Pay no Income Tax despite earning Rs 7.25 Lacs a Year
[email protected]                                                                            Call Us @ +91 9716711090

How to pay no Income tax despite earning Rs. 7.25 Lacs a year?

no income tax despite earning

Introduction:
The Finance Bill, 2020 has come up with a lot of benefits for small and medium taxpayers in such a way that, even those earning Rs. 7.25 Lacs a year need not shell out a single rupee of tax provided they make some eligible investments.

Calculation:
The Finance Act, 2020 allows a rebate up to Rs. 12,500/- for any person earning net taxable income up to Rs. 500,000/-. Thus, effectively for a person earning up to a Net Taxable income of Rs. 5 Lakhs need not pay any tax. Further, if the person is opting for the old rate scheme, he is also allowed a deduction under Chapter VI-A of Rs. 2,25,000/- excluding any eligible donation u/s 80G of the Act.

As a result, such person can earn a gross total income of Rs. 725,000/- (Rs. 500,000 Net Total income + Rs 225,000/- deductions).

How to do your tax planning?

If you are someone who earns Rs. 60,000/- a month, do the following to ensure that you need not pay any tax.

1. Make sure to have deductions under Section 80C at least up to Rs. 150,000. This may consist of deduction made by employer towards Provident fund contribution, Life insurance premium, Principal repayment of housing loan, Investment in PPF (Public provident fund) or maybe education fees of children. These are the most commonly taken options.

2. An additional amount of Rs. 50,000/- is allowed as a deduction for investment in National pension scheme. You can approach your bank for more information on the same.

3. Taking medical insurance of your family is extremely important as a precautionary measure. Additionally, as a tax incentive a deduction up to Rs. 25,000/- is allowed against payment of medical insurance premium provided such payment is made by a mode other than cash.

The following table makes it very easy to understand the above

Gross Income - 725000
Less Deductions U/C VIA - -
80 C EPF/LIC / PPF etc

150000 -
80CCD(1B) - NPS 50000 -
80D 25000 225000
Taxable Total income - 500000
Tax on the above - 12500
Less Rebate u/s. 87 A - 12500
Total tax payable Rs - NIL


So on a total income of Rs. 725000, the resident individual need not pay any tax, if he invests as above, which an average individual will definitely do.

Disclaimer: This write up is not intended to be a professional advice to anyone, therefore neither the Author nor the Organization he represents accepts any responsibility whatsoever and hence no liability can arise for any losses, claims or due to the contents of this write up. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. The opinion is the personal opinion of the author and the firm P P Jayaraman & Co will not in any way be responsible for any claim etc.

Get Regular WhatsApp Updates

Related Articles

Due date to pay tax for Senior Citizens for FY 2019-20 as per Income T...
Taxpayers Charter, Faceless Appeal, and Faceless Assessment- An Overvi...
Key Changes in Income Tax Policies
CBDT issues Guidance on Mutual Agreement Procedure (MAP) for the benef...
Offshore funds managed in India exempt from business connection in Ind...
12 Major Income Tax Amendments for FY 2020-21 (AY 2021-22)

Recent Blogs

E-TDS TCS Return
No interest for GST tax paid under wrong head – Jharkhand HC
Annual compliance to be done by private limited company
Faceless Assessments under Customs from 1st November,2020
List of Trademark Status and meaning of such status
Summary of Recent Enhancements on GSTN Portal
GST Action Plan for Sep 2020
Investor Education and Protection Fund | Complete Overview
Key highlights of 41st GST Council meeting

Our Services

Contact