10 LACS INCOME, YET ZERO TAX
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*
- Identify the Total Taxable Salary
- 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
- 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 |
