What is tax planning?
Tax planning is the analysis of an individual’s financial situation from a tax efficiency point of view so as to plan an individual’s finances in the most optimized way. It allows an individual to make the best use of various taxes. Income tax planning involves planning under various provisions of the Indian taxation laws. In India, tax planning offers provisions such as deduction, contributions, incentives, exemptions.
Advantages of tax planning:
- To reduce tax liabilities
Individuals wish to reduce their tax burden and save money for their future. With the various benefits offered under the Income Tax Act 1961, you can reduce your payable tax by arranging your investments. The Act offers many tax planning investment schemes that can reduce your tax liability.
2. Minimise litigation
Minimising litigation saves the taxpayer from legal liability. Litigate is to resolve tax disputes with
local, federal, state or foreign tax authorities.
3. Leverage productivity
The core tax planning objective is channelizing funds from taxable sources to different income-generating plans. This ensures optimal utilization of funds for productive causes.
4. Ensure economic stability
Effective tax planning and management of income provides a healthy inflow of white money that show sound progress of the economy. This benefits both the citizens and the economy. Every taxpayer’s money is devoted to the betterment of the country.
How to save taxes?
- Section 80C
Taxpayers are provided with several options to reduce their tax liabilities. There are various sections of the Indian Income Tax law that offer tax deductions and exemptions, of which, Section 80C is the most popular tax-saving instrument. Here is a quick look at how you can save tax by using various deductions allowed under the Income-tax Act.
Section 80C It is the most commonly used section where an individual can save tax by investing or spending a maximum of Rs 1.5 lakh in a financial year in/on specified avenues. Some of the commonly used investment/expenditure avenues under Section 80C are Employees Provident Fund (EPF), Public Provident Fund (PPF), Equity-linked savings scheme (ELSS) mutual funds, National Pension System (NPS), repayment of the principal amount of home loan, children school fees etc.
- Section 80CCD (1b)
You can further save tax by investing additional Rs 50,000 in NPS. Do keep in mind that this deduction is available over and above the tax benefit available under section 80C. Thus, you can save tax by investing up to Rs 2 lakh in a financial year -Rs 1.5 lakh under section 80C and Rs 50,000 under Section 80CCD(1b).
- Section 80CCD (2)
This deduction is available on the employer’s contribution to an employee’s Tier-I NPS account. A maximum contribution of 10% of the basic salary plus dearness allowance (if applicable) is allowed under this section.
- Section 80D
Premium paid for the health insurance policy of self, spouse and dependent children can be claimed as deduction under section 80D of the Income-tax act up to Rs 25,000. In addition to that, the premium paid for the health insurance of parents can offer an additional tax break up to Rs 25,000. If your parents are senior citizens (age 60 years and above), then this tax break would go up to a maximum of Rs 50,000. Therefore, health insurance premiums paid for self (including spouse and dependent children) and senior citizen parents can help you save tax up to Rs 75,000 in a financial year. If both the taxpayer and parents are senior citizens then, the maximum deduction of Rs 1 lakh can be claimed in a financial year.
If your senior citizen parents are not covered under any health insurance policy, then the medical expenses incurred for them can be claimed as a deduction under section 80D. The maximum amount that can be claimed as a deduction under section 80D for medical bills in this manner is currently Rs 50,000.
- Section 80DD and Section 80DDB
Apart from section 80D, there are two other sections that can help you save tax in case of medical expenses incurred for disabled and/or specified persons. Section 80DD offers a tax break on the medical expenses incurred for a dependent disabled person. Dependent here includes spouse, children, parents, brothers, and sisters of the individual.
The deduction allowed depends on whether the dependent is disabled or severely disabled. If the dependent is at least 40% disabled, then the maximum deduction that can be claimed is Rs 75,000. On the other hand, if the disability is 80% or more, then it is considered a severe disability and the maximum deduction that can be claimed is Rs 1.25 lakh.
Section 80DDB offers a deduction for the medical expenses incurred for the treatment of specified illnesses such as cancers, chronic kidney diseases, etc. This deduction can be claimed for the expenses incurred on self or the dependent. For individuals below 60 years of age, whether self or dependent, the maximum deduction allowed is Rs 40,000. For senior citizens aged 60 years and above, the maximum deduction that can be claimed is Rs 1 lakh. The list of diseases for which deduction can be claimed under this section is specified in the Income-tax Act.
