Are you paying too much income tax? Here is how to avoid it
Tax rates in India are not unreasonably high and there are enough tax breaks. Yet, every taxpayer thinks he pays too much tax.
ET Wealth looks at how the effective tax rate has changed in the past nine years for various income levels. Current income is not comparable with past salaries, so incomes for previous years have been adjusted for inflation.
Calculations assume that the taxpayers avail of the maximum deduction under Sec 80C, home loan interest, medical insurance and NPS contribution avaliable in the relevant financial years.
All the figures in lakhs
Rs 1 crore earned today is not equal to the same amount earned nine years ago. To make a fair comparison, incomes of previous years have been adjusted for infl ation. An income of Rs 1.2 crore in the current year is deflated by 3% inflation to Rs 1.16 crore for 2016-17.
Those earning over Rs 1 crore pay almost a third of their income in tax. Their tax shot up in 2013-14 when P. Chidambaram put a one-time 10% surcharge which has now become a regular feature.
Monthly income Rs 5 lakh
Taxpayers earning over Rs 50 lakh also pay a very high tax. The 10% surcharge on income levied in 2017 has caused the tax liability to shoot up.
Monthly income Rs 2 lakh
Those earning Rs 24 lakh a year pay a high tax because more than 50% of their income is taxed at 30%. They will gain immensely if the tax slabs are broadened.
Monthly income Rs 1 lakh
Taxpayers with an annual income of Rs 12 lakh are not so badly off, but their tax could be even lower if the Sec 80C limit is increased to Rs 2 lakh.
Monthly income Rs 75,000
If they avail of all the deductions available to them, taxpayers earning Rs 75,000 a month pay a very low tax. If the budget hikes the Sec 80C limit, their tax can be zero.
Source by:- economictimesShare:
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