You Live In Taxing Times-A Person Doesn't Know How Much He Has Until He Has To Pay Tax On It

One must have heard the famous saying " Taxes Are Paid In The Sweat Of Every Man Who Labors ". No matter how old one is, one continues to pay taxes. Taxes are the fruit and sweat of one’s labour. One can notice particularly in the older generation how they still love to pay taxes. It gives them a sense of satisfaction that they are contributing to the growth and development of our Great Nation. Doesn’t one need to learn from the elders of our nation why one needs to pay those income taxes? One needs to consider how the Government would get funds to construct bridges, flyovers, railway tracks and the great ships and aircraft that guard our maritime boundaries. You must have heard the famous quote by Franklin Roosevelt the former US President.

" Taxes Are The Dues That We Pay For The Privileges Of Membership In An Organized Society ". Care To Know Why You Need To Pay Those Income Taxes?. The team of Financial Planners at IndianMoney.com are always there for you to plan your taxation 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.

Individual Who Is More Than 80 Years At Any Time During The Previous Year: (Financial Year 2013-2014)

	Income Tax Slabs	Income Tax Rates	Education Cess
1	Where the total income does not exceed INR 5,00,000	NIL	NIL
2	Where the total income exceeds INR 5,00,000 but does not exceed INR 10,00,000	20% of the amount by which the total income exceeds INR 5 Lakh	2 % of Income Tax
3	Where the total income exceeds INR 10,00,000	INR 100000 + 30% of the amount by which the total income exceeds INR 10,00,000	2 % of Income Tax

Education Cess :

Here Education cess on Income tax and Secondary and Higher Education cess on income tax shall be levied at the rate of 2% and 1% respectively. Let us consider Mr Mahesh an elderly gentleman 82 years of age earns INR 12 Lakhs per annum working as a consultant in the Garment and fabrics industry. Mr Mahesh is well aware of his income tax deductions and makes use of them. One can calculate the income tax Mr Mahesh would have payed had he not made use of the income tax deductions available to him..

Table 1 :

Heads	% Of Income Tax	Income Tax
Up To INR 5 Lakhs	NIL	NIL
INR 5 Lakhs - INR 10 Lakhs Here you have a range of 500000 To 1000000 which gives us 500000 (1000000-500000) You then calculate 20% of INR 500000	20%	INR 1,00,000 (A)
Mr Mahesh earns INR 12 Lakhs Here you have a range of 1000000 To 1200000 which gives us 200000. You then calculate 30% of INR 200000	INR 1,00,000 + 30%	INR 60,000 (B)
Total		INR 160000 (C)=(A)+(B)
Educational Cess	3% Of Total Tax (3% Of INR 160000)	INR 4800
Net Tax Payable		INR 164800

From this example one can notice that had Mr Mahesh not made use of the income tax deductions available to him he would have payed an income tax of INR 164800.
 

What Are The Deductions Available Under Section 80 C Of The Income Tax Act Which Is Used By Mr Mahesh?

Senior Citizens Saving Scheme

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 Mahesh invests INR 1 Lakh in the senior citizens saving scheme and gets deductions under Section 80 C of the Income Tax Act. This proves to be a lucrative method for him to save on his income tax.

What Are The Deductions Available Under Section 80 DD Of The Income Tax Act Which Is Used By Mr Mahesh?

Heads	Amount
Gross Taxable Income	INR 1200000 (A)
Less Senior Citizens Saving Schemes Under Section 80 C	INR 100000 (B)
Less Tax Deductions Under Section 80DD	INR 50000 (C)
Less Tax Deductions Under Section 80G	INR 100000 (D)
Total Taxable Income	INR 950000 (A) - ( B+C+D)

Table 3

Heads	% Of Income Tax	Income Tax
Up To INR 5.0 Lakhs	NIL	NIL (A)
INR 5 Lakhs - INR 10 Lakhs Here you have a range of 500000 To 1000000 which gives us 500000. You then calculate 20% of INR 450000 since the net taxable amount is INR 950000 after deductions as shown in Table 2.	20%	INR 90000 (B)
Total Tax		INR 90000 (A)+(B)
Education Cess	3% Of INR 90000	INR 2700 (C)
Net Tax Payable		INR 92700

I would like to end this article with the famous saying " We Are Taxed Twice as Much by Our Idleness. Three Times As Much By Our Pride, And Four Times As Much By Our Foolishness. So better be in a hurry and file those income taxes.