Live Market Watch
Taxation

Income Tax for Salaried People in India - Tax Slabs

Income Tax Slab 1 - Zero Tax

Male salaried individuals have to pay zero tax if their net taxable income is Rs.1,80,000 and below. For women the limit is Rs. 1,90,000 while for senior citizens the zero taxation limit is Rs. 2,40,000. According to the income tax dept, only men and women who are 65 years of age and above are considered to be senior citizens. By investing in the most optimum tax saving schemes and using salary allowances, it is possible to bring down both high incomes and tds rates.

Income Tax Slab 2 - Ten Percent Tax

People earning between Rs. 1,80,001 to 5,00,000 fall in this category. Men have to pay 10 percent of the amount greater than Rs. 1,80,000 while women have to pay 10 percent of the amount between Rs. 1,90,001 and Rs. 5,00,000. Senior Citizens pay income tax TDS rates at 10 percent of the amount between 2,40,000 and Rs. 5 lakhs.

Income Tax Slab 3 - Twenty Percent Tax

Indian Citizens earning between Rs. 5,00,001 to 8,00,001 have to pay this income tax rate TDS. In this bracket, salaried men have to pay Rs 14,000 plus 20 percent of the amount between Rs. 5,00,000 and Rs. 8,00,000. The tax slab for women says that women pay Rs. 11,000 + 20 percent of the amount between Rs. 5 - 8 lakhs while senior citizens pay Rs. 6,000 plus 20 percent of the amount between Rs. 5 - 8 lakhs.

Income Tax Slab 4 - Thirty Percent Tax

All TDS India citizens who earn a salary of above Rs. 5,00,000 fall in this category. Men have to pay Rs.54,000 plus 30 percent of the amount greater than Rs. 5,00,000. Women salaried taxpayers have to pay Rs. 51,000 + 30 % of the income more than Rs. 5,00,000 while for senior citizens, the TDS rate is Rs. 46,000 plus 30 percent of the income above Rs.5 lakhs.

Education Cess - In addition to the income tax calculated according to the above income tax TDS rates, a 3% Education Cess will also be charged on the total Income tax paid (not on the total taxable income). If your taxable income exceeds Rs. 10 lacs, a 10% surcharge on the total income tax (not on the total taxable income) is also charged.

Best Tax Saving Investments For Deductions : 
Tax Deductions Through Investments
According to Section 80C of the Income Tax Act, you can reduce your taxable income by Rs.1 lakh by investing in certain investments. These investment can be from any one source or a combination of sources such as Public provident fund, national savings certificate, tax saving mutual funds, pension plans, fixed deposits and life insurance policies. Since, the returns on investment, risk factors, term of deposit and entry load or commissions vary for each type of investment, here is some information about each type to help you select the best according to your needs. They are arranged as the best investments for young salaried tax payers in India according to the ones which I prefer the most –

1. Equity Linked Savings Scheme (ELSS) – 
High Risk. Also known as tax saving mutual funds, an ELSS has the lowest lock in period of 3 years. As the money invested in an ELSS is invested by mutual funds in diversified stocks in the stock market, there is no guaranteed return. Dividends and profits from redemption of units after the term period is tax free. If you buy directly from the mutual fund instead of a broker/distributor, then you pay zero entry load, else entry load is around two percent. Remember, in the long run, the stock markets always see a rise.

2. Bank or Post Office Fixed Deposits – 
Low Risk. Only investments made in scheduled banks for a period of five years or more can be counted as a Bank Fixed Deposit. The interest on such fixed deposits is around 8-9 percent. Income from interest is taxable. Forms are available at bank and post office counters.

3. National Savings Certificate –
Low Risk. It comes in denominations of Rs.100, 500, 1000, 5000 and 10,000. The forms are available at any post office. The maturity period is six years while the interest rate is 8 percent compounded half yearly. If you pay in cash, you will be given the National Savings Certificate then and there. If you pay by cheque, you will have to wait a week before you can collect the NSC certificate from the post office. Interest is taxable.

4. Life Insurance Policy – 
If you are looking for life insurance cover along with investment, then you should choose one such policy that offers a guaranteed return on maturity. If you have a huge loan to pay off and a family it is better to go for a cheap traditional term insurance where you don’t get the premium back but have a huge insurance cover in case of any untoward incident. Premiums can vary and may be paid monthly, quarterly, annually or in a lump sum depending on the policy you choose. Term of the policy can vary from five years till twenty years and more. Money received from an insurance company as proceeds of an insurance policy (by way of an insurance claim, or by maturity) is generally exempt from tax.