- Section 80U
If you are an individual with a disability of 40% and above, then you can claim a tax break under section 80U. However, deductions under sections 80U and 80DD cannot be claimed simultaneously.
Deduction under section 80U is claimed by the disabled individual whereas deduction under section 80DD is claimed by the dependent who has incurred expenses for the treatment of the disabled individual. The deduction amount under Section 80U for disability and severe disability is the same as mentioned in section Section DD
- Interest on Housing Loan
Apart from the tax benefit available on home loan principal repayment under section 80C, one can also claim tax benefit on a maximum of Rs 2 lakh on the interest paid on the loan during a financial year. If you are paying interest on a home loan for an under-construction property, this benefit will be available after the possession of the house, provided it happens within five years. The interest paid during the construction period can be accumulated and claimed in five equal installments after getting possession of the house.
- Section 80EEA
If you have taken a home loan to buy a house under the affordable housing segment during FY 2020-21, then you are eligible to claim an additional tax break on interest paid up to a maximum of Rs 1.5 lakh. This deduction is available over and above section 24 (mentioned above) where you get a tax benefit of up to Rs 2 lakh. However, there are certain conditions that you must satisfy before claiming tax benefits under Section 80EEA.
- Section 80G
Contributing to charity can also help you save tax. If you donate to specified government notified funds under section 80G you can claim up to 100% of the donation as a deduction from your gross total income thereby reducing your taxable income and consequently the tax
- Section 80TTA
Interest earned on balances in savings accounts held with banks or post offices is taxable under Income from other sources. However, interest earned from these sources up to Rs 10,000 in a financial year can be claimed as a deduction from gross total income under section 80TTA.
- Section 80TTB
Senior citizens (those aged 60 years and above) can claim a maximum deduction of Rs 50,000 from gross total income under this section. The deduction can be claimed on the interest earned from specified sources such as savings account, fixed deposits, senior citizen savings account etc.
- Section 80E
Interest paid on an education loan will also get you a tax break. Only individuals can claim this deduction. HUFs are not entitled to this deduction. There is no limit on the maximum amount that one can claim as a deduction from gross total income under this section in a financial year. However, the benefit is available for a maximum of 8 years from the start date of loan repayment.
Tax Planning is not a day’s work and has to be carried out considering the financial goals, liquidity position, and taxability on returns etc. A taxpayer can save the tax as well as build wealth alongside by doing tax planning in advance.
‘Tax’, a word that brings stress to the taxpayers. It is a compulsory contribution, imposed by the state government on the working crowd. They are taxed according to the income they receive. It can be any income, which includes salary, income from a business, or house property. People get irritated paying tax because, they have worked really hard to earn their money, and from what they get, part of it goes to the Govt. Some people don’t even realize that their 2 to 3 month’s salary goes into paying taxes.
Now let us talk about what is the other option available to save this tax being paid. The Govt may have made this contribution compulsory, but they have also provided us with tax-saving tools. That’s another thing, most of the working crowd are still not aware of these tools, which results in frustration of paying tax.
Tax is vast and very complicated to understand. So even though they use the basic deductions, a huge chunk of their income still gets cut. This is because they are not aware of the other saving tools available. Only professionals in this field will be able to help you out. Tax planning is very important, as it allows you to take more of your hard-earned money home. Those falling under the 5% tax bracket, do not have to work much on their tax planning as they can easily bring it down to nil. Those in the 20% or 30% tax bracket need advanced tax planning since a huge amount must be getting cut.
Related article : New Tax Regime Vs Old Tax Regime -Which one should you opt for?
Let us see few tax planning tools other that of section 80C:
Hindu Undivided Family:
Famously known as HUF, is a great tool for tax planning. All the members can transfer their income except salary income to the HUF account. A HUF when created also enjoys the same exemptions and deductions as that of an individual. For married couples, if either the husband or wife has an ancestral property that generates rental income, they can transfer this income to the HUF account and it will be taxed as the income of HUF. However, it’s not the same in the case of, a person buying a property, and income generated from that, if transferred to the HUF, will be added to the person’s income and taxed accordingly, it will not be treated as income from HUF. But the rental income once transferred can be invested in tax-saving tools.
People with housing loans can take the benefit of Rs.200000/- under section 80C. For the interest amount, there are 2 situations, one is self-occupied where the person gets the deduction up to 2 lakhs and if it is taken in joint names of the husband and wife, then 4 lakhs. In the second situation, in case of a let-out property or deemed to be let out, there is no limit to the deduction. However, in one year a maximum of 2 lacs only can be claimed as a deduction. Anything over it can be carried forward to the next year for up to 8 years.
