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.
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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.
See Also: Income Tax Saving Tips
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.
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
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.
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