The following 5 points will give you the essential information about income tax, brief you on tax benefits, and inform you about the best ways to save income tax.
Find your tax slab: Your income determines the tax slab you fall into. The Tax slab specifies the percentage of your income that counts as your tax liability. Refer to the table below to find your tax slab.
|₹2,50,001 to ₹5,00,000||5% of income exceeding ₹2,50,000|
|₹5,00,001 to ₹10,00,000||20% of income exceeding ₹5,00,000|
|Above ₹10,00,000||30% of income exceeding ₹10,00,000|
Applicable to people under the age of 60.
0. Find your tax exemptions: Income redirected to particular essential expenses is exempt from taxation under Section 10 of the Income Tax Act. Some of these expenses are listed below:
- House rent
- Your children’s tuition and hostel fees
- Income put away in pension funds
- A standard deduction of Rs 40,000
- Mobile reimbursement
- Books & Periodicals
0. Find your tax deductions: Under Section 80D, Section 80CCC, and Section 80CCD of the Income Tax Act, you can claim the following expenses as tax deductions and decrease your tax burden significantly:
- Up to ₹25,000 spent on medical insurance
- Up to ₹1.5 lacs spent on investment schemes like ULIPs, ELSS, Tax-Saving FDs, PPF, Senior Citizens’ Saving Scheme and house loan principal repayment, among others.
- At least 50% of the amount given to charitable organizations - and often 100% of the donation, depending on the category of the organisation. For instance, donations to political parties are 100% exempted from tax.
0. Invest in Exempt-Exempt-Exempt Schemes: Certain investment products, such as ULIPs, come with a triple layer of tax benefit. With ULIPs, the amount invested as premium is eligible for 80C deduction. Additionally, interest earned is tax-exempted and the amount received at maturity is non-taxable as well. ULIPs are among the few market-linked instruments under the range of E-E-E.
1. Do you need to pay advance tax? If your annual tax liability is more than ₹10,000, then you are liable to pay advance tax. Instead of paying a lump sum at the end of the financial year, you must pay your income tax in four instalments throughout the current year.
2. Know about tax refunds and rebates: In case you end up paying more taxes than your tax liabilities, the income tax department refunds the extra amount back to you. The government also offers tax rebates to individuals earning ₹5,00,000 or less. These people must file their income tax returns and pay their due taxes, but the government returns 100% of the tax paid as a rebate.