Tax Calculations are so complicated...I am so busy Where do I have the time for all these tax calculations. It is normal to hear people complaining about the amount of taxes they pay. Come on have a heart...Even Mr Obama the US President pays his taxes. Taxes are the price we all pay for civilization. We must have all heard a famous quote." The Best Things In Life Are Free But Sooner or Later The Government Will Find A Way To Tax Them. I would like to remind all of you that the team of Financial Planners at IndianMoney.com are always there for you to plan your Tax Planning needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 022 6181 6111.
See Also: 5 Important Income Tax Changes
Annual Income |
Tax Rate |
Up To INR 2 Lakhs |
NIL |
INR 2 Lakhs - INR 5 Lakhs |
10% |
INR 5 Lakhs - INR 10 Lakhs |
20% |
INR 10 Lakhs and above |
30% |
Let us consider the following case to understand taxation. Mrs Sumita married and 40 years old works for an Advertising and Marketing firm and has a pay package of INR 12 Lakhs per annum. Let us consider Mrs Sumita does not avail of her Income tax deductions. What Would Be The Tax She Would Pay?
Table - 1
Heads |
% of Income Tax |
Income Tax |
Up To INR 2 Lakhs |
NIL |
NIL |
INR 2 Lakhs - INR 5 Lakhs |
10% |
INR 30000 (a) |
INR 5 Lakhs - INR 10 Lakhs |
20% |
INR 100000 (b) |
INR 10 Lakhs and above |
30% |
INR 60000 (c) |
Total |
INR 190000 (a)+(b)+(c) |
|
Educational Cess (190000*3%) |
3% of total tax |
INR 5700 (d) |
Net Tax Payable |
INR 195700 |
Here we notice that Mrs Sumita would have to pay INR 195700 as Income Tax if she does not avail of the income tax deductions.
What does Mrs Sumita Do about Her Tax Deductions?
Mrs Sumita and her spouse have taken a home loan of 30 Lakhs .Mrs Sumita is the co applicant of the home loan
However Mrs Sumita has taken up only INR 50000 deductions on the Principle Component of her EMI. Her Tax deductions under these sections are a sum of INR 2 Lakhs
Here Mrs Sumita has Tax deductions under Section 80 CCF a sum of INR 20000 invested in Infrastructure Bonds.
Under this section Mrs Sumita claims a tax deduction for mediclaim benefits for herself, spouse and children. Here the tax deductible amounts are INR 15000 per annum
Here Mrs Sumitha wants to financially secure her 8 year old sons college Education.She wants a corpus of about 10 Lakhs for her son’s college education. She pays a premium of INR 50000 towards this policy, tax deductible under Section 80C.
Table - 2
Heads |
Amounts |
Gross Taxable Income |
INR 12,00,000 (a) |
Under Section 24 interest portion of EMI is tax deductible up to an amount of 1.5 Lakhs |
INR 1,50,000 (b) |
Principal Portion of EMI of INR 50000 under section 80C |
INR 50000 (c) |
Infrastructure Bond deductible 80 CCF |
INR 20000 (d) |
Medical Benefits 80 D |
INR 15000 (e) |
LIC Child policy |
INR 50000 (f) (g)=(b)+(c)+(d)+(e)+(f)=285000 |
Total Taxable Income |
INR 9,15,000 |
Heads |
% of Income Tax |
Income Tax |
Up To INR 2 Lakhs |
NIL |
NIL |
INR 2 Lakhs - INR 5 Lakhs |
10% |
INR 30000 (a) |
INR 5 Lakhs - INR 9,15,000 |
20% |
INR 83000 (b) |
Total Tax |
INR 113000 (a)+(b) |
|
Education Cess |
3% on Total Tax |
INR 3390 (c) |
Net Tax Payable |
INR 116390 |
See Also: How To Pay Zero Tax?
Here I hope this article has proved to be highly informative to understand how tax deductions can save our precious monetary resources and also gain us returns as we see in the Infrastructure Bonds, LIC Policy and medical reimbursements when we need them. We all know how costly medical treatment is and premiums paid towards this not only guarantee us tax benefits but also timely medical aid when we need it. On a lighter note "Beware Of Strong Drink It Can Make You Shoot At Tax Collectors And Miss" .Here I would like to remind our readers to lookup IndianMoney.com for their queries regarding Income Tax.
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