How Much Income Tax One Can Save in Assessment Year 2023-24

The section 80C of the income tax as well has seen a 25% rise in its standard deduction threshold. In this way, the income taxpayers can make use of their earned income in the assessment year 2020-21 and hence can easily do income tax calculation.

The government for the same has said that the ones having annual income up to Rs.6.5 Lakh may not need to pay any tax on income subject to investment instrument used by him/her such as provident fund.

With basic deductions like interest on a home loan up to Rs.2 Lakh, contribution to National Pension Scheme, education loan interest repayment, medical insurance, etc. a person with high salary can even save a lot from his/her income tax. In this way, careful planning of the investments according to the laws of the income tax one can significantly reduce his/her income tax outgo.

According to the director of EZ Wealth/ Wealth Discovery, Rahul Agarwal, the proportion of the families considered middle class and earning Rs.10 Lakh or more is not much in India, in this way the tax rebates as per the proposed budgetary provisions will impact a lot of salaried middle-class people.

Through income tax calculator, we are here providing an example of the income tax that an Indian resident individual, who is not a senior citizen, earning Rs.10 Lakh annually has to pay:

This is an example of income tax calculation as per the announcements made in budget 2019. However, if one is unaware of the tax saving options given under chapter VI-A of the above example or as per the income tax assessment year 2020-21, then this article will give an understanding of the same. By following these options one can save taxes easily in the assessment year 2020-21:

Tax Saving Options

Section 80C:

The maximum tax exemption allowed under section 80C is not changed and is retained to Rs.1.5 Lakh. Different investment options that can be claimed for tax deduction under section 80C are:

• Employee Provident Fund (EPF)
• Public Provident Fund (PPF)
• National Savings Certificates (NSC)
• 5-year post office or bank saving accounts
• Equity Linked Savings Schemes (ELSS)
• Post Office Senior Citizen Scheme
• Tuition fees of Kids
• National Pension System
• Premiums paid for life insurance plans
• Deposits made against Sukanya Samriddhi Account

Section 80CCD:

The maximum tax deduction allowed under this section is up to rs.50, 000 and one can avail this benefit by investing in government pension schemes such as the National Pension Scheme (NPS).

Section 80D:

The rising price of healthcare treatment has made the purchase of health insurance plans by common man necessary. In addition to this, the purchase of health insurance plan also enables one to save taxes under section 80D of the Income Tax Act. The maximum allowed limit under this section is Rs.25, 000. Moreover, the premium that one pays for health insurance plans of spouse, parents, and children can also be claimed under this section.

Section 80G:

The donations that one makes towards certain charitable institutions, funds, or other government aid are considered for tax deduction under section 80G. However, the donations that an individual makes should not be more than 10% of his/her gross annual income. Moreover, the donations that one gives in cash should not be more than Rs2, 000.

Section 80E:

The repayment of the interest of the education loan is eligible to get tax exemption under section 80E. The education loan that one has taken for the higher studies of self, spouse, or children can be claimed here.

Section 80TTL (or 80TTA):

The interest amount that an individual avails from his/her savings account is considered under this section of an income tax deduction. The interest that one gets from the savings account is included in ‘Income from Other Sources' and the maximum limit allowed for the same is Rs.10, 000.

Section 80TTB:

The interest that senior citizens avail from their savings account, fixed deposits, post office savings, recurring deposit, term deposit, etc. is eligible for tax deduction under section 80TTB. The maximum allowed limit of this section is Rs.50, 000.

These are some of the tax saving options that one can opt for in the assessment year 2020-21. Here we are discussing some of the key points related to budget 2019 that every taxpayer must know:   

Key Points to Know Related to Income Tax Changes as per Budget 2019

• An individual with an annual salary of up to Rs.5 Lakh gets a full tax rebate.
• The house owners are allowed to claim income tax relief on their second house as self-occupied.
• The standard deduction is increased from Rs.40, 000 (in AY2019-20) to Rs.50, 000 (in AY2020-21).
• An individual can avail the profit of up to Rs.2 Crore from the sale of his/her property (residential) for investing in not one but 2 residential properties for avoiding capital gains.

Summing it Up!

The income tax calculation provided in the example above gives a clear understanding of the amendments made in income tax law in budget 2019. Apart from this, the income tax saving options that a taxpayer can use to save taxes in the assessment year 2020-21 are also clearly specified. So, overall the new budget is giving a lot more chances to save tax by improving the minimum income limit eligible for tax.

Helpful Resources: Computation of Taxable Income