Rule 3: Take Full Advantage Of Tax Deductions

Various tax deductions are available under the I.T. Law. One should try to avail of the benefit of these deductions for each and every member of the family. The various investment options that offer tax rebates should be reviewed keeping in mind various aspects like the age factor, etc. A check-list should be prepared of the various deductions permissible under the Income Tax Law (See Chapter X). Check whether each and every tax paying family member is claiming these. If special care is taken of this aspect, then it is legally possible to save a lot of income tax.

It is suggested that a chart be prepared of tax, deductions and exemptions for every family member for purposes of overall tax planning of the family. It would be worthwhile if a group tax chart is prepared containing details relating to income tax, tax deductions, net taxable income, tax deducted at source, rebate of tax, and, finally, the net amount of income tax paid in the case of each family member. With the help of this one simple chart, you can achieve substantial tax planning as it will show up those who have not made optimum use of tax deductions.


TAX DEDUCTIONS


Tax payers now enjoy straight deduction in terms of Section 80C in respect of stipulated investments and expenditure to the tune of ` 1.5 Lakh. Moreover, such investment can be made in any single stipulated item, or a combination of the stipulated avenues of investment. Similarly, within the above limit the investment can also be made in Pension Plans in terms of Section 8OCCC. .


TAX RATES


For a Resident Senior Citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of the previous year, i.e., born on or after April 2, 1939 but before April 2, 1959)—

Net Income Range

Income-Tax Rates

Surcharge

Health and Education Case (HEC)

Up to Rs. 3,00,000

Nil

Nil

Nil

Rs. 3,00,000 — Rs. 5,00,000

5% of (total income minus Rs. 3,00,000) [see Note 1]

Nil

4% of income-tax

Rs. 5,00,000 — Rs. 10,00,000

Rs. 10,000 + 20% of (total
income minus Rs. 5,00,000)

Nil

4% of income-tax

Rs. 10,00,000 — Rs. 50,00,000

Rs. 1,10,000 + 30% of (total
income minus Rs. 10,00,000)

Nil

4% of income-tax

Rs. 50,00,000 - Rs. 1,00,00,000

Rs. 13,10,000 + 30% of (total
income minus Rs. 50,00,000)

10% of income- tax [see Note 2]

4% of income-tax and surcharge

Above
Rs.1,00,00,000

Rs. 28,10,000 + 30% of (total income minus Rs.1,00,00,000)

15% of income- tax [see Note 2]

4% of income-tax and surcharge

 

For a Resident Super Senior Citizen (who is 80 years or more at any time during the previous year, i.e., born before April 2, 1939)—

Net Income Range

Income-Tax Rates

Surcharge

Health and Education Cess (HEC)

Up to Rs. 500,000

Nil

Nil

Nil

Rs. 5,00,000 — Rs. 10,00,000

20% of (total income minus
Rs. 5,00,000)

Nil

4% of income-tax

Rs. 10,00,000 — Rs. 50,00,000

Rs. 1,00,000 + 30% of (total income minus Rs. 10,00,000)

Nil

4% of income-tax

Rs. 50,00,000 - Rs. 1,00,00,000

Rs. 13,00,000 + 30% of (total income minus Rs. 50,00,000)

10% of income- tax [see Note 2]

4% of income-tax and surcharge

Above
Rs. 1,00,00,000

Rs. 28,00,000 + 30% of (total income minus Rs. 1,00,00,000)

15% of income- tax [See Note 2]

4% of income-tax and surcharge

 

For any other resident individual (born on or after April 2, 1959), any non-resident individual, every HUF/ AOP/BOI/artificial juridical person—

Net Income Range

Income-Tax Rates

Surcharge

Health and Education Cess (HEC)

Up to Rs. 2,50,000

Nil

Nil

Nil

Rs. 2,50,000 — Rs. 5,00,000

5% of (total income minus Rs. 2,50,000) [see Note 1]

Nil

4% of income-tax

Rs. 5,00,000— Rs. 10,00,000

Rs. 12,500 + 20% of (total income minus Rs. 5,00,000)

Nil

4% of income-tax

Rs. 10,00,000 — Rs. 50,00,000

Rs. 1,12,500 + 30% of (total
income minus Rs. 10,00,000)

Nil

4% of income-tax

Rs. 50,00,000 - Rs. 1,00,00,000

Rs. 13,12,500 + 30% of (total
income minus Rs. 50,00,000)

10% of income- tax [see Note 2]

4% of income-tax and surcharge

Above
Rs. 1,00,00,000

Rs. 28,12,500 + 30% of (total income minus Rs. 1,00,00,000)

15% of income- tax [see Note 2]

4% of income-tax and surcharge

 

Notes:
1.         Rebate under section 87A
- A resident individual (whose net income does not exceed Rs. 3,50,000) can avail rebate under section 87A. It is deductible from income-tax before calculating Education Cess. The amount of rebate is 100% of income-tax or Rs. 2,500, whichever is less.

2.         Surcharge - Surcharge is 10% of income-tax if net income is more than Rs. 50 lakh but not more than Rs. I crore. If net income is more than Rs. I crore, surcharge is 15% of income-tax. Surcharge is subject to a marginal relief. If net income exceeds Rs. 50 lakh, the amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 50 lakh by more than the amount of income that exceeds Rs. 50 lakh. Likewise, if net income exceeds Rs. 1 crore, the amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax and surcharge on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

3.         Health and Education Cess (HEC) - It is 4% of income-tax and surcharge.

>> Alternate minimum tax - Tax payable by a non-corporate assessee cannot be less than 18.5% (+SC+HEC) of “adjusted total income” as per section 115JC

 
 
More Topics ...
Rule-1 : Spread Your Income Among Your Family Members under Income Tax Act.
Rule-2 : Take Full Advantage Of All Tax Exemptions under Income Tax Act.
Rule-3 : Take Full Advantage Of Tax Deductions under Income Tax Act.
Rule-4 : Exempted Incomes under Income Tax Act.
Rule-5 : Don’t Overdo It — Keep Tax Planning Simple under Income Tax Act.
 
 
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