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Q1. How do I save tax?
A.You can reduce your tax liability by taking advantage of the various tax deductions. Under Section 80C of the Income tax Act, 1961 you can reduce your total taxable income by up to Rupees One lakh by making specified investments. There are other sections of the Act as well like 80 D, 80 E, and Section 24 under which you can reduce your total taxable income.
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Q2. What are the income tax slabs for the current financial year 2008-09 (assessment year 2009-2010)?
A.There are three categories of individuals and the tax rates are given as under:
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Income tax rates for financial year 2008-09 (assessment year 2009-10) as applicable to individuals and HUF |
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Range of taxable income (in Rs.) |
Resident women |
Resident senior citizen (65 years or more during the financial year 2008-09) |
General including HUF (other than women and senior citizens) |
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Upto Rs 150000 |
Nil |
Nil |
Nil |
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From150001 to 180000 |
Nil |
Nil |
10% |
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From 180001 to 225000 |
10% |
Nil |
10% |
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From 225001 to 300000 |
10% |
10% |
10% |
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From 300001 to 500000 |
20% |
20% |
20% |
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From 500001 and above |
30% |
30% |
30% |
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Surcharge @10% on basic tax. if income exceeds 10 lakhs . |
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Education cess @ 3% on basic tax and surcharge. |
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Q3. What are the various categories of deduction?
A.Currently Income tax Act, 1961 provides for following deductions to reduce the tax liability
- Deduction under Section 80C - Various Investments options like Insurance ,PPF , ELSS etc.
- Deductions under Section 80D – Medical insurance premium
- Deductions under Section 80E – Interest on Education loan
- Deductions under Section 80 G - Donation
- Deductions under Section 24 - Interest on loan for purchase of house property
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Q4. How do I calculate my tax liability
A.You can calculate your Net taxable income by reducing the various deductions available under sections 80C to 80U and Section 24 (few examples were given in Question No-3) from your gross total income. (Gross total income is calculated by adding income under five heads –income from salary, house property, capital gains, business and profession & other sources.).You can then use the tax slabs applicable in your case to calculate tax liability for the year.
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Q5. What facts should I consider while making my tax saving decision?
A.It is advisable that Investments in “tax instruments” should never be done merely to save taxes. The decision to invest should be made keeping in view security, long term goals, liquidity and returns (After-tax) like any other investments.
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