How to save Tax for salary of 12 lakhs
A situation where no tax is paid on a salary of Rs. 12,00,000 per annum in India could occur if the individual effectively utilizes deductions and exemptions available under the Income Tax Act. Here’s an explanation:
1. Basic Exemption Limit :
Individuals in India have a basic exemption limit, which means that a certain amount of income is not subject to income tax. In that year, the basic exemption limit for individuals below 60 years of age was Rs. 2.5 lakh.
2. Deductions :
The Income Tax Act provides for various deductions under different sections. If an individual has made investments or expenses that are eligible for deductions, their taxable income can be reduced. For example:
- Under Section 80C:
An individual can claim deductions for investments in instruments like Provident Fund, National Savings Certificates, and Life Insurance Premiums, up to a specified limit.
- Section 80D :
Section are available for health insurance premiums paid.
- And under Section 24(b):
Deductions for home loan interest payments.
3. HRA Exemption :
If the individual is eligible for House Rent Allowance (HRA) and lives in rented accommodation, a portion of the HRA can be exempt from income tax.
4. Standard Deduction :
A standard deduction of a certain amount is allowed for salaried individuals, which can further reduce the taxable income.
5. Tax Rebates :
There are certain rebates available under Section 87A for individuals with taxable income below a certain threshold. In the past, this rebate was available for incomes up to Rs. 5 lakh.
If an individual’s salary of Rs. 12,00,000 is structured in a way that takes full advantage of the above provisions, their taxable income can be reduced to a level where no income tax is payable.
Please note that tax laws and exemptions may change from year to year, and it’s essential to keep up to date with the latest tax regulations and consult with a tax professional to ensure you are compliant with the most current laws. Additionally, your specific eligibility for deductions and exemptions will depend on your financial situation and the nature of your investments and expenses