Evolution of e-Commerce in India !

An insight into India’s e-Commerce market. It focuses on the various sub-segments of the e-Commerce market and highlights the factors driving growth across these segments and the challenges.

India is at the cusp of a digital revolution. Internet has become an integral part of the growing urban Indian population. Various factors have been driving this trend, such as:

• Declining broadband subscription prices
• Launch of 3G services leading to an ever-increasing number of “netizens”
• Urban India’s changing lifestyle
• Convenience of online shopping
• Changes in the supporting ecosystem

Methodology

In 2012, we conducted a research study on the Indian e-Commerce sector, elucidating a detailed market perspective. The report focused on the following key e-Commerce segments along with elaborating on the ecosystem, investment scenario and operational challenges:

• Travel
• Retail
• Classifieds

We conducted comprehensive interviews which provided a firsthand perspective on opportunities and challenges in store for various stakeholders.

The number of users making online transactions in India is expected to grow from 11 million in 2011 to 38 million in 2015.

Executive summary

Although the trend of e-Commerce has been making rounds in India for 15 years, the appropriate ecosystem has now started to fall in place. The e-Commerce market in India has enjoyed phenomenal growth of almost 50% in the last five years.
Key factors driving the growth story of e-Commerce in India include:

• Considerable rise in the number of internet users
• Growing acceptability of online payments
• Proliferation of internet-enabled devices
• Favorable demographics

The number of users making online transactions in India is expected to grow from 11 million in 2011 to 38 million in 2015.Venture capitalists (VC) and private equity players have demonstrated their faith in the growth of e-Commerce in the country. This is amply substantiated by the significant increase in the total investments (US$305 million in 2011 against US$55 million in 2010).

Modes of e-Commerce transactions

Based on participants involved in the transaction e-Commerce transactions can be segmented into three broad categories or modes:

• Consumer-to-consumer (C2C) – Online classifieds, online travel
• Business-to-consumer (B2C) – Online retail, online retail/e-tailing, online classifieds, digital downloads, financial services, online travel
• Business-to-business (B2B) – Online classifieds

Size of the e-Commerce market in India

India’s consumer-facing e-Commerce market (B2C-C2C) grew at a whopping CAGR of 49.1% from 2007 to 2011 to reach a market size of US$9.9 billion. Online travel, the largest domestic B2C e-Commerce segment, accounted for 81% revenues in 2011.
Consumer-facing e-commerce market size(US$ billion)


Source:IAMAI

India’s e-Commerce ecosystem

Pros

• Annual disposable income per household to grow by two-and-a-half times by 2015
• Discretionary spending expected to form a major portion of expenditure in India
• Proliferation expected in the sales of PCs, tablets and smartphones
• More Indians increasing time spent online
• Probability of growth in internet user base, mirroring that of the voice user base
• Volume and average value of transactions higher for credit cards than debit cards
• Increase in the number of payment options

Cons

• Low average broadband speed and flat average internet speed cause for concern
• Online payment landscape marred by low penetration of credit and debit cards
• High failure rate of online payment transactions

Online travel

Online travel has traditionally been the largest e-Commerce sub-sector (by revenue) in India. To improve margins with online retail, online travel players are diversifying their offerings to include hotel reservations, along with the regular ticketing services. They however need to develop skill sets that are different from the ones required in the ticketing segment. Also, they need to manage challenges associated with a diverse supplier base, technological constraints, customer experience, authenticity of information and grievance redressal.

Online retail

This segment has evolved and grown significantly over the past few years. Cash-on-delivery has been one of the key growth drivers and is touted to have accounted for 50% to 80% of online retail sales. Players have adopted new business models including stock-and-sell, consignment and group buying; however, concerns surrounding inventory management, location of warehouses and in-house logistics capabilities are posing teething issues.

Online classifieds

Classifieds, the earliest entrant in the e-Commerce space in India, is undergoing a shift in operational model from vertical to horizontal offering. Players now offer a gamut of services ranging from buying/selling cars to finding domestic help/babysitter.