In an education loan, the interest amount available for deduction is unlimited. This deduction is allowed for seven years. It can be for any further studies after passing Senior Secondary Education. The loan is available for deduction even if taken in the spouse or children’s name. This comes under section 80E.
This comes under the deduction 80D. For an individual the limit is up to 25000/- and for senior citizens above 60 years of age, the limit is 50000/-. So an individual can claim his amount and if he takes mediclaim in his parent’s name, who are above 60, he can get a total benefit of 75000/-.
Expenses Incurred On Medical Treatment:
This deduction comes under section 80DDB. He can take the benefit for the specified diseases for himself, his spouse, children, parents, brothers, and sisters. The maximum deduction is up to Rs. 40000/- and for senior citizens, it is up to Rs. 100000/-. If you have taken a policy, worth Rs. 150000/-, and your medical bills have actually come up to 2 lakhs, then you will get the benefit on only Rs. 50000/-, i.e. (200000 – 150000 = 50000). To avail this benefit, the bills and a certificate from the specialist are required.
Any donation or charity made to any NGO, political parties and trust can be claimed under section 80G. The maximum deduction is 10% of your gross total income.
Invest In Spouse’s Name:
Any surplus income can be invested in the house property, PPF, mutual funds, and equity. To invest in house property in the spouse’s name, you can lend her the money and she can give you her jewelry in exchange. In case the individual is not married but engaged, and if his fiancé does not have any taxable income or pays tax at a lower rate, then he can transfer the surplus income to her and it won’t be taxed as his income, as in the case of a married couple.
Invest In Mom’s And Dad’s Name:
If you have surplus income, you can invest in their name. When money is transferred to parents, there is no clubbing of provisions. You can transfer any amount. There is no limit as such. So, these are the other tax-saving tools that a person can use if he/she has exhausted the deduction under section 80C. If it is too complicated to understand, then it’s better to seek help from a tax professional.
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The Income Tax Department of India has announced the last dates to file Income Tax Return (ITR) for financial year 2019-2020. After several extensions, the date for individuals, Hindu Undivided Family, Body of Individuals and Association of Persons has been finalised on 30th November. Businesses requiring Audit & Transfer Pricing report need to carry out their tax return filing by 31st October.
If you are filing your tax return online for the first time, then your chance of getting confused is pretty high. Today, we are going to walk you through some income tax return filing tips, which can be of great assistance while you file your returns without making any mistakes. So, keep them in mind while filing your income tax return form in a confident manner.
- Choosing The Right Form
There are seven different kinds of forms available for you to choose from. You have to understand which one is applicable to you and choose the right one accordingly. Some of these are meant for specific companies and trusts, while others might apply to specific individuals or Hindu Undivided Families (HUF). Most importantly, the Central Board of Direct Taxes (CBDT) has issued new forms for the assessment year 2020. Some of the earlier forms have been replaced as well making it even more crucial to choose the correct one.
- Missing Deadlines
If you miss the specified deadline, then you will have to pay a late fee based on your income. However, you shall always have the option of filing a belated return. Even though it is not the most desirable thing to do, a belated e tax filing for the financial year 2019 can be carried out within 31st March 2021.
- TDS And Rent Paid
If you are a tenant paying rent that is over 50,000 INR a month, you will have to deduct 5% in the form of TDS. Even though you will not be able to show it as your own tax liability while e tax filing, this has been made mandatory by the central authorities. You also need to keep in mind that your landlord will receive the credit for TDS paid
- Income Tax Return
You may be working as a salaried employee in a company that deducts a certain amount in the form of TDS every month. Even if Form 16 is issued, it does not relieve you of your responsibilities to pay your taxes. You have to find out if you are applicable for income tax e-filing and accordingly choose the relevant form to file your returns with the Income Tax Department of India.
- Interest Income And ITR
If you have a bank account (savings), then interest earned more than 10,000 INR on the same shall be taxed. Even if it is less than that amount, you will have to provide this information while filing your ITR. However, senior citizens can claim exception in interest income up to 50,000 INR on their bank deposits.
Related Article : Know How To Save Taxes By Claiming Expenses
- Unpaid ITR Dues
If you have failed to pay your taxes for the last few years, then you can file a belated return only for FY 2018-19. Tax returns for Financial Years 2016-17 and 2017-18 cannot be filed any further.
