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High earning people are struggling to save tax. Under the new tax system the central government will provide Rs. Income up to Rs 7 lakh is exempted from tax, whereas under the old tax system income up to Rs. There is exemption on annual income up to Rs 5 lakh. But if your annual income exceeds both these limits then you may have to pay tax. People have to pay tax on higher income as per the tax slab. Under the old tax system, it was said in the income tax rules that no tax would have to be paid on annual income up to Rs 2.5 lakh. There is a provision of 5 percent tax on income up to Rs 2.5-5 lakh. Whereas 20 percent tax is levied on annual income of Rs 5-10 lakh. There is a 30 percent tax slab on annual income of Rs 10 lakh and above.
You can save tax even on income of Rs 10.50 lakh!
According to this, if your annual income is Rs 10 lakh then you will have to pay 30 percent tax. However, if you want, you will not have to pay a single rupee tax. Not only this, if your salary is Rs 10.50 lakh then you can save the entire amount of tax by investing and taking advantage of exemptions.
How can you save tax on income of Rs 10.50 lakh?
1. The standard deduction is Rs. A discount of up to Rs 50 thousand is available. In such a situation, tax will now be levied on Rs 10 lakh.
2. By investing in schemes like PPF, EPF, ELSS, NSC you can earn Rs. Tax of Rs 1.5 lakh can be saved. Now if we subtract Rs 1.5 lakh from Rs 10 lakh, then Rs 8.5 lakh will come under the tax net.
3. Similarly, if you contribute Rs. 50,000 separately, then under section 80CCD (1B) you will get additional Rs. 50 thousand helps in saving income tax. Now if Rs 50 thousand more is deducted then Rs 8 lakh will come under the tax net.
4. If a home loan is also taken, then tax saving of up to Rs 2 lakh can be done on its interest under Section 24B of Income Tax. If you want Rs. 8 lakh, other Rs. 2 lakh, total tax revenue Rs. Will be 6 lakhs.
5. You can save tax up to Rs 25 thousand by taking a medical policy under Section 80D of Income Tax. This health insurance should have your name, the names of your spouse and children. Apart from this, if you buy health insurance in the name of your parents, you can get an additional discount of up to Rs 50,000. In such a situation, if we get Rs. The total tax liability is arrived at by deducting Rs 75 thousand from Rs 6 lakh. Will be 5.25 lakhs.
6. If you donate to any organization, you can get tax benefit of up to Rs 25,000. Under Section 80G of Income Tax, you can claim tax deduction of up to Rs 25,000 on the amount given as donation. After deducting Rs 25 thousand, your income will now come in the tax slab of Rs 5 lakh. According to income tax rules, no tax will have to be paid on income up to Rs 5 lakh under the old tax system.