The two main bulletins made within the Union Budget for 2023–24 have been that the FM elevated the tax exemption restrict underneath the brand new tax regime from ₹2.5 lakh to ₹3 lakh and that a normal deduction of ₹50,000 was launched underneath the brand new tax regime, which was beforehand out there solely underneath the previous tax regime. However, these adjustments will take impact beginning subsequent 12 months i.e. for AY 2024-25. Do salaried individuals know that they might cut back their efficient tax fee to zero in the event that they earn a gross wage of Rs. 10 lakh in a fiscal 12 months? We’ll discover out from our specialists.
Dr. Suresh Surana, Founder, RSM India
Every salaried worker can be subjected to tax as per the marginal slab charges on his complete revenue (i.e. Gross Total Income much less eligible deductions). Thus, for a salaried taxpayer, his wage revenue would type a significant element, he can be required to have in mind another revenue corresponding to curiosity revenue from banks, rental revenue, and so on. for the aim of computing his tax. Salaried people with no different main supply of revenue need to cope not solely with rising inflation but in addition with the rise in the price of dwelling. Hence, with a purpose to optimise their tax planning, workers must effectively utilise the out there deductions and exemptions underneath the IT Act. Accordingly, any salaried individual with a gross wage of Rs. 10 lakhs could declare the next usually claimed deductions underneath the previous tax regime in order to deliver their efficient tax fee to zero:
1. Standard deduction of Rs. 50,000 underneath part 16(ia) of IT Act.
2. Deduction underneath part 80C of IT Act of upto Rs. 1,50,000 in direction of funds made to Life Insurance Premium, Provident Fund, National Savings Certificate, Housing Loan Principal, and so on.
3. Deduction underneath part 80CCD (1B) of IT Act of Rs. 50,000 on contribution to National Pension Scheme notified by Central Government
4. Deduction underneath part 80D of the IT Act of Rs. 25,000 (Rs. 50,000 in case of senior citizen) in direction of funds made to Health Insurance Premium.
5. Deduction underneath part 24(b) of the IT Act on the subject of curiosity on housing mortgage upto Rs. 2,00,000 pa whereas the compensation of the principal element of the mortgage could possibly be claimed as deduction u/s 80C as aforementioned.
After claiming all of the deductions out there to the salaried individual, if the entire revenue of the taxpayer is upto Rs. 5,00,000, then such taxpayer can be eligible to assert rebate underneath part 87A of IT Act of upto Rs. 12,500 pa.
The under illustration offers a quick overview on the tax computation for a gross wage of Rs. 10 lakhs:
ParticularsAmount (Rs.)Amount (Rs.)Income underneath the Head ‘Salary’ Gross Salary10,00,000 Less: Standard Deduction u/s 16(ia)(50,000)9,50,000 Income from House Property Interest Paid/ Payable on Housing mortgage (assuming on Self occupied property)(2,00,000)(2,00,000) Income from different Heads is assumed to be NIL– Gross Total Income 7,50,000 Less: Deductions underneath Chapter VI-A Deduction u/s 80C LIC premium 40,000 Contribution to Public Provident Fund 70,000 Tuition Fees of kids 5,000 Repayment of Housing Loan 50,000 Deduction u/s can be restricted to most Rs. 1,50,000 (1,65,000) (1,50,000) Deduction u/s 80CCD(1B) Contribution to National Pension Scheme(50,000)(50,000) Deduction u/s 80D Mediclaim premium paid for Self and Spouse25,000 Parents (aged 50 years and above)25,000(50,000) Net Taxable Income 5,00,000 Total Tax @ relevant marginal slab fee of 5% 12,500 Rebate u/s 87A (Tax payable or Rs. 12,500 whichever is decrease) (12,500)Total Tax Payable NIL
Apart from the above, salaried taxpayers may additionally avail exemptions u/s 10 on the subject of House hire allowance, go away journey concession, go away encashment, and so on. relying upon their wage elements as specified of their CTC. The limits for such deductions would usually be computed primarily based on sure wage elements corresponding to Basis Salary, Dearness allowance, and so on.
Please notice {that a} salaried particular person who opts for the brand new proposed tax regime, having an revenue of Rs. 700,000 (i.e. after a normal deduction of Rs. 50,000) may have NIL tax legal responsibility.
Note: Every salaried particular person would have the choice of selecting between the previous and new tax regime and going ahead for Financial Year 2023-24, it’s introduced that the proposed new tax regime can be the ‘default’ tax regime.
Archit Gupta, Founder and CEO, Clear
Theoretically, it’s potential to pay “0” tax on an revenue of ₹10L. Even if the wage is ₹12L, tax payable may be introduced right down to “0”.
How can one save tax on a wage above ₹10 lakh? – The superb method to save taxes is to make the most of numerous tax saving deductions and tax saving bills. The concept right here is to deliver down the taxable revenue to ₹5L whereby part 87A is triggered and a taxpayer will get the reduction underneath it.
Which tax regime may also help deduct the tax quantity to zero on ₹10 lakh wage or above? – The previous tax regime is the one which may deliver down the tax payable to “0” by deducting from the taxable revenue which is ₹10L. Under the brand new tax regime there’s a very restricted scope to scale back from the taxable revenue which is nearing or at ₹10L.
Salary Earning ₹10 lakh – Salary ₹12 lakhName of deduction Std Deduction – Given By Default to all salaried employees-50,000.00 -50,000.00 9,50,000.0011,50,000.00Home Loan curiosity on self occupied property underneath part 24(b) Max Dedn – ₹2,00,000.00-2,00,000.00-2,00,000.00 7,50,000.009,50,000.0080C – Max deduction of 1,50,000-1,50,000.00-1,50,000.0080D – Medical Insurance for Self 25,000 + Medical Insurance for folks 25,000 (Non Sr Citizen)-50,000.00-50,000.0080CCD(1B) – Contribution to NPS by self – Max Deduction ₹50,000-50,000.00-50,000.00 5,00,000.007,00,000.0080EEB – (Interest on mortgage paid to accumulate electrical automobile) – Max Deduction ₹1,50,000–1,50,000.00 5,00,000.00 5,50,000.0080CCD(2) – Employer contribution to NPS Max 10% of fundamental salary–50,000.00Taxable Income5,00,000.00 5,00,000.00Tax on the revenue 12,500.0012,500.00Less: 87A rebate-12,500.00-12,500.00Tax payableNILNIL
Further revenue discount continues to be potential if LTA and HRA has been taken
CA Vitesh Waikar, Sr. Tax Consultant at Fintoo
Since the announcement associated to ‘Zero Tax For Income Up To Rs. 7.5 Lakhs’ underneath the brand new tax regime within the Budget 2023, it has turn out to be one-of-the most talked about matters and has additionally been lined by most information channels. However, with regards to the advantages associated to ‘Zero Tax’, even the previous tax regime is at least the brand new one.
Though it has not been within the limelight, however even the previous tax regime means that you can declare the next deductions and convey down your tax legal responsibility to Zero in case your revenue is as much as Rs. 10 Lakhs;
• Standard Deduction of Rs. 50,000/-
• PT (Professional Tax) – Rs. 2,500/-
• Deductions Under 80C – Rs. 1,50,000/-
• Interest on SOP – Rs. 2,00,000/-
• Additional NPS – Rs. 50,000/- and
• Deduction For Mediclaim Under 80D – Rs. 50,000/-
Using the utmost capping underneath the talked about deductions, you possibly can deliver down your web taxable revenue to Rs. 5 Lakhs and thus, additionally cut back your tax quantity to zero underneath the previous tax regime.
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