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Personal Finance - Reaching the zero income tax level of ₹5 lakh
22-Jul-2019
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Did you know you could pay zero taxes even if you earn more than 5 lakh? According to the current tax laws, there are three tax slabs depending on your income. To begin with, if your salary is 2.5 lakh or lesser, you don’t have to pay any taxes. If your salary is between 2.5 and 5 lakh, you will be taxed at 5%. If your salary is more than 5 lakh and less than10 lakh the tax liability will be equal to 12,500 plus 20% of total income exceeding 5 lakh and if your income is more than10 lakh then your will be taxed at 30%.

For this financial year, if your salary is 5 lakh, you can earn full rebate on your tax liability of 12,500. In the interim budget, the then finance minister had increased the rebate amount from the erstwhile 2,500. However, you should note that the rebate is not a tax exemption and you will still have to file your returns. The tax slab on income above 2.5 lakh continues for those who earn above 5 lakh. For instance, if your taxable income is 6.5 lakh, you still have to pay tax based on slab rate and you don’t get the rebate.

“Deduction of up to 1.5 lakh for investments made under section 80C covers investments in public provident fund (PPF), employee provident fund contribution, LIC insurance premium, ELSS of mutual funds, NPS contribution, five-year fixed deposits and national savings certificate (NSC). You can also claim the deduction under the limit of 1.5 lakh for payments made for tuition fees of children and repayments of housing loan," said Archit Gupta, founder and CEO, Cleartax. Thus, in the above example, cumulatively you can save 3 lakh and bring your income down to 5 lakh from 8 lakh, according to Gupta.

Source : Live Mint back