If tax is payable on your salary then the company deducts it. However, the final calculation of income tax is done by the Income Tax Department only after filing ITR. The Income Tax Department either deducts tax from your financial year’s earnings or sends you a tax refund.
Income Tax Saving Tips: If you are also a salaried class, then your company might have asked for investment related documents. Actually, every company asks for investment related documents from its employees between December and February. On the basis of these documents, the company calculates income tax for the financial year. If tax is payable on your salary then the company deducts it. However, the final calculation of income tax is done by the Income Tax Department only after filing ITR. The Income Tax Department either deducts tax from your financial year’s earnings or sends you a tax refund.
How to pay minimum income tax?
The question that every employee has is how to avoid income tax or at least how to pay income tax? If you have selected the old tax regime then you will definitely have this question. Tax exemption of Rs 12,500 is available under Section 87A of the Income Tax Act. There are many investment options under the old tax regime. Even if your salary is Rs 12 lakh, you do not need to pay tax of Rs 1.
Planning is necessary to save tax
Chartered Accountant Ashish Mishra says that to save income tax, you need to plan your savings properly. For this you can take advice from any expert. If the company has deducted your tax, then you can get the deducted money back by filing ITR. On salary of Rs 12 lakh, you come under 30 percent tax bracket under the old tax regime. It would be better for you to select the old tax regime on this salary. See the complete calculation…
This is the complete mathematics
1. Any company pays the salary of its employees in two parts. In this, the first is called Part-A and the second is called Part-B. At some places it is called Part-1 and Part-2. Generally, on a salary of Rs 12 lakh, Rs 3 lakh is kept in Part-B or Part-2. In this way your taxable income reduces to Rs 9 lakh.
2. First of all, you subtract Rs 50,000 given by the Finance Ministry as standard deduction. After deducting these, your taxable income reduced to Rs 8.50 lakh.
3. You can claim savings of up to Rs 1.5 lakh under Section 80C of Income Tax. In this, tuition fee, LIC, PPF, Mutual Fund (ELSS), EPF or principal amount of home loan can be claimed. In this way taxable income reduced to Rs 7 lakh.
4. Under Section 24B of Income Tax, a rebate of Rs 2 lakh is available on home loan interest. Now after reducing this, the taxable income reduced to Rs 5 lakh. Rs 12,500 is taxed on income of Rs 5 lakh. But the Income Tax Department gives exemption in this under Section 87A.
More options for tax saving
If your salary is more, then to make the income tax zero (0), you will have to invest Rs 50 thousand in NPS under 80CCD (1B). Apart from this, under Section 80D, you can claim premium for health insurance of children, wife and parents. Premium up to Rs 25 thousand can be claimed for child and wife. You can claim Rs 25000 separately for parents. If your parents are senior citizens then you can claim Rs 50,000 as premium.
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