Challenges for the e-Commerce sector in India

The phenomenal growth of the e-Commerce sector is accompanied by certain challenges:

• Absence of e-Commerce laws
• Low entry barriers leading to reduced competitive advantages
• Rapidly changing business models
• Urban phenomenon
• Shortage of manpower
• Customer loyalty

However, e-Commerce is set to continue on its growth path on the back of the stabilization of the ecosystem and interest demonstrated by VC players, combined with support from the Government of India (GoI).

Top 15 e-commerce investments in India in 2014:

While e-commerce marketplaces like Flipkart, Amazon, and Snapdeal snapped up big ticket investments, niche portals like Urbanladder, Myntra, and Firstcry among a few others have also found their spot in the sun. With close to 250 million internet users, Indian e-commerce industry has been a land of opportunities for institutional investors. Besides Tiger Global, Sequoia, and Naspers among others, this year Indian e-commerce segment also drew the attention of new investors like DST Global, Soft Bank, BlackRock, and Sofina etc. Over the past 10 months, Indian e-commerce companies (only selling physical goods) have secured over $3.9 billion investment from VC/PE and internal funding (including Amazon).

 The top 15 investments in Indian e-commerce:

• To outnumber Flipkart's funding number, Amazon announced $2 billion investment to its India focused marketplace, Amazon.in, in July this year.

• The poster boy of Indian e-commerce space, Flipkart, raised $1 billion from Tiger Global Management and Naspers. Singapore’s sovereign wealth fund, GIC, along with existing investors Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management and Sofina, also participated in this latest financing round.
•  The financial service arm of the Japanese telecommunication and internet corporation, SoftBank Internet and Media, Inc. (‘SIMI’) committed $627 million funding in New Delhi-based online marketplace, Snapdeal. Following the investment, SoftBank became the biggest stakeholder in the company.

• In February this year, Kunal Bahl-led Snapdeal amassed $133 million funding led by eBay, Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital.

• Mukesh Bansal-led Myntra secured $50 million (about Rs.300 crore) investment led by Premji Invest along with existing investors Accel Partners and Tiger Global.

• Grocery and veggie e-tailer Bigbasket snapped up $33 million from Helion Ventures, Ascent Capital, Zodius Capital and Lionrock Capital in September this year.

• Fashion e-commerce major Jabong secured $27.5 million (Rs 173 crore) from British development finance institution CDC in a deal in February 2014.

• Furniture e-tailer Urbanladder closed $21 million (approx Rs.120 crore) Series B funding from Steadview Capital along with the existing investors, SAIF Partners and Kalaari Capital, in January this year.

• Online baby care portal Firstcry received $15 million funding (Rs. 92 crore) from Vertex Venture Management, a subsidiary of Singapore’s state run investment company Temasek Holdings.

• Web-based fashion discovery platform Limeroad raised $15 million investment from New York-based Tiger Global, including existing investors, Lightspeed Venture Partners and Matrix Partners, India.

• Furniture and home products marketplace Pepperfry raised $15 million funding led by Bertelsmann India Investments (BII), including Norwest Venture Partners (NVP).

• Smile Group-backed flash sales portal Fashionandyou secured $10 million (Rs. 60 crore) from its existing partners — Sequoia Capital, Smile Group, Norwest Venture Partners, Intel Capital and Nokia Growth Partners — and a new investor in June this year (via).

• Online Indian ethnic wear store Cbazaar received funding of Rs. 30 crore to Rs 50 crore from private equity firm Forum Synergies among others (via).

• Online lingerie store PrettySecrets pulled off $2 million Series A round led by Rehan Yar Khan of Orios Venture Partners and co-invested by India Quotient along with participation from prominent angel investors like Anupam Mittal and Ravi Gururaj.

• E-tailer of funny and quirky products Happilyunmarried secured $0.65 million (Rs.4 crore) from InfoEdge. The investment was done through optionally convertible cumulative redeemable preference shares.

Non-Resident Indian (NRI) - Different Type Of Bank Accounts !

Just became a Non-Resident Indian (NRI)? One of the first practical issues you face is regarding your bank accounts in India. What kind of bank account can be maintained and operated – NRO / NRE / FCNR account? Note that NRI for the purpose of bank accounts is as defined under FEMA. 

NRIs / PIOs / OCBs are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India, with an authorised dealer. Such accounts can be opened with banks specially authorised by the Reserve Bank in this behalf. NRIs can open and operate the following five types of Bank accounts. 

