This financial year 2012-13 is going to be end on 31^{st} March 2012 and most of us must be busy in calculation of income tax they have to save or pay. As the financial year is coming to end the decision that where to save tax is becoming confusing. In this article I will discuss the various methods where one can invest to save tax. But first of all let us discuss the income tax exemption limits for various categories:

**1. For Females: up to 2 lakh no tax**

**2. For Males: up to 2 lakh no tax**

For both males and females the income tax rates:

2-5 lakh = 10%

5-10 lakh = 20%

Above 10 lakh = 30%

**3. For Senior Citizens (In between age 60 – 80 years) : up to 2.5 lakh no tax**

The income tax rates are:

2.5 – 5 lakh = 10%

5-10 lakh = 20%

Above 10 lakh = 30%

**4. For Senior Citizens above 80 years : up to 5 lakh no tax**

The income rates are:

5-10 lakh = 20%

Above 10 lakh = 30%

Thus these are the income tax limits for males, females and senior citizens.

Now if person ‘A’ salary is 4 lakh per annum (male or female), then ‘A’ has to pay tax on

4lakh – 2 lakh = 2 lakh.

According to our above discussion ‘A’r income tax rates are 10%, it means ‘A’ tax will be 20000. But do you know that there are many methods through you can save tax and reduce this amount of 20000.

Please read my article how senior citizens can save income tax for detail information.

**Where and how to save income tax:**

One can invest up to Rs. 1 lakh in various investment options and Rs. 15000 extra in medical insurance (it is Rs. 20000 for senior citizens).

Let us discuss which are these income tax saving instruments:

1. Public Provident Fund (PPF): You can invest up to Rs. 1 lakh in PPF. The rate of return is 8.6% compounded annually. The lock in period is 15 years. But one can tale loan after certain years. I will discuss PPF in detail in another article.

2. Insurance Policies and Unit linked Insurance plans

3. Equity linked Saving Schemes (ELSS) of Mutual Funds: The lock in period is 3 years

4. National Pension Scheme

5. Tuition fee of children (maximum 2)

6. Medical Insurance: up to Rs. 15000 and Rs. 20000 for senior citizen.

7. Home loan

8. Bank Fixed Deposit of 5 years (One can not break this FD)

There is more income tax saving methods. I will discuss these and above mentioned in detail in future articles.

Now if person ‘A’ invested Rs. 100000 in any of the scheme and Rs. 15000 in medical insurance, then total amount on which ‘A’ will pay tax will be

2 lakh – 1 lakh – 15000 = Rs. 85000

Thus the income tax will be 10 % of 85000 that is Rs. 8500. Thus ‘A’ can save tax

Of 20000 – 8500= Rs. 11500.

These are the methods through which one can save income tax.

**Note**: Please give your feedback in comment section and of course you can also submit your queries regarding saving of income tax in comment section. I will try to solve it. Thanks

Thanks for this wonderful article

Just wanted to confirm the last date for filing of Income Tax Return??

Thanks.

Last date is 31st july.

I have 2 queries

1> suppose a person have the package of 7 lacs and he is getting 50 thousand in hand after PF and other deducation then how much tax he has to pay. and how much tax deducation can be minimized also share the way. Regards

Sachin

the person total income is 7 lacs, then he can save 1 lac through various tax saving options mentioned in the article, thus net income is 6 lac. The tax from 0-2 lakh is nil,

and from 2-5 lakh is 10% (=Rs. 30000),

and from 5-10 lakh is 20% and in this person case the remaining amount is 1 lakh so tax will be rs. 20000.

Thus total tax is 30000 + 20000 = rs. 50000 + 3% education cess,

so total tax will be 50000 + rs. 1500= Rs. 51500.

I hope my answer solved your query.

I have a question. I am getting 4.5 lakh per annum. Could you please let me know what is the taxable amount and how much will be deducted? Also, I am planning to do 1 lakh fixed deposit for a five year plan. However, I need to know if I can do a 2 lakh fixed deposit for a five a year plan instead of 1 lakh. Will that be accepted by the Income Tax department?

Case I: if you save no tax:

Total income= 4.5 lakh

0-2 lakh- no tax

2- 5 lakh at 10% (in your case 2- 4.5 lakh)= rs. 25000 + 3% education cess= 25000 + 750 = rs 25750 (total tax),

Second case: If you save 0ne lakh (suppose in 5 year FD)

Then net income: 4.5 -1 = 3.5 lakh

0-2 lakh = no tax

2-3.5 lakh at 10% = rs 15000 + education cess 3% = 15000 + 450 = rs 15450 total tax.

If you are planning for 2013-14, then according to new proposal you can minus rs 2000 from your total tax (If your income is in between 2-5 lakh) that is 15450- 2000= rs 13450.

You can also invest maximum rs 15000 in medical insurance,

Regarding your last query about FD, you can deposit rs 2 lakh in 5 year FD but tax benefit will only be for 1 lakh as this is the maximum limit under section 80C

Thank you for the information and advise. This has helped me a lot 🙂

You are welcome.

Actually i had another question for you. Can we do/consider two savings under the section (80 C)?

For ex: Can i do PPF and Fixed deposit as a tax saving scheme? Is this allowed? If yes, could you

please explain me about PPF saving, how to proceed with it?

Yes, we can do investments in both of the options that is PPF and five year FD. But the total amount for tax exemption will be maximum one lakh.

Regarding PPF, one can invest maximum one lakh in a financial year. The present rate of interest is 8.7%. The interest on PPF is tax free. One can open PPF in post office or in selected banks like SBI, PNB. I will suggest to open PPF account in a bank like SBI.

The PPF account is for 15 years and one can take loan after 7 years against the deposited amount. PPF is very very good option for salaried class people especially of private sector.

I will post the detail article on PPF very soon.

One more question, do they also accept two wheeler/bike loan or is it just for house/property?

According to me, no tax exemption on two wheeler/bike loan.

So no use in getting a loan for car/bike as a tax saving scheme right? This would not be accepted?

yes

Hi,

Suppose I have 3.5 lakhs p.a. and I have invested in various scheme up to 1 lakh as per rule.

But I want save 10% tax on above 50 thousand amount.

How can I save the tax on above rs 50 thousand amount?

or Is it compulsory to pay tax on 50 thousand?

Regards,

Dattatraya

You can invest rs. 15000 in mediclaim insurance for you, your spouse and parents, or rs 20000 if your parents are senior citizen.

Then your total taxable salary will be 35000 or 30000. You can also save tax if you taken home loan for already build house or flat.

regarding house rent paid

2000 rs. per month maximum

I am getting 3.5 lakh per annum. Please let me know what is the taxable amount and how much will be deducted?

can you please tell me how to calculate tax for 3.5lakhs in detail?

Thank you

Do you want this for 2012-13 or 2013-14?

Hi,

My salary is 3 lakh per annum. please let me know how much tax is there on this income and what all i can do to avoid this tax for current year and upcoming year

Please read this article:

http://managementation.com/calculation-of-income-tax-for-financial-year-2013-14/

You can invest res. one lakh in various tax saving saving schemes like PPF, 5 yr. FD, mutual fund (ELSS), etc. to save tax.

I find your way of clarifying the queries the best which is to actally take expample of salary

I would request you to do same by telling exact breakdown of my annual pay for tax deduction for current assesment year 2012-13.

LPA: 8.35

have you invested in tax saving schemes?