5. Government Infrastructure Bonds –
Low Risk. The main problem about these tax saving bonds are that they are open and available only for a fixed period. As many bonds open around February, they miss the January 31 deadline of submitting investment proof prevalent in most offices. The major institutions that offer these bonds are ICICI, IDBI and Rural Electrification Corporation. Term periods can range from five to seven years and interest may vary from 6 to 9 percent per annum. Forms for Tax Saving bonds are available at local distributors that sit on the pavement outside major banks. Companies like ICICI have not come out with tax saving infrastructure bonds for a long period now.

6. Public Provident Fund –
Low Risk. The investment limit is Rs.500 to Rs.70,000 per year - in multiples of Rs.5. The main problem about this scheme, is that you have to remember to invest an amount of at least Rs.500 annually for 15 years or your account will become defunct. Interest rate is 8 percent per annum compounded while the lock in time period is15 years. Another negative point is that as interest rates are on the downside and they are routinely changed by the government they may see a further fall. As interest for the financial year is calculated on the lowest balance after March 5th, make sure you invest before that date. PPF Accounts may also be made in name of your spouse or kids for tax benefit. You can open a Public Provident Fund Account at main post offices, branches of the State Bank of India and some nationalised banks

7. Pension Plans
High Risk. Life insurance companies such as LIC, Tata AIG Life, Aviva, ICICI Prudential and Bharti Axa Life offer such pension plans. On maturity, the investor receives one-third of the amount while the remaining 2/3rd goes into an annuity that provides regular income in the form of pension. Only premiums till Rs.10,000 per year are eligible for deductions from total income. Like Unit Linked Insurance Plans (ULIP’s), a substantial amount of the money invested into Pension Plans goes into paying ‘fund charges’ and commissions. Plus, the annuity received by the insured investor is taxable. Terms can extend from 10 years upwards. Though some return may be guaranteed – a large part depends on the debt market, share market and inflation.

8. Unit Linked Insurance Plan – 
A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. In other words, it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. In the event of the insured person’s untimely death, his nominees would normally receive an amount that is the higher of the sum assured or the value of the units (investments). To put it simply, ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products. ULIPs have been selling like proverbial ’hot cakes’ in the recent past and they are likely to continue to outsell their plain vanilla counterparts going ahead

9. Senior Citizens Saving Scheme – 
– Only people over the age of 60 years and retired personnel over 55 years are allowed to invest in this scheme. This scheme is available at all public sector banks in the country. Investments have to be made in multiples of Rs.1000 till a maximum of 15 lakhs for a period of five years. The deposit made gets an interest of 9 percent per year from the date of deposit which is computed quarterly. Interest is taxable and is deducted at source

 

Tax Deductions For Expenses

Other than the investments above that qualify for a deduction from total income, there are also certain expenses that are tax deductible such as home loans, education loans, tuition fees, medical insurance premium and treatment for specified terminal diseases. Here is some information about the most common expenses which are tax deductible in India.

1. Home Loan –
If you are repaying such a home loan, the principal amount of the loan taken can be counted as a deduction under Section 80C of the Income Tax Act.

2. Tuition Fees of Children – 
The tuition fees of upto two children at school, college and university level may also be taken as a deduction from total income thus reducing the amount on which tax will be calculated.

3. Interest on Home Loan -
According to Section 24, a tax exemption of up to Rs. 1,50,000 is allowed on the interest paid for a home loan in the current financial year.

4. Medical Insurance Premium -
Section 80 D - An amount of up to Rs.15,000 for individuals and Rs.20,000 for senior citizens as premium towards a medical insurance or mediclaim policy is tax deductible. This also includes medical insurance for dependents such as spouse, children or parents on the condition that you paid the premium.

5. Education Loan – 
Section 80E - The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest). Only loans taken for higher education - fulltime studies in any graduate or post-graduate, professional, and pure and applied science courses - may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start repaying the education loan.

6. Donations to a charity - 
Section 80G – All donations to specific charitable organizations such as the Prime Minister’s Relief Fund, CARE and Help Age India are eligible for a 100 percent tax relief. Donations to other charitable institutions and trusts get only 50 per cent tax relief.

7. Other Deductions - 
- Under Chapter VI , there are also other deductions available for handicapped people and medical treatment of disabled dependents (up to Rs.50,000). Also, deduction for medical treatment for specified diseases such as neurological diseases, cancer, AIDS and hemophilia are allowed up to Rs.40,000 for individuals and Rs. 60,000 for senior citizens.

There are other deductions also available on certain other expenses, but since they are not applicable to most tax payers in India, I have not mentioned them. After deducting all the above mentioned investments and expenses from your total gross income, you are left with your ’Net Taxable Income’. The next post will provide information on the tax slabs and tax calculation on net taxable income for different categories of people such as male salaried individuals, women and senior citizens.