1. Ordinary Non-Resident Rupee Accounts (NRO Accounts) 

These are Rupee denominated non-repatriable accounts and can be in the form of savings, current recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National / PIO resident in India leaves for taking up employment, etc. outside the country, his bank account in India gets designated as NRO account. 

The deposits can be used to make all legitimate payments in rupees. Interest income, from NRO accounts is taxable. Interest income, net of taxes is reportable. NRO account can be funded through any of the following sources:

• By proceeds of foreign exchange remittance from abroad through banking channels in an approved manner
• By proceeds of foreign currency notes and traveler cheques brought into India by the non-resident while on a temporary visit to India
• By transfer from an existing non-resident account in the name of the same person
• By funds from a local source representing bonafide transactions in rupees

Conditions regarding repatriation of balances in NRO accounts:

• Repatriation is allowed up to US dollars 1 million per calendar year for any purpose from the balances in NRO accounts subject to payment of applicable taxes
• Limit of US dollars 1 million includes sale proceeds of immovable properties held by NRIs / PIOs for a period of 10 years
• In case a property is sold after being held for less than 10 years, remittance can be made if the sale proceeds have been held by the NRI/PIO for the balance period

Please refer to the Master Circular on NRO account from RBI website through link below:

http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/02MC010712FL.pdf 

2. Non-Resident (External) Rupee Accounts (NRE Accounts) 

NRIs, PIOs, OCBs are eligible to open NRE Accounts. These are rupee denominated accounts and can be in the form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can be credited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted to residents for operation of accounts. 

The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. Interest lying to the credit of NRE accounts is exempt from tax in the hands of the NRI. Funds held in NRE accounts may be freely transferred to FCNR accounts of the same account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holders. 

Immediately upon return of the account holder to India and on his becoming a resident in India, NRE Account will be re-designated as Resident Rupee Account or converted to RFC account as per the option of the account holder. However, if the account holder is only on a short visit to India, the account will continue to be treated as NRE account. 

The initial deposit in NRE account can be made in any of the following manners:

• By proceeds of foreign exchange remittances from abroad through banking channels in an approved manner
• By proceeds of foreign currency notes and traveler cheques brought into India by the non-resident while on a temporary visit to India
• By transfer from an existing NRE Account of the same person

3. Foreign Currency (Non –Resident) Accounts (Banks) (FCNR (B) Accounts) 

NRIs / PIOs / OCBs are permitted to open such accounts in US Dollars, Sterling Pounds, Australian Dollars, Canadian Dollars, Japanese Yen and Euro. The account may be opened only in the form of term deposit for any of the following maturity periods; (a) one year and above but less than two years, (ii) two years and above but less than three years, (iii) three years and above but less than four years, (iv) four years and above but less than five years, and (v) five years. 

Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but not ordinarily resident status under the Indian tax laws. Money lying in FCNR (B) accounts can also be utilised for local disbursements including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guidelines. 

4. Non-Resident (Non-Repatriable) Rupee Deposit Accounts (NRNR Accounts) 

NRIs / PIOs / OCBs, other non-resident Individuals/entities are permitted to open these accounts by transfer of freely convertible foreign currency funds from abroad, or from NRE / FCNR accounts. Non-residents can open joint accounts with other Non-Residents (except Pakistan and Bangladeshi nationals) or resident close relatives in India. Deposits can be held jointly with a resident. Deposits can be for a period from 6 months to 3 years, and can be renewed further. Accounts may also be opened by transfer of funds from the existing NRE/FCNR accounts of the non-resident accounts holders. 

The principal is non-repatriable; interest can be repatriated. There is no income tax on the interest. Accounts under the Non-Resident (Non-Repatriable) Rupee Deposit Scheme may be opened in Indian rupees out of the funds in freely convertible foreign exchange transferred for the purpose to India in an approved manner from the country of residence of the prospective non-resident account holder or from any other country. Transfer of funds from the existing NRE / FCNR Accounts of the non-resident account holder may also open accounts. 

5. Non-Resident (Special) Rupee Accounts with banks in India 

NRIs/PIOs presently have the facility of maintaining bank accounts and undertaking financial transactions in India subject to certain exchange control regulations. 