- Income Tax Return Tips for Consultancy Professionals
If you happen to be a doctor, architect, engineer, etc., and your source of income is through professional consultation, then you can opt for a presumptive taxation scheme. Tax consultants in Mumbai, India advocate the selection of either ITR-3 or ITR-4 form, in such a case. However, if your income is less than 50 lakhs INR (through indirect consultation) then you need to proceed with ITR-1 form. If Consultation is not your only source of income and it exceeds 50 lakhs INR, you may have to choose ITR-2 form.
- Basic Information Requirements
While filing your Income Tax Returns, you will need to provide information regarding a few basic things such as PAN Card details, your Address, Bank Account number, mobile number and email ID. The process of online tax filing will be faster if you have these documents ready and with you, before beginning with the procedure.
- Income Tax Rates
The income tax rates differ based on your income bracket. If your income is up to 2,50,000 INR then tax rate will be 0%. If it falls between 2.5 lakh and 5 lakh INR, the tax rate will be 10% of the amount exceeding 2.5 lakh INR. The tax rate will keep on increasing after this. For example, if your revenue falls under the taxable bracket between 5-10 lakh INR, the tax rate will be 20% of the amount exceeding 5 lakh. Similarly, for income above 10 lakh, the tax rate becomes 30% of the amount exceeding 10 lakh. This however does not apply to you if you are a senior citizen.
- Income Tax Rates For Senior Citizen
If you are a senior citizen falling under the prescribed age bracket (60-79 years) you will receive a basic tax exemption up to 3 lakh INR. For individuals, above 80 years of age, the basic tax exemption amount is 5 lakh INR.
Income tax e-filing can prove to be a strenuous procedure because off frequent alterations in the forms. With more columns and tables being added for ensuring better presentation of information regarding the sources of income it becomes all the more necessary to understand these Income Tax Return filing tips in details. Alternatively, you can also seek out the assistance of tax advisory firms if you are not feeling very confident about getting it done by yourself.
I’m sure that, more than half of the nation, wishes that, they din’t have to pay tax. Life would be a lot easier, if we din’t have to pay. Sadly that’s not possible in India. This is because most of our Government earnings are dependent in the public through tax. It is our duty as citizens of India to pay tax, where our money goes, is a whole different thing all together. If we try to avoid taxes, we may end up paying more of it, if we get caught.
Must read: Tax Planning For Salaried Youngsters
Some may feel that, they work so hard to earn their salary, and a huge chunk goes towards taxes. Did you know that almost 3 months of your salary goes in paying tax, in a year? Surprised? well you should be. If the Government has imposed tax on the public, it has also come up with tax rules where you can save your tax. In fact, planning your taxes well, can allow you to save most of your money, which can be used to fund other goals. Some people are still not aware of the basic tax exemptions available to them. Whereas some people just make use of only the basic tax exemptions and the deductions related to their salary income.
Salary is not the only income a person has. A person can receive income from the assets held by them. One can have many assets like, cars, houses, properties, investments, etc. Some of these assets depreciate and some appreciate. For example, a house, it’s value will only appreciate and on the other hand, a car’s value will depreciate. So the income received on these assets is called capital income.
If the income from such asset is more than the cost at which it was bought, it is known as capital gain, but if the cost of the asset was more than the price at which it was sold, it brings in a capital loss. Now, we also have long term capital gain and short term capital gain.
Any capital asset, that attracts a gain or loss, if sold in less than 36 months, it will be considered as short term capital gain or loss. If the asset is held for more than 36 months and then sold, the gain or loss will be treated as long term capital gain or loss.
However, in case of property, the holding period is 24 months. This means, if a property is sold within 24 months, the gain or loss will be treated as short term capital gain or loss and vice-versa.
Only in the case of shares and securities, the time period is less than 12 months, it attracts short term capital gain and loss, and if it is more than 12 months, then long term capital gain or loss.
So, the different tax rules are made according to, how long the asset has been in ownership of the individual.
More tax can be saved on long term capital gains. The tax deducted is less from a long term capital gain, than from a short term capital gain. Let us take an example of the sale of a debt mutual fund which attracts a gain. If the sale is done within 3 years, it is obviously a short capital gain, so here the taxpayer will have to pay tax according to their tax slab. So, if any taxpayer falls in the 20% tax slab, they will have to pay 20% tax on the short tern capital gain. But if it was held for more than 36 months, they will have to pay 20% with indexation benefit.
