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How to zero income tax on personal income of Rs 10 lakh
Edu-Visor Update 10-01-2022
It is common knowledge that income tax on income of Rs.10 lakh in a personal situation will attract Rs. 1,17,000/-. But, if you plan well, you need not pay any income tax on your personal income of Rs 10 lakh.
In order to promote savings and provide tax relief, the government has enacted several exemptions under various heads for the benefit of individual assessees. However, the basic exemption limit under the Income Tax Act is only Rs. 2.5 lakh but by availing various available exemptions, an individual assessee can pay nil tax up to an income of Rs 10 lakh and thus save his hard earned money. Otherwise, with the help of these deductions and exemptions, one can reduce their tax to a great extent.
The art of saving on income tax is not very difficult but basic knowledge of income tax is essential. Let us see what exemptions can be availed to reduce the tax liability of an individual.
1. If you are a salaried individual, you can avail the deduction of Rs. 50,000/- as 'Standard Deduction' under section 16(ia) of the Income Tax Act.
2. Any person can claim an exemption under section 80C of the Income Tax Act subject to a maximum of Rs 1,50,000 by contributing to EPF, PPF, ELSS, NSC etc. or by paying LIC premium of self or spouse or children.
The payment of tuition fee of two children is also exempted under this section. Contribution to PPF is beneficial in two respects. Firstly, the interest on PPF is completely exempt from income tax under section 10(11) of the Income Tax Act. Secondly, the amount deposited in the PPF account cannot be attached by any authority/court.
3. An additional deduction of Rs 50,000 can be claimed for contribution to the National Pension System (NPS) scheme under Section 80CCD (1B) of the Income Tax Act.
4. If an individual has taken a home loan and he repays interest over Rs 2 lakhs, then he can claim under section 24B of Income Tax upto a maximum amount of Rs. 2 lakhs from his taxable income.
5. Rebate of Rs 25,000 can be availed for payment of health insurance premium for health insurance of self, spouse and children under section 80D of the Income Tax Act. However, if a person pays for the health insurance of his senior citizen parents, an additional exemption of Rs 50,000 can be availed.
6. An individual can claim a preventive health check-up deduction for up to Rs 5,000 per financial year under Section 80D. This preventive health check-up deduction is included within the aforementioned 80D limit of Rs 25,000 for individuals and Rs 50,000 for senior citizens
7. A further exemption u/s 80 DDB of the Income Tax Act towards medical treatment of certain specified ailments availed for self or a dependent can be availed. The dependent can be spouse, parent or sibling. The exemption is available for medical expenses of Rs. 40,000/- per annum. However, in respect of medical expenses of a dependent senior citizen this exemption is Rs. 1,00,000/-.This exemption is over & above the exemption u/s 80D of the Income Tax Act.
8.An exemption can be claimed under 80 G of the Income Tax Act for donation to organisations registered under Section 80G of Income Tax. Section 80G of the Income Tax Act, 1961 offers income tax deduction to an assessee, who makes donations to charitable organisations. This deduction varies based on the receiving organisation, which implies that one may avail deduction of 50% or 100% of the amount donated, with or without restriction.
Thus, the assessee should manage his financial affairs and make investments in such a way that his taxable income is less than Rs 5 lakh so that there is no incidence of income tax mandated in section 87A of the Income Tax Act.
Team Edu-Visor