In order to simplify the procedures and to provide greater freedom to NRIs/PIOs for putting through financial transactions in India, NRIs and PIOs are now permitted to open bank accounts in India, which will be at par with rupee accounts, maintained by residents. They can now open Non-Resident (Special) Rupee Accounts with banks in India which will have the same facilities and restrictions as are applicable to rupee accounts maintained in India by residents relating to repatriation of funds held in these accounts and/or income/interest earned on them. The procedure for opening such accounts is the same as that of domestic accounts of resident individuals. The existing facilities for NRIs / PIOs to maintain and operate NRO, NRE and FCNR accounts also continues. The repatriation facilities available under these accounts will continue as before. 

Given below is comparison between NRO, NRE and FCNR (B) accounts:

Accounts and features	NRO	NRE	FCNR(B)
Purpose of Account	To park Indian earnings like rent, Indian salary, dividend etc	To park overseas savings remitted to India after converting to INR	To park overseas savings without converting into INR
Who can open an account	Any person resident outside India (other than a person resident in Nepal and Bhutan). Individuals / entities of Bangladesh/ Pakistan nationality / ownership as well as erstwhile OCBs require prior approval of RBI)	NRIs(individuals / entities of Bangladesh/ Pakistan nationality/ ownership require prior approval of RBI)	NRIs (individuals /entities of Bangladesh/ Pakistan nationality/ ownership require prior approval of RBI)
Nomination	Permitted	Permitted	Permitted
Currency in which account is denominated	Indian Rupees	Indian Rupees	Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar
Account Types	Savings Bank Account Fixed Deposit Current Account	Savings Bank Account Fixed Deposit Current Account	Fixed Deposit
Joint Holding	Both with resident / non-resident	Only with NRIs	Only with NRIs
Tax deducted at source	Subject to tax deducted at source	Exempt from tax deducted at source	Exempt from tax deducted at source
Repatriation of Principal	The principal amount is not repatriable and can be used only for local payments. Funds up to USD 1 million (or equivalent) per financial year can be repatriated out of the balance held in NRO accounts for theeducation of your children, for medical expenses for your family and you, etc	Freely Repatriable	Freely Repatriable
Repatriation of Interest	Freely Repatriable	Freely Repatriable	Freely Repatriable
Period for fixed deposits	As applicable to resident accounts.	At the discretion of the bank	For terms not less than 1 year and not more than 5 years.
Rate of Interest	Banks are free to determine their interest rates on savings deposits under NRO Accounts. However, interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.	Banks are free to determine the interest rates of saving’s and term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.	Subject to cap : LIBOR / SWAP rates + 200 basis points  for tenor of 1 year to less than 3 years & LIBOR / SWAP rates + 300 basis points  for tenor of 3 years to 5 years (w.e.f. May 4, 2012) for the respective currency / corresponding maturities.
Operations by Power of Attorney in favour of a resident by the non-resident account holder	Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the accountholder himself through normal banking channels.	Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.	Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the accountholder himself through normal banking channels.
Loans a. In India i) to the Account holder ii) to Third Parties	Permitted Permitted	Permitted up to Rs.100 lakhs Permitted up to Rs.100 lakhs	Permitted up to Rs.100 lakhs Permitted up to Rs.100 lakhs
b.Abroad i) to the Accountholder ii) to Third Parties	Not Permitted Not Permitted	Permitted (Provided no funds are remitted back to India and are used abroad only) Permitted (Provided no funds are remitted back to India and are used abroad only)	Permitted (Provided no funds are remitted back to India and are used abroad only) Permitted (Provided no funds are remitted back to India and are used abroad only)
c.Foreign Currency Loans in India i) to the Account holder ii) to Third Parties	NotPermitted Not Permitted	Not Permitted Not Permitted	Permitted up to Rs.100 lakhs Not Permitted
Purpose of Loan a.In India i) to the Account holder	Personal requirement and / or business purpose *	i) Personal purposes or for carrying on business activities. * ii) Direct investment in India on non-repatriation basis by way of contribution to the capital ofIndian firms / companies iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 6(a) of Sch.1 toFEMA 5)	i)Personal purposes or for carrying on business activities. * ii)Direct investment in India on non-repatriation basis by way of contribution to the capital ofIndian firms / companies iii)Acquisition of flat / house in India for his own residential use. (Please refer to para 9 of Sch. 2 to FEMA5)
ii) to Third Party	Personal requirement and / or business purpose *	Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (Please refer to para 6(b) of Sch. 1to FEMA 5)	Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (Please refer to para 9 of Sch. 2 toFEMA 5).
b. Abroad To the account holder and Third Party	Not permitted.	Fund based and / or non-fund based facilities for bonafide purposes.	Fund based and / or non-fund based facilities for bonafide purposes.

