How Much Income Tax One Can Save in Assessment Year 2020-21

Budget 2019 has shown a number of changes related to the Income Tax. By using these changes an income tax assesse can make most of his/her earnings in the assessment year 2020-21. With many changes related to the income tax, one of the most useful is a full tax rebate given to an individual with an annual salary up to Rs.5 Lakh. Once these income tax changes come in force, many of the income taxpayers will get the benefit by wisely planning their investment.

Read more
Best Tax Saving Plans
  • High Returns

    Get Returns as high as 15%*
  • Zero Capital Gains tax

    unlike 10% in Mutual Funds
  • Save upto Rs 46,800

    in Tax under section 80 C

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Get Instant Tax Receipts
Save upto ₹46,800 in Taxes Under Section 80C
+91
View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company Tax benefit is subject to changes in tax laws
Get Updates on WhatsApp

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:

Indian Resident Individual (Not a Senior Citizen)

AY 2019-20

AY 2020-21

(A)

 

 

Income

Rs.1, 000, 000.00

Rs.1, 000, 000.00

Standard Deduction

Rs.40, 000 (-)

Rs.50, 000 (-)

Net Income

Rs.960,000.00

Rs.950, 000.00

(B)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Under House Property

 

 

National Rent

Rs.300, 000.00

0

Less

 

 

(1)   Standard Deduction @ 30%

Rs.90, 000.00

0.00

(2)   Interest on house loan

Rs.200, 000. 00

Rs.200, 000. 00

Net Income from House Property

Rs.10, 000. 00

Rs.200, 000. 00 (-)

 

 

 

Gross Income (A+B)

Rs.970, 000.00

Rs.750, 000. 00

Less: Deductions as per chapter VI – A

 

 

Under Section 80C

Rs.150, 000. 00

Rs.150, 000. 00

Under Section 80CCD

Rs.50, 000.00

Rs.50, 000.00

Under Section 80D

Rs.50, 000.00

Rs.50, 000.00

 

 

 

Total Income

Rs.720, 000.00

Rs.5, 00, 000. 00

Gross Income Tax

Rs.56, 500.00

Rs.12, 500.00

Less: Deduction under section 87A

0

Rs.12, 500.00

Balance Tax

Rs.56, 500.00

-

Education Cess @ 4%

Rs.2, 260.00

-

Total Tax

Rs.58, 760.00

0

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

Tax Saving Investment
Save Tax Under Section 80C

Income Tax articles

Recent Articles
Popular Articles
Income Tax Above 10 Lakh

10 Jun 2022

Every year on the 1st of February, the Government of India...
Read more
Investment Declaration with Form 12BB

08 Jun 2022

Tax planning is vital for salaried individuals to streamline...
Read more
NPS Tax Savings

08 Jun 2022

NPS or National Pension Scheme is a voluntary pension plan...
Read more
How is Short-Term Capital Gains Tax Calculated on Shares?

08 Jun 2022

Any property or security in your name is a capital asset for...
Read more
How to Save TDS on Interest with Form 15G and 15H?

08 Jun 2022

Fixed deposits are the safest investment vehicles for most...
Read more
Tax Saving Investments
Tax Saving Investments are an integral part of one’s life as they offer tax deductions under section 80C or...
Read more
Income Tax Above 5 Lakh
Income tax is the tax levied on the income earned by an individual through any source and hence is taxable in the...
Read more
Gratuity Eligibility Before and After Completion of 5 Years
An employee is a person who is hired by an organization to work in a specific field that they have expertise in...
Read more
Cost Inflation Index
We all have read in the school books, never took it seriously as a child, and now it has become the most...
Read more
SBI PPF Calculator
Public Provident Fund or PPF is a complete Government-backed investment scheme offered to all individuals, both...
Read more
top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL