Paying income tax has always hurt a common man. But it’s because of us only, the Government is able to provide all amenities on a holistic level. Hence, we all should not only pay appropriate income tax on our taxable income but also file income tax return for that particular fiscal year. As per government data, only 1.5% of total population base pays income tax. The major reason of this is 93% of the total population earns income less than INR 2.5 lacs.
Income Tax Slab Rates for 2017-18
Below is the income tax slab for Individual tax payers of HUF for both Men and Women younger than 60 years:
- Income up to INR 2,50,000 – No Tax
- Income from INR 2,50,000 – INR 5,00,000 – 5% Tax
- Income from INR 5,00,000 – INR 10,00,000 – 20% Tax
- Income greater than INR 10,00,000 – 30% Tax
*Surcharge of 10% and 15% of income tax levied in case income is more than INR 50 lacs and INR 1 Crore respectively.
How to Save Income Tax?
While paying income tax, the government has provided us certain benefits because of which we are able to reduce the amount payable to the government as tax. Below is the step by step guide which can help you to plan saving income tax for 2017-2018 fiscal year.
Under this section you can save tax up to INR 1.5 Lacs by following options:
- Buy Life Insurance
- Invest in PPF
Note that if you invest partial amounts in all or any of these options, the maximum amount under 80C can be INR 1.5 lacs only. This means if you are a man or woman earning up to INR 4 Lacs per annum, you need not pay any tax as you can save INR 1.5 lacs in all/any of the options mentioned above including your PF contribution.
In case you wish to invest in insurance policies focused towards health of your/ spouse/ dependent children, you can save up to INR 25,000 from your table income. Moreover, if you pay INR 30,000 for your parents’ health insurance, you can additionally save INR 30,000 from your taxable income.
HRA (House Rent Allowance)
By submitting Rent Receipts against the HRA received in your salary, only if you stay in a rented accommodation can be a big saviour for you. The amount which is the least from the following 3 options simply become non taxable:
- Actual HRA received from employer
- Actual Rent Paid – 10% of basic salary
- 50% of basic salary in case you live in metro (Delhi/Mumbai/Chennai/Kolkata) or 40% of basic in case of other city.
However, if you do not get HRA from your employer, the minimum amount of the following becomes non taxable INR 60,000 Rent Paid – 10% of total income 25% of total income.
By donating some amount to charity, not only earns you good wishes but also help you save tax on that amount. The amount you donate is 100% or 50% Non-Taxable based upon to which organisation you have donated. You should note that any amount donated above INR 2,000 should not be given in cash to become eligible under this section.
For the amount paid against the interest on loan taken for higher education becomes eligible under this section. This is eligible for a maximum of 8 years or for the number of years till when the interest is paid – whichever is lower.
In case you have taken loan from bank for your home, then the interest paid up to INR 2 lac becomes non taxable. Apart from this, if you are a first time buyer, you can claim additional INR 50,000 as non taxable in case all the below conditions are met:
- Housing loan was sanctioned in 2016-17.
- The loan value is not more than INR 35 lacs
- The Registered Value of house is less than INR 50 lacs
There are organisations where certain amount from CTC are given as perks. Example:
- INR 2,200 for food coupons
- INR 32,000 as Car Maintenance & Fuel Allowance
- INR 15,000 as Medical allowance
- INR 10,000 as Driver salary (in case you have hired one!)
- And certain percentage of salary as Leave Travel Allowance.
Producing bills made against all these headers may provide you additional component from your hard earned income going as tax.
We suggest you to maintain your Salary Slips and Income Statements all together while calculating the Taxable Salary component. You can also reach out to a Chartered Accountant for his expert advice. Concluding, we can totally realise today – Saving money from Income tax is definitely an ART!