Let us now look at the computation of how a long term capital gain is taxed.
1. Sale/consideration of the asset – (XXXXX)
2. Less: Indexed Cost of Acquisition (COA) (XXXXX)
3. Less: Indexed Cost of improvement (COI) (XXXXX)
4. Gross total LTCG (XXXXX)
5. Less: Exemption under various sections (XXXXX)
(54, 54B, 54D, etc.)
6. Net LTCG (XXXXX)
(Calculations: Indexed Cost of Asset = COA / CII of year of acquisition X CII which the assets is transferred.) (CII = Cost Inflation Index.)
There are many ways to save tax incurred on the long term capitals gains by you. Given below are the sections where you can save your tax on the capital gains:
|SECTIONS||CAPITAL ASSET||TAX EXEMPTION ON THE CAPITAL GAIN|
|54EC||Any capital asset||
|54 F||Any capital asset excluding house property.||
|54 B||Agricultural land||
|10(38)||Sale of shares and equity mutual funds covered under Securities Transaction Task (STT) .||Exempt till a gain of 1,00,000. For any gain above 1 lac, 10% of gain needs to be paid as tax.|
Please note the following points:
- Under section 54, the lower of the 2 will be exempt:
- Amount of capital gain
- Amount of investment in the new house.
- That under section 54 F, If only part of the consideration is invested, then exemption shall be considered proportionately,
i.e. Amount Exempt = Capital gain X (amount invested/ net sale consideration)
Just started making money. First Job, first month salary. How do you feel when tax is deducted from your salary? obviously the feeling is not good. The best you can do is to start at a right note. Start tax planning in right way as per your future financial goals and aspiration. The objective of tax planning should not be only to save taxes but also to help you to create corpus or wealth for your secured financial future. Government has encouraged savings and investment through tax exemption and deduction to save for various financial aspect of individual’s life.
Lets discuss few of the best suitable strategies for salaried youngsters in early 20’s to save taxes.
One of the most common mistake youngsters make in the initial years of their career is to just invest for tax savings. Ideally investment should be done with an objective to save for specific purpose of your life like retirement planning, wealth creation for future goals etc. not just for tax savings. Getting into wrong commitment of savings and investment just to save taxes harm your financial life. Tax savings is never a primary objective of investment. Right way for tax planning is to set your investment objective first and then select an instrument which helps to achieve that objective along with tax savings. For example, a youngster wish to create wealth by investing in equity and wish to save taxes, ideally the best way to do investment and tax planning is to invest in Equity Linked Savings Scheme (ELSS) of MF.
Don’t buy insurance policies to save taxes
Insurance is a must have product in anyone’s financial portfolio. But buying insurance just to save taxes is not the right way to plan taxes or insurance. The main purpose to buy insurance is to insure life and medical risk. There are tax benefit on Life insurance premium payment u/s. 80C and Mediclaim premium payment u/s. 80D. If you need insurance and additionally if there is tax benefit then it’s bonus point. But to create wealth and for saving taxes if you invest in insurance policy without understanding it’s real benefit in your financial life, then it can have negative impact on your financial life.
Investment in NSC, Tax savings FD etc. to save taxes
Many youngsters take advice from their parents or seniors in their office. There is no harm in investing in NSC or tax saving FD. If it matches your financial objective then it is one of the best tax saving choice with guarantee and tax benefit. Youngster can take risk in their early part of their career. By investing in theses safe investment we may guarantee return of interest and capital but loose chance of making higher return on investment. For long term investors like youngsters in 20’s there are better choices with higher possible returns and tax savings. For example investing in ELSS MF scheme, Investing in RGESS, Investing in Equity pension scheme etc
Don’t follow someone blindly just to save taxes
My friends has invested in a ULIP policy to save taxes that’s why even I have purchased same ULIP policy to save taxes. One of the common tax saving & investment style is to copy someone as it is. But it’s a very big financial blunders which an investors makes. Ideally every person financial needs and goals are different. Even if your age or salary is same still your investment needs are different. It is always advisable to understand your financial objective first and accordingly investment and tax savings instrument should be identified.
Claim Expenses to save taxes
Income Tax Act allows you to claim your expenses for tax savings purpose. Not all but some specific expenses like rent paid, interest on educational loan etc. By showing rent receipt to your employer based on a calculation salaried people can claim HRA exemption to save taxes and increase in hand salary.
