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Home Articles How to Save Tax with Salary More Than 5 Lakhs?

How to Save Tax with Salary More Than 5 Lakhs?

IndianMoney.com Research Team | Updated On Monday, July 22,2019, 06:14 PM

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How to Save Tax with Salary More Than 5 Lakhs?

 

 

The deadline to file Income Tax Returns is fast approaching. Yes, July 31st is just 10 days away. If you have not filed taxes, make sure to go through the document checklist to file taxes.

Another big question is how to save taxes with salary more than Rs 5 Lakhs. For the current financial year (FY 2019-20), if your salary is up to Rs 5 Lakhs or less, you enjoy a rebate and can bring taxes to zero.

Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

How to Save Tax with Salary More than 5 Lakhs?

If your salary is Rs 2.5 Lakh or less, you don’t have to pay income taxes. But, you can pay zero taxes even if you earn more than Rs 5 Lakhs.

Take a Look at Income Tax Slabs for Individuals Below 60 Years:

Take a Look at Tax Slabs:

  • If your salary is Rs 2.5 Lakhs or less a year, there are no taxes.
  • For taxable income between Rs 2.5 Lakhs and Rs 5 Lakhs, you are taxed at 5%.
  • If taxable salary is more than Rs 5 Lakh and less than Rs 10 Lakhs, you must pay Rs 12,500 + 20% of income over Rs 5 Lakhs in tax.
  • If income is more than Rs 10 Lakhs, then you are taxed at 30%.

See Also: Income Tax Saving Tips

Save Taxes with Salary More Than Rs 5 Lakhs

Let’s say your taxable salary is Rs 6.5 Lakhs. You have to pay taxes based on income tax slab. You don’t get the income tax rebate.

Income Tax Rebate Under Section 87A:

  • Resident Indians get this rebate.
  • Total income after Section 80 deductions, doesn’t exceed Rs 5 Lakhs.
  • The maximum rebate is limited to Rs 12,500. If total tax payable is less than Rs 12,500, then this amount is given as a rebate under Section 87A. This rebate is applied to total tax payable, before adding the 4% education cess.

If your taxable salary is Rs 6.5 Lakhs, there are ways to bring it to zero. Invest in financial instruments like PPF, SCSS, ELSS, NPS, NSC, Sukanya Samriddhi Yojana, 5 year tax saver FD, Life insurance premiums, home loan principal and so on to enjoy Section 80C benefits. This is a collective deduction under Section 80C up to Rs 1.5 Lakhs a year.

Use tax deductions under Section 80C, if taxable salary is Rs 6.5 Lakhs a year. Use tax exemptions and tax deductions to bring taxable salary to Rs 5 Lakhs or less. The rebate ensure you pay zero taxes.

See Also: 5 Steps to Save Tax - 2018

Save Taxes with Salary More than Rs 5 Lakhs

What if your taxable salary is Rs 8.5 Lakhs a year? Well, you can still pay zero taxes. After the standard deduction of Rs 50,000 a year, the gross income reduces to Rs 8 Lakhs.

You can avail tax deductions of Rs 1.5 Lakhs a year and bring taxable income to Rs 6.5 Lakhs. If you have a home loan, you get a tax deduction up to Rs 2 Lakhs a year under Section 24(b) on home loan interest. Your taxable income is below Rs 5 Lakhs and after the income tax rebate, you pay zero taxes.

Yes, you now pay zero taxes, even if salary is more than Rs 5 Lakhs. However, just saving taxes should not be a priority. Focus on financial goals before investing in tax saving instruments.

See Also: How To Save Income Tax Through Your Family Members

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