* The loans cannot be utilised for the purpose of re-lending or for carrying on agriculture or plantation activities or for investment in real estate business.

Quarterly Average Balance Versus Monthly Average Balance !

Savings and current accountholders are typically required to maintain a minimum balance in their bank account. Amount of balance requirement varies from bank to bank, and even the same bank could have differing balance requirement depending on the account holder’s location (Urban, Semi-urban and Rural) or category of account (Normal, Privilege, Platinum, etc).

It is important to note that minimum balance is not required to be maintained on each day, but only on an average. Let’s understand how bank calculates balance maintained by an account holder.

Quarterly Average Balance (QAB)

What is the meaning of QAB of Rs 10,000? It means that on an average the accountholder needs to maintain Rs 10,000 daily. Key word is average. Requirement is not to maintain Rs 10,000 balance every single day, but on an average. Under QAB the bank computes the average balance on a quarterly basis, i.e. once every 3 month. For example, for October to December quarter, day end balance for each day in the quarter would be summed up and divided by the number of days in the quarter to arrive at the QAB maintained. Let’s understand with a sample bank statement below:

Date	Particular	Withdrawal	Deposit	Balance (A)	Days (B)	Product (A*B)
1-Oct-12	Opening Balance			8,000	14	112,000
15-Oct-12	Cash Deposit		10,000	18,000	23	414,000
7-Nov-12	ATM Withdrawal	15,000		3,000	27	81,000
4-Dec-12	Cheque Deposit		9,000	12,000	28	336,000
31-Dec-12	Closing Balance			12,000
				SUM	92 (C)	943,000 (D)
					QAB = D/C	10,250

Balance maintained is as under:

• Opening balance on quarter beginning, i.e. 1st October is Rs 8,000
• Rs 8,000 is maintained for 14 days from 1st October to 14th October. Thus total balance maintained for 14 days is (8,000 * 14) = 112,000
• Rs 18,000 is maintained for 23 days from 15th October to 6th November. Thus total balance maintained for 23 days is (18,000 * 23) = 414,000
• Rs 3,000 is maintained for 27 days from 7th November to 3rd December. Thus total balance maintained for 27 days is (3,000 * 27) = 81,000
• Rs 12,000 is maintained for 28 days from 4th December to 31st December. Thus total balance maintained for 28 days is (12,000 * 28) = 336,000
• Closing balance on quarter end, i.e. 31st December is Rs 12,000
• Total balance maintained for 92 days in the quarter is 943,000. Thus on an average daily balance maintained is 943,000 / 92 = 10,250.
• Note that even though balance maintained was below 10,000 for (14+27) = 41 days, still QAB requirement of Rs 10,000 is met.

Monthly Average Balance (MAB)

MAB is similar in concept as QAB. Only difference is that while for QAB balance maintained is computed for 3 months (i.e. a quarter) at a time, for MAB computation is done every month. Thus the bank will add day end balances for each day of the month and divide by number of days in the month to arrive at MAB.

QAB vs MAB - Which is better?

Well depends from whose perspective the question is answered – customers or bank.

While optically QAB and MAB requirement of Rs 10,000 might look the same, but the chances of charges for non-maintenance on minimum balance is higher under MAB. Let me explain by way of an example:

You had Rs 5,000 in account for first 85 days of a quarter. On the 86^th day you deposited Rs 100,000 and maintained the same for balance 5 days in the quarter (assuming 90 days in the quarter). While under QAB method balance maintained is [(85*5,000)+(5*100,000)]/90 = 925,000/90 = 10,278. Thus QAB requirement is met and no penalty would be imposed for non-maintenance of QAB.

