New Delhi2 hours ago
In the budget, Finance Minister Nirmala Sitharaman made 5 major announcements to promote the new tax system. Now you must be wondering whether the new tax system is beneficial or the old one. If your salary is up to 10 lakhs per annum and you are ready to invest, then the old tax system can be beneficial for you. How, let’s know….
Will know the tax calculation from the old tax system later, first know about the announcements related to the new tax system released in the budget and how much tax will have to be paid.
The Finance Minister has given complete tax exemption on the income of 7 lakhs. Tax slab has been changed. Standard deduction of 50 thousand has also been included. Lowered the higher surcharge rate for high earners and increased the tax limit on leave encashment received on retirement. Click to read full news
Now you know how much tax will be levied on your salary in the new tax system?
How will salary up to 7.50 lakh be tax free?
CA Karthik Gupta says that standard deduction of Rs 50,000 has also been included in the new tax system. That is, there will be no tax on salary up to Rs 7.5 lakh. Think of it like this… On a salary of Rs 7.5 lakh, first deduct the standard deduction of Rs 50,000. Remaining 7 lakh rupees. As soon as you reach 7 lakh rupees, you will come under the ambit of rebate and will get complete tax exemption.
If your salary is Rs 10, 15 or 20 lakh, then you will get standard deduction of Rs 50,000 only. Let us know in the graphics how much tax you will have to pay after taking advantage of standard deduction.
This is the talk of the new tax system… Now let’s know how much tax you will have to pay in the old tax system…
0 tax on annual income up to 7 lakh even in old system
If your annual salary is 7 lakhs. Now standard deduction of 50,000, section 80C maximum exemption of 1.5 lakh can be taken in this, total of 2 lakh rupees. Means the remaining income of 5 lakhs. Under section 87(A), tax is exempted on income up to 5 lakhs. That is, no tax on income up to 7 lakhs.
Income up to 10 lakh can be tax free even in old tax option
In this budget, there was no relief in income tax even in the old tax option. Income tax will have to be paid on earning more than 2.5 lakh rupees annually. If your annual income is between 5 lakh to 10 lakh then you will have to pay tax up to 20%. There are many such provisions in the Income Tax Act, from which you can make income tax free. Understand its complete maths…
Now understand how the entire tax will be saved?
Taking advantage of section 87A of income tax, deduct Rs 5 lakh from the income of Rs 10 lakh, then your taxable income will be Rs 5 lakh. In standard deduction, a rebate of up to Rs 50,000 is available. Deducting this amount from Rs 5 lakh, the taxable income will be Rs 4.5 lakh.
Under 80C, you can save tax up to 1.5 lakhs. For this, one has to invest in EPF, PPF, Equity Linked Savings Scheme, Mutual Fund, Sukanya Samriddhi Yojana, National Savings Certificate, 5 year FD, National Pension System and Senior Citizen Saving Scheme. A maximum investment of up to 1.5 lakhs has to be made in any one of these or in a combination of several plans. If you have done this, then subtract Rs 1.50 lakh more from Rs 4.5 lakh. Now the income coming under the ambit of tax will remain Rs 3 lakh.
If you have taken a home loan, then under section 24B of Income Tax, you get tax exemption on the interest of 2 lakhs. Deduct this also from your taxable income. That is, now the income of Rs 1 lakh will come under the ambit of tax.
If you separately invest up to Rs 50,000 annually in the National Pension System (NPS), then under section 80CCD (1B) you will get an additional Rs 50,000 exemption.
By taking a medical policy under 80D, you can save tax up to Rs 25,000. You, your wife and children should be named in this health insurance. Apart from this, if your parents are senior citizens, then you can get an additional discount of up to Rs 50,000 by purchasing health insurance in their name. In this way, you can save full tax on income of Rs 10 lakh.
Even if there is an income of 15 lakhs, tax is only on 10 lakhs.
If your annual income is 15 lakhs, then you will have to pay tax of Rs 1 lakh 87 thousand 500. However, except 87A, you can make income of 5 lakhs tax free by adopting the above provisions. After this, you will have to pay tax only on the income of 10 lakhs.
Even if there is an income of 20 lakhs, the tax is only on 15 lakhs.
If your annual income is 15 lakhs, then you will have to pay tax of 3 lakh 37 thousand 500 rupees. In this too, except 87A, you can make income of 5 lakhs tax free by adopting the above provisions. After this, you will have to pay tax only on the income of 15 lakhs.
Note: Tax calculation is approximate.