As soon as the budget season approaches, once again the discussion of Income Tax has started. If media reports are to be believed, taxpayers may get to hear good news after nine years. That is, Finance Minister Nirmala Sitharaman can increase the income tax exemption limit on February 1. At present, no tax has to be paid on annual income up to Rs 2.5 lakh. It will be known on February 1 whether the Finance Minister will give relief to taxpayers or not, but you can save 100% tax on annual income up to Rs 10.5 lakh even in the current system. That means you will not have to pay any taxes. Let’s know how…
If your annual income is between Rs 10 lakh and Rs 20 lakh, then you come in the tax slab of 30 percent. If your annual income is Rs 10 lakh 50 thousand, then you get a standard deduction of Rs 50,000. In this case, your taxable income remains only Rs 10 lakh. The standard deduction is the amount that is directly deducted from your income. Tax is calculated on the remaining income only according to the tax slab. This reduces your total tax payable. If media reports are to be believed then it can be increased to 70 thousand rupees.
Advantage of 80c
Under Section 80C of the Income Tax Act 1961, the taxpayer can avail of tax exemption on investments up to Rs 1.5 lakh in a financial year. In this, you can claim PPF (PPF), LIC (LIC), children’s tuition fee, EPF (EPF), and Mutual funds (ELSS). Also, if there is an ongoing home loan, you can claim it on the interest paid on the principal as well. In this way, now you will have to pay tax on an income of Rs 8 lakh 50 thousand.
Will get benefit from NPS
Under Section 80CCD of the Income Tax Act 1961, a provision for tax deduction has been made on NPS. If you want that there is no tax on the income of 8 lakh 50 thousand rupees, then for this you have to invest in NPS under this section. For this, you will have to invest 50 thousand rupees. That means now your taxable income has come down to Rs 8 lakh. You can also reduce it.
Home loan interest
Income tax exemption is available on both the interest and principal amount paid on the home loan for the purchase of a house. You can avail of interest deduction of up to Rs 2 lakh under section 24B of the Income Tax Act. However, you will get this exemption only if you have spent this much amount on home loan interest payments. Now your taxable income is reduced to Rs 6 lakh only. There is a way to reduce it too.
Medical health insurance
You can claim 75 thousand rupees by using section 80D of income tax. Under this, you can buy medical health insurance for your family for Rs 25,000. Its premium can be claimed. Not only this, you can separately claim a health insurance premium of Rs 50,000 for your parents. In this way, you can claim a total of 75 thousand rupees in the name of health insurance premiums. Now your taxable income remains only Rs 5 lakh 25 thousand.
Donations will save tax
If you do not want to pay any income tax, then you will have to donate Rs 25,000 to any organization or trust. You can claim it under section 80G of income tax. In this way, your taxable income will be Rs 5 lakh. You will not have to pay any tax on this. Income from Rs 2.5 lakh to Rs 5 lakh is taxed at 100 percent. But the government has given an exemption for depositing this amount.