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Income Tax Rule: Income up to Rs 10 lakh can be tax free, if you adopt this method, know the all details here

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There is little time left for the end of the current financial year. Taxpayers are being asked for investment details in the offices. That’s why people have already started financial planning.

Especially such taxpayers, who invest at the very last moment. They are looking for investment avenues for tax saving. Generally, there is no tax liability on annual income up to five lakh rupees. It has to pay tax on excess income. However, by choosing the investment option, taxpayers can get tax concession even on income of more than five lakh rupees. A taxpayer can also declare income up to Rs 10 lakh tax free.

Earning up to 2.5 lakh tax free

According to the Income Tax Rule, there is no tax liability on income up to 2.5 lakhs annually. There is a provision of 5% tax on income of Rs 2.5-5 lakh. Income tax is to be paid at 30% on income between 5 to 10 lakhs and 30% on income above 10 lakhs.

Suppose someone’s CTC is Rs 10 lakh. In this way, according to his annual income, he comes under the purview of 20 per cent tax slab. But if he wants, he will not have to pay even a single rupee as tax. For this, he has to choose all kinds of investment options. Then he can take advantage of exemption in income tax.

Standard deduction

Income tax rules clearly state that up to Rs 50,000 is available as standard deduction. So deduct this amount from your earning of Rs 10 lakhs, then it will be Rs (10,00,000-50,000=9,50,000).

Saving under 80C

After this, you can save tax of Rs 1.5 lakh under 80C. Saving schemes like EPF, PPF, ELSS, NSC come under this. You can get tax exemption by investing in them. Apart from this, you can also take tax exemption in the form of tuition fees for two children. Now deducting Rs 1,50,000 from Rs 9,50,000, then this amount will come to the tax net of Rs 8 lakh.

Home loan

Home loan borrowers can save an additional tax of Rs 2 lakh. Under section 24B of Income Tax, the home loan borrower gets tax exemption on the interest of two lakhs. You also deduct this from your annual income. (8,00,000-2,00,000= 6,00,000). In this way, now your income of Rs 6 lakh will come under the ambit of tax.

National Pension System

If you separately invest up to Rs 50,000 annually in the National Pension System (NPS), then under section 80CCD (1B) you can save an additional Rs 50,000 in income tax. (6,00,000-50,000 = 5,50,000). In this way, now the income of Rs 5.5 lakh will be taxable.

Health policy

You can save tax up to Rs 25,000 by taking a medical policy under section 80D of income tax. You, your wife and children should be named in this health insurance. Apart from this, if your parents are senior citizens, then you can get an additional discount of up to Rs 50,000 by purchasing health insurance in their name. (5,50,000- 75,000 = Rs.4,75,000). In this way, your income of Rs 10 lakh is now out of the purview of tax liability.

The income tax rules clearly state that the tax on an income of Rs 5 lakh is Rs 12,500 (5% of Rs 2.5 lakh). In this case, a rebate of Rs 12, 500 is available under Income Tax Section 87A. Then you choose the option of investment, then you will not have to pay tax of even a single rupee on the income of Rs 10 lakh.

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