IndianMoney.com Be Wise Get Rich , India's No.1 Free financial Education Portal
Indianmoney.com - India's No.1 Free Financial Helpline Number
 
Home Blog Blog Income Tax - 'A Penny Saved Is A Penny Taxed'Income Tax - 'A Penny Saved Is A Penny Taxed'

Income Tax - 'A Penny Saved Is A Penny Taxed'

By - IndianMoney.com Research Team    |    Updated On 04 September 2015 |    Financial Planning

Income Tax - 'A Penny Saved Is A Penny Taxed'

Here we have the famous saying “Everything We Have Is Taxed Including Our Patience”.Oh why do we all have to pay taxes? Isn’t there a way we can save on these Taxes? ,Here we have the famous saying “Where There Is A Will There Is A Way”. Here in India the Government has provided us a way to save on our Income Tax by making use of the tax deductions available to us. Mustn’t We Make Use Of This Splendid Opportunity Available To Us? 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  02261816111.

Let us consider the case of Mr  Naveen a 65 year old Elderly citizen. He earns 14 Lakhs per annum working as a manager in a retail firm. Mr Naveen is very frugal and not only pays his taxes on time but also studies all available tax deductions which apply to him. The Income Tax Slab Shown below is the one which concerns him. In order to solve our Taxation queries we can look up the website IndianMoney.com.

Income Tax Slab Rates for Male/Females Between 60-80 Years FY-2012-2013:

 

INCOME

TAX RATE

Upto Rs 2.5 Lakhs

NIL

> INR 2.5 Lakhs-INR 5 Lakhs

10%

> INR 5 Lakhs-INR 10 Lakhs

20%

>INR 10 Lakhs

30%

           

 

 

 

 

 

 

 

Here Had Mr Naveen Not Been Using His Income Tax Deductions These Would Have Been The Rates Which Would Have Applied To Him:     

TABLE 1:

 Heads

 % of Income Tax

 Income Tax

Up To INR 2.5  Lakhs

NIL

      NIL

     > INR 2.5 Lakhs - INR 5 Lakhs

10%

           INR 25000

      > INR 5 Lakhs-INR 10 Lakhs

20%

            INR 100000

             >INR 10 Lakhs

30%

            INR 120000

Total 

 

            INR 245000

                Educational Cess                

 3% of total tax

       INR 7350

Net Tax Payable 

 

          INR 252350

 

Here this would be the Income Tax Rate payable by Mr  Naveen   had   he not used his Income Tax Deductions.   Here Mr Naveen invests a sum of INR 100000 towards Senior Citizens Saving Schemes. This is tax deductible under Section 80C.

Senior Citizens Saving Scheme Under Section 80C:

  • Senior Citizens Saving Scheme is the most lucrative scheme among all small saving schemes and is meant only for senior citizens. Interest income is tax chargeable.

  •  Current rate of interest is 9% per annum payable quarterly.

Here Mr Naveen undergoes treatment for a disease and claims INR 60000 as tax deductions under Section 80DDB. Tax Deductions Under Section 80DDB:

  • Here we have deductions of INR 40000 or the amount actually paid, whichever is lesser for the treatment of a disease or an ailment of the tax payer or a dependent relative .Here the deductions will be reduced by an amount received under insurance of an insurer or if he is reimbursed by the employer. If he is a senior citizen then INR 60000 or the actual expenditure whichever is less.

Here Mr Naveen suffers from a minor physical disability and avails tax deductions of INR 50000. Tax Deductions Under Section 80 U:

  • Deductions of INR 50000 to an individual who suffers from a physical disability including blindness or mental retardation. If an individual has severe disability deductions of INR 1 Lakh are available.

TABLE 2 :                                                                                                                        

 Heads

 

Amounts

             Gross Taxable Income

 

                            INR 14,00,000

Less Senior Citizens Saving Schemes Under Section 80 C

 

                           INR 1,00,000

Less Tax Deductions Under

Section 80DDB

 

                        INR 60,000

          Less Tax Deductions Under

 Section  80 U

 

                         INR 50,000

Total Taxable Income

 

                      INR 11,90,000

 

TABLE 3:

                                                                                                                        

 Heads

 

% of Income Tax

Income Tax

 

                  Up To INR 2.5  Lakhs

NIL

                                      NIL                                   

  >  INR 2.5 Lakhs -INR 5 Lakhs             

10%

                                      INR 25000

 > INR 5 Lakhs – INR 10 Lakhs

20 %

                                      INR 100000

       INR 10 Lakhs

30%

                                      INR 57000

Total Tax

 

                                      INR 182000

Education Cess

3% on Total Tax

                                      INR 5460                                   

         Net Tax Payable

 

                                      INR 187460

 

  • Here we have Net Income Tax Payable INR 252350 (TABLE -1) where Mr Naveen has not done any tax deductions as per the various tax deduction instruments available to him.

  • Here we have Net Tax Payable INR 187460 (TABLE - 3) where we calculate the amount. Mr Naveen has saved when he made use of the tax saving instruments available to him.

  • Here the difference between TABLE 3 and TABLE 1 is the yearly amount Mr Naveen  has saved on tax by making use of  tax saving instruments available to  him.This translates to a sum of INR 64890.

Here we have seen how Prudence, Financial Discipline, Frugality and other qualities have helped Mr Naveen save on his taxes. Don’t you think we all need to inculcate these qualities in us so that they help us not only in saving our taxes but also in our day to day activities . I would like to end this article with the famous quote:“When There Is Income Tax The Just Will Pay More And The Unjust Less ”.