Most of you must be aware that there are certain tax-saving investments that not only help us save for the future but also reduce current taxes. We all would love to make such investments that would take the entire tax burden off our shoulders. What it implies is that any money you save on taxes would eventually convert into additional income for you.
Knowing Your Tax Slab
Our task would become a lot easier if we could somehow get to know the upper bound/limit of the investments we should make to maximize the tax benefits. Let's understand the slab of income versus the tax bracket (for a tax filer below 60 years of age) they fall into:
- If your income is up to 2.50 lakhs annually, then you don't need to pay any income tax.
- If your annual income falls in the slab of 2.5-5 lakhs, then you need to pay 5% of your income as income tax.
- If your annual income falls in the slab of 5-10 lakhs, then you need to pay 20% of your income as income tax.
- If your annual income is more than 10 lakhs, then you need to pay 30% of your income as income tax.
Saving Under Income Tax Act
Now that you are aware of your tax slab, let's take a look at how much one could save under Section 80C and Section 80D of the Income Tax Act. Our Government, in order to encourage long-term savings for our retirement, gives us tax breaks on these savings. Regardless of the tax slab you come under, the upper bound/limit for it remains ₹150,000.
For example, according to Section 80C of the Income Tax Act:
- If you come under the category of 5% tax slab, the tax you can save is ₹7,500.
- If you come under the category of 20% tax slab, the tax you can save is ₹30,000.
- If you come under the category of 30% tax slab, the tax you can save is ₹45,000.
However, the maximum limit still remains intact at ₹150,000.
Also, under Section 80D of the Income Tax Act, you can reduce your tax liability by up to ₹35,000, i.e., you can deduct a maximum of ₹35,000 from your taxable income.
For example, according to Section 80D of the Income Tax Act:
- If you come under the category of 5% tax slab, the tax you can save is ₹1,750.
- If you come under the category of 20% tax slab, the tax you can save is ₹7,000.
- If you come under the category of 30% tax slab, the tax you can save is ₹10,500.
Besides, there are some other sections also by which one can be exempted from paying tax (having a certain maximum limit though). So these were some facts that would help you in knowing how much you need to invest to have maximum savings on the tax you owe.
From India, Hyderabad
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5Knowing Your Tax Slab
Our task would become a lot easier if we could somehow get to know the upper bound/limit of the investments we should make to maximize the tax benefits. Let's understand the slab of income versus the tax bracket (for a tax filer below 60 years of age) they fall into:
- If your income is up to 2.50 lakhs annually, then you don't need to pay any income tax.
- If your annual income falls in the slab of 2.5-5 lakhs, then you need to pay 5% of your income as income tax.
- If your annual income falls in the slab of 5-10 lakhs, then you need to pay 20% of your income as income tax.
- If your annual income is more than 10 lakhs, then you need to pay 30% of your income as income tax.
Saving Under Income Tax Act
Now that you are aware of your tax slab, let's take a look at how much one could save under Section 80C and Section 80D of the Income Tax Act. Our Government, in order to encourage long-term savings for our retirement, gives us tax breaks on these savings. Regardless of the tax slab you come under, the upper bound/limit for it remains ₹150,000.
For example, according to Section 80C of the Income Tax Act:
- If you come under the category of 5% tax slab, the tax you can save is ₹7,500.
- If you come under the category of 20% tax slab, the tax you can save is ₹30,000.
- If you come under the category of 30% tax slab, the tax you can save is ₹45,000.
However, the maximum limit still remains intact at ₹150,000.
Also, under Section 80D of the Income Tax Act, you can reduce your tax liability by up to ₹35,000, i.e., you can deduct a maximum of ₹35,000 from your taxable income.
For example, according to Section 80D of the Income Tax Act:
- If you come under the category of 5% tax slab, the tax you can save is ₹1,750.
- If you come under the category of 20% tax slab, the tax you can save is ₹7,000.
- If you come under the category of 30% tax slab, the tax you can save is ₹10,500.
Besides, there are some other sections also by which one can be exempted from paying tax (having a certain maximum limit though). So these were some facts that would help you in knowing how much you need to invest to have maximum savings on the tax you owe.
From India, Hyderabad
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Circular No 1-2018 Processing of income-tax returns under section 143(1) of the Income-tax Act .pdf
Income Tax Calculator.xls