New Delhi: Taxpayers who earn more than Rs 10 lakh are required to pay thousands of rupees in income tax. Even if the salary is a little more than Rs 10 lakh, there are various strategies by which taxpayers can save a lot of money on income tax. You may not have to pay any income tax at all if you take advantage of all of the available deductions.
You will need to accurately assess the savings and expenses in order to take full use of the tax exemption choices accessible to taxpayers. The best part is that you don’t even need a financial advisor for this because you can teach yourself how to save money on taxes.
Many also hope that Finance Minister will rejig tax slabs to lower their tax burden, although this demand seems far fetched. The development, if it occurs, will indeed be cherished by taxpayers. But even if it doesn’t there are plenty of provisions in existing tax laws, which if adequately utilised, can significantly reduce the tax burden.
For instance, if you earn about Rs 10,50,000 per annum, and you’re aged less than 60, you will come under the 30% income tax slab. Here’s how you can save income tax:
1. Deduct Rs.50,000 as the standard tax deduction
Rs 10,50,000 – Rs 50,000 = Rs 10,00,000
2. Now, you can start your savings by first investing in instruments that offer rebates under Section 80C of the Income Tax Act. You can save up to a maximum of Rs 1.5 lakh by putting your money in investment tools such as EPF, PPF, ELSS, NSC and up to Rs 1.5 lakh annually in the form of tuition fees for two children.
Rs 10,000,000 – Rs 1,50,000 = Rs.8,50,000
3. Invest up to Rs 50,000 annually in the National Pension System (NPS) scheme to get a rebate under section 80CCD (1B) of the Income Tax Act.
Rs 8,50,000 – Rs 50,0000 = Rs.8,00,000
4. If you have a home loan to repay and your annual interest is over Rs 2 lakhs, then you can save up to a maximum of Rs 2 lakh under section 24B of income tax.
Rs 8,00,000 – Rs 2,00,000 = Rs.6,00,000
5. Further, you can claim a return of up to Rs 25,000 for health insurance premiums. You can save on the premiums of preventive healthcare check-up for spouse, children and yourself under Section 80D of the Income Tax. Moreover, buying health insurance for parents can help you avail of an additional deduction of up to Rs 50,000 if parents should be senior citizens.
Rs 6,00,000 – Rs 75,000 = Rs 5,25,000
6. Also, the tax department allows taxpayers to claim a deduction on the amount donated to organisations registered under Section 80G of Income Tax. For availing of the returns, you will have to share the necessary documents, including a stamped receipt of the donation. Also Read: Centre slaps Rs 653 crore import duty evasion notice on Xiaomi
Rs 5,25,000 – Rs 25,000 = Rs.5,00,000
7. With all deductions, your taxable salary will now come down to Rs 5 lakh. In India, a taxpayer is required to pay tax at 5% if he or she earns more than Rs 2.5 lakh. So, in this case, your tax will be Rs 12,500 (5% of Rs 2.5 lakh). However, you can avail of the exemption on the tax. This will bring down your annual tax to zero.
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