Tax planning is not rocket science if not methodically in a purpose-based approach. Save taxes even easier for them to rs 10 lakh that are worth a year or less. The tax savings scheme under the 80C section, NPS is below the 80CCD (1B) section, education or home loans, and even insurance premiums can help you achieve zero taxes in certain years if your annual salary is less than Rs 10 Lakh per year.
For some with income of rs 10,000 per year and interest income of rs 20,000, annual income will be reduced to Rs 9.7 Lakh taxable income due to standard deduction. The government allows flat standard reduction for individuals that generate salary or retirement income. It was reinstalled in the 2018 budget. For 2022-23, namely Rs 50,000.
Tax-saving investment based on Section 80C can reduce taxable income more than Rs 1.50 lakh. Other Rs 50,000 can be stored by investments in the national pension scheme under the 80CCD (1B) section. These two reductions will bring taxable income to 7.7 lakh rs per year. Reducing a home loan, if any, has the potential to shave other significant pieces of taxable income.
Assuming a home loan or home rental allowance (HRA) will further reduce the taxable income of RS 2 lakh, effective taxable income now down to Rs 5.7 lakh. Health insurance, which is very important after Covid, can reduce taxable income with other RS 25,000. Taxpayers can separately claim RS 50,000 others are paid for elderly parents’ insurance. After claiming this reduction, taxable income will drop to Rs 4.95 lakh.
After the taxable income is under the RS 5 Lakh, it will not be taxed because it is qualified for full rebates under the 87A section. After using all of these deductions, taxpayers with RS 10 lakh per year can effectively reduce their tax obligations to nil.