Last Day of Filling Tax Return: How to Pay Zero Tax on 10 Lakh Salary Income
How to legally pay zero tax on 10 lakh salary income in India
Introduction:
Paying taxes is a civic duty, but smart financial planning can significantly reduce your tax burden. If you earn a salary of ₹10 lakh annually in India, you can leverage various legal avenues to potentially bring your tax liability to zero. This comprehensive guide will explore strategies, exemptions, and deductions that can help you maximize your savings.
Understanding the Tax Structure:
India’s tax system is structured with progressive tax slabs. For the fiscal year 2023-24, the income tax slabs are divided into categories based on income levels. The government also provides various exemptions and deductions under the Income Tax Act, 1961, which can reduce taxable income.
Key Strategies to Reduce Tax Liability:
- Utilize Section 80C Deductions:
pc. India today - Section 80C allows deductions up to ₹1.5 lakh per annum. Investments in instruments like Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificate (NSC), and Equity Linked Savings Scheme (ELSS) are popular choices.
- Life insurance premiums, tuition fees for children, and principal repayment of home loans also qualify under this section.
- Take Advantage of Section 80D:
- This section offers deductions on health insurance premiums. You can claim up to ₹25,000 for yourself, your spouse, and children, and an additional ₹25,000 for insuring your parents (₹50,000 if parents are senior citizens).
- Claim HRA and Standard Deduction:
- House Rent Allowance (HRA) is a major component of salary and can be claimed if you live in rented accommodation. The amount is calculated based on various factors, including rent paid and salary.
- Additionally, a standard deduction of ₹50,000 is available to salaried employees, which reduces the taxable salary directly.
- Invest in National Pension System (NPS):
- NPS offers additional tax benefits under Section 80CCD(1B). You can claim an extra deduction of ₹50,000 beyond the 80C limit by contributing to NPS.
- Explore Section 80E for Education Loans:
- If you have taken an education loan for higher studies, the interest paid on the loan is deductible under Section 80E. There is no upper limit on the amount, and the deduction is available for a maximum of 8 years.
- Deduction Under Section 24(b):
- Interest paid on a home loan can be claimed as a deduction under Section 24(b). The maximum limit for a self-occupied property is ₹2 lakh per annum.
- Tax-Free Allowances and Reimbursements:
- Certain allowances like Leave Travel Allowance (LTA) and reimbursements for medical expenses are tax-free. Proper documentation and adherence to conditions are necessary to claim these benefits.
Sample Calculation:
Assuming a ₹10 lakh salary, here’s how you can potentially reduce your tax liability:
- Section 80C Investments: ₹1,50,000
- Section 80D (Health Insurance): ₹25,000
- Standard Deduction: ₹50,000
- NPS Contribution: ₹50,000
- Interest on Home Loan (Section 24b): ₹2,00,000
Total Deductions: ₹4,75,000
Taxable Income: ₹10,00,000 – ₹4,75,000 = ₹5,25,000
After applying the applicable tax slab, the tax payable can be significantly reduced, potentially to zero, with appropriate planning and investments.
Conclusion:
Tax planning is not just about saving money; it’s about smart financial planning for the future. By leveraging various exemptions and deductions available under the Income Tax Act, you can significantly reduce your tax liability.
Disclaimer:
Always consult with a certified tax advisor or financial planner to ensure you are making the most of the available benefits and complying with the law.
This blog post is designed to help individuals understand the strategies for reducing their tax liability on a ₹10 lakh salary income in India. It highlights key sections of the Income Tax Act, 1961, and provides actionable steps for effective tax planning. zero tax on 10 lakh salary income
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