ITR Income Slabs And Saving Tax

• Introduction
• What is an Income Tax Return?
• Income Tax Slabs
• Various Tax Slabs
• Ways to save income tax
• Conclusion

Introduction

You can fear it but you have to bear it!

Yes, that is the fact especially when you talk about Income Tax.

There is no rocket science behind the tax that you must know. It is simple but the only thing to always keep a watch on the rates applicable for tax on the annual income.

Income tax does not keep everyone happy because at times the savings becomes difficult with the higher amount of outflow of income in taxes.

Ruhi made Rs.6 lakhs a year. She had a family to take care of and she was a single mother. The expenditures were more than the amount she could save for her daughter’s future. This made Ruhi worried because a portion (Rs.33,800/- as per the old tax regime) of her income was to be given away as income tax. The amount is without any tax deduction/exemption.

Saving this amount for the future could have helped Ruhi accumulate fund for her daughter’s wedding or education.

Income Tax has its own implication. Let us read further to understand what is ITR?

What is an Income Tax Return?

Income Tax Return is the form through which the individuals inform the Income Tax Department about their income and taxes to be paid in the year. The information pertains to a particular financial year starting from 1st April till 31st March to file the return. Your income can be from:

• Income from Salary.
• Profits and Gains from businesses.
• Income from rent.
• Income as interest on deposits.

Who doesn’t want to multiply the income in every possible manner. Filing income tax returns is one of the ways in which you can save money through taxes. Some of the best ways to save income tax is by buying life insurance policy, investing in ELSS, National Pension Scheme or others. After investing the money, you get the benefit of income tax deduction which you can show at the time of filing ITR. Ultimately, your goal of mindfully saving the money is accomplished.

Let us now see what are the different Income Tax Slabs?

Income Tax Slabs

In India, the income tax department levies taxes on individuals depending on the slab system. It implies that different tax rates are applied for different income ranges. Higher the income, more will be the income tax rates for the taxpayers. The system of income tax slabs brings uniformity for all without being unfair to anyone. In common the tax slab rates change with every budget. The classified categories of taxpayers include:

• Super Senior Citizens (age more than 80 years).
• Senior Citizens (age between 60 to 80 years)
• Individuals with age less than 60 years.

Various Tax Slabs

1. Income tax Slab for FY2020-21/AY 2021-22 (Applicable for New Tax Regime)

The tax rates under the new tax regime is same for all the individual categories (super senior citizens, senior citizens, and individuals with age less than 60 years). Here are the rates of income tax applicable for the New Tax Regime:

According to the New Income Tax Slab, the individuals with income less than or equal to Rs.5 lakhs will be eligible for tax rebate.

2. Income Tax Slab Rate – Old Tax Regime.

Tax slab for individuals below age 60 years and HUF.

3. Income Tax Slab Rate-Old Tax Regime.

Tax Slab for individuals between age 60 to 80 years and Super senior citizens above 80 years.

After viewing the income tax slabs, here is the compilation of the new and the old tax regime.

Keeping the tax deduction in mind there are ways in which you can save income tax. Let us explore the possible financial solutions that can protect your money from income tax deductions.

Ways to save income tax

You must save income tax to use your money mindfully in a manner that brings more advantage to you. These are the ways to save income tax:

1. Buy Life Insurance Policies: You can buy any of these life insurance policies to avail income tax deduction maximum up to Rs.1.5 lakhs. All the premium paid under the policy in a year is eligible for deduction under Section 80C of Income Tax Act, 1961. Apart from the premium, the maturity benefit is tax exempted under Section 10(10D) of Income Tax. These are the policies you can buy to save income tax:
2. Term Plan: A term plan is a high life cover available at an affordable premium. The cost of insurance is less. It gives death benefits to the nominee after the life insured passes away. The premium (up to Rs.1.5 lakhs in one year) as well as the death benefit amount is tax-free.
3. Endowment or Savings Insurance Policy: The savings plan is insurance cum savings insurance policy. It allows you to accumulate funds for future goals like buying a house or car.
4. Pension Plan: Pension plan is an insurance policy that comes with life cover as well as guaranteed income benefit after you retire. The premium paid for pension plans is eligible for tax deduction.
5. Child Plan: A child plan is an insurance policy that provides life cover and option to save money for your child’s future. You can buy the policy to save for the purpose of marriage or education. The policy continues to support the child even after the sudden demise of the parents.
6. ULIPs: ULIPs are insurance cum investment plans that help you grow your money after investing for a few years. It also provides life cover and insurance tax benefit.
7. Health Plans/Critical Illness Insurance: The critical illness insurance provides lump sum benefit on the diagnosis of the illness like cancer, renal or cardiac diseases. It gives income tax benefits under Section 80D.

2. Buy a health insurance policy: Different from a common critical illness policy that pays on the diagnosis of critical illness, a health insurance policy pays for the hospitalization expenses. It can help you save tax under Section 80D of Income Tax Act, 1961.
3. Interest earned on Savings Account: The interest earned on savings account is exempted from tax up to Rs.10,000/-. This amount is cumulative of all savings bank accounts.
4. Other provisions for deduction under Section 80C: Some other provisions for deductions under Section 80C include:
5. Public Provident Fund
6. National Pension Scheme
7. Equity Linked Savings Scheme
8. Home Loan’s Principal Amount
9. Fixed Deposit for 5 years
10. Children’s tuition fees
11. Sukanya Samriddhi Account

Conclusion

Saving tax is not about averting the duty to contribute to the development of the nation. It is about putting your money wisely so that you save to secure your future financially. The choicest way to do so is buying a life insurance policy that provides life cover to protect family as well as offer tax deduction under Section 80C of Income Tax Act. For more details on income tax and life insurance read here.