By now, you know the FM has substantially reduced the amount you're required to pay as income tax. But are you aware that you could legitimately restrict your tax payout to barely 1% of gross income by using various investment options?
And that the FM has now made it lucrative to be a dutiful child — and parent?
On the face of it, you have to start paying tax the moment your income crosses Rs 1.50 lakh — if you're a man — and Rs 1.80 lakh if you're a woman.
But a little smart investing goes a long way when it comes to tax-saving. Here's an example — you could pay as little as Rs 6,695 for the whole year, saving tax of Rs 50,000 in the process, if you are earning Rs 5 lakh per annum.
That's a saving of almost 88%. For a woman, tax liability can drop even further, to just Rs 3,605.
Here's how. You already have the basic exemption limit. You also have the option of getting upto Rs 1 lakh deducted from taxable income by investing in instruments covered by Section 80C. These include provident fund, equity linked savings schemes, insurance plans, and fixed deposits.
Expenses incurred for tuition fees for your children and repayment of the principal component of a home loan are also included in this. Besides, interest payment of upto Rs 1.50 lakh on a home loan taken to buy a house for personal use is also deductible.
Assuming an interest rate of 10%, taking a loan of Rs 20 lakh will result in an EMI of Rs 19,300, of which a substantial chunk will initially be the interest part. So you can avail of the maximum deduction benefit of Rs 1.50 lakh from your income.
You can save tax while feeling good about yourself. You can claim deduction upto Rs 20,000 to buy a mediclaim policy for your parents, if at least one of them is a senior citizen. Plus, there's a Rs 15,000 deduction against medical cover for yourself, your wife and children.