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We all know that without taxation a nation cannot survive. Taxes are the price we pay for a civilized society. In India just like in any other nation the main priority of most of its citizens is to save on Taxes. You must have heard the saying “For Every Benefit You Receive Tax Is Levied " Hardly I receive anything and the taxman is waiting at my doorstep. In order to learn more on Taxation please look up the website Moneymindz.com. Most of us must be feeling very hot this season but not because of the heat alone .Now is that time in which the salaried employees must submit their tax related proofs in order to avail income tax deductions .But what are these tax deductions and how do they work ? Why are they so important to us? How can we use these Tax benefits in our day to day life? All these questions must be running through our minds. I would like to remind all of you that the team of Financial Planners at Moneymindz.com are always there for you to plan your Income Tax needs in a most efficient manner and are always willing to lend you a helping hand. You can explore this unique Free Advisory Service just by giving a missed call on 0226211 6588. In order to understand Income tax deductions let us consider the following cases. Mr Suresh is 35 years old and works as an Operations manager in an IT Firm. His salary is INR 11 Lakhs per annum. Mr Suresh did not care to study about income tax deductions as he believed this was not his" cup of tea".
|Annual Income||Tax Rate|
|Up To INR 2 Lakhs||NIL|
|INR 2 Lakhs-INR 5 Lakhs||10%|
|INR 5 Lakhs - INR 10 Lakhs||20%|
|INR 10 Lakhs and above||30%|
Here Mr Suresh was paying his Income taxes as per the slabs shown below : Table - 1
|Heads||% Of Income Tax||Income Tax|
|Up To INR 2 Lakhs||NIL||NIL|
|INR 2 Lakhs -INR 5 Lakhs||10%||INR 30000|
|INR 5 Lakhs - INR 10 Lakhs||20%||INR 100000|
|INR 10 Lakhs and above||30%||INR 30000|
|Educational Cess||3% of total tax||INR 4800|
|Net Tax Payable||INR 164800|
Now let us consider what Mr Suresh should have done in order to save taxes as per the Income Tax Deductions available to him. Mr Suresh could have invested a sum of INR 1 Lakh in Public Provident fund and claimed income tax benefits under section 80C.
Here Mr Suresh Father is 67 years old and mother is 65 years old. He has a Spouse and a child .Here he can avail a medical benefit for his parents ,spouse and his child as per the Section 80D.
Here the maximum amounts available for self, spouse and dependents for mediclaim policies is INR 15000.In case of a senior citizen it is INR 20000.In case the parents of the taxpayer are senior citizens the deductions towards their medical policies is INR 20000.Mr Suresh happened to be in a charitable mood and donated INR 50000 towards Prime Ministers National Relief Fund .This is tax deductible as per Section 80G.
Table - 2
|Gross Taxable Income||INR 11,00,000|
|Less PPF Under 80C||INR 1,00,000|
|Less Tax Deductions under Section 80G||INR 50,000|
|Less Tax Deductions Under Section 80D||INR 35,000|
|Total Taxable Income||INR 9,15,000|
Table - 3
|Heads||% of Income Tax||Income Tax|
|Up To INR 2 Lakhs||NIL||NIL|
|INR 2 Lakhs- INR 5 Lakhs||10%||INR 30000|
|INR 5 Lakhs - INR 9,15,000||20%||INR 83000|
|Total Tax||INR 113000|
|Education Cess||3% on Total Tax||INR 3390|
|Net Tax Payable||INR 116390|