,000 (Standard Deduction) + Rs. 60,000 (80C) + Rs. 40,000 (80DDB) = Rs. 1,50,000
Taxable Income: Gross Income - Total Deductions Taxable Income = Rs. 2,64,000 - Rs. 1,50,000 = Rs. 1,14,000
Conclusion: Exemptions under 80DDB, 80C, 24B and 10(13A)
In conclusion, the taxable income for 'A' for the financial year, considering all relevant deductions including the standard deduction under the Income Tax Act, amounts to Rs. 1,14,000. This calculation takes into account the fully taxable HRA since 'A' lives in his own house, the standard deduction of Rs. 50,000, the deductions under Section 80C (Rs. 60,000), and Section 80DDB (Rs. 40,000). Thus, 'A' is liable to pay income tax on Rs. 1,14,000 as per the relevant tax slabs and rates.
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