Income Tax: Tax will not be charged even if the income is Rs 10 lakh, you just have to do this work..
As the salary of employees increases, the worry and burden of tax also increase. Every year you are paying more tax. In such a situation, such methods are useful for you, by which you can save on tax. The good thing is that you have many such options with the help of which you can save your tax liability.
How much income is tax exempted?
If you want more exemption on income tax then you will have to choose the old regime. According to the Income Tax Act, no tax will have to be paid on annual income up to Rs 2.5 lakh under the old tax regime. There is a provision of 5% tax on income of Rs 2.5 to 5 lakh. 20% tax has to be paid on income of 5 to 10 lakhs and 30% tax on income of more than 10 lakhs.
How will income of Rs 10 lakh be tax-free?
You will have to choose the old regime to make an income of Rs 10 lakh tax-free. Under this, first, you will have to bring your total income below Rs 5 lakh. How can this be done? let's watch-
1. First of all you will get a standard deduction of Rs 50,000. With this, your income increased to Rs 9.5 lakh.
2. Now under Section 80C you get tax exemption up to Rs 1.5 lakh. That means, if you invest in the schemes under this section like EPF, PPF, ELSS, and NSC, then you can avail exemption by showing investment up to Rs 1.5 lakh, then your income becomes Rs 8.5 lakh.
3. Now if you have taken a home loan, you get a rebate of up to Rs 2 lakh on interest payment under Section 24B. With this, your income increased to Rs 6.5 lakh.
4. Now you get a direct rebate of Rs 50,000 on investing in the government's NPS (National Payment Scheme). That means your income has become Rs 6 lakh.
5. Now by taking a medical policy above this Rs 6 lakh, you can avail tax exemption of Rs 25,000. Such a provision has been given in section 80D. Apart from this, you get a separate deduction of up to Rs 50,000 on health insurance taken in the name of your parents. That means if you saved Rs 75,000 directly, your income became Rs 5 lakh 25 thousand.
6. You will get a discount of Rs 25,000 on donations. According to Section 87A, if you donate, you can save tax on donations up to Rs 25,000. With this, your income will come to Rs 5 lakh.
7. Your tax liability will be Rs 12,500 on income up to Rs 5 lakh, but here section 87A will be applicable, under you will get a rebate of Rs 12,500, that is, you will not have to pay tax of even a single rupee.
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