Income Tax Saving: Finance Minister Nirmala Sitharaman presented the country’s budget for the seventh time on 23 July. During the presentation of the budget, the salaried class has once again been disappointed.
The Finance Minister has increased the standard deduction by 50 percent along with the change in the tax slab under the New Tax Regime. Now under the new tax regime, you can claim Rs 75,000 instead of Rs 50,000 as standard deduction. Apart from this, now 10 percent tax will have to be paid on income of 7 to 10 lakhs. Earlier, 10 percent tax had to be paid on income of 7 to 9 lakhs.
After the increase in standard deduction, under the New Tax Regime, you will not have to pay a single rupee tax on an income of Rs 7.75 lakh. But if your income is more than this i.e. Rs 10.50 lakh, can you save income tax? The answer is yes, you will not have to pay a single rupee tax on an annual income of Rs 10.50 lakh. If you also want to save income tax, then for this you will have to select the Old Tax Regime.
There will be a direct benefit of Rs 49,400.
In the old tax regime, you can claim many types of exemptions. On the other hand, if you go to the new tax regime, then you will have to pay 15 percent tax on this income. Under this, 15 percent tax has to be paid on income of 10 to 12 lakhs. After standard deduction, the tax on this income becomes Rs 49,400. Let’s know how you can save this tax in the old tax regime?
No tax on income up to Rs 2.50 lakh
Under the old regime of income tax, there was no tax on income up to Rs 2.5 lakh. But here we will tell you how you can avoid income tax liability on income up to Rs 10.5 lakh. That is, you will not have to pay even a single rupee tax on income up to Rs 10.5 lakh. Let’s know how?
Also Read: ITR Filing: Deadline for filing ITR extended to 31 August? Income Tax Department itself told the truth
1. If your annual income is Rs 10.50 lakh, then how can you avoid paying income tax? Here we will tell you the complete calculation of this. On this income, you will first get a discount of Rs 50 thousand under standard deduction. Due to this, your taxable income of Rs 10.50 lakh is reduced to Rs 10 lakh.
2. Now out of the income of Rs 10 lakh, you can claim savings of up to Rs 1.50 lakh under Section 80C of the Income Tax Act. Under Section 80C, you can claim investments made in LIC, PPF, Sukanya Samriddhi children’s tuition fees, mutual funds (ELSS) and EPF. Under this, you can also claim the principal amount of home loan. In this way, your taxable income is reduced to Rs 8 lakh 50 thousand.
3. After this, you can claim Rs 2 lakh under Section 24B of the Income Tax Act. You get this exemption on the interest amount of home loan. After claiming these two lakh rupees, your taxable income is reduced to Rs 6.50 lakh.
4. After this, you can claim medical health insurance up to Rs 25000 under section 80D for tax saving. If your parents are senior citizens, then you can claim Rs 50000 for their health insurance. In this way, if you claim a premium of Rs 75000, then your taxable income will be reduced to Rs 5.75 lakh.
5. Now you can invest Rs 50,000 in National Pension System (NPS) to reduce your tax liability. You can claim this under 80CCD (1B). That means now your taxable income here has come down to Rs 5.25 lakh. You can reduce it even further.
6. After this, if you donate Rs 25,000 to any organization or trust, you will get the benefit under Income Tax Section 80G and your taxable income will be reduced to Rs 5 lakh.
7. On income between Rs 2.50 lakh and Rs 5 lakh, tax of Rs 12,500 is levied at the rate of 5%. But the government gives you a rebate on this. In this way, your tax is reduced to zero rupees.
Let us tell you that under the old tax regime, there is a provision of 5% tax on income of Rs 2.5 lakh to Rs 5 lakh. After this, there is a provision of 20% tax on annual income of Rs 5 to 10 lakh. Apart from this, there is a tax liability of 30% on annual income of Rs 10 lakh and above.
