Who need to pay TAX and how much?
Understand TAX bracket of India 2011-2012
Understand TAX bracket of India 2011-2012
| Tax payers | Income Tax slab (in Rs.) | TAX |
|---|---|---|
| General | 0 to 1,80,000 | No tax |
| 1,80,001 to 5,00,000 | 10% | |
| 5,00,001 to 8,00,000 | 20% | |
| Above 8,00,000 | 30% | |
| Women | 0 to 1,90,000 | No tax |
| 1,90,001 to 5,00,000 | 10% | |
| 5,00,001 to 8,00,000 | 20% | |
| Above 8,00,000 | 30% |
If you fall in above TAX bracket, these two questions may arise in your mind.
- How much do I invest to save TAX?
- Where do I invest for TAX saving?
In India, Tax planning is broadly divided into two categories.
Tax Saving under Section 80C
The maximum reduction available in Section 80C is Rs. 1,00,000 in any financial year. This is the most common among salaried individual. You can take completed benefit of this section upto Rs. 1 lakh, investment made beyond that is not considered.
Investments made in following products are considered for Section 80C reduction.
- Public Provident Fund (PPF)
- Voluntary Provident Fund (VPF)
- Employer Provident Fund (EPF)
- National Saving Certificate
- Accrued interest on National Saving Certificate
- Life Insurance Premium
- Tuition fees paid for children's education (maximum 2 children)
- Principal component of home loan repayment
- Stamp Duty & Registration charges
- Pension Funds – Sec 80CCC
- 5-Year fixed deposits with banks and Post Office
- Equity Linked Savings Schemes (ELSS)
- Senior Citizens Saving Scheme
Tax Saving beyond Section 80C
If you want to invest more than Rs. 1 lakh (i.e. the reductions under Section 80C are not enough to minimize the general tax liability), then consider this section.
Sec 80D - Medical Insurance premium deduction
An individual who pays medical insurance premium for self or spouse/dependent children is allowed a deduction of upto Rs. 15,000 pa under section 80D. An additional deduction of up to Rs. 15,000 pa is allowed for premium payment made for parents. In case the parents are senior citizens, then the maximum deduction allowed is Rs. 20,000 per year.
Sec 80G - Deduction in respect of donations to certain funds, charitable institutions
Donation given to certain funds, charitable institute is exempted from TAX.
Sec 80GG - Deductions in respect of rents paid (If you are not getting HRA)
If HRA is not included in the salary structure then the salaried individuals can asset rent paid by them for residential lodging.
Sec 24B - Home Loan Interest Payment
Interest payments of upto Rs.150,000 pa are entitled for reduction under Section 24. Whether it is your first home or second home you can take benefits of this. If you and your spouse are both working then there are double tax benefits to be availed by taking a home loan.
Sec 10 (13A) - House Rent Allowance – HRA
HRA should be incorporated in the salaries of individuals who stay in rented houses.
Exemption of Leave Travel Allowance (LTA) or Leave Travel Concession (LTC) (For Salaried)
Transport allowance discharge upto Rs. 800 per month.
Others -
Sec 80DD - Deduction upto Rs. 40,000 pa in respect of maintenance including medical treatment of handicapped dependent.
Sec 80DDB - Deduction upto Rs.15,000 pa in respect of medical treatment of dependant.
Sec 80E - Deduction upto Rs. 25,000 in respect of interest on loan taken for higher education
Sec 80CCF – Tax Saving infrastructure Bonds
Food coupons can release up to Rs.60,000 per year from tax. Example Sodexo vouchers.
Gift Tax
At the end of the year when you are in hurry, don't rush for investment in any product which others/insurance agent advice to you. Take adequate time for TAX planning, do some homework of your own like read reviews on net, ask financial experts on various financial forum etc. Do investment according to your need, for short term investment ( <= 5 years) you can go for ELSS or Infrastructure Bonds etc, for long term you can go for PPF, Home loan etc.
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