However under MAB balance maintained would be Rs 5000 for 1^st and 2^nd months and [(25*5,000)+(5*100,000)]/30 = 625,000/30 = 20,833 for the 3^rd month. Thus the bank will charge for non-maintenance on minimum balance for the 1^st and 2^nd month. Assuming charges of Rs 250 per month, total charges works out to Rs 500 under MAB, while NIL in QAB.

While the change from QAB to MAB is definitely negative for retail customers, it makes immense business sense for the banks. Not only does it increase the Fees income for the bank in the form of MAB charges, in my opinion deployable CASA (Current Account Savings Account) balances would also increase. Given low cost nature of CASA balances, this is expected to enhance bank’s Net Interest margins.

In simple terms, when the account balance calculation is done on a monthly basis, probability of customers maintaining a certain minimum balance more consistently is higher. On the contrary when the calculation is on quarterly basis, even if the customer maintains balance of Rs 900,000 just for 1 day (assuming 90 days in the quarter), theoretically Nil balance can be maintained for rest of 89 days and still meet the minimum balance requirement. Banks gain when account holders maintain balances on more consistent basis as opposed to when the balance fluctuates widely. Balances maintained on consistent basis enables banks to deploy the same for longer at higher margins. On the contrary when balance fluctuates widely, banks would deploy the same for shorter tenor where margins would be lower.

Should RBI mandate banks to stick to QAB?

Some of the private sector banks has switched from QAB to MAB. Clearly the move is not customer friendly and would impact the small savings account holders the most. While the banks are well within their rights to tweak the balance requirement, however given the likely adverse impact on small savings account holders due to steep charges for non-maintenance of MAB (which varies from Rs 250 to Rs 350 per month), RBI should mandate the banks to stick to QAB methodology in consumer interest. Banks might argue balance requirement is not changed and it’s only change in methodology, however clearly it is much more convenient for savings account holders to adhere to balance requirement once every quarter rather than every month. Hopefully RBI will step in and mandate the banks to stick to QAB for minimum balance requirement.

Income Tax Rates for AY 2015-16 (FY- 2014-15)

 

 
Income Tax Rates applicable for Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP) and Body of Individuals (BOI) in India as proposed in the Vote on Account is given below.

Kindly note subsequently Union Budget 2014-15 has been passed by the parliament and revised Income Tax rates proposed for FY 2014-15.
Assessment Year 2015-16, Relevant to Financial Year 2014-15 

For Individuals below 60 years age (including Woman Assessees):

Income	Tax Rate
Upto 200,000	Nil
200,000 to 500,000	10% of the amount exceeding 200,000
500,000 to 1,000,000	Rs.30,000 + 20% of the amount exceeding 500,000
1,000,000 & above	Rs.130,000 + 30% of the amount exceeding 1,000,000

For Individuals aged 60 years and above but below 80 years (Senior Citizen):

Income	Tax Rate
Upto 250,000	Nil
250,000 to 500,000	10% of the amount exceeding 250,000
500,000 to 1,000,000	Rs.25,000 + 20% of the amount exceeding 500,000
1,000,000 & above	Rs.125,000 + 30% of the amount exceeding 1,000,000

For Individuals aged 80 years and above (Very Senior Citizen):

Income	Tax Rate
Upto 500,000	Nil
500,000 to 1,000,000	20% of the amount exceeding 500,000
1,000,000 & above	Rs.100,000 + 30% of the amount exceeding 1,000,000

Tax Credit: Rs. 2,000 for every person whose income doesn’t exceed Rs. 500,000

Surcharge on Income Tax: 10% of the Income Tax payable, in case the total taxable income exceeds Rs.10,000,000. Surcharge shall not exceed the amount of income that exceeds Rs.10,000,000.

Education Cess: 3% of Income Tax plus Surcharge

Note: The above rates were proposed in the Vote On Account presented by the UPA government pending Lok Sabha elections and were valid till 30th June 2014. Thus for AY 2015-16, till the time full budget is passed, Tax Deducted at Source (TDS) liability would be computed as per these rates. It is to be noted that subsequently NDA government has presented the Union Budget for FY 2014-15 and provided the revised Income tax rates for FY 2014-15.