A person living in India has its entity depending on the tax he is paying. However, the amount you have to pay for tax is determined by your profile, income, and tax slab. For example, NRI's have to pay tax on the income earned, whereas the salaries professionals pay tax on the salary amount.
The government uses the income tax deductions for various activities, including civic development. However, there are different ways by which the government allows citizens to save their taxes too. Under the different sections of the IT Act, you can get tax deductions, which is quite helpful. You can claim the deductions from the taxable income by the year-end while filing for the taxes.
Income tax slabs for the Indian citizens
Income tax is altogether a miscellaneous concept and involves various procedures. People must keep checking the income tax slab for FY 2020-21 for better knowledge. However, before knowing the maximum tax deductions, it is vital to understand the income tax slabs.
Income tax slabs in India for citizens under 60 yrs
1. For income up to Rs. 2,50,000 is not taxed
2. The tax rate for income range Rs. 2,50,001- Rs. 5,00,000 is 5% on the total income (after deducting 2,50,000)+ 4% Cess
3. The tax rate for income range Rs. 5,00,001- Rs. 10,00,000 is 20% of total income (After deducting 5,00,000)+ Rs 12,5000 + 4% Cess
4. The tax rate for income above Rs. 10,00,000 is Rs. 1,12,500 + 30% of total income (after deduction of 10,00,000)+ 4% Cess
The tax rate for individuals between 60-80 years
1. Income up to Rs. 3,00,000 is non-taxable
2. The tax rate for income range Rs. 3,00,001- Rs. 5,00,000 is 5% of total income (after deduction of Rs. 3,00,000)+4% Cess
3. The tax rate for income range Rs. 5,00,001- Rs. 10,00,000 is Rs. 10,000+ 20% of total income (after deduction of 5,00,000) + Cess
4. The tax rate for income range Rs. 10,00,000- Rs. 1,10,000 + 30% of total income (after deduction of Rs. 10,00,000 + 4% Cess
The tax rate for individuals above 80 years
1. Income up to Rs. 5,00,000 is non-taxable
2. The tax rate for income range Rs. 5,00,001- Rs. 10,00,000 is 20% of total income (after deduction of Rs. 5,00,000)+4% Cess
3. The tax rate for income range Rs. 10,00,000 is Rs. 1,00,000 + 30% of total income (after deduction of 10,00,000) + Cess
After determining the income tax slabs depending on the annual income, you can choose the total taxable income. For example, if your salary is Rs. 5, 00,000 PA, then the taxable income will be Rs. 2, 50,000. The reason behind this is your income falls under the Rs. 2, 50,000- Rs. 5, 00,000 income tax slab.
Moreover, a 5% tax will be applied on Rs. 2,50,000. It means that you have to pay Rs. 12,500+ 4% Cess. It is the standard deduction for FY 2020-21. If you claim the deductions, it becomes easy to reduce the taxable income.
Deductions under income tax
It is easy to claim the deductions based on the list of the expenses and the investments. For example, health insurance, life insurance, FD, PPF, everything helps with tax deductions. Moreover, with an 80c limit for FY 2020-21, the tuition fees, home rent, earnings, and home loans are eligible for deductions.
Latest Income Tax Slab Rates FY 2020-21 / AY 2021-22
Every year during the budget, new tax deductions and claiming norms are proposed. Subtracting the deductions from the Gross Income helps in reducing the taxable income. In 2020, the finance minister of India presented a new tax regimen.
The tax slabs sparked many debates that helped the tax assesses. The taxpayers can go for it by forgoing 70 tax exemptions. With optional lower income tax rates for the individuals, the finance minister kept the income tax slabs of 15% and 25%. These slabs were added along with the 10%, 20%, and 30% rates.
Income Tax Deductions under New Tax Regime FY 2020-21
If you want to pay income tax under the new lower personal income tax regime, you have to let go of the tax breaks from the old tax structure. Here are some of the tax exemptions as well as the deductions that are unavailable for those who choose the old tax structure.
1. Section 80C deduction claims for provident fund, life insurance premium, and other specified investments like ELSS and PPF
2. Leave travel allowance
3. Standard deduction of Rs. 50,000
4. Deductions under 80TTA and 80TTB
5. Interest paid on the housing loan under Section 24
6. According to the new tax regime, Income from House Property is not allowed
7. Tax break on the interest paid on education loan is not claimable under section 80E
Significant tax deductions to claim
According to the rules, you can either opt for a tax deduction as an individual or HUF or Hindu Undivided Family. Along with the income tax deductions in other broad sections, you can get added tax benefits if you are a first-time homeowner.
Besides, as per the income tax slab for FY 2020-21, if you apply for a joint loan with your spouse, you can get tax benefits. Here is a broader look at the sections as well as the limits that you can claim for tax deductions.
It is one of the 80c deduction for FY 2020-21 and is the vital section where it is easy to save on the income tax deductions. You can claim for a minimum amount of Rs. 1.5 lakh. Some of the different instruments that cover this section include PPF, EPF, insurance, tuition fees for kids, etc.
Moreover, you can claim deductions against the principal amount you have to repay for your home loan under 80C.
Therefore, having a clear idea of the integrated calculations and knowing the tax reduction claims help reduce income tax deductions. Working with the tax agents helps in a better understanding of the tax filings and returns. With correct tax calculation, it becomes easy to get the best tax deductions.
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