Paying tax is the duty of every Indian citizen. The government utilizes the tax that you pay for providing facilities that are used by the country’s public. As per the Income Tax Department of India, only 1.46 crore people have paid income tax, in the financial year 2018-2019. Nearly Rs. 11.17 lakh crore has been produced as revenue from the tax payment. The Central Board of Direct Taxes (CBDT) has simplified the tax collection. It is the responsibility of individuals to pay tax if their income is in the taxable bracket. It is also important for individuals to know how to save tax in India. With the help of the tax-saving provisions, they can grow their savings. It is necessary to know about the tax slab that will give you a fair idea as to how to save tax in India.
Mentioned below are the various income tax slabs as per the latest Income Tax Slab for the annual year 2020-21.
|Total Income||Tax Rate and cess|
|Up to 2.5 lakhs||Nil|
|Rs. 2,50,001-5,00,000||5% of(Total income above 2.5 lakhs)+4% cess|
|Rs. 5,00,000-7,50,000||10%(Total income above 5 lakhs)+4% cess|
|Rs. 7,50,001-10,00,000||15%(Total income above 7.5 lakhs)+4% cess|
|Rs. 10,00,001-12,50,000||20%(Total income above 10 lakhs)+4% cess|
|Rs. 12,50,001-15,00,000||25%(Total income above 12.5 lakhs)+4% cess|
|Above 15,00,000||30%(Total income above 15 lakhs)+4% cess|
There is an additional cess at 4% of the total tax payable that is imposed. There is a surcharge of 10% of the total income that is paid by individuals who are earning more than 50 lakhs annually. The Central Government has made various provisions as per the Income Tax Act, 1961, to reduce the monetary burden.
How can Salaried Individuals Save Tax?
Most of you tend to invest in different products that can put a financial burden on you. In order to reduce this burden, the government also helps in the form of income tax waivers on direct taxes that is levied on the total salary. If you are thinking about how to save tax on your salary, then you can opt for a home loan and avail of the tax benefits as per Section 80C. Getting a home loan comes with dual benefits as it reduces tax liability, apart from giving the relaxation of having your own home. Many housing schemes make housing affordable, while Section 80C reduces financial liability by reducing the tax burden.
With the help of a home loan, you can lower the taxable income as a significant part of the home loan is claimed under Section 80C, which is up to 1.5 lakhs. If you want to know how to save tax on your salary, the above-mentioned tax-saving instrument would surely be helpful. Some of the other tax saving options:
- Opt for Health Insurance: Considering medical inflation and an increase in health insurance, having medical insurance is of utmost importance. These policies lower the financial burden at the time of the medical crisis. You can also claim tax deductions on the premium as per Section 80D of the Income Tax Act, 1961. For people above the age of 60, the limit has been increased to Rs.50000.
|Covered Individuals||Deductions Under Section 80D|
|Health Insurance for individuals, spouse, and children (Below the age of 60 years)||Upto Rs. 25,000|
|For individuals and parents(Below the age of 60 years)||Upto Rs. 50,000|
|For individuals and senior citizen parents||Upto Rs. 75,000|
|For individuals and parents(Both above the age of 60 years)||Upto Rs. 1,00,000|
- Engage in Investments: Investing in capital markets and schemes administered by the government can help you in creating wealth and also helps in saving tax. You can also choose to prefer investment tools such as Equity Linked Savings Scheme (ELSS). Apart from this, you can also invest in 5-year fixed deposit to avail tax exemption benefits without any risk. Investments of up to 1.5 lakhs can be claimed under Section 80C.
- Invest Your Money in Government Schemes: Many schemes are administered by the government that offers high returns on investments apart from tax waivers. You can avail of tax exemptions by investing in the following schemes, under Section 80C of the Income Tax Act:
a) Senior Citizens Savings Scheme(SCSS)
b)National Pension Scheme(NPS)
c) Public Provident Fund (PPF)
- Make Donation to Charity: You can avail of a tax deduction on charitable donations. There is no upper limit applicable, but there are rules that decrease the amount of tax deduction on the charitable contributions. Donations for specific organisations in form of cash amounting to Rs. 2000 are allowed under Section 80G of the Income Tax Act. For making donations to NGOs, the limit is 50% of the donated amount and up to 10% of the total income.
To Sum Up
The best time to start saving tax is the beginning of the annual year. Most people delay it until the end of the last quarter of the year, which is not a good practice. If you plan at the beginning of the year, tax-saving investments can help you in achieving your goals. It is essential to start tax –saving before 31st March and file your returns within due time.
Hope these smart tips will help you in saving more tax.