Increase your future tax exempt income
Tax planning is not a onetime activity but it’s a multiyear activity. We can invest and save in an instrument which will generate tax efficient income. By creating legal entity like HUF or by diverting your income to other members of your family, we can reduce tax on income earned through interest or dividend. Other way we can invest in an instrument which generate tax free income instead of taxable income. Interest earned on NSC or FD is taxable but dividend earned from ELSS scheme or interest from PPF is tax free.
Saving tax is always at the forefront of every taxpayer’s mind. That is why individuals look at legal avenues to lower their tax liability. Thanks to the Income Tax Act provisions, there are ways in which an individual tax-payer can lower his tax outgo. The provisions provide for tax deductions and tax exemptions from the taxable income. These deductions and exemptions reduce your tax liability.
Must read: – Difference between Tax Exemption and Tax Deduction
Moreover, the Union Budget also makes changes and modifications in the available deductions and exemptions. This year’s Union Budget 2020 also made a major change by introducing the optional new tax regime. It is therefore necessary to first check which tax regime will be best suitable to you – Old tax regime or New tax regime. You may read our previous blog on the same here where we have explained the Old vs New tax regime.
In order to get more benefits, you should ideally be opting for the old tax regime. Here are some useful tax saving tips for Financial year 2020-21 to lower your tax:-
Tax saving tips for FY 2020-21
- Utilise the deductions available under Section 80C :- Section 80C is one of the most popular tax deduction sections which allow you tax-free investments and expenses of up to Rs.1.5 lakhs. The popular instruments which qualify for Section 80C deductions include the following –
- Utilise your 80C deduction. Make eligible investments and claim for the allowed expenditure. ELSS investments and life insurance premiums are the most popular go-to instruments for availing maximum 80C deductions.
- Don’t forget to invest in a NPS scheme :- Section 80CCD (1B) allows you an additional deduction of Rs.50, 000 if you invest your income in the National Pension Scheme. Thus, investments in NPS serve you dual purposes. You can claim an additional deduction and also plan for your retirement.
- Buy Health Insurance :- Section 80D of the Income Tax Act allows the premiums paid for a health insurance policy as eligible deductions from your taxable income. So, don’t ignore a health insurance plan. The plan would come in handy in meeting the financial expenses of a medical contingency you and your family faces. Moreover, premiums paid for self and family are allowed as a deduction from tax up to a maximum of Rs.25, 000. If you also buy a health plan for your senior citizen parents, you can claim an additional deduction of Rs.50, 000 making the total available deduction Rs.75, 000.
- Invest in your dream home :- Having your own home must be your dream. Well, for home-owners, there is a tax-relief too. While the principal repayments of a home loan are deducted under Section 80C, interest paid on the home loan qualifies for deduction under Section 24 of the Income Tax Act. Thus, you can claim a tax deduction of up to Rs.2 lakhs on your home loan interest payments.
- Claim a deduction on your savings account interest earnings :- The Prime Minister’s Jan Dhan Yojana scheme has made savings accounts popular among the Indian population. Besides having a banking account, your savings account also earns you an interest. This interest earned, if limited till Rs.10,000 in a financial year, is allowed as a tax deduction under Section 80TTA. So, if you earned an interest on your saving account, claim it as a deduction.
If you follow the above-mentioned tips, here is how your gross total income of Rs.9.85 lakhs would result in zero tax outgo –
|Gross total income from all sources||Rs.9.85 lakhs|
|Less: Section 80C deductions||Rs.1.5 lakhs|
|Less: Section 80CCD (1B) deductions||Rs.50,000|
|Less: Section 80D deductions (for self and senior citizen parents)||Rs.75,000|
|Less: Deductions under Section 24||Rs.2 lakhs|
|Less: Section 80TTA deductions||Rs.10, 000|
|Net taxable income||Rs.5 lakhs|
|Tax payable @5% on the income exceeding Rs.2.5 lakhs to 5 lakhs||Rs.12500|
|Less: Rebate available under Section 87A||Rs.12500|
|Total tax payable||Nil|
If you are a salaried employee, you can claim an additional standard deduction of Rs.50,000 from your salary income for the financial year 2020-21. For senior citizens, interest earned from fixed and post office deposits, up to Rs.50, 000, are also allowed as tax-free income. Taxpayers can also make donations to a charitable cause and earn deduction under Section 80G.
So, these tax-saving tips would definitely help you in lowering your taxes in this financial year. Keep these tips handy and try to minimise your tax liability.