Page 40 - Banking Finance July 2023

ARTICLE

savings for the future financial needs like children education/ The Income Tax Act consists of various sections which provide
marriage or leading a happy retired life. statutory exemptions that help in saving the TAX payable
to Government. These savings can be diverted for future
The second "I" represents how to use the relevant Income savings as a part of financial planning. The relevant sections
Tax provisions for better financial planning. For this he should of the Income tax act applicable to the salaried people are
know various Income Tax Provisions applicable to the appended below:
salaried class to reduce the tax liabilities. Section 80 (C) -expenses and investments up to maximum
1,50,000/- in a financial year.
The present tax rates as per the old regime is Section 80 (D)-Medical insurance premium and expenses up
as follows: to maximum 75000/- (Self, family and senior citizen parents)
The TAX rates (old Regime) Section 80 (DD)-Medical, Nursing and Rehabilitation
expenses on dependent handicapped (75 k to 1.25 L
Annual income Tax Rate
depending on 40%-80% disability)
Up to 250000 Nil
Section 80 (E)-Interest on Education Loan for spouse and
250001-500000 5%
children - no cap - total interest is exempted.
500001-100000 20%
Section 80 (G)- donations to Charitable Organizations -no
Above 1000000 30%
cap-Total donation is exempted.
Section 80 (GGC)-Donations to Political parties- maximum
Surcharge is payable Extra on Income Tax
is -10% of gross Income
Income Exceeding Rs 50 lakhs up to Rs 1Cr - 10%
Section 80 (TTA)- interest income earned up to maximum
Income Exceeding Rs 1Cr and up to Rs 2Cr - 15%
10 K
Income Exceeding Rs 2Cr and up to Rs 5Cr - 25%
Section 24 (B)-interest exemption on home loanup to
Income Exceeding Rs 5Cr and beyond - 37% maximum 2 L for self-occupied and no cap for let-out
property.
Health & Education Cess Extra 4% on Income Tax and
Section 80 (CCC)-Deduction on any payment made in the
Surcharge
previous year to keep in force a contract for annuity plan of
LIC or any other insurer- Deduction Limit - Rs 1.50 lakh
One should also know how to choose the right investment
Section 80 (CCD-1B)-An additional amount of Rs 50,000 paid
tool to reduce the tax burden. If he acquires expertise in
towards notified pension schemes of government is allowed
this, he can use various statutory exemptions to save tax
over and above 80(C) limit of Rs.1.5 lakh
and divert that amount to future savings.
Now we examine a case to understand to what extent we
can save on tax by applying the above sections.

Case : Mr. Savings Rao-aged 30 years, has an assessable
income of 20 Lakhs. As per the old Tax regime he falls under
30% slab.

Let us workout how much tax can he save if he knows
various sections of Income Tax Act:
Tax liability (including edu cess) on 1,50,000 =
150000X30%x104%=46800/-

Had he saved/invested this amount of 150,000 in any of the
following Financial instruments he could have saved this
46800/- every year !!

BANKING FINANCE | JULY | 2023 | 37