TAX SAVING

Q1. How do I save tax?

A.You can reduce your tax liability by taking advantage of the various tax deductions.Under Section 80C of the Income tax Act, 1961 you can reduce your total taxable income by up to Rupees One lakh by making specified investments. There are other sections of the Act as well like 80 D, 80 E, and Section 24 under which you can reduce your total taxable income.

Q2. What are the income tax slabs for the current financial year 2009-10?

A.Tax rate for Individual are revised as under:

Income Range	Individual	Woman	Senior Citizen
Upto Rs. 160,000	Nil	Nil	Nil
Rs. 160,001 to Rs. 190,000	10%	Nil	Nil
Rs. 190,001 to Rs. 240,000	10%	10%	Nil
Rs. 240,001 to Rs.300,000	10%	10%	10%
Rs. 300,001 to Rs. 500,000	20%	20%	20%
Above Rs. 500,000	30%	30%	30%

Previously existing surcharge of 10% on individuals  has been abolished. Education Cess @ 3% remains unchanged.

Q3. What are the various categories of deduction?

A. Currently Income tax Act, 1961 provides for following deductions to reduce the tax liability

• Deduction under Section 80C  - Various Investments options like Insurance ,PPF , ELSS etc.
• Deductions under Section 80D – Medical insurance premium
• Deductions under Section 80E – Interest on Education loan 
• Deductions under Section 80 G - Donation
• Deductions under Section 24  - Interest on loan for purchase of house property

Q4. How do I calculate my tax liability

A. You can calculate your Net taxable income by reducing the various deductions available under sections 80C to 80U and Section 24 (few examples were given in Question No-3) from your gross total income. (Gross total income is calculated by adding income under five heads –income from salary, house property, capital gains, business and profession & other sources.).You can then use the tax slabs applicable in your case to calculate tax liability for the year.

Q5. What facts should I consider while making my tax saving decision?

A. It is advisable that Investments in “tax instruments” should never be done merely to save taxes. The decision to invest should be made keeping in view security, long term goals, liquidity and returns (After-tax) like any other investments.