It’s that time of the year again! Yes, ahead of 31st March, there might be some doubts regarding tax pertaining to tax filing and tax returns, particularly amidst the first time taxpayers. Irrespective of the stage of employment you are in, it is imperative to know about the basics of income tax reforms.
Don’t worry! If your income falls under the bracket of 2.5 LPA, you are exempted from paying any tax — according to Budget FY19. Working-class above this income bracket is liable to pay tax depending on their age slab and income. Whilst, this is again changed for FY19–20.
To know what’s new for tax in FY 19–20, click here
Below are a few things that every taxpayer must know:
- Income of Rs 2.5LPA — 5LPA:
For the ones, who earn an income between these slabs will have to pay a tax amount of 5 percent of the final calculated amount plus 4 percent cess. The final calculated amount is the amount you get after deducting 2.5L from your current income. Suppose your income is 4LPA, then the final tax you are liable is Rs. 7,800.
- Income Rs 5LPA — 10LPA:
People earning income of Rs. 500000L to 10L will have to pay tax amount of Rs. 12,500 in addition to 20 percent of the final calculated amount along with 4% cess. Here, final calculated amount is the amount you get after deducting 5L from your current income. Assume an income of Rs. 550,000. The final tax is Rs. 22,500 + 4% cess.
- Income greater than Rs 10LPA:
This category houses people who earn Rs. 1000,001 or more. The tax rate for them is Rs. 112,500 in addition to 30% of the final calculated amount with 4% cess. Here, the final calculated amount is the amount you get after deducting 100,000 from the current income. For example, if you earn Rs. 1200,000, final tax to be paid will be Rs. 172,500 + 4% cess.
- Rebate on tax:
Reading and researching about the various segments which can save your taxes in the future and planning for it can make you future-ready. For FY19, people under this category can apply for rebate while for FY20, they have been exempted from paying any. Various sections dedicated towards such scheme are discussed later in the blog.
- Filing returns:
Even if you do not fall under the tax bracket, filing returns as ‘zero return’ helps build your credit score. Though not mandatory for non-tax payers, doing so would help in future as in when applying for loans, etc. It is mandatory for people with income more than 2.5L for FY19 and more than 5L for FY20.
Note: These above-mentioned rates are applicable only for the age group below 60 years.
Apart from these tax rates, people eligible for paying taxes can exempt themselves by making sound investments. According to section 80C, by investing in PPF (Public Provident Fund), NSC or similar schemes, you can exempt yourself from paying any kind of tax. Besides 80C, sections like 80D, 80GGC and many more can contribute towards saving taxes.
While there are many other ways through which one can reduce the tax burden, we at Pocket HRMS handpicked a few effective tricks mentioned above.
Disclaimer: All the information, views and opinions expressed in this write-up are those of the authors and their respective web sources and in no way reflect the principles, objectives or views of Pocket HRMS.
Sources: The Economic Times, Paisabazaar