Schedule a Meeting With Us

Name
Email
Mobile
City
Captcha Code 

IPO News


Mindspace Business Parks REIT zooms over 10% in debut trade The Rs 4,500-crore public issue of Mindspace Business Parks REIT was subscribed nearly 13 times late last month.
Fri, 07 Aug 2020 22:17:04 +0530


Mindspace REIT lists at 11% premium on issue price of Rs 275 This is the second REIT listing on the exchanges, after Embassy Office Parks REIT which was listed in March 2019 following fund raising of Rs 4,750 crore via IPO.
Fri, 07 Aug 2020 10:22:19 +0530


Mindspace Business Parks REIT to debut on August 7, issue price set at Rs 275 per share Sharad Mittal of Motilal Oswal Real Estate Fund feels from Mindspace, investors can earn a return of 11-12 percent of which 7-8 percent which accrues from rental yield is as stable as debt.
Thu, 06 Aug 2020 12:00:30 +0530


Mindspace Business Parks REIT IPO subscribed 13 times on final day Mindspace REIT public issue consists of a fresh issue of Rs 1,000 crore and an offer for sale of Rs 3,500 crore.
Wed, 29 Jul 2020 18:08:23 +0530


Mindspace Business Parks REIT IPO fully subscribed on second day The issue will close on July 29 and the bids can be made for minimum 200 units and in multiples of 200 units thereafter.
Tue, 28 Jul 2020 19:23:01 +0530


Mindspace Business Parks REIT IPO subscribed 38% on Day 1 From an investor standpoint, the REIT product is a must-have in any portfolio, said Sharad Mittal, CEO at Motilal Oswal Real Estate Fund.
Mon, 27 Jul 2020 19:37:07 +0530


IIFL Securities recommends subscribing to Mindspace Business Parks REIT IPO; here#39;s why IIFL Securities has recommended the issue for investors seeking returns similar to debt asset class.
Sun, 26 Jul 2020 15:56:10 +0530


Mindspace Business Parks REIT IPO opens on July 27; here are 10 things you should know Mindspace has so far raised Rs 2,643.74 crore from strategic and anchor investors, which is 58.74 percent of the total issue size of Rs 4,500 crore.
Sat, 25 Jul 2020 15:02:45 +0530


3 Point Analysis | Rossari Biotech#39;s stellar listing: What should investors do now? The stock opened with a premium of Rs 245, or 58 percent, on the BSE against its issue price of Rs 425 per share, and rose to Rs 710 intraday, i.e. 67.1 percent higher
Thu, 23 Jul 2020 21:20:14 +0530


Rossari Biotech debuts at Rs 670 with 58% premium over IPO price The listing premium was much higher than the grey market premium (of around Rs 160-180 per share) as well as analysts#39; expectations of Rs 130-175 per share.
Thu, 23 Jul 2020 10:03:35 +0530


Subscribe to Rossari Biotech: Ajcon Research Ajcon Research Rossari Biotech Started in CY03 as “Rossari Lab tech”, a partnership firm, Rossari was converted to Company in CY09 by Mr. Edward Menezes and Mr. Sunil Chari.
Fri, 17 Jul 2020 15:09:34 +0530


Yes Bank FPO subscribed 95% so far, QIB remains strong on final day The maximum bids received at lower end of price band of Rs 12-13 per share. In fact, the anchor book, through which the lender had received Rs 4,098 crore, was also subscribed at Rs 12 per share.
Fri, 17 Jul 2020 15:06:55 +0530


Rossari Biotech#39;s Rs 496-crore IPO subscribed 79 times so far on last day The public issue consists of a fresh issue of Rs 50 crore and an offer for sale of 1.05 crore equity shares by its promoters Edward Menezes and Sunil Chari.
Wed, 15 Jul 2020 11:58:45 +0530


Rossari Biotech IPO subscribed 3 times on Day 2 amid retail, QIB interest In past 3 years (FY17-FY20), company has delivered stupendous growth on revenue, EBITDA and net profit level, which grew at a CAGR of 42 percent, 57 percent and 60 percent respectively.
Tue, 14 Jul 2020 14:40:37 +0530


Subscribe to Rossari Biotech: Emkay Global Financial Emkay Global Financial Rossari Biotech is planning to raise ~Rs4.95bn through a mix of fresh issue (Rs500mn, 1.17mn shares) combined with Offer for Sale (OFS) route (~Rs4.45bn, 10.5mn shares), to the public.
Mon, 13 Jul 2020 18:07:11 +0530