The end of every financial year in March sees a scramble to collect proofs of investment,
submit bills to claim reimbursement for conveyance and even make tax declarations.
However, most people do this with scarce awareness of how much investment they need
to show in order to qualify for income tax benefits. This means that they do not
make timely investments throughout the year. Thus, when the accountant announces
that a large part of the salary will be deducted for taxation, it leaves people
confused.
The first step is in knowing the tax slab under which one's income falls. This will
help clear the confusion about how much income tax can be saved per year. As per
the Union Budget 2015-2016, there were no major tax changes announced and they are
largely in keeping with the tax slabs announced in the last financial year. The
income tax slabs are split into categories: General, women, senior citizens and
very senior citizens (80 years and above who can be show an income).
|
Tax slab (in Indian Rupees)
|
Tax charged (in % of annual income)
|
|
0 to 2,50,000
|
NIL
|
|
2,50,001 to 5,00,000
|
10%
|
|
5,00,001 to 10,00,000
|
20%
|
|
10,00,001 and above
|
30%
|
The tax slabs for senior citizens (age 60 to 79) are as follows:
|
Tax slab (in Indian Rupees)
|
Tax charged (in % of annual income)
|
|
0 to 3,00,000
|
NIL
|
|
3,00,001 to 5,00,000
|
10%
|
|
5,00,001 to 10,00,000
|
20%
|
|
10,00,001 and above
|
30%
|
Similarly, the tax slabs for very senior citizens (age 80 and above) are as follows:
|
Tax slab (in Indian Rupees)
|
Tax charged (in % of annual income)
|
|
0 to 5,00,000
|
NIL
|
|
5,00,000 to 10,00,000
|
20%
|
|
10,00,000 and above
|
30%
|
Investing to save tax
There are ways to bring down the taxable component of one's income so that one pays
lower taxes at the end of the financial year. Birla Sun Life Insurance (ABSLI) has
excellent tax saving plans that allow for tax exemption under Sec 80C of the Income
Tax Act, 1961. The tax benefit is available for premiums paid restricted up to 10%
of the actual sum assured and up to Rs 1,50,000 in one financial year.
However, life insurance is not to be viewed through the prism of an investment or
a tax saving option.