Filling Returns

10 LACS INCOME, YET ZERO TAX

Did you realise that upto the extent of Rs. 10 Lacs one need not pay any tax? It’s a dream come true for every individual whose major part of savings gets eaten up in taxes. It is said a Penny Saved, Is a Penny earned.

In the recent budget, the government has announced additional benefits for investments in pension funds, medical insurance, etc which has further boosted the Net Take Home pay.

Steps towards a Tax Free income*

  1. Identify the Total Taxable Salary
  2. Identify exemptions and deductions which can be claimed

Tax Savings - Exemptions & Deductions

Following are the approximate exemptions and deductions (for salaried individuals) which one can claim in order to reduce the tax outgo

Details

Amt / Rs.

Basic Exemption Limit

2,50,000

Exemption

 

Standard Deduction

50,000

Leave Travel Allowance

50,000

House Rent Allowance – Least of the following as HRA exemption

a. Total HRA received from your employer

b. Rent paid less 10% of (Basic salary +DA)

c. 40% of salary (Basic+DA) for non-metros and 50% of salary (Basic+DA) for Metros

-

Reimbursement / Allowances

 

Company Car Allowance

25,000

Phone / Internet / Communications

25,000

Food Coupons

33,000

House Property Loss (Interest under sec.24)

2,00,000

Deductions

 

Sec 80 C

1,50,000

Sec 80 CCD (NPS - Self Contribution)

50,000

Sec 80 D – Medical ( Self/Family)

50,000

Sec 80 EE (Additional Deduction for Interest on Home Loan

50,000

Sec 80 TTA (Deduction on Savings Account Interest – Up to 10,000)

10,000

Sec 80 G (one may avail deduction of 50% or 100% of the amount donated)

-

Sec 87A (net taxable income up to Rs. 5 lakhs)

12,500

Case Study Example

We have considered few scenarios in order to understand how Tax Planning works and how one should use exemptions and deductions in order to save on taxes

  1. Total Salary as Rs. 10 Lacs

Particulars

With Housing Loan

 

Salary

10,00,000

Less:-

Standard Deduction

50,000

Less:-

Exemptions

 

 

HRA

0

 

 Net Salary

9,50,000

Less:-

Interest (SOP)

-2,00,000

 

Gross Total Income

7,50,000

Less:-

Deductions

 

 

Sec 80 C

-1,50,000

 

Sec 80 D (Includes both for Self + Parents)

-50,000

 

Sec 80 CCD  - NPS

-50,000

 

Total Income

5,00,000

 

Tax slabs (Calculation)

 

 

0 to 2.5 Lacs

Nil

 

2.5 to 5 Lacs

12,500

 

5 to 10 Lacs

-

 

10 Lacs & Above

-

 

Gross Tax Payable

12,500

Less:-

Rebate Under Sec 87A

-12,500

 

Net Tax Payable

Nil