Income Tax Planning: If your annual income from the job is up to Rs 10 lakh, then you do not need to worry about income tax. You can save full tax. Just for this, you have to do some tax planning. The new financial year has started on 1st April. So if you want to save tax then there is full time for you to plan and execute it. We are telling you what you need to do to save on tax.
There are many rules and provisions of income tax that give you the facility of tax deduction. Among these, section 80C is the most popular. Thereafter, section 80CCD(1B), housing loans or education loans and health policy help you save tax. If you are ready to take full advantage of the above rules of income tax, then you will not need to pay tax on income up to Rs 10 lakh.
Income Tax Planning: Advantages of Standard Deduction
The government gives the benefit of the standard deduction to the people who get jobs or pensions. At present, you get a standard deduction of Rs 50,000 on your total income in a financial year. Its benefit is available to all the employed taxpayers. Thus, if your annual income is Rs 10,00,000, your income after standard deduction will be Rs 9.5 lakh.
Under Section 80C of Income Tax, you can get a deduction by investing Rs 1.5 lakh annually. Section 80C covers life insurance premium, PPF, tax-saving scheme of mutual funds, PPF, tuition fee of two children, principal of the home loan, etc. If you take full advantage of this section, your taxable income will come down to Rs.8 lakh (after deducting Rs.1.5 lakh after standard deduction).
Tax Deduction on National Pension Scheme
An additional deduction of Rs 50,000 per annum can be claimed on investment in the National Pension Scheme under Section 80CCD (1B) of Income Tax. This means that under this section you can get an additional deduction of up to Rs 50,000 in a financial year. In this way, after deducting 50 thousand rupees from 8 lakh rupees, your income becomes 7.5 lakh rupees.
Tax exemption on home loan
Tax exemption is available on the home loan. So if you want to reduce your tax, you can take advantage of the deduction on the home loan. If you claim a deduction of up to Rs 2 lakh on home loan interest in a financial year, deducting Rs 2 lakh from Rs 7.5 lakh, your income comes to Rs 5.5 lakh.
Tax exemption on health policy
An income tax deduction is available on the purchase of a health policy. You can claim a deduction of Rs 25,000 annually by purchasing a health policy for yourself and your family. If you buy a health policy for your elderly parents, you get an additional deduction of Rs 50,000 annually. After deducting Rs 75,000 from your income of Rs 5.5 lakh, your annual income becomes Rs 4.75 lakh.
As per the Income Tax rules, if your taxable income is less than Rs 5 lakh, your tax becomes zero. Under Section 87A of Income Tax, income below Rs 5 lakh is not taxable. In this way, you can reduce your tax to zero on salary up to Rs 10 lakh.