Income tax in India works on a slab-based system. As per the old tax regime, individuals who earn more than Rs. 5 lakh per annum need to pay tax as per their slab. If your income is between Rs. 5 lakh to Rs. 10 lakh, you will need to pay 20% of your taxable income to the government. For those who have opted for the old regime, it allows you to claim exemptions under different sections. Here is how you can utilise these exemptions to ensure zero tax payable even if your income is Rs. 7.75 lakh.
- Step 1: The standard deduction that you can claim against your income has been increased to Rs. 50,000. Once you claim this, your taxable income reduces from Rs. 7.75 lakh to Rs. 7.25 lakh.
- Step 2: You can get a deduction of up to Rs. 1.5 lakh under section 80C of the Income Tax Act. You can do this by investing the entire sum into your public provident fund (PPF), or dividing it between your PPF, employee provident fund (EPF), tax-saving mutual funds, and tuition fees paid for your children’s education. Thus, your taxable income gets reduced to Rs. 5.75 lakh.
- Step 3: Invest some money in the national pension scheme. Under section 80CCD (1B) of the Income Tax Act, you can claim a deduction of Rs. 50,000 in this category. With this, your taxable income now reduces to Rs. 5.25 lakh.
- Step 4: Under section 80D of the Income Tax Act, you can claim medical insurance for self of up to Rs. 25,000 as deduction. This reduces your taxable income to Rs. 5 lakh.
- Step 5: If you have interest income from other sources, you can claim a deduction on it as well, under section 80TTA of the Income Tax Act. The deduction amount is Rs. 10,000, which reduces your taxable income to Rs. 4.9 lakh.
- Step 6: Computing for an income of Rs. 4.9 lakh will give you tax liability of Rs. 12,000. For income less than Rs. 5 lakh, you can claim tax rebate under section 87A, up to a total of Rs. 12,500. Thus, you will not have to pay any income tax.
Here is a table illustrating how this works:
Tax calculation particulars |
Amount in Rs. |
Gross salary |
7,75,000 |
Less: Standard deduction |
(50,000) |
Net salary |
7,25,000 |
Income from other sources |
10,000 |
Gross taxable income |
7,35,000 |
Less: Deduction under section 80C |
(1,50,000) |
Less: Deduction under section 80CCD (1B) |
(50,000) |
Less: Deduction under section 80D |
(25,000) |
Less: Deduction under section 80TTA |
(10,000) |
Total income |
5,00,000 |
Income tax |
12,500 |
Less: Rebate under section 87A |
(12,500) |
Total tax payable after rebate |
0 |
Surcharge @ 10%/ 15% |
0 |
Total tax payable after surcharge |
0 |
Education cess @4% |
0 |
Total tax, surcharge, and education cess |
0 |
So, this is how you can claim the full benefit of section 80C, 80D, 80TTA, and 80CCD(1B), and not have to pay any tax.
